<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____ to ____
Commission File Number 0-20421
TELE-COMMUNICATIONS, INC.
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(Exact name of Registrant as specified in its charter)
State of Delaware 84-1260157
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5619 DTC Parkway
Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Tele-Communications, Inc. Series A TCI Group common stock,
par value $1.00 per share
Tele-Communications, Inc. Series B TCI Group common stock,
par value $1.00 per share
Tele-Communications, Inc. Series A Liberty Media Group
common stock, par value $1.00 per share
Tele-Communications, Inc. Series B Liberty Media Group
common stock, par value $1.00 per share
Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock, par value $.01 per share
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
Indicate by check mark whether the Registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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The aggregate market value of the voting stock held by nonaffiliates
of Tele-Communications, Inc., computed by reference to the last sales price of
such stock, as of the close of trading on January 31, 1996, was
$16,435,824,079.
The number of shares outstanding of Tele-Communications, Inc.'s common
stock (net of shares held in treasury), as of January 31, 1996, was:
Tele-Communications, Inc. Series A TCI Group common stock - 571,692,645 shares,
Tele-Communications, Inc. Series B TCI Group common stock - 84,685,554 shares,
Tele-Communications, Inc. Series A Liberty Media Group common stock -
142,896,264 shares, and
Tele-Communications, Inc. Series B Liberty Media Group common stock -
21,196,868 shares.
<PAGE> 2
TELE-COMMUNICATIONS, INC.
1995 ANNUAL REPORT ON FORM 10-K
Table of Contents
<TABLE>
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Page
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-53
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-53
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . I-64
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . II-2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . II-6
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . II-55
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . II-55
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . III-1
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . III-4
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-17
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . III-29
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
</TABLE>
<PAGE> 3
PART I.
Item 1. Business.
(a) General Development of Business
Tele-Communications, Inc. ("TCI" or 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 also has investments 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 a Delaware corporation and was
incorporated in 1994. TCI Communications, Inc. ("TCIC"), a wholly-owned
subsidiary of TCI, and its predecessors have been engaged in the cable
television business since the early 1950's.
On August 3, 1995, the shareholders of TCI approved an amendment to the
Company's charter to (i) authorize two new series of common stock of the
Company, designated the Tele-Communications, Inc. Series A Liberty Media Group
Common Stock, par value $1.00 per share and the Tele-Communications, Inc. Series
B Liberty Media Group Common Stock, par value $1.00 per share (collectively, the
"Liberty Group Stock"), and (ii) redesignate the Company's Class A Common Stock,
par value $1.00 per share, as the Tele-Communications, Inc. Series A TCI Group
Common Stock, par value $1.00 per share, and the Class B Common Stock par value
$1.00 per share, as the Tele-Communications, Inc. Series B TCI Group Common
Stock, par value $1.00 per share (the Series A and Series B TCI Group Common
Stock are referred to collectively herein as the "TCI Group Stock"). The Liberty
Group Stock is intended to reflect the separate performance of the newly created
"Liberty Media Group", which consists of the Company's businesses that are
engaged in: (i) the production, acquisition and distribution through all
available formats and media of branded entertainment, educational and
informational programming and software, including multimedia products and (ii)
electronic retailing, direct marketing, advertising sales relating to
programming services, informercials and transaction processing. The TCI Group
Stock is intended to reflect the separate performance of the Company's
businesses and assets ("TCI Group") not included in the Liberty Media Group, as
well as any equity value of the Company attributable to the Liberty Media Group
that, at any relevant time in the future, is not represented by outstanding
Liberty Group Stock. The issuance of the Liberty Group Stock did not result in
any transfer of assets or liabilities of TCI or any of its subsidiaries or
affect the rights of holders of TCI's or any of its subsidiaries' debt. On
August 10, 1995, TCI distributed one hundred percent of the equity value
attributable to Liberty Media Group to its security holders of record on August
4, 1995.
As of January 26, 1995, TCI, TCIC and TeleCable Corporation
("TeleCable") consummated a transaction, whereby TeleCable was merged into TCIC.
The aggregate $1.6 billion purchase price was satisfied by TCIC's assumption of
approximately $300 million of TeleCable's net liabilities and the issuance to
TeleCable's shareholders of approximately 42 million shares of TCI Class A
common stock and an issue of TCI convertible preferred stock with an aggregate
initial liquidation value of $300 million. Such preferred stock is convertible
into 10 million shares of Series A TCI Group Stock and 2.5 million shares of
Series A Liberty Group Stock.
On April 25, 1995, the Company acquired a 51% ownership interest in
Cablevision S.A. and certain affiliated companies (collectively, "Cablevision")
for a purchase price of $282 million, before liabilities assumed. The purchase
price was paid with cash consideration of $195 million and the issuance of $87
million principal amount of secured negotiable promissory notes payable to the
selling shareholders. TCI has an option during the two-year period ended April
25, 1997 to increase its ownership interest in Cablevision up to 80% at a cost
per subscriber similar to the initial purchase price, adjusted however for
certain fluctuations in applicable foreign currency exchange rates.
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During 1994, subsidiaries of the Company, Comcast Corporation
("Comcast"), Cox Communications, Inc. ("Cox" and together with the Company and
Comcast, the "Cable Partners") and Sprint Corporation ("Sprint") formed a
partnership ("WirelessCo") to engage in the business of providing wireless
communications services on a nationwide basis. Through WirelessCo, in which
the Company owns an indirect 30% interest, the partners participated in
auctions ("PCS Auctions") of broadband personal communications services ("PCS")
licenses conducted by the Federal Communications Commission ("FCC"). In the
first round auction, which concluded during the first quarter of 1995,
WirelessCo was the winning bidder for PCS licenses for 29 markets, including
New York, San Francisco-Oakland-San Jose, Detroit, Dallas-Fort Worth,
Boston-Providence, Minneapolis-St. Paul and Miami-Fort Lauderdale. The
aggregate license cost for these licenses was approximately $2.1 billion.
WirelessCo has also invested in American PSC, L.P. ("APC"), which
holds a PCS license granted under the FCC's pioneer preference program for the
Washington-Baltimore market. WirelessCo acquired its 49% limited partnership
interest in APC for $23 million and has agreed to make capital contributions to
APC equal to 49/51 of the cost of APC's PCS license. Additional capital
contributions may be required in the event APC is unable to finance the full
cost of its PCS license. WirelessCo may also be required to finance the
build-out expenditures for APC's PCS system. Cox, which holds a pioneer
preference PCS license for the Los Angeles-San Diego market, and WirelessCo
have also agreed on the general terms and conditions upon which Cox (with a 51%
interest) and WirelessCo (with a 49% interest) would form a partnership to hold
and develop a PCS system using the Los Angeles-San Diego license. APC and the
Cox partnership would affiliate their PCS systems with WirelessCo and be part
of WirelessCo's nationwide integrated network, offering wireless communications
services under the "Sprint" brand.
During 1994, subsidiaries of Cox, Sprint and the Company also formed a
separate partnership ("PhillieCo"), in which the Company owns a 35.3% interest.
PhillieCo was the winning bidder in the first round auction for a PCS license
for the Philadelphia market at a license cost of $85 million. To the extent
permitted by law, the PCS system to be constructed by PhillieCo would also be
affiliated with WirelessCo's nationwide network.
WirelessCo may bid in subsequent rounds of the PCS Auctions and may
invest in, affiliate with or acquire licenses from other successful bidders.
The capital that WirelessCo will require to fund the construction of the PCS
systems, in addition to the license costs and investments described above, will
be substantial.
In March of 1995, the Cable Partners and Sprint (collectively, the
"Partners") formed two new partnerships, of which the principal partnership is
MajorCo, L.P. ("MajorCo"), to which they contributed their respective interests
in WirelessCo and through which they formed another partnership, NewTelco, L.P.
("NewTelco") to engage in the business of providing local wireline
communications services to residences and businesses on a nationwide basis.
The Cable Partners agreed to contribute their interests in Teleport
Communications Group, Inc. and TCG Partners (collectively, "TCG") to NewTelco.
TCG is one of the largest competitive access providers in the United States in
terms of route miles.
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<PAGE> 5
Effective January 31, 1996, the Partners amended the MajorCo
partnership agreement (the "Partnership Agreement") and certain other
agreements related thereto. Under the Partnership Agreement, the business of
MajorCo and its subsidiaries will be the provision of certain wireless and
other services described in the Partnership Agreement. The Partners intend for
WirelessCo and its subsidiary partnerships to be the exclusive vehicles through
which they engage in the wireless telephony service businesses, subject to
certain exceptions. MajorCo will no longer be authorized to engage in the
business of providing local wireline communications services to residences and
businesses. In connection with the amendment of the Partnership Agreement, the
Partners also agreed to the termination of the agreement to contribute the
Cable Partners' interests in TCG to NewTelco.
Pursuant to separate agreements, each of the Cable Partners and Sprint
have agreed to negotiate in good faith on a market-by-market basis for the
provision of local wireline telephony services over the cable television
facilities of the respective Cable Parent under the Sprint brand. Accordingly,
local wireline telephony offerings in each market would be the subject of
individual agreements to be negotiated with Sprint, rather than being provided
by MajorCo, as originally contemplated. The Cable Partners and Sprint also
reaffirmed their intention to continue to attempt to integrate the business of
TCG with that of MajorCo. In addition, each Cable Partner agreed to certain
restrictions on its ability to offer, promote, or package certain of its
products or services with certain products and services of other persons and
agreed to make its facilities available to Sprint for specified purposes to the
extent and on the terms that it has made such facilities available to others
for such purposes. Such agreements have a term of five years, but under
certain circumstances may terminate after three years.
Execution of the foregoing agreements was a condition to the
effectiveness of a previously approved business plan for the build out of
WirelessCo's nationwide network for wireless personal communications services.
Pursuant to the business plan, the Partners are obligated to make additional
cash capital contributions to MajorCo in the aggregate amount of approximately
$1.9 billion during the two-year period that commenced January 1, 1996. The
business plan contemplates that MajorCo will require additional equity
thereafter.
In July 1995, TCIC and TCI entered into certain agreements with Viacom
Inc. ("Viacom") and certain subsidiaries of Viacom regarding the purchase by
TCIC of all of the common stock of a subsidiary of Viacom ("Cable Sub") which,
at the time of purchase, will own Viacom's cable systems and related assets.
The transaction has been structured as a tax-free reorganization in
which Cable Sub will initially transfer all of its non-cable assets, as well as
all of its liabilities other than current liabilities, to a new subsidiary of
Viacom ("New Viacom Sub"). Cable Sub will also transfer to New Viacom Sub the
proceeds (the "Loan Proceeds") of a $1.7 billion loan facility (the "Loan
Facility") to be arranged by TCIC, TCI and Cable Sub. Following these
transfers, Cable Sub will retain cable assets with an estimated value at
closing of approximately $2.2 billion and the obligation to repay the Loan
Proceeds borrowed under the Loan Facility.
Viacom will offer to the holders of shares of Viacom Class A Common
Stock and Viacom Class B Common Stock (collectively, "Viacom Common Stock") the
opportunity to exchange (the "Exchange Offer") a portion of their shares of
Viacom Common Stock for shares of Class A Common Stock, par value $100 per
share, of Cable Sub ("Cable Sub Class A Stock"). The Exchange Offer will be
subject to a number of conditions, including a condition (the "Minimum
Condition") that sufficient tenders are made of Viacom Common Stock that permit
the number of shares of Cable Sub Class A Stock issued pursuant to the Exchange
Offer to equal the total number of shares of Cable Sub Class A Stock issuable
in the Exchange Offer.
I-3
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Immediately following the completion of the Exchange Offer, TCIC will
acquire from Cable Sub shares of Cable Sub Class B common stock for $350
million (which will be used to reduce Cable Sub's obligations under the Loan
Facility). At the time of such acquisition, the Cable Sub Class A Stock
received by Viacom stockholders pursuant to the Exchange Offer will
automatically convert into a series of senior cumulative exchangeable preferred
stock (the "Exchangeable Preferred Stock") of Cable Sub with a stated value of
$100 per share (the "Stated Value"). The terms of the Exchangeable Preferred
Stock, including its dividend, redemption and exchange features, will be
designed to cause the Exchangeable Preferred Stock, in the opinion of two
investment banks, to initially trade at the Stated Value. The Exchangeable
Preferred Stock will be exchangeable, at the option of the holder commencing
after the fifth anniversary of the date of issuance, for shares of Series A TCI
Group Stock. If insufficient tenders are made by Viacom stockholders in the
Exchange Offer to permit the Minimum Condition to be satisfied, Viacom will
extend the Exchange Offer for up to 15 business days and, during such extension,
TCI and Viacom are to negotiate in good faith to determine mutually acceptable
changes to the terms and conditions for the Exchangeable Preferred Stock and the
Exchange Offer that each believes in good faith will cause the Minimum Condition
to be fulfilled and that would cause the Exchangeable Preferred Stock to trade
at a price equal to the Stated Value immediately following the expiration of the
Exchange Offer. In the event the Minimum Condition is not thereafter met, TCI
and Viacom will each have the right to terminate the transaction. In addition,
either party may terminate the transaction if the Exchange Offer has not
commenced by June 24, 1996 or been consummated by July 24, 1996.
Consummation of the transaction is subject to a number of conditions,
including receipt of a favorable letter ruling from the Internal Revenue
Service that the transaction qualifies as a tax-free transaction and the
satisfaction or waiver of all of the conditions of the Exchange Offer. A
request for a letter ruling from the Internal Revenue Service has been filed by
Viacom. The Company believes that, based upon the unique and complex structure
of the transaction, there exists significant uncertainty as to whether a
favorable ruling will be obtained. In light of the foregoing, management of
the Company has concluded that consummation of the transaction is not yet
probable. No assurance can be given that the transaction will be consummated.
QVC Programming Holdings, Inc. (the "Purchaser"), a corporation which
is jointly owned by Comcast and the Company, commenced an offer (the "QVC
Tender Offer") to purchase all outstanding shares of common stock and preferred
stock of QVC, Inc. ("QVC"). The QVC Tender Offer expired on February 9, 1995,
at which time the Purchaser accepted for payment all shares of QVC which had
been tendered in the QVC Tender Offer. Following consummation of the QVC
Tender Offer, the Purchaser was merged with and into QVC with QVC continuing as
the surviving corporation. The Company owns an approximate 43% interest of the
post-merger QVC.
I-4
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(b) Financial Information about Industry Segments
Although the Company is organized based upon four lines of business
(Domestic Cable and Communications; Programming; International Cable and
Programming; and Technology/Venture Capital), relevant information with respect
to the Company's International Cable and Programming unit and
Technology/Venture Capital unit are contained in the discussion of the
Company's Cable and Communications unit due to their relative insignificance.
Accordingly, the Company operates principally in two industry segments: cable
and communications services and programming services. Home shopping is a
programming service which includes a retail function. Financial information
related to the Company's industry segments can be found in the footnotes to the
Company's consolidated financial statements found in Part II of this report.
Notwithstanding the foregoing, following is a brief description of the
Company's International Cable and Programming unit and Technology/Venture
Capital unit:
International Cable and Programming
The Company, through its international cable and programming
subsidiary, Tele-Communications International, Inc., ("TINTA"), has investments
in cable and telecommunications operations and television programming in
international markets. The Company seeks to invest in markets with favorable
regulatory environments and attractive growth opportunities. Among its
overseas investments, the Company has an indirect 27% interest in TeleWest plc
("TeleWest"). TeleWest provides cable television and residential and business
cable telephony in the United Kingdom. In April of 1995, the Company acquired
a 51% ownership interest in Cablevision, which provides cable television
service in and around Buenos Aires, Argentina. The Company also has a majority
interest in Flextech p.l.c., which provides television programming in the
United Kingdom through its interest in Bravo, The Children's Channel, UK Gold,
UK Living and The Family Channel UK. Through certain other joint ventures, the
Company has interests in cable television systems and television programming in
Hungary, Poland, Norway, Sweden, Israel, Ireland, Malta, France, Chile,
Argentina, Puerto Rico, the Dominican Republic, New Zealand, Australia,
Singapore and Japan.
On July 18, 1995, TINTA completed an initial public offering (the
"IPO") in which it sold TINTA Series A common stock to the public representing
17% of TINTA's total issued and outstanding common stock. TINTA received net
cash proceeds of approximately $300 million from the IPO. Also in July 1995,
TINTA issued 687,500 shares of TINTA Series A common stock as partial
consideration for a 35% ownership interest in Torneos Y Competencias S.A., an
Argentine sports programming company (the "TYC Acquisition"). Subsequent to
the IPO and the TYC Acquisition, TCI owns 82% of the issued and outstanding
stock of TINTA, representing in excess of 90% of the voting power of TINTA.
Technology/Venture Capital
The Company is an investor in companies and joint ventures involved in
developing and providing programming for new television and telecommunications
technologies. Current investments and technologies under development include
interactive and set-top box technology, entertainment software and other
services for wireline and wireless switched broadband interactive networks.
The Company has formed a joint venture with Sega of America and Time Warner
Entertainment Company, L.P. to develop and market the first video game channel,
called "The Sega Channel." The Sega Channel provides Sega Genesis video games
on-demand, 24 hours a day. Subscribers can choose from a wide selection of
games, special versions of soon-to-be released titles, gameplay tips, news,
contests and promotions.
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In January 1996, the Company acquired a controlling interest in United
Video Satellite Group, Inc. ("UVSG"), a provider of satellite-delivered video,
audio, data and program promotion services to cable television systems,
satellite dish owners, radio stations and private network users primarily
throughout North America. UVSG operates in five related businesses: electronic
program promotion and guide services, electronic interactive information
delivery services, satellite transmission services for private networks,
direct-to-home satellite services and satellite distribution of video services.
UVSG also has a 70% ownership interest in SSDS, Inc., which provides
information technology consulting and software development services to large
organizations with complex computer needs.
The Company also has made investments in TSX Corporation, a producer
of communications equipment, and Acclaim Entertainment, Inc. ("Acclaim") and
has formed a joint venture with Acclaim to develop, acquire and distribute
games and other interactive entertainment software over various
telecommunications networks. The Company has also created the National Digital
Television Center, a provider of digital compression and authorization services
to program suppliers and to cable television systems and other video
distribution outlets. In addition to its technology investments, the Company
operates Western Tele-Communications, Inc., a wholesale provider of long
distance, voice, data and other telecommunications services.
(c) Narrative Description of Business
CABLE AND COMMUNICATIONS SERVICES
General. Cable television systems receive video, audio and data
signals transmitted by nearby television and radio broadcast stations,
terrestrial microwave relay services and communications satellites. Such
signals are then amplified and distributed by coaxial cable and optical fiber
to the premises of customers who pay a fee for the service. In many cases,
cable television systems also originate and distribute local programming.
Service Charges. The Company offers a limited "basic service"
(primarily comprised of local broadcast signals and public, educational and
governmental access channels) and an "expanded" tier (primarily comprised of
specialized programming services, in such areas as health, family
entertainment, religion, news, weather, public affairs, education, shopping,
sports and music). The monthly fee for "basic service" generally ranges from
$8.00 to $10.00, and the monthly service fee for the "expanded" tier generally
ranges from $11.00 to $15.00. The Company offers "premium services" (referred
to in the cable television industry as "Pay-TV" and "pay-per-view") to its
customers. Such services consist principally of feature films, as well as live
and taped sports events, concerts and other programming. The Company offers
Pay-TV services for a monthly fee generally ranging from $9.00 to $15.00 per
service, except for certain movie or sports services (such as various regional
sports networks and certain pay-TV channels) offered at $1.00 to $5.00 per
month, pay-per-view movies offered separately generally at $3.00 per movie and
certain pay-per-view events offered separately at $10.00 to $50.00 per event.
Charges are usually discounted when multiple Pay-TV services are ordered.
The Company generally does not charge for additional outlets in a
subscriber's home. As further enhancements to their cable services, customers
may generally rent converters, with or without a remote control device, for a
monthly charge ranging from $0.50 to $3.00 each, as well as purchase a channel
guide for a monthly charge ranging from $1.00 to $2.00. Also a nonrecurring
installation charge (which is based upon the FCC's rules which regulate hourly
service charges for each individual cable system) of up to $60.00 is usually
charged.
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Monthly fees for basic and Pay-TV services to commercial customers
vary widely depending on the nature and type of service. Except under the
terms of certain contracts to provide service to commercial accounts, customers
are free to discontinue service at any time without penalty.
As noted below, the Company's service offerings and rates were
affected by rate regulations issued by the FCC in 1993 and 1994. See
Regulation and Legislation below.
Subscriber Data. TCI operates its cable television systems either
directly through its regional operating divisions or indirectly through certain
subsidiaries or affiliated companies. Domestic basic and Pay-TV cable
customers served by TCI and its consolidated subsidiaries are summarized as
follows (amounts in millions):
<TABLE>
<CAPTION>
Basic subscribers at December 31,
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1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Managed through the Company's
regional operating divisions (1)(2) 11.9 10.7 9.8 9.4 6.4
TKR Cable II, Inc. and
TKR Cable III, Inc. (3) 0.3 0.3 0.3 0.3 --
United Artists Entertainment Company
("UAE") (4) -- -- -- -- 2.3
Other non-managed subsidiaries 0.3 0.2 0.2 0.2 0.2
----- ----- ----- ----- -----
12.5 11.2 10.3 9.9 8.9
===== ===== ===== ===== =====
<CAPTION>
Pay TV subscribers at December 31,
-----------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Managed through the Company's
regional operating divisions (1)(2) 13.4 11.5 9.5 8.8 6.1
TKR Cable II, Inc. and
TKR Cable III, Inc. (3) 0.2 0.2 0.2 0.3 --
UAE (4) -- -- -- -- 2.2
Other non-managed subsidiaries 0.2 0.2 0.2 0.2 0.1
----- ----- ----- ----- -----
13.8 11.9 9.9 9.3 8.4
===== ===== ===== ===== =====
</TABLE>
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(1) In August of 1994, TCI Communications, Inc. and Liberty Media
Corporation consummated a merger whereby each became a wholly-owned
subsidiary of TCI.
(2) In December of 1992, SCI Holdings, Inc. ("SCI") consummated a
transaction (the "Split-Off") that resulted in the ownership of its
cable television systems being split between its two stockholders,
which stockholders were Comcast and the Company. The Split-Off was
effected by the distribution of approximately 50% of the net assets of
SCI to three holding companies formed by the Company (the "Holding
Companies"). Immediately following the Split-Off, the Company owned a
majority of the common stock of the Holding Companies. As such, the
Company, which previously accounted for its investment in SCI using
the equity method, now consolidates its investment in the Holding
Companies. One of the Holding Companies, TKR Cable I, Inc., is
managed through the Company's regional operating divisions.
(3) Management of the remaining two Holding Companies was assumed by an
affiliated company of TCI in December of 1992.
(4) Management assumed by the Company's regional operating divisions in
January of 1992.
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At December 31, 1995, TCI operated substantially all of its
consolidated cable television systems through four regional operating divisions
- -- Central, Great Lakes, Southeast and West. The table below sets forth certain
statistical data of TCI's regional operating divisions as of December 31, 1995.
<TABLE>
<CAPTION>
Estimated
homes Basic Basic Pay-TV Pay
Division passed subscribers penetration (1) subscriptions (2) penetration (3)
- -------- ------ ----------- --------------- ----------------- ---------------
amounts in millions, except for percentages
<S> <C> <C> <C> <C> <C>
Central (4) 4.4 2.5 57% 2.9 116%
Great Lakes (5) 6.4 4.2 66% 4.3 102%
Southeast (6) 4.0 2.5 63% 3.0 120%
West (7) 4.4 2.7 61% 3.2 119%
----- ----- -----
Total 19.2 11.9 62% 13.4 113%
===== ===== =====
</TABLE>
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(1) Calculated by dividing the number of basic subscribers by the number
of estimated homes passed.
(2) A basic customer may subscribe to one or more Pay-TV services and the
number of Pay-TV subscriptions reflected represents the total number
of such subscriptions to Pay-TV services.
(3) Calculated by dividing the number of Pay-TV subscriptions by the
number of basic subscribers.
(4) Central operating division includes cable television systems located
in Colorado, Kansas, Nebraska, New Mexico, North Dakota, Oklahoma,
South Dakota, Texas and Wyoming.
(5) Great Lakes operating division includes cable television systems
located in Connecticut, Illinois, Indiana, Kentucky, Maine,
Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New
York, Ohio, Pennsylvania, Rhode Island, Vermont, West Virginia and
Wisconsin.
(6) Southeast operating division includes cable television systems located
in Alabama, Arkansas, Delaware, District of Columbia, Florida,
Georgia, Iowa, Louisiana, Maryland, Mississippi, Missouri, North
Carolina, South Carolina, Tennessee and Virginia.
(7) West operating division includes cable television systems located in
Arizona, California, Idaho, Nevada, Montana, Oregon, Utah and
Washington.
TCI, its subsidiaries and affiliates operate cable television systems
throughout the continental United States, Puerto Rico and Argentina and,
through certain joint ventures accounted for under the equity method, have cable
television systems and investments in the United Kingdom, other parts of Europe,
Asia, Latin America and certain other foreign countries.
In addition to cable television service, the Company provides
satellite service through its subsidiary NetLink USA and through its
affiliation with Primestar Partners. At December 31, 1995 and 1994, the
Company provided satellite service to 990,000 subscribers and 460,000
subscribers, respectively.
The Company has entered into long-term agreements with a majority of
its program suppliers in order to obtain favorable rates for programming and to
protect the Company from unforeseen future increases in the Company's cost of
programming.
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Local Franchises. Cable television systems generally are constructed
and operated under the authority of nonexclusive permits or "franchises"
granted by local and/or state governmental authorities. Federal law, including
the Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"), limits the power of the franchising authorities to impose certain
conditions upon cable television operators as a condition of the granting or
renewal of a franchise.
Franchises contain varying provisions relating to construction and
operation of cable television systems, such as time limitations on commencement
and/or completion of construction; quality of service, including (in certain
circumstances) requirements as to the number of channels and broad categories
of programming offered to subscribers; rate regulation; provision of service to
certain institutions; provision of channels for public access and commercial
leased-use; and maintenance of insurance and/or indemnity bonds. The Company's
franchises also typically provide for periodic payments of fees, generally
ranging from 3% to 5% of revenue, to the governmental authority granting the
franchise. Franchises usually require the consent of the franchising authority
prior to a transfer of the franchise or a transfer or change in ownership or
operating control of the franchisee.
Subject to applicable law, a franchise may be terminated prior to its
expiration date if the cable television operator fails to comply with the
material terms and conditions thereof. Under the 1984 Cable Act, if a
franchise is lawfully terminated, and if the franchising authority acquires
ownership of the cable television system or effects a transfer of ownership to
a third party, such acquisition or transfer must be at an equitable price or,
in the case of a franchise existing on the effective date of the 1984 Cable
Act, at a price determined in accordance with the terms of the franchise, if
any.
In connection with a renewal of a franchise, the franchising authority
may require the cable operator to comply with different and more stringent
conditions than those originally imposed, subject to the provisions of the 1984
Cable Act and other applicable Federal, state and local law. The 1984 Cable
Act, as supplemented by the renewal provisions of the 1992 Cable Act,
establishes an orderly process for franchise renewal which protects cable
operators against unfair denials of renewals when the operator's past
performance and proposal for future performance meet the standards established
by the 1984 Cable Act. The Company believes that its cable television systems
generally have been operated in a manner which satisfies such standards and
allows for the renewal of such franchises; however, there can be no assurance
that the franchises for such systems will be successfully renewed as they
expire.
Most of the Company's present franchises had initial terms of
approximately 10 to 15 years. The duration of the Company's outstanding
franchises presently varies from a period of months to an indefinite period of
time. Approximately 1,100 of the Company's franchises expire within the next
five years. This represents approximately twenty-five percent of the
franchises held by the Company and involves approximately 4.4 million basic
subscribers.
Technological Changes. Cable operators have traditionally used
coaxial cable for transmission of television signals to subscribers. Optical
fiber is a technologically advanced transmission medium capable of carrying
cable television signals via light waves generated by a laser. The Company is
installing optical fiber technology in its cable systems at a rate such that in
approximately two years TCI anticipates that it will be serving the majority of
its customers with this technology. The systems, which facilitate digital
transmission of voice, video and data signals as discussed below, will have
optical fiber to neighborhood nodes with coaxial cable distribution downstream
from that point.
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Compressed digital video technology converts as many as ten analog
signals (now used to transmit video and voice) into a digital format and
compresses such signals (which is accomplished primarily by eliminating the
redundancies in television imagery) into the space normally occupied by one
analog signal. The digitally compressed signal will be uplinked to a
satellite, which will send the signal back down to a customer's satellite dish
or to a cable system's headend to be distributed, via optical fiber and coaxial
cable, to the customer's home. At the home, a set-top video terminal will
convert the digital signal back into analog channels that can be viewed on a
normal television set. The Company anticipates that it will begin offering
such technology to its cable subscribers in three markets in late 1996 and
intends to make such service available to approximately one-third of its cable
subscribers by the end of 1997, depending upon the availability of set-top
video terminals. However, since 1994, the Company has encountered repeated
delays in the production and delivery of such devices by its suppliers. The
Company will be required to further upgrade its existing distribution system to
enable it to provide additional advanced services, such as two-way interactive
technology. The Company is dependent upon further technological advances to
enable it to provide such interactive services.
During 1994, the Company established the National Digital Television
Center ("NDTC") in Denver to compress, uplink, encrypt and authorize reception
of digital television signals as well as provide digital television and
multimedia production services. The NDTC currently has established long term
contracts to provide services to 16 content providers, digitally compressing
and/or distributing more than 125 channels of programming.
In May 1995, the Company and Kleiner Perkins Caufield & Byers formed a
new company, @Home, that will develop high speed, next generation Internet
services for homes and businesses over cable television systems. A key element
of the @Home service is the underlying network. @Home proposes to operate a
national, high speed, Internet Protocol-based network connecting to both
information providers and cable operators on a turnkey basis. This national
network will reach local subscribers through local headends. Distribution over
cable systems based on both upgraded fiber/coaxial cable designs as well as
older, non-upgraded systems using telephone return paths is planned. @Home
affiliates plan to provide customers with the required broadband cable modem,
which in turn connect to customers' personal computers using existing standard
data communications interfaces. @Home is expected to debut in Sunnyvale,
California in 1996.
Competition. Cable television competes for customers in local markets
with other providers of entertainment, news and information. The competitors
in these markets include broadcast television and radio, newspapers, magazines
and other printed material, motion picture theatres, video cassettes and other
sources of information and entertainment including directly competitive cable
television operations. Both the 1992 Cable Act and the recently enacted
Telecommunications Act of 1996 ("1996 Telecom Act") are designed to increase
competition in the cable television industry. See Regulation and Legislation
below.
There are alternative methods of distributing the same or similar
video programming offered by cable television systems. Further, these
technologies have been encouraged by Congress and the FCC to offer services in
direct competition with existing cable systems.
A significant competitive impact is expected from medium power and
higher power direct broadcast satellites ("DBS") that use high frequencies to
transmit signals that can be received by dish antennas much smaller in size
than traditional home satellite dishes ("HSDs"). The Company has an interest
in an entity, Primestar Partners ("Primestar"), which provides programming and
marketing support to its partners who distribute a multi-channel programming
service via a medium power communications satellite to HSDs of approximately 3
feet in diameter. At December 31, 1995, Primestar, through its partners,
served an estimated 940,000 HSDs in the United States. Two other DBS operators,
DirecTV, a subsidiary of GM Hughes Electronics, and United States Satellite
Broadcasting, a subsidiary of Hubbard Broadcasting, Inc., offer video services
that can be received by HSDs that measure approximately eighteen inches in
diameter. Such DBS operators have the right to distribute substantially all of
the significant cable television programming services currently carried by
cable television systems.
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The competition from DBS will likely continue to grow. One DBS
operator is preparing to launch a new DBS satellite. AT&T Corp. recently made
a large investment in DirecTV and several other major companies are preparing
to develop and operate high-power DBS systems, including MCI Communications
Corp. ("MCI") and News Corp. MCI recently acquired rights to satellite
frequencies for DBS in an FCC auction.
DBS has advantages and disadvantages as an alternative means of
distributing video signals to the home. Among the advantages are that the
capital investment (although initially high) for the satellite and uplinking
segment of a DBS system is fixed and does not increase with the number of
subscribers receiving satellite transmissions; that DBS is not currently
subject to local regulation of service and prices or required to pay franchise
fees; and that the capital costs for the ground segment of a DBS system (the
reception equipment) are directly related to, and limited by, the number of
service subscribers. DBS's disadvantages presently include limited ability to
tailor the programming package to the interests of different geographic
markets, such as providing local news, other local origination services and
local broadcast stations; signal reception being subject to line of sight
angles; and intermittent interference from atmospheric conditions and
terrestrially generated radio frequency noise.
Although the effect of competition from these DBS services cannot be
specifically predicted, it is clear there has been significant growth in DBS
subscribers and the Company assumes that such DBS competition will be
substantial in the near future as developments in technology continue to
increase satellite transmitter power and decrease the cost and size of
equipment needed to receive these transmissions and enable DBS to overcome the
aforementioned disadvantages. Further, the extensive national advertising of
DBS programming packages, including certain sports packages not currently
available on cable television systems, will likely continue the rapid growth in
DBS subscribers.
The 1996 Telecom Act eliminated the statutory and regulatory
restrictions that prevented telephone companies from competing with cable
operators for the provision of video services by any means. See "Regulation
and Legislation" section. The 1996 Telecom Act allows local telephone
companies, including the regional bell operating companies, to compete with
cable television operators both inside and outside their telephone service
areas. The Company expects that it will face substantial competition from
telephone companies for the provision of video services, whether it is through
the acquisition of cable systems, through the provision of wireless cable, or
through the provision of upgraded telephone networks. The Company assumes that
all major telephone companies have already entered or soon will enter the
business of providing video services. Most major telephone companies have
greater financial resources than the Company, and the 1992 Cable Act ensures
that telephone company providers of video services will have access to acquiring
all of the significant cable television programming services. The specific
manner in which telephone company provision of video services will be regulated
is described under Regulation and Legislation below. Additionally, the 1996
Telecom Act eliminates certain federal restrictions on utility holding companies
and thus frees all utility companies to provide cable television services. The
Company expects this could result in another source of significant competition
in the delivery of video services.
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Another alternative method of distribution is multi-channel
multi-point distribution systems ("MMDS"), which deliver programming services
over microwave channels received by subscribers with special antennas. MMDS
systems are less capital intensive, are not required to obtain local franchises
or pay franchise fees, and are subject to fewer regulatory requirements than
cable television systems. The 1992 Cable Act also ensures that MMDS systems
have access to acquire all significant cable television programming services.
Although there are relatively few MMDS systems in the United States currently
in operation, virtually all markets have been licensed or tentatively licensed.
The FCC has taken a series of actions intended to facilitate the development of
wireless cable systems as an alternative means of distributing video
programming, including reallocating the use of certain frequencies to these
services and expanding the permissible use of certain channels reserved for
educational purposes. The FCC's actions enable a single entity to develop an
MMDS system with a potential of up to 35 channels, and thus compete more
effectively with cable television. Developments in compression technology will
significantly increase the number of channels that can be made available from
MMDS. Further, in 1995, several large telephone companies acquired significant
ownership in numerous MMDS companies. This infusion of money into the MMDS
industry can be expected to accelerate its growth and its competitive impact.
Within the cable television industry, cable operators may compete with
other cable operators or others seeking franchises for competing cable
television systems at any time during the terms of existing franchises or upon
expiration of such franchises in expectation that the existing franchise will
not be renewed. The 1992 Cable Act promotes the granting of competitive
franchises. An increasing number of cities are exploring the feasibility of
owning their own cable systems in a manner similar to city-provided utility
services.
The Company also competes with Master Antenna Television ("MATV")
systems and Satellite MATV ("SMATV") systems, which provide multi-channel
program services directly to hotel, motel, apartment, condominium and similar
multi-unit complexes within a cable television system's franchise area,
generally free of any regulation by state and local governmental authorities.
Although long distance telephone companies had no legal prohibition on
the provision of video services, they have historically not been providers of
such services in competition with cable systems. However, such companies may
prove to be a source of competition in the future. The long distance companies
are expected to expand into local markets with local telephone and other
offerings (including video services) in competition with the regional bell
operating companies, which under the 1996 Telecom Act have been released, upon
the terms and conditions of the 1996 Telecom Act, from the legal prohibitions on
their ability to enter the long distance service market.
In addition to competition for subscribers, the cable television
industry competes with broadcast television, radio, the print media and other
sources of information and entertainment for advertising revenue. As the cable
television industry has developed additional programming, its advertising
revenue has increased. Cable operators sell advertising spots primarily to
local and regional advertisers.
The Company has no basis upon which to estimate the number of cable
television companies and other entities with which it competes or may
potentially compete. There are a large number of individual and multiple
system cable television operators in the United States but, measured by the
number of basic subscribers, the Company is the largest provider of cable
television services.
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The full extent to which other media or home delivery services will
compete with cable television systems may not be known for some time and there
can be no assurance that existing, proposed or as yet undeveloped technologies
will not become dominant in the future.
Regulation and Legislation. The operation of cable television systems
is extensively regulated through a combination of Federal legislation and FCC
regulations, by some state governments and by most local government franchising
authorities such as municipalities and counties. On February 8, 1996, the 1996
Telecom Act was signed into law. This new law will alter federal, state and
local laws and regulations regarding telecommunications providers and cable
television service providers, including the Company. The discussion below
summarizes the 1996 Telecom Act and reviews the pre-existing federal cable
television regulation as revised by the 1996 Telecom Act.
The Telecommunications Act of 1996. The following is a summary of
certain provisions of the 1996 Telecom Act which could materially affect the
growth and operation of the cable television industry and the cable and
telecommunications services provided by the Company. There are numerous
rulemakings to be undertaken by the FCC which will interpret and implement the
provisions discussed below. It is not possible at this time to predict the
outcome of such rulemakings.
Cable Rate Regulation. Rate regulation of the Company's cable
television services is divided between the FCC and local units of government
such as states, counties or municipalities. The FCC's jurisdiction extends to
the cable programming service tier ("CPST"), which consists largely of
satellite-delivered programming (excluding basic tier programming and
programming offered on a per-channel or per-program basis). Local units of
governments (commonly referred to as local franchising authorities or "LFAs")
are primarily responsible for regulating rates for the basic tier of cable
service ("BST"), which will typically contain at least the local broadcast
stations and Public Access, Educational and Government ("PEG") channels.
Equipment rates are also regulated by LFAs. The FCC retains appeal
jurisdiction from LFA decisions. Cable services offered on a per-channel or
per-program-only basis remain unregulated.
The 1996 Telecom Act eliminates CPST rate regulation for the Company
as of March 31, 1999. In the interim, CPST rate regulation can be triggered
only by an LFA complaint to the FCC. An LFA complaint must be based upon more
than one subscriber complaint. Prior to the 1996 Telecom Act, an FCC review of
CPST rates could be occasioned by a single subscriber complaint to the FCC.
The 1996 Telecom Act does not disturb existing or pending CPST rate settlements
between the Company and the FCC. The Company's BST rates remain subject to LFA
regulation under the 1996 Telecom Act.
Existing law precludes rate regulation wherever a cable operator faces
"effective competition." The 1996 Telecom Act expands the definition of
effective competition to include any franchise area where a local exchange
carrier (or affiliate) provides video programming services to subscribers by
any means other than through direct broadcast satellite. There is no
penetration minimum for the local exchange carrier to qualify as an effective
competitor, but it must provide "comparable" programming services (12 channels
including some broadcast channels) in the franchise area.
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Under the 1996 Telecom Act, the Company will be allowed to aggregate
on a franchise, system, regional or company level, its equipment costs into
broad categories, such as converter boxes, regardless of the varying levels of
functionality of the equipment within each such broad category. The 1996
Telecom Act will allow the Company to average together costs of different
types of converters (including non-addressable, addressable, and digital). The
statutory changes will also facilitate the rationalizing of equipment rates
across jurisdictional boundaries. These cost-aggregation rules do not apply
to the limited equipment used by "BST-only" subscribers.
Cable Uniform Rate Requirements. The 1996 Telecom Act immediately
relaxes the "uniform rate" requirements of the 1992 Cable Act by specifying
such requirements do not apply where the operator faces "effective
competition," and by exempting bulk discounts to multiple dwelling units,
although complaints about "predatory" pricing may be made to the FCC. Upon a
prima facie showing that there are reasonable grounds to believe that the
discounted price is predatory, the cable system operator will have the burden
of proving otherwise.
System Sales. The 1996 Telecom Act changes the definition of a "cable
system" so that competitive providers of video services will only be regulated
and franchised as a cable system if they use public rights-of-way.
Cable Pole Attachments. Under the 1996 Telecom Act, investor-owned
utilities must make poles and conduits available to cable systems under
delineated terms. Electric utilities are given the right to deny access to
particular poles on a nondiscriminatory basis for lack of capacity, safety,
reliability, and generally accepted engineering purposes. The current method
for determining rates charged by telephone and utility companies for cable
delivery of cable and non-cable services will continue for five years.
However, the FCC will establish a new formula for poles used by cable operators
for telecommunications services which will result in higher pole rental rates
for cable operators. Any increases pursuant to this formula may not begin for
5 years and will be phased in in equal increments over years 5 through 10.
This new FCC formula does not apply in states which certify they regulate pole
rents. Pole owners must impute pole rentals to themselves if they offer
telecommunications or cable services. Cable operators need not pay future
"make-ready" on poles currently contracted if the make-ready is required to
accommodate the attachments of another user, including the pole owner.
Cable Entry Into Telecommunications. The 1996 Telecom Act declares
that no state or local laws or regulations may prohibit or have the effect of
prohibiting the ability of any entity to provide any interstate or intrastate
telecommunications service. States are authorized to impose "competitively
neutral" requirements regarding universal service, public safety and welfare,
service quality, and consumer protection. The 1996 Telecom Act further
provides that cable operators and affiliates providing telecommunications
services are not required to obtain a separate franchise from LFAs for such
services. The 1996 Telecom Act prohibits LFAs from requiring cable operators
to provide telecommunications service or facilities as a condition of a grant
of a franchise, franchise renewal, or franchise transfer, except that LFAs can
seek "institutional networks" as part of such franchise negotiations.
The 1996 Telecom Act clarifies that traditional cable franchise fees
may only be based on revenues related to the provision of cable television
services. However, when cable operators provide telecommunications services,
LFAs may require reasonable, competitively neutral compensation for management
of the public rights-of-way.
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To facilitate the entry of new telecommunications providers (including
cable operators), the 1996 Telecom Act imposes interconnection obligations on
all telecommunications carriers. All carriers must interconnect their networks
with other carriers and may not deploy network features and functions that
interfere with interoperability. Existing local exchange carriers ("LECs")
also have the following obligations: (1) good faith negotiation with those
seeking interconnection; (2) unbundling, equal access and non-discrimination
requirements; (3) resale of services, including "resale at wholesale rates"
(with an exception for certain low-priced residence services to business
customers); (4) notice of changes in the network that would affect
interconnection and interoperability; and (5) physical collocation unless shown
that practical technical reasons, or space limitations, make physical
collocation impractical. The FCC has six months to "complete all actions
necessary to establish regulations" needed to effectuate this section. The
1996 Telecom Act also directs the FCC, within one year of enactment, to adopt
regulations for existing LECs to share infrastructure with qualifying carriers.
Under the 1996 Telecom Act, individual interconnection rates must be
just and reasonable, based on cost, and may include a reasonable profit. Cost
of interconnection will not be determined in a rate of return proceeding.
Traffic termination charges shall be "mutual and reciprocal." The 1996 Telecom
Act contemplates that interconnection agreements will be negotiated by the
parties and submitted to a state public service commission ("PSC") for
approval. A PSC may become involved, at the request of either party, if
negotiations fail. If the state regulator refuses to act, the FCC may
determine the matter. If the PSC acts, an aggrieved party's remedy is to file
a case in federal district court.
The 1996 Telecom Act requires that all telecommunications providers
(including cable operators that provide telecommunications services) must
contribute equitably to a Universal Service Fund ("USF"), although the FCC may
exempt an interstate carrier or class of carriers if their contribution would
be minimal under the USF formula. The 1996 Telecom Act allows states to
determine which intrastate telecommunications providers contribute to the USF.
The purpose of the USF is to provide consumers in all regions, including
low-income consumers and those consumers in rural, insular and high-cost areas,
access to telecommunications and information services that are reasonably
comparable to those services in urban areas at reasonably comparable rates.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act
allows telephone companies to compete directly with cable operators by
repealing the telephone company-cable cross-ownership ban and the FCC's video
dialtone regulations. This will allow LECs, including the regional bell
operating companies, to compete with cable operators both inside and outside
their telephone service areas. If a LEC provides video via radio waves, it is
subject to broadcast jurisdiction. If a LEC provides common carrier channel
service it is subject to common carrier jurisdiction. A LEC providing video
programming to subscribers is otherwise regulated as a cable operator
(including franchising, leased access, and customer service requirements),
unless the LEC elects to provide its programming via an "open video system."
LEC owned programming services will also be fully subject to program access
requirements.
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The 1996 Telecom Act replaces the FCC's video dialtone rules with an
"open video system" ("OVS") plan by which LECs can provide cable service in
their telephone service area. LECs complying with the FCC OVS regulations will
receive relaxed oversight. The 1996 Telecom Act requires the FCC to act on any
such OVS certification within ten days of its filing. Only the program access,
negative option billing prohibition, subscriber privacy, EEO, PEG, must-carry
and retransmission consent provisions of the Communications Act of 1934, as
amended, will apply to LECs providing OVS. Franchising, rate regulation,
consumer service provisions, leased access and equipment compatibility will not
apply. Cable copyright provisions will apply to programmers using OVS. LFAs
may require OVS operators to pay "franchise fees" only to the extent that the
OVS provider or its affiliates provide cable services over the OVS. OVS
operators will be subject to LFA general right-of-way management regulations.
Such fees may not exceed the franchise fees charged to cable operators in the
area, and the OVS provider may pass through the fees as a separate subscriber
bill item.
The 1996 Telecom Act requires the FCC to adopt, within six months,
regulations prohibiting an OVS operator from discriminating among programmers,
and ensuring the OVS rates, terms, and conditions for service are reasonable
and nondiscriminatory. Further, the FCC is to adopt regulations prohibiting a
LEC-OVS operator, or its affiliates, from occupying more than one-third of the
system's activated channels when demand for channels exceeds supply, although
there are no numeric limits. The 1996 Telecom Act also mandates OVS
regulations governing channel sharing; extending the FCC's sports exclusivity,
network nonduplication, and syndex regulations; and controlling the positioning
of programmers on menus and program guides. The 1996 Telecom Act does not
require LECs to use separate subsidiaries to provide incidental interLATA video
or audio programming services to subscribers or for their own programming
ventures.
While there remains a general prohibition on LEC buyouts of cable
systems (any ownership interest exceeding 10 percent), cable operator buyouts
of LEC systems, and joint ventures between cable operators and LECs in the same
market, the 1996 Telecom Act provides exceptions. A rural exemption permits
buyouts where the purchased system serves an area with fewer than 35,000
inhabitants outside an urban area. Where a LEC purchases a cable system, that
system plus any other system in which the LEC has an interest may not serve 10%
or more of the LEC's telephone service area. Additional exceptions are also
provided for such buyouts. The 1996 Telecom Act also provides the FCC with the
power to grant waivers of the buyout provisions in cases where (1) the cable
operator or LEC would be subject to undue economic distress, (2) the system or
facilities would not be economically viable, or (3) the anticompetitive effects
of the proposed transaction are clearly outweighed by the effect of the
transaction in meeting community needs. The LFA must approve any such waiver.
Electric Utility Entry Into Telecommunications/Cable Television. The
1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating
authority. It is anticipated that large utility holding companies will become
significant competitors to both cable television and other telecommunications
providers.
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Cross-Ownership and Must Carry. The 1996 Telecom Act eliminates
broadcast/cable cross-ownership restrictions (including broadcast network/cable
restrictions), but leaves in place FCC regulations prohibiting local
cross-ownership between television stations and cable systems. The FCC is
empowered by the 1996 Telecom Act to adopt rules to ensure carriage, channel
positioning and non-discriminatory treatment of non-affiliated broadcast
stations by cable systems affiliated with a broadcast network. The SMATV and
MMDS cable cross-ownership restrictions have been eliminated for cable
operators subject to effective competition.
The 1996 Telecom Act preserves must carry rights for local television
broadcasters, and clarifies that the geographic scope of must carry is to be
based on commercial publications which delineate television markets based on
viewing patterns. The FCC is directed to grant or deny must carry requests
within 120 days of a complaint being filed with the FCC.
Cable Equipment Compatibility and Scrambling Requirements. The 1996
Telecom Act directs an FCC equipment comparability rulemaking emphasizing that
(1) narrow technical standards, mandating a minimum degree of common design
among televisions, VCRs, and cable systems, and relying heavily on the open
marketplace, should be pursued; (2) competition for all converter features
unrelated to security descrambling should be maximized; and (3) adopted
standards should not affect unrelated telephone and computer features. The
1996 Telecom Act directs the FCC to adopt regulations which assure the
competitive availability of converters ("navigation devices") from vendors
other than cable operators. The 1996 Telecom Act provides that the FCC's rules
may not impinge upon signal security concerns or theft of service protections.
Waivers will be possible where the cable operator shows the waiver is necessary
for the introduction of new services. Once the equipment market becomes
competitive, FCC regulations in this area will be terminated.
The 1996 Telecom Act requires cable operators, upon subscriber
request, to fully scramble or block at no charge the audio and video portion of
any channel not specifically subscribed to by a household. Further, the 1996
Telecom Act provides that sexually explicit programming must be fully scrambled
or blocked. If the cable operator cannot fully scramble or block its signal,
it must restrict transmission to those hours of the day when children are
unlikely to view the programming.
Cable Provision of Internet Services. Transmitting indecent material
via the Internet is made criminal by the 1996 Telecom Act. However, on-line
access providers are exempted from criminal liability for simply providing
interconnection service; they are also granted an affirmative defense from
criminal or other action where in "good faith" they restrict access to indecent
materials. The 1996 Telecom Act further exempts on-line access providers from
civil liability for actions taken in good faith to restrict access to obscene,
excessively violent or otherwise objectionable material.
Pre-existing Federal Regulation. The 1984 Cable Act and 1992 Cable
Act extensively regulated the cable television industry and the vast majority
of that regulation remains unchanged by the 1996 Telecom Act. Among other
things, the 1984 Cable Act (a) requires cable television systems with 36 or
more "activated" channels to reserve a percentage of such channels for
commercial use by unaffiliated third parties; (b) permits franchise authorities
to require the cable operator to provide channel capacity, equipment and
facilities for public, educational and governmental access; and (c) regulates
the renewal of franchises.
The 1992 Cable Act greatly expanded federal and local regulation of
the cable television industry. The Company believes that the 1992 Cable Act
taken as a whole has had and will continue to have a material adverse impact
upon the cable industry in general and upon the Company's cable operations
specifically. See related discussion under the caption Management's Discussion
and Analysis of Financial Condition and Results of Operations. Certain of the
more significant areas of regulation imposed by the 1992 Cable Act are
discussed below.
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Regulation of Program Licensing. The 1992 Cable Act directed the FCC
to promulgate regulations regarding the sale and acquisition of cable
programming between multichannel video program distributors (including cable
operators) and programming services in which a cable operator has an
attributable interest. The legislation and the implementation regulations
adopted by the FCC preclude most exclusive programming contracts (unless the
FCC first determines the contract serves the public interest) and generally
prohibit a cable operator which has an attributable interest in a programmer
from improperly influencing the terms and conditions of sale to unaffiliated
multichannel video program distributors. Further, the 1992 Cable Act requires
that such cable affiliated programmers make their programming services
available to cable operators and competing video technologies such as MMDS and
DBS, and to telephone company providers of video services, on terms and
conditions that do not unfairly discriminate among such competitors.
Regulation of Carriage of Programming. Under the 1992 Cable Act, the
FCC adopted regulations prohibiting cable operators from requiring a financial
interest in a program service as a condition to carriage of such service,
coercing exclusive rights in a programming service or favoring affiliated
programmers so as to restrain unreasonably the ability of unaffiliated
programmers to compete.
Regulation of Cable Service Rates. The 1992 Cable Act subjected the
Company's cable systems to rate regulation, except in those cases where they
face "effective competition". The FCC was required to establish standards and
procedures governing regulation of rates for basic cable service, equipment and
installation, which were then to be implemented by state and local franchising
authorities. The 1992 Cable Act also required the FCC, upon complaint from a
franchising authority or a cable subscriber, to review the "reasonableness" of
rates for CPSTs. The 1996 Telecom Act amended the 1992 Cable Act to allow only
LFAs to file complaints. Services offered on an individual basis, such as pay
television and pay-per-view services, were not subject to rate regulation.
On April 1, 1993, the FCC adopted rate regulations governing virtually
all cable systems. Such regulations were revised on February 22, 1994. Under
such regulations, existing basic and tier service rates typically are evaluated
against "benchmark" rates established by the FCC and subject to mandatory
reductions. Equipment and installation charges are regulated based on "actual
costs". As noted above, the 1996 Telecom Act provides that rate regulation of
the CPST automatically sunsets on March 31, 1999.
The FCC also allowed cable operators to justify rates under "cost of
service" rules, which allow "high cost" systems to establish rates in excess of
the benchmark level. The FCC's interim cost of service rules allowed a cable
operator to recover through rates for regulated cable services its normal
operating expenses plus a rate of return equal to 11.25 percent on the rate
base. However, the FCC significantly limited the inclusion in the rate base of
acquisition costs in excess of the book value of tangible assets. As a result,
the Company pursued cost of service justifications in only a few cases. On
December 15, 1995, the FCC adopted slightly more favorable cost of service
rules.
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The FCC's rate regulations generally permit cable operators to adjust
rates to account for inflation and increases in certain external costs,
including programming costs, to the extent such increases exceed the rate of
inflation. However, a cable operator may pass through increases in the cost of
programming services affiliated with such cable operator to the extent such
costs exceed the rate of inflation only if the price charged by the programmer
to the affiliated cable operator reflects either prevailing prices offered in
the marketplace by the programmer, to unaffiliated third parties or the fair
market value of the programming. The FCCs revised regulations confirm that
increases in pole attachment fees ordinarily will not be accorded external cost
treatment. The FCC recently adopted a method for recovering external costs and
inflation on an annual basis. The new method minimizes the need for frequent
rate adjustments and the regulatory lag problems associated with the previous
rate adjustment methodology.
The regulations also provide mechanisms for adjusting rates when
regulated tiers are affected by channel additions or deletions. Additional
programming costs resulting from channel additions can be accorded the same
external treatment as other program costs increases, and cable operators
presently are permitted to recover a mark-up on their programming expenses.
Under one option, operators are allowed a flat ($.20) fee increase per channel
added to an existing CPST, with an aggregate cap on such increases ($1.20) plus
a license fee reserve ($.30) through 1996. In 1997, an additional flat ($.20)
fee increase will be available, and the license fees for additional channels
and for increases in existing channels will no longer be subject to the
aggregate cap. This optional approach for adding services is scheduled to
expire on December 31, 1997.
The FCC adopted additional rules that permit channels of new
programming services to be added to cable systems in a separate new product
tier which the FCC has determined will not be rate regulated at this time. The
FCC has also adopted rules allowing operators to raise rates based on costs
incurred in connection with a substantial upgrade of the cable system. The FCC
provided additional rate relief for small operators that is not applicable to
the Company, except to the extent it acquires systems already eligible for this
favorable treatment.
The Company reduced many of its existing rates and has limited rate
increases to those increases allowed by FCC regulations. Such actions have had
a material adverse effect on the operating income of the Company's cable
systems. Many of these rate regulations are subject to change during the
course of ongoing proceedings before the FCC.
The Company has negotiated a rate settlement with the FCC which
promises to resolve all liability for alleged overcharges in past CPST rates
and to approve all existing CPST charges as of September 15, 1995. Under the
terms of the proposed settlement (which is still awaiting final action by the
FCC), the Company generally would provide a one time credit to each subscriber
in a CPST regulated community. The aggregate amount of such credits is
approximately $9 million.
Regulation of Customer Service. As required by the 1992 Cable Act,
the FCC has adopted comprehensive regulations establishing minimum standards
for customer service and technical system performance. Franchising authorities
are allowed to enforce stricter customer service requirements than the FCC
standards.
Regulation of Carriage of Broadcast Stations. The 1992 Cable Act
granted broadcasters a choice of "must carry" rights or "retransmission
consent" rights. By October of 1993, cable operations were required to secure
permission from broadcasters that elected retransmission consent rights before
retransmitting the broadcasters' signals. Local and distant broadcasters can
require cable operators to make a payment as a condition to carriage of such
broadcasters' station on a cable system. (Established "superstations" were not
granted such rights.)
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The 1992 Cable Act also imposed obligations to carry "local" broadcast
stations for such stations which chose a "must carry" right, as distinguished
from the "retransmission consent" right described above. The rules adopted by
the FCC generally provided for mandatory carriage by cable systems of all local
full-power commercial television broadcast signals selecting must carry,
including the signals of stations carrying home-shopping programming and,
depending on a cable system's channel capacity, non-commercial television
broadcast signals. The United States Supreme Court is currently reviewing the
constitutionality of the must carry regulations.
Ownership Regulations. The 1992 Cable Act required the FCC to (1)
promulgate rules and regulations establishing reasonable limits on the number
of cable subscribers which may be served by a single multiple system cable
operator or entities in which it has an attributable interest, (2) prescribe
rules and regulations establishing reasonable limits on the number of channels
on a cable system that will be allowed to carry programming in which the owner
of such cable system has an attributable interest, and (3) consider the
necessity and appropriateness of imposing limitations on the degree to which
multichannel video programming distributors (including cable operators) may
engage in the creation or production of video programming. On September 23,
1993, the FCC adopted regulations establishing a 30% limit on the number of
homes nationwide that a cable operator may reach through cable systems in which
it holds an attributable interest, (attributable for these purposes is defined
as a 5% or greater ownership interest or the existence of any common directors)
with an increase to 35% if the additional cable systems are minority
controlled. However, the FCC stayed the effectiveness of its ownership limits
pending the appeal of a September 16, 1993 decision by the United States
District Court for the District of Columbia which, among other things, found
unconstitutional the provision of the 1992 Cable Act requiring the FCC to
establish such ownership limits. If the ownership limits are determined on
appeal to be constitutional, they may affect the Company's ability to acquire
interests in additional cable systems.
On September 23, 1993, the FCC also adopted regulations limiting
carriage by a cable operator of national programming services in which that
operator holds an attributable interest (using the same attribution standards
as were adopted for its limits on the number of homes nationwide that a cable
operator may reach through its cable systems) to 40% of the first 75 activated
channels on each of the cable operator's systems. The rules provide for the
use of two additional channels or a 45% limit, whichever is greater, provided
that the additional channels carry minority controlled programming services.
The regulations also grandfather existing carriage arrangements which exceed
the channel limits, but require new channel capacity to be devoted to
unaffiliated programming services until the system achieves compliance with the
regulations. Channels beyond the first 75 activated channels are not subject
to such limitations, and the rules do not apply to local or regional
programming services.
In the same rulemaking, the FCC concluded that additional restrictions
on the ability of multichannel distributors to engage in the creation or
production of video programming presently are unwarranted.
Under the 1992 Cable Act and the FCC's regulations, a cable operator
may not hold a license for a MMDS system within the same geographic area in
which it provides cable service. The 1996 Telecom Act would allow such
ownership if effective competition exists in that geographic area.
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The 1992 Cable Act contains numerous other provisions which together
with the 1984 Cable Act create a comprehensive regulatory framework. Violation
by a cable operator of the statutory provisions or the rules and regulations of
the FCC can subject the operator to substantial monetary penalties and other
significant sanctions such as suspension of licenses and authorizations,
issuance of cease and desist orders, and imposition of penalties that could be
of severe consequence to the conduct of a cable operator's business. Many of
the specific obligations imposed on the operation of cable television systems
under these laws and regulations are complex, burdensome and increase the
Company's cost of doing business.
In the normal course of its business, the Company obtains licenses
from the FCC for two-way communications stations, and in certain cases,
microwave relay stations and other facilities. Based upon its experience and
knowledge with the renewal process, the Company has no reason to believe that
such licenses will not be renewed as they expire.
Pursuant to lease agreements with local public utilities, the cable
facilities in the Company's cable television systems are generally attached to
utility poles or are in underground ducts controlled by the utility owners.
The rates and conditions imposed on the Company for such attachments or
occupation of utility space are generally subject to regulation by the FCC or,
in some instances, by state agencies, and are subject to change. As described
above, the 1996 Telecom Act significantly revises the regulation of pole
attachment rates and access.
Copyright Regulations. The Copyright Revision Act of 1976 (the
"Copyright Act") provides cable television operators with a compulsory license
for retransmission of broadcast television programming without having to
negotiate with the stations or individual copyright owners for retransmission
consent for the programming. The availability of the compulsory license is
conditioned upon the cable operators' compliance with applicable FCC
regulations, certain reporting requirements and payment of appropriate license
fees, including interest charges for late payments, pursuant to the schedule of
fees established by the Copyright Act and regulations promulgated thereunder.
The Copyright Act also empowers the Copyright Office to periodically review and
adjust copyright royalty rates based on inflation and/or petitions for
adjustments due to modifications of FCC rules. The FCC has recommended to
Congress the abolition of the compulsory license for cable television carriage
of broadcast signals, a proposal that has received substantial support from
members of Congress. Any material change in the existing statutory copyright
scheme could significantly increase the costs of programming and be adverse to
the business interests of the Company.
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<PAGE> 24
State and Local Regulation. Cable television systems are generally
licensed or "franchised" by local municipal or county governments and, in some
cases, by centralized state authorities with such franchises being given for
fixed periods of time subject to extension or renewal largely at the discretion
of the issuing authority. The specific terms and conditions of such franchises
vary significantly depending on the locality, population, competitive services,
and a host of other factors. While this variance takes place even among
systems of essentially the same size in the same state, franchises generally
are comprehensive in nature and impose requirements on the cable operator
relating to all aspects of cable service including franchise fees, technical
requirements, channel capacity, subscriber rates, consumer and service
standards, "access" channel and studio facilities, insurance and penalty
provisions and the like. Local franchise authorities generally control the
sale or transfer of cable systems to third parties. The franchising process,
like the federal regulatory climate, is highly politicized and no assurances
can be given that the Company's franchises will be extended or renewed or that
other problems will not be engendered at the local level. In connection with
the franchise renewal process, LFAs commonly request the provision of enhanced
cable system technology as a condition to franchise renewal. The 1984 Cable
Act grants certain protective procedures in connection with renewal of cable
franchises, which procedures were further clarified by the renewal provisions
of the 1992 Cable Act.
Proposed Changes in Regulation. The regulation of cable television
systems at the federal, state and local levels is subject to the political
process and has been in constant flux over the past decade. Material changes
in the law and regulatory requirements must be anticipated and there can be no
assurance that the Company's business will not be affected adversely by future
legislation, new regulation or deregulation.
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PROGRAMMING SERVICES
Liberty Media Group, through Liberty Media Corporation ("Liberty") its
subsidiaries and affiliates, is an investor in and manager of entities engaged
in the production, acquisition and distribution through all available formats
and media, including cable television systems, broadcast television stations,
C-Band home satellite dishes ("HSDs"), direct broadcast satellite ("DBS"),
on-line and interactive services, home video and traditional retail outlets, of
branded entertainment and informational programming and software, including
multimedia products, delivered in both analog and digital form. The various
entertainment and information programming and programming-related businesses in
which Liberty Media Group has interests fall into five categories: movie
services; general entertainment and information services; sports programming
services; broadcasting; and electronic retailing, which includes direct
marketing, advertising sales relating to programming services, infomercials and
transaction processing.
The following table sets forth Liberty Media Group's programming
interests which are held directly and indirectly through partnerships, joint
ventures, common stock investments and instruments convertible into common
stock. Ownership percentages in the table are approximate, calculated as of
March 15, 1996 and, where applicable, assume conversion to common stock by the
Company and, to the extent known by the Company, other holders. In some cases,
Liberty Media Group's interest may be subject to buy/sell procedures,
repurchase rights or, under certain circumstances, dilution.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SUBSCRIBERS AT LIBERTY MEDIA GROUP
12/31/95 SUBSCRIBERS AT 12/31/94 ATTRIBUTED
ENTITY (000'S) (000'S) YEAR LAUNCHED OWNERSHIP %
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MOVIE SERVICES
Encore Media Corporation 90%
Encore 7,468 5,405 1991
Encore Plus 475 N/A 1995
Love Stories 860 304 1994
Westerns 1,517 304 1994
Mystery 1,515 304 1994
Action 834 185 1994
True Stories & Drama 832 180 1994
WAM! America's Youth 833 185 1994
STARZ! 3,187 1,348 1994 48%(1)
Request TV 32,242(2) 23,853(2) 1985 40%(3)
Viewer's Choice 38,404(2) 26,386(2) 1985 10%
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SUBSCRIBERS AT LIBERTY MEDIA GROUP
12/31/95 SUBSCRIBERS AT 12/31/94 ATTRIBUTED
ENTITY (000'S) (000'S) YEAR LAUNCHED OWNERSHIP %
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ENTERTAINMENT AND INFORMATION SERVICES
Court TV 20,646 15,550 1991 33%(3)
BET Holdings, Inc. (NYSE-BTV) 22%
BET Cable Network 44,234 40,282 1980
BET Action 7,200(2) 6,571(2) 1990
Pay-Per-View
BET on Jazz N/A N/A 1996
Discovery Communications, Inc. 49%
The Discovery Channel 66,534 61,500 1985
The Learning Channel 43,248 31,500 1980
Discovery Asia 1,441 462 1994
Discovery Europe 11,075 9,100 1989
TLC Europe (4) (4) 1991
Discovery Latin America 4,988 2,900 1994
Discovery Channel Online N/A(15) N/A 1995
DMX Inc. (Nasdaq-TUNE) 11%(3)
DMX 18,250(2) 16,500(2) 1991
E! Entertainment Television 37,300 26,792 1990 10%(3)
International Family Entertainment, Inc. (NYSE-FAM) 20%
The Family Channel 62,000 58,800 1977
FIT TV 5,610 1,002 1993
The Family Channel UK(5) 826(6) 402(6) 1993
The Family Channel de Las 34 N/A 1995
Americas
International Channel 7,062 5,839 1990 45%
Faith & Values Channel 25,354 21,957 1993 49%
Turner Broadcasting Systems, Inc. (AMEX-TBS/A; TBS/B) 23%(3)
CNN 67,200 62,800 1980
Cartoon Network 22,400 12,100 1992
Headline News 59,300 54,200 1982
TNT 66,100 60,800 1988
Turner Classic Movies 7,800 3,200 1994
TBS SuperStation 67,100 62,100 1976
CNNfn N/A N/A 1996
CNN International 76,700 57,400 1995 (US)
International Entertain- 42,000(7) 28,000(7)
ment Networks
TNT Latin America 1991
Cartoon Network Latin
America 1993
TNT & Cartoon Network
Europe 1993
TNT & Cartoon Network
Asia 1994
</TABLE>
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<PAGE> 27
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SUBSCRIBERS AT LIBERTY MEDIA GROUP
12/31/95 SUBSCRIBERS AT 12/31/94 ATTRIBUTED
ENTITY (000'S) (000'S) YEAR LAUNCHED OWNERSHIP %
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ENTERTAINMENT AND INFORMATION SERVICES (CONT.)
Intro Television 7,341 6,900 1994 100%
Video Jukebox Network, Inc. (Nasdaq-JUKE) 5%
The Box 22,241 (US) 21,548 1985
792 (UK) 650 1992
SPORTS SERVICES
REGIONAL SPORTS NETWORKS
Home Team Sports 3,149 2,810 1984 20%(8)
Prime Sports-
Intermountain West 559 535 1990 100%
Prime Sports-KBL 2,310 1,623 1985 100%
Prime Sports-Midwest 670 300 1989 65%(3)(8)
Prime Sports-Northwest 2,299 2,188 1988 60%(3)
Prime Sports-Rocky
Mountain 1,690 1,525 1988 77%(8)
Prime Sports-Southwest 4,509 4,138 1983 65%(3)(8)
Prime Sports-West 4,560 4,170 1985 100%
SportsChannel Chicago 2,533 2,330 1984 50%(3)
SportsChannel Pacific 3,553 3,242 1990 50%(3)
SportsChannel 2,465 2,355 1983 22%(3)(8)
Philadelphia/PRISM
SportSouth Network 4,768 4,270 1990 44%(3)
Sunshine Network 3,582 3,380 1988 36.5%(3)(8)
NATIONAL SPORTS NETWORKS
Liberty Satellite Sports(9) 2,270 1,401 1989 65%(3)(8)
Prime Deportiva 1,524(10) 900(10) 1993 100%
Prime Network 50,325 45,947 1989 33%(3)(8)
NewSport 6,279 5,363 1994 33%(3)(8)
Prime Sports Showcase 1,917 1,800 1994 100%
INTERNATIONAL SPORTS PROGRAMMING
Prime Sports Australia 80 2 50%
Premier Sports Network 1995
Premier All-Star Sports 1995
Prime International 1,394 138
Prime Deportiva 1995 100%
Prime Network 1992 65%(3)(8)
BROADCASTING
Netlink USA 437 380 1987 100%
Netlink International 20 20
Silver King Communications, Inc. (Nasdaq-SKTV) 23%(11)
Silver King 28,000(12) 28,000(12) 1986
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SUBSCRIBERS AT LIBERTY MEDIA GROUP
12/31/95 SUBSCRIBERS AT 12/31/94 ATTRIBUTED
ENTITY (000'S) (000'S) YEAR LAUNCHED OWNERSHIP %
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRONIC RETAILING
Home Shopping Network, Inc. (NYSE-HSN) 41%(13)
HSN 69,189(14) 62,000(14) 1985
Spree! 12,000 N/A 1986
ISN N/A(15) N/A 1995
QVC Network 54,611 50,000 1986 43%(3)
Q2 13,031 11,568 1994
QVC-The Shopping 4,029 N/A 1993
Channel (UK)
iQVC N/A(15) N/A 1995
<CAPTION>
OTHER ASSETS
- --------------------------------------------------------------------------------------------------------
LIBERTY MEDIA GROUP
ASSET DESCRIPTION OWNERSHIP %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Americana Television Produces music and 66%
Productions LLC lifestyle programming
Asian Television and Hardware/software 46%
Communications International sales and consulting
LLC in China
MacNeil/Lehrer Productions News/Documentary 67%
Production
Southern Satellite Systems, Inc. Distribution of TBS 100%
SuperStation
signal (in the U.S.)
Royal Communications, Inc. Distribution of TBS 100%
SuperStation
signal (in Canada)
</TABLE>
(1) An entity attributed to TCI Group owns a 50.1% interest in Starz!.
(2) Number of subscribers to whom service is available.
(3) The interests of Liberty Media Group in these entities are presently
or will become subject to buy-sell procedures under which one owner
may initiate the procedure by giving notice setting forth a value for
the entity and the other owner(s) may then elect either to buy the
interest of the initiating owner or to sell their interests to the
initiating owner at a price equal to the value specified by the
initiating owner multiplied by the ownership percentage of the selling
partner.
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<PAGE> 29
(4) Included with Discovery Europe.
(5) Operated by a joint venture in which International Family
Entertainment, Inc. ("IFE") has a 61% interest and Flextech plc
("Flextech"), in which Tele-Communications International, Inc.
("TINTA") has a majority interest, has the remaining 39% interest. On
March 20, 1996, IFE announced that it had agreed to merge The Family
Channel (UK) into Flextech, in exchange for cash and Flextech
securities.
(6) Excludes satellite direct-to-home subscribers.
(7) Includes subscribers for TNT Latin America, Cartoon Network Latin
America, TNT & Cartoon Network Europe and TNT & Cartoon Network Asia.
(8) Includes an indirect interest attributed through Affiliated Regional
Communications, Ltd. in which Liberty Media Group owns a 65% interest.
(9) Distributor of Sports Programming to HSD and DBS markets.
(10) Includes subscriber numbers for La Cadena Deportiva, previously a
regional sports network, which is now a part of Prime Deportiva.
(11) Assumes exercise of an option (the "Option") to purchase 2,000,000
shares of Class B common stock at $1.75 per share, which shares would
constitute voting control of Silver King. Liberty has entered into an
agreement pursuant to which it has agreed to transfer its controlling
interest in HSN to Silver King in exchange for an additional interest
in Silver King. For a description of this transaction, see
description of Silver King in "Broadcasting" below.
(12) Number of television households in areas of Silver King's broadcast
stations.
(13) Liberty Media Group has 80% voting power. Liberty has entered into an
agreement pursuant to which it has agreed to transfer its interest in
HSN to Silver King. See description of transaction in "Broadcasting"
below.
(14) Includes broadcast households and cable subscribers.
(15) Internet service.
Movie Services. "Encore", which is produced and distributed by Encore
Media Corporation ("EMC"), primarily airs movies from the 1960s, 1970s and
1980s. As of December 31, 1995, the service was being offered by cable
operators and other distribution technologies to approximately 29.2 million
households, of which approximately 7.5 million subscribed to Encore. The
service is generally offered as a single premium service or in conjunction with
other programming services. In either case, the subscription price paid by the
subscriber for Encore is generally lower than the prices charged for other
premium movie services. During 1994, Encore launched six new thematic multiplex
services: Love Stories, Westerns, Mystery, Action, True Stories & Drama, and
WAM! America's Youth Network. Cable operators pay EMC a per subscriber fee for
the services. EMC obtains rights to air movies by entering into film licensing
agreements with the holders of distribution rights. EMC has entered into
agreements extending through 2005 with various distributors to exhibit certain
films. EMC has entered into various other agreements where license fees are
contingent on future production, sales and certain other criteria. As of
December 31, 1995, approximately 54% of Encore's total subscribers received the
service pursuant to an affiliation agreement with Satellite Services, Inc.
("SSI"), a wholly owned subsidiary of TCI Communications, Inc. ("TCIC"). SSI
purchases programming services from programming suppliers and then makes such
services available to TCIC's subsidiaries and affiliates.
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<PAGE> 30
Customers served by cable television systems eligible to purchase
programming services through SSI ("SSI Subscribers") represented approximately
22% of U.S. households which receive cable or satellite delivered programming
at December 31, 1995. Percentages of subscribers to the programming services in
which Liberty Media Group has an attributable interest that are SSI Subscribers
are provided below in the description of the service if they significantly
exceed 22%.
"STARZ!" is a first-run premium movie programming service which is
managed by EMC. As of December 31, 1995, STARZ! was offered by cable operators
and other multi-channel video distribution technologies to approximately 16.5
million subscribers, of which approximately 3.2 million elected to receive
STARZ!. Approximately 64% of the subscribers electing to receive STARZ! were SSI
Subscribers. STARZ! is operated and distributed by a partnership ("QE+") owned
29.9% by Liberty Starz, Inc. ("Liberty Starz"); 50.1% by TCI Starz, Inc.
("TCIS"), an entity included in TCI Group, and 20% by EMC.
The QE+ agreement provides that TCIS will be required to make special
capital contributions to QE+ through July 1, 2005, up to a maximum aggregate
capital contribution of $350 million (the "TCIS Contribution"). QE+ is
obligated to pay TCIS a preferred return of 10% per annum on the first $200
million of the TCIS Contribution beginning five years from the date of the
contribution or five years from January 1, 1996, whichever is later. Any amount
of the TCIS Contribution in excess of $200 million will be entitled to a
preferred return of 10% per annum from the date of the contribution. QE+ will
be required to apply 75% of its available cash flow (as defined) to repay the
TCIS Contribution and any preferred return payable thereon. To the extent QE+
has incremental cash requirements, TCIS and Liberty Starz will have the option
to fund 50.1% and 49.9%, respectively, of any such additional capital
requirements. EMC is paid a fee for managing the STARZ! service equal to 20% of
the "managed costs" (as defined) of the service.
In addition, effective July 1, 1995, Liberty Starz began earning a
"Content Fee" for certain services provided to QE+ equal to 4% of the gross
revenue of QE+, which was approximately $970,000 for the six months ended
December 31, 1995. The Content Fee agreement expires on June 30, 2001, subject
to renewal on an annual basis thereafter. Payment of the Content Fee is
subordinated to the repayment of the TCIS Contribution, including any preferred
return, and any other obligations of QE+ to its partners.
Liberty Media Group also has interests in "Request TV" and "Viewer's
Choice" which provide pay-per-view movies and pay-per-view events to cable
operators. Both Request TV and Viewer's Choice act as intermediaries between
movie studios and event promoters, on the one hand, and cable operators, on the
other hand, providing scheduling for movies to be sold on a pay-per-view basis,
satellite distribution of such movies, marketing and promotion, and, in some
instances, billing and collection services. For providing these services, they
are paid a negotiated percentage of pay-per-view revenue generated by their
respective affiliated cable operators.
Entertainment and Information Services. "Court TV" provides live
and/or tape delayed coverage and analysis of selected criminal and civil legal
proceedings. The Court TV service, which was launched in July of 1991, was
received by approximately 20.6 million subscribers at December 31, 1995,
approximately 28% of which were SSI Subscribers.
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<PAGE> 31
"BET Cable Network" is a cable television network whose programming
targets interests and concerns of African-Americans. The network's productions
include hosted music video programs and variety shows. Acquired programs
include situation comedies, soap operas, movies, gospel music programs and
sports and entertainment specials. "BET Action Pay-Per-View" is a pay-per-view
service which distributes films produced by BET Holdings, Inc. ("BET") and
feature films produced by major studios and independent film companies. BET on
Jazz was launched in January 1996 as a national programming service. BET on
Jazz programming embraces all forms of jazz and includes national and
international jazz festivals, jazz music videos, interviews, vintage concerts,
biographies, movies and documentaries. In December 1995, BET repurchased a
portion of its common stock beneficially owned by Time Warner, Inc. ("Time
Warner"). As a result, Liberty Media Group's ownership of BET increased from
approximately 18% to 22%.
The principal businesses of Discovery Communications, Inc.
("Discovery") are the advertiser-supported basic cable networks "Discovery
Channel" and "The Learning Channel". Discovery Channel provides nature, science
and technology, history, exploration and adventure programming and is
distributed to customers in virtually all U.S. cable homes. The Learning Channel
broadcasts a variety of educational and non-fiction programming. Through
internally generated funding, significant investments are being made by
Discovery in building a documentary programming library. Discovery is expanding
the Discovery brand name by establishing channels based in Europe, Latin America
and Asia, a substantial portion of the programming of which is drawn from
Discovery's own documentary programming library. During 1995, Discovery
continued to sell CD-ROMs, videos and other products based on its programming.
In 1995, Discovery augmented such efforts with the acquisition of Discovery
Store, Inc., a previously unrelated 14-store retail chain that sells nature and
science-themed products now under the name Discovery Channel Store.
In July 1995, Discovery launched Discovery Channel Online which
provides World Wide Web users with text, video and audio presentations in the
areas of science, nature, history and human adventure. Discovery recently
announced plans to launch five new networks to coincide with deployment of
digital set-top terminals in 1996.
DMX Inc. is primarily engaged in programming, distributing and
marketing a premium digital music service, DMX, which provides 24-hour per day,
commercial-free, CD quality music programming. DMX is delivered, for a monthly
per subscriber license fee, direct to cable operators by C-Band satellite for
distribution to residential and commercial cable subscribers. DMX is also
delivered by DBS to commercial subscribers and (since October 1995) residential
subscribers. Both cable and DBS subscribers receive DMX through a specially
designed tuner to their stereo systems. DMX is available in 30 different music
formats for cable distribution and in more than 90 different music formats for
DBS distribution. DMX also operates services in Canada, Europe, Israel, Central
and South America and Africa. Approximately 55% of DMX's domestic enabled
tuners are in the homes of SSI Subscribers.
On March 12, 1996, the stockholders of DMX Inc. approved a transaction
in which a subsidiary of TINTA would be merged with and into DMX Inc. As a
result of such transaction TINTA will receive approximately 10.8 million shares
of newly issued DMX Inc. Common Stock, reducing Liberty Media Group's interest
in DMX Inc. from approximately 14% to approximately 11%. Upon completion of the
transaction, TINTA will hold approximately 20% of DMX Inc.
"E! Entertainment Television" is a 24-hour network devoted to the world
of celebrities and entertainment. The network's programming mix includes
entertainment news reports, original programs and exclusive live coverage of
major awards shows and celebrity events.
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International Family Entertainment, Inc.'s ("IFE") principal business
is "The Family Channel", an advertiser-supported basic cable television
network that provides family oriented entertainment programming in the United
States. In addition, IFE owns MTM Entertainment, Inc., a producer and
worldwide distributor of television series and made-for-television movies and
the owner of a significant library of television programming. IFE also operates
The Family Channel (UK), an advertiser-supported network in the United Kingdom;
FIT TV, an advertiser-supported health and fitness cable network; "The Family
Channel de Las Americas", which provides Spanish language family-oriented and
fitness programming to Mexico, Central America and portions of South America;
and Calvin Gilmore Productions, a producer of live musical variety shows. On
March 20, 1996, IFE announced that it had agreed to merge The Family Channel
(UK) into Flextech. IFE will receive cash and shares of Flextech's convertible
redeemable non-voting stock in exchange for its interest in the network.
Flextech owns interests in or manages 13 cable networks in the UK.
On December 15, 1995, Liberty exchanged all of its IFE Convertible
Preferred Stock and all its IFE Class B Common Stock for non-voting IFE Class C
Common Stock. This transaction increased Liberty's equity interest in IFE from
approximately 18% to approximately 20% while reducing its voting power to zero.
The IFE Class C Common Stock is convertible into voting IFE Class B Common
Stock at any time.
"International Channel" is a basic cable service providing
multi-lingual programming in the U.S. The International Channel has announced
that it will begin development of 12 single language pay services designed
primarily to serve viewers who use English as their second language.
In July, 1995, Liberty Media Group acquired a 49% interest in "The
Faith & Values Channel," a national basic cable network reaching more than 26
million viewers through cable television and other forms of multi-channel
distribution. Approximately 29% of the Faith & Values Channel's viewers are SSI
Subscribers. The Faith & Values Channel is managed by representatives of the
National Interfaith Cable Coalition, a group of 64 U.S. denominations and faith
groups. The Channel aims to provide its viewers with non-denominational
religious and values-based entertainment and informational programming that
promotes values of love, justice, reconciliation and hope and introduces
perspectives of faith and values into public and civil discourse.
Turner Broadcasting System, Inc. ("TBS") is a diversified information
and entertainment company, which produces and distributes entertainment and news
programming worldwide, with operations in motion picture, animation, sports and
television production, home video, television syndication, licensing and
merchandising, and publishing. Through its subsidiaries, at December 31, 1995,
TBS owned and operated four domestic entertainment networks (TBS SuperStation,
Turner Network Television, Cartoon Network and Turner Classic Movies); four
International entertainment networks (TNT Latin America, Cartoon Network Latin
America, TNT & Cartoon Network Europe and TNT & Cartoon Network Asia); and four
news networks (Cable News Network, Headline News, Cable News Network
International and CNN Financial Network). On February 16, 1996, TBS and Time
Warner, Inc. ("Time Warner") announced plans to launch a 24-hour sports news
cable service, CNN-SI, in December 1996. TBS' involvement in the creation of
programming and the distribution of original and library product includes
ownership of three motion picture and television production companies (New Line
Cinema Corporation, Castle Rock Entertainment and Turner Pictures Worldwide,
Inc.); Hanna-Barbera, Inc. which is engaged primarily in the production of new
animation product; and two major copyright libraries (The Turner Entertainment
Co. library which contains films from MGM, RKO, pre-1950 Warner Bros, short
subjects, cartoons and television shows, and the Hanna-Barbera library
consisting of over 3,000 half hours of animation programming). TBS also has
ownership interests in two professional sports teams (the Atlanta Braves and the
Atlanta Hawks) and a regional sports network (SportSouth Network ("SportSouth"),
in which Liberty Media Group also has an interest).
On September 22, 1995, the boards of directors of Time Warner, and TBS
approved plans to merge their respective companies (the "TBS/Time Warner
Merger"). Under the terms of the agreement, TBS shareholders will receive 0.75
of a Time Warner common share for each TBS Class A and Class B common share.
Each holder of TBS Class C preferred stock will receive 0.80 of a Time Warner
common share for each of the 6 shares of TBS Class B common stock into which
each of the shares of Class C preferred stock may be converted. Liberty Media
Group will receive approximately 50.1 million shares of Time Warner common stock
in exchange for its TBS holdings.
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<PAGE> 33
Subject to certain conditions, Liberty Media Group has agreed to vote
its TBS shares for the TBS/Time Warner Merger. The Time Warner shares of
common stock received by Liberty Media Group will be exchanged immediately for
a series of voting common stock ("Time Warner Series Common Stock")
economically equivalent to the common stock and placed in a voting trust with
Gerald M. Levin, currently the Chairman of Time Warner, as the trustee.
Liberty Media Group's Time Warner Series Common Stock is being placed in a
voting trust to ensure compliance with FCC requirements.
In connection with the TBS/Time Warner Merger, TBS has agreed to sell
its interest in SportSouth, a regional sports cable network, to Liberty Media
Group for approximately $60 million. Time Warner has agreed to issue 5
million shares of Time Warner common stock to Liberty Media Group in exchange
for a 6-year option to purchase Southern Satellite Systems, Inc. ("Southern").
Time Warner has also agreed to issue additional shares of Time Warner Series
Common Stock to Liberty Media Group having a market value of $160 million in
the event it exercises such option. Any shares of Time Warner common stock
issuable in connection with the Southern option will be exchanged for Time
Warner Series Common Stock. Additionally, Time Warner will grant Liberty Media
Group an option to purchase Time Warner's interest in Sunshine Network, a
Florida-based sports cable network, for $14 million.
The TBS/Time Warner Merger is subject to, among other things, approval
by the FCC and regulatory review by federal antitrust authorities, and approval
by the shareholders of TBS and Time Warner.
Television" (formerly known as "tv! Network"), a 24-hour basic
cable service, features programming from new and existing cable networks which
are not widely distributed. Intro Television also previews premium and
pay-per-view services and showcases the latest developments in programming,
new technology and emerging interactive services. Intro Television is operated
as a promotional channel for use by TCIC's cable television systems and all of
Intro Television's subscribers are SSI Subscribers.
"The Box" is a viewer interactive music video service produced by
Video Jukebox Network, Inc. ("VJN") and offered through cable television
systems and low-power television stations. Viewers may select the music videos
they desire to watch by calling a designated 900 or 976 telephone number, in
which case they pay a fee to VJN for their selections. Alternatively, viewers
may passively view the music videos selected by others, in which case there is
no additional charge for the service. VJN has entered into revenue sharing
arrangements with cable operators who offer The Box as part of their basic
cable service. VJN also has operations in the United Kingdom.
Sports Programming Services. On October 31, 1995, Liberty Media Group
announced that it had entered into a binding agreement in principle with The
News Corporation Limited ("News Corp.") and TINTA to form alliances to own and
operate sports programming services world wide. In the United States, Liberty
Media Group and News Corp. agreed to form a partnership (the "Fox-Liberty
Venture") into which Liberty Media Group will contribute interests in its
national and regional sports networks and into which News Corp. will contribute
its "fx" cable network and certain other assets. Upon consummation, Liberty
Media Group will receive a 50% interest in the Fox-Liberty Venture and $350
million cash. The fx network will be transformed into a nationally distributed,
general entertainment and sports network. The regional sports networks
currently operated under the Prime Sports name will be relaunched under the Fox
Sports banner.
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Internationally, News Corp. and a 50/50 partnership formed by Liberty
Sports, Inc. ("Liberty Sports"), a wholly owned subsidiary of Liberty Media
Group, and TINTA (the "Liberty-TINTA Partnership") have agreed to form a joint
venture (the "International Venture") which will operate currently existing
sports services in Asia, Latin America and Australia and a variety of new
sports services throughout the world except in the United Kingdom, Japan and
New Zealand where prior arrangements preclude an immediate collaboration. The
Liberty-TINTA Partnership will own 50% of the International Venture with News
Corp. owning the other 50%. News Corp. is contributing various international
sports rights, including the Star Sports channel which is broadcast throughout
Asia as part of the Star package of services. The Liberty-TINTA Partnership is
contributing Prime Deportiva, a Spanish language sports service distributed in
Latin America and in Hispanic markets in the United States, an interest in
Torneos y Competencias S.A., an Argentinean sports programming and production
business, various international sports and satellite transponder rights and
cash. The Liberty-TINTA Partnership will also contribute its 50% interest in
Premier Sports and All-Star Sports in Australia. Both are 24-hour sports
services available via MMDS or cable television in Australia.
The transactions contemplated by the above agreements are expected to
close during 1996.
Regional Sports Programming Services. Liberty Media Group has varying
interests in several regional sports networks (the "Liberty Sports Networks"),
which acquire, develop, produce, syndicate and distribute sports programming of
primarily local and regional interest by satellite to cable television
operators, to other multi-channel video programming distributors, and to HSD
owners, in specified geographic areas. The following table sets forth for each
of the Liberty Sports Networks the year of launch, state service area and
significant teams with respect to whose games the network currently has
programming rights:
<TABLE>
<CAPTION>
Sports Network Year Launched Service Area Current Teams
-------------- ------------- ------------ -------------
<S> <C> <C> <C>
Prime Sports-Southwest 1983 AR, LA, Dallas Mavericks
NM, OK, Houston Aeros
TX Houston Astros
Houston Rockets
Dallas Stars
San Antonio Spurs
Big 12 Conference
Home Team Sports 1984 DC, DE, Baltimore Orioles
MD, NC, Washington Bullets
PA, VA, Washington Capitals
WV Colonial Conference
Atlantic 10 Conference
Atlantic Coast Conference
Prime Sports-KBL 1985 MD, NY Pittsburgh Penguins
WV Pittsburgh Pirates
University of Pittsburgh
Atlantic 10 Conference
Prime Sports-Intermountain West 1990 ID, MT, Utah Jazz
NV, UT,
WY
Prime Sports-Midwest 1989 IA, IL, St. Louis Cardinals
IN, MO St. Louis Blues
</TABLE>
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<PAGE> 35
<TABLE>
<CAPTION>
Sports Network Year Launched Service Area Current Teams
-------------- ------------- ------------ -------------
<S> <C> <C> <C>
Prime Sports-Northwest 1988 AK, ID, Seattle Mariners
MT, OR, Big Sky Conference
WA PAC-10 Conference
Oregon State University
University of Oregon
University of Washington
Washington State University
Prime Sports-Rocky Mountain 1988 CO, KS, Denver Nuggets
NE, NM Colorado Avalanche
SD, WY Colorado State University
University of New Mexico
Prime Sports-West 1985 AZ, CA, Los Angeles Lakers
HI, NV Los Angeles Kings
Anaheim Mighty Ducks
California Angels
San Diego Padres
PAC-10 Conference
University of Hawaii
San Diego State University
SportsChannel Chicago 1984 IA, IL, Chicago Blackhawks
IN, WI Chicago Bulls
Chicago White Sox
University of Notre Dame
SportsChannel Pacific 1990 CA, NV, Golden State Warriors
HI Oakland A's
San Francisco Giants
San Jose Sharks
PAC-10 Conference
Stanford University
University of Cal-Berkeley
SportsChannel Philadelphia/PRISM 1983 DE, NJ, Philadelphia Flyers
PA Philadelphia Phillies
Philadelphia 76ers
Atlantic 10 Conference
SportSouth Network 1990 AL, GA, Atlanta Braves
MS, NC, Atlanta Hawks
SC, TN Charlotte Hornets
Southeast Conference
Atlantic Coast Conference
Sunshine Network 1988 FL Orlando Magic
Florida State University
Tampa Bay Lightning
Florida Marlins
Florida Panthers
Miami Heat
</TABLE>
Liberty Sports has also entered into multi-year agreements for rights
to national distribution of certain sports events of the PAC-10 Conference, Big
12 Conference and Conference USA, which will be distributed in part through
regional sports networks and in part through other distribution media.
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<PAGE> 36
In November 1995, the Fox-Liberty Venture entered into a $47 million,
4-year non-exclusive agreement with Major League Baseball ("MLB"), commencing
with the 1997 regular season games, for 2 cable-exclusive nights per week for
26 weeks. MLB games may be carried on fx and/or the Liberty Sports Networks.
The Liberty Sports Networks derive revenue from two principal sources:
(1) fees paid by multichannel video programming distributors pursuant to
affiliation agreements entered into with the regional sports networks and (2)
the sale of advertising time to local, regional and national advertisers plus
infomercials. Each cable operator or other distributor is typically charged a
monthly fee per subscriber in its systems receiving the programming service,
which fees vary depending on whether the service is offered as a basic,
expanded basic or Pay-TV service and the proximity of the cable system to the
venue of the major sporting events distributed by the network. The affiliation
agreements generally provide for limited increases during their term in the
fees charged by the networks.
In addition to owning interests in and operating regional sports
networks, Liberty Sports also provides various services to affiliated and
non-affiliated networks. Liberty Sports, through Liberty Satellite Sports, acts
as a marketing agent to HSD owners and distributors to HSD owners for certain
of the regional sports networks with which it is affiliated. In addition,
Liberty Sports provides support services, such as master control and satellite
uplinking services, and certain program scheduling, post-production and editing
services, to certain of its affiliated networks.
Each of the Liberty Sports Networks sells advertising time to local,
regional and national advertisers. In general, each network's own sales force
markets and sells advertising time to local and regional advertisers, which
accounts for approximately 60% of the total advertising revenue. The remaining
40% of all advertising revenue is sold nationally through Liberty Sports Sales,
a national advertising group headquartered in New York. Advertising revenue as
a percentage of each network's total revenue varies from network to network,
with the more established networks generally deriving a greater percentage of
their revenue from advertising sales than the newer networks with fewer
subscribers.
The cost of acquiring sports programming rights is the principal
expense of the sports networks. The Liberty Sports Networks typically enter
into rights contracts with one or more professional sports teams in their
regions and acquire rights to collegiate sporting events through arrangements
with regional conferences, individual schools and programming syndicators. The
duration of the rights agreements with the professional teams ranges from one
to fifteen years, with most of the existing agreements having remaining terms
from two to four years. The rights contracts for collegiate sporting events
typically range from two to five years. Pursuant to the professional sports
rights agreements, the networks usually acquire the exclusive right to
distribute via cable and other forms of pay television, in their respective
regions, a specified number of games that are not subject to national cable or
broadcast contracts. In some cases, the contract requires the network to
exhibit a minimum number of games and permits exhibition of additional games,
up to a fixed maximum number. The arrangements with respect to collegiate
sports are more varied, but usually provide exclusive regional cable
distribution rights (other than via free over-the-air broadcast television) to
a specified number of events. Both professional and collegiate rights granted
under such agreements are generally subordinate to rights granted under league
or conference national broadcast and national cable contracts. The fee
arrangements for the rights granted to the networks under the professional and
collegiate sports agreements also vary from contract to contract. In most
cases, the contract provides for a charge per game or event, subject to limited
increases over the term of the contract, with either a minimum annual
exhibition requirement or a minimum payment requirement or both. In certain
recent cases a regional network has also acquired broadcast or radio rights to
professional teams or collegiate events and has sub-licensed such rights to
broadcast or radio distributors. Certain factors such as player strikes,
bankruptcy of leagues or individual teams, or team relocations may have an
adverse effect on the revenue of the Liberty Sports Networks.
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<PAGE> 37
The value of the exhibition rights granted under sports rights
contracts, and in some cases the financial commitments incurred thereunder, are
subject to certain contingencies that are not within the control of the
networks, such as the relocation of a professional team to a different region,
changes in the schools participating in a particular collegiate conference, the
terms of applicable national broadcast or cable contracts, and the rules and
regulations of the applicable professional or collegiate league, conference or
association.
The number of SSI Subscribers exceeds 22% of the subscribers of
several of the Liberty Sports Networks, ranging from 27% at Sportschannel
Chicago to 87% at Prime Sports-Intermountain West.
National Sports Programming Services. "Prime Network", a national
"backdrop" service distributed primarily to the Liberty Sports Networks and
other regional sports networks, consists of professional and collegiate sports
events and other sports programming not subject to territorial restrictions,
including college football, baseball and basketball games, professional tennis,
auto racing, soccer, golf, boxing and skiing. The term "backdrop" service is
used to distinguish between original programming produced by a regional sports
network and ancillary programming purchased by the regional sports network from
others, such as Prime Network, to supplement its programming service.
"NewSport" is a national service primarily dedicated to the production
and delivery of sports news and related programming. NewSport is distributed to
regional sports networks to be used as either a backdrop or a stand-alone
second service.
"Prime Sports Showcase" is generally offered as an expanded basic
service and is initially intended to showcase programming of "Prime Deportiva"
(a national Spanish language sports service), "Women's Sports Network" (a
national sports service concentrating on women's sports), "Press Box" (sports
news programming) and "Classic Sports Network" (nostalgic sports programs). At
December 31, 1995, Prime Sports Showcase was distributed to approximately 1.9
million subscribers all of which were SSI Subscribers.
Prime Deportiva is separately available on a full-time, 24-hour basis.
Prime Deportiva, which is generally offered as an expanded basic service or for
distribution on another acceptable tier, predominately features soccer and
boxing.
Liberty Sports also acts as a syndicator of sports events programming
to the broadcast television market.
International Sports Programming Services. Liberty Sports sells and
delivers certain programming internationally to satellite and cable programming
distributors in Asia, Europe and Latin America. Such programming consists of
U.S. domestic sports programming to which Liberty Sports has acquired
international distribution rights and of programming acquired outside the
United States.
In January 1995, and in partnership with Australia Sports Pty, Ltd.
("Australis"), Liberty Sports launched two sports programming services for
distribution in Australia and New Zealand--"Premier Sports Network" and
"Premier All-Star Sports". Liberty Sports produces and manages the services.
Premier Sports Network is currently delivered as part of a multi-channel pay
television package distributed by Australis, and Premier All Star Sports is
distributed by Australis to commercial establishments, primarily pubs.
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<PAGE> 38
Competition-Programming Companies. The business of distributing
pro-gramming for cable television is highly competitive. The number of channels
available to the average subscriber of a domestic cable television system is 60
or less. The various sports, entertainment and information programming
companies described above in which Liberty Media Group has interests (the
"Programming Companies") directly compete with other programming services for
distribution on a limited number of cable television channels and, when
distribution is obtained, the programming offered by the Programming Companies
competes, in varying degrees, for viewers and advertisers with other cable
programming services and off-air broadcast television, radio, print media,
motion picture theaters, video cassettes, internet services and other sources
of information and entertainment. Important competitive factors are the prices
charged for programming, the quantity, quality and variety of the programming
offered and effectiveness of marketing efforts. With the advent of new
compression technologies, which are intended to increase channel capacity,
competition for channel capacity may substantially decrease, although
additional competitors may have the opportunity to enter the marketplace. No
predictions can be made with respect to the viability of these technologies or
the extent to which they will ultimately impact the availability of channel
capacity.
In addition to competition for cable distributors, viewers and
advertisers, the Programming Companies also compete, to varying degrees, for
programming. With respect to the acquisition of sports programming rights, the
Programming Companies compete for national rights principally with the national
broadcast television networks; a number of national cable services that
specialize in or carry sports programming; television "superstations", which
distribute sports and other programming to cable television systems by
satellite; and with independent syndicators that acquire and resell such rights
nationally, regionally and locally. They also compete for local and regional
rights with those competitors, with local broadcast television stations and
with other local and regional sports networks. The owners of distribution
outlets such as cable television systems may also contract directly with the
sports teams in their service areas for the right to distribute a number of
such teams' games on their systems. Four professional sports leagues have each
entered into agreements with national DBS distribution outlets for the
distribution of selected league games, and three of the four leagues have
entered into such agreements with a second DBS distributor. With respect to
the acquisition of non-sports programming (such as syndicated programs and
movies) which is not produced by or specifically for the Programming Companies,
competitors include the national broadcast television networks, local broadcast
television stations, suppliers of pay-per-view programs and other cable program
suppliers.
As set forth in Regulation-Programming Companies below, the FCC's
"financial interest and syndication" rules had limited the ability of the three
major broadcast networks to distribute network programs through syndication to
broadcast stations and to acquire certain financial interests or domestic
syndication rights in first-run non-network programs. However, the FCC repealed
these rules in September 1995. Elimination of these restrictions could permit a
myriad of broadcast station/network production/exhibition arrangements, further
increasing competition to the Programming Companies in the acquisition and sale
of programming.
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<PAGE> 39
In a series of decisions, federal courts had invalidated the statute
prohibiting telephone companies from providing video programming and other
information directly to subscribers in their telephone service areas. Although
those decisions had been subject to review, telephone companies had begun to
invest in and/or form entities for the production and/or acquisition of
programming. Such entities will provide further competition to the Programming
Companies in the creation, acquisition and/or sale of programming. The 1996
Telecom Act eliminated that statutory prohibition and any remaining
uncertainty. Therefore telephone company investment in, development of, and/or
acquisition of programming may be expected to continue and to increase.
However, the provision of programming by telephone companies also should
increase the number of outlets and competition for programming sold by the
Programming Companies.
Satellite Transponder Agreements. The Programming Companies lease
satellite transponders under varying terms on both domestic and international
communications satellites. Domestic communications satellite transponders may
be leased full or part time on a "protected", "transponder protected" or
"unprotected" basis. When the carrier provides services to a customer on a
"protected" basis, replacement transponders are reserved on board the satellite
for use in the event the "protected" transponder fails. Should there be no
reserve transponders available, the "protected" customer will displace an
"unprotected" transponder customer on the same satellite. In certain cases, the
carrier also maintains a protection satellite and should a satellite fail
completely, all of the lessees' "protected" services would be moved to the
protection satellite. The customer who leases an "unprotected" transponder has
no reserve transponders available, and may have its service interrupted for an
indefinite period when its transponder is required to restore a "protected"
service.
The availability of replacement satellites and transponder time beyond
current leases is dependent on a number of factors over which Liberty Media
Group has no control, including competition among prospective users of
available transponders and the availability of satellite launching facilities
for replacement satellites. Many of the commercial satellites now in orbit
will have to be replaced in the next few years. The federal government has
placed restrictions on the launching of commercial satellites by means of the
space shuttle, causing manufacturers of commercial satellites to rely on
alternative delivery systems to place these satellites in orbit. Additional
domestic and foreign commercial launching facilities are being developed
currently, but there can be no assurance that the launch systems currently in
place, or to be developed, will be able to replace the domestic communications
satellites as their useful lives end.
Although the Company believes that the Programming Companies have
taken reasonable steps to ensure its continued satellite transmission
capability, there can be no assurance that termination or interruption of
satellite transmissions will not occur. Such a termination or interruption of
service by one or more of these satellites could have a material adverse
effect on the results of operations and financial condition of Liberty Media
Group.
Liberty Media Group anticipates that compressed digital video
transmission will be deployed commercially within the next several years. This
technology converts as many as ten analog signals (now used to transmit video
and voice) into a digital format and compresses such signals (which is
accomplished primarily by eliminating the redundancies in television imagery)
into the space normally occupied by one analog signal. The industry is
currently developing standards for sending and receiving compressed signals.
Several of Liberty Media Group's transponder leases provide the right to use
the transponders to provide compressed services. Use of compressed service may
result in greater transponder capacity.
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<PAGE> 40
Regulation-Programming Companies. The FCC regulates the providers of
satellite communications services and facilities for the transmission of
programming services, the cable television systems that carry such services and
to some extent the programming services themselves. Cable television systems
are also regulated by municipalities or other state and local government
authorities. Municipalities generally have the jurisdiction to grant and to
review the transfer of franchises, to review rates charged to subscribers, and
to require public, educational, governmental or leased-access channels, except
to the extent that such jurisdiction is preempted by federal law. Any such rate
regulation or other franchise conditions could place downward pressure on
subscriber fees earned by Liberty Media Group, and such regulatory carriage
requirements could adversely affect the number of channels available to carry
Liberty Media Group's networks.
The 1992 Cable Act expanded greatly the scope of federal and local
regulation. Liberty Media Group believes that the legislation taken as a whole
and as presently implemented is having a material adverse impact upon the cable
industry in general and upon Liberty Media Group's programming operations
specifically.
The 1996 Telecom Act, makes significant changes in the regulation of
and competition among telecommunications-related industries, including the cable
television industry. See "Regulation and Legislation - The Telecommunications
Act of 1996" above, for a more detailed summary of such changes. Among other
things, the 1996 Telecom Act eliminates the statutory prohibition of telephone
companies providing video programming in their service areas; establishes a
regulatory alternative for open video systems; eliminates rate regulation of
cable programming service tiers immediately for small cable systems and on March
31, 1999, for all cable systems; extends the program access and
anti-discrimination rules to satellite cable programming vendors owned by
telephone companies and other common carriers; and imposes closed- captioning
requirements for video programming. Many provisions of the 1996 Telecom Act
remain subject to implementation rulemaking proceedings by the FCC. Certain of
the more significant areas of regulation imposed by the 1992 Cable Act as
revised by the 1996 Telecom Act that relate to or may affect programming
operations are discussed below.
Regulation of Program Licensing. The 1992 Cable Act directed the FCC
to promulgate regulations regarding the sale and acquisition of cable
programming between multichannel video program distributors (including cable
operators) and programming services in which a cable operator has an
attributable interest. The legislation and the implementing regulations adopted
by the FCC preclude virtually all exclusive programming contracts between cable
operators and programmers affiliated with any cable operator (unless the FCC
first determines the contract serves the public interest) and generally
prohibit a cable operator which has an attributable interest in a programmer
from improperly influencing the terms and conditions of sale to unaffiliated
multichannel video distributors. Further, the 1992 Cable Act requires that such
affiliated programmers make their programming services available to cable
operators and competing video technologies such as MMDS and DBS services on
terms and conditions that do not unfairly discriminate among such technologies.
The 1996 Telecom Act has extended this requirement to programming services in
which telephone companies and other carriers have attributable ownership
interests.
Regulation of Carriage of Programming. Under the 1992 Cable Act, the
FCC has adopted regulations prohibiting cable operators from requiring a
financial interest in a program service as a condition to carriage of such
service, coercing exclusive rights in a programming service or favoring
affiliated programmers so as to restrain unreasonably the ability of
unaffiliated programmers to compete.
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Regulation of Cable Service Rates. Cable systems are subject to
extensive rate regulation as summarized above in "Regulations and Legislation -
Regulation of Cable Service Rates." The 1996 Telecom Act eliminates rate
regulation of CPSTs in all cable systems as of March 31, 1999. Such
comprehensive regulations include provisions controlling rate increases for
changes in costs, including programming costs, and for additional channels.
The FCC's rate regulations permit cable operators to adjust rates to
account for inflation and increases in certain external costs, including
increases in programming costs to the extent such increases exceed the rate of
inflation. On September 15, 1995, the FCC adopted an alternative methodology
for adjusting regulated rates to account for such cost increases and for the
costs of adding channels which provides cable operators with increased
flexibility to recover such costs. However, a cable operator may pass through
increases in the cost of programming services affiliated with such cable
operator to the extent such costs exceed the rate of inflation only if the
price charged by the programmer to the affiliated cable operator reflects
prevailing prices offered in the marketplace by the programmer to unaffiliated
third parties or the fair market value of the programming.
The 1992 Cable Act provides mechanisms for cable television systems to
adjust rates when regulated tiers are affected by channel additions or
deletions. Additional programming costs resulting from channel additions can
be accorded the same external treatment as other program costs increases, and
cable operators presently are permitted to recover a mark-up on their
programming expenses. Under one option, operators are allowed a flat ($.20)
fee increase per channel added to an existing CPST, with an aggregate cap on
such increases ($1.20) plus a license fee reserve ($.30) through 1996. In
1997, an additional flat ($.20) fee increase will be available, and the license
fees for additional channels and for increases in existing channels will no
longer be subject to the aggregate cap. This optional approach for adding
services is scheduled to expire on December 31, 1997. The aggregate cap and
flat fee mark-up elements of these regulations may adversely affect higher-cost
programming services, including the regional sports networks in which Liberty
Media Group has an ownership interest, while expanding the carriage of
programming services with lower license fees, including programming services in
which Liberty Media Group has an ownership interest.
The complexity of and numerous revisions to the FCC's rate regulations
have impaired the willingness and ability of cable operators to add programming
services and to invest in additional cable plant to expand channel capacity.
Consequently, the cumulative impact of the FCC's rate regulation is likely to
continue to have an adverse impact on Liberty Media Group's programming
interests.
Regulation of Carriage of Broadcast Stations. The 1992 Cable Act
granted broadcasters a choice of "must carry" rights or "retransmission
consent" rights. By October of 1993, cable operations were required to secure
permission from broadcasters that elected retransmission consent rights before
retransmitting the broadcasters' signals. Local and distant broadcasters can
require cable operators to make payment as a condition to carriage of such
broadcasters' station on a cable system. (Established "superstations" were not
granted such rights.) Alternatively, after October 6, 1993, commercial
broadcasters have the right to deny such carriage unless they grant
retransmission consent. HSN's full-time broadcast affiliates have all
requested "must carry" status in lieu of a retransmission fee.
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The 1992 Cable Act also imposed obligations to carry "local" broadcast
stations for such stations which chose a "must carry" right, as distinguished
from the "retransmission consent" right described above. The rules adopted by
the FCC generally provided for mandatory carriage by cable systems of all local
full-power commercial television broadcast signals selecting must carry and,
depending on a cable system's channel capacity, non-commercial television
broadcast signals. In July 1993, the FCC ruled that stations predominantly used
for the transmission of sales presentations or program-length commercials
operate in the public interest and are entitled to choose "must carry" status. A
petition for reconsideration of the FCC's ruling currently remains pending
before the FCC, which petition has been opposed by HSN. The United States
Supreme Court is currently reviewing the constitutionality of the must carry
regulations. The "must-carry" and "retransmission consent" statutory provisions
and regulations remain in effect pending the outcome of these ongoing judicial
proceedings. Such statutorily mandated expansion of carriage of broadcast
stations coupled with the provisions of the 1984 Cable Act, which require cable
television systems with 36 or more "activated" channels to reserve a percentage
of such channels for commercial use by unaffiliated third parties and permit
franchise authorities to require the cable operator to provide channel capacity,
equipment and facilities for public, educational and governmental access, could
adversely affect some or substantially all of the programming services in which
Liberty Media Group holds an interest by decreasing the carriage of such
services in cable systems with limited channel capacity. However, as a result of
"must carry", HSN has experienced increased cable distribution of its
programming due to an increase in the number of cable systems that carry HSN
programming.
Ownership Regulations. The 1992 Cable Act required the FCC to, among
other things, (1) prescribe rules and regulations establishing reasonable
limits on the number of channels on a cable system that will be allowed to
carry programming in which the owner of such cable system has an attributable
interest and (2) consider the necessity and appropriateness of imposing
limitations on the degree to which multichannel video programming distributors
(including cable operators) may engage in the creation or production of video
programming.
On September 23, 1993, the FCC also adopted regulations limiting
carriage by a cable operator of national programming services in which that
operator holds an attributable interest (using the same attribution standards
as were adopted for its limits on the number of homes nationwide that a cable
operator may reach through its cable systems) to 40% of the first 75 activated
channels on each of the cable operator's systems. The rules provide for the
use of two additional channels or a 45% limit, whichever is greater, provided
that the additional channels carry minority controlled programming services.
The regulations also grandfather existing carriage arrangements which exceed
the channel limits, but require new channel capacity to be devoted to
unaffiliated programming services until the system achieves compliance with the
regulations. Channels beyond the first 75 activated channels are not subject
to such limitations, and the rules do not apply to local or regional
programming services. These rules may limit carriage of Liberty Media Group's
programming services on certain systems of cable operators affiliated with
Liberty Media Group. In the same rulemaking, the FCC concluded that additional
restrictions on the ability of multichannel distributors to engage in the
creation or production of video programming presently are unwarranted.
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Several petitions filed with the FCC seeking reconsideration of various
aspects of the regulations implementing the 1992 Cable Act remain undecided.
Petitions for judicial review of regulations adopted by the FCC, as well as
other court challenges to the 1992 Cable Act and the FCC's regulations, also
remain pending. The FCC also must initiate numerous rulemakings to implement the
1996 Telecom Act. Liberty Media Group is uncertain how the courts and/or FCC
ultimately will rule or whether such rulings will materially change any existing
rules or statutory requirements. Further, virtually all are subject to revision
at the discretion of the appropriate governmental authority.
Proposed Changes in Regulation. The regulation of cable television
systems at the federal, state and local levels is subject to the political
process and has been in constant flux over the past decade. This process
continues in the context of legislative proposals for new laws and the adoption
or deletion of administrative regulations and policies. Further material
changes in the law and regulatory requirements must be anticipated and there
can be no assurance that Liberty Media Group's business will not be affected
adversely by future legislation, new regulation or deregulation.
Satellites and Uplink. In general, authorization from the FCC must be
obtained for the construction and operation of a communications satellite. The
FCC authorizes utilization of satellite orbital slots assigned to the United
States by the World Administrative Radio Conference. Such slots are finite in
number, thus limiting the number of carriers that can provide satellite
transponders and the number of transponders available for transmission of
programming services. At present, however, there are numerous competing
satellite service providers that make transponders available for video services
to the cable industry. Certain satellites are more valuable than others to cable
television programmers based on whether a particular satellite is used by other
programmers of popular cable services. Factors that may affect the Programming
Companies' ability to meet their transponder needs in the future include
increases in the number of prospective users of available transponder space, and
the uncertain status of future satellite launches by the United States space
shuttle program, by private entities in the United States and by private and
governmental entities in other countries. Under current policy, the Galaxy V,
Spacenet 2, SatCom C-1 and SatCom C-3 service providers are not subject to the
market exit provisions of Section 214 of the Communications Act of 1934, as
amended (the "Communications Act"), and may therefore cease providing
communications services to customers on short notice, provided that such action
is just, reasonable and non-discriminatory, and subject to any additional rights
or remedies to which the customer and the carrier may have agreed. Several of
the Programming Companies lease transponders on the above-mentioned satellites,
but Liberty Media Group has no reason to believe that such service providers
have any intention to cease providing transmission services via their respective
satellite systems.
The FCC also grants licenses to construct and operate satellite uplink
facilities which transmit signals to satellites. These licenses are generally
issued without a hearing if suitable frequencies are available. A number of the
Programming Companies, as well as HSN and Southern Satellite Systems, Inc.,
have been granted licenses for construction and operation of C-Band and/or
Ku-Band satellite uplink facilities.
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Financial Interest and Syndication. The FCC's "financial interest and
syndication" rules had limited the ability of the three major broadcast
networks to distribute network programs through syndication to broadcast
stations. The major broadcast networks have not been restricted from
distributing network programs to cable or satellite programmers, such as the
Programming Companies. However, under the FCC's modified financial interest and
syndication rules adopted in 1993, the three major networks had been prohibited
from: (a) actively syndicating any prime-time entertainment or first-run
non-network programming to television stations in the United States, (b)
acquiring financial interests or domestic syndication rights in any first-run
non-network program or series distributed in the United States unless that
program or series was produced solely "in-house" by the network, and (c)
warehousing programming by withholding it from the syndication market beyond
certain defined periods.
The FCC eliminated these rules in September 1995. Elimination of
these restrictions could permit a myriad of broadcast station/network
production/exhibition arrangements that only cable operators and the major
broadcast networks (to the extent of distributing to cable and satellite
programmers) were permitted to undertake, further increasing competition to the
Programming Companies in the acquisition and sale of programming. The grant of
expanded syndication powers to the three major networks could lessen the
attractiveness and/or availability of the major networks' programming to cable
system operators and programmers because they would have to compete directly
for such programming with broadcast stations and could be less likely to secure
cable/broadcast network exclusive distribution and other arrangements.
Broadcasting. Netlink USA ("Netlink") packages, markets and
distributes programming to the U.S. HSD subscriber market (the "Retail
Business"). Netlink acquires rights from programmers to market various
satellite-transmitted programming, including services such as ESPN, CNN, HBO,
WTBS and the Discovery Channel, to HSD owners. Netlink offers HSD owners
various packages of programming for monthly, quarterly or annual subscription
periods. Once a subscriber has ordered service by telephone or through an HSD
retailer, Netlink transmits an authorization code to the customer's
descrambler, allowing customers to recieve the programming. Since 1993, Netlink
has also offered pay-per-view services.
Netlink markets its HSD services through direct retail efforts,
satellite equipment dealers and distributors. During 1995, approximately 75%
of Netlink's new subscribers were generated through satellite equipment
dealers. During 1995, Netlink paid commissions to more than 2,000 dealers.
Direct marketing includes advertising in publications targeted at HSD owners,
telemarketing and direct mail. Approximately 96% of Netlink's HSD customers
with subscription packages which expired in 1995 renewed their subscriptions
with Netlink.
During 1995, Netlink uplinked and sold the signals of nine broadcast
television stations to other HSD packagers and marketers in the U.S. and,
through Netlink International, in Canada (the "Wholesale Business"). In
January, 1996, the number of broadcast television signals uplinked by Netlink
was reduced to six. As of December 31, 1995, approximately 600,000 HSD
households subscribed to one or more of such stations through HSD packages
offered by Netlink and other HSD packaging and marketing companies. The other
HSD packaging and marketing companies pay Netlink a fee for the right to sell
these services to their customers.
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In January 1996, TCI Group consummated a merger with United Video
Satellite Group, Inc. ("UVSG"), as a result of which TCI Group acquired voting
control of UVSG. UVSG owns Superstar Satellite Entertainment ("Superstar"),
another large distributor of programming to the HSD market. On March 12, 1996,
UVSG and Liberty Media Group announced an agreement to combine the Retail
Businesses of Netlink and Superstar (the "Netlink/Superstar Venture"). The
Netlink/Superstar Venture, owned approximately 50% by each of UVSG and Liberty
Media Group, will be the nation's largest provider of programming to C-Band
satellite customers. Liberty Media Group will retain ownership of the Wholesale
Business of Netlink.
Competition-Netlink. Netlink competes with other HSD program packagers,
some of which are affiliated with well-known, large programmers and cable
television system operators. Because a significant portion of Netlink's sales
are generated through HSD dealers, Netlink also competes for dealer
relationships on the basis of commission rates and quality of service offered to
the dealer and its customers. In addition, the HSD market faces significant
competition from cable television as well as DBS services, which were launched
in 1994. DBS uses higher power Ku-Band frequencies that can be received by
significantly smaller hardware than HSDs that receive C-Band frequencies.
Because of the smaller dish size, DBS may be more widely accepted than HSD
systems in urban markets.
During 1995 Netlink leased nine satellite transponders on an
"unprotected" or "transponder unprotected" basis on two separate communications
satellites. Netlink has "seniority status" on such satellite transponders which
results in Netlink having favorable ranking should transponders be required to
restore a "protected" service. See "Satellite Transponder Agreements" above.
In January 1996 the number of satellite transponders leased by Netlink was
reduced to six.
In uplinking and selling the signals of broadcast television stations
in the United States, Netlink is subject to the FCC regulations and Copyright
Act provisions described below under "Other Assets-Transmission of TBS
Superstation ("WTBS")-Regulation-Southern". Pursuant to such regulations,
Netlink may only distribute the signals of network broadcast stations to
"unserved households" which are outside the Grade B contours of a primary
station affiliated with such network.
Silver King Communications, Inc. ("Silver King") owns and operates 12
independent full power UHF television stations, including one television
satellite station (the "Stations") which affiliate with and primarily broadcast
the retail sales programming of HSN. See "Electronic Retailing Services" below.
The Stations serve eight of the 12 largest metropolitan television markets in
the U.S. As of December 31, 1995, the Stations reached approximately 28 million
households, which is one of the largest audience reaches of any owned and
operated independent television broadcast group in the U.S. In addition to the
HSN programming, the Stations broadcast advertising inserts, issue-responsive
programming, children's programming, ethnic, information and/or religious
programming and public service announcements. As of December 31, 1995, Silver
King also owned 26 low power television ("LPTV") stations that broadcast HSN
retail sales programming.
On February 11, 1993, Liberty Media Group entered into an Option
Agreement (which was amended in 1994) with RMS Limited Partnership ("RMS")
pursuant to which Liberty Media Group had the right to purchase from RMS
2,000,000 shares of Silver King's Class B Common Stock at the price of $1.00
per share (the "Option"). The exercise price of the Option increases at a rate
of $0.25 per year, resulting in the exercise price of the Option during the
final year of exercisability (February 12, 1998 to February 11, 1999) being
$2.25 per share. Upon exercise of the Option, Liberty Media Group would obtain
effective voting control of Silver King as a result of the voting power
associated with the Silver King Class B Common Stock.
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Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into an agreement in August 1995 pursuant to which
the Option would be transferred to Silver Management Company ("Silver Company"),
an entity in which Liberty Media Group would own all of the non-voting equity
interests (which would constitute substantially all of the equity of such
entity) and Mr. Diller would own all of the voting equity interests. Silver
Company would thereafter exercise the Option and hold the shares of the Silver
King Class B Common Stock purchased thereunder. In an amendment to such
agreement entered into in November 1995, Liberty Media Group agreed to
contribute all of its shares of HSN (which shares constitute approximately 41%
of the equity of HSN and approximately 80% of the voting power of HSN) to Silver
Company in return for additional non-voting equity interests in Silver Company.
Following such contribution, Silver Company would exchange such HSN shares with
Silver King for additional shares of Silver King Common Stock and Class B Common
Stock. After giving effect to the exchange, the prior exercise of the Option
and Silver King's acquisition of Savoy Pictures Entertainment, Inc., Silver
Company will own approximately 45% of Silver King on a fully diluted basis, and
approximately 84% of the votes of Silver King. Consummation of the foregoing
transactions is conditioned upon the satisfaction of regulatory requirements, as
well as conditions set forth in the terms of the agreement. Accordingly, no
assurance can be given that the transaction will be consummated.
Electronic Retailing Services. The Liberty Media Group currently
provides electronic retailing services through a subsidiary, HSN, and through
an equity affiliate, QVC, Inc. ("QVC").
HSN. As of December 31, 1995, Liberty Media Group owned approximately
41% of the common equity of HSN, which represents approximately 80% voting
control (as a result of multiple voting rights associated with the HSN Class B
Common Stock held by Liberty Media Group). Liberty Media Group has entered into
certain agreements with Mr. Barry Diller and Silver King which will result in
the transfer of Liberty Media Group's interest in HSN to Silver King. For a
more detailed description of this transaction, see description of Silver King in
"Broadcasting" above. If this transaction is consummated HSN would cease to be
a subsidiary of TCI and therefore, the financial results of HSN would not be
consolidated with the financial results of Liberty Media Group. Although
Liberty Media Group would cease to possess voting control over HSN it would
continue to have an indirect equity interest in HSN through its ownership of the
equity securities of Silver Company.
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The primary business and principal source of revenue of HSN is
electronic retail sales of merchandise by Home Shopping Club, Inc. ("HSC").
HSC sells a variety of consumer goods and services by means of HSC's live,
customer-interactive electronic retail sales programs which are transmitted
twenty-four hours a day, seven days per week, via satellite to cable television
systems, affiliated broadcast television stations and satellite dish receivers.
HSC's retail sales programming is currently carried on two separate networks,
HSN and Spree!. Both networks are carried by cable television systems and
broadcast television stations throughout the country. Spree! programming is
available in one hour segments, which enables broadcast and cable affiliates to
air Spree! in available time slots that would not otherwise produce revenue for
the affiliate.
HSC's product offerings include: jewelry; hardgoods (such as consumer
electronics, housewares and consumables); softgoods (primarily clothing and
fashion accessories); and cosmetics. For the year ended December 31, 1995,
jewelry, hardgoods, softgoods, and cosmetics accounted for approximately 39%,
37%, 14%, and 10%, respectively, of HSC's net sales. HSC purchases merchandise
made to its specifications, merchandise from manufacturers' lines and overstock
inventories of wholesalers. The mix of products and source of such merchandise
depends upon a variety of factors including price and availability. HSC has no
long-term commitments with any of its vendors and there are various sources of
supply available for each category of merchandise sold.
As part of HSC's customer service policy, HSC maintains a return policy
under which a customer may, generally within 30 days, return for any reason any
item purchased from HSC for a full refund of the purchase price, including the
original shipping and handling charges.
Transmission and Programming. HSC produces retail sales programs in
its studios located in St. Petersburg, Florida. These programs are distributed
to cable television systems, broadcast television stations, a direct broadcast
satellite service and HSD's by means of HSN's satellite uplink facilities to
satellite transponders leased by HSN. Any cable television system, broadcast
television station or HSD owner in the United States and the Caribbean Islands
equipped with standard satellite receiving facilities is capable of receiving
HSC programming.
HSN has lease agreements securing full-time use of three transponders
on three domestic communications satellites. Each of the transponder lease
agreements grants HSN "protected" rights. See "Satellite Transponder
Agreements" above.
Affiliation with Cable Operators. HSC enters into affiliation
agreements with cable system operators to carry HSN, Spree! or both. HSC has a
standard form of affiliation agreement which has a term of five years, is
automatically renewable for subsequent one year terms, and obligates the cable
operator to assist the promotional efforts of HSC by carrying commercials
regarding HSN and Spree! and distributing HSC's marketing materials to the
cable operator's subscribers. The standard form of affiliation agreement
provides that the cable operator will receive a commission of five percent of
the net sales of merchandise sold within the cable operator's franchise area
(from both cable and non-cable households). However, particularly with
larger, multiple system operators, HSC has agreed to provide additional
compensation. In the past, this has included the purchase of advertising
availabilities from cable operators on other programming networks and the
establishment of commission guarantees committing HSC to a certain level of
payments. Although a number of these contracts remain in effect, as a general
rule, HSC is no longer entering into agreements that provide for advertising
availability and commission guarantee compensation. These forms of
compensation were replaced with cable distribution fees or performance bonus
commissions that are intended to increase sales by compensating the cable
operators for promotional efforts which result in higher net sales levels.
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Due to the possibility of "must carry" being found unconstitutional,
HSC embarked on an aggressive campaign to bring the "must carry" households
under contract by volunteering to pay commissions to cable operators required
to transmit HSC's programming. As an additional contract incentive, HSC
offered to up-front payments, based on a commitment to transmit HSC programming
to a certain number of subscribers. In exchange for these payments, HSC
required significant commitments for both the "must carry" and "non-must carry"
households and original terms of five to fifteen years.
Affiliation Agreements with Broadcast Television Stations. Each of the
full power Silver King stations has an affiliation agreement with HSC to carry
HSC's programming through December 28, 1997, providing for an hourly fee, and
upon reaching certain sales levels, commissions on net sales. These agreements
are automatically renewable at Silver King's option for a five-year term, unless
written notice is given by Silver King at least 18 months prior to the
expiration date. HSN has agreed in principle with Silver King that the period
for delivery of the notice of non-renewal by Silver King will be extended until
December 28, 1996. Silver King has informed HSN that it has not made any final
decision regarding whether it will renew any or all of the affiliation
agreements, but presently contemplates that it will not renew the affiliation
agreements. HSN believes, based on its preliminary analysis, that the orderly
termination of the affiliation agreements may be in its best interests because
of the potential cost savings and the existing cable carriage of the HSC
programming in many of the Silver King markets. HSN is evaluating the affected
markets to determine the need for obtaining additional program carriage and the
related costs of such carriage. There can be no assurance that Silver King will
in fact terminate any or all of the affiliation agreements or that, if so
terminated, that HSN will be able to find other means of distributing HSC
programming by broadcast or cable to the households in the broadcast areas
currently served by Silver King stations.
Thirteen of the Silver King LPTV stations are currently under existing
affiliation agreements, and HSN contemplates entering into contracts with the
remaining stations in 1996.
In addition to affiliation agreements with the Silver King broadcast
television and LPTV stations, HSC has entered into affiliation agreements with
other broadcast television stations and LPTV stations to carry either HSN or
Spree! for a predetermined number of hours per day. The broadcast station
affiliation agreements may generally be terminated upon notice by either party
and specify the payment of fixed hourly fees for the carriage of HSC
programming.
Distribution, Data Processing and Telecommunications. HSN's
fulfillment subsidiaries store, service and ship merchandise from warehouses
located in St. Petersburg, Florida, Salem, Virginia and Waterloo, Iowa. During
1995, HSN closed its distribution warehouse in Reno, Nevada. Generally,
merchandise is delivered to customers within 7 to 10 business days of placing
an order.
HSN currently operates several Unisys main frame computers and has
extensive computer systems which track purchase orders, inventory, sales,
payments, credit authorization, and delivery of merchandise to customers. HSC
has digital telephone and switching systems and utilizes a VRU System which
allows callers to place their orders by means of touch tone input or to be
transferred to an operator.
Additional Subsidiary Businesses. In addition to the electronic
retailing business, HSN's subsidiaries are involved in mail order, insurance
and other businesses complementary to electronic retailing. These include:
HSN Mail Order, Inc. which markets a variety of merchandise through
five mail order catalogs;
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Vela Research, Inc. which develops and markets high technology audio
and video MPEG compression/decompression products to the cable, computer and
telecommunications industries;
HSN Insurance, Inc., a full-service insurance agency, markets a wide
range of insurance products such as life, health, auto, homeowners and
commercial policies to the public and HSC customers; and
Internet Shopping Network, Inc. ("ISN") which operates an interactive
shopping service on the internet, specializing in small office and computer
equipment. ISN is also engaged in exploring business opportunities for
merchandising products via digital interactive television services and other
new digital retailing vehicles.
Effect on HSN of the 1992 Cable Act. The "must carry" provisions of
the 1992 Cable Act, discussed in "Regulations-Programming Companies" above,
mandate that cable systems carry the signals of local commercial television
stations or, at the station's option, that cable systems and television
stations negotiate a fee to be paid by cable systems for the retransmission by
such cable systems of the local television station's broadcast signal. HSC's
full-time, full power broadcast affiliates have all requested "must carry"
status in lieu of a retransmission fee and most have obtained "must carry"
status. The U.S. District court for the District of Columbia has twice upheld
the constitutionality of the "must carry" rules. The Supreme Court will review
this issue in late 1996 or early 1997. Between 1993 and 1994, "must carry" was
important to HSN in obtaining carriage by cable operators. Due to
HSC's success in obtaining long-term carriage commitments, in the event "must
carry" is ruled unconstitutional, HSN does not believe the ruling will
have a material adverse impact on HSN or result in any significant loss
in carriage.
In November 1994 the FCC issued, pursuant to the 1992 Cable Act,
"going forward" rules regarding the fees cable operators can impose upon
subscribers for new programming, discussed in "Regulations-Programming
Companies" above. The going forward rules provide that cable operators may
increase the charges to subscribers due to increases in external programming
costs. The cable operator must offset these increases by revenues it receives
from all sources other than advertising. However, in August 1995, the FCC
excluded commission revenues paid by HSN and other electronic retailing
services to cable operators for merchandise sales from such offset. This may
make carriage of HSN more attractive to cable operators.
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Competition-HSN. HSN operates in a highly competitive environment.
It is in direct competition with businesses which are engaged in retail
merchandising, other electronic retailers, direct marketing retailers such as
mail order companies, companies that sell from catalogs, and other discount
retailers and companies that market through computer technology. HSN also
competes for access to its customers with broadcasters and alternative forms of
entertainment and information, such as programming for network and independent
broadcast television states, and basic and pay cable television services. In
particular, the price and availability or programming for cable television
systems affects the availability of these channels for HSN's programs and the
compensation which must be paid to the cable operators for carriage of HSC
programming. In addition, HSN believes that competition for channel capacity
has substantially increased. With the advent of new compression technologies
on the horizon, this competition for channel capacity may substantially
decrease, although additional competitors may have the opportunity to enter the
marketplace. No predictions can be made with respect to the viability of these
technologies or the extent to which they will ultimately affect the
availability of channel capacity.
HSN was the first specialty retailer to market merchandise by means of
live, nationally televised sales programs. There are other companies, some
having an affiliation or common ownership with cable operators (including the
Company), that now market merchandise by means of live television. A number of
other entities are engaged in direct retail sales businesses which utilize
television in some form and which target the same markets in which HSN operates.
HSN cannot predict the degree of success with which it will meet competition in
the future.
In addition to the above factors, HSN's affiliation with broadcast
television stations creates another set of competitive conditions. These
stations compete for television viewers primarily within local markets. HSN's
affiliated broadcast television stations are located in highly competitive
markets and compete against both VHF and UHF stations. Due to technical
factors, a UHF television generally requires greater power and a high antenna
to secure substantially the same geographical coverage as a VHF television
station. Under present FCC regulations, additional UHF commercial television
broadcasting stations may be licensed except in thirty designated markets,
including most o the largest cities, under an FCC decision precluding
additional applications. HSN cannot quantify the competitive effect of the
foregoing or any other sources of video programming on any of HSN's affiliated
television stations, nor can it predict whether such competition will have a
material adverse effect on its operations.
In summary, HSN operates in a highly competitive environment in which,
among other things, technological change, changes in distribution patterns,
media innovations, data processing improvements and new entrants make the
competitive position of both HSN and its competitors extremely difficult to
predict.
QVC. In February 1995, QVC Programming Holdings, Inc. (the
"Purchaser"), completed its acquisition of QVC. In connection with this
acquisition, Liberty Media Group contributed substantially all of the shares of
QVC owned by it (which constituted approximately 18.8% of the shares of QVC on
a fully diluted basis prior to such acquisition) together with cash to acquire
an approximate 42.6% equity interest in the Purchaser. Upon the merger of the
Purchaser into QVC, this interest became an approximate 42.6% interest in QVC,
as the surviving corporation. The remaining 57.4% of QVC was acquired by
Comcast, which manages the day-to-day operations of QVC.
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QVC markets and sells a wide variety of consumer products and services
primarily by means of its televised shopping programs, known as "QVC" and "Q2".
Cable television system operators that have entered into affiliation agreements
with QVC carry its programming as part of their basic service and pursuant to
such agreements receive from QVC commissions equal to 5% of the net sales of
merchandise sold to customers located in the cable operator's service area. QVC
is also a joint venturer in the operation of a British televised shopping
service. On December 8, 1995, QVC launched iQVC, an online shopping service,
via the Microsoft Network. iQVC is offering a wide variety of consumer
products. iQVC will pay Microsoft a commission based on a percentage of total
sales. QVC faces most of the same competitive factors as HSN, described above
under "Competition-HSN". Unlike HSN, QVC does not have affiliation agreements
with over-the-air broadcast television stations and therefore is not able to
obtain the benefits of the "must carry" regulation.
Other Assets
Transmission of TBS SuperStation ("WTBS"). Southern and its wholly
owned subsidiary, Royal Communications, Inc. ("Royal"), transmit the signal of
WTBS, a 24-hour independent UHF television station originated by TBS, from the
uplinking facilities of LMC SatCom, Inc., a wholly owned subsidiary of
Southern, in and near Atlanta, Georgia, to a protected transponder on the
Galaxy V Satellite. Southern leases such transponder from TBS pursuant to a
sublease that expires in the year 2000. Southern makes the WTBS signal
available to cable television system operators and operators of other
non-broadcast distribution media who receive the signal on their earth stations
and offer the service to their subscribers. Southern also makes the WTBS signal
available to HSD owners through program packagers. A substantial portion of
Southern's consolidated revenue for 1995 was derived from the HSD market. No
payment to TBS is required for the transmission by Southern of the WTBS signal.
See "Regulation-Southern" below. At December 31, 1995, Southern (and Royal)
transmitted WTBS to an estimated 62.5 million homes throughout the United
States, Puerto Rico, the U.S. Virgin Islands and Canada. Cable and other
operators pay Southern a per-subscriber fee for this service, generally
pursuant to written service agreements, the expiration dates of which range
from 1996 to 2005. Cable television system operators serving approximately 37%
of the U.S. cable subscribers to whom the WTBS service was made available at
December 31, 1995, are served either on a non-contract basis or pursuant to
service agreements which expire in the next five years. Approximately 25% of
the U.S. cable subscribers to whom WTBS was made available at December 31, 1995
received the service pursuant to a service agreement between Southern and SSI
which expires in 2001. Royal began distribution in Canada of the WTBS signal in
1991. Canadian agreements expire between 1996 and 2001. Southern provides the
WTBS signal to the U.S. and Canadian HSD markets for a per-subscriber fee
pursuant to program packager agreements, most of which terminate between 1998
and 2001. Southern also has agreements with DBS distributors including
Primestar Partners, in which TCIC has an interest, and with DirecTV, Inc.,
AlphaStar, EchoStar and Express Vu (Canadian). Such agreements expire between
1997 and 1998.
In connection with the TBS/Time Warner Merger, Time Warner has agreed
to acquire a 6-year option to purchase Southern (the "Southern Option"). Grant
of the Southern Option is conditioned upon the consummation of the TBS/Time
Warner Merger. For a more detailed description of the terms of the Southern
Option, see the description of the TBS/Time Warner Merger in "Entertainment and
Information" above.
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Competition-Southern. Although Southern is currently the sole
satellite carrier of WTBS, other independent television stations are
transmitted by other carriers. Southern does not have an agreement with TBS
with respect to the retransmission of the WTBS signal and there are no specific
statutory or regulatory restrictions that would prevent any satellite carrier
from transmitting the WTBS signal so long as the carrier meets the passive
carrier requirements of the Copyright Act, and any applicable requirements of
the Communications Act or, if the carrier serves HSD owners, so long as the
carrier meets the requirements of the Satellite Home Viewer Act of 1988 (the
"SHV Act"). Further, Southern has no control over the programming on such
stations. TBS produces and distributes other cable programming services,
including "TNT", a basic cable entertainment service, and TBS has and may be
expected to continue to give priority to the programming needs of such services
in allocating programming owned by it or to which it has national distribution
rights. Southern's business could be adversely affected by any change in the
type, mix or quality of the programming on WTBS that results in the service
being less desirable to cable operators and their subscribers. TBS derives
significant revenues from the sale of advertising time on WTBS, however, and
Liberty Media Group therefore believes that TBS has an economic incentive to
maintain the audience appeal of WTBS's programming.
Regulation-Southern. Southern is subject to a number of FCC and
Copyright Act regulations. In addition to the copyright and licensing
requirements summarized below, Southern is subject to the Regulation of Program
Licensing adopted by the FCC under the 1992 Cable Act as summarized above in
the discussion under "Regulation-Programming Companies".
Copyright Regulations. The Copyright Act provides cable television
operators with a compulsory copyright license for retransmission of broadcast
television programming without having to negotiate program rights with the
stations or individual copyright owners. However, see "-Regulation-Programming
Companies-Regulation of Carriage of Broadcast Stations" above regarding the
imposition of retransmission consent for broadcast stations. Therefore, cable
systems that carry distant broadcast signals, such as WTBS, must pay royalty
fees to the Register of Copyrights, the amount of which is based upon a formula
utilizing the amount of the system's semi-annual gross receipts and the number
and type of distant signals carried by the system. Any increases in the
required fees could adversely affect the competitive position of WTBS and
therefore, Southern. The Copyright Act empowers the Copyright Office to review
periodically and adjust copyright royalty rates based on inflation and/or
petitions for adjustments due to modifications of FCC rules. Further, the FCC
has recommended to Congress the abolition of the compulsory license for cable
television carriage of broadcast signals, a proposal that has received
substantial support from members of Congress. If the compulsory license is
abolished, a cable operator would not be permitted to retransmit WTBS unless
such cable operator reached a licensing agreement with the copyright owners or
licensees of the programming contained on the WTBS signal being retransmitted.
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Southern is not permitted to provide the WTBS signal to HSD owners
under the separate compulsory license extended to cable systems. Under
regulations adopted by the Copyright Office, satellite carriers such as
Southern are not "cable systems" within the meaning of the Copyright Act. In
1994 the United States Court of Appeals for the Eleventh Circuit upheld such
regulations in an action challenging their validity brought by Southern and
other satellite carriers, and the Supreme Court declined to review that
decision. Instead, Southern markets the WTBS signal through program packagers
to HSD owners. Pursuant to the SHV Act, Congress granted a compulsory copyright
license to satellite carriers retransmitting the broadcast signals of
"superstations", such as WTBS, and network stations to the public for private
home viewing. In 1994, Congress extended this license until December 31, 1999.
Pursuant to the provisions of the SHV Act, on May 1, 1992 the Copyright Royalty
Tribunal ("CRT") adopted an increase in the compulsory license fees for the HSD
market effective January 1, 1993, which Congress has extended through July 1,
1997, thus increasing Southern's copyright payment by 17%. New fees after July
1, 1997 will be determined either through negotiations with the copyright
owners of the signals being carried or, if no agreement can be reached, by an
arbitration panel conducted under the auspices of the Copyright Office. If the
license granted under the SHV Act is not further extended, satellite carriers
will be required to negotiate private licenses for the retransmission of
copyrighted material to HSD owners after 1999.
Syndicated Exclusivity. The FCC's syndicated exclusivity rules, which
became effective January 1, 1990, require cable systems with more than 1,000
subscribers to delete programming from distant broadcast signals if exclusive
local broadcast rights to such programming have been purchased by a television
station which broadcasts in the locale of the cable system and such station
requests the cable system to "black out" such programming. These rules could
lead to cable operators dropping distant broadcast signals from their systems
because of the administrative difficulty of providing for the blackout and
because the service may be less attractive to subscribers if a material portion
of its programming were blacked out. Although such rules could therefore result
in additional channels becoming available for certain of the Programming
Companies' services, they could have an adverse effect on Southern's business
if WTBS were to carry a material amount of programming subject to deletion. TBS
has stated that it is programming WTBS to avoid blackouts and that, because it
has a reasonable basis for believing that deletions of its programming will not
be required, it is offering, as permitted by the FCC, to indemnify cable
operators that carry WTBS in order to ensure that its programming is not
blacked out. However, Southern cannot control TBS's programming decisions with
respect to WTBS.
FCC Licensing. Satellite carriers, including carriers like Southern
that lease transponders from others rather than owning a satellite, may provide
their services as a private carrier and/or as a common carrier. Common carriers
are required, pursuant to the Communications Act, to provide services on terms
and conditions that are just, reasonable and non-discriminatory. The FCC does
not set the rates charged by non-dominant common carriers. However, the United
States Court of Appeals for the District of Columbia Circuit has invalidated
the FCC's permissive de-tariffing rules for non-dominant common carriers in
AT&T Co. v. FCC and its streamlined range rate tariff filing rules for such
carriers in Southwestern Bell Corp. v. FCC. Consequently, even non-dominant
carriers are required to file tariffs pursuant to the FCC's rules. Private
carriers are subject to a lesser degree of regulation by the FCC. The Copyright
Act exempts any carrier from liability for copyright infringement in delivering
television broadcast signals to cable television systems if it meets the
passive carrier requirements of the Copyright Act.
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MacNeil/Lehrer Productions. In January 1995, Liberty Media Group
acquired a 66 2/3% general partnership interest in MacNeil/Lehrer Productions
("MLP"). MLP is the primary producer of the "MacNeil/Lehrer News Hour" on PBS
and a producer of other high-quality documentary and public affairs
programming. Liberty is attempting to increase the level of production at MLP
by finding new markets for MLP documentary and public affairs programming.
These markets may include cable, as well as broadcast networks, on line
services and CD-ROM applications.
Americana Television Productions, LLC. Americana Television
Productions ("ATP") was formed in February 1995 to produce and distribute
television shows for the cable, satellite and broadcast markets. ATP also
produces home video and audio products. ATP's video library was originally
developed for the Americana Television Network, which ceased operations in
December 1994. Such library includes nearly 600 hours of original programming
highlighting traditional music, people and crafts which are uniquely American.
Asian Television and Communications International, LLC ("ATCL"). ATCL
was established in 1993 to participate in the burgeoning media markets in Asia.
ATCL has three divisions: (1) Consulting, which provides strategic assistance
as well as market research to media companies interested in entering the Asian
markets; (2) Hardware, which is one of four licensed distributors of General
Instrument Corporation products in the People's Republic of China ("PRC"); and
(3) Programming, which licenses exclusive and non-exclusive TV programs in the
PRC, Taiwan, Singapore, Hong Kong and India. In addition, the programming
division works on advertising time-TV program barter projects in the PRC.
GENERAL
Legislative, administrative and/or judicial action may change all or
portions of the foregoing statements relating to competition and regulation.
The Company has not expended material amounts during the last three
fiscal years on research and development activities.
There is no one customer or affiliated group of customers to whom
sales are made in an amount which exceeds 10% of the Company's consolidated
revenue.
Compliance with Federal, state and local provisions which have been
enacted or adopted regulating the discharge of material into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, results of operations or competitive
position of the Company.
At December 31, 1995, the Company had approximately 39,000 employees,
the majority of which are employees of TCI Communications, Inc. Of these
employees, approximately 850 were located in its corporate headquarters and
most of the balance were located at the Company's various facilities in the
communities in which the Company owns and/or operates cable television systems
or programming services.
(d) Financial Information about Foreign & Domestic Operations and Export
Sales
The Company has neither material foreign operations nor export sales.
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<PAGE> 55
Item 2. Properties.
The Company owns its executive offices in a suburb of Denver,
Colorado. It leases most of its regional and local operating offices. The
Company owns many of its head-end and antenna sites. Its physical cable
television properties, which are located throughout the United States, consist
of system components, motor vehicles, miscellaneous hardware, spare parts and
other components. The Company's programming subsidiaries generally own their
production and transmitting equipment and facilities.
The Company's cable television facilities are, in the opinion of
management, suitable and adequate by industry standards. Physical properties
of the Company are not held subject to any major encumbrance.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the Company
is a party or to which any of its property is subject, except as follows:
On September 30, 1994, an action captioned The Carter Revocable Trust
by H. Allen Carter and Sharlynn Carter as Trustee v. Tele-Communications, Inc.;
IR-Daniels Partners III; Daniels Ventures, Inc.; Cablevision Equities IV;
Daniels & Associates, Inc.; and John V. Saeman, 94-N-2253, was filed in the
United States District Court for the District of Colorado. The suit alleges
that all the defendants violated disclosure requirements under the Securities
Exchange Act of 1934, and that defendants IR-Daniels Partners III (now known as
IR-TCI Partners III), Daniels Ventures, Inc. (now known as TCI Ventures, Inc.)
and Daniels & Associates, Inc. (now known as TCI Cablevision Associates, Inc.
or "D&A") breached a fiduciary duty to plaintiff and other limited partners of
American Cable TV Investors 3 (the "ACT 3 Partnership"), in connection with (i)
the sale to TCI Communications, Inc. of ACT 3 Partnership's ownership interest
in the Redlands System and (ii) the sale to affiliates of TCIC of ACT 3
Partnership's ownership interests in other cable television systems (the "ACT 3
Transactions").
Plaintiff brings this action on behalf of himself and purports to
bring it as a class action on behalf of all persons who were limited partners
of the ACT 3 Partnership as of the close of business on October 1, 1993 and who
had their proxies solicited by the defendants in connection with the ACT 3
Transactions that allegedly "resulted in the dissolution of the ACT 3
Partnership and the loss of their limited partnership interests."
Plaintiff seeks unspecified damages that allegedly include, but are
not limited to (i) the difference between the value of ACT 3 Partnership's
interest in the Redlands System (as a percentage of the appraised value of that
system as determined by a 1992 appraisal) and the amount paid by TCIC for the
ACT 3 Partnership's interest in the Redlands System, plus the amount of a fee
paid to D&A, and (ii) the difference between the fair market value of the
limited partnership interests owned by members of a putative class and value
received by members of the putative class pursuant to the ACT 3 Transactions.
Plaintiff also seeks interest and consequential damages.
Plaintiffs moved for class certification which was granted by the
Court on November 3, 1995. Factual discovery in this case is complete. The
case is not currently set for trial, but there is a pre-trial conference
scheduled for April 9, 1996. Defendants will be filing a Motion for Summary
Judgment within the scheduling deadlines ordered by the Court. Management of
the Company believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
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<PAGE> 56
On September 30, 1994, an action captioned WEBBCO v.
Tele-Communications, Inc.; IR-Daniels Partners II; Daniels Ventures, Inc.;
Cablevision Equities III; Daniels & Associates, Inc.; and John V. Saeman,
94-N-2254, was filed in the United States District Court for the District of
Colorado. The suit alleges that all the defendants violated disclosure
requirements under the Securities Exchange Act of 1934, and that defendants
IR-Daniels Partners II (now known as IR-TCI Partners II), Daniels Ventures,
Inc. (now known as TCI Ventures, Inc.) and D&A breached a fiduciary duty to
plaintiff and other limited partners of American Cable TV Investors 2 (the "ACT
2 Partnership"), in connection with the sale to TCIC of ACT 2 Partnership's
ownership interest in the Redlands System (the "ACT 2 Transaction").
Plaintiff brings this action on behalf of himself and purports to
bring it as a class action on behalf of all persons who were limited partners
of the ACT 2 Partnership as of the close of business on October 1, 1993 and who
had their proxies solicited by the defendants in connection with the ACT 2
Transaction that allegedly "resulted in the dissolution of the ACT 2
Partnership and the loss of their limited partnership interests."
Plaintiff seeks unspecified damages that allegedly include, but are
not limited to (i) the difference between the value of ACT 2 Partnership's
interest in the Redlands System (as a percentage of the appraised value of that
system as determined by a 1992 appraisal) and the amount paid by TCIC for ACT 2
Partnership's interest in the Redlands System, plus the amount of a fee paid to
D&A, and (ii) the difference between the fair market value of the limited
partnership interests owned by members of a putative class and value received
by members of the putative class pursuant to the ACT 2 Transaction. Plaintiff
also seeks interest and consequential damages.
Plaintiffs moved for class certification which was granted by the
Court on November 3, 1995. Factual discovery in this case is complete. The
case is not currently set for trial, but there is pre-trial conference
scheduled for April 9, 1996. Defendants will be filing a Motion for Summary
Judgment within the scheduling deadlines ordered by the Court. Management of
the Company believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
Intellectual Property Development Corporation v. UA-Columbia
Cablevision of Westchester, Inc. and Tele-Communications, Inc. On September
1, 1994, plaintiff filed suit in federal court in New York for the alleged
infringement of a patent for an invention used in broadcasting systems with
fiber optic transmission lines. Plaintiff seeks injunctive relief and
unspecified treble damages. The patent at issue expired on January 16, 1996,
thereby eliminating any claim for injunctive relief by plaintiff. The issues
now center around whether defendants owe past damages up to the time the patent
expired. Discovery is currently ongoing. Based upon the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition of this action should not have a
material adverse effect upon the financial condition of the Company.
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<PAGE> 57
QVC Shareholders Litigation. In July 1994, eight putative class
action lawsuits were filed by certain shareholders of the company in the
Delaware Court of Chancery on behalf of unspecified classes of holders of QVC
common stock. On August 3, 1994, these actions were consolidated under the
caption In re QVC Shareholders Litigation, Consolidated Civil Action No. 13590
(Court of Chancery, New Castle County, State of Delaware) (the "Consolidated
Action"). The defendants named in the designated complaint in the Consolidated
Action included QVC and its then directors (Barry Diller, Bruce R. Ramer, Linda
J Wachner, William F. Costello, J. Bruce Llewellyn, Brian L. Roberts, Ralph J.
Roberts and Joseph M. Segal). In their designated complaint in the
Consolidated Action, plaintiffs alleged, among other things, that the QVC
directors breached their fiduciary duties by failing to take all possible steps
to seek out and encourage the best offer for QVC following the announcement by
Comcast of a merger proposal to acquire QVC. Plaintiffs sought, among other
things, an injunction ordering the defendants to auction QVC and an award of
unspecified damages to the members of the plaintiff class. On July 22, 1994,
Comcast and Liberty made a merger proposal to QVC in order to acquire the
remaining shares of QVC common stock that Comcast and Liberty collectively did
not already own.
During early August 1994, counsel for the plaintiffs in the
Consolidated Action advised counsel for Liberty that they were preparing to
amend the designated complaint to name Comcast and Liberty as defendants. On
August 3-4, 1994, plaintiffs' counsel negotiated with counsel for Liberty with
respect to a proposed increase in the consideration to be paid to QVC's public
shareholders as well as the accelerated payment of such consideration, as bases
for the possible settlement of the Consolidated Action. On August 5,
plaintiffs, defendants, Comcast and Liberty executed a memorandum of
understanding which contemplates the settlement and dismissal with prejudice of
the Consolidated Action. On August 4, 1994, Comcast, Liberty, QVC Programming
Holdings, Inc. and the Company executed a merger agreement which, among other
things, reflected the parties' agreement to the terms and transactions
contemplated by the memorandum of understanding. On August 19, 1994, as
contemplated by the memorandum of understanding, plaintiffs filed a
consolidated amended class action complaint with the Delaware Court of Chancery
against QVC, the company's directors, Comcast and Liberty.
The proposed settlement of the Consolidated Action is subject to
numerous conditions set forth in the memorandum of understanding and, if
approved by the Delaware Court of Chancery, would result in a dismissal with
prejudice of the Consolidated Action, and a complete release of all claims,
known or unknown, arising out of or related to the acts, transactions or
occurrences that are alleged in the Consolidated Action. Defendants in the
Consolidated Action have entered into the memorandum of understanding and are
proposing to enter into the stipulation of settlement for the Consolidated
Action solely because the proposed settlement would eliminate the distraction,
burden and expense of the litigation. Based upon the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
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In re Liberty Media Corporation Shareholders Litigation, Cons. C.A.
No. 13168 (Del. Ch.). In October 1993, after the announcement that Liberty
would recombine with TCI through the mergers of TCIC and Liberty with
subsidiaries of a newly formed holding company, seven putative class action
lawsuits were filed by Liberty stockholders in the Court of Chancery of the
State of Delaware (the "Delaware Chancery Court") on behalf of unspecified
classes of the holders of Liberty common stock (other than defendants). The
original defendants included certain directors of Liberty (Bob Magness, John C.
Malone, Peter R. Barton, H.F. Lenfest, Robert L. Johnson and Paul A. Gould),
Liberty and TCI. These actions were consolidated by the Delaware Chancery
Court on October 27, 1993 under the caption In re Liberty Media Corporation
Shareholder Litigation, Cons. C.A. No. 13168 (the "Liberty Stockholder
Action"). On December 21, 1994, plaintiffs were permitted by the Delaware
Chancery Court to file a second consolidated amended complaint against the
defendants named in the pending complaint and Liberty directors David Wargo and
David Rapley. The pending complaint is on behalf of a putative class
consisting of all holders of Liberty common stock (except the defendants and
their affiliates) from and after October 7, 1993 through the date of the
TCI/Liberty Combination. Plaintiffs allege that the Liberty stockholders
received inadequate consideration in the TCI/Liberty Combination, that the
defendants impeded the ability of third parties to seek to acquire Liberty, and
that the defendants failed to conduct an auction or market check following the
announcement of the proposed TCI/Liberty Combination. Plaintiffs seek to
rescind the TCI/Liberty Combination, to require defendants to take all
appropriate steps to enhance Liberty's value as an acquisition candidate, to
account to the plaintiff class for all profits obtained by defendants, and to
require defendants to pay unspecified damages to the plaintiff class. The case
remains pending before the Delaware Chancery Court. Discovery has commenced in
the action. Management of the Company believes that plaintiffs' complaint is
without merit, and intends to contest vigorously the plaintiffs' allegations.
Based upon the facts available, management believes that, although no assurance
can be given as to the outcome of this action, the ultimate disposition should
not have a material adverse effect upon the financial condition of the Company.
Cooper, et al. v. UCTC of Baltimore, Inc., et al. On October 24,
1994, plaintiffs, three current employees of United Cable Television of
Baltimore Limited Partnership and two spouses of such current employees, filed
suit in the Circuit Court for Baltimore City against UCTC of Baltimore, Inc.,
United Cable Television of Baltimore Limited Partnership, TCI East, Inc. and
Tele-Communications, Inc. The suit alleges, inter alia, eight various tort
claims, including assault, false imprisonment, intentional infliction of
emotional distress, invasion of privacy by intrusion, invasion of privacy by
false light, defamation by slander, defamation by libel and loss of consortium
in connection with an incident that occurred October 26, 1993, at the Baltimore
system. Each plaintiff seeks $1,000,000 compensatory damages and $5,000,000
punitive damages per count. The loss of consortium claim is limited to four of
the five plaintiffs. On November 1, 1994, plaintiffs also filed an action in
United States District Court for the District of Maryland alleging
discrimination on the basis of race in violation of 42 U.S.C. Section 1981 and
loss of consortium. Both counts sought $1,000,000 in compensatory damages and
$5,000,000 in punitive damages for each plaintiff (the loss of consortium claim
is limited to four of the five plaintiffs). On January 6, 1995, the parties
stipulated to the dismissal of the case without prejudice, which dismissal the
Court approved on January 9, 1995. A Motion to Dismiss was filed in the state
court action and the Court dismissed plaintiffs' claims for intentional
infliction of emotional distress, false light and privacy violations without
prejudice and granted plaintiffs' leave to amend the complaint. Discovery is
currently ongoing and trial is scheduled to commence October 21, 1996. Based
upon the facts available, management believes that, although no assurance can
be given, as to the outcome of this action, the ultimate disposition should not
have a material adverse effect upon the financial condition of the Company.
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<PAGE> 59
Miles Whittenburg, Jr., et al., v. Tele-Communications, Inc., et al.
On April 9, 1994, plaintiffs, six current employees of United Cable Television
of Baltimore Limited Partnership and four spouses, filed suit in the Circuit
Court for Baltimore City against Tele-Communications, Inc., TCI East, Inc.,
UCTC of Baltimore, Inc., and United Cable Television of Baltimore Limited
Partnership. The suit alleges, inter alia, nine various tort claims, including
but not limited to, false imprisonment, assault, battery, intentional
infliction of emotional distress, invasion of privacy by intrusion, invasion of
privacy by false light, defamation by slander, defamation by libel, and loss of
consortium in connection with an incident that occurred October 26, 1993, at
the Baltimore system. Each of the nine counts in the complaint seek
compensatory damages of $1,000,000 per plaintiff, and punitive damages of
$5,000,000 per plaintiff. On October 24, 1994, plaintiffs also filed in the
United States District Court for the District of Maryland, a lawsuit containing
claims of discrimination on the basis of race in violation of 42 U.S.C. Section
1981 and loss of consortium. Both counts sought compensatory damages of
$1,000,000 per plaintiff and punitive damages of $5,000,000 per plaintiff. The
loss of consortium claims apply to eight of the plaintiffs. On January 6,
1995, the parties stipulated to the dismissal of the case without prejudice,
which dismissal the Court approved on January 9, 1995. The Company intends to
contest the state court case. Discovery is currently ongoing and trial is
scheduled to commence October 21, 1996. Based upon the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
Elmer Lewis v. Tele-Communications, Inc., et al. On June 23, 1994,
plaintiff filed suit in the United States District Court for the District of
Maryland against Tele-Communications, Inc., TCI East, Inc., UCTC of Baltimore,
Inc. and United Cable Television of Baltimore Limited Partnership. On August
2, 1994, the suit was consolidated for all purposes with Tyrone Belgrave, et
al. v. Tele-Communications, Inc. et al. The suit alleges, inter alia, false
imprisonment, assault, employment defamation, intentional infliction of
emotional distress, unreasonable intrusion upon seclusion, invasion of privacy
by false light, wrongful discharge and discrimination on the basis of race.
The complaint also seeks divestiture of the Baltimore City cable franchise from
the Company. Each of the ten counts in the complaint seek compensatory damages
of $1,000,000 and punitive damages of $5,000,000. In a decision dated October
3, 1994, the Court granted defendants' motion to dismiss the intentional
infliction of emotional distress, unreasonable intrusion upon seclusion,
invasion of privacy by false light, wrongful discharge and violation of cable
franchise agreement claims. On February 4, 1995, the federal court dismissed
the federal claims without prejudice and remanded the remaining state claims to
Circuit Court for Baltimore City. On February 14, 1995, Lewis and his spouse
filed an amended complaint in Circuit Court for Baltimore City against the
current defendants (the amended complaint was consolidated with the Belgrave
and Fannell plaintiffs). Lewis alleges assault, civil conspiracy to commit
assault, battery, civil conspiracy to commit battery, false imprisonment, civil
conspiracy to commit false imprisonment, intentional infliction of emotional
distress, civil conspiracy to intentionally inflict emotional distress,
invasion of privacy by intrusion, civil conspiracy to commit invasion of
privacy by intrusion, defamation, civil conspiracy to defame, invasion of
privacy by false light, and civil conspiracy to commit invasion of privacy by
false light. Lewis and his spouse also allege loss of consortium. Each claim
seeks $1,000,000 in compensatory damages and $5,000,000 in punitive damages per
plaintiff. The Company intends to contest the case. Motions to Dismiss were
filed in this consolidated action and the Court entered an Order dismissing
plaintiffs' claims for intentional infliction of emotional distress and
wrongful discharge without prejudice and granted plaintiffs' leave to amend
their complaint. Discovery is currently ongoing and trial is scheduled to
commence October 21, 1996. Based upon the facts available, management believes
that, although no assurance can be given as to the outcome of this action, the
ultimate disposition should not have a material adverse effect upon the
financial condition of the Company.
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<PAGE> 60
Tyrone Belgrave, et al., v. Tele-Communications, Inc., et al. On
February 8, 1994, Tyrone Belgrave and 26 other current or former employees of
United Cable Television of Baltimore Limited Partnership filed suit in the
Circuit Court for Baltimore City against Tele-Communications, Inc., TCI East,
Inc., UCTC of Baltimore, Inc., and United Cable Television of Baltimore Limited
Partnership. The action alleges, inter alia, false imprisonment, assault,
employment defamation, intentional infliction of emotional distress,
unreasonable intrusion upon seclusion, invasion of privacy by false light,
wrongful discharge and discrimination on the basis of race. The complaint also
seeks divestiture of the Baltimore City cable franchise from the Company. Six
counts in the complaint each seek compensatory damages of $1,000,000 per
plaintiff, and punitive damages of $5,000,000 per plaintiff. Three other
counts in the complaint each seek compensatory damages for $1,000,000 per
plaintiff and punitive damages of $5,000,000 per plaintiff. On March 29, 1994,
the defendants removed the case to the United States District Court for the
District of Maryland. In a decision dated October 3, 1994, the Court granted
defendants motion to dismiss the intentional infliction of emotional distress,
unreasonable intrusion upon seclusion, invasion of privacy by false light,
wrongful discharge and violation of cable franchise agreement claims. On
February 9, 1995, the federal court dismissed the federal claims without
prejudice and remanded the remaining state claims to the Circuit Court for
Baltimore City. On February 14, 1995, 37 persons (the 27 original plaintiffs
and 10 spouses of plaintiffs) filed an amended complaint in Circuit Court for
Baltimore City against the current defendants. (The amended complaint was
consolidated with the Lewis and Fannell plaintiffs). The 27 existing
plaintiffs allege assault, civil conspiracy to commit assault, battery, civil
conspiracy to commit battery, false imprisonment, civil conspiracy to commit
false imprisonment, intentional infliction of emotional distress, civil
conspiracy to intentionally inflict emotional distress, invasion of privacy by
intrusion, civil conspiracy to commit invasion of privacy by intrusion,
defamation, civil conspiracy to defame, invasion of privacy by false light, and
civil conspiracy to commit invasion of privacy by false light. Ten existing
plaintiffs and their spouses allege loss on consortium. Ten existing
plaintiffs also allege wrongful discharge and civil conspiracy to wrongfully
terminate. Each claim seeks $1,000,000 in compensatory damages and $5,000,000
in punitive damages per plaintiff. The Company intends to contest the case.
Motions to Dismiss were filed in this consolidated action and the Court entered
an Order dismissing plaintiffs' claims for intentional infliction of emotional
distress and wrongful discharge without prejudice and granted plaintiffs' leave
to amend their complaint. Discovery is currently ongoing and trial is
scheduled to commence October 21, 1996. Based upon the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
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<PAGE> 61
Viacom International, Inc. v. Tele-Communications, Inc., Liberty Media
Corporation, Satellite Services, Inc., Encore Media Corporation, NetLink USA,
Comcast Corporation, and QVC Network, Inc. This suit was filed on September
23, 1993 in the United States District Court for the Southern District of New
York, and the complaint was amended on November 9, 1993. The amended complaint
alleges that the Company violated the antitrust laws of the United States and
the State of New York, violated the 1992 Cable Act, breached an affiliation
agreement, and tortiously interfered with the Viacom Inc. - Paramount
Communications, Inc. ("Paramount") merger agreement and with plaintiff's
prospective business advantage. The amended complaint further alleges that
even if plaintiff is ultimately successful in its bid to acquire Paramount, its
competitive position will still be diminished because the Company, through
Liberty, will have forced plaintiff to expend additional financial resources to
consummate the acquisition. Plaintiff is seeking permanent injunctive relief
and actual and punitive or treble damages of an undisclosed amount. Plaintiff
claims that the Company, along with Liberty, has conspired to use its monopoly
power in cable television markets to weaken unaffiliated programmers and deny
access to essential facilities necessary for distributing programming to cable
television systems. Plaintiff also alleges that the Company has conspired to
deny essential technology necessary for distributing programming to owners of
home satellite dishes. Plaintiff claims that the Company is engaging in these
alleged conspiracies in an attempt to monopolize alleged national markets for
non-broadcast television programming and distribution. On October 11, 1994,
the United States District Court granted Tele-Communications, Inc. and the
other defendants' motion for partial summary judgment and dismissed Viacom's $2
billion damage claim alleging that defendants tortiously interfered with its
contract to merge with Paramount and with the prospective business advantage
Viacom claimed it had in seeking to merge with Paramount. The Court also held
that the $2 billion difference between plaintiff's cost to acquire Paramount
under its original proposed merger agreement with Paramount and the costs it
finally incurred when plaintiff acquired Paramount pursuant to a merger
agreement entered into after an auction, was not incurred as a result of an
antitrust injury and could not be asserted as a discreet element of Viacom's
damage even if Viacom was ultimately successful in proving any or all of its
antitrust claims. Viacom has also voluntarily dismissed its claims that the
defendants violated Section 7 of the Clayton Act and that certain of the
defendants breached the affiliation agreement they had with Viacom. On January
20, 1995, the parties entered into a settlement agreement under which this
action is to be dismissed with prejudice contemporaneously with the first
closing of the sale of certain cable systems pursuant to the Tele-Vue
Agreement. The Stipulation of Discontinuance with Prejudice has been executed
by the parties and is being held in escrow pending the first closing described
above. Based upon the facts available, management believes that, although no
assurance can be given as to the outcome of this action, the ultimate
disposition should not have a material adverse effect upon the financial
condition of the Company.
I-59
<PAGE> 62
Euan Fannell v. Tele-Communications, Inc., et al. On February 8,
1994, Euan Fannell, the former general manager of UCTC of Baltimore, Inc. filed
suit in the Circuit Court for Baltimore City against Tele-Communications, Inc.,
TCI East, Inc., UCTC of Baltimore, Inc., and United Cable Television of
Baltimore Limited Partnership. The suit alleges, inter alia, employment
defamation, intentional infliction of emotional distress, unreasonable
intrusion upon seclusion, invasion of privacy by false light, breach of
contract, and discrimination on the basis of race. The complaint also seeks
divestiture of the Baltimore City cable franchise of the Company. The
plaintiff seeks $10,000,000 in compensatory damages and $50,000,000 in punitive
damages with respect to the intentional infliction of emotional distress claim;
and $10,000,000 in compensatory damages and $50,000,000 in punitive damages
with respect to each of five other counts. On March 29, 1994, the defendants
removed the case to the United States District Court for the District of
Maryland and the case was subsequently consolidated with the Belgrave case. In
a decision dated November 15, 1994, the federal court dismissed plaintiffs'
intentional infliction of emotional distress, unreasonable intrusion upon
seclusion, invasion of privacy by false light, and violation of cable franchise
agreement claims. On February 9, 1995, the federal court dismissed the federal
claims without prejudice and remanded the remaining state claims to the Circuit
Court for Baltimore City. On February 14, 1995, plaintiff filed an amended
complaint in Circuit Court for Baltimore City against the current defendants.
The amended action alleges intentional infliction of emotional distress, civil
conspiracy to intentionally inflict emotional distress, invasion of privacy by
intrusion, civil conspiracy to commit invasion of privacy by intrusion,
defamation, civil conspiracy to defame, invasion of privacy by false light,
civil conspiracy to commit invasion of privacy by false light, wrongful
discharge, civil conspiracy to wrongfully terminate, and breach of contract.
With respect to all claims other than breach of contract, plaintiff seeks
$1,000,000 in compensatory damages and $5,000,000 in punitive damages. With
respect to the breach of contract claim, plaintiff seeks $100,000 plus
prejudgment interest. The Company intends to contest the case. Motions to
Dismiss were filed in this consolidated action and the Court entered an Order
dismissing plaintiffs' claims for intentional infliction of emotional distress
and wrongful discharge without prejudice and granted plaintiffs' leave to amend
their complaint. Discovery is currently ongoing and trial is scheduled to
commence October 21, 1996. Based upon the facts available, management believes
that, although no assurance can be given as to the outcome of this action, the
ultimate disposition should not have a material adverse effect upon the
financial condition of the Company.
I-60
<PAGE> 63
Leonie Palumbo, et al. v. Tele-Communications, Inc., et al. On
February 8, 1994, Leonie Palumbo, a former employee of TCI East, Inc., filed a
class action suit in the United States District Court for the District of
Columbia against Tele-Communications, Inc., John Malone, and J.C. Sparkman.
The action alleges, on behalf of a class of past, present and future black
employees of the Company, and all past, present and future black applicants for
employment with the Company, discrimination on the basis of race. The
complaint seeks unspecified compensation and punitive damages as well as
injunctive relief for these violations. On June 22, 1994, defendants moved to
disqualify plaintiffs' counsel on the ground that during the time period
relevant to the case, plaintiffs' lead counsel had an ownership interest and
fiduciary responsibilities relating to United Cable Television of Baltimore
Limited Partnership, one of the cable systems whose policies and practices are
under attack. Plaintiffs' lead counsel was a member of the board of UCTC of
Baltimore, Inc., the general partner of United Cable Television of Baltimore
Limited Partnership. By Order dated August 30, 1994, the Court granted
Defendants' Motion and gave plaintiffs 60 days to find substitute counsel. At
a status conference on April 26, 1995, the Court dismissed the action without
prejudice, with the understanding that plaintiffs would have six months to
reinstitute the case with new counsel and that defendants would not raise any
objection to plaintiffs' reopening the case within the six month period in the
event that new counsel was retained. The six month period has expired and no
substitute counsel has surfaced for plaintiffs. Accordingly, this case will
not be reported in future filings.
Les Dunnaville v. United Artists Cable, et al. On February 9, 1994,
Les Dunnaville and Jay Sharrieff, former employees of United Cable Television
of Baltimore Limited Partnership, filed an amended complaint in the Circuit
Court for Baltimore City against United Cable Television of Baltimore Limited
Partnership, TCI Cablevision of Maryland, Tele-Communications, Inc. and three
company employees, Roy Harbert, Tony Peduto, and Richard Bushie (the suit was
initially filed on December 3, 1993, but the parties agreed on December 30,
1993 that no responsive pleading would be due pending filing of an amended
complaint). The action alleges, inter alia, intentional interference with
contract, tortious interference with prospective advantage, defamation, false
light, invasion of privacy, intentional infliction of emotional distress, civil
conspiracy, violation of Maryland's Fair Employment Practices Act, and
respondeat superior with respect to the individual defendants. Six counts in
the complaint each seek compensatory damages of $1,000,000 and punitive damages
of $1,000,000; the intentional infliction of emotional distress count seeks
compensatory damages of $1,000,000 and punitive damages of $2,000,000; and the
count which alleges violation of Maryland's Fair Employment Practices Act seeks
damages of $500,000. By order dated May 18, 1994, the Court dismissed the
respondeat superior claim. Defendants filed Motions for Summary Judgment in
December 1995 and January 1996 on all remaining counts of plaintiffs'
complaint. The Court granted Summary judgment in the defendant's favor on
March 15, 1996. Unless an appeal is filed within 45 days, the case will be
closed. Based upon the facts available, management believes that, although no
assurance can be given as to the outcome of this action, the ultimate
disposition should not have a material adverse effect upon the financial
condition of the Company.
I-61
<PAGE> 64
Tony Jeffreys, et al v. Tele-Communications, Inc. et al. On February
7, 1995, Tony Jeffreys and 41 current and former employees of United Cable
Television of Baltimore Limited Partnership filed a complaint in Circuit Court
for Baltimore City against Tele-Communications, Inc., UCT of Baltimore, Inc.,
United Cable Television of Baltimore Limited Partnership, UCTC of Baltimore,
Inc. and TCI East, Inc. With two exceptions, these plaintiffs are also parties
to identical claims asserted in the amended complaints filed on February 14,
1994 in the previously described Belgrave, Fannell and Lewis actions. The
action alleges, in part, that the defendants engaged U.S. Corporate
Investigations, Inc. and Blackburn Associates and conspired to illegally
terminate the employment of management personnel and employees of the Baltimore
system which culminated in the October 26, 1993, incident described in earlier
reports. Plaintiffs seek damages in connection with their claims of assault,
civil conspiracy to commit assault, battery, civil conspiracy to commit
battery, false imprisonment, civil conspiracy to commit false imprisonment,
intentional infliction of emotional distress, civil conspiracy to intentionally
inflict emotional distress, invasion of privacy by intrusion, civil conspiracy
to commit invasion of privacy by intrusion, defamation as to plaintiff Fannell,
defamation as to all plaintiffs except Fannell, civil conspiracy to defame,
invasion of privacy by false light, civil conspiracy to commit invasion of
privacy by false light, wrongful discharge, civil conspiracy to wrongfully
terminate, breach of contract as to plaintiff Fannell, and loss of consortium.
Each count seeks $1,000,000 in compensatory damages and $5,000,000 in punitive
damages per plaintiff. The Company intends to contest this action. Motions to
Dismiss were filed in this consolidated action and the Court entered an Order
dismissing plaintiffs' claims for intentional infliction of emotional distress
and wrongful discharge without prejudice and granted plaintiffs' leave to amend
their complaint. Discovery is currently ongoing and trial is scheduled to
commence October 21, 1996. Based upon the facts available, management believes
that, although no assurance can be given as to the outcome of this action, the
ultimate disposition should not have a material adverse effect upon the
financial condition of the Company.
Donald E. Watson v. Tele-Communications, Inc., et al. On March 10,
1995, Donald Watson, doing business under the name of Tri-County Cable, filed
suit in Superior Court for the District of Columbia against TCI, TCI East,
Inc., District Cablevision Limited Partnership, District Cablevision, Inc., TCI
of D.C., Inc., TCI of Maryland, Inc., TCI Development Corporation, United Cable
Television of Baltimore Limited Partnership, TCI of Pennsylvania, Inc. and two
individuals, Richard Bushey and Roy Harbert. The action alleges breach of
settlement agreement, intentional misrepresentations, tortious interference
with prospective advantage, tortious interference with contract, tortious
interference with economic relations, and discrimination on the basis of race.
Three counts in the Complaint seek compensatory damages of $2,500,000 and
punitive damages of $25,000,000; one count seeks compensatory damages of
$2,500,000 and punitive damages of $40,000,000; and two counts each seek
compensatory damages of $20,000,000 and punitive damages of $40,000,000. The
Company intends to contest this action. Based upon the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
I-62
<PAGE> 65
Louis Beverly v. Tele-Communications, Inc., et al. On July 27, 1995,
Louis Beverly, a former employee of United Cable Television of Baltimore
Limited Partnership filed a complaint in United States District Court for the
District of Maryland against Tele-Communications, Inc., United Artists Cable of
Baltimore, Inc., United Cable Television of Baltimore Limited Partnership, UCTC
of Baltimore, Inc., and TCI East, Inc. The plaintiff alleges, in part, that
his termination on September 11, 1987, was the result of racial discrimination.
Plaintiff filed five counts, including race discrimination (Title VII),
violation of 42 USC 1981, defamation, invasion of privacy (false light), and
assault and battery. Each count seeks $3,000,000 in compensatory and
$6,000,000 in punitive damages, an award of all bonuses and other compensation
lost due to defendants' actions as well as attorneys' fees, costs, and
pre-judgment interest. On February 14, 1996, the Court granted defendants'
Motion dismissing Tele-Communications, Inc., and TCI East, Inc. as parties,
along with various counts asserted by the plaintiffs including 42 USC 1981,
defamation, invasion of privacy, and assault and battery. United Artists Cable
of Baltimore was also dismissed from the Title VII claim for race
discrimination. Currently, the only damages available to plaintiff are those
which existed prior to the amendment to the Civil Rights Act of 1991. As the
case currently stands, the remaining defendants are faced with one count
without exposure to punitive damages. Based upon the facts available,
management believes that, although no assurances can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
Turner Broadcasting Systems, Inc. Shareholder Litigation Following
the announcement of the proposed merger (the "TBS-Time Warner Merger") between
Turner Broadcasting Systems, Inc. ("TBS") and Time Warner, Inc. ("Time Warner")
several purported class action lawsuits were filed by TBS shareholders in
Fulton County Superior Court, Georgia. On November 1, 1995, plaintiffs in
thirteen of the cases filed a second amended class action Complaint in what
will be a consolidated action styled Lewis v. TBS, Inc. C.A. No. B-41500. The
defendants include, among others, Tele-Communications, Inc., John Malone,
Peter Barton and Fred Vierra. The claims and defendants in the actions other
than the Lewis action are substantially the same as set forth in the second
amended complaint in the Lewis action. Plaintiffs allege in the second amended
complaint in the Lewis action that defendants have injured the public
stockholders of TBS in conjunction with the TBS-Time Warner Merger proposal by
(a) misrepresenting the extent to which defendants Time Warner, TCI, John
Malone and R.E. Turner ("Turner") have acted for their own benefit and not for
the benefit of TBS or its stockholders, (b) failing to adequately disclose the
full nature and value of special considerations granted to TCI and Turner in
connection with the TBS-Time Warner Merger proposal, (c) failing to engage in
arms' length bargaining or give any consideration to maximizing TBS stockholder
value, (d) proposing to provide the public holders of TBS stock with unfair
consideration in the TBS-Time Warner Merger, and (e) seeking to entrench
certain of the TBS officers and directors. Plaintiffs in the Lewis action seek
to enjoin the consummation of the TBS-Time Warner Merger, enjoin the transfer
of any assets to TCI in connection with the TBS-Time Warner Merger, or to
rescind the TBS-Time Warner Merger or transfer of assets if such acts are
consummated. Plaintiffs also seek unspecified compensatory and punitive
damages. All of the cases remain pending before the Superior Court in Georgia.
On December 20, 1995, the TCI defendants filed an answer to the second amended
complaint in the Lewis action denying plaintiffs' charges and raising several
affirmative defenses. Discovery has not commenced in any of the actions.
Based upon the facts available, management believes that, although no assurance
can be given as to the outcome of these actions, the ultimate disposition
should not have a material adverse effect upon the financial condition of the
Company.
I-63
<PAGE> 66
Time Warner Stockholder Litigation. In November 1995, two derivative
action lawsuits on behalf of and for the benefit of Time Warner, Inc. were
filed in the Delaware Chancery Court by purported stockholders of Time Warner.
These actions, which have identical claims and allegations, are styled as
Bernard v. Time Warner, Inc., C.A. No. 14651, and Parnes v. Time Warner, Inc.,
C.A. No. 14660, respectively. The defendants named in both complaints are Time
Warner, Inc., Tele-Communications, Inc., and the following individuals who are
directors of Time Warner: Gerald M. Levin, Merv Adelson, Beverly Sills
Greenough, Michael A. Miles, Donald S. Perkins, Raymond S. Troubh, Edward S.
Finkelstein, Carla A. Hills, Henry Luce, III, Reuben Mark, Francis T. Vincent,
Jr., Lawrence B. Buttenweiser, David T. Kearns, J. Richard Munro, and Richard
D. Parson. In both cases, plaintiffs allege among other things that the Time
Warner directors breached their fiduciary duties in establishing the terms of
Time Warner's proposed merger with Turner Broadcasting System, Inc.
Specifically, plaintiffs contend in both cases that the Time Warner directors
impermissibly sought to entrench themselves and that TCI aided and abetted the
Time Warner directors' alleged breaches of fiduciary duty. Plaintiffs complain
in both cases that, in connection with the proposed TBS-Time Warner Merger, TCI
will receive (i) a premium for its TBS stock with a value of nearly 7% over the
value of the merger consideration to be received by other TBS stockholders,
(ii) exclusive programming benefits at discounted prices from TBS, (iii) an
agreement to purchase TBS's and Time Warner's interests in two regional sports
networks, and (iv) five million additional shares of Time Warner stock in
exchange for giving Time Warner an option to purchase a subsidiary of TCI. In
exchange for these alleged benefits, TCI allegedly facilitated efforts by the
Time Warner directors and Time Warner's management to entrench themselves by
allowing the Time Warner voting stock to be received by TCI upon consummation
of the TBS-Time Warner Merger to be placed in a voting trust controlled by
defendant Levin, who is the chairman and chief executive officer of Time
Warner. Plaintiffs seek in both actions to enjoin the consummation of the
proposed TBS-Time Warner Merger, to rescind the TBS-Time Warner Merger if it is
consummated, and to enjoin the transfer of Time Warner's assets or stock to TCI
in connection with the TBS-Time Warner Merger. TCI moved to dismiss these
actions on November 22, 1995. Discovery has not commenced in these actions.
On December 5, 1995, plaintiffs in both actions agreed to stay any proceedings
pending regulatory developments regarding the proposed TBS-Time Warner Merger.
Based upon the facts available, management believes that, although no
assurances can be given as to the outcome of this action, the ultimate
disposition should not have a material adverse effect upon the financial
condition of the Company.
Clarence L. Elder, both individually and as the group Representative
vs. Tele-Communications, Inc. et al. On December 18, 1995, plaintiff filed
suit in the Circuit Court for Baltimore City, Case No. 95345001/CL205580
against UCTC L.P. Company, UCTC of Baltimore, Inc., UTI Purchase Company, Inc.
and Tele-Communications, Inc. The allegations made in the complaint pertain to
plaintiff's interest in United Cable Television of Baltimore Limited
Partnership. Plaintiff claims he was wrongfully denied certain preference
distributions, rights to purchase stock, rights to escrow funds, and tax
distributions. Plaintiff claims entitlement to compensatory damages in excess
of $70,000,000 plus punitive damages in excess of $450,000,000. Plaintiff
asserts claims for: breach of contract; negligent misrepresentation;
negligence; unjust enrichment; conversion; fraud; and breach of fiduciary duty.
The Company intends to contest this action. Based upon the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition should not have a material adverse
effect upon the financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
I-64
<PAGE> 67
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
On August 3, 1995, the shareholders of Tele-Communications, Inc.
("TCI" or the "Company") authorized the Board of Directors (the "Board") of TCI
to issue a new class of stock ("Liberty Group Stock") which is intended to
reflect the separate performance of TCI's business which produces and
distributes cable television programming services ("Liberty Media Group").
While the Liberty Group Stock constitutes common stock of TCI, the issuance of
the Liberty Group Stock did not result in any transfer of assets or liabilities
of TCI or any of its subsidiaries or affect the rights of holders of TCI's or
any of its subsidiaries' debt. On August 10, 1995, TCI distributed one hundred
percent of the equity value attributable to Liberty Media Group (the
"Distribution") to its security holders of record on August 4, 1995.
Additionally, the stockholders of TCI approved the redesignation of the
previously authorized TCI Class A and Class B common stock into Series A TCI
Group and Series B TCI Group common stock ("TCI Group Stock"). The TCI Group
Stock is intended to reflect the performance of those businesses of the Company
not attributed to Liberty Media Group.
Prior to the Distribution, shares of TCI's Class A and Class B common
stock were traded on the Nasdaq National Market under the symbols TCOMA and
TCOMB, respectively. Subsequent to the Distribution, shares of Series A and
Series B TCI Group Stock and Series A and Series B Liberty Group Stock are
traded on the Nasdaq National Market under the symbols TCOMA, TCOMB, LBTYA and
LBTYB, respectively. The following table sets forth the range of high and low
sales prices of shares of common stock of TCI and its predecessor, TCI
Communications, Inc., for the periods indicated as furnished by Nasdaq. The
prices have been rounded up to the nearest eighth, and do not include retail
markups, markdowns, or commissions. TCI Communications, Inc. and Liberty Media
Corporation became wholly-owned subsidiaries of Tele-Communications, Inc. on
August 4, 1994.
<TABLE>
<CAPTION>
Tele-Communications, Inc.
------------------------- Class A Class B
---------------- -----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1994:
----
First quarter 30-1/4 20-3/8 32-3/4 22
Second quarter 23-3/8 18-1/4 24-3/4 21-1/4
Third quarter 23-7/8 19-3/4 25-3/4 21-1/4
Fourth quarter 25 20-1/4 25-3/4 21-1/2
1995:
-----
First quarter 23-3/4 19-7/8 25 20-3/4
Second quarter 24-1/2 17-1/4 24 18-1/4
Third quarter (through
the Distribution) 26-1/4 22-5/8 26-1/4 22-1/4
<CAPTION>
TCI Group Stock
--------------- Series A Series B
---------------- -----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1995:
-----
Third quarter (from the
Distribution through
September 30, 1995) 20 16-7/8 20 17-1/2
Fourth quarter 21-1/4 16-5/8 21-1/4 16-3/4
<CAPTION>
Liberty Group Stock
------------------- Series A Series B
---------------- -----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1995:
-----
Third quarter (from the
Distribution through
September 30, 1995 28 23-1/2 29-1/2 24-1/4
Fourth quarter 28-1/8 22-7/8 29 24
</TABLE>
II-1
<PAGE> 68
As of January 31, 1996, there were 6,339 holders of record of Series A
TCI Group Stock, 409 holders of record of Series B TCI Group Stock, 5,786
holders of record of Series A Liberty Group Stock and 395 holders of record of
Series B Liberty Group Stock (which amounts do not include the number of
shareholders whose shares are held of record by brokerage houses but include
each brokerage house as one shareholder).
The Company has not paid cash dividends on its common stock and has no
present intention of so doing. Payment of cash dividends, if any, in the
future will be determined by the Board in light of the Company's earnings,
financial condition and other relevant considerations. The Company is a
holding company and its assets consist almost entirely of investments in its
subsidiaries. As a holding company, the Company's ability to pay dividends on
any classes or series of its stock is dependent on the earnings of, or other
funds available to, the Company's subsidiaries and the distribution or other
payment of such earnings or other funds to the Company in the form of
dividends, loans or other advances, payment or reimbursement of management fees
and expenses and repayment of loans and advances from the Company. Certain of
the Company's subsidiaries are subject to loan agreements that prohibit or
limit the transfer of funds by such subsidiaries to the Company in the form of
dividends, loans, or advances, and require that such subsidiaries' indebtedness
to the Company be subordinate to the indebtedness under such loan agreements.
The amount of net assets of subsidiaries subject to such restrictions exceeds
the Company's consolidated net assets. For further discussion of such
restrictions, see the Tele-Communications, Inc. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Item 6. Selected Financial Data.
The following tables present selected information relating to the
financial condition and results of operations of Tele-Communications, Inc. for
the past five years. The following data should be read in conjunction with the
Company's consolidated financial statements.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1995 1994(a) 1993(a) 1992(a) 1991(a)
---- ------- ------- ------- -------
amounts in millions
<S> <C> <C> <C> <C> <C>
Summary Balance Sheet Data:
- --------------------------
Property and equipment, net $ 7,026 5,876 4,935 4,562 4,081
Franchise costs, net $ 12,230 9,444 9,197 9,300 8,104
Net assets of discontinued
operations $ -- -- -- -- 242
Total assets $ 25,130 19,276 16,527 16,315 15,169
Debt $ 13,211 11,162 9,900 10,285 9,455
Redeemable preferred stock $ 478 170 18 110 115
Stockholders' equity $ 4,550 2,655 2,116 1,728 1,571
Common shares outstanding
(net of treasury shares):
Class A common stock -- 491 403 382 370
Class B common stock -- 85 47 48 49
Series A TCI Group Stock 572 -- -- -- --
Series B TCI Group Stock 85 -- -- -- --
Series A Liberty Group
Stock 143 -- -- -- --
Series B Liberty Group
Stock 21 -- -- -- --
(continued)
</TABLE>
II-2
<PAGE> 69
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------
1995 1994(a) 1993(a) 1992(a) 1991(a)
------- ------- ------- ------- -------
amounts in millions, except per share data
<S> <C> <C> <C> <C> <C>
Summary Statement of
- --------------------
Operations Data:
---------------
Revenue $ 6,851 4,936 4,153 3,574 3,214
Operating income $ 542 788 916 864 674
Earnings (loss) from:
Continuing operations $ (171) 62 (5) 8 (77)
Discontinued operations -- -- -- (15) (19)
------- ------ ------ ------ ------
(171) 62 (5) (7) (96)
Dividend requirement on
preferred stocks (34) (8) (2) (15) --
------- ------ ------ ------ ------
Net earnings (loss) attributable
to common stockholders $ (205) 54 (7) (22) (96)
======= ====== ====== ====== ======
Net earnings (loss) attributable
to common stockholders:
TCI Class A and Class B
common stock $ (71)(b) 54 (7) (22) (96)
TCI Group Stock (107)(c) -- -- -- --
Liberty Group Stock (27)(c) -- -- -- --
------- ------ ------ ------ ------
$ (205) 54 (7) (22) (96)
======= ====== ====== ====== ======
Primary earnings (loss) from
continuing operations
attributable to common
stockholders per common
and common equivalent
share:
TCI Class A and Class B $ (.11)(b) .10 (.02) (.01) (.22)
common stock
TCI Group Stock $ (.16)(c) -- -- -- --
Liberty Group Stock $ (.16)(c) -- -- -- --
Weighted average common
and common equivalent
shares outstanding:
TCI Class A and Class B
common stock 648 (b) 541 433 424 360
TCI Group Stock 656 (c) -- -- -- --
Liberty Group Stock 164 (c) -- -- -- --
</TABLE>
- ---------------
(a) Restated - see notes 5 and 6 to the Tele-Communications, Inc.
consolidated financial statements included in Part II of this
report.
(b) From January 1, 1995 through the date of the Distribution.
(c) From the date of the Distribution through December 31, 1995.
II-3
<PAGE> 70
The following tables present selected information relating to the
financial condition and results of operations of Liberty Media Group for the
past three years. The following data should be read in conjunction with Liberty
Media Group's combined financial statements.
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1994(a) 1993(a)
---- ------- -------
amounts in millions
Summary Balance Sheet Data:
- ---------------------------
<S> <C> <C> <C>
Investments in affiliates, accounted for under
the equity method, and related receivables $ 299 279 237
Investment in Turner Broadcasting
Systems, Inc. $ 945 654 487
Other investments, at cost $ 111 103 235
Total assets $ 2,518 2,188 1,738
Debt $ 251 93 150
Combined equity $ 1,613 1,518 1,188
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1995 1994(a) 1993(a)
---- ------- -------
amounts in millions
Summary Statement of
- --------------------
Operations Data:
----------------
<S> <C> <C> <C>
Revenue $ 1,540 1,483 1,207
Cost of goods sold, operating, selling, general
and administrative expenses, including
amounts to TCI $(1,536) (1,402) (1,171)
Depreciation and amortization $ (98) (49) (40)
Operating income (loss) $ (111) 31 (4)
Interest expense, including amounts to TCI $ (19) (13) (12)
Dividend and interest income, primarily
from affiliates S 12 20 23
Share of earnings (losses) of affiliates, net $ (15) 31 27
Net earnings (loss) $ (56) 135 30
</TABLE>
- -------------------------
(a) Restated - see note 4 to the Liberty Media Group combined
financial statements included in Part II of this report.
II-4
<PAGE> 71
The following tables present selected information relating to the financial
condition and results of operations of TCI Group for the past three years. The
following data should be read in conjunction with TCI Group's combined
financial statements.
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994(a) 1993(a)
---- ------- -------
Summary Balance Sheet Data: amounts in millions
- ---------------------------
<S> <C> <C> <C>
Property and equipment, net $ 6,822 5,682 5,007
Franchise cost, net $ 12,230 9,444 9,334
Total assets $ 22,612 17,121 15,648
Debt $ 12,960 11,068 10,010
Redeemable preferred stock $ 478 168 18
Combined equity $ 2,936 1,137 1,150
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1995 1994(a) 1993(a)
---- ------ ------
amounts in millions
Summary Statement of
- --------------------
Operations Data:
----------------
<S> <C> <C> <C>
Revenue $ 5,384 4,269 4,090
Operating, selling, gereral and administrative $ (3,457) (2,480) (2,251)
Depreciation and amortization $ (1,274) (1,001) (920)
Operating income $ 653 788 919
Interest expense $ (993) (786) (735)
Dividend and interest income, primarily
from affiliates $ 43 23 20
Share of losses of affiliates, net $ (178) (117) (66)
Loss before earnings (loss) of Liberty Media
Group through the date of Distribution $ (115) (22) (33)
Earnings (loss) of Liberty Media Group
through the date of Distribution $ (29) 135 30
-------- ------- -------
Net earnings (loss) (144) 133 (3)
Dividend requirement on preferred stocks (34) (14) (12)
-------- ------- -------
Net earnings (loss) attributable to
common stockholders $ (178) 99 (15)
======= ======= =======
</TABLE>
- -------------------------
(a) Restated - see note 13 to the TCI Group combined financial
statements included in Part II of this report.
II-5
<PAGE> 72
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
TELE-COMMUNICATIONS, INC.
Summary of Operations
As of January 27, 1994, TCI Communications, Inc. (formerly
Tele-Communications, Inc. or "Old TCI") and Liberty Media Corporation
("Liberty") entered into a definitive merger agreement to combine the two
companies (the "TCI/Liberty Combination"). The transaction was consummated on
August 4, 1994 and was structured as a tax free exchange of Class A and Class B
shares of both companies and preferred stock of Liberty for like shares of a
newly formed holding company, TCI/Liberty Holding Company. In connection with
the TCI/Liberty Combination, Old TCI changed its name to TCI Communications,
Inc. ("TCIC") and TCI/Liberty Holding Company changed its name to
Tele-Communications, Inc. ("TCI" or the "Company").
During the fourth quarter of 1994, the Company was reorganized (the
"Reorganization") based upon four lines of business: Domestic Cable and
Communications; Programming; International Cable and Programming ("TINTA"); and
Technology/Venture Capital. The Company reorganized its structure to provide
for financial and operational independence in the four operating units, each
under the direction of its own chief executive officer, while maintaining the
synergies and scale economies provided by a common corporate parent. While
neither the International Cable and Programming unit nor the Technology/Venture
Capital unit is currently significant to the Company as a whole, the Company
believes each unit has growth potential and each unit is unique enough in
nature to warrant separate operational focus.
On August 3, 1995, the shareholders of TCI authorized the Board of
Directors of TCI (the "Board") to issue a new class of stock ("Liberty Group
Stock") which is intended to reflect the separate performance of TCI's business
which produces and distributes cable television programming services ("Liberty
Media Group"). While the Liberty Group Stock constitutes common stock of TCI,
the issuance of the Liberty Group Stock did not result in any transfer of
assets or liabilities of TCI or any of its subsidiaries or affect the rights of
holders of TCI's or any of its subsidiaries' debt. On August 10, 1995, TCI
distributed one hundred percent of the equity value attributable to Liberty
Media Group (the "Distribution") to its security holders of record on August 4,
1995. Additionally, the stockholders of TCI approved the redesignation of the
previously authorized TCI Class A and Class B common stock into Series A TCI
Group and Series B TCI Group common stock ("TCI Group Stock"). The TCI Group
Stock is intended to reflect the performance of those businesses of the Company
not attributed to Liberty Media Group. Such businesses are referred to herein
as "TCI Group". Liberty Media Group and TCI Group are sometimes herein after
referred to individually as a "Group".
Subsequent to consummation of the TCI/Liberty Combination, the Company
operates principally in two industry segments: cable and communications
services and programming services. Home shopping is a programming service
which includes a retail function. Separate amounts for the aforementioned home
shopping services have been provided to enhance the readers understanding of
the Company. The Technology/Venture Capital and the International Cable and
Programming portions of the Company's business have been included with cable
and communications services due to their relative insignificance. The amounts
provided for the Company's programming services segment represent the results
of Liberty Media Group since the date of the TCI/Liberty Combination. The
tables below set forth for the periods presented, the percentage relationship
that certain items bear to revenue. This summary provides trend data relating
to the normal recurring operations of the Company. Other items of significance
are discussed under separate captions below.
II-6
<PAGE> 73
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------------------------
1995 1994 1993
----------------- ------------------ ---------------------
amounts in millions, except for percentages
<S> <C> <C> <C> <C> <C> <C>
Cable and Communications Services:
- ----------------------------------
Revenue 100% $ 5,384 100% $ 4,247 100% $ 4,153
Operating costs and expenses before
depreciation and amortization 64 3,457 58 2,474 56 2,326
Depreciation and amortization 24 1,274 23 992 22 911
---- ------- ---- ------- ----- -------
Operating income 12% $ 653 19% $ 781 22% $ 916
==== ======= ==== ======= ===== =======
Programming Services:
- --------------------
Electronic Retailing Services:
Net sales 100% $ 1,019 100% $ 482 -- $ --
Cost of sales 69 702 65 313 -- --
Operating costs and expenses before
depreciation and amortization 35 359 30 145 -- --
Depreciation and amortization 4 43 3 15 -- --
---- ------- ---- ------- ----- -------
Operating income (loss) (8)% $ (85) 2% $ 9 -- $ --
==== ======= ==== ======= ===== =======
Other Programming Services:
Revenue 100% $ 521 100% $ 240 -- $ --
Operating costs and expenses before
depreciation and amortization 94 492 96 231 -- --
Depreciation and amortization 11 55 5 11 -- --
---- ------- ---- ------- ----- -------
Operating loss (5)% $ (26) (1)% $ (2) -- $ --
==== ======= ==== ======= ===== =======
Eliminations
- ------------
Revenue 100% $ (73) 100% $ (33) -- $ --
Operating costs and expenses before
depreciation and amortization (100) (73) (100) (33) -- --
---- ------- ---- ------- ----- -------
Operating income --% $ -- --% $ -- --% $ --
==== ======= ==== ======= ===== =======
Tele-Communications, Inc. Consolidated:
- --------------------------------------
Revenue 100% $ 6,851 100% $ 4,936 100% $ 4,153
Cost of sales 10 702 6 313 -- --
Operating costs and expenses before
depreciation and amortization 62 4,235 57 2,817 56 2,326
Depreciation and amortization 20 1,372 21 1,018 22 911
---- ------- ---- ------- ----- -------
Operating income 8% $ 542 16% $ 788 22% $ 916
==== ======= ==== ======= ===== =======
</TABLE>
II-7
<PAGE> 74
Cable and Communications Services
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). In 1993 and
1994, the Federal Communications Commission ("FCC") adopted certain rate
regulations required by the 1992 Cable Act and imposed a moratorium on certain
rate increases. As a result of such actions, the Company's basic and tier
service rates and its equipment and installation charges (the "Regulated
Services") are subject to the jurisdiction of local franchising authorities and
the FCC. The regulations established benchmark rates in 1993 which were
further reduced in 1994, to which the rates charged by cable operators for
Regulated Services were required to conform.
The FCC also allowed cable operators to justify rates under "cost of
service" rules, which allow "high cost" systems to establish rates in excess of
the benchmark level. The FCC's interim cost of service rules allowed a cable
operator to recover through rates for regulated cable services its normal
operating expenses plus a rate of return equal to 11.25 percent on the rate
base. However, the FCC significantly limited the inclusion in the rate base of
acquisition costs in excess of the book value of tangible assets. As a result,
the Company pursued cost of service justifications in only a few cases. On
December 15, 1995, the FCC adopted slightly more favorable cost of service
rules.
The regulations also provide mechanisms for adjusting rates when
regulated tiers are affected by channel additions or deletions. Additional
programming costs resulting from channel additions can be accorded the same
external treatment as other program costs increases, and cable operators
presently are permitted to recover a mark-up on their programming expenses.
Under one option, operators are allowed a flat ($.20) fee increase per channel
added to an existing cable programming services tier ("CPST"), with an aggregate
cap on such increases ($1.20) plus a license fee reserve ($.30) through 1996.
In 1997, an additional flat ($.20) fee increase will be available, and the
license fees for additional channels and for increases in existing channels will
no longer be subject to the aggregate cap. This optional approach for adding
services is scheduled to expire on December 31, 1997.
The Company reduced its rates in 1993 and 1994 and limited its rate
increases in 1995 in response to FCC regulations. The Company believes that it
has complied in all material respects with the provisions of the 1992 Cable
Act, including its rate setting provisions. However, the Company's rates for
Regulated Services are subject to review by the FCC, if a complaint has been
filed, or by the appropriate franchise authority, if such authority has been
certified. If, as a result of the review process, a system cannot substantiate
its rates, it could be required to retroactively reduce its rates to the
appropriate benchmark and refund the excess portion of rates received. Any
refunds of the excess portion of tier service rates would be retroactive to the
date of complaint. Any refunds of the excess portion of all other Regulated
Service rates would be retroactive to one year prior to the implementation of
the rate reductions.
On October 30, 1995, the FCC accepted for comment a proposed resolution
of all complaints against the CPST currently pending against cable systems owned
by the Company. If the proposed resolution is accepted by the FCC, the Company
will settle all pending complaints by a one-time credit to each subscriber in
CPST regulated franchises. The aggregate amount of such credits is
approximately $9 million and had previously been accrued by the Company. In
addition, the FCC will find that the CPST rates in CPST regulated franchises on
September 15, 1995 comply with federal regulations. The Company has committed
not to file any additional cost-of-service filings until May 15, 1996 in
franchises that were subject to CPST regulation prior to September 15, 1995.
However, the Company will be able to avail itself of the other mechanisms under
FCC rules to recover costs, including abbreviated cost-of-service filings
covering system rebuilds and upgrades. In the proposed resolution, the Company
does not admit any violation of, or any failure to conform to, the 1992 Cable
Act or the rules promulgated thereunder. The comment period has ended and the
Company is awaiting final action by the FCC.
II-8
<PAGE> 75
On February 8, 1996, the Telecommunications Act of 1996 (the "1996
Telecom Act") was signed into law. Because the 1996 Telecom Act does not
deregulate CPST rates until 1999 (and basic service tier rates will remain
regulated thereafter), the Company believes that the 1993 and 1994 rate
regulations have had and will continue to have a material adverse effect on its
results of operations.
Revenue from Cable and Communications increased 26% from 1994 to 1995.
Such increase is due to the effect of certain acquisitions (13%), growth in the
Company's satellite subscribers (4%), increases in the rates charged to the
Company's subscribers from inflation increases, the provision of new channels
and increases in equipment costs (4%), growth in subscriber levels within the
Company's cable television systems (4%) and an increase in the Company's long-
distance voice and data service revenue (1%).
Revenue increased 2% from 1993 to 1994. Such increase was the result
of the TCI/Liberty Combination in August of 1994 (1%), growth in subscriber
levels within the Company's cable television systems (5%), the effect of
certain other acquisitions (2%) and certain new services (1%), net of a
decrease in revenue (4%) due to rate reductions required by rate regulation
implemented pursuant to the 1992 Cable Act and a decrease in revenue (3%) due
to the transfer of Netlink USA ("Netlink") to the Programming unit in the
Reorganization. Netlink's operations were included in Cable and Communications
Services in 1993, but have been reflected in Programming Services for all of
1994 and 1995. In the second half of 1994, as a result of the FCC revision of
its rate regulations which reduced benchmark rates, the Company experienced an
additional decrease, in excess of that which was incurred in 1993, in the price
charged for its Regulated Services.
Included in the Company's revenue from cable operations of $5,105
million, $4,203 million and $4,098 million for the years ended December 31,
1995, 1994 and 1993, respectively, is $5,038 million, $4,177 million and $4,098
million attributable to TCIC and $67 million, $26 million and $0 attributable
to other cable operations.
Operating costs and expenses before depreciation and amortization
increased 40% for the year ended December 31, 1995. Exclusive of the affects
of acquisitions (13%) and Primestar (7%) (see discussion below), such expenses
increased 20%. Programming expenses accounted for the majority of such
increase. In this regard, programming expenses represented $1,251 million
(36%), $903 million (36%) and $740 million (32%) of operating costs and
expenses before depreciation and amortization during 1995, 1994 and 1993,
respectively. The Company cannot determine whether and to what extent
increases in the cost of programming will affect its future operating costs.
However, such programming costs have increased at a greater percentage than
increases in revenue of Regulated Services. The Company will experience an
increase in programming costs in the first five months of 1996 without
increasing its rates charged to its customers at that time. In June of 1996,
the Company will be entitled to an increase in its service rates for increased
programming costs and inflation. FCC regulations provide for the Company to
further increase its rates by an additional amount intended to recover
increased programming costs incurred during the first five months of 1996 and
not previously recovered, as well as interest on said amounts.
During 1995, the Company changed its approach to how it ordered and
stored excess cable distribution equipment. The Company created material
support centers and consolidated all of its excess inventory. In conjunction
with this change, the Company incurred $5 million of costs. Additionally,
during 1995, the Company incurred approximately $22 million in expenses related
to initiatives to improve its customer service, to begin the redesign of its
computer and accounting systems and to promote and market the Company's
products. During the fourth quarter of 1995, the Company incurred $25 million
in expenses related to payment of bonuses to the majority of its employees.
The Company has an investment in a direct broadcast satellite
partnership, Primestar Partners ("Primestar"). Primestar provides programming
and marketing support to each of its cable partners who then provide satellite
service to their customers. During 1995, the Company's revenue and expenses
related to such satellite service have increased significantly as the number of
the Company's Primestar subscribers increased from approximately 100,000
subscribers at January 1, 1995 to approximately 550,000 subscribers at December
31, 1995. During the year ended December 31, 1995, revenue increased from $30
million to $207 million and operating, selling, general and administrative
expenses increased from $18 million to $197 million, as compared to the year
ended December 31, 1994. The Company incurs significant sales commissions and
installation costs when customers initially subscribe. Therefore, as long
as the Company continues to launch this new service and increase its Primestar
subscriber base at such a rapid pace, management expects operating costs and
expenses will increase as well.
II-9
<PAGE> 76
Operating costs and expenses before depreciation and amortization
increased 6% for the year ended December 31, 1994 compared to the corresponding
period of 1993. The consolidation of Liberty resulted in an increase of $18
million in operating, selling, general and administrative expenses from
Liberty's cable television systems. In 1993, the Company incurred certain
one-time direct charges relating to the implementation of the FCC rate
regulations.
The increase in the Company's depreciation expense in 1995 is due to
acquisitions, as well as increased capital expenditures due to a program to
upgrade and install optical fiber technology in the Company's cable systems.
The systems, which facilitate digital transmission of voice, video and data
signals, will have optical fiber to neighborhood nodes with coaxial cable
distribution downstream from that point. The increase in amortization expense
in 1995 is due to acquisitions.
The Company records compensation relating to stock appreciation rights
and restricted stock awards granted to certain employees. Such compensation is
subject to future adjustment based upon market value, and ultimately, on the
final determination of market value when the rights are exercised or the
restricted stock awards are vested.
Electronic Retailing Services
This information reflects the results of Home Shopping Network, Inc.
("HSN"), which became a consolidated subsidiary of the Company in the
TCI/Liberty Combination. HSN's primary business is the sale of merchandise to
viewers of the home shopping programming produced and distributed by Home
Shopping Club, Inc. ("HSC"), a wholly-owned subsidiary of HSN.
During the year ended December 31, 1995, HSN's net sales increased
from $482 million to $1,019 million. Such increase is due to the consolidation
of HSN in August of 1994 in connection with the TCI/Liberty Combination.
However, on an annualized basis, HSN's net sales decreased approximately 10%.
Such annualized decrease is the net affect of a 19% decease in the number of
packages shipped, partially offset by a 9% increase on the average price per
unit sold.
In September 1994, HSN appointed new management personnel to institute
procedures intended to improve purchasing and other merchandising practices.
Their strategies included offering a greater variety of products, developing
strong private label lines, selling higher margin items and offering name brand
and other high quality merchandise. These efforts were aimed at long-term
improvements in sales by attracting new customers and increasing the frequency
of repeat purchases. However, the impact of these strategies was to adversely
affect sales during 1995.
Since June 5, 1995, HSN has operated two full-time networks renamed
HSN, the primary network, and Spree!. On August 5, 1995, HSN relaunched the
HSN network with more scheduled programs and theme related shows, new sets,
graphics and music. During the third quarter of 1995, HSN relaunched the
Spree! network with a more spontaneous format, new graphics and music. These
changes were designed to eliminate programming redundancies, distinguish the
networks and reach a broader range of potential customers.
Management of HSN also instituted promotional programs to help
increase sales, including a national advertising campaign and a "no interest --
no payments" credit promotion through February 1996 for certain purchases made
during the third and fourth quarters of 1995 using HSN's private label credit
card. Although the credit promotion program was successful, its effect was not
enough to offset the decline in sales discussed above.
Additionally, $4 million of the restructuring charges for the year
ended December 31, 1995, represents HSN management's estimate of costs to be
incurred in connection with the closing of HSN's Reno, Nevada, distribution
center, which was accomplished in June 1995. The decision to close the Reno
distribution center was based on an evaluation of HSN's overall distribution
strategy. Management of HSN believes that consolidation of HSN's distribution
facilities will result in better operating efficiencies and improved service
to customers.
II-10
<PAGE> 77
HSN's cost of sales increased from $313 million to $702 million during
1995. As a percent of sales, cost of sales increased from 65% in 1994 to 69%
in 1995. The increase in the cost of sales percentages primarily relate to
warehouse sales and other promotional events. Such events included price
discounts to (i) facilitate the restructuring of HSN's distribution center,
(ii) make room for new holiday merchandise and (iii) adjust inventory levels
and product mix. In addition, cost of sales for the year ended December 31,
1995 includes a $12 million increase in HSC's inventory carrying value
adjustment related to products which are inconsistent with HSN's new sales and
merchandise philosophy.
HSN believes that future levels of net sales of HSC will be dependent,
in large part, on program carriage, market penetration and merchandising
management. Program carriage is defined as the number of cable systems and
broadcast television stations that carry HSC programming. Market penetration
represents the level of active purchasers within a market.
Cable television systems and affiliated broadcast television stations
broadcast HSC programming under affiliation agreements with varying original
terms. HSN seeks to increase the number of cable television systems and
broadcast television stations that televise HSC programming while evaluating
the expected profitability of each contract.
HSN believes that seasonality does impact its business, but not to the
same extent it impacts the retail industry in general.
On November 27, 1995, the Company announced that it had agreed to
exchange its controlling interest in HSN for shares of Silver King
Communications, Inc. ("Silver King"). The Company will receive approximately
11 million newly issued shares of Silver King in exchange for its 37.5 million
shares of HSN.
Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into an agreement in August 1995 pursuant to
which an option owned by Liberty Media Group to purchase 2 million shares of
Silver King Class B common stock (the "Option") (which shares would constitute
voting control of Silver King) would be transferred to Silver Management
Company ("Silver Company"), an entity in which Liberty Media Group would own
all of the non-voting equity interests (which would constitute substantially
all of the equity of such entity) and Mr. Diller would own all of the voting
equity interests. Silver Company would thereafter exercise the Option and hold
the shares of Silver King Class B Common Stock purchased thereunder. In an
amendment to such agreement entered into in November 1995, Liberty Media Group
agreed to contribute all of its shares of HSN (which shares constitute
approximately 41% of the equity of HSN and approximately 90% of the voting
power of HSN) to Silver Company in return for additional non-voting equity
interests in Silver Company. Following such contribution, Silver Company would
exchange such HSN shares with Silver King for additional shares of Silver King
Common Stock and Class B Common Stock (thereby increasing Silver Company's
controlling interest in Silver King to in excess of 80% of the voting power of
Silver King). Each such transaction is subject to the satisfaction of certain
conditions, including the receipt of all necessary regulatory consents and
approvals. If consummated, HSN would cease to be a subsidiary of the Company
and therefore, the financial results of HSN would not be consolidated with the
financial results of Liberty Media Group. Although the Company would cease to
possess voting control over HSN, it would continue to have an indirect equity
interest in HSN through its ownership of the equity securities of Silver
Company. No assurance can be given that the transaction will be consummated.
II-11
<PAGE> 78
Other Programming Services
Revenue from the Company's Other Programming Services increased $281
million or 117% from 1994 to 1995, and operating costs and expenses before
depreciation and amortization increased $261 million or 113%. Such increases
are primarily due to the TCI/Liberty Combination.
Revenue of TCI's consolidated entertainment and information
programming services represented $240 million of total consolidated revenue for
1994. This revenue was attributable to subscription and advertising revenue at
TCI's consolidated sports programming businesses ($91 million), revenue from
Netlink, a marketer and distributor of programming to the United States home
satellite dish subscriber market ($132 million) and subscription revenue
generated by Southern Satellite Systems, Inc. ("Southern") and Encore Media
Corporation ("Encore") ($17 million).
On October 31, 1995, Liberty Media Group announced that it had entered
into a binding agreement in principle with The News Corporation Limited ("News
Corp.") and TINTA. In the United States, Liberty Media Group and News Corp.
agreed to form a partnership (the "Fox-Liberty Venture") into which Liberty
Media Group will contribute interests in its national and regional sports
networks and into which News Corp. will contribute its fx cable network and
certain other assets. Upon consummation, Liberty Media Group will receive a 50%
interest in the Fox-Liberty Venture and $350 million in cash. The fx Network
will be transformed into a nationally distributed, general entertainment and
sports network. The regional sports networks currently operated under the Prime
Sports name will be relaunched under the Fox Sports banner.
Internationally, News Corp., and a 50/50 partnership formed by Liberty
Sports, a wholly owned subsidiary of Liberty Media Group, and TINTA (the
"Liberty-TINTA Partnership") have agreed to form a venture to operate currently
existing sports services in Asia, Latin American and Australia and a variety of
new sports services throughout the world except in the United Kingdom, Japan
and New Zealand where prior arrangements preclude an immediate collaboration.
The Liberty-TINTA Partnership will own 50% of the international venture with
News Corp. owning the other 50%. News Corp. is contributing various
international sports rights, including the Star Sports channel which is
broadcast throughout Asia as part of the Star package of services. The
Liberty-TINTA Partnership is contributing Prime Deportiva, a Spanish language
sports service distributed in Latin America and in Hispanic markets in the
United States, an interest in Torneos y Competencias S.A., an Argentinean
sports programming and production business, various international sports and
satellite transponder rights and cash. The Liberty-TINTA Partnership will also
contribute their 50% interest in Premiere Sports and All-Star Sports in
Australia. Both are 24-hour sports services available via MMDS or cable
television in Australia.
The closing of the formation of both the US Venture and the
International Venture is expected to occur during 1996.
Other Income and Expense
The Company's interest expense increased $225 million or 29% during
1995, as compared to 1994 and $54 million or 7% during 1994, as compared to
1993. Such increases are the result of higher interest rates and debt
balances. The Company's weighted average interest rate on borrowings was 8.1%,
7.5% and 7.2% during 1995, 1994 and 1993, respectively.
II-12
<PAGE> 79
The Company is a shareholder of TeleWest plc ("TeleWest"), a company
that is currently operating and constructing cable television and telephone
systems in the United Kingdom ("UK"). TeleWest, which is accounted for under
the equity method, had a carrying value at December 31, 1995 of $550 million
and comprised $70 million, $43 million and $28 million of the Company's share
of its affiliates' losses in 1995, 1994, and 1993, respectively. In addition,
the Company has other less significant equity method investments in video
distribution and programming businesses located in the UK, other parts of
Europe, Asia, Latin America and certain other foreign countries. In the
aggregate, such other equity method investments had a carrying value of $354
million at December 31, 1995 and accounted for $62 million and $50 million of
the Company's share of its affiliates' losses in 1995 and 1994, respectively.
TeleWest was formed during the fourth quarter of 1995 upon the merger
(the "TeleWest Merger") of TeleWest Communications plc (formerly TCI/US WEST
Cable Communications Group or "TeleWest UK") ("TeleWest Communications") with
SBC (CableComms)(UK). Prior to the TeleWest Merger, the Company had an
effective ownership interest of approximately 36% in TeleWest Communications,
and subsequent to the TeleWest Merger the Company has an effective ownership
interest of approximately 27% in TeleWest. As a result of the TeleWest Merger,
the Company recognized a gain of $165 million (before deducting the related tax
expense of $58 million). Such gain represents the difference between the
Company's recorded cost for TeleWest Communications and the Company's effective
proportionate share of TeleWest's net assets. There is no assurance that the
Company will realize similar gains in future periods.
As a result of the TeleWest Communications November 1994 initial
public offering (the "TeleWest IPO") and the associated dilution of the
Company's ownership interest of TeleWest Communications, the Company recognized
a gain amounting to $161 million (before deducting the related tax expense of
$57 million) in 1994.
TeleWest, which is currently constructing broadband cable television
and telephony networks in the UK, has incurred net losses since its inception.
Although there is no assurance, the Company believes (i) that the continued
expansion of TeleWest's networks ultimately will provide TeleWest with a
revenue base that will exceed its expenses and (ii) that TeleWest's present and
future sources of liquidity (including the net proceeds from the TeleWest IPO
and certain bank credit facilities) will be sufficient to meet TeleWest's
liquidity requirements for the foreseeable future. The Company has no present
intention to make significant loans to or investments in TeleWest.
During the year ended December 31, 1995, the Company recognized a gain
amounting to $123 million in connection with the sale to the public of 20
million shares of common stock (the "IPO") and the issuance of shares of common
stock for an investment in an Argentine programming entity (the "TYC
Acquisition") by TINTA. There is no assurance that the Company will realize
similar gains in future periods.
Effective February 9, 1995, QVC Programming Holdings, Inc. (the
"Purchaser"), a corporation jointly owned by Comcast Corporation and the
Company, was merged (the "QVC Merger") with and into QVC, Inc. ("QVC") with QVC
continuing as the surviving corporation. The Company owns an approximate 43%
interest of the post-merger QVC. Upon consummation of the QVC Merger, the
Company was deemed to exercise significant influence over QVC and, accordingly,
adopted the equity method of accounting for its investment in QVC. The
accompanying 1994 financial statements have been restated to reflect such
change in accounting. Such restatement resulted in an increase in the
Company's net earnings of $5 million for the year ended December 31, 1994.
II-13
<PAGE> 80
During 1995, BET Holdings, Inc. ("BET") repurchased a portion of its
own common stock. As a result of the repurchase, the Company's ownership of
BET was increased from 19% to 22%. Therefore, the Company is deemed to
exercise significant influence over BET and, has accordingly adopted the equity
method of accounting for its investment in BET. The accompanying 1994 and 1993
financial statements have been restated to reflect such change in accounting.
Such restatement resulted in an increase in the Company's net earnings of $2
million for each of 1994 and 1993.
On July 11, 1994, Rainbow Program Enterprise ("Rainbow") purchased
49.9% of Liberty's 50% general partnership interest in American Movie Classics
Company ("AMC"). The gain recognized by Liberty in connection with the
disposition of AMC was $183 million and is included in the Company's share of
Liberty's earnings prior to the TCI/Liberty Combination.
Net Earnings (Loss)
The Company's net loss (before preferred stock dividend requirements)
of $171 million for the year ended December 31, 1995 represented a decrease of
$233 million as compared to the Company's net earnings (before preferred stock
dividend requirements) of $62 million for 1994. Such decrease is due primarily
to a decrease in operating income, a decrease in share of earnings of
affiliates (a significant portion of which results from the gain recognized in
1994 by Liberty upon the sale of its investment in AMC), and an increase in
interest expense partially offset by the recognition of a gain resulting from
the TINTA IPO.
The Company's net earnings (before preferred stock dividend
requirements) of $62 million for the year ended December 31, 1994 represented
an increase of $67 million as compared to the Company's net loss (before
preferred stock dividend requirements) of $5 million for the corresponding
period of 1993. Such increase is principally the result of the effect of
improved share of earnings from Liberty prior to the TCI/Liberty Combination
(principally resulting from the gain recognized by Liberty upon the sale of its
investment in AMC), the recognition of a gain resulting from the TeleWest IPO,
and the reduction in income tax expense (principally resulting from the
required recognition in the third quarter of 1993 of the cumulative effect of
the change in the Federal income tax rate from 34% to 35%), net of the effect
of the aforementioned reduction in rates charged for Regulated Services and the
decrease in gain on disposition of assets.
Inflation has not had a significant impact on the Company's results of
operations during the three-year period ended December 31, 1995.
Recent Accounting Pronouncements
In March of 1995, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of ("Statement No. 121"), effective for fiscal years beginning after
December 15, 1995. Statement No. 121 requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company will adopt Statement No. 121 effective January 1, 1996. The
effect of such adoption is not expected to be significant.
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Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("Statement No. 123") was issued by the FASB in
October 1995. Statement No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans as well as transactions
in which an entity issues its equity instruments to acquire goods or services
from non-employees. The Company will include the disclosures required by
Statement No. 123 in the notes to future financial statements.
Liquidity and Capital Resources
During 1994, subsidiaries of the Company, Comcast Corporation
("Comcast"), Cox Communications, Inc. ("Cox" and together with the Company and
Comcast, the "Cable Partners") and Sprint Corporation ("Sprint") formed a
partnership ("WirelessCo") to engage in the business of providing wireless
communications services on a nationwide basis. Through WirelessCo, in which
the Company owns an indirect 30% interest, the partners participated in
auctions ("PCS Auctions") of broadband personal communications services ("PCS")
licenses conducted by the FCC. In the first round auction, which concluded
during the first quarter of 1995, WirelessCo was the winning bidder for PCS
licenses for 29 markets, including New York, San Francisco-Oakland-San Jose,
Detroit, Dallas-Fort Worth, Boston-Providence, Minneapolis-St. Paul and Miami-
Fort Lauderdale. The aggregate license cost for these licenses was
approximately $2.1 billion.
WirelessCo also invested in American PSC, L.P. ("APC"), which holds a
PCS license granted under the FCC's pioneer preference program for the
Washington-Baltimore market. WirelessCo acquired its 49% limited partnership
interest in APC for $23 million and agreed to make capital contributions to APC
equal to 49/51 of the cost of APC's PCS license. Additional capital
contributions may be required in the event APC is unable to finance the full
cost of its PCS license. WirelessCo may also be required to finance the
build-out expenditures for APC's PCS system. Cox, which holds a pioneer
preference PCS license for the Los Angeles-San Diego market, and WirelessCo
have also agreed on the general terms and conditions upon which Cox (with a 51%
interest) and WirelessCo (with a 49% interest) would form a partnership to hold
and develop a PCS system using the Los Angeles-San Diego license. APC and the
Cox partnership would affiliate their PCS systems with WirelessCo and be part
of WirelessCo's nationwide integrated network, offering wireless communications
services under the "Sprint" brand.
During 1994, subsidiaries of Cox, Sprint and the Company also formed a
separate partnership ("PhillieCo"), in which the Company owns a 35.3% interest.
PhillieCo was the winning bidder in the first round auction for a PCS license
for the Philadelphia market at a license cost of $85 million. To the extent
permitted by law, the PCS system to be constructed by PhillieCo would also be
affiliated with WirelessCo's nationwide network.
WirelessCo may bid in subsequent rounds of the PCS Auctions and may
invest in, affiliate with or acquire licenses from other successful bidders.
The capital that WirelessCo will require to fund the construction of the PCS
systems, in addition to the license costs and investments described above, will
be substantial.
In March of 1995, the Cable Partners and Sprint ( collectively, the
"Partners") formed two new partnerships, of which the principal partnership is
MajorCo, L.P. ("MajorCo"), to which they contributed their respective interests
in WirelessCo and through which they formed another partnership, NewTelco, L.P.
("New Telco") to engage in the business of providing local wireline
communications services to residences and businesses on a nationwide basis.
The Cable Partners agreed to contribute their interests in Teleport
Communications Group, Inc. and TCG Partners (collectively, "TCG") to NewTelco.
TCG is one of the largest competitive access providers in the United States in
terms of route miles.
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Effective January 31, 1996, the Partners amended the MajorCo
partnership agreement (the "Partnership Agreement") and certain other
agreements related thereto. Under the Partnership Agreement, the business of
MajorCo and its subsidiaries will be the provision of certain wireless and
other services described in the Partnership Agreement. The Partners intend for
WirelessCo and its subsidiary partnerships to be the exclusive vehicles through
which they engage in the wireless telephony service businesses, subject to
certain exceptions. MajorCo will no longer be authorized to engage in the
business of providing local wireline communications services to residences and
businesses. In connection with the amendment of the Partnership Agreement, the
Partners, also agreed to the termination of the agreement to contribute the
Cable Partners' interests in TCG to NewTelco.
Pursuant to separate agreements, each of the Cable Partners and Sprint
have agreed to negotiate in good faith on a market-by-market basis for the
provision of local wireline telephony services over the cable television
facilities of the respective Cable Partner under the Sprint brand. Accordingly,
local wireline telephony offerings in each market would be the subject of
individual agreements to be negotiated with Sprint, rather than being provided
by MajorCo, as originally contemplated. The Cable Partners and Sprint also
reaffirmed their intention to continue to attempt to integrate the business of
TCG with that of MajorCo. In addition, each Cable Partner agreed to certain
restrictions on its ability to offer, promote, or package certain of its
products or services with certain products and services of other persons and
agreed to make its facilities available to Sprint for specified purposes to the
extent and on the terms that it has made such facilities available to others
for such purposes. Such agreements have a term of five years, but under
certain circumstances may terminate after three years.
Execution of the foregoing agreements was a condition to the
effectiveness of a previously approved business plan for the build out of
WirelessCo's nationwide network for wireless personal communications services.
Pursuant to the business plan, the Partners are obligated to make additional
cash capital contributions to MajorCo in the aggregate amount of approximately
$1.9 billion during the two-year period that commenced January 1, 1996. The
business plan contemplates that MajorCo will require additional equity
thereafter.
As of January 26, 1995, TCI, TCIC, and TeleCable Corporation
("TeleCable") consummated a transaction whereby TeleCable was merged into TCIC
(the "TeleCable Merger"). The aggregate $1.6 billion purchase price was
satisfied by TCIC's assumption of approximately $300 million of TeleCable's net
liabilities and the issuance to TeleCable's shareholders of approximately 42
million shares of TCI Class A common stock and 1 million shares of TCI
Convertible Preferred stock, Series D (the "Series D Preferred Stock") with an
aggregate initial liquidation value of $300 million. The Series D Preferred
Stock, which accrues dividends at a rate of 5.5% per annum, is convertible into
10 million shares of Series A TCI Group Stock and 2.5 million shares of Series
A Liberty Group Stock. The Series D Preferred Stock is redeemable for cash at
the option of TCI after five years and at the option of either TCI or the
holder after ten years.
On April 25, 1995, TINTA acquired a 51% ownership interest in
Cablevision S.A. and certain affiliated companies (collectively, "Cablevision")
for a purchase price of $282 million, before liabilities assumed. The purchase
price was paid with cash consideration of $195 million and TINTA's issuance of
$87 million principal amount of secured negotiable promissory notes payable to
the selling shareholders. TINTA has an option during the two-year period ended
April 25, 1997 to increase its ownership interest in Cablevision up to 80% at a
cost per subscriber similar to the initial purchase price, adjusted however for
certain fluctuations in applicable foreign currency exchange rates.
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In July 1995, TCIC and TCI, entered into certain agreements with
Viacom Inc. ("Viacom") and certain subsidiaries of Viacom regarding the
purchase by TCIC of all of the common stock of a subsidiary of Viacom ("Cable
Sub") which, at the time of purchase, will own Viacom's cable systems and
related assets.
The transaction has been structured as a tax-free reorganization in
which Cable Sub will initially transfer all of its non-cable assets, as well as
all of its liabilities other than current liabilities, to a new subsidiary of
Viacom ("New Viacom Sub"). Cable Sub will also transfer to New Viacom Sub the
proceeds (the "Loan Proceeds") of a $1.7 billion loan facility (the "Loan
Facility") to be arranged by TCIC, TCI and Cable Sub. Following these
transfers, Cable Sub will retain cable assets with an estimated value at
closing of approximately $2.2 billion and the obligation to repay the Loan
Proceeds borrowed under the Loan Facility. Repayment of the Loan Proceeds
will be non-recourse to Viacom and New Viacom Sub.
Viacom will offer to the holders of shares of Viacom Class A Common
Stock and Viacom Class B Common Stock (collectively, "Viacom Common Stock") the
opportunity to exchange (the "Exchange Offer") a portion of their shares of
Viacom Common Stock for shares of Class A Common Stock, par value $100 per
share, of Cable Sub ("Cable Sub Class A Stock"). The Exchange Offer will be
subject to a number of conditions, including a condition (the "Minimum
Condition") that sufficient tenders are made of Viacom Common Stock that permit
the number of shares of Cable Sub Class A Stock issued pursuant to the Exchange
Offer to equal the total number of shares of Cable Sub Class A Stock issuable
in the Exchange Offer.
Immediately following the completion of the Exchange Offer, TCIC will
acquire from Cable Sub shares of Cable Sub Class B common stock for $350
million (which will be used to reduce Cable Sub's obligations under the Loan
Facility). At the time of such acquisition, the Cable Sub Class A Stock
received by Viacom stockholders pursuant to the Exchange Offer will
automatically convert into a series of senior cumulative exchangeable preferred
stock (the "Exchangeable Preferred Stock") of Cable Sub with a stated value of
$100 per share (the "Stated Value"). The terms of the Exchangeable Preferred
Stock, including its dividend, redemption and exchange features, will be
designed to cause the Exchangeable Preferred Stock, in the opinion of two
investment banks, to initially trade at the Stated Value. The Exchangeable
Preferred Stock will be exchangeable, at the option of the holder commencing
after the fifth anniversary of the date of issuance, for shares of Series A TCI
Group Stock. The Exchangeable Preferred Stock will also be redeemable, at the
option of Cable Sub, after the fifth anniversary of the date of issuance, and
will be subject to mandatory redemption on the tenth anniversary of the date of
issuance at a price equal to the Stated Value per share plus accrued and unpaid
dividends, payable in cash or, at the election of Cable Sub, in shares of
Series A TCI Group Stock or in any combination of the foregoing. If
insufficient tenders are made by Viacom stockholders in the Exchange Offer to
permit the Minimum Condition to be satisfied, Viacom will extend the Exchange
Offer for up to 15 business days and, during such extension, TCI and Viacom are
to negotiate in good faith to determine mutually acceptable changes in the
terms and conditions for the Exchangeable Preferred Stock and the Exchange
Offer that each believes in good faith will cause the Minimum Condition to be
fulfilled and that would cause the Exchangeable Preferred Stock to trade at a
price equal to the Stated Value immediately following the expiration of the
Exchange Offer. In the event the Minimum Condition is not thereafter met, TCI
and Viacom will each have the right to terminate the transaction. In addition,
either party may terminate the transaction if the Exchange offer has not
commenced by June 24, 1996 or been consummated by July 24, 1996.
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Consummation of the transaction is subject to a number of conditions,
including receipt of a favorable letter ruling from the Internal Revenue
Service that the transaction qualifies as a tax-free transaction and the
satisfaction or waiver of all of the conditions of the Exchange Offer. A
request for a letter ruling from the Internal Revenue Service has been filed by
Viacom. The Company believes that, based upon the unique and complex structure
of the transaction, there exists significant uncertainty as to whether a
favorable ruling will be obtained. In light of the foregoing, management of
the Company has concluded that consummation of the transaction is not yet
probable. Accordingly, no assurance can be given that the transaction will be
consummated.
At December 31, 1995, Cable Sub provided service to approximately 1.2
million basic subscribers and had total assets of $1,067 million. For the year
ended December 31, 1995, Cable Sub had revenue of $442 million and net earnings
of $34 million. It is expected that if the transaction is consummated, the
Company would account for such acquisition under the purchase method of
accounting. Accordingly, the cost to acquire Cable Sub estimated at
approximately $2.2 billion (reflecting the Loan Proceeds of $1.7 billion and
the estimated aggregate Stated Value of the Exchangeable Preferred Stock of
$500 million) would be allocated to the assets and liabilities acquired
according to their respective fair values, with any excess being treated as
intangible assets. As such, the Company will, if such transaction is
consummated, reflect additional interest expense, depreciation, amortization
and minority share of losses of consolidated subsidiaries. On a pro forma
basis, if the transaction had been consummated under its current terms on or
before January 1, 1995, Cable Sub would have reflected loss before taxes of
approximately $51 million for the year ended December 31, 1995. On a pro forma
basis, Cable Sub would reflect an approximate $21 million of preferred stock
dividend requirements on an annual basis assuming, solely for the purpose of
this presentation, a dividend rate of 4.25% per annum on the Exchangeable
Preferred Stock. On a pro forma basis, the Company would reflect the foregoing
financial impacts of Cable Sub in its consolidated results of operations except
that the preferred stock dividend requirement of Cable Sub would be reflected
as minority interest in the Company's statement of operations and the Company
would incur an additional approximately $28 million of interest expense per
year arising from the assumed borrowing by the Company for its $350 million
capital contribution to Cable Sub.
The Company owns shares of common stock and preferred stock of Turner
Broadcasting System, Inc. ("TBS"). On September 22, 1995, the boards of
directors of Time Warner and TBS approved plans to merge their respective
companies (the "TBS/Time Warner Merger"). Under the terms of the agreement,
TBS shareholders will receive 0.75 of a Time Warner common share for each TBS
Class A and Class B common share. Each holder of TBS Class C preferred stock
will receive 0.80 of a Time Warner common share for each of the 6 shares of TBS
Class B common stock into which each of the shares of Class C preferred stock
may be converted.
Subject to certain conditions, the Company has agreed to vote its TBS
shares for the TBS/Time Warner Merger. The Time Warner shares of common stock
received by the Company will be exchanged immediately for a series of voting
common stock ("Time Warner Series Common Stock") economically equivalent to the
common stock and placed in a voting trust with Time Warner Chairman, Gerald M.
Levin, as the trustee.
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In connection with the TBS/Time Warner Merger, TBS has agreed to sell
its interest in SportSouth Network, L.P. ("SportSouth"), a regional sports
cable network, to the Company for approximately $60 million; and Time Warner
has agreed to issue shares of Time Warner Series Common Stock economically
equivalent to 5 million shares of Time Warner common stock to the Company in
exchange for a 6-year option to purchase Southern. Time Warner has also agreed
to issue additional shares of Time Warner Series Common Stock to the Company
having a market value of $160 million in the event Time Warner exercised such
option. Any shares of Time Warner common stock issuable in connection with the
Southern option will be exchanged for Time Warner Series Common Stock.
Additionally, Time Warner will grant the Company an option to purchase Time
Warner's interest in Sunshine Network, a Florida based sports cable network,
for $14 million.
The TBS/Time Warner Merger is subject to, among other things, approval
by the FCC and regulatory review by federal antitrust authorities, and approval
by the shareholders of TBS and Time Warner. It is expected to be completed in
1996.
Pursuant to an underwritten public offering, the Company sold
19,550,000 shares of TCI Class A common stock in February of 1995. The Company
received net proceeds of approximately $401 million. Such proceeds were
immediately used to reduce outstanding indebtedness under credit facilities.
On July 18, 1995, TINTA completed the IPO in which it sold 20 million
shares of TINTA Series A common stock to the public for aggregate consideration
of $320 million, before deducting related expenses (approximately $19 million).
TINTA used the IPO proceeds to repay debt of the Company ($177 million) and
fund acquisitions, operations and capital contributions.
During the year ended December 31, 1995, TCIC sold approximately $1.5
billion of publicly-placed fixed rate senior and medium term notes with interest
rates ranging from 6.8% to 8.8% and maturity dates ranging through 2015. The
proceeds from the sale of these notes were used primarily to repay variable-rate
bank debt.
Subsequent to December 31, 1995, TINTA issued $345 million (before
deducting offering costs of $9 million) of 4.5% convertible subordinated
debentures. TINTA anticipates that it will use the net proceeds to fund
capital contributions to certain of its equity investees.
Also, subsequent to December 31, 1995, the Company, through certain
subsidiaries, issued (i) 4.6 million shares of Cumulative Exchangeable
Preferred Stock for net cash proceeds of $223 million, (ii) 20 million
preferred securities of 8.72% Trust Originated Preferred Securities for net
cash proceeds of $486 million (through a special purpose entity formed as a
Delaware business trust) and (iii) $1 billion of publicly-placed fixed rate
senior and medium term notes with interest rates ranging from 6.9% to 7.9% and
maturity dates ranging through 2026. The Company used the proceeds from the
aforementioned debt and equity securities to retire overnight commercial paper
and to repay variable rate indebtedness.
The Company has a credit facility which matures in September of 1996.
The outstanding balance of such facility was $602 million at December 31, 1995.
The Company currently anticipates that it will refinance such borrowings but
there can be no assurance that it can do so on terms acceptable to the Company.
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The Company is a holding company and its assets consist almost
entirely of investments in its subsidiaries. As a holding company, the
Company's ability to pay dividends on any classes or series of preferred stock
is dependent on the earnings of, or other funds available to, the Company's
subsidiaries and the distribution or other payment of such earnings or other
funds to the Company in the form of dividends, loans or other advances, payment
or reimbursement of management fees and expenses and repayment of loans and
advances from the Company. The Company's subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
the dividends on any class or series of preferred stock of TCI or to make any
funds available therefor, whether by dividends, loans or other payments. The
payment of dividends or the making of loans and advances to the Company by its
subsidiaries may be subject to statutory or regulatory restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business considerations. Further, certain of the Company's subsidiaries are
subject to loan agreements that prohibit or limit the transfer of funds by such
subsidiaries to the Company in the form of dividends, loans, or advances, and
require that such subsidiaries' indebtedness to the Company be subordinate to
the indebtedness under such loan agreements. The amount of net assets of
subsidiaries subject to such restrictions exceeds the Company's consolidated
net assets. The Company's subsidiaries currently have the ability to transfer
funds to the Company in amounts exceeding the Company's dividend requirement on
any class or series of preferred stock. Net cash provided by operating
activities of subsidiaries which are not restricted from making transfers to
the parent company have been and are expected to continue to be sufficient to
enable the parent company to meet its cash obligations.
Moreover, almost all of the consolidated liabilities of the Company
have been incurred by its subsidiaries. Therefore, the Company's rights, and
the extent to which the holders of the Company's preferred stocks will be able
to participate in the distribution of assets of any subsidiary upon the
latter's liquidation or reorganization, will be subject to prior claims of the
subsidiary's creditors, including trade creditors, except to the extent that
the Company may itself be a creditor with recognized claims against such
subsidiary (in which case the claims of the Company would still be subject to
the prior claims of any secured creditor of such subsidiary and of any holder
of indebtedness of such subsidiary that is senior to that held by the Company).
Subsidiaries of the Company had approximately $2.5 billion in unused
lines of credit at December 31, 1995 excluding amounts related to lines of
credit which provide availability to support commercial paper. Although
subsidiaries of the Company were in compliance with the restrictive covenants
contained in their credit facilities at said date, additional borrowings under
the credit facilities are subject to the subsidiaries' continuing compliance
with such restrictive covenants (which relate primarily to the maintenance of
certain ratios of cash flow to total debt and cash flow to debt service, as
defined in the credit facilities) after giving effect to such additional
borrowings. See note 9 to the accompanying consolidated financial statements
for additional information regarding the material terms of the subsidiaries'
lines of credit.
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One measure of liquidity is commonly referred to as "interest
coverage." Interest coverage, which is measured by the ratio of Operating Cash
Flow (operating income before depreciation, amortization and other non-cash
operating credits or charges)($1,975 million, $1,798 million and $1,858 million
in 1995, 1994 and 1993, respectively) to interest expense ($1,010 million, $785
million and $731 million in 1995, 1994 and 1993, respectively), is determined
by reference to the consolidated statements of operations. The Company's
interest coverage ratio was 196%, 229% and 254% for 1995, 1994 and 1993,
respectively. The decrease in the Company's interest coverage in 1995 is
caused by increased interest expense due to higher interest rates and debt
levels in 1995. Management of the Company believes that the foregoing interest
coverage ratio is adequate in light of the consistency and nonseasonal nature
of its cable television operations and the relative predictability of the
Company's interest expense, almost half of which results from fixed rate
indebtedness. 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 accompanying consolidated statements of cash
flows. Net cash provided by operating activities ($957 million, $908
million and $1,247 million in 1995, 1994 and 1993, respectively) reflects net
cash from the operations of the Company available for the Company's liquidity
needs after taking into consideration the aforementioned additional 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. However, management believes that net cash provided by
operating activities, the ability of the Company and its subsidiaries to obtain
additional financing (including the subsidiaries' available lines of credit and
access to public debt markets), issuances and sales of the Company's equity or
equity of its subsidiaries, and proceeds from disposition of assets will
provide adequate sources of short-term and long-term liquidity in the future.
See the Company's consolidated statements of cash flows included in the
accompanying consolidated financial statements.
In order to achieve the desired balance between variable and fixed
rate indebtedness and to diminish its exposure to extreme increases in variable
interest rates, the Company has entered into various interest rate exchange
agreements. At December 31, 1995, after considering the net effect of various
interest rate exchange agreements (see note 9 to the consolidated financial
statements) with notional amounts aggregating $1,918 million, the Company had
$6,002 million (or 45%) of fixed-rate debt with a weighted average interest
rate of 8.8% and $7,209 million (or 55%) of variable-rate debt with a weighted
average interest rate of 6.3%.
Pursuant to the interest rate exchange agreements, the Company pays
(i) fixed interest rates ranging from 6.1% to 9.9% on notional amounts of $602
million at December 31, 1995 and (ii) variable interest rates on notional
amounts of $2,520 million at December 31, 1995. During the years ended
December 31, 1995, 1994 and 1993, the Company's net payments pursuant to its
fixed rate exchange agreements were $13 million, $26 million and $38 million,
respectively. During the years ended December 31, 1995, 1994 and 1993, the
Company's net receipts (payments) pursuant to its variable rate exchange
agreements were (less than $1 million), $36 million and $31 million,
respectively. The Company is exposed to credit losses for the periodic
settlements of amounts due under the interest rate exchange agreements in the
event of nonperformance by the other parties to the agreements. However, the
Company does not anticipate that it will incur any material credit losses
because it does not anticipate nonperformance by the counterparties.
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In connection with its investments in certain foreign entities, the
Company is exposed to unfavorable and potentially volatile fluctuations of the
U.S. dollar against the UK pound sterling ("L."), the Japanese yen ("Yen"), and
various other foreign currencies that are the functional currencies of the
Company's foreign subsidiaries and affiliates. Any increase (decrease) in the
value of the U.S. dollar against any foreign currency that is the functional
currency of an operating subsidiary or affiliate of TINTA will cause the
Company to experience unrealized foreign currency translation losses (gains)
with respect to amounts already invested in such foreign currencies. The
Company is also exposed to foreign currency risk to the extent that the Company
or its foreign subsidiaries and affiliates enter into transactions denominated
in currencies other than their respective functional currencies. Because the
Company generally views its foreign operating subsidiaries and affiliates as
long-term investments, the Company generally does not attempt to hedge existing
investments in its foreign affiliates and subsidiaries. With respect to
funding commitments that are denominated in currencies other than the U.S.
dollar, the Company historically has sought to reduce its exposure to
short-term (generally no more than 90 days) movements in the applicable
exchange rates once the timing and amount of such funding commitments becomes
fixed. Although the Company monitors foreign currency exchange rates with the
objective of mitigating its exposure to unfavorable fluctuations in such rates,
the Company believes that it is not possible or practical to completely
eliminate the Company's exposure to unfavorable fluctuations in foreign
currency exchange rates.
Approximately twenty-five percent of the franchises held by the
Company, involving approximately 4.4 million basic subscribers, expire within
five years. There can be no assurance that the franchises for the Company's
systems will be renewed as they expire, although the Company believes that its
cable television systems generally have been operated in a manner which
satisfies the standards established by the Cable Communications Policy Act of
1984 (the "1984 Cable Act"), as supplemented by the renewal provisions of the
1992 Cable Act, for franchise renewal. However, in the event they are renewed,
the Company cannot predict the impact of any new or different conditions that
might be imposed by the franchising authorities in connection with the
renewals. To date they have not varied significantly from the original terms.
A significant competitive impact is expected from medium power and
higher power direct broadcast satellites ("DBS") that use high frequencies to
transmit signals that can be received by dish antennas much smaller in size
than traditional home satellite dishes ("HSDs"). Primestar distributes a
multi-channel programming service via a medium power communications satellite
to HSDs of approximately 3 feet in diameter. At December 31, 1995, Primestar,
through its partners, served an estimated 940,000 HSDs in the United States.
Two other DBS operators, DirecTV, a subsidiary of GM Hughes Electronics, and
United States Satellite Broadcasting, a subsidiary of Hubbard Broadcasting,
Inc., offer video services that can be received by HSDs that measure
approximately eighteen inches in diameter. Such DBS operators have the right
to distribute substantially all of the significant cable television programming
services currently carried by cable television systems. The competition from
DBS will likely continue to grow. One DBS operator is preparing to launch a
new DBS satellite. AT&T Corp. recently made a large investment in DirecTV, and
several other major companies are preparing to develop and operate high-power
DBS systems, including MCI Communications Corp. ("MCI") and News Corp. MCI
recently acquired rights to satellite frequencies for DBS in an FCC auction.
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The 1996 Telecom Act eliminated the statutory and regulatory
restrictions that prevented telephone companies from competing with cable
operators for the provision of video services by any means. The 1996 Telecom
Act allows local telephone companies, including the regional bell operating
companies, to compete with cable television operators both inside and outside
their telephone service areas. The Company expects that it will face
substantial competition from telephone companies for the provision of video
services. The Company assumes that all major telephone companies have already
entered or soon will enter the business of providing video services. Most
major telephone companies have greater financial resources than the Company,
and the 1992 Cable Act ensures that telephone company providers of video
services will have access to all of the significant cable television
programming services. Additionally, the 1996 Telecom Act eliminates certain
federal restrictions on utility holding companies and thus frees all utility
companies to provide cable television services. The Company expects this
could result in another source of significant competition in the delivery of
video services.
The Company is upgrading and installing optical fiber technology in its
cable systems at a rate such that in approximately two years TCI anticipates
that it will be serving the majority of its customers with this technology. The
systems, which facilitate digital transmission of voice, video and data signals,
will have optical fiber to neighborhood nodes with coaxial cable distribution
downstream from that point. The Company made capital expenditures of $1,782
million in 1995 and the Company expects to expend similar amounts in 1996 to
provide for the continued rebuilding of its cable systems. However, such
proposed expenditures are subject to reevaluation based upon changes in the
Company's liquidity, including those resulting from rate regulation.
The Company has guaranteed notes payable and other obligations of
affiliated and other companies with outstanding balances of approximately $222
million at December 31, 1995. Although there can be no assurance, management
of the Company believes that it will not be required to meet its obligations
under such guarantees, or if it is required to meet any of such guarantees,
that they will not be material to the Company.
The Company is obligated to pay fees for the license to exhibit certain
qualifying films that are released theatrically by various motion picture
studios through February 28, 2009 (the "Film Licensing Obligations"). The
aggregate minimum liability under certain of the license agreements is
approximately $414 million. The aggregate amount of the Film Licensing
Obligations under other license agreements is not currently estimable because
such amount is dependent upon certain variable factors. Nevertheless, the
Company's aggregate payments under the Film Licensing Obligations could prove
to be significant. Additionally, the Company has guaranteed up to $67 million
of similar license fee obligations of an affiliate.
The Company has committed to provide additional debt or equity funding
to certain of its affiliates. At December 31, 1995, such commitments
aggregated $95 million.
The Company intends to continue to develop its entertainment and
information programming services and has made certain financial commitments
related to the acquisition of programming. The Company's obligation for
certain sports program rights contracts as of December 31, 1995 was $448
million. Upon the formation of the Fox-Liberty Venture, of which there is no
assurance, the Company anticipates that such commitments will be transferred to
the Fox-Liberty Venture. In the event the Fox-Liberty Venture is not formed,
the Company expects that sufficient cash will be generated by the programming
services to satisfy these commitments. However, the continued development of
such services may require additional financing and it cannot be predicted
whether the Company will obtain such financing on terms acceptable to the
Company.
II-23
<PAGE> 90
The Company's various partnerships and other affiliates accounted for
under the equity method generally fund their acquisitions, required debt
repayments and capital expenditures through borrowings under and refinancing of
their own credit facilities (which are generally not guaranteed by the Company)
and through net cash provided by their own operating activities.
The Company's subsidiaries generally finance acquisitions and capital
expenditures through net cash provided by operating and financing activities.
Amounts expended for acquisitions and capital expenditures exceed net cash
provided by operating activities.
II-24
<PAGE> 91
LIBERTY MEDIA GROUP
General
As of January 27, 1994, TCIC and Liberty entered into a definitive
merger agreement to combine the two companies. The TCI/Liberty Combination was
consummated on August 4, 1994. Due to the significant economic interest held
by TCIC through its ownership of Liberty preferred stock and Liberty common
stock and other related party considerations, TCIC accounted for its investment
in Liberty under the equity method prior to the consummation of the TCI/Liberty
Combination. Accordingly, TCIC had recognized 100% of Liberty's earnings or
losses before deducting preferred stock dividends. The TCI/Liberty Combination
was accounted for using predecessor cost due to related party considerations.
Accordingly, the accompanying combined financial statements of Liberty Media
Group reflect the combination of the historical financial information of the
assets of TCI and Liberty which produce and distribute cable television
programming attributed to Liberty Media Group.
On August 3, 1995, the shareholders of TCI authorized the Board to
issue a new class of stock which is intended to reflect the separate
performance of Liberty Media Group. However, Liberty Group Stock constitutes
common stock of TCI. The issuance Liberty Group Stock did not result in any
transfer of assets or liabilities of TCI or any of its subsidiaries or affect
the rights of holders of TCI's or any of its subsidiaries' debt. On August 10,
1995, TCI distributed to its security holders of record on August 4, 1995,
Liberty Group Stock representing one hundred percent of the equity value
attributable to Liberty Media Group.
The subsidiaries of TCI and Liberty attributed to Liberty Media Group,
as well as certain investments held by these or other subsidiaries of TCI and
Liberty also attributed to Liberty Media Group at the time of the Distribution,
are as follows (unless otherwise denoted, such subsidiaries and investments
were held separately by Liberty through August 4, 1994, the date the
TCI/Liberty Combination was consummated):
Subsidiaries
Encore
TV Network Corporation ("Intro") (formed in 1994)
HSN
Southern
Netlink (owned by TCIC prior to the TCI/Liberty
Combination)
Liberty Sports, Inc. ("Liberty Sports")
Affiliated Regional Communications, Ltd. ("ARC")
Vision Group Incorporated (owned by TCIC prior to the
TCI/Liberty Combination)
Americana Television Productions LLC (acquired in 1995)
MacNeil/Lehrer Productions (acquired in 1995)
Prime Ticket Networks, L.P. ("Prime Sports-West")
(acquired in 1994)
Encore International, Inc.
Liberty Productions, Inc. (formed in 1995)
Prime Sports Network - Northwest
II-25
<PAGE> 92
Investments
BET
Video Jukebox Network, Inc.
Courtroom Television Network ("Court")
Discovery Communications, Inc. (owned by TCIC
prior to the TCI/Liberty Combination)
DMX, Inc. (owned by TCIC prior to the TCI/Liberty
Combination)
E! Entertainment Television, Inc. (owned by TCIC prior
to the TCI/Liberty Combination)
International Family Entertainment, Inc.
Ingenius (formed in 1994)
International Cable Channels Partnership, Ltd.
(acquired in 1994)
QE+ Ltd. (formed in 1994) (owned by TCIC prior to the
TCI/Liberty Combination)
QVC
Reiss Media Enterprises, Inc. (owned by TCIC prior to
the TCI/Liberty Combination)
TBS (owned by TCIC prior to the TCI/Liberty
Combination)
Prime SportsChannel Networks Associates
Home Team Sports Limited Partnership
SportsChannel Chicago Associates
SportsChannel Pacific Associates
SportsChannel Prism Associates
Prime Sports Network - Upper Midwest
SportSouth
Sunshine Network ("Sunshine")
AMC
Republic Pictures Television (owned by TCIC prior to
the TCI/Liberty Combination)
Sillerman Communications Management Corporation (owned
by TCIC prior to the TCI/Liberty Combination)
Technology Programming Ventures (formed in 1994)
Premier Sports ("Australia") (launched in 1995)
Silver King
Asian Television and Communications LLC
Mountain Mobile Television LLC
Cutthroat Productions, LP (formed in 1994)
The National Registry
PPVN Holding Company (acquired in 1995)
Following the Distribution, the TCI Group Stock is intended to reflect
the separate performance of the TCI Group, which is generally comprised of the
subsidiaries and assets not attributed to Liberty Media Group, including (i)
TCI's Domestic Cable and Communications unit, (ii) TCI's International Cable
and Programming unit and (iii) TCI's Technology/Venture Capital unit. The
businesses of TCI not attributed to Liberty Media Group are referred to as "TCI
Group". Intercompany balances resulting from transactions with such units are
reflected as borrowings from or loans to TCI and, prior to the Distribution,
are included in combined equity in the accompanying combined financial
statements of Liberty Media Group. See note 10 to the accompanying Liberty
Media Group combined financial statements.
II-26
<PAGE> 93
PENDING TRANSACTIONS
On September 22, 1995, the boards of directors of Time Warner and TBS
approved the TBS/Time Warner Merger. Under the terms of the agreement, TBS
shareholders will receive 0.75 Time Warner common shares for each TBS Class A
and B common share. Each holder of TBS Class C preferred stock will receive
0.80 Time Warner common shares for each of the 6 shares of TBS Class B common
stock into which each of the shares of Class C preferred stock may be
converted.
Subject to certain conditions, Liberty Media Group has agreed to vote
its TBS shares for the TBS/Time Warner Merger. The Time Warner shares of
common stock received by Liberty Media Group will be exchanged immediately for
Time Warner Series Common Stock economically equivalent to the common stock and
placed in a voting trust with Time Warner Chairman, Gerald M. Levin, as the
trustee.
In connection with the TBS/Time Warner Merger, TBS has agreed to sell
its interest in SportSouth, a regional sports cable network, to Liberty Media
Group for approximately $60 million; and Time Warner has agreed to issue shares
of Time Warner Series Common Stock economically equivalent to 5 million shares
of Time Warner common stock to Liberty Media Group in exchange for a 6-year
option to purchase Southern. Time Warner has also agreed to issue additional
shares of Time Warner Series Common Stock to Liberty Media Group having a
market value of $160 million in the event Time Warner exercises such option.
Any shares of Time Warner common stock issuable in connection with the Southern
option will be exchanged for Time Warner Series Common Stock. Additionally,
Time Warner will grant Liberty Media Group an option to purchase Time Warner's
interest in Sunshine, a Florida based sports cable network, for $14 million.
The transaction is subject to, among other things, approval by the FCC
and regulatory review by federal antitrust authorities, and approval by the
shareholders of TBS and Time Warner.
On October 31, 1995, Liberty Media Group announced that it had entered
into a binding agreement in principle with News Corp. and TINTA. In the United
States, Liberty Media Group and News Corp. agreed to form the Fox-Liberty
Venture into which Liberty Media Group will contribute interests in its national
and regional sports networks and into which News Corp. will contribute its fx
cable network and certain other assets. Upon consummation, Liberty Media Group
will receive a 50% interest in the Fox-Liberty Venture and $350 million in cash.
The fx Network will be transformed into a nationally distributed, general
entertainment and sports network. The regional sports networks currently
operated under the Prime Sports name will be relaunched under the Fox Sports
banner.
Internationally, News Corp., and a 50/50 partnership formed by Liberty
Sports, a wholly owned subsidiary of Liberty Media Group, and TINTA have agreed
to form a venture to operate currently existing sports services in Asia, Latin
American and Australia and a variety of new sports services throughout the
world except in the United Kingdom, Japan and New Zealand where prior
arrangements preclude an immediate collaboration. The Liberty-TINTA
Partnership will own 50% of the international venture with News Corp. owning
the other 50%. News Corp. is contributing various international sports rights,
including the Star Sports channel which is broadcast throughout Asia as part of
the Star package of services. The Liberty-TINTA Partnership is contributing
Prime Deportiva, a Spanish language sports service distributed in Latin America
and in Hispanic markets in the United States, an interest in Torneos y
Competencias S.A., an Argentinean sports programming and production business,
various international sports and satellite transponder rights and cash. The
Liberty-TINTA Partnership will also contribute their 50% interest in Premiere
Sports and All-Star Sports in Australia. Both are 24-hour sports services
available via MMDS or cable television in Australia.
The transactions contemplated by the above agreements are expected to
close during 1996.
On November 27, 1995, Liberty Media Group announced that it had agreed
to exchange its controlling interest in HSN for shares of Silver King. Liberty
Media Group will receive approximately 11 million newly issued shares of Silver
King in exchange for its 37.5 million shares of HSN.
Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into an agreement in August 1995 pursuant to which
the Option (which shares would constitute voting control of Silver King) would
be transferred to Silver Company, an entity in which Liberty Media Group would
own all of the non-voting equity interests (which would constitute substantially
all of the equity of such entity) and Mr. Diller would own all of the voting
equity interests. Silver Company would thereafter exercise the Option and hold
the shares of Silver King Class B Common Stock purchased thereunder. In an
amendment to such agreement entered into in November 1995, Liberty Media Group
agreed to contribute all of its shares of HSN (which shares constitute
approximately 41% of the equity of HSN and approximately 90% of the voting power
of HSN) to Silver Company in return for additional non-voting equity interests
in Silver Company. Following such contribution, Silver Company would exchange
such HSN shares with Silver King for additional shares of Silver King Common
Stock and Class B Common Stock (thereby increasing Silver Company's controlling
interest in Silver King to in excess of 80% of the voting power of Silver King).
Each such transaction is subject to the satisfaction of certain conditions,
including the receipt of all necessary regulatory consents and approvals. If
consummated, HSN would cease to be a subsidiary of Liberty Media Group and
therefore, the financial results of HSN would not be consolidated with the
financial results of Liberty Media Group. Although Liberty Media Group would
cease to possess voting control over HSN, it would continue to have an indirect
equity interest in HSN through its ownership of the equity securities of Silver
Company. No assurance can be given that the transaction will be consummated.
On March 12, 1996, United Video Satellite Group, Inc. ("UVSG") and
Liberty Media Group agreed to form a venture to combine their Superstar
Satellite Entertainment and Netlink businesses (the "Netlink/Superstar
Venture"). Liberty Media Group and UVSG will each own approximately 50% of
Netlink/Superstar Venture. Upon consummation of the Netlink/Superstar Venture,
Netlink would cease to be consolidated with the financial results of Liberty
Media Group.
The consummation of the above described transactions would materially
effect the results of operations of Liberty Media Group due to a substantial
part of Liberty Media Group's operations no longer being consolidated. At the
same time Liberty Media Group's share of earnings or losses of affiliates could
be materially impacted by certain of these transactions.
II-27
<PAGE> 94
Summary of Operations
Liberty Media Group is engaged in two principal lines of business:
(i) production, acquisition and distribution through all available formats and
media of branded entertainment, educational and informational programming and
software, including multimedia products, ("Entertainment and Information
Programming Services") and (ii) electronic retailing, direct marketing,
advertising sales relating to programming services, infomercials and
transaction processing ("Electronic Retailing Services"). To enhance the
reader's understanding, separate financial data have been provided below for
Electronic Retailing Services, which include a retail function, and other
Entertainment and Information Programming Services. The table below sets
forth, for the periods indicated, certain financial information and the
percentage relationship that certain items bear to revenue. This summary
provides trend data related to the normal recurring operations of Liberty Media
Group. Corporate expenses have been reflected separately in the following
table. Liberty Media Group holds significant equity investments the results of
which are not a component of operating income, but are discussed below under
"Other Income and Expense". Other items of significance are discussed
separately under their own captions below.
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------------------------------
1995 1994 1993
---------------------- --------------------- ------------------
dollar amounts in thousands
<S> <C> <C> <C> <C> <C> <C>
Entertainment and Information
- -----------------------------
Programming Services
- --------------------
Revenue 100% $ 521,050 100% $ 357,031 100% $ 263,960
Operating, selling, general and
administrative 92 477,716 93 332,060 85 224,647
Depreciation and amortization 10 54,688 5 17,006 6 16,112
---- ----------- ---- ----------- ---- ----------
Operating income (loss) (2)% $ (11,354) 2% $ 7,965 9% $ 23,201
==== =========== ==== =========== ==== ==========
Electronic Retailing Services
- -----------------------------
Revenue 100% $ 1,018,625 100% $ 1,125,917 100% $ 942,940
Cost of sales 69 701,678 65 730,505 65 611,526
Operating, selling, general and
administrative 35 359,130 30 341,015 31 288,576
Compensation (adjustments to
compensation) relating to stock
appreciation rights -- (758) -- (1,547) -- 2,834
Depreciation and amortization 4 43,249 3 32,244 2 24,029
---- ----------- ---- ----------- ---- ----------
Operating income (loss) (8)% $ (84,674) 2% $ 23,700 2% $ 15,975
==== =========== ==== =========== ==== ==========
Corporate expenses
- ------------------
Selling, general and administrative $ 4,743 $ 7,132 $ 5,591
Compensation (adjustments to
compensation) relating to stock
appreciation rights 10,261 (7,027) 37,532
Depreciation and amortization 74 86 51
----------- ----------- ----------
Operating loss $ (15,078) $ (191) $ (43,174)
=========== =========== ==========
</TABLE>
II-28
<PAGE> 95
Entertainment and Information Programming Services
Revenue from Entertainment and Information Programming Services
increased 46% or $164 million from 1994 to 1995. Liberty Media Group's regional
sports programming businesses accounted for $102 million of such increase.
Prime Sports-West was acquired by Liberty Media Group in August 1994, and was
responsible for $40 million of the increase in revenue from Liberty Media
Group's regional sports programming businesses. Other new regional sports
programming businesses accounted for $27 million of the increase in revenue for
the year ended December 31, 1995. Excluding the effect of Prime Sports-West and
other new regional sports programming businesses, advertising and infomercial
revenue for the year ended December 31, 1995 increased $11 million over the year
ended December 31, 1994. Increases in direct broadcast satellite revenue
accounts for $20 million of the 1995 increase in revenue from Liberty Media
Group's regional sports programming businesses. The remaining increase in
revenue from Liberty Media Group's regional sports programming businesses is
attributed to subscriber growth and rate increases in the established regional
sports programming businesses. Encore's six new thematic multiplex services
(three launched in July 1994 and three launched in September 1994) and Intro (a
24-hour basic cable service launched in July 1994) accounted for a combined
increase in revenue of $24 million for the year ended December 31, 1995.
Excluding the new thematic multiplex services, Encore experienced a 33% increase
in subscribers (primarily direct broadcast subscribers) representing an $11
million increase in revenue over 1994. Revenue from Netlink, a marketer and
distributor of programming to the United States home satellite dish subscriber
market, increased by $29 million for the year ended December 31, 1995 compared
to the year ended December 31, 1994. Substantially, all of this increase is
attributed to pricing increases and an increase in the average number of retail
subscribers.
Revenue from Entertainment and Information Programming Services
increased 35%, or $93 million, from 1993 to 1994. The August 1994 acquisition
of Prime Sports-West accounted for $21 million of such increase and higher
subscription and advertising revenue from Liberty Media Group's other regional
sports programming businesses accounted for an additional $26 million of such
increase. Netlink accounted for $29 million of the increase in revenue, the
result of growth in the number of subscribers and rate increases. Also
contributing to the increased revenue in 1994 was revenue from Intro which was
launched mid-year.
Operating expenses, exclusive of depreciation and amortization,
increased 44% or $146 million from 1994 to 1995. Prime Sports-West accounted
for $33 million of the increase in operating expenses of Liberty Media Group's
regional sports programming businesses. Other new businesses in the regional
sports programming businesses increased expenses by $63 million for the year
ended December 31, 1995. Expenses at Liberty Media Group's regional sports
programming businesses, excluding the impact of new businesses, increased $14
million for the year ended December 31, 1995. Such increase was caused by
increased programming rights fees in certain markets, new rights agreements, and
increased production costs and technical operations due to a larger number of
events. Intro and the new Encore thematic multiplex services launched during
1994 were responsible for $13 million of the increase in expenses from
Entertainment and Information Programming Services from 1994 to 1995.
Additionally, Encore's expenses increased $4 million due to additional marketing
expenses related to Encore's increase in subscribers and due to additional
personnel and related costs. Netlink's programming costs increased $23 million
for the year ended December 31, 1995 which is directly related to the increases
in subscribers and increases in the rates that Netlink pays to its program
suppliers.
II-29
<PAGE> 96
Operating expenses, exclusive of depreciation and amortization,
increased 48%, or $107 million, from 1993 to 1994. New business activities
(Prime Sports-West and Intro) accounted for $38 million of this increase.
Higher costs at Netlink, primarily the result of license fees for a greater
number of subscribers, accounted for $28 million of the increase. Higher costs
at Encore were associated primarily with the launch of six new thematic
multiplex services during 1994. Liberty Media Group's regional sports
programming businesses also experienced higher costs, primarily the result of
higher rights expenses associated with a greater number of subscribers,
escalation under existing rights contracts, and new rights contracts.
Operating loss for Entertainment and Information Programming Services
was $11 million in 1995. Operating income was $8 million in 1994 and $23
million in 1993. Encore and Intro accounted for a combined increase of $18
million in operating income in 1995 due to increased cable subscribers and
Encore's increased direct broadcast satellite subscribers. Such increase was
offset by a $48 million decrease in operating income in the regional sports
programming businesses due to start-up costs of new businesses, international
ventures and increased amortization related to other intangibles acquired in
the acquisition of Prime Sports-West. The remaining increase in operating
income of Liberty Media Group's Entertainment and Information Programming
Services is primarily a result of increased revenue combined with decreased
expenses from Southern, and growth in rates and subscribers of Netlink. The
decline from 1993 to 1994 was primarily the result of losses related to new
businesses, Prime Sports-West ($8 million) and Intro ($7 million). Intro was
launched during 1994. The loss at Prime Sports-West was partially attributable
to a non-recurring charge of $4 million related to the termination of a contract
to provide advertising sales services. This was the result of a decision by
Liberty Sports to form its own national ad sales organization, which would
handle ad sales for Prime Sports-West as well as other Liberty Sports regional
sports programming businesses. Prime Sports-West also launched a new service
during 1994, La Cadena Deportiva, a Spanish language sports network. The
remaining loss is primarily attributable to the start-up of this new service.
Electronic Retailing Services
This information reflects the results of HSN, which became a
consolidated subsidiary of Liberty Media Group in February 1993. HSN's primary
business is electronic retailing conducted by HSC.
HSN expects to sell a majority of its interest in its infomercial
joint venture, HSN Direct Joint Venture ("HSND"), in early 1996. This
transaction will result in a reduction in net sales, cost of sales and certain
operating expenses in 1996. The sale of HSND should not have a material impact
on HSN's results of operations in future periods.
HSN revenue decreased $107 million or 10% from 1994 to 1995, and net
sales of HSC decreased $141 million or 14%. HSC's sales reflect the net effect
of a 19% decrease in the number of packages shipped which was partially offset
by a 9% increase in the average price per unit sold. The decrease in HSC sales
was offset by sales increases by HSND and wholly-owned subsidiaries of HSN, HSN
Mail Order, Inc., ("Mail Order") and Vela Research, Inc. ("Vela") totaling $31
million for the year ended December 31, 1995.
II-30
<PAGE> 97
Revenue from Electronic Retailing Services was $1,126 million for 1994,
a 19% increase over 1993 revenue of $943 million. The most significant reason
for this increase was a full year of HSN revenue in 1994, compared with
approximately 10 1/2 months of HSN revenue in 1993 (subsequent to Liberty Media
Group's acquisition of HSN in February 1993.) HSN revenue also increased in
1994 as a result of several factors, most significantly the addition of new
cable subscribers due to the "must carry" provisions of the 1992 Cable Act. See
"Impact of Regulation" below. Cable television households reached by HSC
programming increased from 33.8 million at the end of 1993 to 39.0 million at
the end of 1994. The cable television household growth was achieved primarily
through increased cable system carriage of HSC's broadcast signal due to the
implementation of "must carry" beginning in September 1993 and HSN's aggressive
campaign to obtain contracts for cable carriage of HSC programming. Because HSC
programming is now on a cable channel line-up, former broadcast households can
more easily access HSC programming.
During 1996, 4.2 million cable subscribers are covered by cable system
contracts that are subject to termination or renewal. This represents 9% of
the total number of unduplicated cable households receiving HSN. HSN is
pursuing both renewals and additional cable television system contracts, but
channel availability, competition, consolidation within the cable industry and
cost of carriage are some of the factors affecting the negotiations for cable
television system contracts. Although HSN's management cannot determine the
percentage of expiring contracts that will be renewed or the number of
households that will be added through new contracts, HSN's management believes
that a majority of these contracts will be renewed.
HSC's market penetration lags behind increases in carriage. As a
result of the increase in carriage which began in late 1993, and previous
changes in merchandising and programming strategies, HSN has experienced a
decrease in its market penetration. As the new households mature and new plans
of HSN's management are fully implemented, HSN expects market penetration to
improve, but there can be no assurance that this will occur.
In September 1994, HSN appointed new management personnel to institute
procedures intended to improve purchasing and other merchandising practices.
Their strategies included offering a greater variety of products, developing
strong private label lines, selling higher margin items and offering name brand
and other high quality merchandise. These efforts were aimed at long-term
improvements in sales by attracting new customers and increasing the frequency
of repeat purchases; however, the impact of these strategies was to adversely
affect sales during 1995.
Since June 5, 1995, HSN has operated two full-time networks renamed
HSN, the primary network, and Spree!. On August 5, 1995, HSN relaunched the
HSN network with more scheduled programs and theme related shows, new sets,
graphics and music. During the third quarter of 1995, HSN relaunched the
Spree! network with a more spontaneous format, new graphics and music. These
changes were designed to eliminate programming redundancies, distinguish the
networks and reach a broader range of potential customers.
Management of HSN also instituted promotional programs to help
increase sales, including a national advertising campaign and a "no interest --
no payments" credit promotion through February 1996 for certain purchases made
during the third and fourth quarters of 1995 using HSN's private label credit
card. Although the credit promotion program was successful, its effect was not
enough to offset the decline in sales discussed above.
II-31
<PAGE> 98
In November 1995, HSN appointed a new chairman of the board and a new
president and chief executive officer, both with significant experience in the
electronic retailing and programming areas. Immediate changes were made to
HSN's merchandising and programming strategies which resulted in improved sales
in December 1995 and January 1996 when compared to the same months in the prior
years. Further plans include improving inventory mix with respect to product
assortment and price point designed to attract both first-time buyers and
active buyers, improved inventory management and better planning of programmed
shows. While HSN's management is optimistic that results will continue to
improve and HSN will return to profitability, there can be no assurance that
changes to HSN's merchandising and programming strategies will achieve
management's intended results.
Cost of sales decreased $29 million, or 4%, from 1994 to 1995; and
cost of sales, as a percentage of net sales, increased to 69% from 65%. Cost
of sales of HSC decreased $49 million for the year ended December 31, 1995.
Such decrease was partially offset by increases in cost of sales by HSND, Mail
Order and Vela totaling $21 million. As a percentage of HSC's net sales, cost
of sales increased to 72% from 67% during 1995. The 1995 dollar decreases in
cost of sales, compared to 1994, relate to the lower sales volumes. The
comparative increases in cost of sales percentages primarily relate to
warehouse sales and other promotional events. These events included price
discounts to facilitate HSN's distribution center restructuring and sales of
existing merchandise to make room for new merchandise for the holiday selling
season and to adjust inventory levels and product mix in December 1995. In
addition, cost of sales for the year ended December 31, 1995, reflect a $12
million increase in HSC's inventory carrying value adjustment related to
product which is inconsistent with HSC's new sales and merchandising
philosophy.
Operating expenses, exclusive of depreciation and amortization,
increased $18 million, to 35% of sales during 1995 compared with 30% of sales in
the 1994. The majority of such increase was restructuring charges of $16 million
during the year ended December 31, 1995. Such restructuring charges consist of
severance costs of $4 million related to a reduction in work force, $5 million
payments to certain executives as provided for under their employment agreements
in connection with the termination of their employment and $2 million related to
the write-off of certain equipment maintenance and contractual fees related to
service contracts which HSN will no longer utilize. In addition, HSN recorded a
write-down of inventory totaling $1.3 million to net realizable value based on
the disposition of the assets of Ortho-Vent, Inc.
Additionally, $4 million of the restructuring charges for the year
ended December 31, 1995, represents HSN management's estimate of costs to be
incurred in connection with the closing of HSN's Reno, Nevada, distribution
center, which was accomplished in June 1995. The decision to close the Reno
distribution center was based on an evaluation of HSN's overall distribution
strategy. Management of HSN believes that consolidation of HSN's distribution
facilities will result in better operating efficiencies and improved service to
customers.
In 1995 and early 1996, management of HSN instituted measures aimed at
streamlining operations primarily by reducing its work force and other
operating expenses. Although these changes resulted in some reduction in
individual categories of operating expenses in 1995 and will result in future
reductions to operating expenses, HSN incurred additional costs in the third
quarter of 1995 in connection with these measures.
II-32
<PAGE> 99
Cost of sales increased 19%, or $119 million, from 1993 to 1994.
Operating expenses, exclusive of depreciation and amortization, increased 18%,
or $52 million, from 1993 to 1994. These increases were primarily attributable
to the full year of 1994 results compared with 10 1/2 months in 1993. As a
percentage of sales, cost of sales remained flat at 65% for both 1994 and 1993,
and operating expenses declined slightly from 31% in 1993 to 30% in 1994.
HSN believes that seasonality does impact the business but not to the
same extent it impacts the retail industry in general.
Corporate Expenses
During the year ended December 31, 1995, corporate expenses excluding
compensation from stock appreciation rights, depreciation and amortization were
$5 million, compared with $7 million in 1994 and $6 million in 1993. The
decrease in expenses from 1994 to 1995 is primarily due to higher legal costs
incurred during 1994. The amount of expense associated with stock appreciation
rights is based on the market price of the underlying common stock as of the
date of the financial statements. The expense is subject to future adjustment
based on market price fluctuations and, ultimately, on the final determination
of market value when the rights are exercised. Stock options and/or stock
appreciation rights granted by Liberty prior to the TCI/Liberty Combination
have been assumed by TCI.
Subsequent to the Distribution, certain corporate general and
administrative costs are charged to Liberty Media Group at rates set at the
beginning of each year based on projected utilization for that year. The
utilization-based charges are set at levels that management believes to be
reasonable and that would approximate the costs Liberty Media Group would incur
for comparable services on a stand alone basis. The accompanying combined
statements of operations through the date of the TCI/Liberty Combination do not
reflect the allocation of corporate general and administrative costs in the
aforementioned manner because the majority of the entities attributable to
Liberty Media Group were owned, directly or indirectly, by Liberty through such
dates. During the year ended December 31, 1995, Liberty Media Group was
allocated $3 million in corporate general and administrative costs by TCI.
Prior to the determination by the Board to seek approval by
shareholders to distribute Liberty Group Stock, TCI did not have formalized
intercompany allocation methodologies. In connection with such determination,
management of TCI has determined that TCI general corporate expenses should be
allocated to Liberty Media Group based on the amount of time TCI corporate
employees (e.g. legal, corporate, payroll, etc.) expend on Liberty Media Group
matters. TCI management evaluated several alternative allocation methods
including assets, revenue, operating income, and employees. Management did not
believe that any of these methods would reflect an appropriate allocation of
corporate expenses given the diverse nature of TCI's operating subsidiaries,
the relative maturity of certain of the operating subsidiaries, and the way in
which corporate resources are utilized.
Other Income and Expense
Interest expense was $19 million, $13 million and $12 million in 1995,
1994 and 1993, respectively. The increased debt at HSN and Prime Sports-West
is primarily responsible for the increase in interest expense in 1995.
Liberty Media Group's combined indebtedness bears interest at rates
that fluctuate with market rates. Consequently, a general increase in interest
rates would result in an increase in combined interest expense.
II-33
<PAGE> 100
Dividend and interest income was $12 million, $20 million and $23
million for the years ended December 31, 1995, 1994 and 1993, respectively.
The decrease in 1995 is primarily the result of the repayment of an HSN note
receivable in August 1994.
Liberty Media Group's share of losses of affiliates was $15 million
for 1995 compared to earnings of $31 million and $27 million for 1994 and 1993,
respectively. The increase in losses in 1995 is primarily due to share of
losses of Court. In August 1995, Liberty Media Group made an additional $29
million investment in Court which represented Liberty Media Group's pro rata
share of capital calls made in prior years by the other partners of Court that
Liberty Media Group had no obligation to fund. Due to the additional
investment in Court, Liberty Media Group's share of losses of Court for the
year ended December 31, 1995 of $21 million includes $18 million of previously
unrecognized losses of Court. Such losses were not recognized in prior periods
due to the fact that Liberty Media Group's investment in Court had been reduced
to zero. The 1995 increase in losses also was partially due to the sale of
substantially all of Liberty Media Group's interest in AMC in July 1994, which
investment contributed $9 million to the 1994 earnings. Liberty Media Group's
share of earnings in affiliates attributable to its interest in QVC decreased
$9 million for 1995, as compared to 1994. Such change is primarily the result
of increased interest expense on additional debt arising from the QVC Merger as
well as compensation resulting from stock option redemptions in the QVC Merger.
Liberty Media Group's share of losses increased by $8 million due to share of
losses in Australia.
Upon consummation of the QVC Merger, the Purchaser was merged with and
into QVC with QVC continuing as the surviving corporation. Liberty Media Group
owns an approximate 43% interest of the post-merger QVC. Upon consummation of
the QVC Merger, Liberty Media Group is deemed to exercise significant influence
over QVC and, as such, has adopted the equity method of accounting. The 1994
combined financial statements included herein have been restated to reflect the
equity method of accounting. Such restatement resulted in an increase in
Liberty Media Group's net earnings of $4.6 million for the year ended December
31, 1994. The restatement did not affect Liberty Media Group's results of
operations for the year ended December 31, 1993 as QVC was accounted for under
the equity method during that period.
During 1995, BET repurchased a portion of its own common stock. Upon
consummation of the repurchases, Liberty Media Group's ownership of BET was
increased from 19% to 22%. Therefore, Liberty Media Group is deemed to
exercise significant influence over BET and, accordingly, has adopted the
equity method of accounting. The accompanying 1994 and 1993 combined financial
statements have been restated to reflect the equity method of accounting for
Liberty Media Group's investment in BET. Such restatement resulted in an
increase in the Company's net earnings of $1.8 million and $1.5 million for
1994 and 1993, respectively.
II-34
<PAGE> 101
Recent Accounting Pronouncements
In March of 1995, the FASB issued Statement No. 121, effective for
fiscal years beginning after December 15, 1995. Statement No. 121 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. Liberty Media Group will adopt Statement No. 121
effective January 1, 1996. The effect of such adoption is not expected to be
significant.
Statement No. 123 was issued by the FASB in October 1995. Statement
No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans as well as transactions in which an
entity issues its equity instruments to acquire goods or services from
non-employees. Liberty Media Group will include the disclosures required by
Statement No. 123 in the notes to future financial statements.
Liquidity and Capital Resources
Notwithstanding the attribution of assets and liabilities, equity and
items of income and expense to Liberty Media Group for purposes of preparing
its combined financial statements, the change in the capital structure of TCI
approved by the shareholders of TCI does not affect the ownership or the
respective legal title to assets or responsibility for liabilities of TCI or
any of its subsidiaries. TCI and its subsidiaries will each continue to be
responsible for their respective liabilities. Holders of Liberty Group Stock
are holders of common stock of TCI and will continue to be subject to risks
associated with an investment in TCI and all of its businesses, assets and
liabilities. The issuance of Liberty Group Stock does not affect the rights of
creditors of TCI.
Financial effects arising from any portion of TCI that affect the
consolidated results of operations or financial condition of TCI could affect
the combined results of operations or financial condition of Liberty Media
Group and the market price of shares of Liberty Group Stock. In addition, net
losses of any portion of TCI, dividends and distributions on, or repurchases
of, any series of common stock, and dividends on, or certain repurchases of
preferred stock would reduce funds of TCI legally available for dividends on
all series of common stock. Accordingly, Liberty Media Group financial
information should be read in conjunction with the TCI consolidated financial
information.
II-35
<PAGE> 102
Dividends on Liberty Group Stock will be payable at the sole
discretion of the Board out of the lesser of all assets of TCI legally
available for dividends and the available dividend amount with respect to
Liberty Media Group, as defined. Determinations to pay dividends on Liberty
Group Stock will be based primarily upon the financial condition, results of
operations and business requirements of Liberty Media Group and TCI as a whole.
Following the TCI/Liberty Combination, TCI has managed certain
treasury activities for Liberty Media Group on a centralized basis. Cash
receipts of certain businesses attributed to Liberty Media Group are remitted
to TCI and certain cash disbursements of Liberty Media Group are funded by TCI
on a daily basis. Prior to the Distribution, but subsequent to the TCI/Liberty
Combination, the net amounts of such cash activities are included in combined
equity in the accompanying combined financial statements. Prior to the
TCI/Liberty Combination, Liberty separately managed the treasury activities of
its subsidiaries. Subsequent to the Distribution, such cash activities are
included in borrowings from or loans to TCI or, if determined by the Board, as
an equity contribution to the Liberty Media Group.
The Board could determine from time to time that debt of TCI not
incurred by entities attributed to Liberty Media Group or preferred stock and
the proceeds thereof should be specifically attributed to and reflected on the
combined financial statements of Liberty Media Group to the extent that the
debt is incurred or the preferred stock is issued for the benefit of Liberty
Media Group.
For all periods prior to the Distribution, all financial impacts of
equity offerings were attributed entirely to TCI. Following the Distribution,
all financial impacts of issuances of additional shares of TCI Group Stock will
be attributed entirely to TCI Group, and all financial impacts of issuances of
additional shares of Liberty Group Stock, the proceeds of which are attributed
to Liberty Media Group, will to such extent be reflected entirely in the
combined financial statements of Liberty Media Group. Financial impacts of
dividends or other distributions on, and purchases of, TCI Group Stock will be
attributed entirely to TCI Group, and financial impacts of dividends or other
distributions of Liberty Group Stock will be attributed entirely to Liberty
Media Group. Financial impacts of repurchases of Liberty Group Stock the
consideration for which is charged to Liberty Media Group will be reflected
entirely in the combined financial statements of Liberty Media Group, and
financial impacts of repurchases of Liberty Group Stock the consideration for
which is charged to TCI Group will be attributed entirely to TCI Group.
Subsequent to the Distribution, borrowings from or loans to TCI will
bear interest at such rates and have repayment schedules and other terms as are
established by the Board. The Board expects to make such determinations,
either in specific instances or by setting generally applicable policies from
time to time, after consideration of such factors as it deems relevant,
including, without limitation, the use of proceeds by and creditworthiness of
the recipient Group, the capital expenditure plans and investment opportunities
available to each Group and the availability, cost and time associated with
alternative financing sources.
Liberty Media Group's sources of funds include its available cash
balances, cash generated from operating activities, cash distributions from
affiliates, dividend and interest payments, asset sales, availability under
certain credit facilities, and loans and/or equity contributions from TCI. To
the extent cash needs of Liberty Media Group exceed cash provided by Liberty
Media Group, TCI may transfer funds to Liberty Media Group. Conversely, to the
extent cash provided by Liberty Media Group exceeds cash needs of Liberty Media
Group, Liberty Media Group may transfer funds to TCI.
II-36
<PAGE> 103
Many of Liberty Media Group's subsidiaries' loan agreements contain
restrictions regarding transfers of funds to other members of Liberty Media
Group in the form of loans, advances or cash dividends. However, other
subsidiaries, principally Southern (which is the satellite carrier for the
signal of WTBS, a 24-hour independent UHF television station originated by TBS),
Netlink and certain of the regional sports businesses are not restricted from
making transfers of funds to other members of the group. The cash provided by
operating activities of Southern, is a primary source of cash available for
distribution to Liberty Media Group. However, Southern does not have an
agreement with WTBS with respect to the retransmission of its signal and there
are no specific statutory restrictions per se which would prevent any other
satellite carriers from retransmitting such signal to cable operators and
others. If the business of Southern is adversely affected by competitive or
other factors, it may have an adverse effect on the ability of Liberty Media
Group to generate adequate cash to meet its obligations. Additionally, while
Liberty Media Group expects to receive distributions from the Netlink/Superstar
Venture, they may be lower than the cash currently generated and received from
Netlink's operations.
In connection with the TBS/Time Warner Merger, Time Warner has agreed
to issue common stock to Liberty Media Group in exchange for Liberty Media
Group's holdings of TBS common and preferred stock. In addition, Time Warner
has agreed to issue common stock to Liberty Media Group in exchange for a
6-year option to purchase Southern. If Time Warner acquires and exercises an
option to purchase Southern, Southern will no longer be a primary source of
cash available for distribution to Liberty Media Group. However, it is
anticipated that Time Warner will continue to pay dividends on its common
stock, and consequently Liberty Media Group would receive dividends on the
common stock received in connection with the TBS/Time Warner merger in an
amount that would approximate the cash generated by Southern's operations.
There can be no assurance the dividends on the Time Warner Series Common Stock
will continue to be paid, in which case the sale of Southern may have an
adverse effect on the ability of Liberty media Group to generate adequate cash
to meet its obligations.
Liberty Media Group has a revolving line of credit which provides for
borrowings of up to $325 million, $30 million of which was outstanding at
December 31, 1995. Several subsidiaries of Liberty Media Group have credit
facilities. ARC Holding, Ltd. ("ARCH"), a wholly-owned subsidiary of ARC, has a
$40.5 million revolving credit facility with a group of banks, $20 million of
which was outstanding at December 31, 1995. Another subsidiary, Prime Sports-
West, has a $65 million credit facility with a bank, $52 million of which was
outstanding at December 31, 1995. HSN has a revolving credit facility (the
"Credit Facility") for $150 million, $135 million of which was outstanding on
December 31, 1995. The HSN, ARCH and Prime Sports-West facilities restrict the
transfer of funds to affiliated companies, and include various financial
covenants, including maintenance of certain financial ratios.
PrimeSports-West's facility was amended in March 1996 to provide for an
additional $15 million of borrowings in the form of revolving term loans.
On February 13, 1996, the covenants in the Credit Facility were
amended to include the effect of, among other things, certain of the
restructuring charges as previously discussed, to allow for additional
subordinated financing as discussed below and, upon conclusion of the
additional financing, to reduce the maximum borrowing availability under the
Credit Facility to $120 million. However, there remain restrictions on
repurchases of HSN's common stock based upon future cash flow levels. On March
1, 1996, HSN completed a private placement of $100 million of convertible
subordinated debentures due March 1, 2006. HSN used the net proceeds to repay
borrowings under the Credit Facility leaving an outstanding loan balance of $30
million with $90 million available for borrowing under the Credit Facility.
HSN anticipates that it will use its additional borrowing capacity to finance
working capital requirements, capital expenditures and general corporate
purposes.
Various partnerships and other affiliates of Liberty Media Group
accounted for under the equity method finance a substantial portion of their
acquisitions and capital expenditures through borrowings under their own credit
facilities and net cash provided by their operating activities.
II-37
<PAGE> 104
Liberty Media Group intends to continue to develop its entertainment
and information programming services and has made certain financial commitments
related to the acquisition of programming. At December 31, 1995, Liberty Media
Group's future minimum obligation related to certain film licensing agreements
was $163 million. The amount of the total obligation is not currently
estimable because such amount is dependent upon certain variable factors.
Liberty Media Group's obligations for certain sports program rights contracts
at December 31, 1995 was $448 million. Upon the formation of the Fox-Liberty
Venture, of which there is no assurance, Liberty Media Group anticipates that
such commitments will be transferred to the Fox-Liberty Venture. In the event
the Fox-Liberty Venture is not formed, Liberty Media Group expects that
sufficient cash will be generated by the programming services to satisfy these
commitments. However, continued development may require additional financing
and it cannot be predicted whether Liberty Media Group will obtain such
financing. If additional financing cannot be obtained, Liberty Media Group
could attempt to sell assets but there can be no assurance that asset sales, if
any, can be consummated at a price and on terms acceptable to Liberty Media
Group. Further, Liberty Media Group and/or TCI could attempt to sell equity
securities but, again, there can be no certainty that such a sale could be
accomplished on acceptable terms.
HSN has significant working capital needs for inventory and accounts
receivable. However, HSN expects to meet its recurring working capital needs
primarily through internally generated funds, its additional borrowing capacity
as discussed above, and its existing credit facilities.
II-38
<PAGE> 105
TCI GROUP
General
As of January 27, 1994, TCIC and Liberty entered into a definitive
merger agreement to combine the two companies. The transaction was consummated
on August 4, 1994. Due to the significant economic interest held by TCIC
through its ownership of Liberty preferred stock and Liberty common stock and
other related party considerations, TCIC accounted for its investment in
Liberty under the equity method prior to the consummation of the TCI/Liberty
Combination. Accordingly, TCIC had recognized 100% of Liberty's earnings or
losses before deducting preferred stock dividends. The TCI/Liberty Combination
was accounted for using predecessor cost due to related party considerations.
Accordingly, the accompanying combined financial statements of TCI Group
reflect the combination of the historical financial information of the assets
of TCI and Liberty which have not been attributed to Liberty Media Group. For
periods prior to the TCI/Liberty Combination, the combined financial statements
of TCI Group and Liberty Media Group comprise all the accounts included in the
corresponding consolidated financial statements of TCI and subsidiaries and
Liberty and subsidiaries. For periods subsequent to the TCI/Liberty
Combination, the combined financial statements of TCI Group and Liberty Media
Group comprise all the accounts included in the corresponding consolidated
financial statements of TCI and subsidiaries.
II-39
<PAGE> 106
On August 3, 1995, the shareholders of TCI authorized the Board to
issue a new class of stock which is intended to reflect the separate
performance of Liberty Media Group. While the Liberty Group Stock constitutes
common stock of TCI, the issuance of the Liberty Group Stock did not result in
any transfer of assets or liabilities of TCI or any of its subsidiaries or
affect the rights of holders of TCI's or any of its subsidiaries' debt. On
August 10, 1995, TCI distributed one hundred percent of the equity value
attributable to Liberty Media Group to its security holders of record on August
4, 1995. Additionally, shareholders of TCI approved the redesignation of the
previously authorized Class A and Class B common stock of TCI into Series A and
Series B TCI Group Stock.
II-40
<PAGE> 107
Upon the distribution of the Liberty Group Stock and subsequent to the
redesignation of TCI Class A and Class B common stock into Series A and Series
B TCI Group Stock, the TCI Group Stock is intended to reflect the separate
performance of TCI Group, which is generally comprised of the subsidiaries and
assets not attributed to Liberty Media Group, including (i) TCI's Cable and
Communications unit, (ii) TINTA and (iii) TCI's Technology/Venture Capital
unit. The businesses of TCI not attributed to Liberty Media Group are referred
to as "TCI Group".
II-41
<PAGE> 108
Summary of Operations
TCI Group operates principally in the cable and communications
industry. The Technology/Venture Capital and the International Cable and
Programming portions of TCI Group's business have been included with cable and
communications services due to their relative insignificance. The table below
sets forth for the periods presented, the percentage relationship that certain
items bear to revenue. This summary provides trend data relating to the normal
recurring operations of TCI Group. Other items of significance are discussed
separately under separate captions below.
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------
1995 1994 1993
------------------ ----------------- -----------------
amounts in millions, except for percentages
<S> <C> <C> <C> <C> <C> <C>
Revenue 100% $5,384 100% $4,269 100% $4,090
Operating costs and expenses before
depreciation and amortization 64 3,457 58 2,480 55 2,251
Depreciation and amortization 24 1,274 23 1,001 22 920
---- ------ ---- ------ ---- ------
Operating income 12% $ 653 19% $ 788 23% $ 919
==== ====== ==== ====== ==== ======
</TABLE>
On October 5, 1992, Congress enacted the 1992 Cable Act. In 1993 and
1994, the FCC adopted certain rate regulations required by the 1992 Cable Act
and imposed a moratorium on certain rate increases. As a result of such
actions, TCI Group's Regulated Services are subject to the jurisdiction of
local franchising authorities and the FCC. The regulations established
benchmark rates in 1993, which were further reduced in 1994, to which the rates
charged by cable operators for Regulated Services were required to conform.
The FCC also allowed cable operators to justify rates under "cost of
service" rules, which allow "high cost" systems to establish rates in excess of
the benchmark level. The FCC's interim cost of service rules allowed a cable
operator to recover through rates for regulated cable services its normal
operating expenses plus a rate of return equal to 11.25 percent on the rate
base. However, the FCC significantly limited the inclusion in the rate base of
acquisition costs in excess of the book value of tangible assets. As a result,
the Company pursued cost of service justifications in only a few cases. On
December 15, 1995, the FCC adopted slightly more favorable cost of service
rules.
The regulations also provide mechanisms for adjusting rates when
regulated tiers are affected by channel additions or deletions. Additional
programming costs resulting from channel additions can be accorded the same
external treatment as other program costs increases, and cable operators
presently are permitted to recover a mark-up on their programming expenses.
Under one option, operators are allowed a flat ($.20) fee increase per channel
added to an existing CPST, with an aggregate cap on such increases ($1.20) plus
a license fee reserve ($.30) through 1996. In 1997, an additional flat ($.20)
fee increase will be available, and the license fees for additional channels
and for increases in existing channels will no longer be subject to the
aggregate cap. This optional approach for adding services is scheduled to
expire on December 31, 1997.
II-42
<PAGE> 109
TCI Group reduced its rates in 1993 and 1994 and limited its rate
increases in 1995 in response to FCC regulations. TCI Group believes that it
has complied, in all material respects, with the provisions of the 1992 Cable
Act, including its rate setting provisions. However, TCI Group's rates for
Regulated Services are subject to adjustment upon review, as described above.
If, as a result of the review process, a system cannot substantiate its rates,
it could be required to retroactively reduce its rates to the appropriate
benchmark and refund the excess portion of rates received. Any refunds of the
excess portion of tier service rates would be retroactive to the date of
complaint. Any refunds of the excess portion of all other Regulated Service
rates would be retroactive to one year prior to the implementation of the rate
reductions.
On October 30, 1995, the FCC accepted for comment a proposed
resolution of all complaints against the cable programming services tier
currently pending against cable systems owned by TCI Group. If the proposed
resolution is accepted by the FCC, TCI Group will settle all pending complaints
by a one-time credit to each subscriber in CPST regulated franchises. The
aggregate amount of such credits is approximately $9 million and had previously
been accrued by TCI Group. In addition, the FCC will find that the CPST rates
in CPST regulated franchises on September 15, 1995 comply with federal
regulations. TCI Group has committed not to file any additional
cost-of-service filings until May 15, 1996 in franchises that were subject to
CPST regulation prior to September 15, 1995. However, TCI Group will be able
to avail itself of the other mechanisms under FCC rules to recover costs,
including abbreviated cost-of-service filings covering system rebuilds and
upgrades. In the proposed resolution, TCI Group does not admit any violation
of, or any failure to conform to, the 1992 Cable Act or the rules promulgated
thereunder. The comment period has ended and TCI Group is awaiting final
action by the FCC.
Because the 1996 Telecom Act does not deregulate CPST rates until 1999
(and basic service tier rates will remain regulated thereafter), TCI Group
believes that the 1993 and 1994 rate regulations have had and will continue to
have a material adverse effect on its results of operations.
Revenue increased 26% from 1994 to 1995. Such increase is the result
of the effect of certain acquisitions (13%), growth in TCI Group's Primestar
subscribers (4%), increases in the rates charged to TCI Group's subscribers
from inflation increases, the provision of new channels and increases in
equipment costs (4%), growth in subscriber levels within TCI Group's cable
television systems (4%) and an increase in the Company's long distance voice
and data service revenue (1%). Revenue increased by approximately 4% from 1993
to 1994. Such increase was the result of growth in subscriber levels within
TCI Group's cable television systems (5%), the effect of certain other
acquisitions (2%) and certain new services (1%), net of a decrease in revenue
(4%) due to rate reductions required by rate regulation implemented pursuant to
the 1992 Cable Act. In the second half of 1994, as a result of the FCC's
revision of its rate regulations which reduced benchmark rates, TCI Group
experienced an additional decrease, in excess of that which was incurred in
1993, in the price charged for those services that are subject to rate
regulation under the 1992 Cable Act.
Operating costs and expenses before depreciation and amortization
increased 40% for the year ended December 31, 1995. Exclusive of the effects
of acquisitions (13%) and Primestar (7%) (see discussion below), such expenses
increased 20%. Programming expenses accounted for the majority of such
increase. TCI Group cannot determine whether and to what extent increases in
the cost of programming will affect its future operating costs. However, such
programming costs have increased at a greater percentage than increases in
revenue from Regulated Services. TCI Group will experience an increase in
programming costs in the first five months of 1996 without increasing its
rates charged to its customers at that time. In June of 1996, TCI Group will
be entitled to an increase in its service rates for increased programming
costs and inflation. FCC regulations provide for TCI Group to further increase
its rates by an additional amount intended to recover increased programming
costs incurred during the first five months of 1996 and not previously
recovered, as well as interest on said amounts.
During 1995, TCI Group changed its approach to how it ordered and
stored excess cable distribution equipment. TCI Group created material support
centers and consolidated all of its excess inventory. In conjunction with this
change, TCI Group incurred $5 million of costs. Additionally, during 1995, TCI
Group incurred approximately $22 million in expenses related to initiatives to
improve its customer service, to begin the redesign of its computer and
accounting systems and to promote and market TCI Group's products. During the
fourth quarter of 1995, TCI Group incurred $25 million in expenses related to
payment of bonuses to the majority of its employees.
II-43
<PAGE> 110
During 1995, TCI Group's revenue and expenses related to its satellite
service operations have increased significantly as the number of TCI Group's
Primestar subscribers increased from approximately 100,000 subscribers at
January 1, 1995 to approximately 550,000 subscribers at December 31, 1995.
During the year ended December 31, 1995, revenue increased from $30 million to
$207 million and operating, selling, general and administrative expenses
increased from $18 million to $197 million, as compared to the year ended
December 31, 1994. TCI Group incurs significant sales commission and
installation costs when customers initially subscribe. Therefore, as long
as TCI Group continues to launch this new service and increase its Primestar
subscriber base at such a rapid pace, management expects that operating costs
and expenses will increase as well.
Operating costs and expenses before depreciation and amortization
increased 10% for the year ended December 31, 1994 compared to the
corresponding period of 1993. The consolidation of Liberty resulted in an
increase of $18 million in operating, selling, general and administrative
expenses from Liberty's cable television systems. In 1993, TCI Group incurred
certain one-time direct charges relating to the implementation of the FCC rate
regulations.
The increase in TCI Group's depreciation expense in 1995 is due to
acquisitions as well as increased capital expenditures due to a program to
upgrade and install optical fiber technology in TCI Group's cable systems. The
systems, which facilitate digital transmission of voice, video and data signals,
will have optical fiber to neighborhood nodes with coaxial cable distribution
downstream from that point. The increase in TCI Group's amortization expense in
1995 is due to acquisitions.
Certain corporate general and administrative costs are charged to
Liberty Media Group at rates set at the beginning of the year based on
projected utilization for that year. The utilization-based charges are set at
levels that management believes to be reasonable and that would approximate the
costs Liberty Media Group would incur for comparable services on a stand alone
basis. The accompanying combined statements of operations do not reflect the
allocation of corporate general and administrative costs through the date of
the TCI/Liberty Combination in the aforementioned manner because the majority
of the entities attributable to Liberty Media Group were owned, directly or
indirectly, by Liberty Media Corporation for the majority of the periods
presented herein. During 1995, Liberty Media Group was allocated $3 million in
corporate general and administrative costs by TCI Group.
Prior to the determination of the Board to seek approval of
shareholders to distribute the Liberty Group Stock, TCI did not have formalized
intercompany allocation methodologies. In connection with such determination,
management of TCI has determined that TCI general corporate expenses should be
allocated to Liberty Media Group based on the amount of time TCI corporate
employees (e.g. legal, corporate, payroll, etc.) expend on Liberty Media Group
matters. TCI management evaluated several alternative allocation methods
including assets, revenue, operating income, and employees. Management did not
believe that any of these methods would reflect an appropriate allocation of
corporate expenses given the diverse nature of TCI's operating subsidiaries,
the relative maturity of certain of the operating subsidiaries, and the way in
which corporate resources are utilized.
TCI Group records compensation relating to stock appreciation rights
and restricted stock awards granted to certain employees by TCI or TINTA. Such
compensation is subject to future adjustment based upon market value, and
ultimately, on the final determination of market value when the rights are
exercised or the restricted stock awards are vested.
II-44
<PAGE> 111
Other Income and Expenses
During the first quarter of 1995, Liberty Media Group acquired an
additional interest in an investment previously accounted for under the cost
method. Upon consummation of such transaction, Liberty Media Group is deemed
to exercise significant influence over such entity and, as such, adopted the
equity method of accounting. The restatement resulted in an increase in
earnings from Liberty Media Group of $5 million for the year ended December 31,
1994.
TCI Group's interest expense increased $207 million or 26% from 1994
to 1995 and $51 million or 7% from 1993 to 1994. Such increases are the result
of higher interest rates and debt balances. TCI Group's weighted average
interest rate on borrowings was 8.1%, 7.6% and 7.3% during 1995, 1994 and 1993,
respectively.
TCI Group is a shareholder of TeleWest, a company that is currently
operating and constructing cable television and telephone systems in the UK.
TeleWest, which is accounted for under the equity method, had a carrying value
at December 31, 1995 of $550 million and comprised $70 million, $43 million and
$28 million of TCI Group's share of its affiliates' losses in 1995, 1994, and
1993, respectively. In addition, TCI Group has other less significant equity
method investments in video distribution and programming businesses located in
the UK, other parts of Europe, Asia, Latin America and certain other foreign
countries. In the aggregate, such other equity method investments had a
carrying value of $354 million at December 31, 1995 and accounted for $62
million and $50 million of TCI Group's share of its affiliates' losses in 1995
and 1994, respectively.
TeleWest was formed during the fourth quarter of 1995 upon the merger
of TeleWest Communications with SBC (CableComms)(UK). Prior to the TeleWest
Merger, TCI Group had an effective ownership interest of approximately 36% in
TeleWest Communications, and subsequent to the TeleWest Merger, TCI Group has
an effective ownership interest of approximately 27% in TeleWest. As a result
of the TeleWest Merger, TCI Group recognized a gain of $165 million (before
deducting the related tax expense of $58 million). Such gain represents the
difference between TCI Group's recorded cost for TeleWest Communications and
TCI Group's effective proportionate share of TeleWest's net assets. There is no
assurance that TCI Group will realize similar gains in future periods.
As a result of the TeleWest Communications November 1994 initial
public offering and the associated dilution of TCI Group's ownership interest
of TeleWest Communications, TCI Group recognized a gain amounting to $161
million (before deducting the related tax expense of $57 million) in 1994.
TeleWest, which is currently constructing broadband cable television
and telephony networks in the UK, has incurred net losses since its inception.
Although there is no assurance, TCI Group believes (i) that the continued
expansion of TeleWest's networks ultimately will provide TeleWest with a
revenue base that will exceed its expenses and (ii) that TeleWest's present and
future sources of liquidity (including the net proceeds from the TeleWest IPO
and certain bank credit facilities) will be sufficient to meet TeleWest's
liquidity requirements for the foreseeable future. TCI Group has no present
intention to make significant loans to or investments in TeleWest.
As a result of the TINTA IPO and TYC Acquisition, TCI Group recognized
a gain amounting to $123 million during 1995. There is no assurance that TCI
Group will realize similar gains in future periods.
II-45
<PAGE> 112
Net Earnings (Loss)
TCI Group's net loss (before earnings of Liberty Media Group and
preferred stock dividend requirements) of $115 million for the year ended
December 31, 1995 represents a decrease of $93 million, as compared to TCI
Group's net loss of $22 million for 1994. Such decrease is the result of
increases in interest expense and share of losses of affiliates combined with a
decrease in operating income which were partially offset by the aforementioned
gain recognized as a result of the TINTA IPO and the TYC Acquisition and a
decrease in tax expense.
TCI Group's net loss (before earnings of Liberty Media Group and
preferred stock dividend requirements) of $22 million for 1994 represents an
increase of $11 million, as compared to TCI Group's net loss of $33 million for
1993. Such increase is the net result of the recognition of a gain resulting
from TeleWest Communications' initial public offering and a decrease in tax
expense offset by a decrease in operating income and an increase in share of
losses of affiliates.
Inflation has not had a significant impact on TCI Group's results of
operations during the three-year period ended December 31, 1995.
Recent Accounting Pronouncements
In March of 1995, the FASB issued Statement No. 121, effective for
fiscal years beginning after December 15, 1995. Statement No. 121 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. TCI Group will adopt Statement No. 121 effective
January 1, 1996. The effect of such adoption is not expected to be
significant.
Statement No. 123 was issued by the FASB in October 1995. Statement
No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans as well as transactions in which an
entity issues its equity instruments to acquire goods or services from
non-employees. TCI Group will include the disclosures required by Statement
No. 123 in the notes to future financial statements.
Liquidity and Capital Resources
Notwithstanding the attribution of assets and liabilities, equity and
items of income and expense to TCI Group for purposes of preparing its combined
financial statements, the change in the capital structure of TCI approved by
the shareholders of TCI does not affect the ownership or the respective legal
title to assets or responsibility for liabilities of TCI or any of its
subsidiaries. TCI and its subsidiaries each continue to be responsible for
their respective liabilities. Holders of TCI Group Stock are holders of common
stock of TCI and continue to be subject to risks associated with an investment
in TCI and all of its businesses, assets and liabilities. The issuance of
Liberty Group Stock did not affect the rights of creditors of TCI.
Financial effects arising from any portion of TCI that affect the
consolidated results of operations or financial condition and TCI could affect
the combined results of operations or financial condition of TCI Group and the
market price of shares of the TCI Group Stock. In addition, net losses of any
portion of TCI, dividends or distributions on, or repurchases of, any series of
common stock, and dividends on, or certain repurchases of preferred stock would
reduce the funds of TCI legally available for dividends on all series of common
stock. Accordingly, TCI Group financial information should be read in
conjunction with the TCI and Liberty Media Group financial information.
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Dividends on the TCI Group Stock are payable at the sole discretion of
the Board out of the lesser of assets of TCI legally available for dividends
and the available dividend amount with respect to TCI Group, as defined.
Determinations to pay dividends on TCI Group Stock would be based primarily
upon the financial condition, results of operations and business requirements
of TCI Group and TCI as a whole.
Following the TCI/Liberty Combination, TCI Group has managed certain
treasury activities for Liberty Media Group on a centralized basis. Cash
receipts of certain businesses attributed to Liberty Media Group are remitted
to TCI Group and certain cash disbursements of Liberty Media Group are funded
by TCI Group on a daily basis. Prior to the Distribution, but subsequent to
the TCI/Liberty Combination, the net amounts of such cash activities are
included in investment in Liberty Media Group in the accompanying combined
financial statements. Prior to the TCI/Liberty Combination, Liberty separately
managed the treasury activities of its subsidiaries. Subsequent to the
Distribution, such cash activities are included in borrowings from or loans to
TCI Group or, if determined by the Board, as an equity contribution to be
reflected as an Inter-Group Interest to Liberty Media Group.
The Board could determine from time to time that debt of TCI Group not
incurred by entities attributed to the Liberty Media Group or preferred stock
and the proceeds thereof should be specifically attributed to and reflected on
the combined financial statements of Liberty Media Group to the extent that the
debt is incurred or the preferred stock is issued for the benefit of Liberty
Media Group.
For all periods prior to the Distribution, all financial impacts of
equity offerings were attributed entirely to TCI Group. After the
Distribution, all financial impacts of issuances of additional shares of TCI
Group Stock will be attributed entirely to TCI Group, all financial impacts of
issuances of additional shares of Liberty Group Stock, the proceeds of which
are attributed to Liberty Media Group, will be reflected entirely in the
combined financial statements of Liberty Media Group. Financial impacts of
dividends or other distributions on, and purchases of, TCI Group Stock will be
attributed entirely to TCI Group, and financial impacts of dividends or other
distributions on Liberty Group Stock will be attributed entirely to Liberty
Media Group. Financial impacts of repurchases of Liberty Group Stock the
consideration for which is charged to Liberty Media Group will be reflected
entirely in the combined financial statements of Liberty Media Group, and the
financial impacts of repurchases of Liberty Group Stock the consideration for
which is charged to TCI Group will be attributed entirely to TCI Group.
Subsequent to the Distribution, borrowings from or loans to TCI Group
will bear interest at such rates and have repayment schedules and other terms
as are established by the Board. The Board expects to make such
determinations, either in specific instances or by setting generally applicable
policies from time to time, after consideration of such factors as it deems
relevant, including, without limitation, the use of proceeds by and
creditworthiness of the recipient Group, the capital expenditure plans and
investment opportunities available to each Group and the availability, cost and
time associated with alternative financing sources.
During 1994, TCI Group, Comcast, Cox and Sprint formed WirelessCo to
engage in the business of providing wireless communications services on a
nationwide basis. Through WirelessCo, in which TCI Group owns an indirect 30%
interest, the partners participated in PCS Auctions of broadband PCS licenses
conducted by the FCC. In the first round auction, which concluded during the
first quarter of 1995, WirelessCo was the winning bidder for PCS licenses for
29 markets, including New York, San Francisco-Oakland-San Jose, Detroit,
Dallas-Fort Worth, Boston-Providence, Minneapolis-St. Paul and Miami-Fort
Lauderdale. The aggregate license cost for these licenses was approximately
$2.1 billion.
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WirelessCo also invested in APC, which holds a PCS license granted
under the FCC's pioneer preference program for the Washington-Baltimore market.
WirelessCo acquired its 49% limited partnership interest in APC for $23 million
and agreed to make capital contributions to APC equal to 49/51 of the cost of
APC's PCS license. Additional capital contributions may be required in the
event APC is unable to finance the full cost of its PCS license. WirelessCo
may also be required to finance the build-out expenditures for APC's PCS
system. Cox, which holds a pioneer preference PCS license for the Los
Angeles-San Diego market, and WirelessCo have also agreed on the general terms
and conditions upon which Cox (with a 51% interest) and WirelessCo (with a 49%
interest) would form a partnership to hold and develop a PCS system using the
Los Angeles-San Diego license. APC and the Cox partnership would affiliate
their PCS systems with WirelessCo and be part of WirelessCo's nationwide
integrated network, offering wireless communications services under the
"Sprint" brand.
During 1994, subsidiaries of Cox, Sprint and TCI Group also formed
PhillieCo, in which the TCI Group owns a 35.3% interest. PhillieCo was the
winning bidder in the first round auction for a PCS license for the
Philadelphia market at a license cost of $85 million. To the extent permitted
by law, the PCS system to be constructed by PhillieCo would also be affiliated
with WirelessCo's nationwide network.
WirelessCo may bid in subsequent rounds of the PCS Auctions and may
invest in, affiliate with or acquire licenses from other successful bidders.
The capital that WirelessCo will require to fund the construction of the PCS
systems, in addition to the license costs and investments described above, will
be substantial.
In March of 1995, the Cable Partners and Sprint formed two new
partnerships, of which the principal partnership is MajorCo, L.P., to which
they contributed their respective interests in WirelessCo and through which
they formed another partnership, NewTelco, L.P. to engage in the business of
providing local wireline communications services to residences and businesses
on a nationwide basis. The Cable Partners agreed to contribute their interests
in TCG to NewTelco. TCG is one of the largest competitive access providers in
the United States in terms of route miles.
Effective January 31, 1996, the Partners amended the MajorCo
partnership agreement and certain other agreements related thereto. Under the
Partnership Agreement, the business of MajorCo and its subsidiaries will be the
provision of certain wireless and other services described in the Partnership
Agreement. The partners intend for WirelessCo and its subsidiary partnerships
to be the exclusive vehicles through which they engage in the wireless
telephony service businesses, subject to certain exceptions. MajorCo will no
longer be authorized to engage in the businesses of providing local wireline
communications services to residences and businesses. In connection with the
amendment of the Partnership Agreement, the Partners, also agreed to the
termination of the agreement to contribute the Cable Partners' interests in TCG
to NewTelco.
Pursuant to separate agreements, each of the Cable Partners and Sprint
have agreed to negotiate in good faith on a market-by-market basis for the
provision of local wireline telephony services over the cable television
facilities of the respective Cable Partner under the Sprint brand. Accordingly,
local wireline telephony offerings in each market would be the subject of
individual agreements to be negotiated with Sprint, rather than being provided
by MajorCo, as originally contemplated. The Cable Partners and Sprint also
reaffirmed their intention to continue to attempt to integrate the business of
TCG with that of MajorCo. In addition, each Cable Partner agreed to certain
restrictions on its ability to offer, promote, or package certain of its
products or services with certain products and services of other persons and
agreed to make its facilities available to Sprint for specified purposes to the
extent and on the terms that it has made such facilities available to others
for such purposes. Such agreements have a term of five years, but under
certain circumstances may terminate after three years.
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Execution of the foregoing agreements was a condition to the
effectiveness of a previously approved business plan for the build out of
WirelessCo's nationwide network for wireless personal communications services.
Pursuant to the business plan, the Partners are obligated to make additional
cash capital contributions to MajorCo in the aggregate amount of approximately
$1.9 billion during the two-year period that commenced January 1, 1996. The
business plan contemplates that MajorCo will require additional equity
thereafter.
As of January 26, 1995, TCI Group and TeleCable consummated the
TeleCable Merger. The aggregate $1.6 billion purchase price was satisfied by
TCI Group's assumption of approximately $300 million of TeleCable's net
liabilities and the issuance to TeleCable's shareholders of approximately 42
million shares of TCI Class A common stock and 1 million shares of Series D
Preferred Stock with an aggregate initial liquidation value of $300 million.
The Series D Preferred Stock, which accrues dividends at a rate of 5.5% per
annum, is convertible into 10 million shares of Series A TCI Group Stock and
2.5 million shares of Series A Liberty Group Stock. The Series D Preferred
Stock is redeemable for cash at the option of TCI after five years and at the
option of either TCI or the holder after ten years.
On April 25, 1995, TINTA acquired a 51% ownership interest in
Cablevision for a purchase price of $282 million, before liabilities assumed.
The purchase price was paid with cash consideration of $195 million and TINTA's
issuance of $87 million principal amount of secured negotiable promissory notes
payable to the selling shareholders. TINTA has an option during the two-year
period ended April 25, 1997 to increase its ownership interest in Cablevision
up to 80% at a cost per subscriber similar to the initial purchase price,
adjusted however for certain fluctuations in applicable foreign currency
exchange rates.
In July 1995, TCI Group entered into certain agreements with Viacom
and certain subsidiaries of Viacom regarding the purchase by TCI Group of all
of the common stock of Cable Sub which, at the time of purchase, will own
Viacom's cable systems and related assets.
The transaction has been structured as a tax-free reorganization in
which Cable Sub will initially transfer all of its non-cable assets, as well as
all of its liabilities other than current liabilities, to New Viacom Sub.
Cable Sub will also transfer to New Viacom Sub the Loan Proceeds of a $1.7
billion loan facility to be arranged by TCI Group and Cable Sub. Following
these transfers, Cable Sub will retain cable assets with an estimated value at
closing of approximately $2.2 billion and the obligation to repay the Loan
Proceeds borrowed under the Loan Facility. Repayment of the Loan Proceeds
will be non-recourse to Viacom and New Viacom Sub.
Viacom will offer to the holders of shares of Viacom Common Stock the
opportunity to exchange a portion of their shares of Viacom Common Stock for
shares Cable Sub Class A Stock. The Exchange Offer will be subject to a number
of conditions, including a condition that sufficient tenders are made of Viacom
Common Stock that permit the number of shares of Cable Sub Class A Stock issued
pursuant to the Exchange Offer to equal the total number of shares of Cable Sub
Class A Stock issuable in the Exchange Offer.
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Immediately following the completion of the Exchange Offer, TCI Group
will acquire from Cable Sub shares of Cable Sub Class B common stock for $350
million (which will be used to reduce Cable Sub's obligations under the Loan
Facility). At the time of such acquisition, the Cable Sub Class A Stock
received by Viacom stockholders pursuant to the Exchange Offer will
automatically convert into the Exchangeable Preferred Stock of Cable Sub with a
stated value of $100 per share. The terms of the Exchangeable Preferred Stock,
including its dividend, redemption and exchange features, will be designed to
cause the Exchangeable Preferred Stock, in the opinion of two investment banks,
to initially trade at the Stated Value. The Exchangeable Preferred Stock will
be exchangeable, at the option of the holder commencing after the fifth
anniversary of the date of issuance, for shares of Series A TCI Group Stock.
The Exchangeable Preferred Stock will also be redeemable, at the option of
Cable Sub, after the fifth anniversary of the date of issuance, and will be
subject to mandatory redemption on the tenth anniversary of the date of
issuance at a price equal to the Stated Value per share plus accrued and unpaid
dividends, payable in cash or, at the election of Cable Sub, in shares of
Series A TCI Group Stock or in any combination of the foregoing. If
insufficient tenders are made by Viacom stockholders in the Exchange Offer to
permit the Minimum Condition to be satisfied, Viacom will extend the Exchange
Offer for up to 15 business days and, during such extension, TCI Group and
Viacom are to negotiate in good faith to determine mutually acceptable changes
to the terms and conditions for the Exchangeable Preferred Stock and the
Exchange Offer that each believes in good faith will cause the Minimum
Condition to be fulfilled and that would cause the Exchangeable Preferred Stock
to trade at a price equal to the Stated Value immediately following the
expiration of the Exchange Offer. In the event the Minimum Condition is not
thereafter met, TCI and Viacom will each have the right to terminate the
transaction. In addition, either party may terminate the transaction of the
Exchange Offer has not commenced by June 24, 1996 or been consummated by July
24, 1996.
Consummation of the transaction is subject to a number of conditions,
including receipt of a favorable letter ruling from the Internal Revenue
Service that the transaction qualifies as a tax-free transaction and the
satisfaction or waiver of all of the conditions of the Exchange Offer. A
request for a letter ruling from the Internal Revenue Service has been filed by
Viacom. TCI Group believes that, based upon the unique and complex structure
of the transaction, there exists significant uncertainty as to whether a
favorable ruling will be obtained. In light of the foregoing, management of
TCI Group has concluded that consummation of the transaction is not yet
probable. Accordingly, no assurance can be given that the transaction will be
consummated.
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At December 31, 1995, Cable Sub provided service to approximately 1.2
million basic subscribers and had total assets of $1,067 million. For the year
ended December 31, 1995, Cable Sub had revenue of $442 million and net earnings
of $34 million. It is expected that if the transaction is consummated, TCI
Group would account for such acquisition under the purchase method of
accounting. Accordingly, the cost to acquire Cable Sub estimated at
approximately $2.2 billion (reflecting the Loan Proceeds of $1.7 billion and
the estimated aggregate Stated Value of the Exchangeable Preferred Stock of
$500 million) would be allocated to the assets and liabilities acquired
according to their respective fair values, with any excess being treated as
intangible assets. As such, TCI Group will, if such transaction is
consummated, reflect additional interest expense, depreciation, amortization
and minority share of losses of consolidated subsidiaries. On a pro forma
basis, if the transaction had been consummated under its current terms on or
before January 1, 1995, Cable Sub would have reflected loss before taxes of
approximately $51 million for the year ended December 31, 1995. On a pro forma
basis, Cable Sub would reflect an approximate $21 million of preferred stock
dividend requirements on an annual basis assuming, solely for the purpose of
this presentation, a dividend rate of 4.25% per annum on the Exchangeable
Preferred Stock. On a pro forma basis, TCI Group would reflect the foregoing
financial impacts of Cable Sub in its combined results of operations except
that the preferred stock dividend requirement of Cable Sub would be reflected
as minority interest in TCI Group's statement of operations and TCI Group would
incur an additional approximately $28 million of interest expense per year
arising from the assumed borrowing by TCI Group for its $350 million capital
contribution to Cable Sub.
Pursuant to an underwritten public offering, TCI sold 19,550,000
shares of TCI Class A common stock in February of 1995. TCI Group received net
proceeds of approximately $401 million. Such proceeds were immediately used to
reduce outstanding indebtedness under credit facilities.
On July 18, 1995, TINTA completed the IPO in which it sold 20 million
shares of TINTA Series A common stock to the public for aggregate consideration
of $320 million, before deducting related expenses (approximately $19 million).
TINTA used the IPO proceeds to repay debt of the Company ($177 million) and
fund acquisitions, operations and capital contributions.
During the year ended December 31, 1995, TCI Group sold approximately
$1.5 billion of publicly-placed fixed-rate senior and medium term notes with
interest rates ranging from 6.8% to 8.8% and maturity dates ranging through
2015. The proceeds from the sale of these notes were used primarily to repay
variable-rate bank debt.
Subsequent to December 31, 1995, TINTA issued $345 million (before
deducting offering costs of $9 million) of 4.5% convertible subordinated
debentures. TINTA anticipates that it will use the net proceeds to fund
capital contributions to certain of its equity investees.
Also, subsequent to December 31, 1995, TCIC issued (i) 4.6 million
shares of Cumulative Exchangeable Preferred Stock for net cash proceeds of $223
million, (ii) 20 million preferred securities of 8.72% Trust Originated
Preferred Securities for net cash proceeds of $486 million (through a special
purpose entity formed as a Delaware business trust) and (iii) $1.0 billion of
publicly-placed fixed rate senior and medium term notes with interest rates
ranging from 6.9% and 7.9% and maturity dates ranging through 2026. TCIC used
the proceeds from the aforementioned debt and equity securities to retire
overnight commercial paper and to repay variable rate indebtedness.
TCI Group has a credit facility which matures in September of 1996.
The outstanding balance of such facility was $602 million at December 31, 1995.
TCI Group currently anticipates that it will refinance such borrowings but
there can be no assurance that it can do so on terms acceptable to TCI Group.
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TCI Group had approximately $2.2 billion in unused lines of credit at
December 31, 1995, excluding amounts related to lines of credit which provide
availability to support commercial paper. Although TCI Group was in compliance
with the restrictive covenants contained in its credit facilities at said date,
additional borrowings under the credit facilities are subject to TCI Group's
continuing compliance with the restrictive covenants (which relate primarily to
the maintenance of certain ratios of cash flow to total debt and cash flow to
debt service, as defined in the credit facilities) after giving effect to such
additional borrowings. See note 7 to the accompanying TCI Group combined
financial statements for additional information regarding the material terms of
the lines of credit.
One measure of liquidity is commonly referred to as "interest
coverage." Interest coverage, which is measured by the ratio of Operating Cash
Flow (operating income before depreciation, amortization and other non-cash
operating credits or charges) $1,972 million, $1,784 million and $1,870 million
for the years ended December 31, 1995, 1994 and 1993, respectively) to interest
expense ($ 993 million, $786 million and $735 million in 1995, 1994 and 1993,
respectively), is determined by reference to the combined statements of
operations. TCI Group's interest coverage ratio was 199%, 227% and 254% for
1995, 1994 and 1993, respectively. The decrease in TCI Group's interest
coverage in 1995 is caused by an increase in interest expense due to higher
debt balances. Management of TCI Group believes that the foregoing interest
coverage ratio is adequate in light of the consistency and nonseasonal nature
of its cable television operations and the relative predictability of TCI
Group's interest expense, almost half of which results from fixed rate
indebtedness. 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 accompanying combined statements of cash flows.
Net cash provided by operating activities ($955 million, $1,001 million and
$1,257 in 1995, 1994 and 1993, respectively) reflects net cash from the
operations of TCI Group available for TCI Group's liquidity needs after taking
into consideration the aforementioned additional substantial costs of doing
business not reflected in Operating Cash Flow. Amounts expended by TCI Group
for its investing activities exceed net cash provided by operating activities.
However, management believes that net cash provided by operating activities,
the ability of TCI Group to obtain additional financing (including the
available lines of credit and access to public debt markets), issuances and
sales of TCI's equity or equity of its subsidiaries, and proceeds from
disposition of assets will provide adequate sources of short-term and long-term
liquidity in the future. See TCI Group's combined statements of cash flows
included in the accompanying combined financial statements.
In order to achieve the desired balance between variable and fixed
rate indebtedness and to diminish its exposure to extreme increases in variable
interest rates, TCI Group has entered into various interest rate exchange
agreements. At December 31, 1995, after considering the net effect of various
interest rate exchange agreements (see note 7 to the consolidated financial
statements) with notional amounts aggregating $1,918 million, TCI Group had
$5,990 million (or 46%) of fixed-rate debt with a weighted average interest
rate of 8.8% and $6,970 million (or 54%) of variable-rate debt with a weighted
average interest rate of 6.3%.
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Pursuant to the interest rate exchange agreements, TCI Group pays (i)
fixed interest rates ranging from 6.1% to 9.9% on notional amounts of $602
million at December 31, 1995 and (ii) variable interest rates on notional
amounts of $2,520 million at December 31, 1995. During the years ended
December 31, 1995, 1994 and 1993, TCI Group's net payments pursuant to the
fixed rate agreements were $13 million, $26 million and $38 million,
respectively. During the years ended December 31, 1995, 1994 and 1993, TCI
Group's net receipts (payments) pursuant to the variable rate agreements were
(less than $1 million), $36 million and $31 million, respectively. TCI Group
is exposed to credit losses for the periodic settlements of amounts due under
the interest rate exchange agreements in the event of nonperformance by the
other parties to the agreements. However, TCI Group does not anticipate that
it will incur any material credit losses because it does not anticipate
nonperformance by the counterparties.
In connection with its investments in the above-described foreign
entities, TCI Group is exposed to unfavorable and potentially volatile
fluctuations of the U.S. dollar against the UK pound sterling ("L."), the
Japanese yen ("Yen"), and various other foreign currencies that are the
functional currencies of TCI Group's foreign subsidiaries and affiliates. Any
increase (decrease) in the value of the U.S. dollar against any foreign
currency that is the functional currency of an operating subsidiary or
affiliate of TINTA will cause TCI Group to experience unrealized foreign
currency translation losses (gains) with respect to amounts already invested in
such foreign currencies. TCI Group is also exposed to foreign currency risk to
the extent that TCI Group or its foreign subsidiaries and affiliates enter into
transactions denominated in currencies other than their respective functional
currencies. Because TCI Group generally views its foreign operating
subsidiaries and affiliates as long-term investments, TCI Group generally does
not attempt to hedge existing investments in its foreign affiliates and
subsidiaries. With respect to funding commitments that are denominated in
currencies other than the U.S. dollar, TCI Group historically has sought to
reduce its exposure to short-term (generally no more than 90 days) movements
in the applicable exchange rates once the timing and amount of such funding
commitments becomes fixed. Although TCI Group monitors foreign currency
exchange rates with the objective of mitigating its exposure to unfavorable
fluctuations in such rates, TCI Group believes that it is not possible or
practical to completely eliminate TCI Group's exposure to unfavorable
fluctuations in foreign currency exchange rates.
Approximately twenty-five percent of the franchises held by TCI Group,
involving approximately 4.4 million basic subscribers, expire within five
years. There can be no assurance that the franchises for TCI Group's systems
will be renewed as they expire, although TCI Group believes that its cable
television systems generally have been operated in a manner which satisfies the
standards established by the 1984 Cable Act, as supplemented by the renewal
provisions of the 1992 Cable Act, for franchise renewal. However, in the event
they are renewed, TCI Group cannot predict the impact of any new or different
conditions that might be imposed by the franchising authorities in connection
with the renewals. To date they have not varied significantly from the
original terms.
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A significant competitive impact is expected from medium power and
higher power direct broadcast satellites that use high frequencies to transmit
signals that can be received by dish antennas much smaller in size than
traditional HSDs. Primestar distributes a multi-channel programming service
via a medium power communications satellite to HSDs of approximately 3 feet in
diameter. At December 31, 1995, Primestar, through its partners, served an
estimated 940,000 HSDs in the United States. Two other DBS operators, DirecTV,
a subsidiary of GM Hughes Electronics, and United States Satellite
Broadcasting, a subsidiary of Hubbard Broadcasting, Inc., offer video services
that can be received by HSDs that measure approximately eighteen inches in
diameter. Such DBS operators have the right to distribute substantially all of
the significant cable television programming services currently carried by
cable television systems. The competition from DBS will likely continue to
grow. One DBS operator is preparing to launch a new DBS satellite. AT&T Corp.
recently made a large investment in DirecTV and several other major companies
are preparing to develop and operate high-power DBS systems, including MCI and
News Corp. MCI recently acquired rights to satellite frequencies for DBS in an
FCC auction.
The 1996 Telecom Act eliminated the statutory and regulatory
restrictions that prevented telephone companies from competing with cable
operators for the provision of video services by any means. The 1996 Telecom
Act allows local telephone companies, including the regional bell operating
companies, to compete with cable television operators both inside and outside
their telephone service areas. TCI Group expects that it will face substantial
competition from telephone companies for the provision of video services. TCI
Group assumes that all major telephone companies have already entered or soon
will enter the business of providing video services. Most major telephone
companies have greater financial resources than TCI Group, and the 1992 Cable
Act ensures that telephone company providers of video services will have access
to acquiring all of the significant cable television programming services.
Additionally, the 1996 Telecom Act eliminates certain federal restrictions on
utility holding companies and thus frees all utility companies to provide cable
television services. TCI Group expects this could result in another source of
significant competition in the delivery of video services.
TCI Group is upgrading and installing optical fiber technology in its
cable systems at a rate such that in approximately two years TCI Group
anticipates that it will be serving the majority of its customers with this
technology. The systems, which facilitate digital transmission of voice, video
and data signals, will have optical fiber to neighborhood nodes with coaxial
cable distribution downstream from that point. TCI Group made capital
expenditures of $1,733 million in 1995 and TCI Group expects to expend similar
amounts in 1995, among other things, to provide for the continued rebuilding of
its cable systems. However, such proposed expenditures are subject to
reevaluation based upon changes in TCI Group's liquidity, including those
resulting from rate regulation.
TCI Group has guaranteed notes payable and other obligations of
affiliated and other companies with outstanding balances of approximately $212
million at December 31, 1995. Although there can be no assurance, management
of TCI Group believes that it will not be required to meet its obligations
under such guarantees or if it is required to meet any of such guarantees, that
they will not be material to TCI Group.
TCI Group is obligated to pay fees for the license to exhibit certain
films that are released theatrically by various motion picture studios through
February 28, 2009. As of December 31, 1995, these agreements require minimum
payments aggregating approximately $251 million. The aggregate amount of the
Film Licensing Obligations is not currently estimable because such amount is
dependent upon certain variable factors. Nevertheless, TCI Group's required
aggregate payments under the Film Licensing Obligations could prove to be
significant. Additionally, TCI Group has guaranteed up to $67 million of
similar fee obligations of another affiliate.
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TCI Group has committed to provide additional debt or equity funding
to certain of its affiliates. At December 31, 1995, such commitments
aggregated $95 million.
TCI Group's various partnerships and other affiliates accounted for
under the equity method generally fund their acquisitions, required debt
repayments and capital expenditures through borrowings under and refinancing of
their own credit facilities (which are generally not guaranteed by TCI Group)
and through net cash provided by their own operating activities.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of Tele-Communications, Inc. are
filed under this Item, beginning on Page II-56. The combined financial
statements of Liberty Media Group are filed under this Item, beginning on Page
II-109. The combined financial statements of TCI Group are filed under this
Item, beginning at Page II-142. The consolidated financial statements of
Liberty Media Corporation are filed under this Item, beginning on Page II-186.
The financial statement schedules required by Regulation S-X are filed under
Item 14 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
II-55
<PAGE> 122
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We have audited the accompanying 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. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of
Tele-Communications, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
March 18, 1996
II-56
<PAGE> 123
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994 *
---------- ----------
Assets amounts in millions
- ------
<S> <C> <C>
Cash $ 118 74
Trade and other receivables, net 407 301
Inventories, net 104 121
Prepaid expenses 65 36
Prepaid program rights 47 24
Committed film inventory 122 58
Investments in affiliates, accounted for
under the equity method, and related
receivables (notes 5 and 6) 2,372 1,299
Investment in Turner Broadcasting System, Inc.
("TBS") (note 7) 955 660
Property and equipment, at cost:
Land 88 91
Distribution systems 9,162 7,705
Support equipment and buildings 1,429 1,146
--------- ------
10,679 8,942
Less accumulated depreciation 3,653 3,066
--------- ------
7,026 5,876
--------- ------
Franchise costs 14,322 11,152
Less accumulated amortization 2,092 1,708
--------- ------
12,230 9,444
--------- ------
Other assets, net of amortization 1,684 1,383
--------- ------
$ 25,130 19,276
========= ======
</TABLE>
*Restated - see notes 5 and 6.
(continued)
II-57
<PAGE> 124
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994 *
--------- --------
Liabilities and Stockholders' Equity amounts in millions
- ------------------------------------
<S> <C> <C>
Accounts payable $ 243 201
Accrued interest 233 183
Accrued programming expense 318 248
Other accrued expenses 721 561
Debt (note 9) 13,211 11,162
Deferred income taxes (note 14) 4,530 3,509
Other liabilities 195 160
-------- --------
Total liabilities 19,451 16,024
-------- --------
Minority interests in equity
of consolidated subsidiaries 651 429
Redeemable preferred stocks (note 10) 478 168
Stockholders' equity (note 11):
Series Preferred Stock, $.01 par value -- --
Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock,
$.01 par value -- --
Tele-Communications, Inc. Series A TCI
Group common stock, $1 par value
Authorized 1,750,000,000 shares;
issued 672,211,009 in 1995 672 --
Tele-Communications, Inc. Series B TCI
Group common stock, $1 par value
Authorized 150,000,000 shares;
issued 84,691,554 in 1995 85 --
Tele-Communications, Inc. Series A Liberty
Media Group common stock, $1 par value
Authorized 750,000,000 shares;
issued 142,896,264 in 1995 143 --
Tele-Communications, Inc. Series B Liberty
Media Group common stock, $1 par value
Authorized 75,000,000 shares;
issued 21,196,868 in 1995 21 --
Class A common stock, $1 par value
Issued 576,979,498 shares in 1994 -- 577
Class B common stock, $1 par value
Issued 89,287,429 shares in 1994 -- 89
Additional paid-in capital 4,068 2,791
Cumulative foreign currency
translation adjustment, net of taxes (9) (4)
Unrealized holding gains for
available-for-sale securities, net of taxes 338 94
Accumulated deficit (454) (282)
--------- --------
4,864 3,265
Treasury stock, at cost (100,524,364 shares of
Series A TCI Group common stock in 1995; and
86,030,992 shares of Class A common
stock and 4,172,629 shares of Class B
common stock in 1994) (314) (610)
--------- ---------
Total stockholders' equity 4,550 2,655
-------- --------
Commitments and contingencies (note 15)
$ 25,130 19,276
======== ========
</TABLE>
*Restated - see notes 5 and 6.
See accompanying notes to consolidated financial statements.
II-58
<PAGE> 125
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 * 1993 *
---------- ----------- -----------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Revenue (note 16):
From cable and programming services
(notes 4 and 8) $ 5,832 4,454 4,153
Net sales from electronic retailing services 1,019 482 --
---------- ----------- -----------
6,851 4,936 4,153
---------- ----------- -----------
Operating costs and expenses:
Operating (note 4) 2,097 1,445 1,190
Cost of sales from electronic retailing services 702 313 --
Selling, general and administrative 2,066 1,380 1,105
Compensation relating to stock
appreciation rights 55 -- 31
Adjustment to compensation relating to stock
appreciation rights -- (8) --
Restructuring charges 17 -- --
Depreciation 899 700 622
Amortization 473 318 289
---------- ----------- -----------
6,309 4,148 3,237
---------- ----------- -----------
Operating income (note 16) 542 788 916
Other income (expense):
Interest expense (1,010) (785) (731)
Interest and dividend income 52 36 34
Share of earnings of Liberty Media Corporation
("Liberty") (note 4) -- 128 7
Share of losses of other affiliates, net
(notes 5 and 6) (193) (112) (76)
Gain on sale of subsidiary stock (note 13) 123 -- --
Gain on sale of stock by equity investee (note 5) 165 161 --
Gain (loss) on disposition of assets 49 (10) 42
Other, net (19) (24) (28)
---------- ----------- -----------
(833) (606) (752)
---------- ----------- -----------
Earnings (loss) before income taxes (291) 182 164
Income tax benefit (expense) (note 14) 120 (120) (169)
---------- ----------- -----------
Net earnings (loss) (note 8) (171) 62 (5)
Dividend requirements on preferred stocks (34) (8) (2)
---------- ----------- -----------
Net earnings (loss) attributable
to common stockholders (note 8) $ (205) 54 (7)
========== =========== ========
Net earnings (loss) attributable to common
stockholders (note 2):
TCI Class A and Class B common stock $ (71) 54 (7)
TCI Group Series A and Series B common stock (107) -- --
Liberty Media Group Series A and Series B
common stock (27) -- --
---------- ----------- -----------
$ (205) 54 (7)
========== =========== ===========
Primary and fully diluted net earnings (loss)
attributable to common stockholders per common
and common equivalent share (notes 2 and 8):
TCI Class A and Class B common stock $ (.11) .10 (.02)
TCI Group Series A and Series B common stock $ (.16) -- --
Liberty Media Group Series A and Series B
common stock $ (.16) -- --
</TABLE>
* Restated - see notes 5 and 6.
See accompanying notes to consolidated financial statements.
II-59
<PAGE> 126
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Stock
---------------------------------------------------------------------
Class B TCI TCI Group Liberty Media Group
Preferred -------------------- -------------------- --------------------
Stock Class A Class B Series A Series B Series A Series B
----------- -------- --------- -------- -------- -------- --------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993* $ -- 462 48 -- -- -- --
Net loss -- -- -- -- -- -- --
Issuance of common stock
upon conversion of notes
(note 9) -- 20 -- -- -- -- --
Issuance of common stock upon
exercise of options -- -- -- -- -- -- --
Dividends on redeemable
preferred stocks -- -- -- -- -- -- --
Foreign currency translation
adjustment -- -- -- -- -- -- --
Acquisition and retirement
of common stock -- -- (1) -- -- -- --
------- ------- ------ ------- ------- ------- -------
Balance at December 31, 1993 $ -- 482 47 -- -- -- --
------- ------- ------ ------- ------- ------ -------
<CAPTION>
Unrealized
Cumulative holding Note
foreign gains for receivable
Additional currency available- from
paid-in translation for-sale related Accumulated Treasury
capital adjustment securities * party deficit * stock
----------- ---------- ------------ ------------ --------------- ----------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993* 1,909 (19) -- -- (339) (333)
Net loss -- -- -- -- (5) --
Issuance of common stock
upon conversion of notes
(note 9) 383 -- -- -- -- --
Issuance of common stock upon
exercise of options 7 -- -- -- -- --
Dividends on redeemable
preferred stocks (2) -- -- -- -- --
Foreign currency translation
adjustment -- (10) -- -- -- --
Acquisition and retirement
of common stock (4) -- -- -- -- --
------- ----- --------- ------ ------ -------
Balance at December 31, 1993 2,293 (29) -- -- (344) (333)
------- ----- --------- ------ ------ -------
<CAPTION>
Total
stockholders'
equity *
--------------
amounts in millions
<S> <C>
Balance at January 1, 1993* 1,728
Net loss (5)
Issuance of common stock
upon conversion of notes
(note 9) 403
Issuance of common stock upon
exercise of options 7
Dividends on redeemable
preferred stocks (2)
Foreign currency translation
adjustment (10)
Acquisition and retirement
of common stock (5)
-------
Balance at December 31, 1993 2,116
-------
</TABLE>
* Restated-see notes 5 and 6
(continued)
II-60
<PAGE> 127
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity, continued
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------------------------------
Class B TCI TCI Group Liberty Media Group
Preferred -------------------- -------------------- --------------------
Stock Class A Class B Series A Series B Series A Series B
----------- -------- --------- -------- -------- -------- --------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993* $ -- 482 47 -- -- -- --
Unrealized holding gains for
available-for-sale securities
as of January 1, 1994 -- -- -- -- -- -- --
Net earnings -- -- -- -- -- -- --
Conversion of redeemable preferred
stock (note 10) -- 1 -- -- -- -- --
Issuance of common stock upon
conversion of notes (note 9) -- 3 -- -- -- -- --
Issuance of common stock upon
exercise of stock option -- -- -- -- -- -- --
Acquisition and retirement of
common stock -- -- -- -- -- -- --
Consummation of the TCI/Liberty
Combination (note 4) -- 85 42 -- -- -- --
Accreted dividends on all classes of
preferred stock -- -- -- -- -- -- --
Accreted dividends on all classes of
preferred stock not subject
to mandatory redemption
requirements -- -- -- -- -- -- --
Foreign currency translation
adjustment -- -- -- -- -- -- --
Issuance of TCI Class A common
stock to subsidiaries of TCI in
Reorganization -- -- -- -- -- -- --
Issuance of Class A common stock
for investment -- 6 -- -- -- -- --
Repayment of note receivable from
related party -- -- -- -- -- -- --
Change in unrealized holding gains
for available-for-sale securities -- -- -- -- -- -- --
----- ------- ----- ---- ---- ---- ----
Balance at December 31, 1994 $ -- 577 89 -- -- -- --
---- ------- ------ ------ ------- ------ ------
<CAPTION>
Unrealized
Cumulative holding Note
foreign gains for receivable
Additional currency available- from Total
paid-in translation for-sale related Accumulated Treasury stockholders'
capital adjustment securities * party deficit * stock equity *
---------- ---------- ------------ ----------- ----------- -------- -------------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993* 2,293 (29) -- -- (344) (333) 2,116
Unrealized holding gains for
available-for-sale securities
as of January 1, 1994 -- -- 297 -- -- -- 297
Net earnings -- -- -- -- 62 -- 62
Conversion of redeemable preferred
stock (note 10) 17 -- -- -- -- -- 18
Issuance of common stock upon
conversion of notes (note 9) -- -- -- -- -- -- 3
Issuance of common stock upon
exercise of stock option 3 -- -- -- -- -- 3
Acquisition and retirement of
common stock (2) -- -- -- -- -- (2)
Consummation of the TCI/Liberty
Combination (note 4) 383 -- 4 (15) -- (285) 214
Accreted dividends on all classes of
preferred stock (8) -- -- -- -- -- (8)
Accreted dividends on all classes of
preferred stock not subject
to mandatory redemption
requirements 4 -- -- -- -- -- 4
Foreign currency translation
adjustment -- 25 -- -- -- -- 25
Issuance of TCI Class A common
stock to subsidiaries of TCI in
Reorganization (23) -- -- -- -- 23 --
Issuance of Class A common stock
for investment 124 -- -- -- -- -- 130
Repayment of note receivable from
related party -- -- -- 15 -- (15) --
Change in unrealized holding gain
for available-for-sale securities -- -- (207) -- -- -- (207)
----- ----- ---- ----- ----- ----- -----
Balance at December 31, 1994 2,791 (4) 94 -- (282) (610) 2,655
----- ----- ---- ----- ----- ----- -----
</TABLE>
(continued)
*Restated - see notes 5 and 6
II-61
<PAGE> 128
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------------------------------
Class B TCI TCI Group Liberty Media Group
Preferred -------------------- -------------------- --------------------
Stock Class A Class B Series A Series B Series A Series B
----------- -------- --------- -------- -------- -------- --------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 * $ -- 577 89 -- -- -- --
Net loss -- -- -- -- -- -- --
Issuance of common stock in
public offering -- 20 -- -- -- -- --
Issuance of common stock in
private offering -- 1 -- -- -- -- --
Issuance of common stock for
acquisitions and investments
(note 8) -- 59 -- -- -- -- --
Issuance of Class A common
stock to subsidiary of TCI in
Reorganization -- -- -- -- -- -- --
Issuance of Class A common stock to
subsidiary in exchange for
investment -- -- -- -- -- -- --
Retirement of Class A common
stock previously held by subsidiary -- -- -- -- -- -- --
Exchange of common stock held by
subsidiaries of TCI for Convertible
Redeemable Participating Preferred
Stock, Series F ("Series F
Preferred Stock") (note 1) -- (86) (4) -- -- -- --
Conversion of Series F Preferred
Stock held by subsidiary for Series
A TCI Group common stock -- -- -- 101 -- -- --
Distribution of Series A and
Series B Liberty Media Group
common stock to TCI common
stockholders (note 1) -- -- -- -- -- 143 21
Costs associated with Distribution
to stockholders -- -- -- -- -- -- --
Redesignation of TCI common stock
into Series A and Series B TCI
Group common stock (note 1) -- (571) (85) 571 85 -- --
Accreted dividends on all classes of
preferred stock -- -- -- -- -- -- --
Accreted dividends on all classes of
preferred stock not subject to
mandatory redemption
requirements -- -- -- -- -- -- --
Payment of preferred stock dividends -- -- -- -- -- -- --
Issuance of common stock
by subsidiary (note 13) -- -- -- -- -- -- --
Foreign currency translation
adjustment -- -- -- -- -- -- --
Change in unrealized holding gains
for available-for-sale securities -- -- -- -- -- -- --
Adjustment to reflect elimination of
reporting delay with respect to
certain foreign subsidiaries (note 2) -- -- -- -- -- -- --
-------- --------- -------- ------ -------- --------- ---------
Balance at December 31, 1995 $ -- -- -- 672 85 143 21
======== ========= ======== ====== ======== ========= =========
<CAPTION>
Unrealized
Cumulative holding Note
foreign gains for receivable
Additional currency available- from Total
paid-in translation for-sale related Accumulated Treasury stockholders'
capital adjustment securities * party deficit * stock equity *
---------- ---------- ------------ ----------- ----------- -------- -------------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 * 2,791 (4) 94 -- (282) (610) 2,655
Net loss -- -- -- -- (171) -- (171)
Issuance of common stock in
public offering 381 -- -- -- -- -- 401
Issuance of common stock in
private offering 29 -- -- -- -- -- 30
Issuance of common stock for
acquisitions and investments
(note 8) 1,329 -- -- -- -- -- 1,388
Issuance of Class A common
stock to subsidiary of TCI in
Reorganization (6) -- -- -- -- 6 --
Issuance of Class A common stock to
subsidiary in exchange for
investment (1) -- -- -- -- 1 --
Retirement of Class A common
stock previously held by subsidiary 29 -- -- -- -- (29) --
Exchange of common stock held by
subsidiaries of TCI for Convertible
Redeemable Participating Preferred
Stock, Series F ("Series F
Preferred Stock") (note 1) (542) -- -- -- -- 632 --
Conversion of Series F Preferred
Stock held by subsidiary for Series
A TCI Group common stock 213 -- -- -- -- (314) --
Distribution of Series A and
Series B Liberty Media Group
common stock to TCI common
stockholders (note 1) (164) -- -- -- -- -- --
Costs associated with Distribution
to stockholders (8) -- -- -- -- -- (8)
Redesignation of TCI common stock
into Series A and Series B TCI
Group common stock (note 1) -- -- -- -- -- -- --
Accreted dividends on all classes of
preferred stock (34) -- -- -- -- -- (34)
Accreted dividends on all classes of
preferred stock not subject to
mandatory redemption
requirements 10 -- -- -- -- -- 10
Payment of preferred stock dividends (10) -- -- -- -- -- (10)
Issuance of common stock
by subsidiary (note 13) 51 -- -- -- -- -- 51
Foreign currency translation
adjustment -- (5) -- -- -- -- (5)
Change in unrealized holding gains
for available-for-sale securities -- -- 244 -- -- -- 244
Adjustment to reflect elimination of
reporting delay with respect to
certain foreign subsidiaries (note 2) -- -- -- -- (1) -- (1)
-------- -------- -------- -------- -------- ------- -----
Balance at December 31, 1995 4,068 (9) 338 -- (454) (314) 4,550
======== ======== ======== ======== ======== ======= =====
</TABLE>
*Restated - see notes 5 and 6
See accompanying notes to consolidated financial statements.
II-62
<PAGE> 129
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 * 1993 *
------ -------- --------
amounts in millions
(see note 3)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (171) 62 (5)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,372 1,018 911
Compensation relating to stock appreciation
rights 55 -- 31
Adjustment to compensation relating to stock
appreciation rights -- (8) --
Share of earnings of Liberty -- (128) (7)
Share of losses of other affiliates 193 112 76
Gain on sale of subsidiary stock (123) -- --
Gain on sale of stock by equity investee (165) (161) --
Deferred income tax expense (benefit) (153) 37 140
Loss (gain) on disposition of assets (49) 10 (42)
Other non cash charges (credits) (37) 5 48
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Change in receivables (70) 15 (32)
Change in inventories 16 (26) --
Change in prepaids (86) (97) (4)
Change in accrued interest 45 13 63
Change in other accruals and payables 132 56 68
Net cash used in Flextech plc's operating
activities during the month ended
September 30, 1995 (note 2) (2) -- --
---------- ----------- --------
Net cash provided by operating activities 957 908 1,247
---------- ----------- --------
Cash flows from investing activities:
Cash paid for acquisitions (477) (358) (158)
Capital expended for property and equipment (1,782) (1,264) (947)
Cash proceeds from disposition of assets 166 39 149
Additional investments in and
loans to affiliates and others (1,134) (445) (361)
Repayment of loans by affiliates and others 18 148 62
Other investing activities (84) (15) 89
Net cash used in Flextech plc's investing activities
during the month ended September 30, 1995 (note 2) (51) -- --
---------- ----------- --------
Net cash used in investing activities (3,344) (1,895) (1,166)
---------- ----------- --------
Cash flows from financing activities:
Borrowings of debt 8,152 4,676 6,305
Repayments of debt (6,567) (3,607) (6,321)
Proceeds from sale of subsidiary stock 445 -- --
Issuances of common stock 431 1 6
Preferred stock dividends of subsidiaries (6) (6) (6)
Preferred stock dividends (24) (4) (2)
Costs associated with Distributor to Stockholders (8) -- --
Repurchases of preferred stock -- -- (92)
Repurchases of common stock -- -- (4)
Net cash used in Flextech plc's financing activities
during the month ended September 30, 1995 (note 2) 8 -- --
---------- ----------- --------
Net cash provided (used) by financing
activities 2,431 1,060 (114)
---------- ----------- --------
Net increase (decrease) in cash 44 73 (33)
Cash at beginning of year 74 1 34
---------- ----------- --------
Cash at end of year $ 118 74 1
========== =========== ========
</TABLE>
* Restated - see notes 5 and 6.
See accompanying notes to consolidated financial statements.
II-63
<PAGE> 130
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Tele-Communications, Inc. and those of all majority-owned
subsidiaries ("TCI" or the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
Reorganization
During the fourth quarter of 1994, the Company was reorganized (the
"Reorganization") based upon four lines of business: Domestic Cable
and Communications (the "Cable Unit"); Programming (the "Programming
Unit"); International Cable and Programming ("TINTA"); and
Technology/Venture Capital. Upon Reorganization, certain of the
assets of the Cable and Programming Units were transferred to the
other operating units. As consideration for such transfer of assets,
TCI issued 317,112 shares of TCI Class A common stock and 246,402
shares of Redeemable Convertible Preferred Stock, Series E ("Series E
Preferred Stock") (see note 10). Preferred stock of TCI which is
owned by subsidiaries of TCI eliminates in consolidation. Common
stock of the Company held by subsidiaries is treated as treasury stock
in consolidation.
Liberty Group Stock
On August 3, 1995, the stockholders of TCI authorized the Board of
Directors of TCI (the "Board") to issue a new class of stock ("Liberty
Group Stock") which is intended to reflect the separate performance of
TCI's business which produces and distributes cable television
programming services ("Liberty Media Group"). While the Liberty Group
Stock constitutes common stock of TCI, the issuance of the Liberty
Group Stock did not result in any transfer of assets or liabilities of
TCI or any of its subsidiaries or affect the rights of holders of
TCI's or any of its subsidiaries' debt. On August 10, 1995, TCI
distributed one hundred percent of the equity value attributable to
the Liberty Media Group (the "Distribution") to its security holders
of record on August 4, 1995. Additionally, the stockholders of TCI
approved the redesignation of the previously authorized TCI Class A
and Class B common stock into Series A TCI Group and Series B TCI
Group common stock ("TCI Group Stock").
Upon the Distribution of the Liberty Group Stock and subsequent to the
redesignation of TCI Class A and Class B common stock into Series A
and Series B TCI Group Stock, the TCI Group Stock is intended to
reflect the separate performance of the subsidiaries and assets not
attributed to Liberty Media Group, including (i) TCI's Cable and
Communication unit, (ii) TINTA and (iii) TCI's Technology/Venture
Capital unit. Such subsidiaries and assets are referred to as "TCI
Group".
(continued)
II-64
<PAGE> 131
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Notwithstanding the attribution of assets and liabilities, equity and
items of income and expense to TCI Group or to Liberty Media Group for
purposes of preparing their combined financial statements, the change
in the capital structure of TCI does not affect the ownership or the
respective legal title to assets or responsibility for liabilities of
TCI or any of its subsidiaries. TCI and its subsidiaries will each
continue to be responsible for their respective liabilities. Holders
of TCI Group Stock or Liberty Group Stock are holders of common stock
of TCI and continue to be subject to risks associated with an
investment in TCI and all of its businesses, assets and liabilities.
The issuance of Liberty Group Stock did not affect the rights of
creditors of TCI.
Dividends on TCI Group Stock are payable at the sole discretion of the
Board out of the lesser of assets of TCI legally available for
dividends and the available dividend amount with respect to TCI Group,
as defined. Determinations to pay dividends on TCI Group Stock will
be based primarily upon the financial condition, results of operations
and business requirements of TCI Group and TCI as a whole.
Dividends on Liberty Group Stock are payable at the sole discretion of
the Board out of the lesser of all assets of TCI legally available for
dividends and the available dividend amount with respect to Liberty
Media Group, as defined. Determinations to pay dividends on Liberty
Group Stock will be based primarily upon the financial condition,
results of operations and business requirements of Liberty Media Group
and TCI as a whole.
After the Distribution, existing preferred stock and debt securities
of TCI that were convertible into or exchangeable for shares of TCI
Class A common stock were, as a result of the operation of
antidilution provisions, adjusted so that there will be delivered upon
their conversion or exchange (in addition to the same number of shares
of redesignated Series A TCI Group Stock as were theretofore issuable
thereunder) the number of shares of Series A Liberty Group Stock that
would have been issuable in the Distribution with respect to the TCI
Class A common stock issuable upon conversion or exchange had such
conversion or exchange occurred prior to the record date for the
Distribution. Options to purchase TCI Class A common stock
outstanding at the time of the Distribution were adjusted by issuing
to the holders of such options separate options to purchase that
number of shares of Series A Liberty Group Stock which the holder
would have been entitled to receive had the holder exercised such
option to purchase TCI Class A common stock prior to the record date
for the Distribution and reallocating a portion of the aggregate
exercise price of the previously outstanding options to the newly
issued options to purchase Series A Liberty Group Stock.
(continued)
II-65
<PAGE> 132
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A number of wholly-owned subsidiaries of the Company which are part of
the TCI Group owned shares of Class A common stock and preferred stock
of the Company ("Subsidiary Shares"). Because the Distribution of the
Liberty Group Stock was made as a dividend to all holders of the
Company's Class A common stock and Class B common stock and, pursuant
to the anti-dilution provisions set forth therein, to the holders of
securities convertible into Class A common stock and Class B common
stock upon the conversion thereof, shares of Liberty Group Stock would
have otherwise been issued and become issuable in respect of the
Subsidiary Shares held by these subsidiaries and would have been
attributed to TCI Group. The Liberty Group Stock issued in connection
with the Distribution was intended to constitute 100% of the equity
value thereof to the holders of the TCI Class A common stock and TCI
Class B common stock and TCI Group did not initially have any interest
in Liberty Media Group represented by any outstanding shares of
Liberty Group Stock (an "Inter-Group Interest"). Therefore, the
Company determined to exchange all of the outstanding Subsidiary
Shares for shares of a new series of Series Preferred Stock designated
Convertible Redeemable Participating Preferred Stock, Series F (the
"Series F Preferred Stock"). See note 10. The rights, privileges and
preferences of the Series F Preferred Stock did not entitle its
holders to receive Liberty Group Stock in the Distribution or upon
conversion of the Series F Preferred Stock.
(2) Summary of Significant Accounting Policies
Receivables
Receivables are reflected net of an allowance for doubtful accounts.
Such allowance at December 31, 1995 and 1994 was not material.
Inventories, Net
Merchandise inventories are valued at the lower of cost or market,
cost being determined using the first-in, first-out method. Cost
includes freight, certain warehousing costs and other allocable
overhead. Market is determined on the basis of net realizable value,
giving consideration to obsolescence and other factors. Inventories
are presented net of an inventory carrying adjustment of $33 million
and $19 million at December 31, 1995 and 1994, respectively.
Program Rights
Prepaid program rights are amortized on a film-by-film basis (or
event-by-event basis for sports events) over the specific number of
exhibitions. Committed film inventory and program rights payable are
recorded at the estimated costs of the programs when the film is
available for airing. These amounts are amortized on a film-by-film
basis over the specific number of exhibitions.
(continued)
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<PAGE> 133
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Investments
All marketable equity securities held by the Company are classified as
available-for-sale and are carried at fair value. Unrealized holding
gains and losses on securities classified as available-for-sale are
carried net of taxes as a separate component of stockholders' equity.
Other investments in which the ownership interest is less than 20% and
are not considered marketable securities are generally carried at
cost. For those investments in affiliates in which the Company's
voting interest is 20% to 50%, the equity method of accounting is
generally used. Under this method, the investment, originally
recorded at cost, is adjusted to recognize the Company's share of the
net earnings or losses of the affiliates as they occur rather than as
dividends or other distributions are received, limited to the extent
of the Company's investment in, advances to and commitments for the
investee. The Company's share of net earnings or losses of affiliates
includes the amortization of the difference between the Company's
investment and its share of the net assets of the investee.
Recognition of gains on sales of properties to affiliates accounted
for under the equity method is deferred in proportion to the Company's
ownership interest in such affiliates.
Changes in the Company's proportionate share of the underlying equity
of a subsidiary or equity method investee, which result from the
issuance of additional equity securities by such subsidiary or equity
investee, generally are recognized as gains or losses in the Company's
consolidated statements of operations.
Long-Lived Assets
(a) Property and Equipment
Property and equipment is stated at cost, including
acquisition costs allocated to tangible assets acquired.
Construction costs, including interest during construction and
applicable overhead, are capitalized. During 1995, 1994 and
1993, interest capitalized was not material.
Depreciation is computed on a straight-line basis using
estimated useful lives of 3 to 15 years for distribution
systems, 3 to 40 years for support equipment and buildings.
Repairs and maintenance are charged to operations, and
renewals and additions are capitalized. At the time of
ordinary retirements, sales or other dispositions of property,
the original cost and cost of removal of such property are
charged to accumulated depreciation, and salvage, if any, is
credited thereto. Gains or losses are only recognized in
connection with the sales of properties in their entirety.
(continued)
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<PAGE> 134
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(b) Franchise Costs
Franchise costs include the difference between the cost of
acquiring cable television systems and amounts allocated to
their tangible assets. Such amounts are generally amortized
on a straight-line basis over 40 years. Costs incurred by the
Company in obtaining franchises are being amortized on a
straight-line basis over the life of the franchise, generally
10 to 20 years.
In March of 1995, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("Statement No. 121"), effective for fiscal
years beginning after December 15, 1995. Statement No. 121 requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and either the
undiscounted future cash flows estimated to be generated by those
assets or the fair market value are less than the assets' carrying
amount. Statement No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company
will adopt Statement No. 121 effective January 1, 1996. The effect of
such adoption is not expected to be significant.
Interest Rate Derivatives
Amounts receivable or payable under derivative financial instruments
used to manage interest rate risks arising from the Company's
financial liabilities are recognized as interest expense. Gains and
losses on early terminations of derivatives are included in the
carrying amount of the related debt and amortized as yield adjustments
over the remaining terms of the debt. The Company does not use such
instruments for trading purposes.
Minority Interests
Recognition of minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests'
allocable portion of the common equity of those consolidated
subsidiaries. Further, the minority interests' share of losses is not
recognized if the minority holders of common equity of consolidated
subsidiaries have the right to cause the Company to repurchase such
holders' common equity.
Included in minority interests in equity of consolidated subsidiaries
is $49 million and $50 million in 1995 and 1994, respectively, of
preferred stocks (and accumulated dividends thereon) of certain
subsidiaries. The current dividend requirements on these preferred
stocks aggregate $6 million per annum and such dividend requirements
are reflected as minority interests in the accompanying consolidated
statements of operations.
Subsequent to December 31, 1995, TCI Communications, Inc. ("TCIC"), a
wholly-owned subsidiary of TCI, issued to the public 4.6 million
shares of Cumulative Exchangeable Preferred Stock with an initial
liquidation value of $230 million. Such issuance will be reflected as
an increase in the Company's minority interest in equity of
consolidated subsidiaries.
(continued)
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<PAGE> 135
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Trust Originated Preferred Securities(SM)
Subsequent to December 31, 1995, TCI Communications Financing I (the
"Trust"), an indirect wholly-owned subsidiary of the Company, issued
$16 million in common securities and issued $500 million of 8.72%
Trust Originated Preferred Securities(SM) (the "Preferred
Securities" and together with the common securities, the "Trust
Securities"). The Trust exists for the exclusive purposes of issuing
Trust Securities and investing the proceeds thereof into an
aggregate principal amount of $516 million of 8.72% Subordinated
Deferrable Interest Notes due January 31, 2045 (the "Subordinated
Debt Securities") of the Company. The Subordinated Debt Securities
are unsecured obligations of the Company and are subordinate and
junior in right of payment to certain other indebtedness of the
Company. Upon redemption of such Subordinated Debt Securities, the
Preferred Securities will be mandatorily redeemable. The Company
effectively provides a full and unconditional guarantee of the
Trust's obligations under the Preferred Securities. The Company will
present the Preferred Securities as a separate line item in its
balance sheet captioned "Company-obligated mandatorily redeemable
preferred securities of subsidiary trust."
Foreign Currency Translation
All balance sheet accounts of foreign investments are translated at
the current exchange rate as of the end of the accounting period.
Statement of operations items are translated at average currency
exchange rates. The resulting translation adjustment is recorded as a
separate component of stockholders' equity.
Net Sales from Electronic Retailing Services
Revenue includes merchandise sales and shipping and handling revenue,
and is reduced by incentive discounts and sales returns to arrive at
net sales from home shopping services. Revenue is recorded for
credit card sales upon transaction authorization, and for check sales
upon receipt of customer payment, which does not vary significantly
from the time goods are shipped. The Company's sales policy allows
merchandise to be returned at the customer's discretion, generally up
to 30 days. An allowance for returned merchandise is provided based
upon past experience.
Stock Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("Statement No. 123") was issued by the FASB
in October 1995. Statement No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans as
well as transactions in which an entity issues its equity instruments
to acquire goods or services from non-employees. The Company will
include the disclosures required by Statement No. 123 in the notes to
future financial statements.
(continued)
II-69
<PAGE> 136
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Earnings (Loss) Per Common and Common Equivalent Share
(a) TCI Class A and B Common Stock
Loss per common share attributable to common stockholders was
computed by dividing net loss attributable to common
stockholders by the weighted average number of common shares
outstanding (648.2 million for the period from January 1, 1995
through the Distribution and 432.6 million for the year ended
December 31, 1993). Common stock equivalents were not
included in the computation of weighted average shares
outstanding because their inclusion would be anti-dilutive.
Primary earnings per common and common equivalent share
attributable to common stockholders was computed by dividing
net earnings attributable to common stockholders by the
weighted average number of common and common equivalent shares
outstanding (540.8 million for the year ended December 31,
1994).
Fully diluted earnings per common and common equivalent share
attributable to common stockholders was computed by dividing
earnings attributable to common stockholders by the weighted
average number of common and common equivalent shares
outstanding (540.8 million for the year ended December 31,
1994). Shares issuable upon conversion of the Convertible
Preferred Stock, Series C ("Series C Preferred Stock") (see
note 10) have not been included in the computation of weighted
average shares because their effect would be anti-dilutive.
(b) TCI Group Stock
The loss attributable to common stockholders per common share
for the period from the Distribution to December 31, 1995 was
computed by dividing net loss attributable to TCI Group Series
A and Series B common stockholders by the weighted average
number of common shares outstanding of TCI Group Stock during
the period (656.4 million). Common stock equivalents were not
included in the computation of weighted average shares
outstanding because their inclusion would be anti-dilutive.
(c) Liberty Group Stock
The loss per common share for the period from the Distribution
to December 31, 1995 was computed by dividing net loss
attributable to Liberty Media Group Series A and Series B
common stockholders by the weighted average number of common
shares outstanding of Liberty Group Stock during the period
(164.1 million). Common stock equivalents were not included
in the computation of weighted average shares outstanding
because their inclusion would be anti-dilutive.
(continued)
II-70
<PAGE> 137
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Accounting for Foreign Subsidiaries
Through the third quarter of 1995, the Company included certain of its
foreign subsidiaries (Flextech plc ("Flextech") and Cablevision S.A.
("Cablevision")) in its financial statements on a one-month time
delay. The Company eliminated such time delay from its December 31,
1995 financial statements. As a result, the Company's consolidated
statements of operations for the year ended December 31, 1995 include
(i) Cablevision's result of operations for the period from April 25,
1995 (the date Cablevision was acquired - see note 8) through December
31, 1995 and (ii) Flextech's results of operations for the period from
December 1, 1994 through December 31, 1995 (exclusive of the one-month
period ended September 30, 1995). The Company's consolidated
statement of cash flows for the year ended December 31, 1995 includes
the cash flows of Cablevision and Flextech for the same periods except
that Flextech's cash flows for the one-month period ended September
30, 1995 are included therein on a summarized basis. In connection
with the elimination of the above-described reporting delays, the
Company (i) restated certain of its quarterly financial information in
order to present Cablevision's 1995 results of operations on a current
basis (see note 17) and (ii) charged Flextech's net loss for the
one-month ended September 30, 1995 ($1 million) directly to the
Company's accumulated deficit so that the Company's consolidated
statement of operations for the year ended December 31, 1995 would not
include more than 12 months of Flextech's operating results.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification
Certain amounts have been reclassified for comparability with the 1995
presentation.
(continued)
II-71
<PAGE> 138
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Supplemental Disclosures to Consolidated Statements of Cash Flows
Cash paid for interest was $965 million, $758 million and $641
million for the years ended December 31, 1995, 1994 and 1993,
respectively. Cash paid for income taxes was $65 million in
1995 and was not material in 1994 or 1993.
Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------------------
1995 1994 1993
------ ------ ------
amounts in millions
<S> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired $ 3,571 1,921 172
Liabilities assumed, net of current assets (445) (648) (7)
Deferred tax liability recorded
in acquisitions (1,083) (190) (7)
Minority interests in equity of
acquired entities 49 (35) --
Note receivable from related party
assumed (1,615) 15 --
Common stock and preferred stock
issued in acquisitions (808) --
Common stock issued to TCIC and
Liberty in the TCI/Liberty Combination
reflected as treasury stock (note 3) -- 285 --
Unrealized gains on available-for-sale
securities of acquired entities -- (182) --
-------- -------- -------
Cash paid for acquisitions $ 477 358 158
======== ======== =======
Conversion of debt into additional minority
interest in consolidated subsidiary $ 14 -- --
======== ======== =======
Assets contributed for interest in limited
liability company $ 3 -- --
======== ======== =======
Issuance of subsidiary stock for equity
investment $ 11 -- --
======== ======== =======
Receipt of notes receivable upon
disposition of Liberty common
stock and preferred stock $ -- -- 182
======= ======== =======
Noncash exchange of equity investment
for consolidated subsidiary and
equity investment $ -- -- 22
======= ======== =======
Noncash capital contribution to
equity investee $ -- -- 22
======= ======== =======
</TABLE>
(continued)
II-72
<PAGE> 139
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Investment in Liberty Media Corporation
As of January 27, 1994, TCI Communications, Inc. (formerly
Tele-Communications, Inc. or "Old TCI") and Liberty entered into a
definitive merger agreement to combine the two companies (the
"TCI/Liberty Combination"). The transaction was consummated on August
4, 1994 and was structured as a tax free exchange of Class A and Class
B shares of both companies and preferred stock of Liberty for like
shares of a newly formed holding company, TCI/Liberty Holding Company.
In connection with the TCI/Liberty Combination, Old TCI changed its
name to TCI Communications, Inc. and TCI/Liberty Holding Company
changed its name to Tele-Communications, Inc.
Due to the significant economic interest held by TCIC through its
ownership of Liberty preferred stock and Liberty common stock and
other related party considerations, TCIC accounted for its investment
in Liberty under the equity method. Accordingly, TCIC had not
recognized any income relating to dividends, including preferred stock
dividends, and TCIC recorded the earnings or losses generated by
Liberty (by recognizing 100% of Liberty's earnings or losses before
deducting preferred stock dividends) through the date the TCI/Liberty
Combination was consummated.
Summarized unaudited financial information of Liberty for the period
from January 1, 1994 through August 4, 1994 and for the year ended
December 31, 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
Consolidated Operations amounts in millions
-----------------------
<S> <C> <C>
Revenue $ 790 1,153
Operating expenses (726) (1,105)
Depreciation and amortization (32) (49)
------ ------
Operating income (loss) 32 (1)
Interest expense (22) (31)
Other, net 118 39
------ ------
Net earnings $ 128 7
====== ======
</TABLE>
Prior to the TCI/Liberty Combination, TCIC purchased sports and other
programming from certain subsidiaries of Liberty. Charges to TCIC
(which were based upon customary rates charged to others) for such
programming were $27 million and $44 million for the period from
January 1, 1994 through August 4, 1994 and for the year ended December
31, 1993, respectively. Such amounts are included in operating
expenses in the accompanying consolidated statements of operations.
Certain subsidiaries of Liberty purchased from TCIC, at TCIC's cost
plus an administrative fee, certain pay television and other
programming. In addition, a consolidated subsidiary of Liberty paid a
commission to TCIC for merchandise sales to customers who were
subscribers of TCIC's cable systems. Aggregate commissions and
charges for such programming were $9 million and $11 million for the
period from January 1, 1994 through August 4, 1994 and for the year
ended December 31, 1993, respectively. Such amounts are recorded in
revenue in the accompanying consolidated statements of operations.
(continued)
II-73
<PAGE> 140
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On July 11, 1994, Rainbow Program Enterprise purchased 49.9% of
Liberty's 50% general partnership interest in American Movie Classics
Company ("AMC"). The gain recognized by Liberty in connection with
the disposition of AMC was $183 million and is included in the
Company's share of Liberty's earnings prior to the TCI/Liberty
Combination.
(5) Investments in Affiliates
The Company has various investments accounted for under the equity
method. Certain of the more significant investments held by the
Company at December 31, 1995 were MajorCo, L.P. ("MajorCo"), a
partnership formed by the Company, Comcast Corporation ("Comcast"),
Cox Communications, Inc. ("Cox") and Sprint Corporation ("Sprint")
(carrying value of $689 million) (see note 15), Teleport
Communications Group, Inc. and TCG Partners (collectively, "TCG")
(carrying value of $244 million), TeleWest plc ("New TeleWest")
(carrying value of $550 million) and Discovery Communications, Inc.
(carrying value of $117 million).
Summarized unaudited financial information for affiliates other than
Liberty is as follows:
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
---- ----
Combined Financial Position amounts in millions
---------------------------
<S> <C> <C>
Property and equipment, net $ 3,863 2,450
Franchise costs, net 1,204 579
Other assets, net 5,347 3,050
------- -----
Total assets $10,414 6,079
======= =====
Debt $ 5,336 2,333
Due to (from) TCI 45 (2)
Other liabilities 1,713 1,195
Owners' equity 3,320 2,553
------- -----
Total liabilities and equity $10,414 6,079
======= =====
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
Combined Operations amounts in millions
-------------------
<S> <C> <C> <C>
Revenue $ 4,461 2,703 713
Operating expenses (3,807) (2,405) (648)
Depreciation and
amortization (532) (297) (127)
-------- -------- ------
Operating income (loss) 122 1 (62)
Interest expense (337) (100) (37)
Other, net (123) 24 98
-------- -------- ------
Net loss $ (338) (75) (1)
======== ======== ======
</TABLE>
(continued)
II-74
<PAGE> 141
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In August 1995, the Company made an additional $29 million investment
in Courtroom Television Network ("Court") which represented the
Company's pro rata share of capital calls made in prior years by
the other partners of Court that the Company had no obligation to
fund. Due to the additional investment in Court, which restored its
33% ownership interest, the Company's share of losses of Court for the
year ended December 31, 1995 includes $18 million of previously
unrecognized losses of Court. These losses were not recognized in
prior periods due to the fact that the Company's investment in Court
had been reduced to zero.
During 1995, BET Holdings, Inc. ("BET") repurchased a portion of its
common stock. As a result of the repurchase, the Company's ownership
of BET was increased from 19% to 22%. Therefore, the Company is
deemed to exercise significant influence over BET and, accordingly,
has adopted the equity method of accounting for its investment in BET.
As a result, the Company restated its financial statements, which
resulted in a decrease to its investment in BET, its unrealized
holding gains on available-for-sale securities, its deferred taxes and
accumulated deficit of $44 million, $32 million, $18 million and $6
million, respectively, at December 31, 1994. In addition, the Company
increased its net earnings by $2 million for each of 1994 and 1993.
At December 31, 1995, the Company had an effective ownership interest
of approximately 27% in New TeleWest, a company that is currently
operating and constructing cable television and telephone systems in
the United Kingdom ("UK"). New TeleWest was formed on October 3, 1995
upon the merger (the "TeleWest Merger") of TeleWest Communications plc
("TeleWest Communications") with SBC (CableComms) (UK). Prior to the
TeleWest Merger, the Company had an effective ownership interest of
approximately 36% in TeleWest Communications. As a result of the
TeleWest Merger, the Company recognized a gain of approximately $165
million (before deducting deferred income taxes of $58 million), which
gain represents the difference between the Company's recorded cost for
TeleWest Communications and the Company's 27% effective proportionate
share of New TeleWest's net assets.
New TeleWest contributed $70 million, $43 million and $28 million of
the Company's share of its affiliates' losses during the years ended
December 31, 1995, 1994 and 1993, respectively. In addition, the
Company has other less significant equity method investments in video
distribution and programming businesses located in the UK, other parts
of Europe, Asia, Latin America and certain other foreign countries.
In the aggregate, such other equity method investments had a carrying
value of $354 million at December 31, 1995 and accounted for $62
million of the Company's share of its affiliates' losses in 1995.
As a result of TeleWest Communications' November 1994 initial public
offering and the associated dilution of the Company's ownership
interest of TeleWest Communications, the Company recognized a gain
amounting to $161 million (before deducting the related tax expense of
$57 million).
(continued)
II-75
<PAGE> 142
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Certain of the Company's affiliates are general partnerships and any
subsidiary of the Company that is a general partner in a general
partnership is, as such, liable as a matter of partnership law for all
debts (other than non-recourse debts) of that partnership in the event
liabilities of that partnership were to exceed its assets.
(6) Investment in QVC, Inc.
Effective February 9, 1995 and pursuant to an Agreement and Plan of
Merger, QVC Programming Holdings, Inc. (the "Purchaser"), a
corporation which is jointly owned by Comcast and the Company, merged
(the "QVC Merger") with and into QVC, Inc. ("QVC") with QVC continuing
as the surviving corporation. The Company owns an approximate 43%
interest of the post-merger QVC.
Liberty began accounting for its investment in QVC under the cost
method in May 1994, upon its determination to remain outside of the
previous QVC stockholders agreement. Prior to such determination,
Liberty had accounted for its investment in QVC under the equity
method.
Upon consummation of the QVC Merger, the Company was deemed to
exercise significant influence over QVC and, as such, adopted the
equity method of accounting for its investment in QVC. As a result,
TCI restated its financial statements, which resulted in a decrease to
its investment in QVC, its unrealized gain from available-for-sale
securities, its deferred tax liability and accumulated deficit by $211
million, $127 million, $89 million and $5 million, respectively, at
December 31, 1994. In addition, the restatement resulted in an
increase in the Company's share of earnings of Liberty and share of
losses of other affiliates by $1 million and $7 million, respectively,
for the year ended December 31, 1994.
A credit facility entered into by the Purchaser is secured by the
common stock of certain subsidiaries of QVC and by certain of QVC's
carriage and distribution agreements. In addition, Comcast and the
Company have pledged their shares of QVC pursuant to such credit
facility.
(7) Investment in Turner Broadcasting System, Inc.
The Company owns shares of TBS common stock and shares of a class of
preferred stock of TBS which have voting rights and are convertible
into shares of TBS common stock. The holders of those preferred
shares, as a group, are entitled to elect seven of fifteen members of
the board of directors of TBS, and the Company appoints three such
representatives. However, voting control over TBS continues to be
held by its chairman of the board and chief executive officer. The
Company's total holdings of TBS common and preferred stocks represent
an approximate 7.5% voting interest for those matters for which
preferred and common stock vote as a single class.
At December 31, 1995 and 1994, the Company's investment in TBS common
stock had an aggregate market value of $777 million and $487 million,
respectively (including unrealized holding gains of $451 million and
$169 million, respectively).
(continued)
II-76
<PAGE> 143
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 1995 and 1994, the Company's investment in TBS
preferred stock, carried at cost, had an aggregate market value of
$927 million and $579 million, respectively, based upon the market
value of the common stock into which it is convertible. Such market
value exceeded cost by $749 million and $406 million, respectively,
for such periods.
On September 22, 1995, the boards of directors of Time Warner Inc.
("Time Warner") and TBS approved plans to merge their respective
companies (the "TBS/Time Warner Merger"). Under the terms of the
agreement, TBS shareholders will receive 0.75 of a Time Warner common
share for each TBS Class A and Class B common share. Each holder of
TBS Class C preferred stock will receive 0.80 of a Time Warner common
share for each of the 6 shares of TBS Class B common stock into which
each of the shares of Class C preferred stock may be converted.
Subject to certain conditions, the Company has agreed to vote its TBS
shares for the TBS/Time Warner Merger. The Time Warner shares of
common stock received by the Company will be exchanged immediately for
a series of voting common stock ("Time Warner Series Common Stock")
economically equivalent to the common stock and placed in a voting
trust with Time Warner Chairman, Gerald M. Levin, as the trustee.
In connection with the TBS/Time Warner Merger, TBS has agreed to sell
its interest in SportSouth Network, L.P., a regional sports cable
network, to the Company for approximately $60 million; and Time Warner
has agreed to issue 5 million shares of Time Warner common stock to
the Company in exchange for a 6-year option to purchase Southern
Satellite Systems, Inc. ("Southern"). Time Warner has also agreed to
issue additional shares of Time Warner Series Common Stock to the
Company having a market value of $160 million in the event Time Warner
exercises such option. Any shares of Time Warner common stock
issuable in connection with the Southern option will be exchanged for
Time Warner Preferred Stock. Additionally, Time Warner will grant the
Company an option to purchase Time Warner's interest in Sunshine
Network, a Florida based sports cable network, for $14 million.
The transaction is subject to, among other things, approval by the
Federal Communications Commission ("FCC") and regulatory review by
federal antitrust authorities, and approval by the shareholders of TBS
and Time Warner. It is expected to be completed in 1996.
(8) Acquisitions
As of January 26, 1995, TCI, TCIC and TeleCable Corporation
("TeleCable") consummated a transaction, whereby TeleCable was merged
into TCIC. The aggregate $1.6 billion purchase price was satisfied by
TCIC's assumption of approximately $300 million of TeleCable's net
liabilities and the issuance to TeleCable's shareholders of
approximately 42 million shares of TCI Class A common stock and 1
million shares of TCI Convertible Preferred Stock, Series D (the
"Series D Preferred Stock") with an aggregate initial liquidation
value of $300 million (see note 10).
(continued)
II-77
<PAGE> 144
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On April 25, 1995, TINTA acquired a 51% ownership interest in
Cablevision for a purchase price of $282 million, before liabilities
liabilities assumed. The purchase price was paid with cash
consideration of $195 million and TINTA's issuance of $87 million
principal amount of secured negotiable promissory notes payable (the
"Cablevision Notes") to the selling shareholders. TINTA has an option
during the two-year period ended April 25, 1997 to increase its
ownership interest in Cablevision up to 80% at a cost per subscriber
similar to the initial purchase price, adjusted however for certain
fluctuations in applicable foreign currency exchange rates.
The acquisitions of TeleCable and Cablevision were accounted for by
the purchase method. Accordingly, the results of operations of such
acquired entities have been consolidated with those of the Company
since the respective dates of acquisition. On a pro forma basis, the
Company's revenue would have been increased by $77 million, and the
Company's net loss, net loss attributable to common stockholders and
net loss per share would have been decreased by $13 million, $12
million and $.02, respectively, for the year ended December 31, 1995;
and revenue, net earnings, net earnings attributable to common
stockholders and net earnings per share would have increased by $441
million, $17 million, less than $1 million and less than $0.01,
respectively, for 1994 had such acquired entities been consolidated
with the Company on January 1, 1994. The foregoing unaudited pro forma
financial information was based upon historical results of operations
adjusted for acquisition costs and, in the opinion of management, is
not necessarily indicative of the results had the Company operated the
acquired entities since January 1, 1994.
Effective January 26, 1995, TCI purchased from Comcast the 19.9%
minority interest in Heritage Communications, Inc. owned by Comcast
for aggregate consideration of approximately $290 million, the
majority of which was paid in shares of TCI Class A common stock.
(9) Debt
Debt is summarized as follows:
<TABLE>
<CAPTION>
Weighted average December 31,
interest rate at ------------
December 31, 1995 1995 1994
----------------- ---- ----
amounts in millions
<S> <C> <C> <C>
Debt of subsidiaries:
Senior notes 8.5% $ 6,713 5,412
Bank credit facilities 6.9% 3,712 4,045
Commercial paper 6.4% 1,469 445
Notes payable 10.2% 934 1,024
Convertible notes (a) 9.5% 45 45
Cablevision Notes (b) 10.0% 65 --
Other debt 273 191
------- ------
$13,211 11,162
======= ======
</TABLE>
(continued)
II-78
<PAGE> 145
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(a) These convertible notes, which are stated net of unamortized
discount of $186 million at December 31, 1995 and 1994, mature
on December 18, 2021. The notes require (so long as
conversion of the notes has not occurred) an annual interest
payment through 2003 equal to 1.85% of the face amount of the
notes. During the years ended December 31, 1995, 1994 and
1993, certain of these notes were converted into 3,416 shares,
2,350,000 shares and 819,000 shares of TCI Class A common
stock, respectively. At December 31, 1995, the notes were
convertible, at the option of the holders, into an aggregate
of 38,707,574 shares of Series A TCI Group Stock and 9,676,893
shares of Series A Liberty Group Stock.
(b) The Cablevision Notes are secured by TINTA's pledge of stock
representing its 51% interest in Cablevision.
The bank credit facilities and various other debt instruments of the
Company's subsidiaries generally contain restrictive covenants which
require, among other things, the maintenance of certain earnings,
specified cash flow and financial ratios (primarily the ratios of cash
flow to total debt and cash flow to debt service, as defined), and
include certain limitations on indebtedness, investments, guarantees,
dispositions, stock repurchases and/or dividend payments.
As security for borrowings under one of its bank credit facilities,
the Company has pledged 100,524,364 shares of Series A TCI Group Stock
held by a subsidiary of the Company. As security for borrowings under
another of its credit facilities, TCI has pledged a portion of its TBS
common stock (with a quoted market value of $760 million at December
31, 1995).
In order to achieve the desired balance between variable and fixed
rate indebtedness, the Company has entered into various interest rate
exchange agreements pursuant to which it pays (i) fixed interest rates
(the "Fixed Rate Agreements") ranging from 6.1% to 9.9% on notional
amounts of $602 million at December 31, 1995 and (ii) variable
interest rates (the "Variable Rate Agreements") on notional amounts of
$2,520 million at December 31, 1995. During the years ended December
31, 1995, 1994 and 1993, the Company's net payments pursuant to the
Fixed Rate Agreements were $13 million, $26 million and $38 million,
respectively; and the Company's net receipts (payments) pursuant to
the Variable Rate Agreements were (less than $1 million), $36 million
and $31 million, respectively. After giving effect to the Company's
interest rate exchange agreements, approximately 45% of the Company's
indebtedness bears interest at fixed rates.
(continued)
II-79
<PAGE> 146
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company's Fixed Rate Agreements and Variable Rate Agreements
expire as follows (amounts in millions, except percentages):
<TABLE>
<CAPTION>
Fixed Rate Agreements Variable Rate Agreements
--------------------- ------------------------
Expiration Interest Rate Notional Expiration Interest Rate Notional
Date To Be Paid Amount Date To Be Received Amount
-------------- ------------- ------ -------------- -------------- ------
<S> <C> <C> <C> <C> <C>
April 1996 9.9% $ 30 April 1996 6.8% $ 50
May 1996 8.3% 50 July 1996 8.2% 10
June 1996 6.1% 42 August 1996 8.2% 10
July 1996 8.2% 10 September 1996 4.6% 150
August 1996 8.2% 10 April 1997 7.0% 200
November 1996 8.9% 150 September 1998 4.8%-5.2% 300
October 1997 7.2%-9.3% 80 April 1999 7.4% 100
December 1997 8.7% 230 September 1999 7.2%-7.4% 300
----
February 2000 5.8%-6.6% 650
$602 March 2000 5.8%-6.0% 675
====
September 2000 5.1% 75
-------
$ 2,520
=======
</TABLE>
The Company is exposed to credit losses for the periodic settlements
of amounts due under these interest rate exchange agreements in the
event of nonperformance by the other parties to the agreements.
However, the Company does not anticipate that it will incur any
material credit losses because it does not anticipate nonperformance
by the counterparties.
The fair value of the interest rate exchange agreements is the
estimated amount that the Company would pay or receive to terminate
the agreements at December 31, 1995, taking into consideration current
interest rates and assuming the current creditworthiness of the
counterparties. The Company would be required to pay an estimated $25
million at December 31, 1995 to terminate the agreements.
The fair value of the debt of the Company's subsidiaries is estimated
based on the quoted market prices for the same or similar issues or on
the current rates offered to the Company for debt of the same
remaining maturities. The fair value of debt, which has a carrying
value of $13,211 million, was $13,804 million at December 31, 1995.
Certain of TCI's subsidiaries are required to maintain unused
availability under bank credit facilities to the extent of outstanding
commercial paper. Also, certain of TCI's subsidiaries pay fees
ranging from 1/4% to 1/2% per annum on the average unborrowed portion
of the total amount available for borrowings under bank credit
facilities.
(continued)
II-80
<PAGE> 147
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Annual maturities of debt for each of the next five years are as
follows (amounts in millions):
<TABLE>
<S> <C>
1996 $3,494*
1997 745
1998 846
1999 804
2000 920
</TABLE>
* Includes $1,469 million of commercial paper.
(10) Redeemable Preferred Stocks
4-1/2% Convertible Preferred Stock. The 4-1/2% Convertible Preferred
Stock was stated at its redemption value of $3,000 per share, and each
share was convertible into 204 shares of TCI Class A common stock. In
February of 1994, all of the shares of such convertible preferred
stock were tendered to the Company for conversion and, on March 3,
1994, 1,265,004 shares of TCI Class A common stock were issued to the
holders of such preferred stock.
Convertible Preferred Stock, Series C. TCI has issued 70,575 shares
of a series of TCI Series Preferred Stock designated "Convertible
Preferred Stock, Series C," par value $.01 per share, as partial
consideration for an acquisition by TCI .
Each share of Series C Preferred Stock is convertible, at the option
of the holders, into 100 shares of Series A TCI Group Stock and 25
shares of Series A Liberty Group stock, subject to anti-dilution
adjustments. The dividend, liquidation and redemption features of the
Series C Preferred Stock will be determined by reference to the
liquidation value of the Series C Preferred Stock, which as of any
date of determination is equal, on a per share basis, to the sum of
(i) $2,375, plus (ii) all dividends accrued on such share through the
dividend payment date on or immediately preceding such date of
determination to the extent not paid on or before such date, plus
(iii), for purposes of determining liquidation and redemption
payments, all unpaid dividends accrued on the sum of clauses (i) and
(ii) above, to such date of determination.
(continued)
II-81
<PAGE> 148
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Subject to the prior preferences and other rights of any class or
series of TCI preferred stock ranking pari passu with the Series C
Preferred Stock, the holders of Series C Preferred Stock are entitled
to receive and, subject to any prohibition or restriction contained in
any instrument evidencing indebtedness of TCI, TCI is obligated to pay
preferential cumulative cash dividends out of funds legally available
therefor. Dividends accrue cumulatively at an annual rate of 5-1/2%
of the liquidation value per share, whether or not such dividends are
declared or funds are legally or contractually available for payment
of dividends, except that if TCI fails to redeem shares of Series C
Preferred Stock required to be redeemed on a redemption date,
dividends will thereafter accrue cumulatively at an annual rate of 15%
of the liquidation value per share. Accrued dividends are payable
quarterly on January 1, April 1, July 1 and October 1 of each year,
commencing on the first dividend payment date after the issuance of
the Series C Preferred Stock. Dividends not paid on any dividend
payment date will be added to the liquidation value on such date and
remain a part thereof until such dividends and all dividends accrued
thereon are paid in full. Dividends accrue on unpaid dividends at the
rate of 5-1/2% per annum, unless such dividends remain unpaid for two
consecutive quarters in which event such rate will increase to 15% per
annum. The Series C Preferred Stock ranks prior to the Series A TCI
Group Stock, Series A Liberty Group Stock and Class B Preferred Stock
and pari passu with the Series F Preferred Stock with respect to the
declaration and payment of dividends.
Upon the dissolution, liquidation or winding up of TCI, holders of the
Series C Preferred Stock will be entitled to receive from the assets
of TCI available for distribution to stockholders an amount in cash,
per share, equal to the liquidation value. The Series C Preferred
Stock will rank prior to the TCI common stock and Class B Preferred
Stock and pari passu with the Series F Preferred Stock as to any such
distributions.
The Series C Preferred Stock is subject to optional redemption at any
time after the seventh anniversary of its issuance, in whole or in
part, by TCI at a redemption price, per share, equal to the then
liquidation value of the Series C Preferred Stock. Subject to the
rights of any other class or series of the Company's preferred stock
ranking pari passu with the Series C Preferred Stock, the Series C
Preferred Stock is required to be redeemed by the Company at any time
after such seventh anniversary at the option of the holder, in whole
or in part (provided that the aggregate liquidation value of the
shares to be redeemed is in excess of $1 million), in each case at a
redemption price, per share, equal to the liquidation value.
(continued)
II-82
<PAGE> 149
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For so long as any dividends are in arrears on the Series C Preferred
Stock or any class or series of TCI preferred stock ranking pari passu
with the Series C Preferred Stock and until all dividends accrued up
to the immediately preceding dividend payment date on the Series C
Preferred Stock and such parity stock shall have been paid or declared
and set apart so as to be available for payment in full thereof and
for no other purpose, TCI may not redeem or otherwise acquire any
shares of Series C Preferred Stock, any such parity stock or any class
or series of its preferred stock ranking junior (including the TCI
common stock and the Series C Preferred Stock) unless all then
outstanding shares of Series C Preferred Stock and such parity stock
are redeemed. If TCI fails to redeem shares of Series C Preferred
Stock required to be redeemed on a redemption date, and until all such
shares are redeemed in full, TCI may not redeem any such parity stock
or junior stock, or otherwise acquire any shares of such stock or
Series C Preferred Stock. Nothing contained in the two immediately
preceding sentences shall prevent TCI from acquiring (i) shares of
Series C Preferred Stock and any such parity stock pursuant to a
purchase or exchange offer made to holders of all outstanding shares
of Series C Preferred Stock and such parity stock, if (a) as to
holders of all outstanding shares of Series C Preferred Stock, the
terms of the purchase or exchange offer for all such shares are
identical, (b) as to holders for all outstanding shares of a
particular series or class of parity stock, the terms of the purchase
or exchange offer for all such shares are identical and (c) as among
holders of all outstanding shares of Series C Preferred Stock and
parity stock, the terms of each purchase or exchange offer are
substantially identical relative to the respective liquidation prices
of the shares of Series C Preferred Stock and each series or class of
such parity stock, or (ii) shares of Series C Preferred Stock, parity
stock or junior stock in exchange for, or through the application of
the proceeds of the sale of, shares of junior stock.
The Series C Preferred Stock is subject to restrictions on transfer
although it has certain customary registration rights with respect to
the underlying shares of TCI Group and Liberty Group Stock. The
Series C Preferred Stock may vote on all matters submitted to a vote
of the holders of the TCI common stock, has one vote for each share of
TCI Group and Liberty Group Stock into which the shares of Series C
Preferred Stock are converted for such purpose, and may vote as a
single class with the TCI common stock. The Series C Preferred Stock
has no other voting rights except as required by the Delaware General
Corporation Law ("DGCL") and except that the consent of the holders of
record of shares representing at least two-thirds of the liquidation
value of the outstanding shares of the Series C Preferred Stock is
necessary to (i) amend the designation, rights, preferences and
limitations of the Series C Preferred Stock as set forth in the TCI
Charter and (ii) to create or designate any class or series of TCI
preferred stock that would rank prior to the Series C Preferred Stock.
Convertible Preferred Stock, Series D. The Company issued 1,000,000
shares of a series of TCI Series Preferred Stock designated
"Convertible Preferred Stock, Series D, par value $.01 per share, as
partial consideration for the merger between TCIC and TeleCable (see
note 8).
(continued)
II-83
<PAGE> 150
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The holders of the Series D Preferred Stock shall be entitled to
receive, when and as declared by the Board out of unrestricted funds
legally available therefor, cumulative dividends, in preference to
dividends on any stock that ranks junior to the Series D Preferred
Stock (currently the TCI Group Stock, the Liberty Group Stock and the
Class B Preferred Stock), that shall accrue on each share of Series D
Preferred stock at the rate of 5-1/2% per annum of the liquidation
value ($300 per share). Dividends are cumulative, and in the event
that dividends are not paid in full on two consecutive dividend
payment dates or in the event that TCI fails to effect any required
redemption of Series D Preferred Stock, accrue at the rate of 10% per
annum of the liquidation value. The Series D Preferred Stock ranks on
parity with the Series C Preferred Stock and the Series F Preferred
Stock.
Prior to the Distribution, 431 shares of Series D Preferred Stock were
converted into 4,310 shares of TCI Class A common stock. Subsequent
to the Distribution, each share of Series D Preferred Stock is
convertible into 10 shares of Series A TCI Group Stock and 2.5 shares
of Series A Liberty Group Stock, subject to adjustment upon certain
events specified in the certificate of designation establishing Series
D Preferred Stock. To the extent any cash dividends are not paid on
any dividend payment date, the amount of such dividends will be deemed
converted into shares of TCI common stock at a conversion rate equal
to 95% of the then current market price of common stock, and upon
issuance of common stock to holders of Series D Preferred Stock in
respect of such deemed conversion, such dividend will be deemed paid
for all purposes. See note 1.
Shares of Series D Preferred Stock are redeemable for cash at the
option of the holder at any time after the tenth anniversary of the
issue date at a price equal to the liquidation value in effect as of
the date of the redemption. Shares of Series D Preferred Stock may
also be redeemed for cash at the option of TCI after the fifth
anniversary of the issue date at such redemption price or after the
third anniversary of the issue date if the market value per share
exceeds certain defined levels for periods specified in the
certificate of designation.
If TCI fails to effect any required redemption of Series D Preferred
Stock, the holders thereof will have the option to convert their
shares of Series D Preferred Stock into common stock at a conversion
rate of 95% of the then current market value of common stock, provided
that such option may not be exercised unless the failure to redeem
continues for more than a year.
Except as required by law, holders of Series D Preferred Stock are not
entitled to vote on any matters submitted to a vote of the
stockholders of TCI.
(continued)
II-84
<PAGE> 151
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Convertible Redeemable Participating Preferred Stock, Series F.
Immediately prior to the record date for the Distribution, the Company
caused each of its subsidiaries holding Subsidiary Shares to exchange
such shares for shares of Series F Preferred Stock having an aggregate
value of not less than that of the Subsidiary Shares so exchanged.
The Company is authorized to issue 500,000 shares of Series F
Preferred Stock, par value $.01 per share. Subsidiaries of TCI hold
all the issued and outstanding shares. Subsidiaries of TCI exchanged
all of the Subsidiary Shares for 355,141 shares of Series F Preferred
Stock. Subsequent to such exchange, a holder of 78,077 shares of
Series F Preferred Stock converted its holdings into 100,524,364
shares of Series A TCI Group Stock. Such shares of Series A TCI Group
Stock are reflected as treasury stock in the accompanying consolidated
financial statements. Such preferred stock of TCI eliminates in
consolidation.
Each share of Series F Preferred Stock was convertible into 1,000
shares of Series A TCI Group Stock, subject to anti-dilution
adjustments, at the option of the holder at any time. The
anti-dilution provisions of the Series F Preferred Stock provide that
the conversion rate of the Series F Preferred Stock will be adjusted
by increasing the number of shares of Series A TCI Group Stock
issuable upon conversion in the event of any non-cash dividend or
distribution of the Series A TCI Group Stock to give effect to the
value of the securities, assets or other property so distributed;
however, no such adjustment shall entitle the holder to receive the
actual security, asset or other property so distributed upon the
conversion of shares of Series F Preferred Stock. Therefore, the
Distribution resulted in an adjustment to the conversion rate of the
Series F Preferred Stock such that each holder has the right to
receive upon conversion 1,287.51 shares of Series A TCI Group Stock.
The holders of the Series F Preferred Stock are entitled to
participate, on an as-converted basis, with the holders of the Series
A TCI Group Stock, with respect to any cash dividends or distribution
declared and paid on the Series A TCI Group Stock. Dividends or
distribution on the Series A TCI Group Stock which are not paid in
cash would result in the adjustment of the applicable conversion rate
as described above.
Upon the dissolution, liquidation or winding up of the Company,
holders of the Series F Preferred Stock will be entitled to receive
from the assets of the Company available for distribution to
stockholders an amount, in cash or property or a combination thereof,
per share of Series F Preferred Stock, equal to the sum of (x) $.01
and (y) the amount to be distributed per share of Series A TCI Group
Stock in such liquidation, dissolution or winding up multiplied by the
applicable conversion rate of a share of Series F Preferred Stock.
(continued)
II-85
<PAGE> 152
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Series F Preferred Stock is subject to optional redemption by the
Company at any time after its issuance, in whole or in party, at a
redemption price, per share, equal to the issue price of a share of
Series F Preferred Stock (as adjusted in respect of stock splits,
reverse splits and other events affecting the shares of Series F
Preferred Stock), plus any dividends which have been declared but are
unpaid as of the date fixed for such redemption. The Company may
elect to pay the redemption price (or designated portion thereof) of
the shares of Series F Preferred Stock called for redemption by
issuing to the holder thereof, in respect of its shares to be
redeemed, a number of shares of Series A TCI Group Stock equal to the
aggregate redemption price (or designated portion thereof) of such
shares divided by the average of the last sales prices of the Series A
TCI Group Stock for a period specified, and subject to the adjustments
described, in the certificate of designation establishing the Series F
Preferred Stock.
Redeemable Convertible TCI Group Preferred Stock, Series G ("Series G
Preferred Stock") and Redeemable Convertible Liberty Media Group
Preferred Stock, Series H ("Series H Preferred Stock"). Subsequent to
December 31, 1995, TCI issued 7,259,380 shares of a series of TCI
Series Preferred Stock designated "Redeemable Convertible TCI Group
Preferred Stock, Series G" and 7,259,380 shares of a series of TCI
Series Preferred Stock designated "Redeemable Convertible Liberty
Media Group Preferred Stock, Series H" as consideration for an
acquisition.
The initial liquidation value for the Series G Preferred Stock and
Series H Preferred Stock is $21.60 per share and $5.40 per share,
respectively, subject in both cases, to increase in an amount equal to
aggregate accrued but unpaid dividends, if any. No dividends will
accrue on the Series G or Series H Preferred Stock if the sum of the
last reported sale price of TCI Group Stock plus one-fourth of the
last reported sale price of the Liberty Group Stock equals or exceeds
$27 for any ten consecutive trading days during the 65 trading days
immediately prior to the first anniversary of issuance of the Series G
and Series H Preferred Stock. If the sum of the amounts specified in
the preceding sentence does not equal or exceed $27 for the specified
period, dividends will begin to accrue on the Series G and Series H
Preferred Stock on the first anniversary of issuance of the Series G
and Series H Preferred Stock, and will thereafter be payable
semi-annually commencing August 1, 1997, at the rate of 4% per annum
on the liquidation value. Any dividends paid on the Series G and
Series H Preferred Stock may be paid, at TCI's election, in cash or
shares of TCI Group Stock. Additional dividends will accrue on unpaid
dividends initially at a rate of 4% per annum. The dividend rate on
dividends that remain unpaid for six months will increase to 8.625%
per annum.
(continued)
II-86
<PAGE> 153
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Each share of Series G Preferred Stock is convertible at the option of
the holder at any time prior to the close of business on the last
business day prior to redemption into 1.05 shares of Series A TCI
Group Stock and each share of Series H Preferred Stock is convertible
at any time prior to the close of business on the last business day
prior to redemption into .2625 shares of Series A Liberty Group Stock.
The conversion rights of Series G and Series H Preferred Stock are
subject to adjustment in certain circumstances.
Among other such adjustments, if the Liberty Group Stock, or any other
redeemable capital stock of TCI into which either series of Preferred
Stock may be convertible ("Redeemable Capital Stock"), is redeemed in
full by TCI (the "Redemption Event"), then, except as otherwise
described below, the shares of such Series G and Series H Preferred
Stock will thereafter be convertible into the kind and amount of
consideration that would have been received in such Redemption Event
by a holder of the number of shares of Redeemable Capital Stock that
would have been issuable upon conversion of such shares of Series G
and Series H Preferred Stock, if they had been converted in full
immediately prior to such Redemption Event.
However, if any series of Redeemable Capital Stock into which a series
of Series G or Series H Preferred Stock is then convertible is
redeemed in full by TCI in exchange for securities of another issuer
("Redemption Securities"), TCI may elect to provide the holders of
such Series G or Series H Preferred Stock with the right to exchange
such Series G or Series H Preferred Stock, concurrently with the
Redemption Event, for preferred stock of such other issuer ("Mirror
Preferred Stock"). Such Mirror Preferred Stock shall be convertible
into Redemption Securities and shall otherwise have terms and
conditions comparable to the Series G or Series H Preferred Stock
exchanged. If TCI provides such an exchange right, any holder that
does not then choose to participate in such exchange will continue to
hold such Series G or Series H Preferred Stock but such holder will
lose the conversion right with respect to the Redeemable Capital Stock
redeemed in the Redemption Event and will not have any right to
receive Redemption Securities in lieu thereof. A holder that
participates in such exchange will receive Mirror Preferred Stock
convertible into Redemption Securities, but will no longer hold the
Series G or Series H Preferred Stock so exchanged.
An alternative provision will apply if, at the time of exercise of any
such exchange right provided by TCI, the holder of the applicable
series of Series G or Series H Preferred Stock would be entitled to
receive on conversion any property in addition to the Redeemable
Capital Stock being redeemed. In that case, holders that choose to
participate in the exchange will receive both Mirror Preferred Stock
issued by the issuer of the Redemption Securities of the other issuer
and a new preferred stock of TCI convertible into such additional
property. In such event, the Mirror Preferred Stock and such new TCI
preferred stock will have a combined liquidation value equal to the
liquidation value of the Series G or Series H Preferred Stock
exchanged and will otherwise have terms and conditions comparable to
such Series G or Series H Preferred Stock.
(continued)
II-87
<PAGE> 154
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Series G and Series H Preferred Stock are redeemable at TCI's
option, in whole or in part, any time on or after February 1, 2001.
The Series G and Series H Preferred Stock will be redeemable in full
on February 1, 2016, to the extent then outstanding. In all cases,
the redemption price per share will be the liquidation value thereof,
including the amount of any accrued but unpaid dividends thereon, to
and including the redemption date.
The Series G and Series H Preferred Stock will rank prior to TCI
common stock and the TCI Class B Preferred Stock and pari passu with
all other currently outstanding classes and series of TCI preferred
stock with respect to the declaration and payment of dividends and in
liquidation.
The Series G and Series H Preferred Stock will vote in any general
election of directors of TCI and will have one vote per share for such
purposes and will vote as a single class with the TCI common stock,
the TCI Class B Preferred Stock and any other class or series of TCI
Preferred Stock entitled to vote in any general election of directors.
The Series G and Series H Preferred Stock will have no other voting
rights except as required by the DGCL.
(11) Stockholders' Equity
Common Stock
The Series A TCI Group Stock and Series A Liberty Group Stock each
have one vote per share, and the Series B TCI Group Stock and Series B
Liberty Group Stock each have ten votes per share. Each share of
Series B TCI Group Stock is convertible, at the option of the holder,
into one share of Series A TCI Group Stock, and each share of Series B
Liberty Group Stock is convertible, at the option of the holder, into
one share of Series A Liberty Group Stock. See note 1.
The rights of holders of the TCI Group Stock upon liquidation of TCI
are based upon the ratio of the aggregate market capitalization, as
defined, of the TCI Group Stock to the aggregate market
capitalization, as defined, of the TCI Group Stock and the Liberty
Group Stock.
Similarly, the rights of holders of the Liberty Group Stock upon
liquidation of TCI are based upon the ratio of the aggregate market
capitalization, as defined, of the Liberty Group Stock to the
aggregate market capitalization, as defined, of the Liberty Group
Stock and the TCI Group Stock.
Employee Benefit Plans
The Company has several employee stock purchase plans (the "Plans") to
provide employees an opportunity for ownership in the Company and to
create a retirement fund. Terms of the Plans generally provide for
employees to contribute up to 10% of their compensation to a trust for
investment in TCI Group Stock and Liberty Media Group Stock. The
Company, by annual resolution of the Board, generally contributes up
to 100% of the amount contributed by employees. Certain of the
Company's subsidiaries have their own employee benefit plans.
Contributions to all plans aggregated $28 million, $21 million and $16
million for 1995, 1994 and 1993, respectively.
(continued)
II-88
<PAGE> 155
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Preferred Stock
Class A Preferred Stock. The Company is authorized to issue 700,000
shares of Class A Preferred Stock, par value $.01 per share.
Subsidiaries of TCI held all of the issued and outstanding shares of
such stock, amounting to 592,797 shares. Such preferred stock
eliminated in consolidation. The holders of the Class A Preferred
Stock exchanged such Subsidiary Shares for shares of Series F
Preferred Stock immediately prior to the record date of the
Distribution. See note 1.
Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock.
The Company is authorized to issue 1,675,096 shares of Class B
Preferred Stock and 1,620,026 of such shares are issued and
outstanding.
Dividends accrue cumulatively (but without compounding) at an annual
rate of 6% of the stated liquidation value of $100 per share (the
"Stated Liquidation Value"), whether or not such dividends are
declared or funds are legally available for payment of dividends.
Accrued dividends will be payable annually on March 1 of each year (or
the next succeeding business day if March 1 does not fall on a
business day), and, in the sole discretion of the Board, may be
declared and paid in cash, in shares of Series A TCI Group Stock or in
any combination of the foregoing. Accrued dividends not paid as
provided above on any dividend payment date will accumulate and such
accumulated unpaid dividends may be declared and paid in cash, shares
of Series A TCI Group Stock or any combination thereof at any time
(subject to the rights of any senior stock and, if applicable, to the
concurrent satisfaction of any dividend arrearages on any class or
series of TCI preferred stock ranking on a parity with the Class B
Preferred Stock with respect to dividend rights) with reference to any
regular dividend payment date, to holders of record of Class B
Preferred Stock as of a special record date fixed by the Board (which
date may not be more than 45 days nor less than 10 days prior to the
date fixed for the payment of such accumulated unpaid dividends). The
Class B Preferred Stock ranks junior to the Series F Preferred Stock
with respect to the declaration and payment of dividends.
If all or any portion of a dividend payment is to be paid through the
issuance and delivery of shares of Series A TCI Group Stock, the
number of such shares to be issued and delivered will be determined by
dividing the amount of the dividend to be paid in shares of Series A
TCI Group Stock by the Average Market Price of the Series A TCI Group
Stock. For this purpose, "Average Market Price" means the average of
the daily last reported sale prices (or, if no sale price is reported
on any day, the average of the high and low bid prices on such day) of
a share of Series A TCI Group Stock for the period of 20 consecutive
trading days ending on the tenth trading day prior to the regular
record date or special record date, as the case may be, for the
applicable dividend payment.
(continued)
II-89
<PAGE> 156
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In the event of any liquidation, dissolution or winding up of TCI, the
holders of Class B Preferred Stock will be entitled, after payment of
preferential amounts on any class or series of stock ranking prior to
the Class B Preferred Stock with respect to liquidating distributions,
to receive from the assets of TCI available for distribution to
stockholders an amount in cash or property or a combination thereof,
per share, equal to the Stated Liquidation Value thereof, plus all
accumulated and accrued but unpaid dividends thereon to and including
the redemption date. TCI does not have any mandatory obligation to
redeem the Class B Preferred Stock as of any fixed date, at the option
of the holders or otherwise.
Subject to the prior preferences and other rights of any class or
series of TCI preferred stock, the Class B Preferred Stock will be
exchangeable at the option of TCI in whole but not in part at any time
for junior subordinated debt securities of TCI ("Junior Exchange
Notes"). The Junior Exchange Notes will be issued pursuant to an
indenture (the "Indenture"), to be executed by TCI and a qualified
trustee to be chosen by TCI.
If TCI exercises its optional exchange right, each holder of
outstanding shares of Class B Preferred Stock will be entitled to
receive in exchange therefor newly issued Junior Exchange Notes of a
series authorized and established for the purpose of such exchange,
the aggregate principal amount of which will be equal to the aggregate
Stated Liquidation Value of the shares of Class B Preferred Stock so
exchanged by such holder, plus all accumulated and accrued but unpaid
dividends thereon to and including the exchange date. The Junior
Exchange Notes will be issuable only in principal amounts of $100 or
any integral multiple thereof and a cash adjustment will be paid to
the holder for any excess principal that would otherwise be issuable.
The Junior Exchange Notes will mature on the fifteenth anniversary of
the date of issuance and will be subject to earlier redemption at the
option of TCI, in whole or in part, for a redemption price equal to
the principal amount thereof plus accrued but unpaid interest.
Interest will accrue, and be payable annually, on the principal amount
of the Junior Exchange Notes at a rate per annum to be determined
prior to issuance by adding a spread of 215 basis points to the
"Fifteen Year Treasury Rate" (as defined in the Indenture). Interest
will accrue on overdue principal at the same rate, but will not accrue
on overdue interest.
The Junior Exchange Notes will represent unsecured general obligations
of TCI and will be subordinated in right of payment to all Senior Debt
(as defined in the Indenture).
(continued)
II-90
<PAGE> 157
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For so long as any dividends are in arrears on the Class B Preferred
Stock or any class or series of TCI preferred stock ranking pari passu
with the Class B Preferred Stock which is entitled to payment of
cumulative dividends prior to the redemption, exchange, purchase or
other acquisition of the Class B Preferred Stock, and until all
dividends accrued up to the immediately preceding dividend payment
date on the Class B Preferred Stock and such parity stock shall have
been paid or declared and set apart so as to be available for payment
in full thereof and for no other purpose, neither TCI nor any
subsidiary thereof may redeem, exchange, purchase or otherwise acquire
any shares of Class B Preferred Stock, any such parity stock or any
class or series of its capital stock ranking junior to the Class B
Preferred Stock (including the TCI common stock), or set aside any
money or assets for such purpose, unless all of the outstanding shares
of Class B Preferred Stock and such parity stock are redeemed. If TCI
fails to redeem or exchange shares of Class B Preferred Stock on a
date fixed for redemption or exchange, and until such shares are
redeemed or exchanged in full, TCI may not redeem or exchange any
parity stock or junior stock, declare or pay any dividend on or make
any distribution with respect to any junior stock or set aside money
or assets for such purpose and neither TCI nor any subsidiary thereof
may purchase or otherwise acquire any Class B Preferred Stock, parity
stock or junior stock or set aside money or assets for any such
purpose. The failure of TCI to pay any dividends on any class or
series of parity stock or to redeem or exchange on any date fixed for
redemption or exchange any shares of Class B Preferred Stock shall not
prevent TCI from (i) paying any dividends on junior stock solely in
shares of junior stock or the redemption purchase or other acquisition
of junior stock solely in exchange for (together with cash adjustment
for fractional shares, if any) or (but only in the case of a failure
to pay dividends on any parity stock) through the application of the
proceeds from the sale of, shares of junior stock; or (ii) the payment
of dividends on any parity stock solely in shares of parity stock
and/or junior stock or the redemption, exchange, purchase or other
acquisition of Class B Preferred Stock or parity stock solely in
exchange for (together with a cash adjustment for fractional shares,
if any), or (but only in the case of failure to pay dividends on any
parity stock) through the application of the proceeds from the sale
of, parity stock and/or junior stock.
The Class B Preferred Stock will vote in any general election of
directors, will have one vote per share for such purpose and will vote
as a single class with the TCI common stock and any class or series of
TCI preferred stock entitled to vote in any general election of
directors. The Class B Preferred Stock will have no other voting
rights except as required by the DGCL.
Series Preferred Stock. The TCI Series Preferred Stock is issuable,
from time to time, in one or more series, with such designations,
preferences and relative participating, option or other special
rights, qualifications, limitations or restrictions thereof, as shall
be stated and expressed in a resolution or resolutions providing for
the issue of such series adopted by the Board.
(continued)
II-91
<PAGE> 158
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Redeemable Convertible Preferred Stock, Series E. In connection with
the Reorganization, the Board created and authorized the issuance of
the Redeemable Convertible Preferred Stock, Series E, par value $.01
per share. The Company is authorized to issue 400,000 shares of such
preferred stock. Subsidiaries of TCI held all of the issued and
outstanding shares of such stock, amounting to 246,402 shares. All
such preferred stock eliminated in consolidation. The holders of the
Series E Preferred Stock exchanged such Subsidiary Shares for shares
of Series F Preferred Stock immediately prior to the record date of
the Distribution.
Stock Options
In 1994, the Company adopted the Tele-Communications, Inc. 1994 Stock
Incentive Plan (the "1994 Plan"). The Plan provided for awards to be
made in respect of a maximum of 16 million shares of TCI Class A
common stock. Awards may be made as grants of stock options, stock
appreciation rights, restricted shares, stock units or any combination
thereof. Pursuant to the TCI/Liberty Merger Agreement and certain
assumption agreements, stock options and/or stock appreciation rights
granted (or assumed) by Old TCI and stock options and/or stock
appreciation rights granted by Liberty were assumed by the Company and
new options and/or stock appreciation rights were substituted under
the 1994 Plan. The following descriptions represent the terms of the
assumed options and/or stock appreciation rights and additional awards
under the 1994 Plan.
The 1994 Plan was adjusted to provide that the number and type of
shares subject to future awards consists of a number of shares of
Series A TCI Group Stock equal to the number of shares of Class A
common stock subject to future awards immediately prior to the
Distribution and a number of shares of Series A Liberty Group Stock
equal to one-fourth of the number of shares of Class A common stock
subject to future awards immediately prior to Distribution. Following
the Distribution, the Compensation Committee of TCI may in its
discretion grant awards, including awards of options on, or stock
appreciation rights respecting, shares of Series A TCI Group Stock,
Series A Liberty Group Stock, or combinations thereof, in such amounts
and types as it determines in accordance with the terms of the 1994
Plan, as adjusted.
In 1995, the Company adopted the Tele-Communications, Inc. 1995
Employee Stock Incentive Plan (the "1995 Plan"). In addition, the
Company has established the Tele-Communications, Inc. 1996 Stock
Incentive Plan (the "1996 Plan") which is subject to stockholder
approval.
(continued)
II-92
<PAGE> 159
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In connection with the Distribution, each holder of an outstanding
option or stock appreciation right received an additional option or
stock appreciation right, as applicable, covering a number of shares
of Series A Liberty Group Stock equal to one-fourth of the number of
shares of Class A common stock theretofore subject to the outstanding
option or stock appreciation right, and the outstanding option or
stock appreciation right would continue in effect as an option or
stock appreciation right covering the same number of shares of Series
A TCI Group Stock (as redesignated) that were theretofore subject to
the option or stock appreciation right. The aggregate pre-adjustment
strike price of the outstanding options or stock appreciation rights
was allocated between the outstanding options or stock appreciation
rights and the newly issued options or stock appreciation rights in a
ratio determined by the Compensation Committee. The following
descriptions of stock options and/or stock appreciation rights have
been adjusted to reflect such change.
(continued)
II-93
<PAGE> 160
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table presents information regarding certain options in
tandem with stock appreciation rights ("SARs") to purchase Class A,
Series A TCI Group Stock and Series A Liberty Group Stock pursuant to
the 1994 Plan, the 1995 Plan and the 1996 Plan:
<TABLE>
<CAPTION>
Series A Liberty
Class A Series A TCI Media Group
common stock Group Stock Stock
--------------- --------------- --------------
<S> <C> <C> <C>
Outstanding at January 1, 1993 4,525,578 -- --
Granted 3,955,000 -- --
Exercised (96,242) -- --
Canceled (75,000) -- --
-------------- --------------- --------------
Outstanding at December 31, 1993 8,309,336 -- --
Granted 3,191,000 -- --
Assumed 54,600 -- --
Exercised (217,483) -- --
Canceled (16,625) -- --
-------------- --------------- --------------
Outstanding at December 31, 1994 11,320,828 -- --
Converted from Class A options (11,218,866) 11,218,866 --
Adjustment for Distribution -- -- 2,804,715
Granted -- 7,407,500 2,211,000
Exercised (91,962) (933,516) (227,003)
Canceled (10,000) (90,500) (22,625)
-------------- --------------- --------------
Outstanding at December 31, 1995 -- 17,602,350 4,766,087
============== =============== ==============
Exercise Price $8.83-19.56 $6.60-17.00 $8.83-24.00
============== =============== ==============
Vesting period 4-5 years 4-5 years
============== =============== ==============
</TABLE>
On December 13, 1995, pursuant to the 1994 Plan, the Company awarded
330,000 restricted shares of Series A TCI Group common stock and
30,000 restricted shares of Series A Liberty Group Stock to certain
officers and other key employees of the Company. Such restricted
shares vest as to 50% on December 13, 2000 and as to the remaining 50%
on December 13, 2001.
SARs with respect to 1,423,500 shares of Series A TCI Group Stock and
355,875 shares of Series A Liberty Group Stock were outstanding at
December 31, 1995. These rights have an adjusted strike price of
$0.60 and $0.82 per share, respectively, and become exercisable and
vest evenly over seven years, beginning March 28, 1992. The SARs
expire on March 28, 2001. The Company has the option of paying the
holder in stock or cash.
(continued)
II-94
<PAGE> 161
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On August 3, 1995, stockholders of the Company approved the Director
Stock Option Plan including the grant, effective as of November 16,
1994, to each person that as of that date was a member of the Board
and was not an employee of the Company or any of its subsidiaries, of
options to purchase 50,000 shares of TCI Class A common stock.
Pursuant to the Director Stock Option Plan, options to purchase
300,000 shares of Series A TCI Group common stock were granted at an
exercise price of $16.50 per share and options to purchase 75,000
shares of Series A Liberty Group Stock were granted at an exercise
price of $22.00 per share and will vest and become exercisable over a
five-year period, commencing on November 16, 1995 and will expire on
November 16, 2004 During the year ended December 31, 1995, options to
purchase 50,000 shares of Series A TCI Group Stock and options to
purchase 12,500 shares of Series A Liberty Media Group Stock were
canceled.
Estimated compensation relating to restricted stock awards, options
with tandem SARs and SARs has been recorded through December 31, 1995,
but is subject to future adjustment based upon market value, and
ultimately, on the final determination of market value when the rights
are exercised or the restricted stock awards are vested.
Other
In connection with the exercise of a stock option by an
officer/director of Liberty, a note was given to Liberty as partial
payment of the exercise price. This note bore interest at 7.54% per
annum. At the date of the TCI/Liberty Combination, the Company
recorded the net assumed note receivable, amounting to approximately
$15 million, from such officer as a reduction of stockholders' equity.
On October 27, 1994, such officer tendered to the Company 634,917
shares of TCI Class B common stock in full payment of principal and
interest amounting to $15 million.
The shares issued by Liberty upon exercise of the aforementioned
Liberty option, together with all subsequent dividends and
distributions thereon, were subject to repurchase by Liberty under
certain circumstances. Such shares were exchanged for 15,600,000
shares of TCI Class A common stock and 200,000 shares of Class B
Preferred Stock in the TCI/Liberty Combination. The Company's
repurchase right terminates as to 20% of the Option Units per year,
commencing March 28, 1992, and will terminate as to all of the Option
Units on March 28, 1996 or in the event of death, disability or under
certain other circumstances.
(continued)
II-95
<PAGE> 162
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The excess of consideration received on debentures converted or
options exercised over the par value of the stock issued is credited
to additional paid-in capital.
At December 31, 1995, there were 75,466,614 shares of Series A TCI
Group Stock and 19,179,651 shares of Series A Liberty Group Stock
reserved for issuance under exercise privileges related to options,
convertible debt securities and convertible preferred stock and upon
vesting of the restricted stock awards described in this note 11 and
in notes 9 and 10. Additionally, in January of 1996, the Company
issued 7,259,380 shares each of Series G Preferred Stock and Series H
Preferred Stock (see note 10). Such preferred stocks are convertible
into 7,622,349 shares of Series A TCI Group Stock and 1,905,587 shares
of Series A Liberty Group Stock. In addition, one share of Series A
TCI Group Stock is reserved for each outstanding share of Series B TCI
Group Stock and one share of Series A Liberty Group Stock is reserved
for each outstanding share of Series B Liberty Group Stock. See note
1 for the effect of the Distribution on the conversion rights of
holders of convertible securities.
(12) Transactions with Officers and Directors
Effective January 31, 1996, a director of the Company purchased
one-third of the Company's interest in two limited partnerships and
obtained two ten-year options to purchase the Company's remaining
partnership interests. The purchase price for the one-third partnership
interests was 37.209 shares of WestMarc Communications, Inc. (a
wholly-owned subsidiary of the Company) Series C Cumulative Compounding
Preferred Stock owned by such director, and the purchase price for the
ten-year options was $100 for each option. All options are exercisable
for cash in the aggregate amount of $3,000,000.
(13) Sale of Subsidiary Stock
On July 18, 1995, TINTA completed an initial public offering (the
"IPO") in which it sold 20 million shares of TINTA Series A common
stock to the public for consideration of $16.00 per share aggregating
$320 million, before deducting related expenses (approximately $19
million). The shares sold to the public represented 17% of TINTA's
total issued and outstanding common stock. Also in July 1995, TINTA
issued 687,500 shares of TINTA Series A common stock as partial
consideration for a 35% ownership interest in Torneos Y Competencias
S.A., an Argentine sports programming company (the "TYC Acquisition").
As a result of the IPO and the TYC Acquisition, the Company has
recognized a gain amounting to $123 million. Subsequent to the IPO and
the TYC Acquisition, TCI owns 82% of the issued and outstanding stock
of TINTA, representing in excess of 90% of the voting power of TINTA.
In June 1995, Flextech issued share capital for cash and preferred
shares of Thomson Directories Limited. In connection with such
issuance, the Company recorded a $51 million increase to stockholders'
equity and a $93 million increase to minority interests in equity of
consolidated subsidiaries. No gain was recognized in the Company's
consolidated statement of operations due primarily to the existence of
the Company's contingent obligations to repurchase certain of the
Flextech share capital.
(continued)
II-96
<PAGE> 163
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Income Taxes
TCI files a consolidated Federal income tax return with all of its 80%
or more owned subsidiaries. Consolidated subsidiaries in which the
Company owns less than 80% each file a separate income tax return.
TCI and such subsidiaries calculate their respective tax liabilities
on a separate return basis which are combined in the accompanying
consolidated financial statements.
Income tax benefit (expense) for the years ended December 31, 1995, 1994 and
1993 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -------
amounts in millions
<S> <C> <C> <C>
Year ended December 31, 1995:
Federal $ (23) 130 107
State and local (10) 23 13
-------- -------- --------
$ (33) 153 120
======== ======== ========
Year ended December 31, 1994:
Federal $ (69) (29) (98)
State and local (14) (8) (22)
-------- -------- --------
$ (83) (37) (120)
======== ======== ========
Year ended December 31, 1993:
Federal $ (14) (120) (134)
State and local (15) (20) (35)
-------- -------- --------
$ (29) (140) (169)
======== ======== ========
</TABLE>
Income tax benefit (expense) differs from the amounts computed by
applying the Federal income tax rate of 35% as a result of the
following:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------------------------------
1995 1994 1993
------ ------ ------
amounts in millions
<S> <C> <C> <C>
Computed "expected" tax benefit
(expense) $ 102 (64) (57)
Adjustment to deferred tax assets
and liabilities for enacted change
in Federal income tax rate -- -- (76)
Amortization not deductible for
tax purposes (25) (13) (12)
Minority interest in losses (earnings)
of consolidated subsidiaries 9 (3) (1)
Gain on sale of subsidiary stock 43 -- --
Recognition of losses of
consolidated partnership -- (10) (8)
State and local income taxes,
net of Federal income tax benefit (4) (20) (23)
Valuation allowance on
foreign corporation -- (10) --
Other (5) (1) 8
----------- ----------- ------
$ 120 (120) (169)
=========== =========== ======
</TABLE>
(continued)
II-97
<PAGE> 164
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below:
<TABLE>
<CAPTION>
December 31,
---------------------
1995 1994
------ ------
amounts in millions
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 583 490
Less - valuation allowance (121) (100)
Investment tax credit carryforwards 118 122
Less - valuation allowance (41) (36)
Alternative minimum tax credit
carryforwards 95 90
Investments in affiliates, due
principally to losses of affiliates
recognized for financial statement
purposes in excess of losses
recognized for income tax purposes 176 294
Future deductible amounts principally
due to non-deductible accruals 90 52
Other 10 19
------------ -------
Net deferred tax assets 910 931
------------ -------
Deferred tax liabilities:
Property and equipment, principally
due to differences in depreciation 1,111 1,197
Franchise costs, principally due to
differences in amortization 3,569 2,600
Investment in affiliates, due
principally to undistributed
earnings of affiliates 499 452
Intangible assets, principally due to
differences in amortization 42 108
Leases capitalized for tax purposes 53 --
Other 166 83
------------ -------
Total gross deferred tax liabilities 5,440 4,440
------------ -------
Net deferred tax liability $ 4,530 3,509
============ =======
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1995
was $162 million. Such balance increased by $26 million from December
31, 1994.
(continued)
II-98
<PAGE> 165
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 1995, the Company had net operating loss carryforwards
for income tax purposes aggregating approximately $1,177 million of
which, if not utilized to reduce taxable income in future periods, $134
million expires in 2003, $116 million in 2004, $344 million in 2005,
$325 million in 2006, $138 million in 2009 and $120 million in 2010.
Certain subsidiaries of the Company had additional net operating loss
carryforwards for income tax purposes aggregating approximately $245
million and these net operating losses are subject to certain rules
limiting their usage.
At December 31, 1995, the Company had remaining available investment
tax credits of approximately $63 million which, if not utilized to
offset future Federal income taxes payable, expire at various dates
through 2005. Certain subsidiaries of the Company had additional
investment tax credit carryforwards aggregating approximately $55
million and these investment tax credit carryforwards are subject to
certain rules limiting their usage.
Certain of the Federal income tax returns of TCI and its subsidiaries
which filed separate income tax returns are presently under examination
by the Internal Revenue Service for the years 1981 through 1992. A
subsidiary of the Company has filed a petition in United States Tax
Court protesting the disallowance of certain Transitional Investment
Tax Credits and such issue will likely be litigated in 1996. In the
opinion of management, any additional tax liability, not previously
provided for, resulting from these examinations, ultimately determined
to be payable, should not have a material adverse effect on the
consolidated financial position of the Company.
New tax legislation was enacted in the third quarter of 1993 which,
among other matters, increased the corporate Federal income tax rate
from 34% to 35%. The Company has reflected the tax rate change in its
consolidated statements of operations. Such tax rate change resulted
in an increase of $76 million to income tax expense and deferred
income tax liability.
(15) Commitments and Contingencies
During 1994, subsidiaries of the Company, Comcast, Cox (collectively,
the "Cable Partners") and Sprint formed a partnership ("WirelessCo")
to engage in the business of providing wireless communications
services on a nationwide basis. Through WirelessCo, in which the
Company owns an indirect 30% interest, the partners participated in
auctions ("PCS Auctions") of broadband personal communications
services ("PCS") licenses conducted by the Federal Communications
Commission ("FCC"). In the first round auction, which concluded
during the first quarter of 1995, WirelessCo was the winning bidder
for PCS licenses for 29 markets, including New York, San
Francisco-Oakland-San Jose, Detroit, Dallas-Fort Worth,
Boston-Providence, Minneapolis-St. Paul and Miami-Fort Lauderdale.
The aggregate license cost for these licenses was approximately $2.1
billion.
(continued)
II-99
<PAGE> 166
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
WirelessCo also invested in American PSC, L.P. ("APC"), which holds a
PCS license granted under the FCC's pioneer preference program for the
Washington-Baltimore market. WirelessCo acquired its 49% limited
partnership interest in APC for $23 million and agreed to make capital
contributions to APC equal to 49/51 of the cost of APC's PCS license.
Additional capital contributions may be required in the event APC is
unable to finance the full cost of its PCS license. WirelessCo may
also be required to finance the build-out expenditures for APC's PCS
system. Cox, which holds a pioneer preference PCS license for the Los
Angeles-San Diego market, and WirelessCo have also agreed on the
general terms and conditions upon which Cox (with a 51% interest) and
WirelessCo (with a 49% interest) would form a partnership to hold and
develop a PCS system using the Los Angeles-San Diego license. APC and
the Cox partnership would affiliate their PCS systems with WirelessCo
and be part of WirelessCo's nationwide integrated network, offering
wireless communications services under the "Sprint" brand.
During 1994, subsidiaries of Cox, Sprint and the Company also formed a
separate partnership ("PhillieCo"), in which the Company owns a 35.3%
interest. PhillieCo was the winning bidder in the first round auction
for a PCS license for the Philadelphia market at a license cost of $85
million. To the extent permitted by law, the PCS system to be
constructed by PhillieCo would also be affiliated with WirelessCo's
nationwide network.
WirelessCo may bid in subsequent rounds of the PCS Auctions and may
invest in, affiliate with or acquire licenses from other successful
bidders. The capital that WirelessCo will require to fund the
construction of the PCS systems, in addition to the license costs and
investments described above, will be substantial.
In March of 1995, the Cable Partners and Sprint (collectively, the
"Partners") formed two new partnerships, of which the principal
partnership is MajorCo, to which they contributed their respective
interests in WirelessCo and through which they formed another
partnership, NewTelco, L.P. ("New Telco") to engage in the business of
providing local wireline communications services to residences and
businesses on a nationwide basis. The Cable Partners agreed to
contribute their interests in TCG to NewTelco. TCG is one of the
largest competitive access providers in the United States in terms of
route miles.
Effective January 31, 1996, the Partners amended the MajorCo
partnership agreement (the "Partnership Agreement") and certain other
agreements related thereto. Under the Partnership Agreement, the
business of MajorCo and its subsidiaries will be the provision of
certain wireless and other services described in the Partnership
Agreement. The Partners intend for WirelessCo and its subsidiary
partnerships to be the exclusive vehicles through which they engage in
the wireless telephony service businesses, subject to certain
exceptions. MajorCo will no longer be authorized to engage in the
business of providing local wireline communications services to
residences and businesses. In connection with the amendment of the
Partnership Agreement, the Partners, also agreed to the termination of
the agreement to contribute the Cable Partners' interests in TCG to
NewTelco.
(continued)
II-100
<PAGE> 167
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Pursuant to separate agreements, each of the Cable Partners and Sprint
have agreed to negotiate in good faith on a market-by-market basis for
the provision of local wireline telephony services over the cable
television facilities of the respective Cable Partner under the Sprint
brand. Accordingly, local wireline telephony offerings in each market
would be the subject of individual agreements to be negotiated with
Sprint, rather than being provided by MajorCo, as originally
contemplated. The Cable Partners and Sprint also reaffirmed their
intention to continue to attempt to integrate the business of TCG with
that of MajorCo. In addition, each Cable Partner agreed to certain
restrictions on its ability to offer, promote, or package certain of
its products or services with certain products and services of other
persons and agreed to make its facilities available to Sprint for
specified purposes to the extent and on the terms that it has made
such facilities available to others for such purposes. Such
agreements have a term of five years, but under certain circumstances
may terminate after three years.
Execution of the foregoing agreements was a condition to the
effectiveness of a previously approved business plan for the build out
of WirelessCo's nationwide network for wireless personal
communications services. Pursuant to the business plan, the Partners
are obligated to make additional cash capital contributions to MajorCo
in the aggregate amount of approximately $1.9 billion during the
two-year period that commenced January 1, 1996. The business plan
contemplates that MajorCo will require additional equity thereafter.
In July 1995, TCIC and TCI entered into certain agreements with Viacom
Inc. ("Viacom") and certain subsidiaries of Viacom regarding the
purchase by TCIC of all of the common stock of a subsidiary of Viacom
("Cable Sub") which, at the time of purchase, will own Viacom's cable
systems and related assets.
The transaction has been structured as a tax-free reorganization in
which Cable Sub will initially transfer all of its non-cable assets,
as well as all of its liabilities other than current liabilities, to a
new subsidiary of Viacom ("New Viacom Sub"). Cable Sub will also
transfer to New Viacom Sub the proceeds (the "Loan Proceeds") of a
$1.7 billion loan facility (the "Loan Facility") to be arranged by
TCIC, TCI and Cable Sub. Following these transfers, Cable Sub will
retain cable assets with an estimated value at closing of
approximately $2.2 billion and the obligation to repay the Loan
Proceeds borrowed under the Loan Facility. Repayment of the Loan
Proceeds will be non-recourse to Viacom and New Viacom Sub.
Viacom will offer to the holders of shares of Viacom Class A Common
Stock and Viacom Class B Common Stock (collectively, "Viacom Common
Stock") the opportunity to exchange (the "Exchange Offer") a portion
of their shares of Viacom Common Stock for shares of Class A Common
Stock, par value $100 per share, of Cable Sub ("Cable Sub Class A
Stock"). The Exchange Offer will be subject to a number of
conditions, including a condition (the "Minimum Condition") that
sufficient tenders are made of Viacom Common Stock that permit the
number of shares of Cable Sub Class A Stock issued pursuant to the
Exchange Offer to equal the total number of shares of Cable Sub Class
A Stock issuable in the Exchange Offer.
(continued)
II-101
<PAGE> 168
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Immediately following the completion of the Exchange Offer, TCIC will
acquire from Cable Sub shares of Cable Sub Class B common stock for
$350 million (which will be used to reduce Cable Sub's obligations
under the Loan Facility). At the time of such acquisition, the Cable
Sub Class A Stock received by Viacom stockholders pursuant to the
Exchange Offer will automatically convert into a series of senior
cumulative exchangeable preferred stock (the "Exchangeable Preferred
Stock") of Cable Sub with a stated value of $100 per share (the
"Stated Value"). The terms of the Exchangeable Preferred Stock,
including its dividend, redemption and exchange features, will be
designed to cause the Exchangeable Preferred Stock, in the opinion of
two investment banks, to initially trade at the Stated Value. The
Exchangeable Preferred Stock will be exchangeable, at the option of
the holder commencing after the fifth anniversary of the date of
issuance, for shares of Series A TCI Group Stock. The Exchangeable
Preferred Stock will also be redeemable, at the option of Cable Sub,
after the fifth anniversary of the date of issuance, and will be
subject to mandatory redemption on the tenth anniversary of the date
of issuance at a price equal to the Stated Value per share plus
accrued and unpaid dividends, payable in cash or, at the election of
Cable Sub, in shares of Series A TCI Group Stock, or in any
combination of the foregoing. If insufficient tenders are made by
Viacom stockholders in the Exchange Offer to permit the Minimum
Condition to be satisfied, Viacom will extend the Exchange Offer for
up to 15 business days and, during such extension, TCI and Viacom are
to negotiate in good faith to determine mutually acceptable changes to
the terms and conditions for the Exchangeable Preferred Stock and the
Exchange Offer that each believes in good faith will cause the Minimum
Condition to be fulfilled and that would cause the Exchangeable
Preferred Stock to trade at a price equal to the Stated Value
immediately following the expiration of the Exchange Offer. In the
event the Minimum Condition is not thereafter met, TCI and Viacom will
each have the right to terminate the transaction. In addition, either
party may terminate the transaction if the exchange offer has not
commenced by June 24, 1996 or been consummated by July 24, 1996.
Consummation of the transaction is subject to a number of conditions,
including receipt of a favorable letter ruling from the Internal
Revenue Service that the transaction qualifies as a tax-free
transaction and the satisfaction or waiver of all of the conditions of
the Exchange Offer. A request for a letter ruling from the Internal
Revenue Service has been filed by Viacom. The Company believes that,
based upon the unique and complex structure of the transaction, there
exists significant uncertainty as to whether a favorable ruling will
be obtained. In light of the foregoing, management of the Company has
concluded that consummation of the transaction is not yet probable.
No assurance can be given that the transaction will be consummated.
(continued)
II-102
<PAGE> 169
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On October 31, 1995, Liberty Media Group announced that it had entered
into a binding agreement in principle with The News Corporation
Limited ("News Corp.") and TINTA. In the United States, Liberty Media
Group and News Corp. agreed to form a partnership (the "Fox-Liberty
Venture") into which Liberty Media Group will contribute interests in
its national and regional sports networks and into which News Corp.
will contribute its fx cable network and certain other assets. Upon
consummation, Liberty Media Group will receive a 50% interest in the
Fox-Liberty Venture and $350 million in cash. The fx network will be
transformed into a nationally distributed, general entertainment and
sports network. The regional sports networks currently operated under
the Prime Sports name will be relaunched under the Fox Sports banner.
Internationally, News Corp., and a 50/50 partnership forms by Liberty
Sports, Inc., a wholly-owned subsidiary of Liberty Media Group, and
TINTA (the "Liberty-TINTA Partnership") have agreed to form a venture
to operate currently existing sports services in Asia, Latin American
and Australia and a variety of new sports services throughout the
world except in the United Kingdom, Japan and New Zealand where prior
arrangements preclude an immediate collaboration. The Liberty-TINTA
Partnership will own 50% of the international venture with News Corp.
owning the other 50%. News Corp. is contributing various
international sports rights, including the Star Sports channel which
is broadcast throughout Asia as part of the Star package of services.
The Liberty-TINTA Partnership is contributing Prime Deportiva, a
Spanish language sports service distributed in Latin American and in
Hispanic markets in the United States, an interest in Torneos y
Competencias S.A., an Argentinean sports programming and production
business, various international sports and satellite transponder
rights and cash. The Liberty-TINTA Partnership will also contribute
their 50% interest in Premiere Sports and All-Star Sports in
Australia. Both are 24-hour sports services available via MMDS or
cable television in Australia.
The transactions contemplated by the above agreements are expected to
close during 1996.
On November 27, 1995, the Company announced that it had agreed to
exchange its controlling interest in Home Shopping Network, Inc.
("HSN") for shares of Silver King Communications, Inc. ("Silver
King"). The Company will receive approximately 11 million newly
issued shares of Silver King in exchange for it 37.5 million shares of
HSN.
(continued)
II-103
<PAGE> 170
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into an agreement in August 1995
pursuant to which an option owned by Liberty Media Group to purchase 2
million shares of Silver King Class B common stock (the "Option")
(which shares would constitute voting control of Silver King) would be
transferred to Silver Management Company ("Silver Company"), an entity
in which Liberty Media Group would own all of the non-voting equity
interests (which would constitute substantially all of the equity of
such entity) and Mr. Diller would own all of the voting equity
interests. Silver Company would thereafter exercise the Option and
hold the shares of Silver King Class B Common Stock purchased
thereunder. In an amendment to such agreement entered into in
November 1995, Liberty Media Group agreed to contribute all of its
shares of HSN (which shares constitute approximately 41% of the equity
of HSN and approximately 80% of the voting power of HSN) to Silver
Company in return for additional non-voting equity interests in Silver
Company. Following such contribution Silver Company would exchange
such HSN shares with Silver King for additional shares of Silver King
Common Stock and Class B Common Stock (thereby increasing Silver
Company's controlling interest in Silver King to in excess of 80% of
the voting power of Silver King). Each such transaction is subject to
the satisfaction of certain conditions, including the receipt of all
necessary regulatory consents and approvals. If consummated, HSN
would cease to be a subsidiary of the Company and therefore, the
financial results of HSN would not be consolidated with the financial
results of Liberty Media Group. Although the Company would cease to
possess voting control over HSN, it would continue to have an indirect
equity interest in HSN through its ownership of the equity securities
of Silver Company. No assurance can be given that the transaction
will be consummated.
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). In
1993 and 1994, the FCC adopted certain rate regulations required by
the 1992 Cable Act and imposed a moratorium on certain rate increases.
As a result of such actions, the Company's basic and tier service
rates and its equipment and installation charges (the "Regulated
Services") are subject to the jurisdiction of local franchising
authorities and the FCC. Basic and tier service rates are evaluated
against competitive benchmark rates as published by the FCC, and
equipment and installation charges are based on actual costs. Any
rates for Regulated Services that exceeded the benchmarks were reduced
as required by the 1993 and 1994 rate regulations. The rate
regulations do not apply to the relatively few systems which are
subject to "effective competition" or to services offered on an
individual service basis, such as premium movie and pay-per-view
services.
(continued)
II-104
<PAGE> 171
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company believes that it has complied in all material respects
with the provisions of the 1992 Cable Act, including its rate setting
provisions. However, the Company's rates for Regulated Services are
subject to review by the FCC, if a complaint has been filed, or the
appropriate franchise authority, if such authority has been certified.
If, as a result of the review process, a system cannot substantiate
its rates, it could be required to retroactively reduce its rates to
the appropriate benchmark and refund the excess portion of rates
received. Any refunds of the excess portion of tier service rates
would be retroactive to the date of complaint. Any refunds of the
excess portion of all other Regulated Service rates would be
retroactive to one year prior to the implementation of the rate
reductions.
On October 30, 1995, the FCC accepted for comment a proposed
resolution of all complaints against the cable programming services
tier ("CPST") currently pending against cable systems owned by the
Company. If the proposed resolution is accepted by the FCC, the
Company will settle all pending complaints by a one-time credit to
each subscriber in CPST regulated franchises. The aggregate amount of
such credits is approximately $9 million and had previously been
accrued by the Company. In addition, the FCC will find that the CPST
rates in CPST regulated franchises on September 15, 1995 comply with
federal regulations. The Company has committed not to file any
additional cost-of-service filings until May 15, 1996 in franchises
that were subject to CPST regulation prior to September 15, 1995.
However, the Company will be able to avail itself of the other
mechanisms under FCC rules to recover costs, including abbreviated
cost-of-service filings covering system rebuilds and upgrades. In the
proposed resolution, the Company does not admit any violation of, or
any failure to conform to, the 1992 Cable Act or the rules promulgated
thereunder. The comment period has ended and the Company is awaiting
action by the FCC.
The Company is obligated to pay fees for the license to exhibit
certain qualifying films that are released theatrically by various
motion picture studios through February 28, 2009 (the "Film Licensing
Obligations"). The aggregate minimum liability under certain of the
license agreements is approximately $414 million. The aggregate
amount of the Film Licensing Obligations under other license
agreements is not currently estimable because such amount is dependent
upon certain variable factors. Nevertheless, the Company's aggregate
payments under the Film License Obligations could prove to be
significant. Additionally, the Company has guaranteed up to $67
million of similar license fee obligations of an affiliate.
The Company has long-term sports program rights contracts which
require payments through 2006. Future payments for each of the next
five years as follows (amounts in millions):
<TABLE>
<S> <C>
1996 $84
1997 73
1998 62
1999 55
2000 46
</TABLE>
(continued)
II-105
<PAGE> 172
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company has guaranteed notes payable and other obligations of
affiliated and other companies with outstanding balances of
approximately $222 million at December 31, 1995. Although there can
be no assurance, management of the Company believes that it will not
be required to meet its obligations under such guarantees, or if it is
required to fulfill any of such guarantees, that they will not be
material to the Company.
The Company has also committed to provide additional debt or equity
funding to certain of its affiliates. At December 31, 1995, such
commitments aggregated $95 million.
The Company leases business offices, has entered into pole rental
agreements and transponder lease agreements and uses certain equipment
under lease arrangements. Rental expense under such arrangements
amounted to $142 million, $82 million and $70 million in 1995, 1994
and 1993, respectively.
Future minimum lease payments under noncancellable operating leases
for each of the next five years are summarized as follows (amounts in
millions):
<TABLE>
<S> <C>
1996 $104
1997 101
1998 89
1999 86
2000 73
</TABLE>
It is expected that, in the normal course of business, expiring leases
will be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will not be less
than the amount shown for 1996.
Certain key employees of the Company hold restricted stock awards and
options with tandem SARs to acquire shares of certain subsidiaries'
common stock. Estimates of the compensation related to the restricted
stock awards and options and/or SARs have been recorded in the
accompanying consolidated financial statement, but are subject to
future adjustment based upon the market value of the respective common
stock and, ultimately, on the final market value when the rights are
exercised or the restricted stock awards are vested.
The Company has contingent liabilities related to legal proceedings
and other matters arising in the ordinary course of business. In the
opinion of management, it is expected that amounts, if any, which may
be required to satisfy such contingencies will not be material in
relation to the accompanying consolidated financial statements.
(continued)
II-106
<PAGE> 173
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) Information about the Company's Operations
Subsequent to the consummation of the TCI/Liberty Combination, the
Company operates primarily in two industry segments: cable and
communications services ("Cable") and programming services
("Programming"). Programming includes the production, acquisition and
distribution of globally branded entertainment, education and
information programming services and software for distribution through
all available formats and media; and home shopping via television and
other interactive media, direct marketing, advertising sales,
infomercials and transaction processing. Home shopping is a
programming service which includes a retail function. Separate
amounts of the aforementioned home shopping service have been provided
to enhance the readers understanding of the Company. The Company has
investments, accounted for under the equity method and the cost
method, which also operate in the Cable and Programming industries.
The following is selected information about the Company's operations
for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Programming
-----------------------------
Electronic Other Intersegment
Cable Retailing Programming Eliminations Total
----- --------- ----------- ------------ -----
1995 amounts in millions
----
<S> <C> <C> <C> <C> <C>
Revenue $ 5,384 1,019 521 (73) 6,851
======== ========== ============ ============ ========
Operating income
(loss) $ 653 (85) (26) -- 542
======== ========== ============ ============ ========
Depreciation and
amortization $ 1,274 43 55 -- 1,372
======== ========== ============ ============ ========
Capital
expenditures $ 1,733 13 36 -- 1,782
======== ========== ============ ============ ========
Identifiable assets $ 22,612 725 1,793 -- 25,130
======== ========== ============ ============ ========
1994
----
Revenue $ 4,247 482 240 (33) 4,936
======== ========== ============ ============ ========
Operating income
(loss) $ 781 9 (2) -- 788
======== ========== ============ ============ ========
Depreciation and
amortization $ 992 15 11 -- 1,018
======== ========== ============ ============ ========
Capital
expenditures $ 1,239 19 6 -- 1,264
======== ========== ============ ============ ========
Identifiable assets $ 17,121 739 1,448 (32) 19,276
======== ========== ============ ============ ========
</TABLE>
(continued)
II-107
<PAGE> 174
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
amounts in millions,
1995: except per share amounts
----
<S> <C> <C> <C> <C>
Revenue:
As previously reported $ 1,524 1,660 1,761
Adjustment to reflect Cablevision
operations on a current basis -- 14 --
-------- -------- --------
As adjusted $ 1,524 1,674 1,761 1,892
======== ======== ======== ========
Operating income:
As previously reported $ 180 151 182
Adjustment to restate amortization of
of intangibles upon reallocation of
purchase price
Adjustment to reflect Cablevision -- (20) (4)
operations on a current basis
As adjusted $ -- 4 (2)
-------- -------- --------
180 135 176 51
======== ======== ======== ========
Income tax benefit:
As previously reported $ 19 48 37
Adjustment for effect of adopting
equity method of accounting for BET -- -- (1)
Adjustment to restate amortization of
of intangibles upon reallocation of
purchase price
Adjustment to reflect Cablevision -- 8 1
operations on a current basis -- 3 (1)
-------- -------- --------
As adjusted $ 19 59 36 6
======== ======== ======== ========
Net earnings (loss):
As previously reported $ (45) (83) 36
Adjustment for effect of adopting
equity method of accounting for BET 1 -- --
Adjustment to restate amortization of
of intangibles upon reallocation of
purchase price
Adjustment to reflect Cablevision -- (12) (3)
operations on a current basis -- -- (1)
-------- -------- --------
As adjusted $ (44) (95) 32 (64)
======== ======== ======== ========
Primary and fully diluted earnings
(loss) attributable to common
stockholders per common and
common equivalent share:
TCI Class A and Class B common stock
As previously reported $ (.08) (.14) .12
Adjustment for effect of adopting equity
method of accounting for BET -- -- --
Adjustment to restate amortization of
of intangibles upon reallocation of
purchase price
Adjustment to reflect Cablevision -- (.02) --
operations on a current basis -- -- --
-------- -------- --------
As adjusted $ (.08) (.16) .12 N/A
======== ======== ========
</TABLE>
(continued)
II-108
<PAGE> 175
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
amounts in millions,
1995 (continued): except per share amounts
----------------
<S> <C> <C> <C> <C>
Series A and Series B TCI Group Stock
As previously reported $ (.09)
Adjustment to reflect Cablevision
operations on a current basis --
--------
As adjusted N/A N/A $ (.09) (.07)
======== ========
Series A and Series B Liberty Group Stock
As previously reported $ (.02)
Adjustment for effect of adopting equity
method of accounting for BET --
Adjustment to restate amortization of
of intangibles upon reallocation of
purchase price (.01)
--------
As adjusted N/A N/A $ (.03) (.13)
======== ========
1994:
----
Revenue $ 1,060 1,081 1,286 1,509
Operating income $ 234 205 186 163
Income tax expense:
As previously reported $ (31) (21) (33) (31)
Adjustment for effect of adopting
equity method of accounting for
investments:
QVC -- (1) -- (2)
BET -- -- -- (1)
-------- -------- -------- --------
As adjusted $ (31) (22) (33) (34)
======== ======== ======== ========
Net earnings (loss):
As previously reported $ 32 6 25 (8)
Adjustment for effect of adopting
equity method of accounting for
investments:
QVC -- -- 2 3
BET -- 1 -- 1
-------- -------- -------- --------
As adjusted $ 32 7 27 (4)
======== ======== ======== ========
Primary and fully diluted
earnings (loss) attributable to
common stockholders per
common and common equivalent
share:
As previously reported $ .07 .01 .04 (.02)
Adjustment for effect of adopting
equity method of accounting for
investments:
QVC -- -- -- .01
BET -- -- -- --
-------- -------- -------- --------
As adjusted $ .07 .01 .04 (.01)
======== ======== ======== ========
</TABLE>
II-109
<PAGE> 176
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We have audited and reported separately herein on the consolidated financial
statements of Tele-Communications, Inc. and subsidiaries as of December 31,
1995 and 1994 and for each of the years in the three-year period ended December
31, 1995.
We have also audited the accompanying combined balance sheets of Liberty Media
Group (a combination of certain assets of Tele-Communications, Inc. and its
affiliate, Liberty Media Corporation, as defined in note 1) 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. These combined financial statements are the responsibility of the
Companies' managements. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The combined financial statements of Liberty Media Group are presented for
purposes of additional analysis of the consolidated financial statements of
Tele-Communications, Inc. and subsidiaries. As more fully described in note 1,
the combined financial statements of Liberty Media Group are intended to
reflect the performance of the businesses of Tele- Communications, Inc. and its
affiliate, Liberty Media Corporation, which produce and distribute cable
television programming services. The combined financial statements of Liberty
Media Group should be read in conjunction with the consolidated financial
statements of Tele-Communications, Inc. and subsidiaries and Liberty Media
Corporation and subsidiaries.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Liberty Media Group
as of December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
March 18, 1996
II-110
<PAGE> 177
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Combined Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994 *
------------ -------------
Assets amounts in thousands
- ------
<S> <C> <C>
Cash $ 41,225 62,963
Trade and other receivables, net 107,180 95,081
Inventories, net 103,968 119,814
Prepaid expenses 14,176 14,560
Prepaid program rights 28,395 11,257
Committed film inventory 29,931 22,097
Investments in affiliates, accounted for under the
equity method, and related receivables (note 4) 299,331 279,487
Investment in Turner Broadcasting System, Inc.
("TBS") (note 5) 945,282 653,691
Other investments, at cost, and related
receivables (note 6) 110,791 103,440
Property and equipment, at cost:
Land 21,254 21,934
Support equipment and buildings 180,051 150,165
Computer and broadcast equipment 44,962 60,525
------------- ------------
246,267 232,624
Less accumulated depreciation 42,233 38,313
------------- ------------
204,034 194,311
------------- ------------
Intangibles: (note 7)
Excess cost over acquired net assets 364,995 549,770
Other intangibles 283,242 77,925
Cable distribution fees 115,746 71,871
------------- ------------
763,983 699,566
Less accumulated amortization 142,741 81,046
------------- ------------
621,242 618,520
------------- ------------
Other assets, at cost, net of amortization 12,081 12,279
------------- ------------
$2,517,636 2,187,500
============= ============
</TABLE>
* Restated - see note 4.
(continued)
II-111
<PAGE> 178
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Combined Balance Sheets, continued
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994 *
------------ -------------
Liabilities and Combined Equity amounts in thousands
- -------------------------------
<S> <C> <C>
Accounts payable $ 95,313 111,239
Accrued liabilities 161,967 111,990
Film licenses payable 34,864 26,719
Accrued litigation settlements 6,140 27,450
Deferred revenue 50,803 46,845
Debt (note 8) 250,990 92,944
Deferred tax liability (note 9) 201,909 132,475
Other liabilities 14,261 4,320
----------- -----------
Total liabilities 816,247 553,982
----------- -----------
Minority interests in equity of consolidated
subsidiaries 87,960 115,165
Combined equity (note 10):
Combined equity 1,336,125 1,391,440
Due to Tele-Communications, Inc. ("TCI") 7,496 28,724
Unrealized gains on available-for-sale
securities, net of taxes 269,808 98,189
----------- -----------
1,613,429 1,518,353
----------- -----------
Commitments and contingencies (note 11)
$2,517,636 2,187,500
=========== ===========
</TABLE>
* Restated - see note 4.
See accompanying notes to combined financial statements.
II-112
<PAGE> 179
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 * 1993 *
------------ ------------ ------------
amounts in thousands
except per share amounts
<S> <C> <C> <C>
Revenue:
Net sales from electronic retailing services $1,018,625 1,125,917 942,940
Programming services:
From TCI (note 10) 72,886 59,897 47,448
From others 448,164 297,134 216,512
------------ ----------- -----------
1,539,675 1,482,948 1,206,900
------------ ----------- -----------
Cost of sales, operating costs and expenses:
Cost of sales 701,678 730,505 611,526
Operating 420,258 319,591 246,299
Selling, general and administrative 380,586 346,436 266,860
Charges by TCI (note 10) 23,899 14,180 5,655
Compensation relating to stock
appreciation rights (note 10) 9,503 -- 40,366
Adjustment to compensation relating to stock
appreciation rights (note 10) -- (8,574) --
Restructuring charges 16,846 -- --
Depreciation 24,769 22,574 19,384
Amortization 73,242 26,762 20,808
----------- ----------- -----------
1,650,781 1,451,474 1,210,898
----------- ----------- -----------
Operating income (loss) (111,106) 31,474 (3,998)
Other income (expense):
Interest expense (17,395) (10,333) (10,202)
Interest expense to TCI (note 10) (1,920) (2,348) (1,703)
Dividend and interest income,
primarily from affiliates 11,552 20,249 23,145
Share of earnings (losses) of affiliates, net (note 4) (15,092) 30,833 26,631
Minority interests in losses (earnings) of
consolidated subsidiaries 34,518 (10,083) 32
Litigation settlements (9,003) -- (7,475)
Gain (loss) on disposition of assets (note 4) (2,195) 181,088 31,972
Loss on early extinguishment of debt -- (1,491) (3,554)
Other, net 17 (884) (1,586)
----------- ----------- -----------
482 207,031 57,260
----------- ----------- -----------
Earnings (loss) before income taxes (110,624) 238,505 53,262
Income tax benefit (expense) (note 9) 54,292 (103,941) (23,407)
----------- ----------- -----------
Net earnings (loss) $ (56,332) 134,564 29,855
=========== =========== ===========
Loss per common share (note 2) $ (.16)
===========
</TABLE>
* Restated - see note 4.
See accompanying notes to combined financial statements.
II-113
<PAGE> 180
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Equity
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Unrealized
holding gains Total
Combined Due to on available-for- combined
equity * TCI sale securities * equity *
-------------- ---------- ----------------- -----------
amounts in thousands
<S> <C> <C> <C> <C>
Balance at January 1, 1993* $ 893,816 -- -- 893,816
Net earnings 29,855 -- -- 29,855
Sale of programming to TCI (47,448) -- -- (47,448)
Cost allocations from TCI 5,655 -- -- 5,655
Allocation of compensation relating
to stock appreciation rights 40,366 40,366
Payments of compensation
relating to stock appreciation rights (21,541) -- -- (21,541)
Interest expense allocation from TCI 1,703 -- -- 1,703
Intergroup tax allocation 25,404 -- -- 25,404
Acquisition of Home Shopping
Network, Inc. ("HSN") 123,000 -- -- 123,000
Net cash transfers from TCI 134,571 2,738 -- 137,309
---------- ---------- ---------- ----------
Balance at December 31, 1993 1,185,381 2,738 -- 1,188,119
Unrealized holding gains for
available-for-sale securities as of
January 1, 1994 -- -- 292,918 292,918
Net earnings 134,564 -- -- 134,564
Sale of programming to TCI (59,897) -- -- (59,897)
Cost allocations from TCI 14,180 -- -- 14,180
Accrued cable distribution fees
to TCI from HSN -- 28,170 -- 28,170
Allocation of compensation relating
to stock appreciation rights (8,574) (8,574)
Interest expense allocation from TCI 2,348 -- -- 2,348
Intergroup tax allocation 78,238 -- -- 78,238
Acquisition of Prime Sports-West
(note 7) 210,796 -- -- 210,796
Net cash transfers to TCI (165,596) (2,184) -- (167,780)
Change in unrealized holding gains
for available-for-sale securities -- -- (194,729) (194,729)
---------- ---------- ---------- ----------
Balance at December 31, 1994 1,391,440 28,724 98,189 1,518,353
Net loss (56,332) -- -- (56,332)
Sale of programming to TCI (40,358) (32,528) -- (72,886)
Cost allocations from TCI 14,480 9,419 -- 23,899
Cable distribution fees paid to TCI
from HSN -- (26,540) -- (26,540)
Allocation of compensation relating
to stock appreciation rights 6,765 2,738 -- 9,503
Interest expense allocation from TCI 1,786 134 -- 1,920
Intergroup tax allocation 435 (407) -- 28
Deferred tax assets transferred to TCI (13,717) -- -- (13,717)
Deferred tax assets transferred to TCI
upon implementation of tax sharing
agreement (note 9) (2,410) -- -- (2,410)
Net cash transferred from TCI 14,916 25,956 -- 40,872
Contribution to combined equity for
acquisitions 19,120 -- -- 19,120
Change in unrealized holding gains for
available-for-sale securities -- -- 171,619 171,619
---------- ---------- ---------- ----------
Balance at December 31, 1995 $1,336,125 7,496 269,808 1,613,429
========== ========== ========== ==========
</TABLE>
* Restated - see note 4.
See accompanying notes to combined financial statements.
II-114
<PAGE> 181
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 * 1993 *
--------- --------- ---------
amounts in thousands
(see note 3)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (56,332) 134,564 29,855
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 98,011 49,336 40,192
Compensation relating to stock appreciation rights 9,503 -- 40,366
Adjustment to compensation relating to stock
appreciation rights -- (8,574) --
Payment of compensation relating to stock appreciation
rights -- -- (21,541)
Share of losses (earnings) of affiliates, net 15,092 (30,833) (26,631)
Deferred income tax (benefit) expense (53,900) 25,703 (1,997)
Intergroup tax allocation 28 -- --
Noncash interest 1,920 -- --
Minority interests in earnings (losses) (34,518) 10,083 (32)
Litigation settlements 9,003 -- 7,475
Payments of litigation settlements (30,313) -- --
Loss (gain) on disposition of assets 2,195 (181,088) (31,972)
Loss on early extinguishment of debt -- 1,491 3,554
Other noncash charges 6,014 -- --
Changes in operating assets and liabilities, net of the effect of
acquisitions:
Change in receivables (11,851) (13,437) (34,532)
Change in inventories 7,895 (18,455) (8,672)
Change in prepaid expenses (16,658) (10,418) (10,678)
Change in payables, accruals and
deferred revenue 55,607 48,810 55,305
----------- ---------- ----------
Net cash provided by operating activities 1,696 7,182 40,692
----------- ---------- ----------
Cash flows from investing activities:
Cash paid for acquisitions (36,596) -- (160,440)
Capital expended for property and equipment (48,700) (32,455) (18,627)
Additional investments in and loans to affiliates and others (69,479) (23,856) (48,457)
Return of capital from affiliates 20,009 9,880 4,750
Collections on loans to affiliates and others 2,501 149,162 20,136
Cash paid for cable distribution fees (43,875) (71,871) --
Proceeds from disposition of assets 373 180,429 44,061
Other investing activities 14,168 (2,245) (3,569)
----------- ---------- ----------
Net cash provided (used) by investing activities (161,599) 209,044 (162,146)
----------- ---------- ----------
Cash flows from financing activities:
Borrowings of debt 222,549 46,859 150,400
Repayments of debt (50,284) (139,096) (212,181)
Change in cash transfers from TCI (34,655) (149,442) 122,254
Contributions by minority shareholders of subsidiaries 2,084 6,272 48,932
Distributions to minority shareholders of subsidiaries (1,529) (400) --
----------- ---------- ----------
Net cash provided (used) by financing activities 138,165 (235,807) 109,405
----------- ---------- ----------
Net decrease in cash (21,738) (19,581) (12,049)
Cash at beginning of year 62,963 82,544 94,593
----------- ---------- ----------
Cash at end of year $ 41,225 62,963 82,544
=========== ========== ==========
* Restated - see note 4.
</TABLE>
See accompanying notes to combined financial statements.
II-115
<PAGE> 182
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
December 31, 1995,1994 and 1993
(1) Basis of Presentation
On August 3, 1995, the stockholders of TCI authorized the Board of
Directors of TCI (the "Board") to issue a new class of stock ("Liberty
Group Stock") which is intended to reflect the separate performance of
TCI's business which produces and distributes cable television
programming services ("Liberty Media Group"). However, Liberty Group
Stock constitutes common stock of TCI. The issuance of Liberty Group
Stock did not result in any transfer of assets or liabilities of TCI
or any of its subsidiaries or affect the rights of holders of TCI's or
any of its subsidiaries' debt. On August 10, 1995, TCI distributed to
its security holders of record on August 4, 1995, Liberty Group Stock
representing one hundred percent of the equity value attributable to
Liberty Media Group (the "Distribution"). Additionally, the
stockholders of TCI approved the redesignation of the previously
authorized TCI Class A and Class B common stock into Series A TCI
Group and Series B TCI Group common stock ("TCI Group Stock").
As of January 27, 1994, TCI Communications, Inc. (formerly
Tele-Communications, Inc. or "TCIC") and Liberty Media Corporation
("Liberty") entered into a definitive merger agreement to combine the
two companies (the "TCI/Liberty Combination"). The transaction was
consummated on August 4, 1994. Due to the significant economic
interest held by TCIC through its ownership of Liberty preferred stock
and Liberty common stock and other related party considerations, TCIC
accounted for its investment in Liberty under the equity method prior
to the consummation of the TCI/Liberty Combination. Accordingly, TCIC
had recognized 100% of Liberty's earnings or losses before deducting
preferred stock dividends. The TCI/Liberty Combination was accounted
for using predecessor cost due to related party considerations.
Accordingly, the accompanying combined financial statements of Liberty
Media Group reflect the combination of the historical financial
information of the assets of TCI and Liberty which produce and
distribute cable television programming attributed to Liberty Media
Group.
(continued)
II-116
<PAGE> 183
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The subsidiaries of TCI and Liberty attributed to Liberty Media Group,
as well as certain investments held by these or other subsidiaries of
TCI and Liberty also attributed to Liberty Media Group at the time of
the Distribution, are as follows (unless otherwise denoted, such
subsidiaries and investments were held separately by Liberty through
August 4, 1994, the date the TCI/Liberty Combination was consummated):
Subsidiaries
Encore Media Corporation ("Encore")
TV Network Corporation (formed in 1994)
HSN
Southern Satellite Systems, Inc. ("Southern")
Netlink USA (owned by TCIC prior to the TCI/Liberty
Combination)
Liberty Sports, Inc.
Affiliated Regional Communications, Ltd. ("ARC")
Vision Group Incorporated (owned by TCIC prior to the
TCI/Liberty Combination)
Americana Television Productions LLC (acquired in 1995)
MacNeil/Lehrer Productions (acquired in 1995)
Prime Ticket Networks, L.P. ("Prime Sports-West")
(acquired in 1994)
Encore International, Inc.
Liberty Productions, Inc. (formed in 1995)
Prime Sports Network - Northwest
(continued)
II-117
<PAGE> 184
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Investments
BET Holdings, Inc. ("BET")
Video Jukebox Network, Inc.
Courtroom Television Network ("Court")
Discovery Communications, Inc. ("Discovery") (owned by TCIC
prior to the TCI/Liberty Combination)
DMX, Inc. (owned by TCIC prior to the TCI/Liberty
Combination)
E! Entertainment Television, Inc. (owned by TCIC prior to
the TCI/Liberty Combination)
International Family Entertainment, Inc.
Ingenius (formed in 1994)
International Cable Channels Partnership, Ltd. ("ICCP")
(acquired in 1994)
QE+ Ltd. ("QE+") (formed in 1994) (owned by TCIC prior to
the TCI/Liberty Combination)
QVC, Inc. ("QVC")
Reiss Media Enterprises, Inc. (owned by TCIC prior to the
TCI/Liberty Combination)
TBS (owned by TCIC prior to the TCI/Liberty Combination)
Prime SportsChannel Networks Associates
Home Team Sports Limited Partnership ("HTS")
SportsChannel Chicago Associates ("Chicago")
SportsChannel Pacific Associates
SportsChannel Prism Associates
Prime Sports Network - Upper Midwest
SportSouth Network, L.P. ("SportSouth")
Sunshine Network ("Sunshine")
American Movie Classics Company ("AMC")
Republic Pictures Television (owned by TCIC prior to the
TCI/Liberty Combination)
Sillerman Communications Management Corporation (owned by
TCIC prior to the TCI/Liberty Combination)
Technology Programming Ventures (formed in 1994)
Premier Sports ("Australia") (launched in 1995)
Silver King Communications, Inc. ("Silver King")
Asian Television and Communications LLC
Mountain Mobile Television LLC
Cutthroat Productions, LP (formed in 1994)
The National Registry
PPVN Holding Company (acquired in 1995)
(continued)
II-118
<PAGE> 185
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Upon the Distribution of the Liberty Group Stock and subsequent to the
redesignation of TCI Class A and Class B common stock into Series A
and Series B TCI Group Stock, the TCI Group Stock is intended to
reflect the separate performance of the subsidiaries and assets not
attributed to Liberty Media Group, including (i) TCI's Domestic Cable
and Communications unit, (ii) TCI's International Cable and
Programming unit and (iii) TCI's Technology/Venture Capital unit.
Such subsidiaries and assets are collectively referred to as "TCI
Group". Intercompany balances resulting from transactions with such
units are reflected as borrowings from or loans to TCI and, prior to
the Distribution, are included in combined equity in the accompanying
combined financial statements. See note 10.
Notwithstanding the attribution of assets and liabilities, equity and
items of income and expense to Liberty Media Group for purposes of
preparing its combined financial statements, the change in the capital
structure of TCI does not affect the ownership or the respective legal
title to assets or responsibility for liabilities of TCI or any of its
subsidiaries. TCI and its subsidiaries will each continue to be
responsible for their respective liabilities. Holders of Liberty
Group Stock are holders of common stock of TCI and continue to be
subject to risks associated with an investment in TCI and all of its
businesses, assets and liabilities. The issuance of Liberty Group
Stock did not affect the rights of creditors of TCI.
Financial effects arising from any portion of TCI that affect the
consolidated results of operations or financial condition of TCI could
affect the combined results of operations or financial condition of
Liberty Media Group and the market price of shares of Liberty Group
Stock. In addition, net losses of any portion of TCI, dividends and
distributions on, or repurchases of, any series of common stock, and
dividends on, or certain repurchases of preferred stock would reduce
funds of TCI legally available for dividends on all series of common
stock. Accordingly, Liberty Media Group financial information should
be read in conjunction with the TCI consolidated financial
information.
Dividends on Liberty Group Stock are payable at the sole discretion of
the Board out of the lesser of all assets of TCI legally available for
dividends and the available dividend amount with respect to Liberty
Media Group, as defined. Determinations to pay dividends on Liberty
Group Stock will be based primarily upon the financial condition,
results of operations and business requirements of Liberty Media Group
and TCI as a whole.
(continued)
II-119
<PAGE> 186
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
After the Distribution, existing preferred stock and debt securities
of TCI that were convertible into or exchangeable for shares of TCI
Class A common stock were, as a result of the operation of
antidilution provisions, adjusted so that there will be delivered upon
their conversion or exchange the number of shares of Series A Liberty
Group Stock that would have been issuable in the Distribution with
respect to the TCI Class A common stock issuable upon conversion or
exchange had such conversion or exchange occurred prior to the record
date for the Distribution. Options to purchase TCI Class A common
stock outstanding at the time of the Distribution were adjusted by
issuing to the holders of such options separate options to purchase
that number of shares of Series A Liberty Group Stock which the holder
would have been entitled to receive had the holder exercised such
option to purchase TCI Class A common stock prior to the record date
for the Distribution and reallocating a portion of the aggregate
exercise price of the previously outstanding options to the newly
issued options to purchase Series A Liberty Group Stock. The issuance
of shares of Series A Liberty Group Stock upon such conversion,
exchange or exercise of such convertible securities will not result in
any transfer of funds or other assets from TCI to Liberty Media Group
in consideration of such issuance. In the case of the exercise of
such options to purchase Series A Liberty Group Stock, the proceeds
received upon the exercise of such options will be attributed to
Liberty Media Group.
(2) Summary of Significant Accounting Policies
Trade and Other Receivables, Net
A home shopping sales program with a deferred payment arrangement
("flex-pay") allows customers to charge their purchases to third party
credit cards in installments, generally over three consecutive months.
Flex-pay receivables totaled $13,015,000 and $23,621,000 at December
31, 1995 and 1994, respectively. An allowance for doubtful accounts
is provided based on Liberty Media Group's past experience.
Inventories, Net
Merchandise inventories are valued at the lower of cost or market,
cost being determined using the first-in, first-out method. Cost
includes freight, certain warehousing costs and other allocable
overhead. Market is determined on the basis of net realizable value,
giving consideration to obsolescence and other factors. Inventories
are presented net of an inventory carrying adjustment of $33,259,000
and $18,791,000 at December 31, 1995 and 1994, respectively.
Program Rights
Prepaid program rights are amortized on a film-by-film basis (or
event-by-event basis for sports events) over the specific number of
exhibitions. Committed film inventory and program rights payable are
recorded at the estimated costs of the programs when the film is
available for airing. These amounts are amortized on a film- by-film
basis over the specific number of exhibitions.
(continued)
II-120
<PAGE> 187
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Investments
All marketable equity securities held by Liberty Media Group are
classified as available-for-sale and are carried at fair value.
Unrealized holding gains and losses on securities classified as
available-for-sale are carried net of taxes as a separate component of
combined equity.
Other investments in which the ownership interest is less than 20% and
are not considered marketable securities are generally carried at
cost. For those investments in affiliates in which Liberty Media
Group's voting interest is 20% to 50%, the equity method of accounting
is generally used. Under this method, the investment, originally
recorded at cost, is adjusted to recognize Liberty Media Group's share
of net earnings or losses of the affiliates as they occur rather then
as dividends or other distributions are received, limited to the
extent of Liberty Media Group's investment in, advances to and
commitments for the investee. Liberty Media Group's share of net
earnings or losses of affiliates includes the amortization of the
difference between Liberty Media Group's investment and its share of
the net assets of the investee. However, recognition of gains on
sales of properties to affiliates accounted for under the equity
method is deferred in proportion to Liberty Media Group's ownership
interest in such affiliates.
Changes in Liberty Media Group's proportionate share of the underlying
equity of a subsidiary or equity method investee, which result from
the issuance of additional equity securities by such subsidiary or
equity investee, generally are recognized as gains or losses in
Liberty Media Group's combined statements of operations.
Long-Lived Assets
(a) Property and Equipment
Property and equipment, including significant improvements, is
stated at cost which includes acquisition costs allocated to
tangible assets acquired. Construction cost, including
interest during construction and applicable overhead, are
capitalized. Interest capitalized during the periods
presented was not material.
Depreciation is computed on a straight-line basis using
estimated useful lives of 3 to 40 years for support equipment
and buildings (furniture and other equipment are depreciated
from 3 to 8 years and buildings and improvements are
depreciated from 20 to 40 years) and 3 to 10 years for
computer and broadcast equipment.
Repairs and maintenance and any gains or losses on disposition
of assets in their entirety are included in operations.
(b) Excess Cost Over Acquired Net Assets
Excess cost over acquired net assets consists of the
difference between the cost of acquiring programming entities
and amounts assigned to their tangible assets. Such amounts
are amortized on a straight-line basis over 30 years.
(continued)
II-121
<PAGE> 188
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(c) Other Intangibles
Other intangible assets include amounts assigned to covenants
not to compete and amounts in excess of tangible assets
assigned to sports program rights agreements, affiliate
agreements and distribution agreements. The amounts assigned
to these agreements are amortized over the respective lives of
the agreements ranging from 1 to 10 years.
(d) Cable Distribution Fees
Liberty Media Group pays up front fees for long-term cable
contracts for carriage of Liberty Media Group's home shopping
programming. Such cable distribution fees are amortized to
expense on a straight-line basis, over the terms of the
respective contracts, which range from 5 to 15 years.
Liberty Media Group periodically analyzes the value of its
cable distribution fees to determine if an impairment has
occurred. Liberty Media Group measures the potential
impairment of recorded cable distribution fees by the
undiscounted amount of expected future operating cash flows in
relation to the net capital investment. Based on its
analysis, Liberty Media Group does not believe that an
impairment of its cable distribution fees has occurred.
In March of 1995, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("Statement No. 121"), effective for fiscal
years beginning after December 15, 1995. Statement No. 121 requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. Liberty Media Group will adopt Statement No. 121
effective January 1, 1996. The effect of such adoption is not
expected to be significant.
Minority Interests
Recognition of minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests'
allocable portion of the common equity of those consolidated
subsidiaries. Further, the minority interests' share of losses is not
recognized if the minority holders of common equity of consolidated
subsidiaries have the right to cause Liberty Media Group to repurchase
such holders' common equity.
Deferred Revenue
Deferred revenue represents advance billings primarily to home
satellite dish owners. Such revenue is recognized in the month
service is provided.
(continued)
II-122
<PAGE> 189
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Net Sales From Electronic Retailing Services
Revenue includes merchandise sales and shipping and handling revenue,
and is reduced by incentive discounts and sales returns to arrive at
net sales from home shopping services. Revenue is recorded for credit
card sales upon transaction authorization, and for check sales upon
receipt of customer payment, which does not vary significantly from
the time goods are shipped. Liberty Media Group's sales policy allows
merchandise to be returned at the customer's discretion, generally up
to 30 days. An allowance for returned merchandise is provided based
upon past experience.
Stock Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("Statement No. 123") was issued by the FASB
in October 1995. Statement No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans as
well as transactions in which an entity issues its equity instruments
to acquire goods or services from non-employees. Liberty Media Group
will include the disclosures required by Statement No. 123 in the
notes to future financial statements.
Loss Per Common Share
The loss per common share for the period from the Distribution to
December 31, 1995 was computed by dividing net loss attributable to
Liberty Media Group Series A and Series B common stockholders by the
weighted average number of common shares of Liberty Media Group Series
A and Series B common stock outstanding during the period (164.1
million). Common stock equivalents were not included in the
computation of weighted average shares outstanding because their
inclusion would be anti-dilutive. Earnings per common share are
omitted from the statements of operations for the periods from January
1, 1995 through the Distribution and for the years ended December 31,
1994 and 1993 as Liberty Group Stock was not part of the capital
structure of TCI until August 10, 1995, the date of the Distribution.
(continued)
II-123
<PAGE> 190
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification
Certain amounts have been reclassified for comparability with the 1995
presentation.
(3) Supplemental Disclosures to Combined Statements of Cash Flows
Cash paid for interest was $14,968,000, $8,853,000 and $14,018,000 for
the years ended December 31, 1995, 1994 and 1993, respectively. Cash
paid for income taxes during the years ended December 31, 1995, 1994
and 1993 was $1,707,000, $83,267,000 and $8,642,000, respectively. In
addition, Liberty Media Group received an income tax refund amounting
to $11,258,000 during the year ended December 31, 1995.
Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------------------------
1995 1994 1993
-------- -------- --------
amounts in thousands
<S> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired $35,329 302,043 540,254
Net liabilities assumed (934) (21,350) (195,648)
Contribution to combined equity from
TCI for acquisition (19,120) (210,796) (123,000)
Deferred tax asset (liability) recorded
in acquisition 1,084 (69,897) 1,115
Minority interests in equity of
acquired entities 20,237 -- (62,281)
---------- ---------- ----------
Cash paid for acquisitions $36,596 -- 160,440
========== ========== ==========
Conversion of debt into additional minority
interest in consolidated subsidiary $14,215 -- --
========== ========== ==========
Assets contributed for interest in
limited liability company $ 2,633 -- --
========== ========== ==========
</TABLE>
(continued)
II-124
<PAGE> 191
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(4) Investments in Affiliates
Summarized unaudited results of operations for affiliates accounted
for under the equity method are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
------- -------
amounts in thousands
<S> <C> <C>
Combined Financial Position
- ---------------------------
Property and equipment, net $ 310,858 242,742
Program rights 181,844 152,933
Cable distribution rights 184,160 105,705
Due from Liberty Media Group 11,313 11,253
Other intangibles 1,118,050 351,971
Other assets 1,004,800 873,176
----------- -----------
Total assets $2,811,025 1,737,780
=========== ===========
Debt $1,251,035 303,453
Due to Liberty Media Group 682 4,264
Program rights payable 37,782 51,310
Other liabilities 949,003 555,107
Owners' equity 572,523 823,646
----------- -----------
Total liabilities and equity $2,811,025 1,737,780
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Years ended
December 31,
-----------------------------------------------
1995 1994 1993
------- ------- -------
amounts in thousands
<S> <C> <C> <C>
Combined Operations
- -------------------
Revenue $2,577,752 2,104,423 1,781,359
Operating expenses (2,285,307) (1,855,746) (1,522,382)
Depreciation and amortization (122,289) (76,106) (58,197)
------------ ------------ ------------
Operating income 170,156 172,571 200,780
Interest expense (96,609) (20,937) (12,069)
Other, net (114,556) (119,856) (115,634)
------------ ------------ ------------
Net earnings (loss) $ (41,009) 31,778 73,077
============ ============ ============
</TABLE>
(continued)
II-125
<PAGE> 192
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The following table reflects the carrying value of Liberty Media
Group's investments, accounted for under the equity method, including
related receivables:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
------------ ------------
amounts in thousands
<S> <C> <C>
Discovery $117,373 113,182
QVC 81,160 72,100
Sunshine 8,221 7,174
Chicago 29,722 30,163
HTS 3,514 4,292
ICCP 11,563 13,686
Australia 4,212 --
BET 15,353 11,195
Court 7,711 --
Other 20,502 27,695
---------- ---------
$299,331 279,487
========== =========
</TABLE>
The following table reflects Liberty Media Group's share of earnings
(losses) of each of the aforementioned affiliates:
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------------------------------
1995 1994 1993
------- ------- -------
amounts in thousands
<S> <C> <C> <C>
Discovery $ 4,191 7,093 5,454
QVC 2,261 10,830 14,078
Sunshine 2,524 1,376 (957)
Chicago 6,560 6,465 5,859
HTS 744 531 (7,076)
ICCP (1,973) (1,469) --
AMC -- 8,805 11,313
Australia (8,478) -- --
BET 4,158 3,071 2,586
Court (21,064) -- --
Other (4,015) (5,869) (4,626)
---------- ----------- -----------
$(15,092) 30,833 26,631
========== =========== ===========
</TABLE>
In August 1995, Liberty Media Group made an additional $28,775,000
investment in Court which represented Liberty Media Group's pro rata
share of capital calls made in prior years by the other partners of
Court that Liberty Media Group had no obligation to fund. Due to the
additional investment in Court, which restored its 33% ownership
interest, Liberty Media Group's share of losses of Court for the year
ended December 31, 1995 includes $17,664,000 of previously
unrecognized losses of Court. These losses were not recognized in
prior periods due to the fact that Liberty Media Group's investment in
Court had been reduced to zero.
(continued)
II-126
<PAGE> 193
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
During 1995, BET repurchased a portion of its common stock. As a
result of the repurchases, Liberty Media Group's ownership of BET was
increased from 19% to 22%. Therefore, Liberty Media Group is deemed
to exercise significant influence over BET and, accordingly, has
adopted the equity method of accounting for its investment in BET. As
a result, Liberty Media Group restated its financial statements, which
resulted in a decrease to its investment in BET, its unrealized
holding gains on available-for-sale securities, its deferred taxes and
accumulated deficit of $44,211,000, $32,263,000, $18,126,000 and
$6,178,000, respectively, at December 31, 1994. Upon restatement of
Liberty Media Group's share of earnings of BET, Liberty Media Group's
net earnings was increased by approximately $1,812,000 and $1,526,000
for the years ended December 31, 1994 and 1993, respectively.
Liberty Media Group has a 49.9% partnership interest in QE+, a limited
partnership which distributes STARZ!, a first-run movie premium
programming service launched in 1994. Entities attributed to TCI
Group hold the remaining 50.1% partnership interest.
The QE+ limited partnership agreement provides that TCI Group will be
required to make special capital contributions to QE+ through July 1,
2005, up to a maximum amount of $350 million, approximately $86
million of which was paid in 1995. QE+ is obligated to pay TCI Group
a preferred return of 10% per annum on the first $200 million of its
special capital contributions beginning five years from the date of
the contribution or five years from January 1, 1996, whichever is
later. Any TCI Group special capital contributions in excess of $200
million will be entitled to a preferred return of 10% per annum from
the date of the contribution. QE+ is required to apply 75% of its
available cash flow, as defined, to repay the TCI Group special
capital contributions and any preferred return payable thereon. To
the extent such special capital contributions are insufficient to fund
the cash requirements of QE+, TCI Group and Liberty Media Group will
each have the option to fund such cash requirements in proportion to
their respective ownership percentages.
TCI Group has also entered into a long-term affiliation agreement with
QE+ with respect to the distribution of the STARZ! service. Rates per
subscriber specified in the agreement are based upon customary rates
charged to other cable system operators. Payments to QE+ for 1995
aggregated $31 million. The affiliation agreement also provides that
QE+ will not grant materially more favorable terms and conditions to
other major cable system operators unless such more favorable terms
and conditions are made available to TCI Group. The affiliation
agreement also requires TCI Group to make payments to QE+ with respect
to a guaranteed minimum number of subscribers totaling approximately
$339 million for the years 1996, 1997 and 1998.
In connection with the launch of the STARZ! service, TCI Group became
a direct obligor or guarantor of the payment of certain amounts that
may be due pursuant to certain film output, distribution, and license
agreements. As of December 31, 1995, the minimum amount of such
obligations or guarantees was approximately $251 million. The future
obligations of TCI Group with respect to these agreements is not
currently determinable because such amount is dependent upon certain
variable factors, principally the number of films released by the
motion picture companies with which the agreements have been made and
the performance of the theatrical distribution of the films.
(continued)
II-127
<PAGE> 194
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Liberty Media Group also has the right to acquire an additional 10.1%
general partnership interest in QE+ based on a formula designed to
approximate the fair value of such interest. Such right is
exercisable for a period of ten years beginning January 1, 1999 after
QE+ has had positive cash flow for two consecutive calendar quarters.
The right is exercisable only after all special capital contributions
from TCI Group have been repaid, including any preferred return as
discussed above.
Encore (90% owned by Liberty Media Group) earns management fees from
QE+ equal to 20% of managed costs, as defined. In addition, effective
July 1, 1995, Liberty Media Group started earning a "Content Fee" for
certain services provided to QE+ equal to 4% of the gross revenue of
QE+. Such Content Fees aggregated $972,000 for the six months ended
December 31, 1995. The Content Fee agreement expires on June 30,
2001, subject to renewal on an annual basis thereafter. Payment of
the Content Fee will be subordinated to the repayment of the
contributions made by TCI Group and the preferred return thereon.
On November 11, 1993, Liberty Media Group entered into an agreement
with the staff of the Federal Trade Commission pursuant to which
Liberty Media Group agreed to divest all of its equity investments in
QVC during an 18 month time period if QVC was successful in its offer
to buy Paramount Communications, Inc. ("Paramount") and not to vote or
otherwise exercise influence over QVC until such time as QVC withdrew
its offer for Paramount. Simultaneously, Liberty Media Group agreed
to withdraw from a stockholders agreement pursuant to which Liberty
Media Group and certain other stockholders exercised control over QVC
(the "Previous Stockholders' Agreement"). On February 15, 1994, QVC
terminated its offer for Paramount. Upon termination of such offer,
Liberty Media Group had the right to be reinstated as a party to the
Previous Stockholders' Agreement so long as such option was exercised
within 90 days after such termination.
On November 16, 1993, Liberty Media Group sold shares of common stock
of QVC to Comcast Corporation ("Comcast"). The sale to Comcast
reduced Liberty Media Group's interest in QVC common stock (on a fully
diluted basis) from 21.9% to 18.8%. Liberty Media Group continued to
account for its investment in QVC under the equity method, although it
no longer exercised significant influence over such affiliate, due to
the pending determination of whether it would rejoin the control group
under the Previous Stockholders' Agreement. As a result of the
election on May 13, 1994 by Liberty Media Group to forego the exercise
of its option to be reinstated as a party to the Previous
Stockholders' Agreement, Liberty Media Group began, as of that date,
to account for its investment in QVC under the cost method of
accounting.
Effective February 9, 1995 and pursuant to an Agreement and Plan of
Merger, QVC Programming Holdings, Inc. (the "Purchaser"), a
corporation which is jointly owned by Comcast and Liberty Media Group,
merged (the "QVC Merger") with and into QVC with QVC continuing as the
surviving corporation. Liberty Media Group owns an approximate 43%
interest in the post-merger QVC.
(continued)
II-128
<PAGE> 195
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Upon consummation of the QVC Merger, Liberty Media Group was deemed to
exercise significant influence over QVC and, as such, adopted the
equity method of accounting for its investment in QVC. As a result,
Liberty Media Group restated its financial statements, which resulted
in a decrease to its investment in QVC, its unrealized gain on
available-for-sale securities, its deferred tax liability and
accumulated deficit of $207,837,000, $127,219,000, $85,213,000 and
$4,595,000, respectively, at December 31, 1994. The restatement
resulted in an increase in Liberty Media Group's net earnings of
$4,595,000 for the year ended December 31, 1994. The restatement did
not affect Liberty Media Group's results of operations for the year
ended December 31, 1993 as QVC was accounted for under the equity
method during that period.
A credit facility entered into by QVC is secured by the common stock
of certain subsidiaries of QVC and by certain of QVC's carriage and
distribution agreements. In addition, Comcast and Liberty Media
Group have pledged their shares of QVC pursuant to such credit
facility.
On July 11, 1994, Rainbow Program Enterprise purchased 49.9% of
Liberty Media Group's 50% general partnership interest in AMC.
Liberty Media Group recognized a gain of $183,321,000 on the sale of
its interest in AMC.
Certain of Liberty Media Group's affiliates are general partnerships
and any subsidiary of Liberty Media Group that is a general partner in
a general partnership is, as such, liable as a matter of partnership
law for all debts (other than non-recourse debts) of that partnership
in the event liabilities of that partnership were to exceed its
assets.
(5) Investment in Turner Broadcasting System, Inc.
Liberty Media Group owns shares of a class of preferred stock of TBS
which have voting rights and are convertible into shares of TBS common
stock. The holders of those preferred shares, as a group, are
entitled to elect seven of fifteen members of the board of directors
of TBS, and Liberty Media Group appoints three such representatives.
However, voting control over TBS continues to be held by its chairman
of the board and chief executive officer. Liberty Media Group's total
holdings of TBS common and preferred stocks represent an approximate
7.5% voting interest for those matters for which preferred and common
stock vote as a single class.
At December 31, 1995 and 1994, Liberty Media Group's investment in TBS
common stock had an aggregate market value of $767 million and $481
million, respectively (including unrealized holding gains of $447
million and $167 million, respectively).
At December 31, 1995 and 1994, Liberty Media Group's investment in TBS
preferred stock, carried at cost, had an aggregate market value of
$927 million and $579 million, respectively, based upon the market
value of the common stock into which it is convertible. Such market
value exceeded cost by $749 million and $406 million, respectively,
for such periods.
(continued)
II-129
<PAGE> 196
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
As security for borrowings under one of its credit facilities, Liberty
Media Group has pledged a portion of its TBS common stock (with a
quoted market value of approximately $760 million at December 31,
1995). See note 8.
On September 22, 1995, the boards of directors of Time Warner, Inc.
("Time Warner") and TBS approved plans to merge their respective
companies (the "TBS/Time Warner Merger"). Under the terms of the
agreement, TBS shareholders will receive 0.75 of a Time Warner common
share for each TBS Class A and Class B common share. Each holder of
TBS Class C preferred stock will receive 0.80 of a Time Warner common
share for each of the 6 shares of TBS Class B common stock into which
each of the shares of Class C preferred stock may be converted.
Subject to certain conditions, Liberty Media Group has agreed to vote
its TBS shares for the TBS/Time Warner Merger. The Time Warner shares
of common stock received by Liberty Media Group will be exchanged
immediately for a series of voting common stock ("Time Warner Series
Common Stock") economically equivalent to the common stock and placed
in a voting trust with Time Warner Chairman, Gerald M. Levin, as the
trustee.
In connection with the TBS/Time Warner Merger, TBS has agreed to sell
its interest in SportSouth, a regional sports cable network, to
Liberty Media Group for approximately $60 million; and Time Warner has
agreed to issue shares of Time Warner Series Common Stock economically
equivalent to 5 million shares of Time Warner common stock to Liberty
Media Group in exchange for a 6-year option to purchase Southern.
Time Warner has also agreed to issue additional shares of Time Warner
Series Common Stock to Liberty Media Group having a market value of
$160 million in the event Time Warner exercises such option. Any
shares of Time Warner common stock issuable in connection with the
Southern option will be exchanged for Time Warner Series Common Stock.
Additionally, Time Warner will grant Liberty Media Group an option to
purchase Time Warner's interest in Sunshine, a Florida based sports
cable network, for $14 million.
The transaction is subject to, among other things, approval by the
Federal Communications Commission ("FCC") and regulatory review by
federal antitrust authorities, and approval by the shareholders of TBS
and Time Warner.
(continued)
II-130
<PAGE> 197
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(6) Other Investments
Other investments, accounted for under the cost method, and related
receivables, are summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
------------ ------------
amounts in thousands
<S> <C> <C>
Marketable equity securities $ 16,681 31,870
Convertible debt, accrued interest
and preferred stock investments 23,000 46,109
Other investments and related receivables 71,110 25,461
---------- ----------
$110,791 103,440
========== ==========
</TABLE>
Management of Liberty Media Group estimates that the market value,
calculated utilizing a variety of approaches including multiple of
cash flow, per subscriber value, a value of comparable public or
private businesses or publicly quoted market prices, of all of Liberty
Media Group's other investments aggregated $192 million and $155
million at December 31, 1995 and December 31, 1994, respectively. No
independent external appraisals were conducted for those assets.
(7) Acquisitions
On August 8, 1994, Liberty Media Group acquired all the partnership
interests of Prime Sports-West from an independent third party and
Forum Partners ("Forum") for aggregate consideration of $220 million.
On the closing date, TCI paid $33 million in cash to Forum in
consideration of the purchase of the 16.667% partnership interest held
by Forum and the payment of partnership indebtedness owed to Forum.
Also on the closing date, a subsidiary of Liberty Media Group was
merged with and into CVN, Inc. ("CVN"), and all outstanding stock of
CVN, which was held by the independent third party, was converted into
70,575 shares of TCI Convertible Preferred Stock, Series C. CVN owns
the remaining 83.333% general partnership interest in Prime
Sports-West. The consideration paid by TCI on behalf of Liberty Media
Group has been reflected in combined equity of Liberty Media Group.
Upon receipt of the final appraisal, the purchase price allocation for
the Prime Sports-West acquisition was completed and amounts were
reclassified from excess cost to other intangibles. Additional
amortization expense was recognized in the period that the purchase
price allocation was completed due to the difference in remaining
estimated useful lives of the amounts reflected in other intangibles
in comparison to excess costs. See note 12.
(continued)
II-131
<PAGE> 198
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
On February 11, 1993, Liberty Media Group acquired 20,000,000 shares
of the Class B stock of HSN from RMS Limited Partnership ("RMS") for
aggregate consideration of $181,000,000. Subsequent to such
acquisition, Liberty Media Group's ownership represents 23.5% of the
common equity and 65.6% of the controlling voting interests in HSN as
of the date of acquisition. As a result of the acquisition of the
controlling voting interest, HSN became a consolidated subsidiary of
Liberty Media Group for financial reporting purposes.
On June 1, 1993, Liberty Media Group completed the purchase of
approximately 16 million additional shares of HSN common stock at a
price of $7 per share. The shares had been tendered pursuant to a
tender offer initiated by Liberty Media Group in April 1993.
(8) Debt
Debt is summarized as follows:
<TABLE>
<CAPTION>
Weighted average
interest rate at
December 31, 1995 1995 1994
----------------- -------- --------
amounts in thousands
<S> <C> <C> <C>
Notes payable to bank (a) 8.5% $135,000 25,000
Note payable to bank (b) 6.5% 20,000 18,000
Note payable to bank (c) 7.17% 51,600 16,400
Note payable to partnership (d) 10.0% 5,654 11,253
Bank credit facility (e) 6.5% 30,000 --
Convertible notes payable (f) -- -- 14,141
Other debt, with varying rates
and maturities 8,736 8,150
---------- ----------
$250,990 92,944
========== ==========
</TABLE>
(a) Payable by HSN
This revolving credit facility, as amended, (the "Credit
Facility") provides for borrowings up to $150 million, expires
on April 1, 1997 and is secured by the capital stock of Home
Shopping Club, Inc. and HSN Realty, Inc., wholly-owned
subsidiaries of HSN. Borrowings under the Credit Facility may
be used for general corporate purposes. The interest rate on
borrowings under the Credit Facility is tied to the London
Interbank Offered Rate ("LIBOR"), Federal Funds Rate, or Prime
Rate, at HSN's option, plus an applicable margin. HSN must
pay an annual facility fee of .375% of the total commitment
plus $60,000.
(continued)
II-132
<PAGE> 199
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
On February 13, 1996, HSN amended the Credit Facility to give
consent to the anticipated change in control of HSN (see note
11), and to allow for additional subordinated financing and to
reduce the maximum borrowings under the Credit Facility to
$120 million. On March 1, 1996, HSN completed a private
placement of $100 million of convertible subordinated
debentures due March 1, 2006. The net proceeds were used to
repay borrowings under the Credit Facility leaving a balance
of $30 million with $90 million available for borrowings.
Restrictions contained in the Credit Facility include, but are
not limited to limitations on the encumbrance and disposition
of HSN's assets, certain restrictions on repurchases of HSN's
common stock and the maintenance of various financial
covenants and ratios.
(b) Payable by ARC Holding, Ltd.
ARC Holding, Ltd., a wholly-owned subsidiary of ARC, is a
party to a credit agreement, as amended, that provides for up
to $40,500,000 of borrowings at December 31, 1995. Borrowings
bear interest at the agent bank's base rate, LIBOR, a
certificate of deposit rate or a combination thereof, as
selected by ARC Holding, Ltd., plus a margin depending on ARC
Holding, Ltd.'s ratio of total debt to cash flow (as defined).
The commitment amount is reduced in equal quarterly amounts
to achieve annual reductions in the credit facility ranging
from a 11% reduction in 1996 to the final 17% in 2000.
Liberty Media Group must pay an annual commitment fee of
.375% of the unfunded portion of the commitment. Borrowings
under the credit agreement are secured by the assets of ARC
Holding, Ltd., including joint venture interests, and the
stock and assets of its existing and future subsidiaries.
The credit agreement contains certain provisions which limit
ARC Holding, Ltd. as to additional indebtedness, sale of
assets, liens, guarantees and distributions. Additionally,
ARC Holding, Ltd. must maintain certain specified financial
ratios.
(continued)
II-133
<PAGE> 200
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(c) Payable by Prime Sports-West
The Prime Sports-West credit agreement, as amended (the
"Agreement"), provides for borrowings in the form of revolving
term loans aggregating up to $65 million. Prime Sports-West
may specify the interest rate on the loans under various prime
and Eurodollar rate options plus an applicable margin, as
defined. Prime Sports-West must pay an annual commitment fee
of .375% of the unfunded portion of the commitment.
Borrowings under the Agreement are secured by the assets of
Prime Sports-West.
The Agreement contains, among other things, requirements as to
indebtedness obligations, restrictions on distributions and
capital expenditures, as well as maintenance of certain
specified financial ratios.
The Agreement was amended in March 1996 to provide for
borrowings in the form of revolving term loans aggregating up
to $80 million.
(d) Payable by Encore ICCP, Inc.
Encore ICCP, Inc. acquired a 50% general partnership interest
in ICCP in exchange for a note payable to the partnership with
an initial principal amount of $15 million. The note payable
is guaranteed by Encore.
(e) Payable by Communications Capital Corp ("CCC").
This revolving credit agreement, as amended, provides for
borrowings up to $325 million through August of 1997.
Borrowings under such agreement bear interest at optional
measures which approximate the prime rate. As security for
this indebtedness, Liberty Media Group has pledged
substantially all of its TBS Class B common stock. CCC must
pay an annual commitment fee of .3125% of the unfunded portion
of the commitment.
(f) Payable by ARC
In January 1995, these notes were converted into partnership
units held by minority holders.
Certain of Liberty Media Group's subsidiaries are subject to loan
agreements that prohibit or limit the transfer of funds of such
subsidiaries to the parent company in the form of loans, advances or
cash dividends.
The fair value of Liberty Media Group's debt is estimated based on the
quoted market prices for the same or similar issues or on the current
rates offered to Liberty Media Group for debt of the same remaining
maturities. The fair market value of such debt approximated its
carrying value at December 31, 1995.
(continued)
II-134
<PAGE> 201
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
As of December 31, 1995, annual maturities of debt for each of the
next five years were as follows (amounts in thousands):
<TABLE>
<S> <C>
1996 $ 9,198
1997 168,729
1998 15,135
1999 20,273
2000 17,655
</TABLE>
(9) Income Taxes
TCI files a consolidated Federal income tax return with all of its 80%
or more owned subsidiaries. Consolidated subsidiaries in which TCI
owns less than 80% each file a separate tax return. TCI and such
subsidiaries calculate their respective tax liabilities on a separate
return basis. Prior to the TCI/Liberty Combination, Liberty filed a
consolidated Federal income tax return with all of its 80% or more
owned subsidiaries. Consolidated subsidiaries in which Liberty owned
less than 80% each filed a separate income tax return. Liberty and
such subsidiaries calculated their respective tax liabilities on a
separate return basis. Prior to the TCI/Liberty Combination, income
tax expense for Liberty Media Group was based upon those items in the
consolidated tax calculation of TCI and Liberty which are applicable
to Liberty Media Group. Subsequent to the TCI/Liberty Combination,
income tax expense for Liberty Media Group is based upon those items
in the consolidated tax calculations of TCI applicable to Liberty
Media Group. Intergroup tax allocation represents an apportionment of
tax expense or benefit (other than deferred taxes) and alternative
minimum taxes to Liberty Media Group in relation to its amount of
taxable earnings or losses. Prior to the Distribution, the payable or
receivable arising from the intergroup tax allocation has been
reflected as an increase or decrease in combined equity. Subsequent
to the Distribution, such amounts are reflected as borrowings from or
loans to TCI.
A tax sharing agreement (the "Tax Sharing Agreement") among entities
attributed to Liberty Media Group, TCI and certain subsidiaries of TCI
was implemented effective July 1, 1995. The Tax Sharing Agreement
formalizes certain of the elements of a pre-existing tax sharing
arrangement and contains additional provisions regarding the
allocation of certain consolidated income tax attributes and the
settlement procedures with respect to the intercompany allocation of
current tax attributes. The Tax Sharing Agreement encompasses U.S.
federal, state, local and foreign tax consequences and relies upon
the U.S. Internal Revenue Code of 1986 as amended, and any applicable
state, local and foreign tax law and related regulations. Beginning
on the July 1, 1995 effective date, Liberty Media Group will be
responsible to TCI for its share of current consolidated income tax
liabilities. TCI will be responsible to Liberty Media Group to the
extent that Liberty Media Group's income tax attributes generated
after the effective date are utilized by TCI to reduce its
consolidated income tax liabilities. Accordingly, all tax attributes
generated by Liberty Media Group's operations after the effective date
including, but not limited to, net operating losses, tax credits,
deferred intercompany gains, and the tax basis of assets are
inventoried and tracked for the entities comprising Liberty Media
Group. In connection with the implementation of the Tax Sharing
Agreement, Liberty Media Group recorded a decrease to its deferred
income tax liability and an increase to its combined equity of
$2,410,000.
(continued)
II-135
<PAGE> 202
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Income tax benefit (expense) consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
amounts in thousands
<S> <C> <C> <C>
Year ended December 31, 1995:
State and local intergroup tax benefit
(expense) allocation $ (2,192) 8,920 6,728
Federal intergroup tax benefit allocation 2,584 44,980 47,564
---------- ----------- -----------
$ 392 53,900 54,292
========== =========== ===========
Year ended December 31, 1994:
State and local intergroup tax expense
allocation $(16,699) (4,742) (21,441)
Federal intergroup tax expense
allocation (61,539) (20,961) (82,500)
---------- ---------- ----------
$(78,238) (25,703) (103,941)
========== ========== ==========
Year ended December 31, 1993:
State and local intergroup tax expense
allocation $ (3,275) (1,296) (4,571)
Federal intergroup tax benefit (expense)
allocation (21,575) 2,739 (18,836)
Intergroup alternative minimum tax
allocation (554) 554 --
---------- ----------- -----------
$(25,404) 1,997 (23,407)
========== =========== ===========
</TABLE>
Income tax benefit (expense) differs from the amounts computed by the
Federal tax rate of 35% in 1995, 1994 and 1993 as a result of the
following:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1994 1993
-------- -------- --------
amounts in thousands
<S> <C> <C> <C>
Computed expected tax benefit (expense) $38,726 (83,477) (18,642)
Dividends excluded for income tax purposes 1,116 1,134 1,104
Minority interest of consolidated subsidiaries 13,333 (3,548) (398)
Amortization not deductible for income
tax purposes (5,723) (4,774) (2,886)
Excess executive compensation 688 -- (688)
State and local income taxes, net of
Federal income tax benefit 2,043 (13,937) (2,971)
Change in allocated state tax rate 2,353 -- --
Sale of wholly-owned subsidiary -- 920 --
Other, net 1,756 (259) 1,074
---------- ---------- ---------
$54,292 (103,941) (23,407)
========== ========== =========
</TABLE>
(continued)
II-136
<PAGE> 203
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below:
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
-------- --------
amounts in thousands
<S> <C> <C>
Deferred tax assets:
Net operating and capital loss carryforwards $ 36,254 11,629
Charitable contribution carryforward 733 666
Allocated alternative minimum tax paid credit
carryforward -- 2,444
Inventory costs 10,339 5,918
Provision for returns and allowance 9,460 8,729
Future deductible amount attributable to accrued
stock appreciation rights and deferred
compensation 3,094 12,951
Future deductible amount related to accrued
litigation settlements -- 3,065
Other future deductible amounts primarily due
to non-deductible accruals 996 1,056
---------- -----------
Deferred tax assets 60,876 46,458
---------- -----------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation 12,162 11,916
Intangible assets, primarily due to differences in
amortization 3,392 4,172
Investments in affiliates, due principally to
undistributed earnings of affiliates 247,231 162,845
---------- -----------
Deferred tax liabilities 262,785 178,933
---------- -----------
Net deferred tax liabilities $201,909 132,475
========== ===========
</TABLE>
There was no valuation allowance for deferred tax assets as of
December 31, 1995 and 1994.
At December 31, 1995, Liberty Media Group had net operating and
capital loss carryforwards for income tax purposes aggregating
approximately $97,375,000 which, if not utilized to reduce taxable
income in future periods, expire as follows: $2,352,000 in 2003,
$478,000 in 2004, $11,345,000 in 2005, $9,249,000 in 2006, and
$73,951,000 in 2010.
New tax legislation was enacted in the third quarter of 1993 which,
among other matters, increased the corporate Federal income tax rate
from 34% to 35%. Liberty Media Group has reflected the tax rate
changes in its combined statements of operations. Such tax rate
changes resulted in a net increase of $314,000 in income tax expense
in 1993. Liberty Media Group will carryback $8,900,000 of net
operating losses to prior taxable years to obtain an income tax refund.
(continued)
II-137
<PAGE> 204
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(10) Combined Equity
Stock Options and Stock Appreciation Rights
Liberty had granted certain stock options and/or stock appreciation
rights prior to the TCI/Liberty Combination. All such options and/or
stock appreciation rights were assumed by TCI in conjunction with the
TCI/Liberty Combination. Additionally, subsequent to the TCI/Liberty
Combination, certain key employees of Liberty were granted additional
options with tandem stock appreciation rights. Estimates of the
compensation relating to the options and/or stock appreciation rights
granted to employees of Liberty Media Group have been recorded in the
accompanying combined financial statements, but are subject to future
adjustment based upon the market value of Series A TCI Group common
stock and the Series A Liberty Media Group common stock (see note 1)
and, ultimately, on the final determination of market value when the
rights are exercised. Prior to the Distribution, the payable or
receivable arising from the compensation related to the options and/or
stock appreciation rights has been reflected as an increase or
decrease in combined equity. Subsequent to the Distribution, such
amounts are reflected as borrowings from or loans to TCI.
Transactions with TCI and Other Related Parties
Certain TCI corporate general and administrative costs are charged to
Liberty Media Group at rates set at the beginning of the year based on
projected utilization for that year. The utilization-based charges
are set at levels that management believes to be reasonable and that
approximate the costs Liberty Media Group would incur for comparable
services on a stand alone basis. The accompanying combined statements
of operations through the date of the TCI/Liberty Combination do not
reflect the allocation of corporate general and administrative costs
in the aforementioned manner because the majority of the entities
attributable to Liberty Media Group were owned, directly or
indirectly, by Liberty through such dates. During the year ended
December 31, 1995, Liberty Media Group was allocated $3,066,000 in
corporate general and administrative costs by TCI.
Prior to the determination by the Board to seek approval of
stockholders to distribute the Liberty Group Stock, TCI did not have
formalized intercompany allocation methodologies. In connection with
such determination, management of TCI determined that TCI general
corporate expenses should be allocated to Liberty Media Group based on
the amount of time TCI corporate employees (e.g. legal, corporate,
payroll, etc.) expend on Liberty Media Group matters. TCI management
evaluated several alternative allocation methods including assets,
revenue, operating income, and employees. Management did not believe
that any of these methods would reflect an appropriate allocation of
corporate expenses given the diverse nature of TCI's operating
subsidiaries, the relative maturity of certain of the operating
subsidiaries, and the way in which corporate resources are utilized.
Entities included in Liberty Media Group lease satellite transponder
facilities from TCI Group. Charges by TCI Group for such arrangements
for the years ended December 31, 1995, 1994 and 1993 aggregated
$14,709,000, $7,542,000 and $4,455,000, respectively.
(continued)
II-138
<PAGE> 205
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Certain subsidiaries attributed to Liberty Media Group produce and/or
distribute sports and other programming to cable television operators
(including TCI Group) and others. Charges to TCI Group are based upon
customary rates charged to others.
HSN pays a commission to TCI Group for merchandise sales to customers
who are subscribers of TCI Group's cable systems. Aggregate
commissions and charges were $6,124,000, $6,638,000 and $1,200,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
Subsequent to the TCI/Liberty Combination, TCI manages certain
treasury activities for Liberty Media Group on a centralized basis.
Cash receipts of certain businesses attributed to Liberty Media Group
are remitted to TCI and certain cash disbursements of Liberty Media
Group are funded by TCI on a daily basis. Prior to the Distribution,
but subsequent to the TCI/Liberty Combination, the net amounts of such
cash activities are included in combined equity. Prior to the
TCI/Liberty Combination, Liberty separately managed the treasury
activities of its subsidiaries. Subsequent to the Distribution, such
cash activities are included in borrowings from or loans to TCI or, if
determined by the Board, as an equity contribution to Liberty Media
Group.
The Board could determine from time to time that debt of TCI not
incurred by entities attributed to Liberty Media Group or preferred
stock and the proceeds thereof should be specifically attributed to
and reflected on the combined financial statements of Liberty Media
Group to the extent that the debt is incurred or the preferred stock
is issued for the benefit of Liberty Media Group.
For all periods prior to the Distribution, all financial impacts of
equity offerings are attributed entirely to TCI. After the
Distribution, all financial impacts of issuances of additional shares
of TCI Group Stock will be attributed entirely to TCI, and all
financial impacts of issuances of additional shares of Liberty Group
Stock, the proceeds of which are attributed to Liberty Media Group,
will to such extent be reflected entirely in the combined financial
statements of Liberty Media Group. Financial impacts of dividends or
other distributions on, and purchases of, TCI Group Stock will be
attributed entirely to TCI Group, and financial impacts of dividends
or other distributions of Liberty Group stock will be attributed
entirely to Liberty Media Group. Financial impacts of repurchases of
Liberty Group Stock the consideration for which is charged to Liberty
Media Group will be reflected entirely in the combined financial
statements of Liberty Media Group, and financial impacts of
repurchases of Liberty Group Stock the consideration for which is
charged to TCI will be attributed entirely to TCI.
Subsequent to the Distribution, borrowings from or loans to TCI will
bear interest at such rates and have repayment schedules and other
terms as are established by the Board. The Board expects to make such
determinations, either in specific instances or by setting generally
applicable policies from time to time, after consideration of such
factors as it deems relevant, including, without limitation, the use
of proceeds by and creditworthiness of the recipient Group, the
capital expenditure plans and investment opportunities available to
each Group and the availability, cost and time associated with
alternative financing sources.
(continued)
II-139
<PAGE> 206
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(11) Commitments and Contingencies
Liberty Media Group is obligated to pay fees for the license to
exhibit certain qualifying films that are released theatrically by
various motion picture studios through February 28, 2009 (the "Film
Licensing Obligations"). As of December 31, 1995, the aggregate
minimum liability under certain of the license agreements is
approximately $163 million. The aggregate amount of the Film
Licensing Obligations under these license agreements is not currently
estimable because such amount is dependent upon certain variable
factors. Nevertheless, required aggregate payments under the Film
Licensing Obligations could prove to be significant.
Liberty Media Group has long-term sports program rights contracts
which require payments for each of the next five years as follows
(amounts in thousands):
<TABLE>
<S> <C>
1996 $ 84,063
1997 72,884
1998 62,236
1999 54,685
2000 45,736
</TABLE>
Liberty Media Group leases business offices, has entered into
transponder lease agreements and uses certain equipment under lease
arrangements. Rental expense under such arrangements amounted to
$47,569,000, $34,274,000 and $29,250,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
Future minimum lease payments under noncancellable operating leases
for each of the next five years are summarized as follows (amounts in
thousands):
<TABLE>
<S> <C>
1996 $ 58,214
1997 57,580
1998 50,908
1999 49,983
2000 42,369
</TABLE>
It is expected that in the normal course of business, leases that
expire will be renewed or replaced by leases on other properties;
thus, it is anticipated that future minimum lease commitments will not
be less than the amounts shown for 1996.
On October 31, 1995, Liberty Media Group announced that it had entered
into a binding agreement in principle with The News Corporation Limited
("News Corp.") and Tele-Communications International, Inc. ("TINTA").
In the United States, Liberty Media Group and News Corp. agreed to form
a partnership (the "Fox-Liberty Venture") into which Liberty Media
Group will contribute interests in its national and regional sports
networks and into which News Corp. will contribute its fx cable network
and certain other assets. Upon consummation, Liberty Media Group will
receive a 50% interest in the Fox-Liberty Venture and $350 million in
cash. The fx network will be transformed into a nationally distributed,
general entertainment and sports network. The regional sports networks
currently operated under the Prime Sports name will be relaunched under
the Fox Sports banner.
(continued)
II-140
<PAGE> 207
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Internationally, News Corp., and a 50/50 partnership forms by Liberty
Sports, a wholly-owned subsidiary of Liberty Media Group, and TINTA
(the "Liberty-TINTA Partnership") have agreed to form a venture to
operate currently existing sports services in Asia, Latin American and
Australia and a variety of new sports services throughout the world
except in the United Kingdom, Japan and New Zealand where prior
arrangements preclude an immediate collaboration. The Liberty-TINTA
Partnership will own 50% of the international venture with News Corp.
owning the other 50%. News Corp. is contributing various
international sports rights, including the Star Sports channel which
is broadcast throughout Asia as part of the Star package of services.
The Liberty-TINTA Partnership is contributing Prime Deportiva, a
Spanish language sports service distributed in Latin American and in
Hispanic markets in the United States, an interest in Torneos y
Competencias S.A., an Argentinean sports programming and production
business, various international sports and satellite transponder
rights and cash. The Liberty-TINTA Partnership will also contribute
their 50% interest in Premiere Sports and All-Star Sports in
Australia. Both are 24-hour sports services available via MMDS or
cable television in Australia.
The transactions contemplated by the above agreements are expected to
close during 1996.
On November 27, 1995, Liberty Media Group announced that it had agreed
to exchange its controlling interest in HSN for shares of Silver King.
Liberty Media Group will receive approximately 11 million newly issued
shares of Silver King in exchange for its 37.5 million shares of HSN.
Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into an agreement in August 1995 pursuant
to which an option owned by Liberty Media Group to purchase 2 million
shares of Silver King Class B common stock (the "Option")(which shares
would constitute voting control of Silver King) would be transferred to
Silver Management Company ("Silver Company"), an entity in which
Liberty Media Group would own all of the non-voting equity interests
(which would constitute substantially all of the equity of such entity)
and Mr. Diller would own all of the voting equity interests. Silver
Company would thereafter exercise the Option and hold the shares of the
Silver King Class B Common Stock purchased thereunder. In an amendment
to such agreement entered into in November 1995, Liberty Media Group
agreed to contribute all of its shares of HSN (which shares constitute
approximately 41% of the equity of HSN and approximately 80% of the
voting power of HSN) to Silver Company in return for additional
non-voting equity interests in Silver Company. Following such
contribution Silver Company would exchange such HSN shares with Silver
King for additional shares of Silver King Common Stock and Class B
Common Stock (thereby increasing Silver Company's controlling interest
in Silver King to in excess of 80% of the voting power of Silver King).
Each such transaction is subject to the satisfaction of certain
condition, including the receipt of all necessary regulatory consents
and approvals. If consummated, HSN would cease to be a subsidiary of
Liberty Media Group and therefore, the financial results of HSN would
not be consolidated with the financial results of Liberty Media Group.
Although Liberty Media Group would cease to possess voting control over
HSN, it would continue to have an indirect equity interest in HSN
through its ownership of the equity securities of Silver Company. No
assurance can be given that the transaction will be consummated.
(continued)
II-141
<PAGE> 208
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(12) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
amounts in thousands,
Year ended December 31, 1995: except per share data
-----------------------------
<S> <C> <C> <C> <C>
Revenue $ 357,957 368,335 374,920 438,463
Operating loss:
As previously reported $ (25,538) (17,247) (5,453)
Adjustment to restate
amortization of intangibles
upon reallocation of
purchase price -- (20,514) (3,773)
----------- -------- --------
As adjusted $ (25,538) (37,761 (9,226) (38,581)
=========== ========= ========= =========
Net loss:
As previously reported $ (10,691) (59) (5,646)
Adjustment to restate
amortization of intangibles
upon reallocation of
purchase price -- (12,600) (2,799)
Adjustment to restate
share of earnings of BET,
net of taxes 541 537 646
Adjustment to properly reflect
other expense, net -- -- (4,082)
----------- -------- --------
As adjusted $ (10,150) (12,122) (11,881) (22,179)
=========== ======== ======== ========
Loss per share:
As previously reported $(0.02)
Adjustment to restate
amortization of intangibles
upon reallocation of
Adjustment to restate
share of earnings of BET,
net of taxes (.01)
-------- --------
As adjusted N/A N/A $(0.03) (.13)
======== ========
Year ended December 31, 1994:
----------------------------
Revenue $ 350,855 357,789 363,929 410,375
Operating income (loss) $ 25,292 9,190 1,325 (4,333)
Gain (loss) on disposition
of assets $ (2,233) -- 183,321 --
Net earnings
As previously reported $ 15,444 10,736 106,568 109
Adjustment to restate share
of earnings of BET, net of
taxes 540 537 630 --
----------- -------- -------- --------
As adjusted $ 15,984 11,273 107,198 109
=========== ======== ======== ========
</TABLE>
II-142
<PAGE> 209
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We have audited and reported separately herein on the consolidated financial
statements of Tele-Communications, Inc. and subsidiaries as of December 31,
1995 and 1994 and for each of the years in the three-year period ended December
31, 1995.
We have also audited the accompanying combined balance sheets of TCI Group (a
combination of certain assets of Tele-Communications, Inc. and its affiliate,
Liberty Media Corporation, as defined in note 1) 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. These
combined financial statements are the responsibility of the companies'
managements. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The combined financial statements of TCI Group are presented for purposes of
additional analysis of the consolidated financial statements of
Tele-Communications, Inc. and subsidiaries. As more fully described in note 1,
the combined financial statements of TCI Group are intended to reflect the
performance of the remaining businesses of Tele-Communications, Inc. and its
affiliate, Liberty Media Corporation, which have not been attributed to the
Liberty Media Group. Liberty Media Group includes the businesses of
Tele-Communications, Inc. and Liberty Media Corporation which produce and
distribute cable television programming services. The combined financial
statements of TCI Group should be read in conjunction with the consolidated
financial statements of Tele-Communications, Inc. and subsidiaries and Liberty
Media Corporation and subsidiaries.
As more fully described in Note 1 to the combined financial statements, TCI
Group has accounted for its interest in the Liberty Media Group in a manner
similar to the equity method of accounting that, in our opinion, should be
consolidated with TCI Group to conform to generally accepted accounting
principles for the periods subsequent to the mergers of TCI Communications, Inc.
and Liberty Media Corporation on August 4, 1994. The Liberty Media Group is
under the sole control of Tele-Communications, Inc. If TCI Group's interest in
the Liberty Media Group were consolidated with the TCI Group subsequent to the
mergers, the combined financial position, combined results of operations, and
combined cash flows of the TCI Group would equal the consolidated financial
position, consolidated results of operations, and consolidated cash flows of
Tele-Communications, Inc. and subsidiaries, which financial statements are
included separately herein.
In our opinion, except for the effects of not consolidating TCI Group's
interest in Liberty Media Group as discussed in the preceding paragraph, the
combined financial statements referred to in the second paragraph above present
fairly, in all material respects, the financial position of TCI Group as of
December 31, 1995 and 1994, and the results of their operations and cash flows
for each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Denver, Colorado
March 18, 1996
II-143
<PAGE> 210
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Combined Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994 *
------------ ------------
Assets amounts in millions
- ------
<S> <C> <C>
Cash $ 77 11
Trade and other receivables, net 300 206
Prepaid expenses 51 22
Prepaid program rights 19 13
Committed film inventory 92 36
Investments in affiliates, accounted for
under the equity method, and related
receivables (note 5) 2,073 1,019
Property and equipment, at cost:
Land 67 69
Distribution systems 9,153 7,705
Support equipment and buildings 1,213 935
---------- ---------
10,433 8,709
Less accumulated depreciation 3,611 3,027
---------- ---------
6,822 5,682
---------- ---------
Franchise costs 14,322 11,152
Less accumulated amortization 2,092 1,708
---------- ---------
12,230 9,444
---------- ---------
Other assets, net of amortization 948 688
---------- ---------
$ 22,612 17,121
========== =========
</TABLE>
* Restated - see note 13.
(continued)
II-144
<PAGE> 211
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Combined Balance Sheets, continued
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994 *
------------ ------------
Liabilities and Combined Equity amounts in millions
- -------------------------------
<S> <C> <C>
Accounts payable $ 148 90
Accrued interest 228 183
Accrued programming expense 272 207
Other accrued expenses 518 435
Debt (note 7) 12,960 11,068
Deferred income taxes (note 12) 4,328 3,377
Other liabilities 181 142
----------- ----------
Total liabilities 18,635 15,502
----------- ----------
Minority interests in equity
of consolidated subsidiaries 563 314
Redeemable preferred stock (note 8) 478 168
Combined equity (note 9):
Combined equity, including preferred
stocks 2,884 2,565
Cumulative foreign currency
translation adjustment (9) (4)
TCI Group unrealized holding gains (losses)
for available-for-sale securities, net of taxes 68 (4)
Due from Liberty Media Group (7) (29)
Liberty Media Group unrealized holding
gains for available-for-sale securities,
net of taxes -- 98
Interest in Liberty Media Group -- (1,489)
----------- ----------
Combined equity 2,936 1,137
----------- ----------
Commitments and contingencies (note 14)
$ 22,612 17,121
============ ===========
</TABLE>
* Restated - see note 13.
See accompanying notes to combined financial statements.
II-145
<PAGE> 212
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994* 1993*
-------- -------- --------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Revenue $ 5,384 4,269 4,090
Operating costs and expenses:
Operating 1,677 1,232 1,341
Programming charges from Liberty
Media Group (note 13) 73 60 47
Selling, general and administrative 1,686 1,207 838
Charges to Liberty Media Group (note 13) (24) (14) (6)
Compensation relating to stock
appreciation rights 45 -- 31
Adjustment to compensation relating to
stock appreciation rights -- (5) --
Depreciation 874 694 628
Amortization 400 307 292
-------- -------- --------
4,731 3,481 3,171
-------- -------- --------
Operating income 653 788 919
Other income (expense):
Interest expense (993) (786) (735)
Interest and dividend income 41 21 18
Interest income from Liberty Media
Group (note 13) 2 2 2
Gain on sale of subsidiary stock (note 11) 123 -- --
Gain on sale of stock by equity investee
(note 5) 165 161 --
Share of losses of affiliates,
net (note 5) (178) (117) (66)
Gain (loss) on disposition of assets 51 (13) 42
Other, net (45) (18) (57)
-------- -------- --------
(834) (750) (796)
-------- -------- --------
Earnings (loss) before income taxes (181) 38 123
Income tax benefit (expense) (note 12) 66 (60) (156)
-------- -------- --------
Loss before earnings
(loss) of Liberty Media Group
through the date of Distribution
(note 1) (115) (22) (33)
Earnings (loss) of Liberty Media Group
through the date of Distribution
(note 1) (29) 135 30
-------- -------- --------
Net earnings (loss) (144) 113 (3)
Dividend requirements on
preferred stocks (34) (14) (12)
-------- -------- --------
Net earnings (loss) attributable to
common stockholders $ (178) 99 (15)
======== ======== ========
Loss attributable to common stockholders
per common share (note 3) $ (.16)
========
</TABLE>
* Restated - see note 13.
See accompanying notes to combined financial statements.
II-146
<PAGE> 213
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Equity
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
TCI Liberty
Group Media
unrealized Group
holding unrealized
Combined Cumulative Note gains Due holding Interest
equity, foreign receivable (losses) for from gains for in
including currency from available- Liberty available- Liberty
preferred translation related for-sale Media for-sale Media Combined
stocks adjustment party securities Group securities* Group* equity
------ ---------- ----------- ---------- -------- ------------ ------ ---------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 1,660 (19) (15) -- -- -- (894) 732
Net loss (3) -- -- -- -- -- (30) (33)
Purchase of programming from
Liberty Media Group -- -- -- -- -- -- 47 47
Cost allocations to Liberty
Media Group -- -- -- -- -- -- (6) (6)
Allocation to Liberty Media Group
of compensation related to stock
appreciation rights -- -- -- -- -- -- (40) (40)
Payments of compensation related
to stock appreciation rights -- -- -- -- -- -- 22 22
Interest income from Liberty
Media Group -- -- -- -- -- -- (2) (2)
Intergroup tax allocation -- -- -- -- -- -- (25) (25)
Net cash transfers to Liberty
Media Group -- -- -- -- (3) -- (134) (137)
Foreign currency translation
adjustment -- (10) -- -- -- -- -- (10)
Payment of TCI and Liberty
preferred stock dividends (11) -- -- -- -- -- -- (11)
Issuance of Liberty Class A
common stock for acquisition
by Liberty Media Group 123 -- -- -- -- -- (123) --
Issuance of TCI Class A
common stock upon
conversion of notes 403 -- -- -- -- -- -- 403
Issuance of TCI Class A
common stock upon
exercise of stock options 7 -- -- -- -- -- -- 7
Acquisition and retirement of
TCI common stock (5) -- -- -- -- -- -- (5)
-------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1993 2,174 (29) (15) -- (3) -- (1,185) 942
-------- ------- ------- ------- ------- ------- -------- -------
</TABLE>
* Restated - see note 9.
II-147
<PAGE> 214
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Equity (continued)
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
TCI Liberty
Group Media
unrealized Group
holding unrealized
Combined Cumulative Note gains Due holding Interest
equity, foreign receivable (losses) for from gains for in
including currency from available- Liberty available- Liberty
preferred translation related for-sale Media for-sale Media Combined
stocks adjustment party securities Group securities * Group * equity
------ ---------- ----------- ---------- -------- ------------ ------- ------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 2,174 (29) (15) -- (3) -- (1,185) 942
Unrealized holding gains for
available-for-sale securities
as of January 1, 1994 -- -- -- 22 -- 293 (293) 22
Net earnings (loss) 113 -- -- -- -- -- (135) (22)
Purchase of programming from
Liberty Media Group -- -- -- -- -- -- 60 60
Cost allocations to Liberty
Media Group -- -- -- -- -- -- (14) (14)
Accrued cable distribution fees
to TCI from Home Shopping
Network, Inc. ('HSN") -- -- -- -- (28) -- -- (28)
Allocation to Liberty Media
Group of compensation related
to stock appreciation rights -- -- -- -- -- -- 8 8
Interest income from Liberty
Media Group -- -- -- -- -- -- (2) (2)
Intergroup tax allocation -- -- -- -- -- -- (78) (78)
Net cash transfers from Liberty
Media Group -- -- -- -- 2 -- 166 168
Change in unrealized holding
gains for available-for-sale
securities -- -- -- (26) -- (195) 195 (26)
Foreign currency translation
adjustment -- 25 -- -- -- -- -- 25
Payment of TCI and Liberty
preferred stock dividends (14) -- -- -- -- -- -- (14)
Issuance of TCI common stock
for investments 130 -- -- -- -- -- -- 130
Fees incurred in TCI/Liberty
Combination (13) -- -- -- -- -- -- (13)
Issuance of TCI preferred stock
for acquisition by Liberty
Media Group 168 -- -- -- -- -- (168) --
Acquisition by Liberty Media Group -- -- -- -- -- -- (43) (43)
Conversion of redeemable preferred
stock 18 -- -- -- -- -- -- 18
Issuance of TCI Class A common
stock upon conversion of notes 3 -- -- -- -- -- -- 3
Issuance of TCI Class A common
stock upon exercise of stock
options 3 -- -- -- -- -- -- 3
Acquisition and retirement of
TCI common stock (2) -- -- -- -- -- -- (2)
Repayment of note receivable
from related party with TCI
common stock (15) -- 15 -- -- -- -- --
------- ------ ------- ------ ------- ------ -------- ---------
Balance at December 31, 1994 2,565 (4) -- (4) (29) 98 (1,489) 1,137
------- ------ ------- ------ ------- ------ -------- ---------
</TABLE>
* Restated - see note 9.
II-148
<PAGE> 215
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Equity (continued)
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
TCI Liberty
Group Media
unrealized Group
holding unrealized
Combined Cumulative Note gains Due holding Interest
equity, foreign receivable (losses) for from gains for in
including currency from available- Liberty available- Liberty
preferred translation related for-sale Media for-sale Media Combined
stocks adjustment party securities Group securities* Group* equity
------ ---------- ----------- ---------- -------- ------------ ------- --------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 2,565 (4) -- (4) (29) 98 (1,489) 1,137
Net loss (144) -- -- -- -- -- 29 (115)
Purchase of programming from
Liberty Media Group -- -- -- -- 33 -- 40 73
Cost allocations to Liberty
Media Group -- -- -- -- (9) -- (15) (24)
Cable distribution fees received
from HSN -- -- -- -- 27 -- -- 27
Allocation of compensation
relating to stock appreciation
rights -- -- -- -- (3) -- (7) (10)
Interest income from Liberty
Media Group -- -- -- -- -- -- (2) (2)
Deferred tax assets transferred
from Liberty Media Group -- -- -- -- -- -- 14 14
Turner Broadcasting System, Inc.
("TBS") stock received in
acquisition transferred to
Liberty Media Group -- -- -- -- -- -- (7) (7)
Net cash transfers to Liberty
Media Group -- -- -- -- (26) -- (15) (41)
Change in unrealized gains for
available-for-sale securities -- -- -- 72 -- 108 (108) 72
Foreign currency translation
adjustment -- (5) -- -- -- -- -- (5)
Accreted dividends on TCI preferred
stock subject to mandatory
redemption requirements (24) -- -- -- -- -- -- (24)
Payment of TCI preferred stock
dividends (10) -- -- -- -- -- -- (10)
Issuance of TCI Class A common
stock for acquisitions and
investments 1,378 -- -- -- -- -- -- 1,378
Issuance of TCI Class A common
stock for acquisition by Liberty
Media Group 10 -- -- -- -- -- (10) --
Cash paid by TCI Group for
investment by Liberty Media
Group contributed to Liberty
Media Group combined equity -- -- -- -- -- -- (2) (2)
Proceeds from issuances of TCI
Class A common stock in
public and private offerings 431 -- -- -- -- -- -- 431
Distribution of TCI Series A and
Series B Liberty Media Group
common stock to TCI common
stockholders (1,364) -- -- -- -- (206) 1,570 --
Costs associated with
Distribution to stockholders (8) -- -- -- -- -- -- (8)
Adjustment to reflect elimination
of reporting delay with
respect to certain foreign
subsidiaries (note 2) (1) -- -- -- -- -- -- (1)
Deferred tax assets transferred
from Liberty Media Group
upon implementation of tax
sharing agreement -- -- -- -- -- -- 2 2
Issuance of Common stock by
subsidiary (note 11) 51 -- -- -- -- -- -- 51
-------- ------- --------- ------- ------ ------ --------- --------
Balance at December 31, 1995 $ 2,884 (9) -- 68 (7) -- -- 2,936
======== ======= ========= ======= ====== ====== ========= ========
</TABLE>
* Restated - see note 9.
See accompanying notes to combined financial statements.
II-149
<PAGE> 216
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Combined Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
amounts in millions
(see note 4)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss before earnings or loss of Liberty Media
Group* $(115) (22) (33)
Adjustments to reconcile net loss before
earnings or loss of Liberty Media Group to
net cash provided by operating activities:
Depreciation and amortization 1,274 1,001 920
Compensation relating to stock
appreciation rights 45 -- 31
Adjustment to compensation relating to stock
appreciation rights -- (5) --
Share of losses of affiliates 178 117 66
Gain on sale of subsidiary stock (123) -- --
Gain on sale of stock by equity investee (165) (161) --
Deferred income tax expense (benefit) (99) -- 128
Loss (gain) on disposition of assets (51) 13 (42)
Other noncash charges (credits) 11 1 84
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Change in receivables (58) 4 (12)
Change in prepaids (56) (50) (4)
Change in accruals and payables 76 77 56
Change in accrued interest 40 26 63
Net cash used in Flextech plc's operating activities
during the month ended September 30, 1995 (note 2) (2) -- --
-------- ------ ------
Net cash provided by operating activities 955 1,001 1,257
-------- ------ ------
Cash flows from investing activities:
Cash paid for acquisitions (440) (541) (262)
Capital expended for property and equipment (1,733) (1,249) (954)
Proceeds from disposition of assets 148 41 146
Additional investments in and
loans to affiliates and others (1,064) (434) (295)
Change in due from Liberty Media Group 22 2 (3)
Change in interest in Liberty Media Group 13 148 (119)
Repayment of loans by affiliates and others 18 33 62
Return of capital from affiliates 2 21 81
Payment received on preferred stock investment
redemption -- -- 287
Other investing activities (62) (97) (105)
Net cash used in Flextech plc's investing activities
during the month ended September 30, 1995 (note 2) (51) -- --
-------- ------ ------
Net cash used in investing activities (3,147) (2,076) (1,162)
-------- ------ ------
Cash flows from financing activities:
Borrowings of debt 7,929 4,648 6,399
Repayments of debt (6,517) (3,612) (6,426)
Proceeds from sale of subsidiary stock 445 -- --
Preferred stock dividends of subsidiaries (6) (6) (6)
Preferred stock dividends (24) (4) (2)
Issuances of common stock 431 1 6
Costs associated with Distribution to stockholders (8) -- --
Repurchases of preferred stock -- -- (92)
Repurchases of common stock -- -- (4)
Net cash provided by Flextech plc's financing activities
during the month ended September 30, 1995 (note 2) 8 -- --
-------- ------ ------
Net cash provided by financing activities 2,258 1,027 (125)
-------- ------ ------
Net increase (decrease) in cash 66 2 (26)
Cash at beginning of year 11 9 35
-------- ------ ------
Cash at end of year $ 77 11 9
======== ====== ======
</TABLE>
* Net earnings or loss of Liberty Media Group does not provide or use funds.
See accompanying notes to combined financial statements.
II-150
<PAGE> 217
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
December 31, 1995, 1994 and 1993
(1) Basis of Presentation
On August 3, 1995, the stockholders of TCI authorized the Board of
Directors of TCI (the "Board") to issue a new class of stock ("Liberty
Group Stock") which is intended to reflect the separate performance of
TCI's business which produces and distributes cable television
programming services ("Liberty Media Group"). While the Liberty Group
Stock constitutes common stock of TCI, issuance of the Liberty Group
Stock did not result in any transfer of assets or liabilities of TCI
or any of its subsidiaries or affect the rights of holders of TCI's or
any of its subsidiaries' debt. On August 10, 1995, TCI distributed
one hundred percent of the equity value attributable to the Liberty
Media Group (the "Distribution") to its security holders of record on
August 4, 1995. Additionally, the stockholders, of TCI approved the
redesignation of the previously authorized Class A and Class B common
stock into Series A TCI Group and Series B TCI Group common stock
("TCI Group Stock").
Upon the distribution of the Liberty Group Stock and subsequent to the
redesignation of TCI Class A and Class B common stock into TCI Group
Stock, the TCI Group Stock is intended to reflect the separate
performance of the subsidiaries and assets not attributed to Liberty
Media Group, including (i) TCI's Cable and Communication unit, (ii)
TCI's International Cable and Programming unit ("TINTA") and (iii)
TCI's Technology/Venture Capital unit. Such subsidiaries and assets
are collectively referred to as "TCI Group".
(continued)
II-151
<PAGE> 218
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
On January 27, 1994, TCI Communications, Inc. (formerly
Tele-Communications, Inc. or "TCIC") and Liberty Media Corporation
("Liberty") entered into a definitive merger agreement to combine the
two companies (the "TCI/Liberty Combination"). The transaction was
consummated on August 4, 1994. Due to the significant economic
interest held by TCIC through its ownership of Liberty preferred stock
and Liberty common stock and other related party considerations, TCIC
accounted for its investment in Liberty under the equity method prior
to the consummation of the TCI/Liberty Combination. Accordingly, TCIC
had recognized 100% of Liberty's earnings or losses before deducting
preferred stock dividends. The TCI/Liberty Combination was accounted
for using predecessor cost due to related party considerations.
Accordingly, the accompanying combined financial statements of TCI
Group reflect the combination of the historical financial information
of the assets of TCI and Liberty which have not been attributed to
Liberty Media Group. For periods prior to the TCI/Liberty
Combination, the combined financial statements of TCI Group and
Liberty Media Group comprise all the accounts included in the
consolidated financial statements of TCI and subsidiaries and the
separate consolidated financial statements of Liberty and
subsidiaries. For periods subsequent to the TCI/Liberty Combination,
the combined financial statements of TCI Group and Liberty Media Group
comprise all the accounts included in the corresponding consolidated
financial statements of TCI and subsidiaries.
Notwithstanding the attribution of assets and liabilities, equity and
items of income and expense to TCI Group for purposes of preparing its
combined financial statements, the change in the capital structure of
TCI does not affect the ownership or the respective legal title to
assets or responsibility for liabilities of TCI or any of its
subsidiaries. TCI and its subsidiaries each continue to be
responsible for their respective liabilities. Holders of TCI Group
Stock are holders of common stock of TCI and continue to be subject to
risks associated with an investment in TCI and all of its businesses,
assets and liabilities. The issuance of Liberty Group Stock did not
affect the rights of creditors of TCI.
Financial effects arising from any portion of TCI that affect the
consolidated results of operations or financial condition of TCI could
affect the combined results of operations or financial condition of
TCI Group and the market price of shares of the TCI Group Stock. In
addition, net losses of any portion of TCI, dividends or distributions
on, or repurchases of, any series of common stock, and dividends on,
or certain repurchases of preferred stock would reduce the funds of
TCI legally available for dividends on all series of common stock.
Accordingly, TCI Group financial information should be read in
conjunction with the TCI and Liberty Media Group financial
information.
Dividends on the TCI Group Stock are payable at the sole discretion of
the Board out of the lesser of assets of TCI legally available for
dividends and the available dividend amount with respect to TCI Group,
as defined. Determinations to pay dividends on TCI Group Stock are
based primarily upon the financial condition, results of operations
and business requirements of TCI Group and TCI as a whole.
(continued)
II-152
<PAGE> 219
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
After the Distribution, existing preferred stock and debt securities
of TCI that were convertible into or exchangeable for shares of TCI
Class A common stock were, as a result of the operation of
antidilution provisions, adjusted so that there will be delivered upon
their conversion or exchange (in addition to the same number of shares
of redesignated Series A TCI Group Stock as were theretofore issuable
thereunder) the number of shares of Series A Liberty Group Stock that
would have been issuable in the Distribution with respect to the TCI
Class A common stock issuable upon conversion or exchange had such
conversion or exchange occurred prior to the record date for the
Distribution. Options to purchase TCI Class A common stock
outstanding at the time of the Distribution were adjusted by issuing
to the holders of such options separate options to purchase that
number of shares of Series A Liberty Group Stock which the holder
would have been entitled to receive had the holder exercised such
option to purchase TCI Class A common stock prior to the record date
for the Distribution and reallocating a portion of the aggregate
exercise price of the previously outstanding options to the newly
issued options to purchase Series A Liberty Group Stock. The issuance
of shares of Series A Liberty Group Stock upon such conversion,
exchange or exercise of such convertible securities will not result in
any transfer of funds or other assets from TCI Group to Liberty Media
Group or a reduction in any Inter-Group Interest that then may exist,
in consideration of such issuance. In the case of the exercise of
such options to purchase Series A Liberty Group Stock, the proceeds
received upon the exercise of such options will be attributed to
Liberty Media Group.
A number of wholly-owned subsidiaries which are part of TCI Group
owned shares of TCI Class A common stock and TCI preferred stock
("Subsidiary Shares"). Because the distribution of the Liberty Group
Stock was made as a dividend to all holders of TCI's Class A common
stock and Class B common stock and, pursuant to the anti- dilution
provisions set forth therein, to the holders of securities convertible
into TCI Class A common stock and TCI Class B common stock upon the
conversion thereof, shares of Liberty Group Stock would otherwise have
been issued and become issuable in respect of the Subsidiary Shares
held by these subsidiaries and would be attributed to TCI Group. The
Liberty Group Stock issued in connection with the Distribution is
intended to constitute 100% of the equity value thereof to the holders
of TCI Class A common stock and TCI Class B common stock, and TCI
Group does not initially have any interest in Liberty Media Group
represented by any outstanding shares of Liberty Group Stock (an
"Inter-Group Interest"). Therefore, TCI determined to exchange all of
the outstanding Subsidiary Shares for shares of a new series of Series
Preferred Stock designated Convertible Redeemable Participating
Preferred Stock, Series F (the "Series F Preferred Stock"). See note
8. The rights, privileges and preferences of the Series F Preferred
Stock did not entitle its holders to receive Liberty Group Stock in
the Distribution or upon conversion of the Series F Preferred Stock.
(continued)
II-153
<PAGE> 220
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Prior to the Distribution, TCI Group had a 100% Inter-Group Interest
in Liberty Media Group. Following the Distribution of Liberty Group
Stock, TCI Group has no Inter-Group Interest in Liberty Media Group.
For periods in which an Inter-Group Interest exists, TCI Group would
account for its Inter-Group Interest in a manner similar to the equity
method of accounting. For periods after the Distribution and before
the creation of an Inter-Group Interest, TCI Group would not reflect
any interest in Liberty Media Group. An Inter-Group Interest would be
created only if a subsequent transfer of cash or other property from
TCI Group to Liberty Media Group is specifically designated by the
Board as being made to create an Inter-Group Interest or if
outstanding shares of Liberty Group Stock are purchased with funds
attributable to TCI Group. However, Liberty Media Group is under the
sole control of TCI. Management of TCI believes that generally
accepted accounting principles require that Liberty Media Group be
consolidated with TCI Group. If Liberty Media Group were consolidated
with TCI Group, the combined financial position, combined results of
operations, and combined cash flows of TCI Group would equal the
consolidated financial position, consolidated results of operations
and consolidated cash flows of TCI and subsidiaries, which financial
statements are included separately herein. Management of TCI has
elected to present the accompanying combined financial statements in a
manner that does not comply with generally accepted accounting
principles.
During the fourth quarter of 1994, TCI was reorganized (the
"Reorganization") based upon four lines of business: Domestic Cable
and Communications; Programming; TINTA and Technology/Venture Capital.
Upon Reorganization, certain of the assets of TCIC and Liberty were
transferred to the other operating units. In the first quarter of
1995, TCIC transferred additional assets to TINTA.
(2) Summary of Significant Accounting Policies
Receivables
Receivables are reflected net of an allowance for doubtful accounts.
Such allowance at December 31, 1995 and 1994 was not material.
Investments
All marketable equity securities held by TCI Group are classified as
available-for-sale and are carried at fair value. Unrealized holding
gains and losses on securities classified as available-for-sale are
carried net of taxes as a separate component of combined equity.
(continued)
II-154
<PAGE> 221
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Other investments in which the ownership interest is less than 20% but
are not considered marketable securities are generally carried at
cost. For those investments in affiliates in which TCI Group's voting
interest is 20% to 50%, the equity method of accounting is generally
used. Under this method, the investment, originally recorded at cost,
is adjusted to recognize TCI Group's share of the net earnings or
losses of the affiliates as they occur rather than as dividends or
other distributions are received, limited to the extent of TCI Group's
investment in, advances to and commitments for the investee. TCI
Group's share of net earnings or losses of affiliates includes the
amortization of the difference between TCI Group's investment and its
share of the net assets of the investee. Recognition of gains on
sales of properties to affiliates accounted for under the equity
method is deferred in proportion to TCI Group's ownership interest in
such affiliates.
Changes in TCI Group's proportionate share of the underlying equity of
a subsidiary or equity method investee, which result from the issuance
of additional equity securities by such subsidiary or equity investee,
generally are recognized as gains or losses in TCI Group's combined
statements of operations.
Long-Lived Assets
(a) Property and Equipment
Property and equipment is stated at cost, including
acquisition costs allocated to tangible assets acquired.
Construction costs, including interest during construction and
applicable overhead, are capitalized. During 1995, 1994 and
1993, interest capitalized was not material.
Depreciation is computed on a straight-line basis using
estimated useful lives of 3 to 15 years for distribution
systems and 3 to 40 years for support equipment and buildings.
Repairs and maintenance are charged to operations, and
renewals and additions are capitalized. At the time of
ordinary retirements, sales or other dispositions of property,
the original cost and cost of removal of such property are
charged to accumulated depreciation, and salvage, if any, is
credited thereto. Gains or losses are only recognized in
connection with the sales of properties in their entirety.
(b) Franchise Costs
Franchise costs include the difference between the cost of
acquiring cable television systems and amounts allocated to
their tangible assets. Such amounts are generally amortized
on a straight-line basis over 40 years. Costs incurred by TCI
Group in obtaining franchises are being amortized on a
straight-line basis over the life of the franchise, generally
10 to 20 years.
(continued)
II-155
<PAGE> 222
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
In March of 1995, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("Statement No. 121"), effective for fiscal
years beginning after December 15, 1995. Statement No. 121 requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. TCI Group will adopt Statement No. 121 effective January
1, 1996. The effect of such adoption is not expected to be
significant.
Interest Rate Derivatives
Amounts receivable or payable under derivative financial instruments
used to manage interest rate risks arising from TCI Group's financial
liabilities are recognized as interest expense. Gains and losses on
early terminations of derivatives are included in the carrying amount
of the related debt and amortized as yield adjustments over the
remaining terms of the debt. TCI Group does not use such instruments
for trading purposes.
Minority Interests
Recognition of minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests'
allocable portion of the common equity of those consolidated
subsidiaries. Further, the minority interests' share of losses is not
recognized if the minority holders of common equity of consolidated
subsidiaries have the right to cause TCI Group to repurchase such
holders' common equity.
Included in minority interests in equity of consolidated subsidiaries
is $49 million and $50 million in 1995 and 1994, respectively, of
preferred stocks (and accumulated dividends thereon) of certain
subsidiaries. The current dividend requirements on these preferred
stocks aggregate $6 million per annum and such dividend requirements
are reflected as minority interests in the accompanying combined
statements of operations.
Subsequent to December 31, 1995, TCIC issued to the public 4.6 million
shares of Cumulative Exchangeable Preferred Stock with an initial
liquidation value of $230 million. Such issuance will be reflected as
an increase in TCI Group's minority interest in equity of consolidated
subsidiaries.
(continued)
II-156
<PAGE> 223
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Trust Originated Preferred Securities(SM)
Subsequent to December 31, 1995, TCI Communications Financing I (the
"Trust"), an indirect wholly-owned subsidiary of TCI Group, issued
$16 million in common securities and issued $500 million of 8.72% Trust
Originated Preferred Securities(SM) (the "Preferred Securities", and
together with the common securities, the "Trust Securities"). The
Trust exists for the exclusive purpose of issuing Trust Securities and
investing the proceeds thereof into an aggregate principal amount of
$516 million of 8.72% Subordinated Deferrable Interest Notes due
January 31, 2045 (the "Subordinated Debt Securities") of TCI Group.
The Subordinated Debt Securities are unsecured obligations of TCI Group
and are subordinate and junior in right of payment to certain other
indebtedness of TCI Group. Upon redemption of such Subordinated Debt
Securities, the Preferred Securities will be mandatorily redeemable.
TCI Group effectively provides a full and unconditional guarantee of
the Trust's obligations under the Preferred Securities. TCI Group will
present the Preferred Securities as a separate line item in its balance
sheet captioned "Company-obligated mandatorily redeemable preferred
securities of subsidiary trust."
Foreign Currency Translation
All balance sheet accounts of foreign investments are translated at
the current exchange rate as of the end of the accounting period.
Statement of operations items are translated at average currency
exchange rates. The resulting translation adjustment is recorded as a
separate component of combined equity.
Stock Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("Statement No. 123") was issued by the FASB
in October 1995. Statement No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans as
well as transactions in which an entity issues its equity instruments
to acquire goods or services from non-employees. TCI Group will
include the disclosures required by Statement No. 123 in the notes to
future financial statements.
(continued)
II-157
<PAGE> 224
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Accounting for Foreign Subsidiaries
Through the third quarter of 1995, TCI Group included certain of its
foreign subsidiaries (Flextech plc ("Flextech") and Cablevision S.A.
("Cablevision")) in its financial statements on a one-month time delay.
TCI Group eliminated such time delay from its December 31, 1995
financial statements. As a result, TCI Group's combined statements of
operations for the year ended December 31, 1995 include (i)
Cablevision's result of operations for the period from April 25, 1995
(the date Cablevision was acquired - see note 6) through December 31,
1995 and (ii) Flextech's results of operations for the period from
December 1, 1994 through December 31, 1995 (exclusive of the one-month
period ended September 30, 1995). TCI Group's combined statement of
cash flows for the year ended December 31, 1995 includes the cash flows
of Cablevision and Flextech for the same periods except that Flextech's
cash flows for the one-month period ended September 30, 1995 are
included therein on a summarized basis. In connection with the
elimination of the above-described reporting delays, TCI Group (i)
restated certain of its quarterly financial information in order to
present Cablevision's 1995 results of operations on a current basis and
(ii) charged Flextech's net loss for the one-month ended September 30,
1995 ($1 million) directly to TCI Group's accumulated deficit so that
TCI Group's combined statement of operations for the year ended
December 31, 1995 would not include more than 12 months of Flextech's
operating results.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification
Certain amounts have been reclassified for comparability with the 1995
presentation.
(3) Loss Per Common Share
The loss attributable to common stockholders per common share for the
period from the Distribution to December 31, 1995 was computed by
dividing net loss attributable to TCI Group Series A and Series B
common stockholders by the weighted average number of common shares
outstanding of TCI Group Series A and Series B Stock during the period
(656.4 million). Common stock equivalents were not included in the
computation of weighted average shares outstanding because their
inclusion would be anti-dilutive. Earnings or loss per common and
common equivalent share are omitted from the combined statements of
operations for the period from January 1, 1995 through the
Distribution and for the years ended December 31, 1994 and 1993 as TCI
Group Stock was not part of the capital structure of TCI until August
10, 1995, the date of the Distribution.
(continued)
II-158
<PAGE> 225
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(4) Supplemental Disclosures to Combined Statements of Cash Flows
Cash paid for interest was $953 million, $758 million and $646 million
for the years ended December 31, 1995, 1994 and 1993, respectively.
Cash paid for income taxes was $63 million in 1995 and was not material
in 1994 or 1993.
Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1995 1994 1993
---------- ---------- ----------
amounts in millions
<S> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired $ 3,540 694 318
Liabilities assumed, net of
current assets (457) (10) (8)
Deferred tax liability recorded
in acquisitions (1,083) (34) (7)
Minority interests in equity of
acquired entities 43 (35) (8)
Common stock issued in
acquisitions (1,305) (298) --
Contribution to combined equity
of Liberty Media Group from
TCI Group for acquisition 2 211 --
Noncash contribution for
acquisition -- -- (33)
Redeemable preferred stock
issued in acquisition (300)
Fees incurred in the TCI/Liberty
combination -- 13 --
----------- ------ ------
Cash paid for acquisitions $ 440 541 262
=========== ====== ======
Issuance of subsidiary stock for
equity investment $ 11 -- --
=========== ====== ======
Noncash exchange of equity
investment for consolidated
subsidiary and equity investment $ -- -- 22
=========== ====== ======
Noncash capital contribution
to equity investee $ -- -- 22
=========== ====== ======
</TABLE>
(continued)
II-159
<PAGE> 226
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(5) Investments in Affiliates
TCI Group has various investments accounted for under the equity
method. Certain of the more significant investments held by TCI Group
at December 31, 1995 were MajorCo, L.P. ("MajorCo"), a partnership
formed by TCI Group, Comcast Corporation ("Comcast"), Cox
Communications, Inc. ("Cox") and Sprint Corporation ("Sprint")
(carrying value of $689 million) (see note 14), Teleport
Communications Group, Inc. and TCG Partners (collectively, "TCG")
(carrying value of $244 million) and TeleWest plc ("New TeleWest")
(carrying value of $550 million).
Summarized unaudited results of operations for affiliates accounted for
under the equity method are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
Combined Financial Position 1995 1994
--------------------------- -------- --------
amounts in millions
<S> <C> <C>
Property and equipment, net $ 3,555 2,186
Franchise costs, net 1,204 1,231
Other assets, net 2,923 1,219
-------- -------
Total assets $ 7,682 4,636
======== =======
Debt $ 4,085 2,410
Due to (from) TCI Group 44 (3)
Other liabilities 870 560
Owners' equity 2,683 1,669
-------- -------
Total liabilities and equity $ 7,682 4,636
======== =======
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
Combined Operations 1995 1994 1993
------------------- -------- -------- --------
amounts in millions
<S> <C> <C> <C>
Revenue $ 1,924 1,431 1,044
Operating expenses (1,640) (1,232) (727)
Depreciation and amortization (411) (324) (276)
-------- -------- -------
Operating income (loss) (127) (125) 41
Interest expense (241) (159) (123)
Other, net (7) 111 99
-------- -------- -------
Net earnings (loss) $ (375) (173) 17
======== ======== =======
</TABLE>
(continued)
II-160
<PAGE> 227
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
At December 31, 1995, TCI Group had an effective ownership interest of
approximately 27% in New TeleWest, a company that is currently
operating and constructing cable television and telephone systems in
the United Kingdom ("UK"). New TeleWest was formed on October 3, 1995
upon the merger (the "TeleWest Merger") of TeleWest Communications plc
("TeleWest Communications") with SBC (CableComms) (UK). Prior to the
TeleWest Merger, TCI Group had an effective ownership interest of
approximately 36% in TeleWest Communications. As a result of the
TeleWest Merger, TCI Group recognized a gain of $165 million (before
deducting the related tax expense of $58 million), which gain
represents the difference between TCI Group's recorded cost for
TeleWest Communications and TCI Group's 27% effective proportionate
share of New TeleWest's net assets.
New TeleWest contributed $70 million, $43 million and $28 million of
TCI Group's share of its affiliates' losses during the years ended
December 31, 1995, 1994 and 1993, respectively. In addition, TCI
Group has other less significant equity method investments in video
distribution and programming businesses located in the UK, other parts
of Europe, Asia, Latin America and certain other foreign countries.
In the aggregate, such other equity method investments had a carrying
value of $354 million at December 31, 1995 and accounted for $62
million of TCI Group's share of its affiliates' losses in 1995.
As a result of the TeleWest Communications' November 23, 1994 initial
public offering and the associated dilution of TCI Group's ownership
interest of TeleWest Communications, TCI Group recognized a gain
amounting to $161 million (before deducting the related tax expense of
$57 million).
Certain of TCI Group's affiliates are general partnerships and any
subsidiary of TCI Group that is a general partner in a general
partnership is, as such, liable as a matter of partnership law for all
debts of that partnership in the event liabilities of that partnership
were to exceed its assets.
(6) Acquisitions
As of January 26, 1995, TCI Group and TeleCable Corporation
("TeleCable") consummated a transaction, whereby TeleCable was merged
into TCI Group. The aggregate $1.6 billion purchase price was
satisfied by TCIC's assumption of approximately $300 million of
TeleCable's net liabilities and the issuance to TeleCable's
shareholders of approximately 42 million shares of TCI Class A common
stock and 1 million shares of TCI Convertible Preferred Stock, Series
D (the "Series D Preferred Stock") with an aggregate initial
liquidation value of $300 million (see note 8).
On April 25, 1995, TINTA acquired a 51% ownership interest in
Cablevision for a purchase price of $282 million, before liabilities
assumed. The purchase price was paid with cash consideration of $195
million and TINTA's issuance of $87 million principal amount of secured
negotiable promissory notes payable (the "Cablevision Notes") to the
selling shareholders. TINTA has an option during the two-year period
ended April 25, 1997 to increase its ownership interest in Cablevision
up to 80% at a cost per subscriber similar to the initial purchase
price, adjusted however for certain fluctuations in applicable foreign
currency exchange rates.
(continued)
II-161
<PAGE> 228
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The acquisitions of TeleCable and Cablevision were accounted for by
the purchase method. Accordingly, the results of operations of such
acquired entities have been included with those of TCI Group since
their respective dates of acquisition. On a pro forma basis, TCI
Group's revenue would have been increased by $77 million and TCI
Group's net loss and net loss attributable to common stockholders
would have been decreased by $13 million and $12 million,
respectively, for the year ended December 31, 1995; and revenue, net
earnings and earnings attributable to common stockholders would have
increased by $441 million, $17 million and less than $1 million,
respectively for 1994 had such acquired entities been combined with
TCI Group on January 1, 1994. The foregoing unaudited pro forma
financial information was based upon historical results of operations
adjusted for acquisition costs and, in the opinion of management, is
not necessarily indicative of the results had TCI Group operated the
acquired entities since January 1, 1994.
Effective January 26, 1995, TCI Group purchased from Comcast the 19.9%
minority interest in Heritage Communications, Inc. owned by Comcast
for an aggregate consideration of approximately $290 million, the
majority of which was paid in shares of TCI Class A common stock.
(7) Debt
Debt is summarized as follows:
<TABLE>
<CAPTION>
Weighted average December 31,
interest rate at ------------------------------
December 31, 1995 1995 1994
----------------- ------------ ------------
amounts in millions
<S> <C> <C> <C>
Senior notes 8.5% $ 6,713 5,412
Bank credit facilities 6.8% 3,473 3,986
Commercial paper 6.4% 1,469 445
Notes payable 10.2% 934 1,024
Convertible notes (a) 9.5% 45 45
Cablevision Notes (b) 10.0% 65 --
Other debt 261 156
-------- ------
$ 12,960 11,068
======== ======
</TABLE>
(a) These convertible notes, which are stated net of unamortized
discount of $186 million at December 31, 1995 and 1994, mature
on December 18, 2021. The notes require (so long as
conversion of the notes has not occurred) an annual interest
payment through 2003 equal to 1.85% of the face amount of the
notes. At December 31, 1995, the notes were convertible, at
the option of the holders, into an aggregate of 38,707,574
shares of Series A TCI Group Stock and 9,676,893 shares of
Series A Liberty Group Stock. See note 1.
(continued)
II-162
<PAGE> 229
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
(b) The Cablevision Notes are secured by TINTA's pledge of stock
representing its 51% interest in Cablevision.
The bank credit facilities and various other debt instruments
attributable to the TCI Group generally contain restrictive covenants
which require, among other things, the maintenance of certain
earnings, specified cash flow and financial ratios (primarily the
ratios of cash flow to total debt and cash flow to debt service, as
defined), and include certain limitations on indebtedness,
investments, guarantees, dispositions, stock repurchases and/or
dividend payments.
As security for borrowings under one of TCI Group's bank credit
facilities, TCI Group as pledged 100,524,364 shares of Series A TCI
Group Stock held by a subsidiary of TCI Group.
In order to achieve the desired balance between variable and fixed
rate indebtedness, TCI Group has entered into various interest rate
exchange agreements pursuant to which it pays (i) fixed interest rates
(the "Fixed Rate Agreements") ranging from 6.1% to 9.9% on notional
amounts of $602 million at December 31, 1995 and (ii) variable
interest rates (the "Variable Rate Agreements") on notional amounts of
$2,520 million at December 31, 1995. During the years ended December
31, 1995, 1994 and 1993, TCI Group's net payments pursuant to the
Fixed Rate Agreements were $13 million, $26 million and $38 million,
respectively; and TCI Group's net receipts (payments) pursuant to the
Variable Rate Agreements were (less than $1 million), $36 million and
$32 million, respectively. After giving effect to TCI Group's
interest rate exchange agreements, approximately 46% of TCI Group's
indebtedness bears interest at fixed rates.
TCI Group's Fixed Rate Agreements and Variable Rate Agreements expire
as follows (amounts in millions, except percentages):
<TABLE>
<CAPTION>
Fixed Rate Agreements Variable Rate Agreements
--------------------- ------------------------
Expiration Interest Rate Notional Expiration Interest Rate Notional
Date To Be Paid Amount Date To Be Received Amount
-------------- ------------- ------ -------------- -------------- ------
<S> <C> <C> <C> <C> <C>
April 1996 9.9% $ 30 April 1996 6.8% $ 50
May 1996 8.3% 50 July 1996 8.2% 10
June 1996 6.1% 42 August 1996 8.2% 10
July 1996 8.2% 10 September 1996 4.6% 150
August 1996 8.2% 10 April 1997 7.0% 200
November 1996 8.9% 150 September 1998 4.8%-5.2% 300
October 1997 7.2%-9.3% 80 April 1999 7.4% 100
December 1997 8.7% 230 September 1999 7.2%-7.4% 300
-----
February 2000 5.8%-6.6% 650
$ 602 March 2000 5.8%-6.0% 675
=====
September 2000 5.1% 75
----------
$ 2,520
==========
</TABLE>
(continued)
II-163
<PAGE> 230
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
TCI Group is exposed to credit losses for the periodic settlements of
amounts due under these interest rate exchange agreements in the event
of nonperformance by the other parties to the agreements. However,
TCI Group does not anticipate that it will incur any material credit
losses because it does not anticipate nonperformance by the
counterparties.
The fair value of the interest rate exchange agreements is the
estimated amount that TCI Group would pay or receive to terminate the
agreements at December 31, 1995, taking into consideration current
interest rates and assuming the current creditworthiness of the
counterparties. TCI Group would be required to pay an estimated $25
million at December 31, 1995 to terminate the agreements.
The fair value of the debt attributable to the TCI Group is estimated
based on the quoted market prices for the same or similar issues or on
the current rates offered to the TCI Group for debt of the same
remaining maturities. The fair value of debt, which has a carrying
value of $12,960 million, was $13,553 million at December 31, 1995.
Certain subsidiaries attributed to the TCI Group are required to
maintain unused availability under bank credit facilities to the
extent of outstanding commercial paper. Also, certain of TCI Group's
subsidiaries pay fees ranging from 1/4% to 1/2% per annum on the
average unborrowed portion of the total amount available for
borrowings under bank credit facilities.
Annual maturities of debt for each of the next five years are as
follows (amounts in millions):
<TABLE>
<S> <C>
1996 $3,485*
1997 576
1998 831
1999 784
2000 902
</TABLE>
*Includes $1,469 million of commercial paper.
(8) Redeemable Preferred Stock
Convertible Preferred Stock, Series C ("Series C Preferred Stock").
TCI has issued 70,575 shares of a series of TCI Series Preferred Stock
designated "Convertible Preferred Stock, Series C," par value $.01 per
share, as partial consideration for an acquisition by TCI .
Each share of Series C Preferred Stock is convertible, at the option
of the holders, into 100 shares of Series A TCI Group Stock and 25
shares of Series A Liberty Group Stock, subject to anti-dilution
adjustments. The dividend, liquidation and redemption features of the
Series C Preferred Stock will be determined by reference to the
liquidation value of the Series C Preferred Stock, which as of any
date of determination is equal, on a per share basis, to the sum of
(i) $2,375, plus (ii) all dividends accrued on such share through the
dividend payment date on or immediately preceding such date of
determination to the extent not paid on or before such date, plus
(iii), for purposes of determining liquidation and redemption
payments, all unpaid dividends accrued on the sum of clauses (i) and
(ii) above, to such date of determination.
(continued)
II-164
<PAGE> 231
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Subject to the prior preferences and other rights of any class or
series of TCI preferred stock ranking pari passu with the Series C
Preferred Stock, the holders of Series C Preferred Stock are entitled
to receive and, subject to any prohibition or restriction contained in
any instrument evidencing indebtedness of TCI, TCI is obligated to pay
preferential cumulative cash dividends out of funds legally available
therefor. Dividends accrue cumulatively at an annual rate of 5-1/2%
of the liquidation value per share, whether or not such dividends are
declared or funds are legally or contractually available for payment
of dividends, except that if TCI fails to redeem shares of Series C
Preferred Stock required to be redeemed on a redemption date,
dividends will thereafter accrue cumulatively at an annual rate of 15%
of the liquidation value per share. Accrued dividends are payable
quarterly on January 1, April 1, July 1 and October 1 of each year,
commencing on the first dividend payment date after the issuance of
the Series C Preferred Stock. Dividends not paid on any dividend
payment date will be added to the liquidation value on such date and
remain a part thereof until such dividends and all dividends accrued
thereon are paid in full. Dividends accrue on unpaid dividends at the
rate of 5-1/2% per annum, unless such dividends remain unpaid for two
consecutive quarters in which event such rate will increase to 15% per
annum. The Series C Preferred Stock ranks prior to the TCI common
stock and Class B Preferred Stock and pari passu with the Series F
Preferred Stock with respect to the declaration and payment of
dividends.
Upon the dissolution, liquidation or winding up of TCI, holders of the
Series C Preferred Stock will be entitled to receive from the assets
of TCI available for distribution to stockholders an amount in cash,
per share, equal to the liquidation value. The Series C Preferred
Stock will rank prior to the TCI common stock and Class B Preferred
Stock and pari passu with the Series F Preferred Stock as to any such
distributions.
The Series C Preferred Stock is subject to optional redemption at any
time after the seventh anniversary of its issuance, in whole or in
part, by TCI at a redemption price, per share, equal to the then
liquidation value of the Series C Preferred Stock. Subject to the
rights of any other class or series of TCI's preferred stock ranking
pari passu with the Series C Preferred Stock, the Series C Preferred
Stock is required to be redeemed by TCI at any time after such seventh
anniversary at the option of the holder, in whole or in part (provided
that the aggregate liquidation value of the shares to be redeemed is
in excess of $1 million), in each case at a redemption price, per
share, equal to the liquidation value.
(continued)
II-165
<PAGE> 232
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
For so long as any dividends are in arrears on the Series C Preferred
Stock or any class or series of TCI preferred stock ranking pari passu
with the Series C Preferred Stock and until all dividends accrued up
to the immediately preceding dividend payment date on the Series C
Preferred Stock and such parity stock shall have been paid or declared
and set apart so as to be available for payment in full thereof and
for no other purpose, TCI may not redeem or otherwise acquire any
shares of Series C Preferred Stock, any such parity stock or any class
or series of its preferred stock ranking junior (including the TCI
common stock and Series C Preferred Stock) unless all then outstanding
shares of Series C Preferred Stock and such parity stock are redeemed.
If TCI fails to redeem shares of Series C Preferred Stock required to
be redeemed on a redemption date, and until all such shares are
redeemed in full, TCI may not redeem any such parity stock or junior
stock, or otherwise acquire any shares of such stock or Series C
Preferred Stock. Nothing contained in the two immediately preceding
sentences shall prevent TCI from acquiring (i) shares of Series C
Preferred Stock and any such parity stock pursuant to a purchase or
exchange offer made to holders of all outstanding shares of Series C
Preferred Stock and such parity stock, if (a) as to holders of all
outstanding shares of Series C Preferred Stock, the terms of the
purchase or exchange offer for all such shares are identical, (b) as
to holders for all outstanding shares of a particular series or class
of parity stock, the terms of the purchase or exchange offer for all
such shares are identical and (c) as among holders of all outstanding
shares of Series C Preferred Stock and parity stock, the terms of each
purchase or exchange offer are substantially identical relative to the
respective liquidation prices of the shares of Series C Preferred
Stock and each series or class of such parity stock, or (ii) shares of
Series C Preferred Stock, parity stock or junior stock in exchange
for, or through the application of the proceeds of the sale of, shares
of junior stock.
The Series C Preferred Stock is subject to restrictions on transfer
although it has certain customary registration rights with respect to
the underlying shares of TCI Group and Liberty Media Group common
stock. The Series C Preferred Stock may vote on all matters submitted
to a vote of the holders of the TCI common stock, has one vote for
each share of TCI Group and Liberty Media Group Stock into which the
shares of Series C Preferred Stock are converted for such purpose, and
may vote as a single class with the TCI common stock. The Series C
Preferred Stock has no other voting rights except as required by the
Delaware General Corporation Law ("DGCL") and except that the consent
of the holders of record of shares representing at least two-thirds of
the liquidation value of the outstanding shares of the Series C
Preferred Stock is necessary to (i) amend the designation, rights,
preferences and limitations of the Series C Preferred Stock as set
forth in the TCI Charter and (ii) to create or designate any class or
series of TCI preferred stock that would rank prior to the Series C
Preferred Stock.
Convertible Preferred Stock, Series D. TCI issued 1,000,000 shares of
a series of TCI Series Preferred Stock designated "Convertible
Preferred Stock, Series D", par value $.01 per share, as partial
consideration for the merger between TCIC and TeleCable (see note 6).
(continued)
II-166
<PAGE> 233
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The holders of the Series D Preferred Stock shall be entitled to
receive, when and as declared by the Board out of unrestricted funds
legally available therefor, cumulative dividends, in preference to
dividends on any stock that ranks junior to the Series D Preferred
Stock (currently the TCI Group Stock, the Liberty Group Stock, and the
Class B Preferred Stock), that shall accrue on each share of Series D
Preferred stock at the rate of 5-1/2% per annum of the liquidation
value ($300 per share). Dividends are cumulative, and in the event
that dividends are not paid in full on two consecutive dividend
payment dates or in the event that TCI fails to effect any required
redemption of Series D Preferred Stock, accrue at the rate of 10% per
annum of the liquidation value. The Series D Preferred Stock ranks on
parity with the Series F Preferred Stock and the Series C Preferred
Stock.
Prior to the Distribution, 431 shares of Series D Preferred Stock were
converted into 4,310 shares of TCI Class A common stock. Subsequent
to the Distribution, each share of Series D Preferred Stock is
convertible into 10 shares of Series A TCI Group Stock and 2.5 shares
of Series A Liberty Group Stock, subject to adjustment upon certain
events specified in the certificate of designation establishing Series
D Preferred Stock. To the extent any cash dividends are not paid on
any dividend payment date, the amount of such dividends will be deemed
converted into shares of common stock at a conversion rate equal to
95% of the then current market price of common stock, and upon
issuance of common stock to holders of Series D Preferred Stock in
respect of such deemed conversion, such dividend will be deemed paid
for all purposes. See note 1.
Shares of Series D Preferred Stock are redeemable for cash at the
option of the holder at any time after the tenth anniversary of the
issue date at a price equal to the liquidation value in effect as of
the date of the redemption. Shares of Series D Preferred Stock may
also be redeemed for cash at the option of TCI after the fifth
anniversary of the issue date at such redemption price or after the
third anniversary of the issue date if the market value per share
exceeds certain defined levels for periods specified in the
certificate of designation.
If TCI fails to effect any required redemption of Series D Preferred
Stock, the holders thereof will have the option to convert their
shares of Series D Preferred Stock into common stock at a conversion
rate of 95% of the then current market value of common stock, provided
that such option may not be exercised unless the failure to redeem
continues for more than a year.
Except as required by law, holders of Series D Preferred Stock are not
entitled to vote on any matters submitted to a vote of the
stockholders of TCI.
(continued)
II-167
<PAGE> 234
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Convertible Redeemable Participating Preferred Stock, Series F.
Immediately prior to the record date for the Distribution, TCI Group
caused each of its subsidiaries holding Subsidiary Shares to exchange
such shares for shares of Series F Preferred Stock having an aggregate
value of not less than that of the Subsidiary Shares so exchanged.
TCI Group is authorized to issue 500,000 shares of Series F Preferred
Stock, par value $.01 per share. Subsidiaries of TCI hold all the
issued and outstanding shares. Subsidiaries of TCI exchanged all of
the Subsidiary Shares for 355,141 shares of Series F Preferred Stock.
Subsequent to such exchange, a holder of 78,077 shares of Series F
Preferred Stock converted its holdings into 100,524,364 shares of
Series A TCI Group Stock. Such shares of Series A TCI Group Stock are
reflected as a reduction in combined equity in the accompanying
combined financial statements.
Each share of Series F Preferred Stock was convertible into 1,000
shares of Series A TCI Group Stock, subject to antidilution
adjustments, at the option of the holder at any time. The
anti-dilution provisions of the Series F Preferred Stock provide that
the conversion rate of the Series F Preferred Stock will be adjusted
by increasing the number of shares of Series A TCI Group Stock
issuable upon conversion in the event of any non- cash dividend or
distribution of the Series A TCI Group Stock to give effect to the
value of the securities, assets or other property so distributed;
however, no such adjustment shall entitle the holder to receive the
actual security, asset or other property so distributed upon the
conversion of shares of Series F Preferred Stock. Therefore, the
Distribution resulted in an adjustment to the conversion rate of the
Series F Preferred Stock such that each holder has the right to
receive upon conversion 1,287.51 shares of Series A TCI Group Stock.
The holders of the Series F Preferred Stock are entitled to
participate, on an as-converted basis, with the holders of the Series
A TCI Group Stock, with respect to any cash dividends or distribution
declared and paid on the Series A TCI Group Stock. Dividends or
distribution on the Series A TCI Group Stock which are not paid in
cash would result in the adjustment of the applicable conversion rate
as described above.
Upon the dissolution, liquidation or winding up of TCI, holders of the
Series F Preferred Stock will be entitled to receive from the assets
of TCI available for distribution to stockholders an amount, in cash
or property or a combination thereof, per share of Series F Preferred
Stock, equal to the sum of (x) $.01 and (y) the amount to be
distributed per share of Series A TCI Group Stock in such liquidation,
dissolution or winding up multiplied by the applicable conversion rate
of a share of Series F Preferred Stock.
(continued)
II-168
<PAGE> 235
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The Series F Preferred Stock is subject to optional redemption by TCI
at any time after its issuance, in whole or in party, at a redemption
price, per share, equal to the issue price of a share of Series F
Preferred Stock (as adjusted in respect of stock splits, reverse
splits and other events affecting the shares of Series F Preferred
Stock), plus any dividends which have been declared but are unpaid as
of the date fixed for such redemption. TCI may elect to pay the
redemption price (or designated portion thereof) of the shares of
Series F Preferred Stock called for redemption by issuing to the
holder thereof, in respect of its shares to be redeemed, a number of
shares of Series A TCI Group Stock equal to the aggregate redemption
price (or designated portion thereof) of such shares divided by the
average of the last sales prices of the Series A TCI Group Stock for a
period specified, and subject to the adjustments described, in the
certificate of designation establishing the Series F Preferred Stock.
Redeemable Convertible TCI Group Preferred Stock, Series G ("Series G
Preferred Stock") and Redeemable Convertible Liberty Media Group
Preferred Stock, Series H ("Series H Preferred Stock"). Subsequent to
December 31, 1995, TCI issued 7,259,380 shares of a series of TCI
Series Preferred Stock designated "Redeemable Convertible TCI Group
Preferred Stock, Series G" and 7,259,380 shares of a series of TCI
Series Preferred Stock designated "Redeemable Convertible Liberty
Media Group Preferred Stock, Series H" as consideration for an
acquisition.
The initial liquidation value for the Series G Preferred Stock and
Series H Preferred Stock is $21.60 per share and $5.40 per share,
respectively, subject in both cases, to increase in an amount equal to
aggregate accrued but unpaid dividends, if any. No dividends will
accrue on the Series G or Series H Preferred Stock if the sum of the
last reported sale price of TCI Group Stock plus one-fourth of the
last reported sale price of the Liberty Group Stock equals or exceeds
$27 for any ten consecutive trading days during the 65 trading days
immediately prior to the first anniversary of issuance of the Series G
and Series H Preferred Stock. If the sum of the amounts specified in
the preceding sentence does not equal or exceed $27 for the specified
period, dividends will begin to accrue on the Series G and Series H
Preferred Stock on the first anniversary of issuance of the Series G
and Series H Preferred Stock, and will thereafter be payable
semi-annually commencing August 1, 1997, at the rate of 4% per annum
on the liquidation value. Any dividends paid on the Series G and
Series H Preferred Stock may be paid, at TCI's election, in cash or
shares of TCI Group Stock. Additional dividends will accrue on unpaid
dividends initially at a rate of 4% per annum. The dividend rate on
dividends that remain unpaid for six months will increase to 8.625%
per annum.
Each share of Series G Preferred Stock is convertible at the option of
the holder at any time prior to the close of business on the last
business day prior to redemption into 1.05 shares of Series A TCI
Group Stock and each share of Series H Preferred Stock is convertible
at any time prior to the close of business on the last business day
prior to redemption into .2625 shares of Series A Liberty Group Stock.
The conversion rights of Series G and Series H Preferred Stock are
subject to adjustment in certain circumstances.
(continued)
II-169
<PAGE> 236
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Among other such adjustments, if the Liberty Group Stock, or any other
redeemable capital stock of TCI into which either series of Preferred
Stock may be convertible ("Redeemable Capital Stock"), is redeemed in
full by TCI (the "Redemption Event"), then, except as otherwise
described below, the shares of such Series G and Series H Preferred
Stock will thereafter be convertible into the kind and amount of
consideration that would have been received in such Redemption Event
by a holder of the number of shares of Redeemable Capital Stock that
would have been issuable upon conversion of such shares of Series G
and Series H Preferred Stock, if they had been converted in full
immediately prior to such Redemption Event.
However, if any series of Redeemable Capital Stock into which a series
of Series G or Series H Preferred Stock is then convertible is
redeemed in full by TCI in exchange for securities of another issuer
("Redemption Securities"), TCI may elect to provide the holders of
such Series G or Series H Preferred Stock with the right to exchange
such Series G or Series H Preferred Stock, concurrently with the
Redemption Event, for preferred stock of such other issuer ("Mirror
Preferred Stock"). Such Mirror Preferred Stock shall be convertible
into Redemption Securities and shall otherwise have terms and
conditions comparable to the Series G or Series H Preferred Stock
exchanged. If TCI provides such an exchange right, any holder that
does not then choose to participate in such exchange will continue to
hold such Series G or Series H Preferred Stock but such holder will
loose the conversion right with respect to the Redeemable Capital
Stock redeemed in the Redemption Event and will not have any right to
receive Redemption Securities in lieu thereof. A holder that
participates in such exchange will receive Mirror Preferred Stock
convertible into Redemption Securities, but will no longer hold the
Series G or Series H Preferred Stock so exchanged.
An alternative provision will apply if, at the time of exercise of any
such exchange right provided by TCI, the holder of the applicable
series of Series G or Series H Preferred Stock would be entitled to
receive on conversion any property in addition to the Redeemable
Capital Stock being redeemed. In that case, holders that choose to
participate in the exchange will receive both Mirror Preferred Stock
issued by the issuer of the Redemption Securities of the other issuer
and a new preferred stock of TCI convertible into such additional
property. In such event, the Mirror Preferred Stock and such new TCI
preferred stock will have a combined liquidation value equal to the
liquidation value of the Series G or Series H Preferred Stock
exchanged and will otherwise have terms and conditions comparable to
such Series G or Series H Preferred Stock.
The Series G and Series H Preferred Stock are redeemable at TCI's
option, in whole or in part, any time on or after February 1, 2001.
The Series G and Series H Preferred Stock will be redeemable in full
on February 1, 2016, to the extent then outstanding. In all cases,
the redemption price per share will be the liquidation value thereof,
including the amount of any accrued but unpaid dividends thereon, to
and including the redemption date.
The Series G and Series H Preferred Stock will rank prior to TCI
common stock and the TCI Class B Preferred Stock and pari passu with
all other currently outstanding classes and series of TCI preferred
stock with respect to the declaration and payment of dividends and in
liquidation.
(continued)
II-170
<PAGE> 237
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The Series G and Series H Preferred Stock will vote in any general
election of directors of TCI and will have one vote per share for such
purposes and will vote as a single class with the TCI common stock,
the TCI Class B Preferred Stock and any other class or series of TCI
Preferred Stock entitled to vote in any general election of directors.
The Series G and Series H Preferred Stock will have no other voting
rights except as required by the DGCL.
(9) Combined Equity
General
The rights of holders of the TCI Group Stock upon liquidation of TCI
are based upon the ratio of the aggregate market capitalization, as
defined, of the TCI Group Stock to the aggregate market
capitalization, as defined, of the TCI Group Stock and the Liberty
Group Stock.
Employee Benefit Plans
TCI has several employee stock purchase plans (the "Plans") to provide
employees an opportunity for ownership in TCI and to create a
retirement fund. Terms of the Plans generally provide for employees
to contribute up to 10% of their compensation to a trust for
investment in TCI common stock. TCI, by annual resolution of the
Board, generally contributes up to 100% of the amount contributed by
employees. Certain of TCI's subsidiaries have their own employee
benefit plans. Contributions to all plans aggregated $28 million, $21
million and $16 million for 1995, 1994 and 1993, respectively.
Preferred Stock
Class A Preferred Stock. TCI is authorized to issue 700,000 shares of
Class A Preferred Stock, par value $.01 per share. Subsidiaries of
TCI held all of the issued and outstanding shares of such stock,
amounting to 592,797 shares. Such preferred stock eliminated in
consolidation. The holders of the Class A Preferred Stock exchanged
such Subsidiary Shares for shares of Series F Preferred Stock
immediately prior to the record date of the Distribution.
Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock.
TCI is authorized to issue 1,675,096 shares of Class B Preferred Stock
and 1,620,026 of such shares are issued and outstanding.
(continued)
II-171
<PAGE> 238
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Dividends accrue cumulatively (but without compounding) at an annual
rate of 6% of the stated liquidation value of $100 per share (the
"Stated Liquidation Value"), whether or not such dividends are
declared or funds are legally available for payment of dividends.
Accrued dividends will be payable annually on March 1 of each year (or
the next succeeding business day if March 1 does not fall on a
business day), and, in the sole discretion of the Board, may be
declared and paid in cash, in shares Series A TCI Group Stock or in
any combination of the foregoing. Accrued dividends not paid as
provided above on any dividend payment date will accumulate and such
accumulated unpaid dividends may be declared and paid in cash, shares
of Series A TCI Group Stock or any combination thereof at any time
(subject to the rights of any senior stock and, if applicable, to the
concurrent satisfaction of any dividend arrearages on any class or
series of TCI preferred stock ranking on a parity with the Class B
Preferred Stock with respect to dividend rights) with reference to any
regular dividend payment date, to holders of record of Class B
Preferred Stock as of a special record date fixed by the Board (which
date may not be more than 45 days nor less than 10 days prior to the
date fixed for the payment of such accumulated unpaid dividends). The
Class B Preferred Stock ranks junior to the Series F Preferred Stock
with respect to the declaration and payment of dividends.
If all or any portion of a dividend payment is to be paid through the
issuance and delivery of shares of Series A TCI Group Stock, the
number of such shares to be issued and delivered will be determined by
dividing the amount of the dividend to be paid in shares of Series A
TCI Group Stock by the Average Market Price of the Series A TCI Group
Stock. For this purpose, "Average Market Price" means the average of
the daily last reported sale prices (or, if no sale price is reported
on any day, the average of the high and low bid prices on such day) of
a share of Series A TCI Group Stock for the period of 20 consecutive
trading days ending on the tenth trading day prior to the regular
record date or special record date, as the case may be, for the
applicable dividend payment.
In the event of any liquidation, dissolution or winding up of TCI, the
holders of Class B Preferred Stock will be entitled, after payment of
preferential amounts on any class or series of stock ranking prior to
the Class B Preferred Stock with respect to liquidating distributions,
to receive from the assets of TCI available for distribution to
stockholders an amount in cash or property or a combination thereof,
per share, equal to the stated liquidaton value thereof, plus all
accumulated and accrued but unpaid dividends thereon to and including
the redemption date. TCI does not have any mandatory obligation to
redeem the Class B Preferred Stock as of any fixed date, at the option
of the holders or otherwise.
Subject to the prior preferences and other rights of any class or
series of TCI preferred stock, the Class B Preferred Stock will be
exchangeable at the option of TCI in whole but not in part at any time
for junior subordinated debt securities of TCI ("Junior Exchange
Notes"). The Junior Exchange Notes will be issued pursuant to an
indenture (the "Indenture"), to be executed by TCI and a qualified
trustee to be chosen by TCI.
(continued)
II-172
<PAGE> 239
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
If TCI exercises its optional exchange right, each holder of
outstanding shares of Class B Preferred Stock will be entitled to
receive in exchange therefor newly issued Junior Exchange Notes of a
series authorized and established for the purpose of such exchange,
the aggregate principal amount of which will be equal to the aggregate
Stated Liquidation Value of the shares of Class B Preferred Stock so
exchanged by such holder, plus all accumulated and accrued but unpaid
dividends thereon to and including the exchange date. The Junior
Exchange Notes will be issuable only in principal amounts of $100 or
any integral multiple thereof and a cash adjustment will be paid to
the holder for any excess principal that would otherwise be issuable.
The Junior Exchange Notes will mature on the fifteenth anniversary of
the date of issuance and will be subject to earlier redemption at the
option of TCI, in whole or in part, for a redemption price equal to
the principal amount thereof plus accrued but unpaid interest.
Interest will accrue, and be payable annually, on the principal amount
of the Junior Exchange Notes at a rate per annum to be determined
prior to issuance by adding a spread of 215 basis points to the
"Fifteen Year Treasury Rate" (as defined in the Indenture). Interest
will accrue on overdue principal at the same rate, but will not accrue
on overdue interest.
The Junior Exchange Notes will represent unsecured general obligations
of TCI and will be subordinated in right of payment to all Senior Debt
(as defined in the Indenture). Accordingly, holders of Class B
Preferred Stock who receive Junior Exchange Notes in exchange therefor
may have difficulty selling such Notes.
(continued)
II-173
<PAGE> 240
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
For so long as any dividends are in arrears on the Class B Preferred
Stock or any class or series of TCI preferred stock ranking pari passu
with the Class B Preferred Stock which is entitled to payment of
cumulative dividends prior to the redemption, exchange, purchase or
other acquisition of the Class B Preferred Stock, and until all
dividends accrued up to the immediately preceding dividend payment
date on the Class B Preferred Stock and such parity stock shall have
been paid or declared and set apart so as to be available for payment
in full thereof and for no other purpose, neither TCI nor any
subsidiary thereof may redeem, exchange, purchase or otherwise acquire
any shares of Class B Preferred Stock, any such parity stock or any
class or series of its capital stock ranking junior to the Class B
Preferred Stock (including the TCI common stock), or set aside any
money or assets for such purpose, unless all of the outstanding shares
of Class B Preferred Stock and such parity stock are redeemed. If TCI
fails to redeem or exchange shares of Class B Preferred Stock on a
date fixed for redemption or exchange, and until such shares are
redeemed or exchanged in full, TCI may not redeem or exchange any
parity stock or junior stock, declare or pay any dividend on or make
any distribution with respect to any junior stock or set aside money
or assets for such purpose and neither TCI nor any subsidiary thereof
may purchase or otherwise acquire any Class B Preferred Stock, parity
stock or junior stock or set aside money or assets for any such
purpose. The failure of TCI to pay any dividends on any class or
series of parity stock or to redeem or exchange on any date fixed for
redemption or exchange any shares of Class B Preferred Stock shall not
prevent TCI from (i) paying any dividends on junior stock solely in
shares of junior stock or the redemption purchase or other acquisition
of junior stock solely in exchange for (together with cash adjustment
for fractional shares, if any) or (but only in the case of a failure
to pay dividends on any parity stock) through the application of the
proceeds from the sale of, shares of junior stock; or (ii) the payment
of dividends on any parity stock solely in shares of parity stock
and/or junior stock or the redemption, exchange, purchase or other
acquisition of Class B Preferred Stock or parity stock solely in
exchange for (together with a cash adjustment for fractional shares,
if any), or (but only in the case of failure to pay dividends on any
parity stock) through the application of the proceeds from the sale
of, parity stock and/or junior stock.
The Class B Preferred Stock will vote in any general election of
directors, will have one vote per share for such purpose and will vote
as a single class with the TCI common stock, the Class A Preferred
Stock and any other class or series of TCI preferred stock entitled to
vote in any general election of directors. The Class B Preferred
Stock will have no other voting rights except as required by the DGCL.
Series Preferred Stock. The TCI Series Preferred Stock is issuable,
from time to time, in one or more series, with such designations,
preferences and relative participating, option or other special
rights, qualifications, limitations or restrictions thereof, as shall
be stated and expressed in a resolution or resolutions providing for
the issue of such series adopted by the Board.
(continued)
II-174
<PAGE> 241
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
All shares of any one series of the TCI Series Preferred Stock are
required to be alike for every particular and all shares are required
to rank equally and be identical in all respects, except insofar as
they may vary with respect to matters which the Board is expressly
authorized by the TCI Charter to determine in the resolution or
resolutions providing for the issue of any series of the TCI Series
Preferred Stock.
Redeemable Convertible Preferred Stock, Series E. In connection with
the Reorganization, the Board created and authorized the issuance of
the Redeemable Convertible Preferred Stock, Series E, par value $.01
per share. TCI is authorized to issue 400,000 shares. Subsidiaries of
TCI held all of the issued and outstanding shares of such stock,
amounting to 246,402 shares. All such preferred stock eliminated in
consolidation. The holders of the Series E Preferred Stock exchanged
such Subsidiary Shares for shares of Series F Preferred Stock
immediately prior to the record date of the Distribution.
Stock Options and Stock Appreciation Rights
Certain key employees of TCI Group hold options with tandem stock
appreciation rights to acquire Series A TCI Group Stock and Series A
Liberty Group Stock as well as restricted stock awards of Series A TCI
Group Stock and Series A Liberty Group Stock. Estimates of the
compensation relating to the options and/or stock appreciation rights
as well as restricted stock awards granted to such employees have been
recorded in the accompanying combined financial statements, but are
subject to future adjustment based upon the market value of Series A
TCI Group Stock and Series A Liberty Group Stock (see note 1) and,
ultimately, on the final determination of market value when the rights
are exercised or the restricted shares are vested.
(10) Transactions with Officers and Directors
Effective January 31, 1996, a director of TCI purchased one-third of
TCI Group's interest in two limited partnerships and obtained two
ten-year options to purchase TCI Group's remaining partnership
interests. The purchase price for the one-third partnership interests
was 37.209 shares of WestMarc Communications, Inc. (a wholly-owned
subsidiary of TCI Group) Series C Cumulative Compounding Preferred
Stock owned by such director, and the purchase price for the ten-year
options was $100 for each option. All options are exercisable for cash
in the aggregate amount of $3,000,000.
(11) Sale of Subsidiary Stock
On July 18, 1995, TINTA completed an initial public offering (the
"IPO") in which it sold 20 million shares of TINTA Series A common
stock to the public for consideration of $16.00 per share aggregating
$320 million, before deducting related expenses (approximately $19
million). The shares sold to the public represented 17% of TINTA's
total issued and outstanding common stock. Also in July 1995, TINTA
issued 687,500 Shares of TINTA Series A common stock as partial
consideration for a 35% ownership interest in Torneos Y Competencias
S.A., an Argentine sports programming company (the "TYC Acquisition").
As a result of the IPO and the TYC Acquisition, TCI Group has
recognized a nonrecurring gain amounting to $123 million. Subsequent to
the IPO and the TYC Acquisition, TCI owns 82% of the issued and
outstanding stock of TINTA, representing in excess of 90% of the voting
power of TINTA.
In June 1995, Flextech issued share capital for cash and preferred
shares of Thomson Directories Limited. In connection with such
issuance, TCI Group recorded a $51 million increase to stockholders'
equity and a $93 million increase to minority interest in equity of
consolidated subsidiaries. No gain was recognized in TCI Group's
combined statement of operations due primarily to the existence of TCI
Group's contingent obligations to repurchase certain of Flextech share
capital.
(12) Income Taxes
TCI files a consolidated Federal income tax return with all of its 80%
or more owned subsidiaries. Consolidated subsidiaries in which TCI
owns less than 80% each file a separate income tax return. TCI and
such subsidiaries calculate their respective tax liabilities on a
separate return basis which are combined in the accompanying combined
financial statements.
(continued)
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<PAGE> 242
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
A tax sharing agreement (the "Tax Sharing Agreement") among entities
attributed to TCI Group and certain other subsidiaries of TCI was
implemented effective July 1, 1995. The Tax Sharing Agreement
formalizes certain of the elements of a pre- existing tax sharing
arrangement and contains additional provisions regarding the allocation
of certain consolidated income tax attributes and the settlement
procedures with respect to the intercompany allocation of current tax
attributes. The Tax Sharing Agreement encompasses U.S. federal, state,
local and foreign tax consequences and relies upon the U.S. Internal
Revenue Code of 1986 as amended, and any applicable state, local and
foreign tax law and related regulations. Beginning on the July 1, 1995
effective date, TCI Group is responsible to TCI for its share of
current consolidated income tax liabilities. TCI is responsible to TCI
Group to the extent that TCI Group's income tax attributes generated
after the effective date are utilized by TCI to reduce its consolidated
income tax liabilities. Accordingly, all tax attributes generated by
TCI Group's operations after the effective date including, but not
limited to, net operating losses, tax credits, deferred intercompany
gains, and the tax basis of assets are inventoried and tracked for the
entities comprising TCI Group. In connection with the implementation
of the Tax Sharing Agreement, TCI Group recorded an increase to its
deferred income tax liability and a decrease to its combined equity of
$2 million.
Income tax benefit (expense) for the years ended December 31, 1995,
1994 and 1993 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- ---------
amounts in millions
<S> <C> <C> <C>
Year ended December 31, 1995:
Federal $(26) $ 85 $ 59
State and local (8) 14 6
----- ----- -----
$(34) 99 65
===== ===== =====
Year ended December 31, 1994:
Federal $(49) (4) (53)
State and local (11) 4 (7)
----- ----- -----
$(60) -- (60)
===== ===== =====
Year ended December 31, 1993:
Federal $(12) (110) (122)
State and local (16) (18) (34)
----- ------ -----
$(28) (128) (156)
===== ====== =====
</TABLE>
II-176
<PAGE> 243
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Income tax benefit (expense) differs from the amounts computed by
applying the Federal income tax rate of 35% as a result of the
following:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
amounts in millions
<S> <C> <C> <C>
Computed "expected" tax benefit
(expense) $ 63 (13) (43)
Adjustment to deferred tax assets
and liabilities for enacted
change in Federal income
tax rate -- -- (76)
Amortization not deductible
for tax purposes (19) (12) (13)
Minority interest in earnings
of consolidated subsidiaries (3) (3) (1)
Gain on sale of subsidiary
stock 43 -- --
Gain recognized for tax
purposes on exchange of assets (12) -- --
Recognition of losses of
consolidated partnership -- (10) (8)
State and local income taxes,
net of Federal income tax
benefit (6) (9) (22)
Valuation allowance on foreign
corporation -- (10) --
Other (1) (3) 7
---- ------ ----
$ 65 (60) (156)
==== ====== ====
</TABLE>
(continued)
II-177
<PAGE> 244
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 547 478
Less-valuation allowance (121) (100)
Investment tax credit carryforwards 118 122
Less-valuation allowance (41) (36)
Alternative minimum tax credit carryforwards 95 88
Investments in affiliates, due principally to
losses of affiliates recognized for financial
statement purposes in excess of losses
recognized for income tax purposes 176 294
Future deductible amounts principally due
to non-deductible accruals 86 35
Other -- 4
------ -----
Net deferred tax assets 860 885
------ -----
Deferred tax liabilities:
Property and equipment, principally due
to differences in depreciation 1,099 1,185
Franchise costs, principally due to differences
in amortization 3,566 2,600
Investment in affiliates, due principally to
undistributed earnings of affiliates 263 290
Intangible assets, principally due to
differences in amortization 42 104
Leases capitalized for tax purposes 53 --
Other 165 83
------ -----
Total gross deferred tax liabilities 5,188 4,262
------ -----
Net deferred tax liability $4,328 3,377
====== =====
</TABLE>
The valuation allowance for deferred tax assets as of December 31,
1995 and 1994 was $162 million and $136 million, respectively.
At December 31, 1995, TCI Group had net operating loss carryforwards
for income tax purposes aggregating approximately $1,089 million of
which, if not utilized to reduce taxable income in future periods, $132
million expires in 2003, $116 million in 2004, $333 million in 2005,
$316 million in 2006, $138 million in 2009 and $54 million in 2010.
Certain subsidiaries of TCI Group had additional net operating loss
carryforwards for income tax purposes aggregating approximately $245
million and these net operating losses are subject to certain rules
limiting their usage.
(continued)
II-178
<PAGE> 245
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
At December 31, 1995, TCI Group had remaining available investment tax
credits of approximately $63 million which, if not utilized to offset
future Federal income taxes payable, expire at various dates through
2005. Certain subsidiaries of TCI Group had additional investment tax
credit carryforwards aggregating approximately $55 million and these
investment tax credit carryforwards are subject to certain rules
limiting their usage.
Certain of the Federal income tax returns of TCI and its subsidiaries
which filed separate income tax returns are presently under
examination by the Internal Revenue Service for the years 1981
through 1992. A subsidiary of TCI Group has filed a petition in
United States Tax Court protesting the disallowance of certain
Transitional Investment Tax Credits and such issue will likely be
litigated in 1996. In the opinion of management, any additional tax
liability, not previously provided for, resulting from these
examinations, ultimately determined to be payable, should not have a
material adverse effect on the combined financial position of TCI
Group.
New tax legislation was enacted in the third quarter of 1993 which,
among other matters, increased the corporate Federal income tax rate
from 34% to 35%. TCI Group has reflected the tax rate change in its
combined statements of operations. Such tax rate change resulted in
an increase of $76 million to income tax expense and deferred income
tax liability.
(13) Transactions with Liberty Media Group and Other Related Parties
Certain TCI corporate general and administrative costs are charged to
Liberty Media Group at rates set at the beginning of the year based on
projected utilization for that year. The utilization-based charges
are set at levels that management believes to be reasonable and that
approximate the costs Liberty Media Group would incur for comparable
services on a stand alone basis. The accompanying combined statements
of operations do not reflect the allocation of corporate general and
administrative costs through the date of the TCI/Liberty Combination
in the aforementioned manner because the majority of the entities
attributable to Liberty Media Group were owned, directly or
indirectly, by Liberty Media Corporation for the majority of the
periods presented herein. During the year ended December 31, 1995,
Liberty Media Group was allocated $3 million in corporate general and
administrative costs by TCI Group.
(continued)
II-179
<PAGE> 246
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Prior to the determination by the Board to seek approval of
stockholders to distribute the Liberty Group Stock, TCI did not have
formalized intercompany allocation methodologies. In connection with
such determination, management of TCI determined that TCI general
corporate expenses should be allocated to Liberty Media Group based on
the amount of time TCI corporate employees (e.g. legal, corporate,
payroll, etc.) expend on Liberty Media Group matters. TCI management
evaluated several alternative allocation methods including assets,
revenue, operating income, and employees. Management did not believe
that any of these methods would reflect an appropriate allocation of
corporate expenses given the diverse nature of TCI's operating
subsidiaries, the relative maturity of certain of the operating
subsidiaries, and the way in which corporate resources are utilized.
TCI Group has a 50.1% partnership interest in QE+Ltd Limited
Partnership ("QE+"), which distributes STARZ!, a first-run movie
premium programming service launched in 1994. Entities attributed to
Liberty Media Group hold the remaining 49.9% partnership interest.
The QE+ limited partnership agreement provides that TCI Group will be
required to make special capital contributions to QE+ through July 1,
2005, up to a maximum amount of $350 million, approximately $86
million of which was paid in 1995. QE+ is obligated to pay TCI Group
a preferred return of 10% per annum on the first $200 million of its
special capital contributions beginning five years from the date of
the contribution or five years from January 1, 1996, whichever is
later. Any TCI Group special capital contributions in excess of $200
million will be entitled to a preferred return of 10% per annum from
the date of the contribution. QE+ is required to apply 75% of its
available cash flow, as defined, to repay the TCI Group special
capital contributions and any preferred return payable thereon. To
the extent such special capital contributions are insufficient to fund
the cash requirements of QE+, TCI Group and Liberty Media Group will
each have the option to fund such cash requirements in proportion to
their respective ownership percentages.
TCI Group has also entered into a long-term affiliation agreement with
QE+ with respect to the distribution of the STARZ! service. Rates per
subscriber specified in the agreement are based upon customary rates
charged to other cable system operators. Payments to QE+ for 1995
aggregated $31 million. The affiliation agreement also provides that
QE+ will not grant materially more favorable terms and conditions to
other major cable system operators unless such more favorable terms
and conditions are made available to TCI Group. The affiliation
agreement also requires TCI Group to make payments to QE+ with respect
to a guaranteed minimum number of subscribers totaling approximately
$339 million for the years 1996, 1997 and 1998.
Liberty Media Group also has the right to acquire an additional 10.1%
general partnership interest in QE+ based on a formula designed to
approximate the fair value of such interest. Such right is
exercisable for a period of ten years beginning January 1, 1999 after
QE+ has had positive cash flow for two consecutive calendar quarters.
The right is exercisable only after all special capital contributions
from TCI Group have been repaid, including any preferred return as
discussed above.
(continued)
II-180
<PAGE> 247
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Encore Media Corporation (90% owned by Liberty Media Group) earns
management fees from QE+ equal to 20% of managed costs, as defined.
In addition, effective July 1, 1995, Liberty Media Group started
earning a "Content Fee" for certain services provided to QE+ equal to
4% of the gross revenue of QE+. Such Content Fees aggregated $1
million for the six months ended December 31, 1995. The Content Fee
agreement expires on June 30, 2001, subject to renewal on an annual
basis thereafter. Payment of the Content Fee will be subordinated to
the repayment of the contributions made by TCI Group and the preferred
return thereon.
Subsidiaries of Liberty Media Group lease satellite transponder
facilities from TCI Group. Charges to Liberty Media Group for such
arrangements for the years ended December 31, 1995, 1994 and 1993,
aggregated $15 million, $8 million and $4 million, respectively.
Certain subsidiaries attributed to Liberty Media Group produce and/or
distribute sports and other programming to cable television operators
(including TCI Group) and others. Charges to TCI Group are based upon
customary rates charged to others.
HSN pays a commission to TCI Group for merchandise sales to customers
who are subscribers of TCI Group's cable systems. Aggregate
commissions and charges to TCI Group were $6 million, $7 million and
$1 million for the years ended December 31, 1995 1994 and 1993,
respectively.
Subsequent to the TCI/Liberty Combination, TCI Group manages certain
treasury activities for Liberty Media Group on a centralized basis.
Cash receipts of certain businesses attributed to Liberty Media Group
are remitted to TCI Group and certain cash disbursements of Liberty
Media Group are funded by TCI Group on a daily basis. Prior to the
Distribution of the Liberty Group Stock, but subsequent to the
TCI/Liberty Combination, the net amounts of such cash activities are
included in investment in Liberty Media Group in the accompanying
combined financial statements. Prior to the TCI/Liberty Combination,
Liberty Media Corporation separately managed the treasury activities
of its subsidiaries. Subsequent to the Distribution, such cash
activities are included in borrowings from or loans to TCI Group or,
if determined by the Board, as an equity contribution to be reflected
as an Inter-Group Interest to Liberty Media Group.
The Board could determine from time to time that debt of TCI Group not
incurred by entities attributed to Liberty Media Group or preferred
stock and the proceeds thereof should be specifically attributed to
and reflected on the combined financial statements of Liberty Media
Group to the extent that the debt is incurred or the preferred stock
is issued for the benefit of Liberty Media Group.
(continued)
II-181
<PAGE> 248
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
For all periods prior to the Distribution, all financial impacts of
equity offerings were attributed entirely to TCI Group. After the
Distribution, all financial impacts of issuances of additional shares
of TCI Group Stock will be attributed entirely to TCI Group, all
financial impacts of issuances of additional shares of Liberty Group
Stock the proceeds of which are attributed to the Liberty Media Group
will be reflected entirely in the combined financial statements of
Liberty Media Group. Financial impacts of dividends or other
distributions on, and purchases of, TCI Group Stock will be attributed
entirely to TCI Group, and financial impacts of dividends or other
distributions on Liberty Group Stock will be attributed entirely to
Liberty Media Group. Financial impacts of repurchases of Liberty
Group Stock, the consideration for which is charged to Liberty Media
Group, will be reflected entirely in the combined financial statements
of Liberty Media Group, and the financial impacts of repurchases of
Liberty Group Stock the consideration for which is charged to TCI
Group, will be attributed entirely to TCI Group.
Subsequent to the Distribution, borrowings from or loans to TCI Group
will bear interest at such rates and have repayment schedules and
other terms as are established by the Board. The Board expects to
make such determinations, either in specific instances or by setting
generally applicable policies from time to time, after consideration
of such factors as it deems relevant, including, without limitation,
the use of proceeds by and creditworthiness of the recipient Group,
the capital expenditure plans and investment opportunities available
to each Group and the availability, cost and time associated with
alternative financing sources.
During the first quarter of 1995, Liberty Media Group acquired an
additional interest in an investment previously accounted for under
the cost method. Upon consummation of such transaction, Liberty Media
Group is deemed to exercise significant influence over such entity
and, as such, adopted the equity method of accounting. As a result,
TCI Group restated its interest in Liberty Media Group, its unrealized
gain on available-for-sale securities and accumulated deficit by $122
million, $127 million and $5 million, respectively, at December 31,
1994. The restatement resulted in an increase in the earnings from
Liberty Media Group of $5 million for the year ended December 31,
1994.
During 1995, BET Holdings, Inc. ("BET") repurchased a portion of its
common stock. As a result of the repurchase, Liberty Media Group's
ownership of BET was increased from 19% to 22%. Therefore, Liberty
Media Group is deemed to exercise significant influence over BET and,
accordingly, has adopted the equity method of accounting for its
investment in BET. As a result, Liberty Media Group restated its
financial statements, which resulted in a decrease in its investment in
BET, its unrealized holding gains on available-for-sale securities, its
deferred taxes and accumulated deficit of $44 million, $32 million, $18
million and $6 million, respectively, at December 31, 1994. In
addition, TCI Group increased its earnings of Liberty Media Group by $2
million for each of 1994 and 1993.
(14) Commitments and Contingencies
During 1994, TCI Group, Comcast, Cox (collectively, the "Cable
Partners") and Sprint formed a partnership ("WirelessCo") to engage in
the business of providing wireless communications services on a
nationwide basis. Through WirelessCo, in which TCI Group owns an
indirect 30% interest, the partners participated in auctions ("PCS
Auctions") of broadband personal communications services ("PCS")
licenses conducted by the Federal Communications Commission ("FCC").
In the first round auction, which concluded during the first quarter
of 1995, WirelessCo was the winning bidder for PCS licenses for 29
markets, including New York, San Francisco- Oakland-San Jose, Detroit,
Dallas-Fort Worth, Boston-Providence, Minneapolis-St. Paul and
Miami-Fort Lauderdale. The aggregate license cost for these licenses
was approximately $2.1 billion.
(continued)
II-182
<PAGE> 249
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
WirelessCo also invested in American PSC, L.P. ("APC"), which holds a
PCS license granted under the FCC's pioneer preference program for the
Washington-Baltimore market. WirelessCo acquired its 49% limited
partnership interest in APC for $23 million and agreed to make capital
contributions to APC equal to 49/51 of the cost of APC's PCS license.
Additional capital contributions may be required in the event APC is
unable to finance the full cost of its PCS license. WirelessCo may
also be required to finance the build-out expenditures for APC's PCS
system. Cox, which holds a pioneer preference PCS license for the Los
Angeles-San Diego market, and WirelessCo have also agreed on the
general terms and conditions upon which Cox (with a 51% interest) and
WirelessCo (with a 49% interest) would form a partnership to hold and
develop a PCS system using the Los Angeles-San Diego license. APC and
the Cox partnership would affiliate their PCS systems with WirelessCo
and be part of WirelessCo's nationwide integrated network, offering
wireless communications services under the "Sprint" brand
During 1994, subsidiaries of Cox, Sprint and TCI Group also formed a
separate partnership ("PhillieCo"), in which TCI Group owns a 35.3%
interest. PhillieCo was the winning bidder in the first round auction
for a PCS license for the Philadelphia market at a license cost of $85
million. To the extent permitted by law, the PCS system to be
constructed by PhillieCo would also be affiliated with WirelessCo's
nationwide network.
WirelessCo may bid in subsequent rounds of the PCS Auctions and may
invest in, affiliate with or acquire licenses from other successful
bidders. The capital that WirelessCo will require to fund the
construction of the PCS systems, in addition to the license costs and
investments described above, will be substantial.
In March of 1995, the Cable Partners and Sprint (collectively, the
"Partners") formed two new partnerships, of which the principal
partnership is MajorCo, to which they contributed their respective
interests in WirelessCo and through which they formed another
partnership, NewTelco, L.P. ("New Telco") to engage in the business of
providing local wireline communications services to residences and
businesses on a nationwide basis. The Cable Partners agreed to
contribute their interests in TCG to NewTelco. TCG is one of the
largest competitive access providers in the United States in terms of
route miles.
Effective January 31, 1996, the Partners amended the MajorCo
partnership agreement (the "Partnership Agreement") and certain other
agreements related thereto. Under the Partnership Agreement, the
business of MajorCo and its subsidiaries will be the provision of
certain wireless and other services described in the Partnership
Agreement. The Partners intend for WirelessCo and its subsidiary
partnerships to be the exclusive vehicles through which they engage in
the wireless telephony service businesses, subject to certain
exceptions. MajorCo will no longer be authorized to engage in the
business of providing local wireline communications services to
residences and businesses. In connection with the amendment of the
Partnership Agreement, the Partners, also agreed to the termination of
the agreement to contribute the Cable Partners' interests in TCG to
NewTelco.
(continued)
II-183
<PAGE> 250
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Pursuant to separate agreements, each of the Cable Partners and Sprint
have agreed to negotiate in good faith on a market-by-market basis for
the provision of local wireline telephony services over the cable
television facilities of the respective Cable Partner under the Sprint
brand. Accordingly, local wireline telephony offerings in each market
would be the subject of individual agreements to be negotiated with
Sprint, rather than being provided by MajorCo, as originally
contemplated. The Cable Partners and Sprint also reaffirmed their
intention to continue to attempt to integrate the business of TCG with
that of MajorCo. In addition, each Cable Partner agreed to certain
restrictions on its ability to offer, promote, or package certain of
its products or services with certain products and services of other
persons and agreed to make its facilities available to Sprint for
specified purposes to the extent and on the terms that it has made
such facilities available to others for such purposes. Such
agreements have a term of five years, but under certain circumstances
may terminate after three years.
Execution of the foregoing agreements was a condition to the
effectiveness of a previously approved business plan for the build out
of WirelessCo's nationwide network for wireless personal
communications services. Pursuant to the business plan, the Partners
are obligated to make additional cash capital contributions to MajorCo
in the aggregate amount of approximately $1.9 billion during the
two-year period that commenced January 1, 1996. The business plan
contemplates that MajorCo will require additional equity thereafter.
In July, 1995, TCI Group entered into certain agreements with Viacom
Inc. ("Viacom") and certain subsidiaries of Viacom regarding the
purchase by TCI Group of all of the common stock of a subsidiary of
Viacom ("Cable Sub") which, at the time of purchase, will own Viacom's
cable systems and related assets.
The transaction has been structured as a tax-free reorganization in
which Cable Sub will initially transfer all of its non-cable assets,
as well as all of its liabilities other than current liabilities, to a
new subsidiary of Viacom ("New Viacom Sub"). Cable Sub will also
transfer to New Viacom Sub the proceeds (the "Loan Proceeds") of a
$1.7 billion loan facility (the "Loan Facility") to be arranged by TCI
Group and Cable Sub. Following these transfers, Cable Sub will retain
cable assets with an estimated value at closing of approximately $2.2
billion and the obligation to repay the Loan Proceeds borrowed under
the Loan Facility. Repayment of the Loan Proceeds will be
non-recourse to Viacom and New Viacom Sub.
Viacom will offer to the holders of shares of Viacom Class A Common
Stock and Viacom Class B Common Stock (collectively, "Viacom Common
Stock") the opportunity to exchange (the "Exchange Offer") a portion
of their shares of Viacom Common Stock for shares of Class A Common
Stock, par value $100 per share, of Cable Sub ("Cable Sub Class A
Stock"). The Exchange Offer will be subject to a number of
conditions, including a condition (the "Minimum Condition") that
sufficient tenders are made of Viacom Common Stock that permit the
number of shares of Cable Sub Class A Stock issued pursuant to the
Exchange Offer to equal the total number of shares of Cable Sub Class
A Stock issuable in the Exchange Offer.
(continued)
II-184
<PAGE> 251
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
Immediately following the completion of the Exchange Offer, TCI Group
will acquire from Cable Sub shares of Cable Sub Class B common stock
for $350 million (which will be used to reduce Cable Sub's obligations
under the Loan Facility). At the time of such acquisition, the Cable
Sub Class A Stock received by Viacom stockholders pursuant to the
Exchange Offer will automatically convert into a series of senior
cumulative exchangeable preferred stock (the "Exchangeable Preferred
Stock") of Cable Sub with a stated value of $100 per share (the
"Stated Value"). The terms of the Exchangeable Preferred Stock,
including its dividend, redemption and exchange features, will be
designed to cause the Exchangeable Preferred Stock, in the opinion of
two investment banks, to initially trade at the Stated Value. The
Exchangeable Preferred Stock will be exchangeable, at the option of
the holder commencing after the fifth anniversary of the date of
issuance, for shares of Series A TCI Group Stock. The Exchangeable
Preferred Stock will also be redeemable, at the option of Cable Sub,
after the fifth anniversary of the date of issuance, and will be
subject to mandatory redemption on the tenth anniversary of the date
of issuance at a price equal to the Stated Value per share plus
accrued and unpaid dividends, payable in cash or, at the election of
Cable Sub, in shares of Series A TCI Group Stock, or in any
combination of the foregoing. If insufficient tenders are made by
Viacom stockholders in the Exchange Offer to permit the Minimum
Condition to be satisfied, Viacom will extend the Exchange Offer for
up to 15 business days and, during such extension, TCI Group and
Viacom are to negotiate in good faith to determine mutually acceptable
changes to the terms and conditions for the Exchangeable Preferred
Stock and the Exchange Offer that each believes in good faith will
cause the Minimum Condition to be fulfilled and that would cause the
Exchangeable Preferred Stock to trade at a price equal to the Stated
Value immediately following the expiration of the Exchange Offer. In
the event the Minimum Condition is not thereafter met, TCI and Viacom
will each have the right to terminate the transaction. In addition,
either party may terminate the transaction if the Exchange Offer has
not commenced by June 24, 1996 or been consummated by July 24, 1996.
Consummation of the transaction is subject to a number of conditions,
including receipt of a favorable letter ruling from the Internal
Revenue Service that the transaction qualifies as a tax-free
transaction and the satisfaction or waiver of all of the conditions of
the Exchange Offer. A request for a letter ruling from the Internal
Revenue Service has been filed by Viacom. TCI Group believes that,
based upon the unique and complex structure of the transaction, there
exists significant uncertainty as to whether a favorable ruling will
be obtained. In light of the foregoing, management of TCI Group has
concluded that consummation of the transaction is not yet probable.
No assurance can be given that the transaction will be consummated.
(continued)
II-185
<PAGE> 252
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). In
1993 and 1994, the FCC adopted certain rate regulations required by
the 1992 Cable Act and imposed a moratorium on certain rate increases.
As a result of such actions, TCI Group's basic and tier service rates
and its equipment and installation charges (the "Regulated Services")
are subject to the jurisdiction of local franchising authorities and
the FCC. Basic and tier service rates are evaluated against
competitive benchmark rates as published by the FCC, and equipment and
installation charges are based on actual costs. Any rates for
Regulated Services that exceeded the benchmarks were reduced as
required by the 1993 and 1994 rate regulations. The rate regulations
do not apply to the relatively few systems which are subject to
"effective competition" or to services offered on an individual
service basis, such as premium movie and pay- per-view services.
TCI Group believes that it has complied in all material respects with
the provisions of the 1992 Cable Act, including its rate setting
provisions. However, TCI Group's rates for regulated services are
subject to review by the FCC, if a complaint has been filed, or the
appropriate franchise authority, if such authority has been certified.
If, as a result of the review process, a system cannot substantiate
its rates, it could be required to retroactively reduce its rates to
the appropriate benchmark and refund the excess portion of rates
received. Any refunds of the excess portion of tier service rates
would be retroactive to the date of complaint. Any refunds of the
excess portion of all other Regulated Service rates would be
retroactive to one year prior to the implementation of the rate
reductions.
On October 30, 1995, the FCC accepted for comment a proposed
resolution of all complaints against the cable programming services
tier ("CPST") currently pending against cable systems owned by TCI
Group. If the proposed resolution is accepted by the FCC, TCI Group
will settle all pending complaints by a one-time credit to each
subscriber in CPST regulated franchises. The aggregate amount of such
credits is approximately $9 million and had previously been accrued by
TCI Group. In addition, the FCC will find that the CPST rates in CPST
regulated franchises on September 15, 1995 comply with federal
regulations. TCI Group has committed not to file any additional
cost-of-service filings until May 15, 1996 in franchises that were
subject to CPST regulation prior to September 15, 1995. However, TCI
Group will be able to avail itself of the other mechanisms under FCC
rules to recover costs, including abbreviated cost-of-service filings
covering system rebuilds and upgrades. In the proposed resolution,
TCI Group does not admit any violation of, or any failure to conform
to, the 1992 Cable Act or the rules promulgated thereunder. The
comment period has ended and TCI Group is awaiting action by the FCC.
TCI Group has guaranteed notes payable and other obligations of
affiliated and other companies with outstanding balances of
approximately $212 million at December 31, 1995. Although there can
be no assurance, management of TCI Group believes that it will not be
required to meet its obligations under such guarantees, or if it is
required to meet any of such obligations, that they will not be
material to TCI Group.
(continued)
II-186
<PAGE> 253
"TCI GROUP"
(a combination of certain assets, as defined in note 1)
Notes to Combined Financial Statements
TCI Group is obligated to pay fees for the license to exhibit certain
films that are released theatrically by various motion picture studios
through December 31, 2005 (the "Film Licensing Obligations"). As of
December 31, 1995, these agreements require minimum payments
aggregating approximately $251 million. The aggregate amount of the
Film Licensing Obligations is not currently estimable because such
amount is dependent upon certain variable factors. Nevertheless, TCI
Group's required aggregate payments under the Film Licensing
Obligations could prove to be significant. Additionally, TCI Group
has guaranteed up to $67 million of similar license fee obligations of
another affiliate.
TCI Group has also committed to provide additional debt or equity
funding to certain of its affiliates. At December 31, 1995, such
commitments aggregated $95 million.
TCI Group leases business offices, has entered into pole rental
agreements and transponder lease agreements and uses certain equipment
under lease arrangements. Rental expense under such arrangements,
amounted to $114 million, $75 million and $64 million in 1995, 1994 and
1993, respectively.
Future minimum lease payments under noncancellable operating leases
for each of the next five years are summarized as follows (amounts in
millions):
<TABLE>
<S> <C>
1996 $ 66
1997 64
1998 59
1999 57
2000 51
</TABLE>
It is expected that, in the normal course of business, expiring leases
will be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will not be less
than the amount shown for 1995.
Certain key employees of TCI Group hold restricted stock awards and
options with tandem SARs to acquire shares of certain subsidiaries'
common stock. Estimates of the compensation related to the restricted
stock awards and options and/or SARs have been recorded in the
accompanying consolidated financial statement, but are subject to
future adjustment based upon the market value of the respective common
stock and, ultimately, on the final market value when the rights are
exercised.
TCI Group has contingent liabilities related to legal proceedings and
other matters arising in the ordinary course of business. In the
opinion of management, it is expected that amounts, if any, which may
be required to satisfy such contingencies will not be material in
relation to the accompanying combined financial statements.
II-187
<PAGE> 254
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Liberty Media Corporation:
We have audited the accompanying consolidated statement of operations,
stockholders' equity, and cash flows of Liberty Media Corporation and
subsidiaries for the year ended December 31, 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Liberty Media Corporation and subsidiaries for the year ended December 31,
1993, in conformity with generally accepted accounting principles.
As discussed in note 6 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
/s/ KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Denver, Colorado
March 18, 1994
II-188
<PAGE> 255
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
Year ended December 31, 1993
<TABLE>
<CAPTION>
amounts in thousands,
except per share data
<S> <C>
Revenue:
Net sales from home shopping services $ 942,940
From Tele-Communications Inc. ("TCI") (note 9) 44,074
From cable and programming services 166,242
-----------
1,153,256
-----------
Cost of sales, operating costs and expenses:
Cost of sales 611,526
Operating, selling, general and administrative 442,142
Charges by TCI (note 9) 10,856
Compensation relating to stock
appreciation rights (note 8) 40,366
Depreciation 24,958
Amortization 24,311
-----------
1,154,159
-----------
Operating loss (903)
Other income (expense):
Interest expense to TCI (note 9) (13,039)
Other interest expense (18,041)
Interest income from TCI (note 9) 3,788
Dividend and interest income, primarily from affiliates 19,761
Share of earnings of affiliates, net (note 4) 34,044
Gain on sale of investment 31,972
Loss on transactions with TCI (note 9) (30,296)
Litigation settlements (7,475)
Other, net (1,303)
-----------
Earnings before income taxes and extraordinary item 18,508
Income tax expense (note 6) (11,522)
-----------
Earnings before extraordinary item 6,986
Extraordinary item-loss on early extinguishment of debt, net of
taxes (2,191)
-----------
Net earnings 4,795
Dividend requirement on preferred stocks (notes 7 and 8) (31,972)
-----------
Net loss attributable to common shareholders $ (27,177)
===========
Loss per share:
Net loss before extraordinary item $ (0.19)
Extraordinary item, net (0.02)
-----------
Net loss attributable to common shareholders $ (0.21)
===========
</TABLE>
See accompanying notes to consolidated financial statements.
II-189
<PAGE> 256
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
----------------------- --------------------- paid-in Retained
Class C Class E Class A Class B capital earnings
--------- --------- --------- --------- ---------- ---------
amounts in thousands
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ 4 16 76,036 43,340 323,855 --
Dividends, including accretion on all
classes of preferred stock -- -- -- -- (27,177) (4,795)
Dividends, including accretion on all
classes of preferred stock not subject to
mandatory redemption requirements -- -- -- -- 19,229 --
Cash dividends on Class E preferred
stock -- -- -- -- (9,743) --
Issuance of Class A common stock and
Class E Preferred Stock upon
conversion of preferred stock
(note 9) -- 1 4,406 -- 8,360 --
Issuance of Class A common stock
for acquisition (note 5) -- -- 8,000 -- 115,000 --
Redemption of preferred stock (note 9) (4) -- -- -- (175,787) --
Acquisition and retirement of
common stock (note 9) -- -- (928) -- (17,611) --
Exchange of Class B common stock
for Class A common stock -- -- 1 (1) -- --
Accrued interest on note receivable
from related party (note 8) -- -- -- -- -- --
Prepayment of interest on note receivable
from related party (note 8) -- -- -- -- -- --
Net earnings -- -- -- -- -- 4,795
-------- --------- -------- --------- ---------- --------
Balance at December 31, 1993 $ -- 17 87,515 43,339 236,126 --
======= ========= ======== ========= ========== =========
<CAPTION>
Note
receivable Total
from stock-
related holders'
party equity
------------ --------
<S> <C> <C>
Balance at January 1, 1993 (14,500) 428,751
Dividends, including accretion on all
classes of preferred stock -- (31,972)
Dividends, including accretion on all
classes of preferred stock not subject to
mandatory redemption requirements -- 19,229
Cash dividends on Class E preferred
stock -- (9,743)
Issuance of Class A common stock and
Class E Preferred Stock upon
conversion of preferred stock
(note 9) -- 12,767
Issuance of Class A common stock
for acquisition (note 5) -- 123,000
Redemption of preferred stock (note 9) -- (175,791)
Acquisition and retirement of
common stock (note 9) -- (18,539)
Exchange of Class B common stock
for Class A common stock -- --
Accrued interest on note receivable
from related party (note 8) (984) (984)
Prepayment of interest on note receivable
from related party (note 8) 984 984
Net earnings -- 4,795
--------- ---------
Balance at December 31, 1993 (14,500) 352,497
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
II-190
<PAGE> 257
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Year ended December 31, 1993
<TABLE>
<CAPTION>
amounts in thousands
(see note 3)
<S> <C>
Cash flows from operating activities:
Net earnings $ 4,795
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 49,269
Compensation relating to stock appreciation rights 40,366
Payment of compensation relating to stock appreciation
rights (21,541)
Share of earnings of affiliates, net, (34,044)
Loss on transactions with TCI 30,296
Deferred income tax benefit (12,206)
Noncash interest and dividends (4,941)
Gain on sale of investment (31,972)
Litigation settlements 7,475
Payment of premium received upon redemption of
preferred stock investment 8,248
Loss on early extinguishment of debt, net of tax 2,191
Other noncash charges 8,636
Changes in operating assets and liabilities, net of effect
of acquisitions:
Change in receivables (15,318)
Change in inventories (7,606)
Change in due to/from
TCI, other than repayment
for commercial paper 22,660
Change in prepaid expenses (10,347)
Change in payables and accruals 43,810
---------
Net cash provided by operating activities $ 79,771
---------
</TABLE>
(continued)
II-191
<PAGE> 258
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows, continued
Year ended December 31, 1993
<TABLE>
<CAPTION>
amounts in thousands
(see note 3)
<S> <C>
Cash flows from investing activities:
Cash paid for acquisitions $(264,180)
Capital expended for property and equipment (25,476)
Additional investments in and
loans to affiliates and others (48,155)
Return of capital from affiliates 84,750
Collections on loans to affiliates and others 20,541
Cash received on redemption of
preferred stock investment 104,336
Proceeds from disposition of assets 53,228
Other investing activities, net (2,719)
---------
Net cash used by investing activities (77,675)
---------
Cash flows from financing activities:
Borrowings of debt 291,314
Repayments of debt (317,326)
Dividends on preferred stock (9,743)
Cash paid for redemption of preferred stock (12,338)
Contributions by minority shareholders of subsidiaries 41,049
---------
Net cash used by financing activities (7,044)
---------
Net decrease in cash and cash equivalents (4,948)
Cash and cash equivalents at beginning of year 96,253
---------
Cash and cash equivalents at end of year $ 91,305
=========
</TABLE>
See accompanying notes to consolidated financial statements.
II-192
<PAGE> 259
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993
(1) Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Liberty Media Corporation, those of all majority-owned
subsidiaries and entities for which there is a controlling voting
interest ("Liberty" or the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation. The
Company made certain significant acquisitions in 1993 (see note 5).
On January 27, 1994, Liberty and TCI entered into a definitive merger
agreement (the "Merger Agreement"). Under the Merger Agreement, the
transaction will be structured as a tax-free exchange of shares of
Class A and Class B common stock of both companies and preferred stock
of Liberty for like shares of a newly formed holding company,
TCI/Liberty Holding Company ("TCI/Liberty"). TCI stockholders will
receive one share of TCI/Liberty common stock for each of their
shares. Liberty common stockholders will receive 0.975 of a share of
TCI/Liberty common stock for each of their shares. Holders of Liberty
Class E, 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
(the "Class E Preferred Stock") will receive one share of a
substantially identical class of voting preferred stock of TCI/Liberty
for each of their shares. The transaction is subject to the approval
of both sets of shareholders as well as various regulatory approvals
and other customary conditions. Subject to timely receipt of such
approvals, which cannot be assured, it is anticipated the closing of
such transaction will take place during 1994.
In these notes to the consolidated financial statements, any reference
to TCI in connection with the issuance of the Company's preferred
stock includes subsidiaries of TCI.
(2) Summary of Significant Accounting Policies
Cash Equivalents
Cash equivalents consist of investments which are readily convertible
into cash and have original maturities of three months or less.
Investments
Investments in which the ownership interest is less than 20% are
generally carried at cost. For those investments in affiliates in
which the Company's voting interest is 20% to 50%, the equity method
of accounting is generally used. Under this method, the investment,
originally recorded at cost, is adjusted to recognize the Company's
share of net earnings or losses of the affiliates as they occur rather
than as dividends or other distributions are received, limited to the
extent of the Company's investment in, advances to and guarantees for
the investee. The Company's share of net earnings or losses of
affiliates includes the amortization of purchase adjustments.
(continued)
II-193
<PAGE> 260
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Property and Equipment
Property and equipment, including significant improvements, is stated
at cost which includes acquisition costs allocated to tangible assets
acquired. Construction costs, including interest during construction
and applicable overhead, are capitalized. Interest capitalized during
the periods presented was not material.
Depreciation is computed on a straight-line basis using estimated
useful lives of 5 to 15 years for cable distribution systems, 3 to 40
years for support equipment and buildings and 6 to 13 years for
computer and broadcast equipment.
Repairs and maintenance and any gains or losses on disposition of
assets in their entirety are included in operations. However,
recognition of gains on sales of properties to affiliates accounted
for under the equity method is deferred in proportion to the Company's
ownership interest in such affiliates.
Franchise Costs
Franchise costs include the difference between the cost of acquiring
cable television systems and amounts assigned to their tangible
assets. Such amounts are generally amortized on a straight-line basis
over 40 years. Costs incurred by Liberty in obtaining franchises are
being amortized on a straight-line basis over the life of the
franchise, generally 10 to 20 years.
Excess Cost Over Acquired Net Assets
Excess cost over acquired net assets consists of the difference
between the cost of acquiring programming entities and amounts
assigned to their tangible assets. Such amounts are amortized on a
straight-line basis over 30 years.
Other Intangible Assets
Other intangible assets consist of amounts assigned to covenants not
to compete and amounts (in excess of tangible assets) assigned to
sports program rights agreements, affiliate agreements and
distribution agreements. The amounts assigned to these agreements are
amortized over the respective lives of the agreements ranging from 1
to 10 years.
Net Sales
Net Sales include merchandise sales and shipping and handling
revenues, and are reduced by incentive discounts and sales returns to
arrive at net sales. The Company's sales policy allows merchandise to
be returned at the customer's discretion, generally up to 30 days
after the date of sale. An allowance for returned merchandise is
provided based upon past experience.
(continued)
II-194
<PAGE> 261
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Loss Per Common and Common Equivalent Share
Loss per common share attributable to common shareholders for the year
ended December 31, 1993 was computed by dividing net loss attributable
to common shareholders by the weighted average number of common shares
outstanding (130,574,056). Common stock equivalents were not included
in the computation of weighted average shares outstanding because
their inclusion would be anti-dilutive.
(3) Supplemental Disclosures to Consolidated Statement of Cash Flows
Cash paid for interest was $20,354,000, for the year ended December
31, 1993. Cash paid for income taxes during the year ended December
31, 1993 was $6,621,000.
Significant noncash investing and financing activities for the year
ended December 31, 1993 (amounts in thousands):
<TABLE>
<S> <C>
Cash paid for acquisitions:
Fair value of assets acquired $686,200
Net liabilities assumed (197,536)
Deferred tax asset recorded upon acquisition 1,115
Common stock issued for acquisition (123,000)
Noncash contribution for acquisition (32,673)
Minority interests in equity of acquired entities (69,926)
--------
$264,180
========
Liberty Class A common stock issued upon
conversion of preferred stock $ 12,767
========
Note issued in exchange for Liberty Class A common
stock $ 18,539
========
Notes issued in redemption of preferred stocks $163,057
========
Accreted and unpaid preferred stock dividends $ 30,348
========
</TABLE>
(continued)
II-195
<PAGE> 262
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Investments in Affiliates
Summarized unaudited financial information for affiliates accounted
for under the equity method, which operate in three related industries
(see note 11) is as follows (amounts in thousands):
<TABLE>
<CAPTION>
Year ended
December 31, 1993
-----------------
<S> <C>
Combined Operations
Revenue $ 2,131,210
Operating expenses (1,595,103)
Depreciation and amortization (199,304)
-----------
Operating income 336,803
Interest expense (98,933)
Other, net (116,686)
-----------
Net earnings $ 121,184
===========
</TABLE>
The following table reflects the Company's share of earnings (losses)
of the Company's investments accounted for under the equity method for
the year ended December 31, 1993 (amounts in thousands):
<TABLE>
<S> <C>
QVC, Inc. ("QVC") $13,978
Kansas City Cable Partners 10,522
US Cable of Lake County 637
Columbia Associates, L.P. (5,256)
Lenfest Communications, Inc. (6,710)
Mile Hi Cablevision Associates, Ltd. ("Mile Hi")
(see note 5) (380)
The Cable Partnerships of Country Cable and
Knight-Ridder Cablevision, Inc. 11,358
Sunshine Network Joint Venture (957)
American Movie Classics Company 11,313
Sioux Falls Cable Television 1,788
SportsChannel Chicago Associates 5,859
Home Team Sports Limited Partnership (7,076)
Other investments (1,032)
-------
$34,044
=======
</TABLE>
(continued)
II-196
<PAGE> 263
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On November 11, 1993, Liberty entered into an agreement with the staff
of the Federal Trade Commission pursuant to which Liberty agreed to
divest all of its equity interests in QVC during an 18 month time
period if QVC was successful in its offer to buy Paramount
Communications, Inc. ("Paramount") and not to vote or otherwise
exercise or influence control over QVC until such time as QVC withdrew
its offer for Paramount. Simultaneously, Liberty agreed to withdraw
from a stockholders agreement pursuant to which Liberty and certain
other stockholders exercised control over QVC (the "Stockholders'
Agreement"). On February 15, 1994, QVC terminated its offer for
Paramount. Upon termination of such offer, Liberty has the right to be
reinstated as a party to the Stockholders' Agreement so long as such
option is exercised within 90 days after such termination. However,
Liberty has not yet determined if it will rejoin the control group
under the Stockholders' Agreement.
On November 16, 1993, Liberty sold 1,690,041 shares of common stock of
QVC to Comcast Corporation ("Comcast") for aggregate consideration of
approximately $31,461,000. The sale to Comcast reduced Liberty's
interest in QVC common stock (on a fully diluted basis) from 21.6% to
18.5%. Liberty continues to account for its investment in QVC under
the equity method, although it no longer exercises significant control
over such affiliate, pending the determination of whether it will
rejoin the control group under the Stockholders' Agreement. Liberty
will change to the cost method of accounting in the event it elects
not to be reinstated as a party to the Stockholders' Agreement.
Certain of the shares of stock of QVC owned by Liberty are subject to
repurchase by QVC in the event that commitments to carry its
programming are not met. Approximately 46% of the shares which the
Company holds or would hold upon exercise or conversion of convertible
securities, are "unvested" and are subject to such repurchase rights
by QVC. QVC's repurchase rights with respect to QVC securities held by
the Company are exercisable over a period of time, ending in the year
2004, if certain carriage commitments made by Satellite Services,
Inc., ("SSI"), an indirect wholly owned subsidiary of TCI, are not
met. Under the terms of a certain agreement pursuant to which the
Company acquired from TCI a substantial number of the QVC securities
it now beneficially owns, TCI has agreed to reimburse the Company in
the event QVC exercises its right to repurchase certain of the
"unvested" shares. Such reimbursement will be based on the value
assigned such shares when the Company acquired them from TCI, which is
substantially below the current market price of such shares. Pursuant
to an agreement with Comcast and Mr. Barry Diller ("Diller"), Liberty
may be required to sell approximately 1.63 million shares of QVC
common stock to Diller. The purchase price under the Diller purchase
right is $34.082 per share.
(continued)
II-197
<PAGE> 264
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On October 1, 1993 KCCP made an $80,000,000 distribution to the
Company. The Company recorded the amount received as a reduction of
its investment in KCCP. Approximately $63,174,000 was used to repay a
note payable to KCCP, including accrued interest.
Certain of the Company's affiliates are general partnerships and any
subsidiary of the Company that is a general partner in a general
partnership is, as such, liable as a matter of partnership law for all
debts (other than non-recourse debts) of that partnership in the event
liabilities of that partnership were to exceed its assets.
(5) Acquisitions
On February 11, 1993, Liberty acquired 20,000,000 shares of the Class
B Stock of Home Shopping Network, Inc. ("HSN") from RMS Limited
Partnership ("RMS") for $58,000,000 in cash and 8,000,000 shares of
Liberty Class A common stock. Liberty had previously acquired shares
of common stock of HSN in 1992. Such common stock acquired in 1992 and
the Class B Stock acquired represented 23.5% of the common equity and
65.6% of the controlling voting interest of HSN as of the date of
acquisition. As a result of the acquisition of the controlling voting
interest, HSN became a consolidated subsidiary of the Company for
financial reporting purposes.
On June 1, 1993, Liberty completed the purchase of approximately
16,000,000 shares of HSN common stock at a price of $7 per share. The
shares had been tendered pursuant to a tender offer initiated by the
Company in April 1993.
On March 15, 1993, Mile Hi Cable Partners, L.P. ("New Mile Hi")
completed the acquisition (the "Mile Hi Acquisition") of all the
general and limited partnership interests in Mile Hi, the owner of the
cable television system serving Denver, Colorado. New Mile Hi is a
limited partnership formed among Community Cable Television ("CCT") a
general partnership owned 50.001% by the Company and 49.999% by TCI,
(78% limited partnership interest), Daniels Communications, Inc.
("DCI") (1% limited partner) and P & B Johnson Corp. ("PBJC") (21%
general partnership interest), a corporation controlled by Robert L.
Johnson, a member of the Company's Board of Directors. New Mile Hi is
a consolidated subsidiary of the Company for financial reporting
purposes. Liberty's investment in Mile Hi, which was previously
accounted for under the cost method, was previously received from TCI.
Prior to the Mile Hi Acquisition, the Company, indirectly owned a
32.175% interest in Mile Hi through its ownership of a limited
partnership interest in Daniels & Associates Partners Limited
("DAPL"), one of Mile Hi's general partners. DAPL was liquidated on
March 12, 1993, at which time a subsidiary of Liberty (and partner in
DAPL) received a liquidating distribution consisting of its
proportionate interest in DAPL's partnership interest in Mile Hi,
representing the aforementioned 32.175% interest in Mile Hi. The
subsidiary of Liberty also received a note receivable of approximately
$50 million (the "Mile Hi Note") in novation of a loan receivable from
DAPL in an equal amount. The subsidiary then was merged into Liberty
Cable Partner, Inc. ("LCP") a wholly owned subsidiary of the Company
and a general partner of CCT.
(continued)
II-198
<PAGE> 265
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The total value of the Mile Hi Acquisition was approximately $180
million. Of that amount, approximately $70 million was in the form of
Mile Hi debt paid at the closing. Another $50 million was in the form
of the Mile Hi Note, which debt was assumed by New Mile Hi and then by
CCT. Of the remaining $60 million, approximately $40 million was paid
in cash to partners in Mile Hi in exchange for their partnership
interests. The remaining $20 million of interest in Mile Hi was
acquired by New Mile Hi through the contribution by LCP to CCT and by
CCT to New Mile Hi of the 32.175% interest in Mile Hi received in the
DAPL liquidation and by DCI's contribution to New Mile Hi of a 0.4%
interest in Mile Hi.
Of the $110 million in cash required by New Mile Hi to complete the
transaction, $105 million was loaned to New Mile Hi by CCT and $5
million was provided by PBJC as a capital contribution to New Mile Hi.
Of the $5 million contributed by PBJC, approximately $4 million was
provided by CCT through loans to Mr. Johnson and trusts for the
benefit of his children. CCT funded its loans to New Mile Hi and the
Johnson interests by borrowing $93 million under its revolving credit
facility and by borrowing $16 million from TCI in the form of a
subordinated note.
The acquisitions of HSN and all the general and limited partnership
interests in Mile Hi were accounted for by the purchase method.
Accordingly, the results of operations of such acquired entities have
been consolidated with those of the Company since their respective
dates of acquisition. On a pro forma basis the Company's revenue would
have been increased by approximately $111,208,000 for the year ended
December 31, 1993, had the acquisition occurred prior to January 1,
1993. Earnings before extraordinary item, on a pro forma basis would
have been decreased by approximately $9,378,000 for the year ended
December 31, 1993. Net loss attributable to common shareholders and
loss per common share would have increased by $14,429,000 and $0.11,
respectively, for the year ended December 31, 1993. The foregoing
unaudited pro forma financial information was based upon historical
results of operations adjusted for acquisition costs and, in the
opinion of management, is not necessarily indicative of the results
had the Company operated the acquired entities since prior to January
1, 1993.
(6) Income Taxes
Liberty files a consolidated Federal income tax return with all of its
80% or more owned subsidiaries. Consolidated subsidiaries in which
the Company owns less than 80% each file a separate income tax return.
Liberty and such subsidiaries calculate their respective tax
liabilities on a separate return basis which are combined in the
accompanying consolidated financial statements.
(continued)
II-199
<PAGE> 266
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Certain of the Federal income tax returns of a less than 80% owned
subsidiary of Liberty (the "Subsidiary") are presently under
examination by the IRS. During 1993, the IRS completed its examination
of the Subsidiary's Federal income tax returns for its 1989 and 1988
fiscal years, proposing adjustments of approximately $11 million, not
including interest thereon. The adjustments related primarily to
issues currently under protest for the Subsidiary's 1987 and 1986
fiscal years, including the Subsidiary's amortization of acquired FCC
broadcast licenses and related intangible assets and the Subsidiary's
deduction of certain royalty payments to a related party. The
Subsidiary's management believes that it has valid positions related
to the adjustments and intends to vigorously defend its interests. The
Subsidiary has protested all proposed adjustments to the Appellate
Division of the IRS. Management of the Subsidiary believes that the
ultimate resolution of the matters will not have a material effect on
the results of operations of the Subsidiary.
On February 9, 1994, the IRS announced a comprehensive Settlement
Initiative which broadly addresses intangibles issues currently being
contested by various taxpayers. The intangibles issues currently being
protested by the Subsidiary are subject to this Settlement Initiative.
At this time, it is not certain whether the IRS will make a settlement
offer to the Subsidiary, nor whether the Subsidiary would accept such
an offer if made.
The Financial Accounting Standards Board Statement No. 109 requires a
change from the deferred method of accounting for income taxes of APB
Opinion No. 11 to the asset and liability method of accounting for
income taxes. Under the asset and liability method of Statement No.
109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered
or settled. Under Statement No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. The Company adopted
Statement No. 109 in 1993 and has applied the provisions of Statement
No. 109 retroactively.
Income tax benefit (expense) for the year ended December 31, 1993
consists of (amounts if thousands):
<TABLE>
<S> <C>
Current Federal tax expense $(19,396)
Current state tax expense (4,332)
--------
(23,728)
--------
Deferred Federal tax benefit 11,423
Deferred state tax benefit 783
--------
12,206
--------
$(11,522)
========
</TABLE>
(continued)
II-200
<PAGE> 267
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income tax benefit (expense) for the year ended December 31, 1993
differs from the amounts computed by the Federal tax rate of 35% as a
result of the following (amounts in thousands):
<TABLE>
<S> <C>
Computed expected tax expense $ (6,478)
Dividends excluded for income tax
purposes 182
Amortization not deductible for income
tax purposes (3,944)
Excess executive compensation (689)
Minority interest in consolidated
corporate subsidiaries 386
State and local income taxes, net of
Federal income tax benefit (2,307)
Effect of change in anticipated state tax
rate 2,043
Effect of change in Federal tax rate (707)
Other, net (8)
---------
$ (11,522)
=========
</TABLE>
The significant components of deferred tax benefit for the year ended
December 31, 1993 are as follows (amounts in thousands):
<TABLE>
<S> <C>
Differences in recognition of earnings or losses of
affiliates for income tax and financial statement
purposes $ 3,098
Dividend income, including premium on redemption,
recognized for financial statement purposes in excess
of income recognized for income tax purposes (814)
Differences in recognition of compensation relating
to stock appreciation rights and unearned
compensation arrangements 8,517
Litigation settlement expenses recognized for financial
statement purposes in excess of amount
recognized for income tax purposes 2,766
Inventory costing 4,057
Accrued liabilities for financial statement purposes
in excess of amount recognized for income tax
purposes attributable primarily to
home shopping programming services 3,200
Utilization of net operating loss, capital loss,
investment tax credit and alternative minimum tax
credit (8,931)
Change in valuation allowance during the period (134)
Differences in depreciation and amortization for
income tax and financial statement purposes (871)
Net benefit realized due to change in
state and Federal income tax rates 1,336
Other, net (18)
-------
$12,206
=======
</TABLE>
(continued)
II-201
<PAGE> 268
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The valuation allowance for deferred tax assets as of December 31,
1993 was $2,017,000 as compared to $1,138,000 at December 31, 1992.
New tax legislation was enacted in the third quarter of 1993 which,
among other matters, increased the corporate Federal income tax rate
from 34% to 35%. In addition, the Company recognized the benefit of a
reduction in its state income tax rate relating to its receipt of
favorable tax rulings from certain state tax authorities. The Company
has reflected the tax rate changes in its consolidated statements of
operations in accordance with the treatment prescribed by Statement
No. 109. Such tax rate changes resulted in a net decrease of
$1,336,000 in income tax expense.
(7) Preferred Stocks Subject to Mandatory Redemption Requirements
Class A Redeemable Convertible Preferred Stock
The 10,794 shares of Class A Preferred Stock outstanding at December
31, 1992 held by TCI (representing 100% of the issued and outstanding
shares at that time) were converted on January 15, 1993 in accordance
to its terms, into 4,405,678 shares of Liberty Class A common stock
and 55,070 shares of Liberty Class E Preferred Stock. Such Class A
Preferred Stock was retired and may not be reissued.
Class B Redeemable Exchangeable Preferred Stock
The Company is authorized to issue up to 106,000 shares of the Class B
Preferred Stock. The aggregate number of shares of such Class B
Preferred Stock that was issued to TCI and outstanding at December 31,
1993 is 105,353 shares (representing 100% of the issued and
outstanding shares). The accretion rate for the Class B Preferred
Stock is 8.5% per annum, compounded semi-annually.
(continued)
II-202
<PAGE> 269
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At the option of the Company, the shares of the Class B Preferred
Stock are redeemable at any time, in whole or in part, at a redemption
price equal to accreted value per share as of the redemption date,
payable solely in cash, and at the option of the Company will also be
exchangeable, in whole but not in part, for shares of a series of
Class F Serial Preferred Stock or of any other class or series of
preferred stock of the Company then authorized to be issued (the
"Convertible Exchangeable Preferred Stock"), the rights, preferences
and qualifications of which shall be substantially similar to those of
the Class B Preferred Stock as to ranking, voting rights, rights of
redemption for cash at the option of the Company and mandatory
redemption on March 28, 2006. If the Company elects to issue shares
of Convertible Exchangeable Preferred Stock in exchange for Class B
Preferred Stock, such shares will be convertible, in whole or in part,
at the option of the holder into shares of Liberty Class A common
stock, but will not be exchangeable at such holder's option for TCI
common stock. The holder will have optional redemption rights
equivalent to those for the Class B Preferred Stock, as described
below, but the Company will not have the right to satisfy its
redemption obligations with respect thereto through the issuance of
additional shares of Convertible Exchangeable Preferred Stock. The
shares of Convertible Exchangeable Preferred Stock may accrete
dividends at a rate different from the accretion rate then applicable
to the shares of Class B Preferred Stock for which they are exchanged
or may provide for the accrual and payment of cash dividends (which
may or may not be cumulative). At the option of the Company, at any
time after March 28, 1995, the shares of Convertible Exchangeable
Preferred Stock will be exchangeable, in whole or in part, at the
option of the holder into shares of Liberty Class A common stock (the
"Convertible Subordinated Notes"). If the shares of Convertible
Exchangeable Preferred Stock that are being exchanged for Convertible
Subordinated Notes accrete dividends, then the Convertible
Subordinated Notes will be zero coupon notes, the issue price of which
shall be equal to the liquidation price of the shares of Convertible
Exchangeable Preferred Stock for which they are exchanged as of the
date of such exchange, and the principal amount of Exchangeable
Preferred Stock at March 28, 2006. If the shares of Convertible
Exchangeable Preferred Stock that are being exchanged for Convertible
Subordinated Notes provide for the accrual and payment of cash
dividends, the principal amount of such Convertible Subordinated Notes
shall be equal to the liquidation price of the shares of Convertible
Exchangeable Preferred Stock for which they are exchanged as of the
date of such exchange, plus (to the extent not already included in
such liquidation price) all accumulated or accrued and unpaid
dividends, if any, to the date of such exchange and interest will
accrue, and be payable semiannually, on such principal amount at a
rate per annum equivalent to the annual dividend rate for such shares
of Convertible Exchangeable Preferred Stock for which they are
exchanged, except for such variations as may be appropriate to reflect
the differences between debt securities and equity securities and
except that such Convertible Subordinated Notes will not be
exchangeable for another issue of Convertible Subordinated Notes.
(continued)
II-203
<PAGE> 270
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In addition, at any time after March 28, 1995, the shares of Class B
Preferred Stock shall each be exchangeable, at the Company's option,
in whole but not in part, for zero coupon subordinated notes of the
Company (the "Exchangeable Subordinated Notes"). The principal amount
of such Exchangeable Subordinated Notes shall be equal to the accreted
value of the shares for which they are exchanged as of March 28, 2006
(rounded down to the nearest $1,000) and the issue price of such
Exchangeable Subordinated Notes (plus the amount of any cash
adjustment payable in lieu of issuing Notes in other than authorized
denominations) shall be equal to the accreted value of such shares as
of the date of exchange. The terms of the Exchangeable Subordinated
Notes shall otherwise be substantially similar to those of the Class B
Preferred Stock for which they are exchanged, except for such
variations as may be appropriate to reflect the differences between
debt securities and equity securities and except that such
exchangeable Subordinated Notes will be exchangeable at the option of
the Company at any time after issuance thereof for Convertible
Subordinated Notes of the Company, but will not be exchangeable or
redeemable for shares of Convertible Exchangeable Preferred Stock or
for another issue of Exchangeable Subordinated Notes. The rate at
which the Exchangeable Subordinated Notes may be exchanged for shares
of TCI common stock at the option of the holder shall be calculated so
that the aggregate principal mount of the Exchangeable Subordinated
Notes issued in exchange for shares of the Class B Preferred Stock
will be exchangeable into the same aggregate number of shares of TCI
common stock as the shares of Class B Preferred Stock for which they
were exchanged.
The shares of Class B Preferred Stock are also exchangeable or
redeemable at the option of the holder as described below.
The shares of Class B Preferred Stock, unless previously redeemed,
will be exchangeable at the option of the holder at any time in whole
or in part for shares of TCI common stock. The Company will have the
option of delivering shares of TCI Class A common stock or TCI Class B
common stock or any combination thereof upon such exchange. The
exchange rate for the Class B Preferred Stock is 54.34 shares of TCI
common stock for each share of Class B Preferred Stock, subject to
adjustment under certain conditions.
The exchange rights of the shares of Class B Preferred Stock will
expire at the close of business on the business day immediately
preceding March 28, 2006 or, in the case of shares of Class B
Preferred Stock called for redemption or exchange, at the close of
business on the date specified for such redemption or exchange, unless
in either case the Company defaults in the payment of the redemption
price or the making of the exchange.
The Company deposited with an escrow agent all shares of TCI common
stock acquired by the Company in connection with the Exchange. The
TCI common stock is held by the escrow agent for delivery to holders
of Class B Preferred Stock upon exchange. Upon surrender of shares of
Class B Preferred Stock for exchange, the holder thereof shall be
entitled to receive the shares of TCI common stock at the then
applicable exchange rate. Any shares of TCI common stock remaining in
escrow after March 28, 2006 will be returned to and become the sole
property of the Company.
(continued)
II-204
<PAGE> 271
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The holders of shares of Class B Preferred Stock may, by delivery of a
written notice of demand (a "Demand Notice"), require the Company to
redeem all shares of Class B Preferred Stock covered by such Demand
Notice on March 28, 1996 and March 28, 2001 (each such date a "Special
Redemption Date"), at a redemption price (the "Special Redemption
Price") equal to the accreted value of such shares as of such Special
Redemption Date.
The Special Redemption Price will be payable by the Company, at its
option, in cash, Liberty Class A common stock, Convertible
Exchangeable Preferred Stock, TCI common stock, the Company's
convertible subordinated extension notes due on March 28, 2006 (the
"Non-Convertible Extension Notes", and together with the Convertible
Extension Notes, the "Extension Notes") or any combination thereof;
provided, however, that if any Convertible Extension Notes are issued
as such payment, Convertible Extension Notes shall constitute no less
than 25% of the Special Redemption Price and if Non-Convertible
Extension Notes are issued as such payment, Non-Convertible Extension
Notes shall constitute no less than 25% of the Special Redemption
Price.
Unless all outstanding shares of Class B Preferred Stock to be
redeemed or exchanged are at the time held by TCI, the Company's right
to redeem shares of Class B Preferred Stock through the delivery of
Extension Notes or shares of Liberty Class A common stock, Convertible
Exchangeable Preferred Stock or TCI common stock is subject to the
Company satisfying various conditions.
Class D Redeemable Voting Preferred Stock
The Company is authorized to issue up to 18,000 shares of Class D
Redeemable Voting Preferred Stock (the "Class D Preferred Stock").
The aggregate number of shares of such Class D Preferred Stock issued
to TCI and outstanding at December 31, 1993 is 17,238 shares
(representing 100% of the issued and outstanding shares). The
accretion rate for the Class D Preferred Stock is 10% per annum,
compounded semi-annually.
The Class D Preferred Stock is redeemable at the option of the Company
at any time and from time to time on and after March 28, 1996, in
whole or in part, for a redemption price, payable solely in cash,
equal to the accreted value per share of such class as of the
redemption date. The Class D Preferred Stock is subject to a
mandatory redemption requirement on March 28, 2006.
(continued)
II-205
<PAGE> 272
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Originally, TCI had the exclusive right to elect a number of directors
equal to not less than 20% (rounded upward to the nearest whole
number) of the total number of members of the Company's Board of
Directors for so long as all of the outstanding shares of Class D
Preferred Stock are owned by TCI, voting together as a separate class.
On March 26, 1993 in conjunction with the Recapitalization Agreement
described in note 9, the terms of the Class D Preferred was amended
to reduce the number of directors elected by the holders of the Class
D Preferred from 20% of the total number of the Company's Board of
Directors to 11% (which shall include the right to fill any vacancy
created by the death or resignation of any director elected by the
holders of Class D Preferred Stock or by the removal by such holders
of any director elected by them, and to elect such number of
additional directors to fill any newly created directorships as is
necessary to maintain such level of representation). In the event
that TCI ceases to own in the aggregate 100% of the outstanding shares
of Class D Preferred Stock, the foregoing special voting rights of
such class shall terminate.
(8) Stockholders' Equity
(a) Preferred Stocks Not Subject to Mandatory Redemption Requirements
Class C Redeemable Exchangeable Preferred Stock
On March 26, 1993, 399,299 shares of Class C Redeemable Exchangeable
Preferred Stock (the "Class C Preferred Stock") held by TCI
(representing 100% of the issued and outstanding shares) were
repurchased and retired and may not be reissued.
Class E, 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
The Company is authorized to issue 2,000,000 shares of Class E
Preferred Stock. The Company issued 1,620,026 shares of Class E
Preferred Stock on March 12, 1992. When issued, the shares had a
liquidation value of $100 per share. Dividends accrue on the Class E
Preferred Stock at the rate of 6% per annum and are payable on March 1
of each year in cash or, at the option of the Company, in whole or in
part, in shares of its Class A common stock. No interest or additional
dividends will accrue or be payable on accumulated, accrued and unpaid
dividends.
The Class E Preferred Stock is redeemable at the option of the Company
at any time or from time to time, in whole or in part, for a
redemption price payable solely in cash equal to the liquidation value
of each share (including any accrued and unpaid dividends). There is
no mandatory redemption requirement.
In addition, the shares of Class E Preferred Stock may, at any time,
at the option of the Company, be exchanged in whole for junior
subordinated notes of the Company (the "Junior Exchange Notes"). The
principal amount of the Junior Exchange Notes shall be equal to the
liquidation value of each share (including accrued and unpaid
dividends) on the exchange date.
The Junior Exchange Notes will bear interest, payable annually, at a
rate equal to the prevailing Fifteen Year Treasury Rate (as defined)
plus 2.15% and will have a maturity date 15 years from the date of
issuance.
(continued)
II-206
<PAGE> 273
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Class F Serial Preferred Stock
The Company is authorized to issue 5,000,000 shares of Class F Serial
Preferred Stock (the "Class F Preferred Stock") in one or more series
and to fix and state the designations, powers, preferences,
qualifications, limitations, restrictions and relative rights of the
shares of each such series. At any time that shares of any class or
series of the above-described preferred stock (other than the Class F
Preferred Stock) are issued and outstanding, the number of shares of
Class F Preferred Stock of any series that may be issued shall not
exceed the difference between five million (the number of Class F
Preferred Stock currently authorized) and the sum of (i) the number of
shares of all classes and series of the above-described preferred
stock (other than the Class F Preferred Stock) issued and outstanding
and (ii) the number of shares of all series of Class F Preferred Stock
issued and outstanding, in each case at the time the resolution of the
Board of Directors authorizing the issuance of shares of such series
of Class F Preferred Stock is adopted.
(b) Common Stock
General
Liberty is authorized to issue 300,000,000 Class A shares and
100,000,000 Class B shares. Liberty had 87,515,378 Class A shares and
43,338,720 Class B shares outstanding at December 31, 1993.
The Class A common stock has one vote per share and the Class B common
stock has ten votes per share. Each share of Class B common stock is
convertible, at the option of the holder, into one share of Class A
common stock.
Stock Option
The Company has an employment agreement with an officer (who is also a
director). Pursuant to this agreement, such officer was granted an
option to acquire 100,000 shares of Liberty Class B common stock at a
purchase price of $256 per share (reflects actual shares issued). The
employment agreement was amended and the option was exercised with
cash and a $25,500,000 note. This note bears interest at 7.54% per
annum. During October 1991, such officer tendered to the Company in
partial payment of such note, 800,000 shares of TCI Class B common
stock, resulting in a net reduction of $12,195,000 in the amount
payable under the note.
The 100,000 shares issued by Liberty upon exercise of this option,
together with all subsequent dividends and distributions thereon,
including shares issued in connection with certain stock splits of the
Company (collectively totaling 16,000,000 shares of Liberty Class B
common stock and 200,000 shares of Class E Preferred Stock at December
31, 1993, the "Option Units"), are subject to repurchase by the
Company under certain circumstances. The Company's repurchase right
will terminate as to 20% of the Option Units per year, commencing
March 28, 1992, and will terminate as to all of the Option Units in
the event of death, disability or under certain other circumstances.
(continued)
II-207
<PAGE> 274
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On October 24, 1992, said officer of the Company entered into a letter
agreement with respect to the timing and method of payment under the
promissory note and the release of the 200,000 shares of Class E
Preferred Stock from the collateral securing the promissory note. A
payment of approximately $984,000 for all interest accruing during
calendar 1993 (after giving effect to a discount at the rate of 7.54%
per annum to reflect the time value of money received prior to the
scheduled payment date) was made in March 1993. After giving effect to
the payment and the terms of the letter agreement, the remaining
principal balance on the note is approximately $14,500,000. The next
scheduled payment will be on October 24, 1994 in the principal amount
of approximately $4,300,000 plus interest accrued from December 31,
1993 to the payment date.
Stock Plan
The Company has a Stock Incentive Plan (the "Stock Plan") in order to
provide a special incentive to officers and other persons. Under the
Stock Plan, stock options, stock appreciation rights, restricted stock
and other awards valued by reference to, or that are otherwise based
on, the value of Class A common stock may be granted in respect to a
maximum of 40,000,000 shares of Class A common stock. Shares to be
delivered under the Stock Plan will be available from authorized but
unissued shares of Class A common stock or from shares of Class A
common stock reacquired by the Company. Shares of Class A common stock
that are subject to options or other awards that terminate or expire
unexercised will return to the pool of such shares available for grant
under the Stock Plan.
In June 1993, the Company granted an aggregate of 56,000 non-qualified
stock options with stock appreciation rights to certain officers and
key employees under the Stock Plan. Each option is exercisable for one
share of Class A common stock at an exercise price of $19.08. The
options vest in five equal annual installments commencing June 3, 1994
and expire in June 2003. Estimates of compensation relating to these
stock options with stock appreciation rights have been recorded
through December 31, 1993, but are subject to future adjustments based
upon market value and, ultimately, on the final determination of
market value when the rights are exercised.
Stock Appreciation Rights
The Company has granted to certain of its officers stock appreciation
rights with respect to 2,240,000 shares of Liberty Class A common
stock. These rights have an adjusted strike price of $0.80 per share,
become exercisable and vest evenly over seven years. Stock
appreciation rights expire on March 28, 2001. Estimates of
compensation relating to these stock appreciation rights have been
recorded through December 31, 1993, but are subject to future
adjustment based upon market value and, ultimately, on the final
determination of market value when the rights are exercised. Stock
appreciation rights with respect to 526,000 shares were exercised on
October 29, 1993 and on November 2, 1993 stock appreciation rights
with respect to 240,000 shares were exercised resulting in an
aggregate payment of $21,541,200 (the difference between the market
price and exercise price on the dates exercised) to the officers
exercising such rights.
(continued)
II-208
<PAGE> 275
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In 1993, the President of HSN received stock appreciation rights with
respect to 984,876 shares of HSN's common stock at an exercise price
of $8.25 per share. These rights vest over a four year period and are
exercisable until February 23, 2003. The stock appreciation rights
will vest upon termination of employment other than for cause and will
be exercisable for up to one year following the termination of
employment. In the event of a change in ownership control of HSN, all
unvested stock appreciation rights will vest immediately prior to the
change in control and shall remain exercisable for a one year period.
Stock appreciation rights not exercised will expire to the extent not
exercised. These rights may be exercised for cash or, so long as HSN
is a public company, for shares of HSN's common stock equal to the
excess of the fair market value of each share of common stock over
$8.25 at the exercise date. The stock appreciation rights also will
vest in the event of death or disability.
Estimated compensation relating to these stock appreciation rights has
been recorded through December 31, 1993, but is subject to future
adjustment based upon market value, and ultimately, on the final
determination of market value when the rights are exercised.
(9) Transactions with TCI and Other Related Parties
Certain subsidiaries of Liberty produce and/or distribute sports and
other programming to cable television operators (including TCI) and
others. Charges to TCI are based upon customary rates charged to
others.
Certain subsidiaries of Liberty purchase, at TCI's cost plus an
administrative fee, certain pay television and other programming
through a subsidiary of TCI. In addition, HSN pays a commission to TCI
for merchandise sales to customers who are subscribers of TCI's cable
systems. Aggregate commissions and charges to TCI were approximately
$10,650,000 for the year ended December 31, 1993.
Pursuant to a Cable Television Management Agreement, a subsidiary of
TCI provides management services for cable television systems owned by
CCT. The subsidiary receives a fee equal to 3% of the gross cable
television revenue of the partnership.
Liberty has an 11.6% note payable to TCI with a principal amount of
$76,952,000 which is due on February 1, 1997 and is secured by the
Company's partnership interest in CCT and in the Mile Hi Note. In
addition, Liberty has a 6% note payable to TCI with a principle amount
of $104,644. A subsidiary of Liberty also has a 6% note payable to
TCI totaling $4,322,000.
(continued)
II-209
<PAGE> 276
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
CCT has a note payable to TCI of approximately $58 million, including
accrued interest, due January 1, 2000. The note bears interest at 8%
per annum. Additionally, CCT has approximately $36 million, including
accrued interest, in notes receivable from TCI due January 1, 2000.
The notes receivable earn interest at 11.6% per annum.
On March 26, 1993, Liberty and TCI and certain of their respective
subsidiaries entered into a series of agreements regarding the
repurchase by Liberty of certain shares of its common and preferred
stock from TCI and the purchase by TCI of certain cable television
investments from Liberty and on June 3, 1993, Liberty completed the
transactions contemplated by said agreements. The first such agreement
(the "Recapitalization Agreement") was between Liberty, TCIL and
Tele-Communications of Colorado, Inc. ("TCIC") both of which are wholly
owned subsidiaries of TCI. The Recapitalization Agreement provided for
the Company's repurchase of 927,900 shares of Liberty Class A common
stock owned by TCIL, and repurchase of all of the outstanding shares of
the Class C Preferred Stock. Liberty paid an aggregate purchase price
for the Class C Preferred Stock of approximately $175 million and
approximately $19 million for the shares of Class A common stock. The
aggregate price of approximately $194 million was satisfied by delivery
of approximately $12 million in cash and four promissory notes totaling
approximately $182 million. The shares of Class A common stock sold by
TCIL are part of those received upon conversion of the Class A
Preferred Stock into 4,405,678 shares of Liberty Class A common stock
and 55,070 shares of Class E Preferred Stock.
In connection with the Recapitalization Agreement, TCIC and LCP
entered into an Option-Put Agreement (the "Option-Put Agreement")
which was amended on November 30, 1993. Under the amended Option-Put
Agreement, between June 30, 1994 and September 28, 1994, and between
January 1, 1996 and January 31, 1996, TCIC will have the option to
purchase LCP's interest in CCT and the Mile Hi Note for an amount
equal to $77 million plus interest on such amount from June 3, 1993.
Between April 1, 1995 and June 29, 1995, and between January 1, 1997
and January 31, 1997, LCP will have the right to require TCIC to
purchase LCP's interest in CCT and the Mile Hi Note for an amount
equal to $77 million plus interest on such amount from June 3, 1993.
Also on June 3, 1993, Liberty and a subsidiary of TCI entered into the
second such agreement (the "Purchase and Sale Agreement") pursuant to
which a TCI subsidiary purchased from the Company a 16% limited
partnership interest in Intermedia Partners from LCP and all of LCP's
interest in a special allocation of income and gain of $7 million
under the partnership agreement of Intermedia Partners, for a purchase
price of approximately $9 million (which resulted in a loss in the
Company's statement of operations of approximately $22 million). Also
pursuant to which TCI has an option to purchase the Company's
remaining 6% interest in Intermedia Partners prior to December 31,
1995 for approximately $3.6 million plus interest at 8% per annum from
June 3, 1993 (which resulted in a provision for impairment of
investment in the Company's statement of operations of approximately
$8 million). The Company's obligation to sell such partnership
interest and to grant such option were conditioned upon consummation
of the transactions contemplated by the Recapitalization Agreement.
(continued)
II-210
<PAGE> 277
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Commitments and Contingencies
The Company has long-term sports program rights contracts which
require payments through 1998. Future payments by year are as follows
(amounts in thousands):
<TABLE>
<S> <C>
1994 $15,345
1995 11,503
1996 8,580
1997 5,926
1998 1,300
</TABLE>
Liberty leases business offices, has entered into pole rental
agreements and transponder lease agreements, and uses certain
equipment under lease arrangements. Rental expense under such
arrangements amounted to approximately $22,515,000, for the year ended
December 31, 1993.
Future minimum lease payments under noncancellable operating leases
for each of the next five years are summarized as follows (amounts in
thousands):
<TABLE>
<S> <C>
1994 $22,810
1995 20,029
1996 19,526
1997 19,296
1998 14,985
</TABLE>
It is expected that in the normal course of business, leases that
expire will be renewed or replaced by leases on other properties;
thus, it is anticipated that future minimum lease commitments will not
be less than the amounts shown for 1994.
The Company is obligated to pay fees for the license to exhibit
certain qualifying films that are released theatrically by various
motion picture studios through December 31, 2006 (the "Film License
Obligations"). As of December 31, 1993, these agreements require
minimum payments aggregating approximately $189 million. The aggregate
amount of the Film License Obligations is not currently estimable
because such amount is dependent upon the number of qualifying films
produced by the motion picture studios, the amount of United States
theatrical film rentals for such qualifying films, and certain other
factors. Nevertheless, the Company's aggregate payments under the Film
License Obligations could prove to be significant.
(continued)
II-211
<PAGE> 278
LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Information About Liberty's Operations
Liberty operates primarily in the United States in two industry
segments, cable television systems ("Cable") and production and
distribution of cable television programming services ("Programming").
Home shopping is a programming service which includes a retail
function. Separate amounts have been provided for home shopping
programming services to enhance the reader's understanding of the
Company. Operating income is total revenue less operating costs and
expenses which includes an allocation of corporate general and
administrative expenses. Liberty has investments, accounted for under
the equity method, which also operate in the United States in the
Cable and Programming industries. The following is selected
information about Liberty's operations for the year ended December 31,
1993.
<TABLE>
<CAPTION>
Home
Corporate Shopping Cable Programming Total
--------- -------- --------- ----------- ---------
amounts in thousands
<S> <C> <C> <C> <C> <C>
Revenue $ -- 942,940 56,744 153,572 1,153,256
========== ======= ======= ======= =========
Revenue from TCI $ -- -- -- 44,074 44,074
========== ======= ======= ======= =========
Operating income (loss) $ (43,327) 15,975 9,834 16,615 (903)
=========== ======= ======= ======= =========
Depreciation and
amortization $ 164 24,029 11,169 13,907 49,269
========== ======= ======= ======= =========
Capital expenditures,
including acquisitions $ 426 13,156 8,374 3,520 25,476
========== ======= ======= ======= =========
</TABLE>
(12) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
amounts in thousands,
except per share data
<S> <C> <C> <C> <C>
1993:
----
Revenue $179,072 303,685 313,083 357,416
Operating income (loss) $ 2,089 (2,603) 1,302 (1,691)
Gain on sale of investment $ 10,613 -- -- 21,359
Loss on transactions with TCI $ -- (30,296) -- --
Extraordinary item, net $ (1,792) (399) -- --
Net earnings (loss) $ 10,454 (18,016) 11,161 1,196
Net earnings (loss) attributable to
common shareholders $ (441) (27,520) 5,429 (4,645)
Primary and fully diluted
earnings (loss) per common and
common equivalent share $ 0.00 (0.21) 0.04 (0.04)
</TABLE>
II-212
<PAGE> 279
PART III.
Item 10. Directors and Executive Officers of the Registrant.
The following lists the directors and executive officers of
Tele-Communications, Inc. ("TCI" or the "Company"), their birth dates, a
description of their business experience and positions held with the Company as
of January 31, 1996. Directors of TCI are elected to staggered three-year
terms with one-third elected annually. The date the present term of office
expires for each director is the date of the Annual Meeting of the Company's
stockholders held during the year footnoted opposite their names. All officers
are appointed for an indefinite term, serving at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
Name Positions
---------------------------- ------------------------------------------------------------------
<S> <C>
Bob Magness (3) Chairman of the Board and director of TCI since June of 1994 and of TCI
Born June 3, 1924 Communications, Inc. ("TCIC") (predecessor company to TCI) since 1973;
TCIC director since 1968.
John C. Malone (1) TCI director since June of 1994; Chief Executive Officer and President
Born March 7, 1941 of TCI since January of 1994; Chief Executive Officer of TCIC from
March of 1992 to October of 1994 and President of TCIC from 1973 to
October of 1994; Chairman of the Board and director of Tele-
Communications International, Inc. since May 1995; is President and a
director of many of the Company's subsidiaries; also a director of
Turner Broadcasting System, Inc., BET Holdings, Inc., Home Shopping
Network, Inc. and The Bank of New York; TCIC director since 1973.
Donne F. Fisher (2) Executive Vice President of TCI from January of 1994 through January 1,
Born May 24, 1938 1996; on January 1, 1996, Mr. Fisher resigned his position as Executive
Vice President of TCI; Executive Vice President of TCIC from December
of 1991 to October of 1994; was previously Senior Vice President of
TCIC since 1982 and Treasurer since 1970; TCI director since June of
1994; TCIC director since 1980; also a director of General
Communication, Inc.
John W. Gallivan (3) Chairman of the Board of Kearns-Tribune Corporation ("Kearns"), a
Born June 28, 1915 newspaper publishing concern; also a director of Silver King Mining
Company; TCI director since June of 1994; TCIC director from 1980 to
August of 1994. Reinstated as TCIC director in January of 1996.
Kim Magness (2) TCI director since June of 1994; TCIC director from 1985 to August of
Born May 17, 1952 1994; reinstated as TCIC director in January of 1996. Manages numerous
personal and business investments, and is Chairman and President of a
company developing liners for irrigation canals.
Robert A. Naify (1) TCI director since June of 1994; TCIC director from 1987 to August of
Born February 17, 1922 1994; also Co-Chairman, Co-Chief Executive Officer and a director of
The Todd-AO Corporation.
</TABLE>
(continued)
III-1
<PAGE> 280
<TABLE>
<CAPTION>
Name Positions
---------------------------- ------------------------------------------------------------------
<S> <C>
Jerome H. Kern (3) TCI director since June of 1994; TCIC director from December of 1993 to
Born June 1, 1937 August of 1994; director of Tele-Communications International, Inc.
("International"), a subsidiary of TCI, since May, 1995; also is a
senior partner with the law firm of Baker & Botts, L.L.P., since
September of 1992. Prior to joining Baker & Botts, L.L.P., was senior
partner with the Law Offices of Jerome H. Kern from January 1, 1992 to
September 1, 1992 and, prior to that, was a senior partner with the law
firm of Shea & Gould from 1986 through December 31, 1991.
Tony Coelho (1) TCI director since June, 1994; Appointed TCIC director from March of
Born June 14, 1942 1994 to August of 1994; is chairman of the board and chief
executive officer of ETC w/tci (TCI's newly formed education division)
since October 1995; President and Chief Executive Officer of
Wertheim Schroder Investment Services from 1990 to June of 1995 and;
Managing Director of Wertheim Schroder & Co., Incorporated from 1989
to June of 1995; also a director of Circus Circus Enterprises, Inc., ICF
Kaiser International, Inc., Service Corporation International,
Specialty Retail Group, Inc., and Tanknology Environmental, Inc.
Stephen M. Brett Executive Vice President, General Counsel and Secretary of TCI since
Born September 20, 1940 January of 1994. Appointed TCI Senior Vice President and General
Counsel of TCIC as of December of 1991. Vice President and Secretary
and a director of most of TCI's subsidiaries. From August of 1988
through December of 1991, was Executive Vice President-Legal and
Secretary of United Artists Entertainment Company ("UAE") and its
predecessor, United Artists Communications, Inc. ("UACI").
Fred A. Vierra Executive Vice President of TCI since January of 1994. Chairman of the
Born November 9, 1931 Board and Chief Executive Officer of International since October of
1994. Vice Chairman of the Board of International since May of 1995.
Executive Vice President of TCIC from December of 1991 to
October of 1994. Was President, Chief Operating Officer and a director
of UAE from May of 1989 through December of 1991.
Peter R. Barton Executive Vice President of TCI since January of 1994; President and
Born April 6, 1951 Chief Executive Officer of Liberty Media Corporation ("Liberty"), a
wholly-owned subsidiary of TCI subsequent to August 4, 1994, since June
of 1990; was Senior Vice President of TCIC from 1988 to March of 1991.
</TABLE>
(continued)
III-2
<PAGE> 281
<TABLE>
<CAPTION>
Name Positions
---------------------------- ------------------------------------------------------------------
<S> <C>
Brendan R. Clouston Executive Vice President of TCI since January of 1994; President and
Born April 28, 1953 Chief Executive Officer of TCIC since October of 1994; Executive Vice
President and Chief Operating Officer of TCIC from March of 1992 to
October of 1994; previously Senior Vice President of TCIC since
December of 1991; from January of 1987 through December of 1991, held
various executive positions with UAE and its predecessor, UACI, most
recently Executive Vice President and Chief Financial Officer.
Larry E. Romrell Executive Vice President of TCI since January of 1994. President of TCI
Born December 30, 1939 Technology Ventures, Inc., a wholly-owned subsidiary of TCI, since
September of 1994 and a director of same since December of 1994; Senior
Vice President of TCIC from 1991 to October of 1994; previously held
various executive positions with WestMarc Communications, Inc.
("WestMarc"), a wholly-owned subsidiary of TCI.
Barry P. Marshall Executive Vice President and Chief Operating Officer of TCIC since
Born March 4, 1946 October of 1994. Executive Vice President and Chief Operating Officer
of TCI Cable Management Corporation, TCIC's primary operating
subsidiary, from March of 1992 through January 1, 1994, where he
directly oversaw all of TCIC's regional operating divisions. From 1986
to March of 1992, was Vice President and Chief Operating Officer of
TCIC's largest regional operating division.
Gary K. Bracken Controller of TCIC since 1969. Appointed Senior Vice President of TCIC
Born July 29, 1939 in December of 1991. Was named Vice President and Principal Accounting
Officer of TCIC in 1982.
Bernard W. Schotters Appointed Senior Vice President-Finance and Treasurer of TCIC in
Born November 25, 1944 December of 1991. Was appointed Vice President-Finance of TCIC in
1984. Vice President and Treasurer of most of TCI's subsidiaries.
Robert N. Thomson Appointed Senior Vice President of TCIC in February of 1995. Senior
Born December 19, 1943 Vice President of Communications and Policy Planning for TCIC from 1991
to October of 1994. Previously, Vice President of Government Affairs
for TCIC from January of 1987 to 1991.
</TABLE>
_______________________________
(1) Director's term expires in 1996.
(2) Director's term expires in 1997.
(3) Director's term expires in 1998.
(continued)
III-3
<PAGE> 282
Mr. J. C. Sparkman, previously an Executive Vice President of TCI, retired
in March of 1995 and Mr. R. E. Turner resigned from the Board of Directors in
October of 1995.
There are no family relations, of first cousin or closer, among the above
named individuals, by blood, marriage or adoption, except that Bob Magness and
Kim Magness are father and son, respectively.
During the past five years, none of the above persons have had any
involvement in such legal proceedings as would be material to an evaluation of
his ability or integrity.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
TCI's officers and directors, and persons who own more than ten percent of a
registered class of TCI's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish TCI with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such Forms 3, 4 and 5 and
amendments thereto furnished to TCI with respect to its most recent fiscal
year, or written representations that no Forms 5 were required, TCI believes
that, during the year ended December 31, 1995, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with except that one report, covering one
transaction, was filed late by Mr. Robert Thomson, an officer of the Company,
and except that two reports, one covering shares held by minor children and one
covering a transaction relating to the exercise of stock options, were filed
late by Mr. Bernard Schotters, another officer of the Company.
Item 11. Executive Compensation.
(a) Summary Compensation Table of Tele-Communications, Inc.
On August 3, 1995, TCI amended its Restated Certificate of
Incorporation to, among other things, (i) redesignate the TCI Class A
Common Stock as "Tele-Communications, Inc. Series A TCI Group Common
Stock" ("Series A Stock") and TCI's Class B Common Stock as
"Tele-Communications, Inc. Series B TCI Group Common Stock" ("Series B
Stock") and (ii) authorize two additional series of TCI common stock,
designated as "Tele-Communications, Inc. Series A Liberty Media Group
Common Stock" ("Liberty Series A Stock") and "Tele-Communications, Inc.
Series B Liberty Media Group Common Stock" ("Liberty Series B Stock").
Thereafter, TCI distributed to the holders of TCI 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 such
distribution (the "Distribution"). Certain of the stock options with
tandem stock appreciation rights relative to Series A Stock and Liberty
Series A Stock indicated in the following tables were granted prior to
the foregoing redesignation and Distribution. Options to purchase TCI
Class A common stock outstanding at the time of the Distribution were
adjusted by issuing to the holders of such options separate options to
purchase that number of shares of Liberty Series A Stock which the
holder would have been entitled to receive had the holder exercised
such option to purchase TCI Class A common stock prior to the record
date for the Distribution and reallocating a portion of the aggregate
exercise price of the previously outstanding options to the newly
issued options to purchase Liberty Series A Stock.
The following table shows, for the three years ended December 31, 1995,
all forms of compensation for the Chief Executive Officer and each of
the four most highly compensated executive officers of TCI, whose total
annual salary and bonus exceeded $100,000 for the year ended December
31, 1995:
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards
-------------------------------- ----------------------
Other
Annual Restricted
Compen- Stock Options/ All Other
sation Award(s) SARs Compensation
Position Year Salary ($) ($) ($) (#) ($)
- -------- ---- ----------- ----------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Bob Magness 1995 $850,000 --- --- 1,250,000 (7) $17,500 (10)(11)
Chairman of the 1994 $830,769 --- --- --- $ 2,500 (11)
Board 1993 $800,000 --- --- --- $ 2,500 (11)
John C. Malone 1995 $850,000 (1) $ 3,758 (3) --- 1,250,000 (7) $17,500 (10)(11)
President and Chief 1994 $821,731 (1) $ 2,610 (3) --- --- $17,500 (10)(11)
Executive Officer 1993 $800,000 (1) $ 2,726 (3) --- --- $17,500 (10)(11)
Fred A. Vierra 1995 $650,000 (2) $ 3,207 (3) $ 380,625 (5) 400,000 (7) $15,000 (10)
Executive Vice 1994 $669,613 (2) $ 1,024 (3) --- 250,000 (8) $15,000 (10)
President 1993 $623,617 (2) $ 263 (3) --- 125,000 (9) $15,000 (10)
Brendan R. Clouston 1995 $550,000 $ 3,181 (3) $2,062,500(6) 1,000,000 (7) $15,000 (10)
Executive Vice 1994 $525,000 $ 1,000 (3) --- 625,000 (8) $15,000 (10)
President 1993 $519,231 $ 263 (3) --- 625,000 (9) $15,000 (10)
Donne F. Fisher 1995 $450,000 $341,670 (3)(4) --- --- $17,500 (10)(11)
Executive Vice 1994 $440,385 $388,135 (3)(4) --- 250,000 (8) $17,500 (10)(11)
President 1993 $400,000 $432,860 (3)(4) --- --- $17,500 (10)(11)
</TABLE>
____________________
(continued)
III-4
<PAGE> 283
(1) Includes deferred compensation of $320,000 in 1995, $320,000 in 1994
and $150,000 in 1993.
(2) Includes deferred compensation of $250,000 in each of the years
presented.
(3) Consists of amounts reimbursed during the year for the payment of
taxes. During 1995, 1994 and 1993, a total of $5,673, $4,138 and
$864, respectively, was paid to Mr. Fisher.
(4) Includes $335,997, $383,997 and $431,996 dividend income received on
WestMarc preferred stock which is subject to forfeiture.
(5) International, a majority owned subsidiary of TCI, has a stock
incentive plan (the "International Plan") which is subject to the
approval of the International shareholders. On December 13, 1995,
pursuant to the International Plan, Mr. Vierra was granted 15,000
restricted shares of Series A Tele-Communications International, Inc.
common stock ("TINTA Series A Stock"). Such restricted shares vest as
to 50% of such shares on December 13, 1999 and as to the remaining
shares 50% on December 13, 2000. The value of such restricted stock
award was $341,250 at the end of 1995 based upon the closing price of
TINTA Series A Stock on December 29, 1995. International has not paid
cash dividends on TINTA Series A Stock and does not anticipate
declaring and paying cash dividends on the TINTA Series A Stock at any
time in the foreseeable future.
(6) The Company has a stock incentive plan, the Tele-Communications, Inc.
1994 Stock Incentive Plan (the "1994 Plan"). On December 13, 1995,
pursuant to the 1994 Plan, Mr. Clouston was granted 100,000 restricted
shares of Series A Stock. Such restricted shares vest as to 50% of
such shares on December 13, 1999 and as to the remaining shares 50% on
December 13, 2000. The value of such restricted stock award was
$1,987,500 at the end of 1995 based upon the closing price of Series A
Stock on December 29, 1995. TCI has not paid cash dividends on the
Series A Stock and does not anticipate declaring and paying cash
dividends on the Series A Stock at any time in the foreseeable future.
(7) For additional information regarding this award, see Option/SAR Grants
Table below.
(8) On November 17, 1994, pursuant to the 1994 Plan, certain executive
officers and other key employees were granted an aggregate of 3,191,000
options in tandem with stock appreciation rights to acquire shares of
Series A Stock at an adjusted purchase price of $16.50 per share and an
aggregate of 797,750 options in tandem with stock appreciation rights
to acquire shares of Liberty Series A Stock at a purchase price of
$22.00 per share. Such options vest evenly over five years, became
exercisable beginning on November 17, 1995 and expire on November 17,
2004. Notwithstanding the vesting schedule as set forth in the option
agreement, the option shares shall become available for purchase if
grantee's employment with the Company (a) shall terminate by reason of
(i) termination by the Company without cause (ii) termination by the
grantee for good reason (as defined in the agreement) or (iii)
disability, (b) shall terminate pursuant to provisions of a written
employment agreement, if any, between the grantee and the Company which
expressly permits the grantee to terminate such employment upon
occurrence of specified events (other than the giving of notice and
passage of time), or (c) if grantee dies while employed by the Company.
Further, the option shares will become available for purchase in the
event of an Approved Transaction, Board Change, or Control Purchase
(each as defined in the Plan), unless in the case of an Approved
Transaction, the Compensation Committee under the circumstances
specified in the Plan determines otherwise.
(continued)
III-5
<PAGE> 284
(9) On October 12, 1993 certain executive officers and other key employees
were granted an aggregate of 1,355,000 options in tandem with stock
appreciation rights to acquire shares of Series A Stock at an adjusted
purchase price of $12.50 per share and an aggregate of 338,750 options
in tandem with stock appreciation rights to acquire shares of Liberty
Series A Stock at a purchase price of $16.75 per share. On November
12, 1993, an additional grant of stock options in tandem with stock
appreciation rights to purchase an aggregate of 600,000 shares of
Series A Stock was made to Messrs. Clouston and Vierra at an adjusted
purchase price of $12.50 per share and an aggregate of 150,000 options
in tandem with stock appreciation rights to acquire shares of Liberty
Series A Stock at a purchase price of $16.75 per share. Such options
vest evenly over four years, first became exercisable on October 12,
1994 and expire on October 12, 2003. Notwithstanding the vesting
schedule as set forth in the option agreement, the option shares shall
become available for purchase if grantee's employment with the Company
(a) shall terminate by reason of (i) termination by the Company without
cause (ii) termination by the grantee for good reason (as defined in
the agreement) or (iii) disability, (b) shall terminate pursuant to
provisions of a written employment agreement, if any, between the
grantee and the Company which expressly permits the grantee to
terminate such employment upon occurrence of specified events (other
than the giving of notice and passage of time), or (c) if grantee dies
while employed by the Company. Further, the option shares will become
available for purchase in the event of an Approved Transaction, Board
Change, or Control Purchase (each as defined in the 1994 Plan), unless
in the case of an Approved Transaction, the Compensation Committee
under the circumstances specified in the 1994 Plan determines
otherwise.
(10) Includes dollar value of annual TCI contributions to the TCI Employee
Stock Purchase Plan ("ESPP") in which all named executive officers are
fully vested. Directors who are not employees of TCI are ineligible
to participate in the ESPP. The ESPP, a defined contribution plan,
enables participating employees to acquire a proprietary interest in
TCI and benefits upon retirement. Under the terms of the ESPP,
employees are eligible for participation after one year of service.
The ESPP's normal retirement age is 65 years. Participants may
contribute up to 10% of their compensation and TCI (by annual
resolution of the Board of Directors) may contribute up to 100% of the
participants' contributions. The ESPP includes a salary deferral
feature in respect of employee contributions. Forfeitures (due to
participants' withdrawal prior to full vesting) are used to reduce
TCI's otherwise determined contributions. Generally, participants
acquire a vested right in TCI contributions as follows:
<TABLE>
<CAPTION>
Years of service Vesting Percentage
---------------- ------------------
<S> <C>
Less than 1 0
1-2 20
2-3 30
3-4 45
4-5 60
5-6 80
6 or more 100
</TABLE>
Participant contributions are fully vested. Although TCI has not
expressed an intent to terminate the ESPP, it may do so, at any time.
The ESPP provides for full and immediate vesting of all participants'
rights upon termination. In each of the years ending December 31,
1995, 1994 and 1993, TCI contributed $15,000 to the ESPP for Dr.
Malone and Mr. Fisher. In the year ending December 31, 1995, TCI
contributed $15,000 to the ESPP for Mr. Magness.
(11) Includes fees paid to directors for attendance at each meeting of the
Board of Directors ($500 per meeting). During 1995, 1994 and 1993, a
total of $2,500 of such fees, respectively, were paid to each of Dr.
Malone, Mr. Magness and Mr. Fisher.
(continued)
III-6
<PAGE> 285
(b) Option/SAR Grants Table of Tele-Communications, Inc. The
following table shows all individual grants of stock options and stock
appreciation rights ("SARs") granted to each of the named executive officers of
TCI during the year ended December 31, 1995:
<TABLE>
<CAPTION>
Number of
Securities
Underlying % of Total
Options/ Options/SARs Market
SARs Granted Exercise or Price on Grant Date
Granted to Employees Base Price Grant Date Expiration Present Value
Name (#) in Fiscal Year ($/Sh) ($/Sh) Date ($)
- ---- ----------- ---------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Bob Magness
Series A 1,000,000 (1) $17.00 $20.625 (5) August 4, 2005 $14,133,800 (8)
Liberty Series A 250,000 (1) $24.00 $26.25 (6) August 4, 2005 $ 4,543,150 (9)
John C. Malone
Series A 1,000,000 (2) $17.00 $20.625 (5) August 4, 2005 $14,133,800 (8)
Liberty Series A 250,000 (2) $24.00 $26.25 (6) August 4, 2005 $ 4,543,150 (9)
Fred A. Vierra
TINTA Series A 400,000 (3) $16.00 $25.375 (7) August 4, 2005 $ 6,913,440 (10)
Brendan R. Clouston
Series A 1,000,000 (4) $17.00 $20.625 (5) August 4, 2005 $14,133,800 (8)
</TABLE>
_________________________
(1) On December 13, 1995, pursuant to an incentive plan subject to the
approval of shareholders (the "1996 Plan"), certain executive officers
of TCI, including Dr. Malone and Mr. Magness, were granted an
aggregate of 2,000,000 options in tandem with stock appreciation
rights to acquire shares of Series A Stock and 1,100,000 options in
tandem with stock appreciation rights to acquire shares of Liberty
Series A Stock. Each such grant of options with tandem stock
appreciation rights vests evenly over five years with such vesting
period beginning August 4, 1995, first becomes exercisable beginning
on August 4, 1996 and expires on August 4, 2005. Mr. Magness' grant
of 1,000,000 options in tandem with stock appreciation rights to
purchase Series A Stock represents 50% of the total options granted to
purchase Series A Stock pursuant to the 1996 Plan and, together with
the options granted to purchase Series A Stock described in note 4
below, represents 13.5% of all options granted in 1995 to purchase
Series A Stock. Additionally, Mr. Magness' grant of 250,000 options
in tandem with stock appreciation rights to purchase Liberty Series A
Stock represents 22.7% of the total options granted to purchase
Liberty Series A Stock pursuant to the 1996 Plan and, together with
the options granted to purchase Liberty Series A Stock described in
note 4 below, represents 11.3% of all options granted in 1995 to
purchase Liberty Series A Stock.
(2) Dr. Malone's grant of 1,000,000 options in tandem with stock
appreciation rights to purchase Series A Stock represents 50% of the
total options granted to purchase Series A Stock pursuant to the 1996
Plan and, together with the options granted to purchase Series A Stock
described in note 4 below, represents 13.5% of all options granted in
1995 to purchase Series A Stock. Additionally, Dr. Malone's grant of
250,000 options in tandem with stock appreciation rights to purchase
Liberty Series A Stock represents 22.7% of the total options granted
to purchase Liberty Series A Stock pursuant to the 1996 Plan and,
together with the options granted to purchase Liberty Series A Stock
described in note 4 below, represents 11.3% of all options granted in
1995 to purchase Liberty Series A Stock.
(continued)
III-7
<PAGE> 286
(3) On December 13, 1995, pursuant to the International Plan, certain
executive officers and other key employees of TCI were granted an
aggregate of 1,302,000 options in tandem with stock appreciation
rights to acquire shares of TINTA Series A Stock. Additionally, one
executive officer of TCI was granted an aggregate of 50,000 options
in tandem with stock appreciation rights to acquire from TCI shares of
TINTA Series A Stock owned by it. Each such grant of options vests
evenly over 5 years with such vesting period beginning August 4, 1995,
first becomes exercisable beginning August 4, 1996 and expires on
August 4, 2005. Mr. Vierra's grant of 400,000 options in tandem with
stock appreciation rights represents 30.7% of the total options
granted pursuant to the International Plan and, together with the
grant by TCI of options in tandem with stock appreciation rights to
purchase its ownership of TINTA Series A Stock, represents 29.6% of
all options granted in 1995 to purchase TINTA Series A Stock.
(4) On December 13, 1995, pursuant to the 1994 Plan, certain executive
officers were granted an aggregate of 2,650,000 options in tandem with
stock appreciation rights to acquire shares of Series A Stock and an
aggregate of 675,000 options in tandem with stock appreciation rights
to acquire shares of Liberty Series A Stock. Additionally, the
Company has a stock incentive plan, the Tele-Communications, Inc. 1995
Stock Incentive Plan (the "1995 Plan"). On December 13, 1995,
pursuant to the 1995 Plan, certain key employees were granted an
aggregate of 2,757,500 options in tandem with stock appreciation
rights to acquire shares of Series A Stock and an aggregate of 436,000
options in tandem with stock appreciation rights to acquire shares of
Liberty Series A Stock. Each such grant of options with tandem stock
appreciation rights vests evenly over five years with such vesting
period beginning August 4, 1995, first becomes exercisable beginning
on August 4, 1996 and expires on August 4, 2005. Mr. Clouston's
grant, pursuant to the 1994 Plan, of 1,000,000 options in tandem with
stock appreciation rights to acquire shares of Series A Stock
represents 37.7% of the total options granted to purchase Series A
Stock pursuant to the 1994 Plan and, together with the options granted
to purchase Series A Stock pursuant to the 1995 Plan and the 1996
Plan, represents 13.5% of all options granted in 1995 to purchase
Series A Stock.
(5) Represents the closing market price per share of Series A Stock on
December 13, 1995.
(6) Represents the closing market price per share of Liberty Series A
Stock on December 13, 1995.
(7) Represents the closing market price per share of TINTA Series A Stock
on December 13, 1995.
(8) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 5.65% discount rate; (b) a volatility factor
based upon the historical trading pattern of Series A Stock; (c) the
10-year option term; and (d) the closing price of Series A Stock on
February 8, 1996. The actual value an executive may realize will
depend upon the extent to which the stock price exceeds the exercise
price on the date the option is exercised. Accordingly, the value, if
any, realized by an executive will not necessarily be the value
determined by the model.
(continued)
III-8
<PAGE> 287
(9) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 5.65% discount rate; (b) a volatility factor
based upon the historical trading pattern of Liberty Series A Stock;
(c) the 10-year option term; and (d) the closing price of Liberty
Series A Stock on February 8, 1996. The actual value an executive may
realize will depend upon the extent to which the stock price exceeds
the exercise price on the date the option is exercised. Accordingly,
the value, if any, realized by an executive will not necessarily be
the value determined by the model.
(10) The values shown are based on the Black-Scholes model and are stated
in current annualized dollars on a present value basis. The key
assumptions used in the model for purposes of this calculation include
the following: (a) a 5.75% discount rate; (b) a volatility factor
based upon the historical trading pattern of TINTA Series A Stock; (c)
the 10-year option term; and (d) the closing price of TINTA Series A
Stock on January 15, 1996. The actual value an executive may realize
will depend upon the extent to which the stock price exceeds the
exercise price on the date the option is exercised. Accordingly, the
value, if any, realized by an executive will not necessarily be the
value determined by the model.
(continued)
III-9
<PAGE> 288
(c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
Value Table of Tele-Communications, Inc. The following table shows each
exercise of stock options and SARs during the year ended December 31, 1995 by
each of the named executive officers of TCI and the December 31, 1995 number
and year-end value of unexercised options and SARs on an aggregated basis:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1995 (#) 1995 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
----- ------------------ ----------------------- ------------- -------------
<S> <C> <C> <C> <C>
Bob Magness
Exercisable
Series A -- -- 600,000 $ 4,425,000
Liberty Series A -- -- 150,000 $ 1,518,750
Unexercisable
Series A -- -- 1,400,000 $ 5,825,000
Liberty Series A -- -- 350,000 $ 1,731,250
John C. Malone
Exercisable
Series A -- -- 600,000 $ 4,425,000
Liberty Series A -- -- 150,000 $ 1,518,750
Unexercisable
Series A -- -- 1,400,000 $ 5,825,000
Liberty Series A -- -- 350,000 $ 1,731,250
Fred A. Vierra
Exercisable
Series A 9,714 $ 100,054 150,000 $ 946,250
Liberty Series A -- -- 37,500 $ 327,188
TINTA Series A -- -- -- --
Unexercisable
Series A -- -- 250,000 $ 1,203,750
Liberty Series A -- -- 62,500 $ 422,813
TINTA Series A -- -- 400,000 $ 2,700,000
Brendan R. Clouston
Exercisable
Series A -- $ 2,396,875 (1) 265,000 $ 1,794,375
Liberty Series A -- $ 873,438 (1) 66,250 $ 618,281
Unexercisable
Series A -- -- 1,610,000 $ 6,733,750
Liberty Series A -- -- 152,500 $ 1,334,063
Donne F. Fisher
Exercisable
Series A -- -- 40,000 $ 135,000
Liberty Series A -- -- 10,000 $ 48,750
Unexercisable
Series A -- -- 160,000 $ 540,000
Liberty Series A -- -- 40,000 $ 195,000
</TABLE>
- -----------------------
(continued)
III-10
<PAGE> 289
(1) Mr. Clouston received an aggregate payment of $3,270,313 from the
Company (based on the market value of Series A Stock of $19.875 per
share and Liberty Series A Stock of $27.50 per share) in September of
1995, in cancellation of his options with tandem stock appreciation
rights covering 325,000 shares of Series A Stock and 81,250 shares of
Liberty Series A Stock.
(d) Compensation of directors. The standard arrangement by which
TCI's directors are compensated for all services (including any amounts payable
for committee participation or special assignments) as a director is as
follows: each director receives a fee of $500 plus travel expenses for
attendance at each meeting of the Board of Directors and each director who is
not a full-time employee of TCI receives additional compensation of $30,000 per
year. In addition, the Company's stockholders approved an option plan for its
directors (the "Director Stock Option Plan") and in connection with such
approval, approved the grant effective as of November 16, 1994, to each person
that as of such date was a member of the Board of Directors and was not an
employee of the Company or any of its subsidiaries, of options to purchase
50,000 shares of Series A Stock and 12,500 shares of Liberty Series A Stock.
Such options have a purchase price of $16.50 per share and $22.00 per share,
respectively, and vest and become exercisable over a five-year period,
commencing on November 16, 1995, and will expire on November 16, 2004. Each
person who becomes a director of the Company and is not an employee of the
Company or any of its subsidiaries will be automatically granted similar
options upon such person's becoming a director. The exercise price of each
such subsequently granted option will be equal to the fair market value of the
Series A Stock on the date the option is granted. In general, such fair market
value will be 95% of the last sale price for the shares of the Series A Stock
as reported on the Nasdaq Stock Market on the date of the grant, with the price
resulting from such percentage rounded down to the nearest quarter dollar.
The Company has a deferred compensation plan for all non-employee
directors. Each director may elect to defer receipt of all, but not less than
all, of the annual compensation (excluding meeting fees and reimbursable
expenses) payable to the director for serving on the Company's Board of
Directors for each calendar year for which such deferral is elected. An
election to defer may be made as to the compensation payable for a single
calendar year or period of years. Any compensation deferred shall be credited
to the director's account on the last day of the quarter for which compensation
has accrued. Such deferred compensation bears interest from the date credited
to the date of payment at a rate of 8% per annum in 1993 and 120% of the
applicable federal long-term rate thereafter, compounded annually.
A director may elect payment of deferred compensation to be made at a
specified year in the future or upon termination of the director's service as
director of the Company. Each director may elect payment in a lump sum, three
substantially equal consecutive annual installments or five substantially equal
consecutive annual installments. In the event that a director dies prior to
payment of all the amounts payable pursuant to the plan, any amounts remaining
in the director's deferred compensation account, together with accrued interest
thereon, shall be paid to the director's designated beneficiary.
There are no other arrangements whereby any of TCI's directors
received compensation for services as a director during 1995 in addition to or
in lieu of that specified by the aforedescribed standard arrangement.
(continued)
III-11
<PAGE> 290
(e) Employment Contracts and Termination of Employment and Change
of Control Arrangements. Effective November 1, 1992 the employment agreements
between TCIC and Mr. Magness and Dr. Malone, as amended, were further amended
and restated. Pursuant to an Assignment and Assumption Agreement, dated August
4, 1994, the payment, performance and other obligations of such employment
agreements were assumed by TCI. The term of each agreement is extended daily
so that the remainder of the employment term shall at all times on and prior to
the effective date of the termination of employment as provided by each
agreement be five years. Dr. Malone's and Mr. Magness' employment agreements
provide for annual salaries of $800,000, subject to increase upon approval of
the board of directors. During 1995, Dr. Malone and Mr. Magness were each
given a salary increase such that their annual salary is currently $850,000.
Additionally, these employment agreements provide for personal use of the
Company's aircraft and flight crew, limited to an aggregate value of $35,000
per year.
Dr. Malone's employment agreement provides, among other things, for
deferral of a portion (40% in 1993 and not in excess of 40% thereafter) of the
monthly compensation payable to him. Pursuant to a letter agreement entered
into between Dr. Malone and the Company subsequent to the date of his
employment agreement, Dr. Malone deferred $150,000 in 1993 in lieu of 40% of
his compensation for such year. The deferred amounts will be payable in
monthly installments over a 20-year period commencing on the termination of Dr.
Malone's employment, together with interest thereon at the rate of 8% per annum
compounded annually from the date of deferral to the date of payment. The
amendment also provides for the payment of certain benefits, discussed below.
Mr. Magness' and Dr. Malone's agreements described above also provide
that upon termination of such executive's employment by the Company (other than
for cause, as defined in the agreement), or if Mr. Magness or Dr. Malone elects
to terminate the agreement because of a change in control of the Company, all
remaining compensation due under the agreement for the balance of the
employment term shall be immediately due and payable.
Dr. Malone's and Mr. Magness' agreements provide that during their
employment with the Company and for a period of two years following the
effective date of their termination of employment with the Company, unless
termination results from a change in control of the Company, they will not be
connected with any entity in any manner, as defined in the agreement, which
competes in a material respect with the business of the Company. However, the
agreements provide that both executives may own securities of any corporation
listed on a national securities exchange or quoted in the Nasdaq System to the
extent of an aggregate of 5% of the amount of such securities outstanding.
Dr. Malone's agreement also provides that in the event of termination
of his employment with the Company, he will be entitled to receive 240
consecutive monthly payments of $15,000 (increased at the rate of 12% per annum
compounded annually from January 1, 1988 to the date payment commences), the
first of which will be payable on the first day of the month succeeding the
termination of Dr. Malone's employment. In the event of Dr. Malone's death,
his beneficiaries will be entitled to receive the foregoing monthly payments.
The Company currently owns a whole-life insurance policy on Dr. Malone, the
face value of which is sufficient to meet its obligation under the salary
continuation arrangement. The premiums payable by the Company on such
insurance policy are currently being funded through earnings on the policy.
Dr. Malone has no interest in this policy.
(continued)
III-12
<PAGE> 291
The Company pays a portion of the annual premiums (equal to the
"PS-58" costs) on three whole-life insurance policies of which Dr. Malone is
the insured and trusts for the benefit of members of his family are the owners.
The Company is the designated beneficiary of the proceeds of such policies less
an amount equal to the greater of the cash surrender value thereof at the time
of Dr. Malone's death and the amount of the premiums paid by the policy owners.
Dr. Malone deferred a portion of his monthly compensation under his
previous employment agreement. Such deferred compensation (together with
interest thereon at the rate of 13% per annum compounded annually from the date
of deferral to the date of payment) will continue to be payable under the terms
of the previous agreement. The rate at which interest accrues on such
previously deferred compensation was established in 1983 pursuant to such
earlier agreement.
Effective January 1, 1992, the Company entered into an employment
agreement with Mr. Fisher which provided for a salary of $375,000 in the first
year with annual increases of $25,000 in each succeeding year of his employment
term. The term of the agreement (of which his initial term was January 1, 1992
through December 31, 1996) was extended daily so that the remainder of the
employment term shall at all times be five years unless Mr. Fisher's employment
was terminated as provided by the agreement. Mr. Fisher's employment agreement
provided for the restricted stock grant of WestMarc preferred stock discussed
in Item 13 below and provided for personal use of the Company's aircraft and
flightcrew, limited to an aggregate value of $35,000 per year.
Effective January 1, 1996, Mr. Fisher resigned as an executive officer
of the Company and the Company and Mr. Fisher entered into a consulting
agreement. During the term of the consulting agreement, which extends until
January 1, 2006 unless sooner terminated as provided in the agreement, Mr.
Fisher is obligated to provide consulting services for up to 70 hours per month
and 700 hours during any period of twelve consecutive months as and if
requested by the Company's chief executive officer. Whether or not his
services are requested, Mr. Fisher will receive compensation as follows: (i)
during the period from January 1, 1996 through December 31, 2000, inclusive,
the rate of $475,000 per annum, increased annually by the amount of $25,000 per
annum in each successive year of such period commencing January 1, 1997 and
(ii) from and after January 1, 2001 throughout the balance of the Term, the
rate of $500,000 per annum. If he dies before the end of the term of his
consulting services, the Company is required to pay his designated
beneficiaries a lump sum equal to one year's compensation at the then-current
rate. During the term of the agreement, Mr. Fisher will continue to be
entitled to participate in, and to be accorded all rights and benefits under,
all group insurance policies (including, but not limited to, all disability,
life, health and medical insurance policies) maintained by the Company for the
benefit of its employees. The consulting agreement also provides for Mr.
Fisher's personal use of the Company's aircraft and flight crew, limited to an
aggregate value of $35,000 per year.
(continued)
III-13
<PAGE> 292
Under a prior employment agreement between Mr. Fisher and the Company,
a portion of Mr. Fisher's salary was deferred, and the deferred amounts, plus
interest at an annual rate of 13%, were to be paid to him in 240 monthly
installments which would have commenced on the date of termination of his
full-time employment with the Company. The consulting agreement provides for
such payment to be made to Mr. Fisher in 240 monthly installments of $21,425.92
each, without interest, commencing on January 1, 2001, with any remaining
payments due after Mr. Fisher's death being paid in a lump-sum to his
designated beneficiaries. Similarly, Mr. Fisher's 1992 employment agreement
with the Company provided for Mr. Fisher to receive, commencing on termination
of his employment, 240 consecutive monthly salary continuation payments of
$6,250, increased at the rate of 12% per annum, compounded annually from
January 1, 1988 to the date of such termination. The consulting agreement
provides that such salary continuation payments will be made in 240 consecutive
monthly payments of $27,271.84 each, without interest, commencing on January 1,
2001, with any remaining payments due after Mr. Fisher's death being made to
his designated beneficiaries.
Mr. Fisher's consulting agreement provides that during its term, Mr.
Fisher will not be connected in any manner specified with any entity which
competes in a material respect with the business of the Company; however, he
may own securities of any corporation listed on a national securities exchange
or quoted in the Nasdaq System to the extent of an aggregate of 5% of the
amount of such securities outstanding.
International and TCI have entered into an Amended and Restated
Employment Agreement with Mr. Vierra relating to Mr. Vierra's employment with
International as Vice Chairman and Chief Executive Officer, providing for a
base salary of $650,000 per year. Mr. Vierra's salary is subject to annual
review by the board of directors, which may in its sole discretion increase his
salary. Mr. Vierra's salary for 1995 is currently set at $650,000. Mr.
Vierra's employment agreement provides for the deferral of a portion of each
monthly salary payment so as to result in the deferral of salary at the rate of
$250,000 per annum. The deferred amounts are to be paid in monthly
installments over a 240-month period commencing on the later of December 31,
1998 and the termination of Mr. Vierra's full-time employment with
International, together with interest thereon at the rate of 8% per annum
compounded annually from the date of deferral to the payment date. In the
event of Mr. Vierra's death, all outstanding deferred amounts will be paid in a
lump sum to his beneficiaries.
While he is employed by International pursuant to his employment
agreement, Mr. Vierra is entitled to participate in all formal incentive
compensation plans, stock incentive plans, employee stock purchase plans,
retirement plans and insurance plans or policies adopted for the benefit of
TCI's or International's executive officers or employees generally.
Additionally, Mr. Vierra's employment agreement provides for personal use of
TCI's aircraft and flight crew, limited to an aggregate value of $35,000 per
year.
Mr. Vierra's employment agreement has a stated termination date of
December 31, 1998. It also provides that upon an earlier termination of Mr.
Vierra's employment by International without cause, all remaining compensation
due under such agreement for the balance of the employment term would become
immediately due and payable to Mr. Vierra. Upon his death during the
employment term, International would pay to Mr. Vierra's beneficiaries a lump
sum in an amount equal to the lesser of (i) the compensation due under his
employment agreement for the balance of the employment term and (ii) one year's
salary. In the event of his disability, International would continue to pay
Mr. Vierra his annual salary as and when it would have otherwise become due
until the first to occur of the end of the employment term or the date of his
death.
(continued)
III-14
<PAGE> 293
Mr. Vierra's agreement further provides that during his employment
with International and for the longer of a period of two years following the
effective date of his termination of employment or if Mr. Vierra terminates his
employment before the end of the term of his employment in breach of the
employment agreement, or if Mr. Vierra is terminated "for cause" (as defined in
the employment agreement) by International, until December 31, 1998 with
International, he will not be connected with any entity in any manner, as
defined in the agreement, which competes in a material respect with the
business of International or any of International's or TCI's majority owned
subsidiaries. However, the agreement provides that Mr. Vierra may own
securities of any corporation listed on a national securities exchange or
quoted in the Nasdaq National Market System to the extent of an aggregate of 5%
of the amount of such securities outstanding. Under the employment agreement,
substantially all of Mr. Vierra's business time, attention and efforts will be
devoted to the affairs of International.
(f) Additional information with respect to Compensation Committee
Interlocks and Insider Participation in Compensation Decisions.
The members of the Company's compensation committee are Messrs. Robert
A. Naify and John W. Gallivan, both directors of the Company. Neither Mr.
Naify nor Mr. Gallivan are or were officers of the Company or any of its
subsidiaries.
Dr. Malone is an executive officer and a director of TCI and is
Chairman of the Board and a member of the compensation committee of
International. Also, Mr. Kern is a director of TCI and a partner with the law
firm of Baker & Botts, L.L.P., the principal outside counsel for TCI. He is
also a director and member of the compensation committee of International.
Mr. R.E. Turner, a director of the Company through October 4, 1995, is
the Chairman of the Board and President of Turner Broadcasting System, Inc.
("TBS") and the beneficial owner of 67.6% of the total voting power of all
outstanding TBS stock as of December 31, 1995. Mr. Fred A. Vierra, an Executive
Vice President of the Company, serves on the compensation committee of the Board
of Directors of TBS. During the year ended December 31, 1995, the Company and
its affiliates paid approximately $128 million to purchase certain cable
television programming from TBS.
During the year ended December 31, 1995, the Company paid
approximately $1.8 million to TBS relating to the lease of a satellite
transponder. The Company is committed to pay approximately $9 million through
the year 2000 pursuant to such lease.
During the year ended December 31, 1995, the Company and its
affiliates paid license fees of approximately $1.5 million to TBS for the
rights to exhibit certain motion pictures.
The TBS SuperStation signal is retransmitted by a common carrier,
Southern Satellite Systems, Inc. ("Southern"), which is controlled by an
indirect wholly-owned subsidiary of the Company. Southern is compensated by
the local cable systems receiving the retransmission of the TBS SuperStation
and does not have a contract with, or receive compensation from, TBS with
respect to such retransmission.
TBS and the Company each own a 44% indirect interest in SportSouth
Network, Ltd. ("SportSouth"), a limited partnership that operates a regional
sports network serving the Southeast United States. SportSouth's revenue is
primarily derived from the sale of advertising and the subscription sale of its
service to cable television operators.
III-15
<PAGE> 294
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security ownership of certain beneficial owners. The following
table sets forth, as of January 31, 1996, information with respect to the
ownership of Series A Stock , Series B Stock, Liberty Series A Stock, Liberty
Series B Stock, TCI Group Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock ("Class B Preferred Stock"), Convertible Preferred Stock, Series
C ("Series C Preferred Stock"), Redeemable Convertible TCI Group Preferred
Stock, Series G ("Series G Preferred Stock") and Redeemable Convertible Liberty
Media Group Preferred Stock, Series H ("Series H Preferred Stock") by each
person known to the Company to own beneficially more than 5% of any such class
outstanding on that date. Shares issuable upon exercise or conversion of
convertible securities are deemed to be outstanding for the purpose of computing
the percentage of ownership and overall voting power of persons beneficially
owning such convertible securities, but have not been deemed to be outstanding
for the purpose of computing the percentage ownership or overall voting power of
any other person. Voting power in the table is computed with respect to a
general election of directors and, therefore, the TCI Class B Preferred Stock,
the Series G Preferred Stock and the Series H Preferred Stock are included in
the calculation. The number of shares of Dr. Malone includes interests of such
individual in shares held by the trustee of TCI's ESPP. So far as is known to
TCI, the persons indicated below have sole voting and investment power with
respect to the shares indicated as owned by them except as otherwise stated in
the notes to the table and except for the shares held by the trustee of the ESPP
for the benefit of Dr. Malone, which shares are voted at the discretion of the
trustee.
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class(1) Power (1)
----- ------------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Series A Bob Magness, Chairman of 5,626,938 (2)(3)(4) * 26.2%
Series B the Board and a Director 37,132,076 (2)(4)(7) 43.9%
Liberty Series A 5619 DTC Parkway 1,406,734 (2)(3)(4) *
Liberty Series B Englewood, Colorado 9,283,019 (2)(4)(7) 43.8%
Class B Pref. 125,000 7.7%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Series A John C. Malone, President 2,171,395 (5) * 17.8%
Series B and a Director 25,287,083 (6)(7)(8) 29.9%
Liberty Series A 5619 DTC Parkway 542,819 (5) *
Liberty Series B Englewood, Colorado 6,349,270 (6)(7)(8) 30.0%
Class B Pref. 306,000 (6)(8) 18.9%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Series A Kearns-Tribune Corporation 8,792,514 (4) 1.5% 7.0%
Series B 400 Tribune Building 9,112,500 (4)(7) 10.8%
Liberty Series A Salt Lake City, Utah 2,198,128 (4) 1.5%
Liberty Series B 2,278,125 (4)(7) 10.8%
Class B Pref -- --
Series C. Pref -- --
Series G Pref. -- --
Series H Pref. -- --
</TABLE>
(continued)
III-16
<PAGE> 295
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class(1) Power(1)
----- ------------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Series A The Associated Group, Inc. 12,479,976 2.2% 5.8%
Series B 200 Gateway Towers 7,071,852 8.4%
Liberty Series A Pittsburgh, Pennsylvania 3,119,994 2.2%
Liberty Series B 1,767,963 8.3%
Class B Pref. 41,598 2.6%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Series A The Equitable Companies 41,193,448 (9) 7.2% 3.1%
Series B Incorporated -- --
Liberty Series A 787 Seventh Avenue 14,685,004 (10) 10.3%
Liberty Series B New York, New York; and -- --
Class B Pref. The Mutuelles AXA and AXA -- --
Series C Pref. 101-100 Terrasse Boieldieu -- --
Series G Pref. 92042 Paris La Defense -- --
Series H Pref. France -- --
Series A The Capital Group 39,546,870 (11) 6.9% 2.9%
Series B Companies, Inc. -- --
Liberty Series A 333 South Hope Street 13,037,740 (12) 9.1%
Liberty Series B Los Angeles, California -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
Series A Bill Daniels 259 (13) * *
Series B c/o Daniels & Associates -- --
Liberty Series A 3200 Cherry Creek Drive South 64 (13) *
Liberty Series B Denver, Colorado -- --
Class B Pref. -- --
Series C Pref. 70,575 100%
Series G Pref. -- --
Series H Pref. -- --
Series A Lawrence Flinn, Jr. 1,102,500 (13) * *
Series B 209 Taconic Road 24,000 (13) *
Liberty Series A Greenwich, Connecticut 275,611 (13) *
Liberty Series B 6,000 (13) *
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. 6,186,647 (13) 85.2%
Series H Pref. 6,186,647 (13) 85.2%
Series A Cedefast -- -- *
Series B Box 20 -- --
Liberty Series A Bowling Green Station -- --
Liberty Series B New York, New York -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. 484,954 (13) 6.7%
Series H Pref. 484,954 (13) 6.7%
</TABLE>
____________________
* Less than one percent.
(1) Based on 571,692,645 shares of Series A Stock (after elimination of
shares of TCI held by subsidiaries of TCI), 84,685,554 shares of
Series B Stock, 142,896,264 shares of Liberty Series A Stock,
21,196,868 shares of Liberty Series B Stock, 1,620,026 shares of Class
B Preferred Stock, 70,575 shares of Series C Preferred Stock,
7,259,380 shares of Series G Preferred Stock and 7,259,380 shares of
Series H Preferred Stock outstanding on January 31, 1996.
(continued)
III-17
<PAGE> 296
(2) Mr. Magness, as executor of the Estate of Betsy Magness, is the
beneficial owner of all shares of Series A Stock, Series B Stock,
Liberty Series A Stock and Liberty Series B Stock held of record by
the Estate of Betsy Magness. The number of shares held by Mr. Magness
includes 2,105,332 shares of Series A Stock, 6,346,212 shares of
Series B Stock, 526,333 shares of Liberty Series A Stock and 1,586,553
shares of Liberty Series B Stock of which Mr. Magness is beneficial
owner as executor.
(3) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 1,000,000
shares of Series A Stock and 250,000 shares of Liberty Series A Stock.
Options to acquire 600,000 and 150,000 shares of Series A Stock and
Liberty Series A Stock, respectively, are currently exercisable.
Additionally assumes the exercise in full of stock options granted in
tandem with stock appreciation rights in December of 1995 to acquire
1,000,000 shares of Series A Stock and 250,000 shares of Liberty
Series A Stock. None of the options are exercisable until August 4,
1996. Such grant is subject to the approval by shareholders of the
1996 Plan. See note 1 to the table in Item 11(b) for additional
information.
(4) Mr. Magness and Kearns are parties to a buy-sell agreement, entered
into in October of 1968, as amended, under which neither party may
dispose of their shares without notification of the proposed sale to
the other, who may then buy such shares at the offered price, sell all
of their shares to the other at the offered price or exchange one of
their Series A shares for each Series B share or one of their Liberty
Series A shares for each Liberty Series B hare held by the other and
purchase any remaining Series B shares or Liberty Series B shares at
the offered price. There are certain exceptions, including transfers
to specified persons or entities, certain public sales of Series A
shares or Liberty Series A shares and exchanges of Series A shares for
Series B shares or Liberty Series A shares for Liberty Series B
shares.
(5) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 1,000,000
shares of Series A Stock and 250,000 shares of Liberty Series A Stock.
Options to acquire 600,000 and 150,000 shares of Series A Stock and
Liberty Series A Stock, respectively, are currently exercisable.
Additionally assumes the exercise in full of stock options granted in
tandem with stock appreciation rights in December of 1995 to acquire
1,000,000 shares of Series A Stock and 250,000 shares of Liberty
Series A Stock. None of the options are exercisable until August 4,
1996. Such grant is subject to the approval by shareholders of the
1996 Plan. See note 2 to the table in Item 11(b) for additional
information.
(6) Includes 1,173,000 shares of Series B Stock, 293,250 shares of Liberty
Series B Stock and 6,900 shares of Class B Preferred Stock held by Dr.
Malone's wife, Mrs. Leslie Malone, but Dr. Malone has disclaimed any
beneficial ownership of such shares.
(7) Pursuant to a letter agreement, dated June 17, 1988, Mr. Magness and
Kearns each agreed with Dr. Malone that prior to making a disposition
of a significant portion of their respective holdings of Series B
Stock or Liberty Series B Stock, he or it would first offer Dr. Malone
the opportunity to purchase such shares.
(continued)
III-18
<PAGE> 297
(8) The number of shares of Series B Stock, Liberty Series B Stock and
Class B Preferred Stock held by Dr. Malone includes 3,120,000, 780,000
and 40,000 TCI Restricted Voting Shares, respectively, that are
subject to repurchase by TCI under certain circumstances. Until they
cease to be subject to TCI's repurchase right (March 28, 1996), such
shares may not be transferred and, with respect to any matter
submitted to a vote of the stockholders of TCI, the votes represented
thereby will be cast in the same proportion as all other votes are
cast with respect to such matter. The number of shares of Series A
Stock, Series B Stock, Liberty Series A Stock, Liberty Series B Stock
and Class B Preferred Stock held by Dr. Malone which are not subject
to such repurchase rights and voting requirements represent 16.1% of
the total voting power of the shares of TCI common stock, TCI Class B
Preferred Stock and Series C Preferred Stock outstanding (excluding
3,120,000, 780,000 and 40,000 TCI Restricted Voting Shares from such
total voting power).
(9) The number of shares in the table is based upon a Schedule 13G, dated
February 9, 1996, filed by The Equitable Companies Incorporated which
Schedule 13G reflects that said corporation has sole voting power over
30,729,443 shares and shared voting power over 1,002,725 shares of
Series A Stock. No information is given with respect to voting power
over the remaining shares.
(10) The number of shares in the table is based upon a Schedule 13G, dated
January 9, 1996, filed by the Equitable Companies Incorporated which
Schedule 13G reflects that said corporation has sole voting power over
11,219,798 shares and shared voting power over 273,681 shares of
Liberty Series A Stock. No information is given with respect to
voting power over the remaining shares.
(11) Certain operating subsidiaries of The Capital Group Companies, Inc.
exercised investment discretion over various institutional accounts
which held as of December 29, 1995, 39,546,870 shares of Series A
Stock. Capital Guardian Trust Company, a bank, and one of such
operating companies, exercised investment discretion over 3,636,820 of
said shares. Capital Research and Management Company, a registered
investment advisor, and Capital International Limited and Capital
International, S.A., other operating subsidiaries, had investment
discretion with respect to 35,565,750, 137,770 and 206,510 shares,
respectively, of the above shares.
(12) Certain operating subsidiaries of The Capital Group Companies, Inc.
exercised investment discretion over various institutional accounts
which held as of December 29, 1995, 13,037,740 shares of Liberty
Series A Stock. Capital Guardian Trust Company, a bank, and one of
such operating companies, exercised investment discretion over
3,123,430 of said shares. Capital Research and Management Company, a
registered investment advisor, and Capital International Limited and
Capital International, S.A., other operating subsidiaries, had
investment discretion with respect to 9,825,430, 34,440 and 54,420
shares, respectively, of the above shares.
(13) Based upon the Company's review of the record of shareholders provided
by the Company's transfer agent, The Bank of New York.
(continued)
III-19
<PAGE> 298
(b) Security ownership of management. The following table sets forth,
as of January 31, 1996, information with respect to the ownership of TCI voting
securities (Series A Stock, Series B Stock, Liberty Series A Stock, Liberty
Series B Stock (other than directors' qualifying shares), Class B Preferred
Stock, Series C Preferred Stock, Series G Preferred Stock and Series H
Preferred Stock), TCIC voting securities (Class A common stock ("Class A
Stock"), Class B common stock ("Class B Stock"), and Cumulative Exchangeable
Preferred Stock, Series A ("Series A Preferred Stock")) and International
voting securities (Series A Tele-Communications International, Inc. common
stock ("TINTA Series A Stock") and Series B Tele-Communications International,
Inc. common stock ("TINTA Series B Stock")) by all directors and each of the
named executive officers of TCI and by all executive officers and directors of
TCI as a group. Shares issuable upon exercise or conversion of convertible
securities and upon vesting of restricted shares are deemed to be outstanding
for the purpose of computing the percentage ownership and overall voting power
of persons beneficially owning such securities, but have not been deemed to be
outstanding for the purpose of computing the percentage ownership or overall
voting power of any other person. Voting power in the table is computed with
respect to a general election of directors. The number of Series A Stock,
Series B Stock, Liberty Series A Stock and Liberty Series B Stock in the table
include interests of the named directors or executive officers or of members of
the group of directors and executive officers in shares held by the trustee of
TCI's ESPP and shares held by the trustee of UAE's Employee Stock Ownership
Plan for their respective accounts. So far as is known to TCI, the persons
indicated below have sole voting and investment power with respect to the
shares indicated as owned by them except as otherwise stated in the notes to
the table and except for the shares held by the trustee of TCI's ESPP for the
benefit of such person, which shares are voted at the discretion of the
trustee.
(continued)
III-20
<PAGE> 299
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1)(2)(3) (1)(2)(3)
-------------- ---------------- ----------------------- --------- ---------
<S> <C> <C> <C> <C>
Series A Bob Magness 5,626,938 (4) * 26.2%
Series B 37,132,076 (4) 43.9%
Liberty Series A 1,406,734 (4) *
Liberty Series B 9,283,019 (4) 43.8%
Class B Pref. 125,000 (4) 7.7%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 450,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A John C. Malone 2,171,395 (5) * 17.8%
Series B 25,287,083 (5) 29.9%
Liberty Series A 542,819 (5) *
Liberty Series B 6,349,270 (5) 30.0%
Class B Pref. 306,000 (5) 18.9%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 450,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A Donne F. Fisher 536,367 (6) * *
Series B 249,072 *
Liberty Series A 136,358 (6) *
Liberty Series B 62,268 *
Class B Pref. 3,464 *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A John W. Gallivan 52,124 (7)(17) * *
Series B -- --
Liberty Series A 13,031 (7)(17) *
Liberty Series B -- --
Class B Pref. 14 (17) *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
</TABLE>
(continued)
III-21
<PAGE> 300
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1)(2)(3) (1)(2)(3)
-------------- ---------------- ----------------------- --------- ---------
<S> <C> <C> <C> <C>
Series A Kim Magness 50,000 (8) * *
Series B 518,000 *
Liberty Series A 12,500 (8) *
Liberty Series B 129,500 *
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 2,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A Jerome H. Kern 2,050,000 (9) * *
Series B -- --
Liberty Series A 512,500 (9) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A Tony Coehlo 150,800 (10) * *
Series B -- --
Liberty Series A 12,700 (10) *
Liberty Series B -- --
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 1,000 * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A Robert A. Naify 23,697,826 (11) 4.0% 1.6%
Series B -- --
Liberty Series A 5,922,192 (11) 4.0%
Liberty Series B -- --
Class B Pref. 1,000 *
Series C. Pref -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
</TABLE>
(continued)
III-22
<PAGE> 301
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1)(2)(3) (1)(2)(3)
-------------- ---------------- ----------------------- --------- ---------
<S> <C> <C> <C> <C>
Series A Fred A. Vierra 580,321 (12) * *
Series B -- --
Liberty Series A 140,994 (12) *
Liberty Series B -- --
Class B Pref. 200 *
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 442,000 (13) * *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A Brendan R. Clouston 1,985,391 (14) * *
Series B 230 *
Liberty Series A 221,347 (14) *
Liberty Series B 57 *
Class B Pref. -- --
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A -- -- --
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
Series A All directors and 38,774,044 (1)(4)(5)(6)(7)(8)(9) 6.4% 45.7%
executive officers (10)(11)(12)(14)(15)
Series B as a group 63,187,091 (1)(4)(5)(13) 74.6%
Liberty Series A (17 persons) 10,393,899 (1)(4)(5)(6)(7)(8)(9) 6.8%
(10)(11)(12)(14)(15)
Liberty Series B 15,824,271 (1)(4)(5) 74.7%
Class B Pref. 437,052 (1)(5) 27.0%
Series C Pref. -- --
Series G Pref. -- --
Series H Pref. -- --
TINTA Series A 1,396,000 (2)(13)(16) 1.3% *
TINTA Series B -- --
Class A -- -- --
Class B -- --
Series A Pref. -- --
</TABLE>
_________________________
* Less than one percent.
(1) See note 1 to the table in Item 12(a).
(2) Based on 106,487,500 shares of TINTA Series A Stock and 11,700,000
shares of TINTA Series B Stock outstanding on January 31, 1996.
(continued)
III-23
<PAGE> 302
(3) Based on 811,655 shares of Class A Stock, 94,447 shares of Class B
Stock and 4,600,000 shares of Series A Preferred Stock outstanding on
January 31, 1996.
(4) See notes (2) through (4) and note (7) to the table in Item 12(a).
(5) See notes (5) through (8) to the table in Item 12(a).
(6) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1994 to acquire 200,000
shares of Series A Stock and 50,000 shares of Liberty Series A Stock.
Options to acquire 40,000 shares of Series A Stock and 10,000 shares
of Liberty Series A Stock are currently exercisable. See note 8 to
the table in Item 11(a) for additional information.
(7) Includes 1,524 shares of Series A Stock and 381 shares of Liberty
Series A Stock held by Mr. Gallivan's wife. Also, assumes the
exercise in full of options granted, pursuant to the Director Stock
Option Plan, to acquire 50,000 shares of Series A Stock and 12,500
shares of Liberty Series A Stock. Options to acquire 10,000 shares of
Series A Stock and 2,500 shares of Liberty Series A Stock are
currently exercisable. See Item 11(d) for additional information.
(8) Assumes the exercise in full of options granted, pursuant to the
Director Stock Option Plan, to acquire 50,000 shares of Series A Stock
and 12,500 shares of Liberty Series A Stock. Options to acquire
10,000 shares of Series A Stock and 2,500 shares of Liberty Series A
Stock are currently exercisable. See Item 11(d) for additional
information.
(9) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights to acquire 1,500,000 shares of Series A
Stock and 375,000 shares of Liberty Series A Stock. Options to
acquire 700,000 shares and 175,000 shares of Series A Stock and
Liberty Series A Stock, respectively, are currently exercisable and
the remainder vest and become exercisable evenly over two years. The
options expire on October 12, 1998. Additionally, assumes the
exercise in full of stock options granted in tandem with stock
appreciation rights to acquire 500,000 shares of Series A Stock and
125,000 shares of Liberty Series A Stock. None of the options are
exercisable until August 4, 1996. Also assumes the exercise in full
of stock options granted, pursuant to the Director Stock Option Plan,
to acquire 50,000 shares of Series A Stock and 12,500 shares of
Liberty Series A Stock. Options to acquire 10,000 shares of Series A
and 2,500 shares of Liberty Series A Stock are currently exercisable.
See Item 11(d) for additional information.
(10) Assumes the exercise in full of stock options granted to acquire
50,000 shares of Series A Stock and 12,500 shares of Liberty Series A
Stock. Options to acquire 10,000 shares of Series A Stock and 2,500
shares of Liberty Series A Stock are currently exercisable. See Item
11(d) for additional information. Additionally assumes the exercise
in full of stock options granted in tandem with stock appreciation
rights granted to acquire 100,000 shares of Series A Stock. None of
these options are exercisable until August 4, 1996.
(continued)
III-24
<PAGE> 303
(11) Mr. Robert Naify received notes, which are currently convertible into
22,446,926 shares of Series A Stock and 5,611,731 shares of Liberty
Series A Stock, as partial consideration for the sale to TCI of the
stock owned by him in UACI. Mr. Naify is also a co-trustee, along
with Mr. Naify's brother, Marshall, and their sister, of a trust for
the benefit of Marshall which holds additional notes convertible into
341,606 shares of Series A Stock and 85,401 shares of Liberty Series A
Stock. The number of shares indicated as held by Mr. Naify assumes
the conversion of these notes. Also, assumes the exercise in full of
options granted, pursuant to the Director Stock Option Plan, to
acquire 50,000 shares of Series A Stock and 12,500 shares of Liberty
Series A Stock. Options to acquire 10,000 shares of Series A Stock
and 2,500 shares of Liberty Series A Stock are currently exercisable.
See Item 11(d) for additional information.
(12) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November 1992 to acquire 100,000 shares
of Series A Stock and 25,000 shares of Liberty Series A Stock.
Options to acquire 60,000 shares of Series A Stock and 15,000 shares
of Liberty Series A Stock are currently exercisable. Also assumes the
exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1993 to acquire 100,000 shares of
Series A Stock and 25,000 shares of Liberty Series A Stock. Options
to acquire 50,000 shares of Series A Stock and 12,500 shares of
Liberty Series A Stock are currently exercisable. See note 9 to the
table in Item 11(a) for additional information. Additionally assumes
the exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1994 to acquire 200,000 shares of
Series A Stock and 50,000 shares of Liberty Series A Stock. Options
to acquire 40,000 shares of Series A Stock and 10,000 shares of
Liberty Series A Stock are currently exercisable. See note 8 to the
table in Item 11(a) for additional information.
(13) Assumes the exercise in full of options granted in tandem with stock
appreciation rights in December of 1995 to acquire 400,00 shares of
TINTA Series A Stock. None of the options are exercisable until
August 4, 1996. See note 3 to the table in Item 11(b) for additional
information. Additionally assumes the vesting in full of 15,000 TINTA
Series A restricted stock. None of the stock is currently vested.
See note 5 to the table in Item 11(a) for additional information.
(14) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1992 to acquire 300,000
shares of Series A Stock and 75,000 shares of Liberty Series A Stock.
Options to acquire 100,000 shares of Series A Stock and 25,000 shares
of Liberty Series A Stock are currently exercisable. Additionally
assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November of 1993 to acquire 375,000
shares of Series A Stock and 93,750 shares of Liberty Series A Stock.
Options to acquire 125,000 shares of Series A Stock and 31,250 shares
of Liberty Series A Stock are currently exercisable. See note 9 to
the table in Item 11(a) for additional information. Also assumes the
exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1994 to acquire 200,000 shares of
Series A Stock and 50,000 shares of Liberty Series A Stock. Options
to acquire 40,000 shares of Series A Stock and 10,000 shares of
Liberty Series A Stock are currently exercisable. See note 8 to the
table in Item 11(a) for additional information. Assumes the exercise
in full of stock options granted in tandem with stock appreciation
rights in December of 1995 to purchase 1,000,000 shares of Series A
Stock. None of the options are exercisable until August 4, 1996. See
note 4 to the table in Item 11(b) for additional information.
Additionally assumes the vesting in full of 100,000 Series A
restricted stock. None of the stock is currently vested. See note 6
to the table in Item 11(a) for additional information.
(continued)
III-25
<PAGE> 304
(15) Certain executive officers and directors of TCI (10 persons, including
Messrs. Magness, Malone, Vierra and Clouston) hold options which were
granted in tandem with stock appreciation rights in November of 1992,
to acquire an aggregate of 3,025,000 shares of Series A Stock and an
aggregate of 756,250 shares of Liberty Series A Stock at purchase
prices of $12.50 per shares and $16.75 per share, respectively.
Options to acquire 1,735,000 shares of Series A Stock and 433,750
shares of Liberty Series A Stock are currently exercisable.
Additionally certain executive officers (8 persons including Messrs.
Vierra and Clouston) hold stock options granted in tandem with stock
appreciation rights in October and November of 1993 to acquire an
aggregate of 1,100,000 shares of Series A Stock and an aggregate of
275,000 shares of Liberty Series A Stock at purchase prices of $12.50
per share and $16.75 per share, respectively. Options to acquire
487,500 shares of Series A Stock and 121,875 shares of Liberty Series
A Stock are currently exercisable. Also, certain executive officers
and directors (10 persons including Messrs. Fisher, Vierra and
Clouston) hold stock options which were granted in tandem with stock
appreciation rights in November of 1994 to acquire an aggregate of
1,450,000 shares of Series A Stock and an aggregate of 362,500 shares
of Liberty Series A Stock at purchase prices of $16.50 per share and
$22.50 per share, respectively. Options to acquire 290,000 shares of
Series A Stock and 72,500 shares of Liberty Series A Stock are
currently exercisable. Additionally, certain executive officers and
directors (11 persons, including Messrs. Magness, Malone, Kern and
Clouston) hold stock options which were granted, pursuant to the 1994
Plan and the 1996 Plan (the 1996 Plan is subject to approval by
shareholders), in tandem with stock appreciation rights in December of
1995 to acquire an aggregate of 4,650,000 shares of Series A Stock at
$17.00 per share. None of the options are exercisable until August 4,
1996. Additionally, certain executive officers and directors (6
persons, including Messrs. Magness, Malone and Kern) hold stock
options which were granted, pursuant to the 1994 Plan and the 1996
Plan, in tandem with stock appreciation rights in December of 1995 to
acquire an aggregate of 1,775,000 shares of Liberty Series A Stock at
a purchase price of $24.00 per share. None of the options are
exercisable until August 4, 1996. Also, certain executive officers (7
persons, including Mr. Clouston) hold an aggregate of 240,000 shares
of Series A restricted stock. None of the shares are currently
vested. Certain executive officers (2 persons) hold an aggregate of
20,000 shares of Liberty Series A restricted stock. None of the
shares are currently vested. Mr. Kern holds an option to acquire
1,500,000 shares of Series A Stock and 375,000 shares of Liberty
Series A Stock as described in note 5 above. Also, Messrs. Gallivan,
Kim Magness, Kern, Coelho and Naify hold options to purchase an
aggregate of 250,000 shares of Series A Stock and an aggregate of
62,500 shares of Liberty Series A Stock at purchase prices of $16.50
per share and $22.50 per share, respectively. Options to purchase
50,000 shares of Series A Stock and 12,500 shares of Liberty Series A
Stock are currently exercisable. All of the aforementioned options
with tandem stock appreciation rights, options and restricted stock
are reflected in this table assuming the exercise or vesting in full
of such securities.
(16) Two executive officers, including Mr. Vierra, hold options which were
granted in tandem with stock appreciation rights in December of 1995 to
acquire an aggregate of 450,000 shares of TINTA Series A Stock. None
of the options are exercisable until August 4, 1996. Additionally Mr.
Vierra holds 15,000 shares of TINTA Series A restricted stock. None of
the shares are currently vested. Additionally, one executive officer
holds options granted in tandem with stock appreciation rights in
December of 1995 by TCI to acquire 50,000 shares of its TINTA Series A
Stock. None of the options are exercisable until August 4, 1996.
(continued)
III-26
<PAGE> 305
(17) The number of shares in the table does not include any shares held by
Kearns, of which Mr. Gallivan is an officer.
No equity securities in any subsidiary of the Company, other than
directors' qualifying shares, are owned by any of the Company's
executive officers or directors, except for those shares of TINTA
Series A Stock reflected in the tables in Item 12 and except that Mr.
Bob Magness, a director and an executive officer of the Company, owns
944 shares of WestMarc Series C Cumulative Compounding Redeemable
Preferred Stock; Mr. Kim Magness, a director of the Company, owns 31
shares of WestMarc Series C Cumulative Compounding Redeemable
Preferred Stock; Dr. Malone, a director and an executive officer of
the Company, owns, as trustee for his children, 68 shares of WestMarc
Series C Cumulative Compounding Redeemable Preferred Stock; Mr. Larry
Romrell, an officer of the Company, owns 103 shares of WestMarc Series
C Cumulative Compounding Redeemable Preferred Stock and Mr. Jerome
Kern, a director of the Company, is deemed to have beneficial
ownership over 116 shares of WestMarc Series C Cumulative Compounding
Redeemable Preferred Stock owned by his wife, Diane D. Kern. Mr. Kern
has disclaimed any beneficial ownership of such shares owned by Mrs.
Kern.
(c) Change of control. The Company knows of no arrangements,
including any pledge by any person of securities of the Company, the operation
of which may at a subsequent date result in a change in control of the Company.
(continued)
III-27
<PAGE> 306
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with management and others.
Pursuant to a Restricted Stock Award Agreement dated December 10, 1992, the
Company transferred to Mr. Fisher, a director and until January 1, 1996, an
officer of the Company, 124.03 shares (having a liquidation value of $4
million) of WestMarc Series C Cumulative Compounding Preferred Stock owned by
the Company, subject to forfeiture in the event of certain circumstances from
the date of grant through February 1, 2002, with the number of shares subject
to forfeiture decreasing by 10% on February 1 of each year. Upon Mr. Fisher's
resignation as an officer of the Company effective January 1, 1996, he acquired
vested title to 37.209 of such shares of WestMarc Series C Cumulative
Compounding Preferred Stock and forfeited the balance of such shares. As
described below, effective as of January 31, 1996, the 37.209 vested shares of
WestMarc Series C Cumulative Compounding Preferred Stock owned by Mr. Fisher
were used by one of his affiliates as the consideration for the purchase of
certain partnership interests held by subsidiaries of the Company.
In 1989, ECP Holdings, Inc., a subsidiary of the Company ("ECP"), and
Halcyon Communications, Inc., an Oklahoma corporation which is not an affiliate
of the Company ("HCI"), formed Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), for the purpose of acquiring, owning and operating
cable television systems. In 1994, HCI and American Televenture of Minersville,
Inc., a subsidiary of the Company ("ATM"), as general partners, and three other
subsidiaries of the Company, TCI Cablevision of Nevada, Inc. ("TCINV"), TEMPO
Cable, Inc. ("Tempo Cable"), and TCI Cablevision of Utah, Inc. ("TCIU") as
limited partners, formed Halcyon Communications Limited Partnership, an Oklahoma
limited partnership ("HCLP"), for the purpose of acquiring, owning and operating
certain other cable television systems. Effective as of January 31, 1996, Fisher
Communication Associates, L.L.C., a Colorado limited liability company ("Fisher
Communications") controlled by Mr. Donne F. Fisher, a director (and, until
January 1, 1996, an executive officer) of the Company purchased one-third of
ECP's partnership interest in HCP and one-third of the partnership interest of
each of ATM, TCINV, TCIU and Tempo Cable in HCLP, a ten-year option to purchase
the balance of ECP's partnership interest in HCP and ten-year options to
purchase the balance of the partnership interest in HCLP of each of ATM, TCINV,
TCIU and Tempo Cable. The purchase price for each such partnership interest
purchased by Fisher Communications consisted of shares of Series C Cumulative
Compounding Preferred Stock of WestMarc Communications, Inc., a subsidiary of
the Company (the "WestMarc Shares"). The purchase price for each such option
acquired by Fisher Communications was $100 in cash, and each such option is
exercisable for cash in a specified amount. The number of WestMarc Shares
delivered to each of the Company's subsidiaries named above as consideration for
one-third of its partnership interest in HCP or HCLP, and the cash exercise
price which Fisher Communications would be required to pay in order to exercise
the options granted by those subsidiaries, are as follows:
<TABLE>
<CAPTION>
Cash Exercise Price
Number of WestMarc Shares Of Option
------------------------- -------------------------
<S> <C> <C>
ECP 14.8836 $ 1,200,000
ATM 0.5224 42,120
TCINV 2.8911 233,100
TCIU 4.3557 351,180
Tempo Cable 14.5562 1,173,600
------- -----------
37.2090 $ 3,000,000
======= ===========
</TABLE>
(continued)
III-28
<PAGE> 307
The WestMarc Shares are not publicly traded. The dividend, liquidation,
and redemption features of the WestMarc Shares are determined by reference to
"Liquidation Price," which is defined, per share, as the sum of (i) $32,250
plus (ii) an amount equal to all dividends which accrued during any quarterly
dividend period and were not paid in full at the end of that period or
subsequently.
See also Item 11(g) above.
The Company believes that the foregoing business dealings with management
during 1995 were based upon terms no less advantageous to the Company than
those which would be available in dealing with unaffiliated persons.
(b) Certain business relationships
Mr. Jerome H. Kern, a director of TCI, is a partner with the law firm of
Baker & Botts, L.L.P., the principal outside counsel for TCI. Fees paid to
Baker & Botts, L.L.P. by TCI and consolidated subsidiaries were $8.8 million
for the last full fiscal year.
See also Item 13(a) above.
(c) Indebtedness of management
None.
III-29
<PAGE> 308
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
<TABLE>
<CAPTION>
Included in Part II of this Report: Page No.
--------------
<S> <C>
Tele-Communications, Inc.:
Independent Auditors' Report II-56
Consolidated Balance Sheets,
December 31, 1995 and 1994 II-57 to II-58
Consolidated Statements of Operations,
Years ended December 31, 1995, 1994 and 1993 II-59
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1995, 1994 and 1993 II-60 to II-62
Consolidated Statements of Cash Flows,
Years ended December 31, 1995, 1994 and 1993 II-63
Notes to Consolidated Financial Statements,
December 31, 1995, 1994 and 1993 II-64 to II-108
"Liberty Media Group":
Independent Auditors' Report II-109
Combined Balance Sheets,
December 31, 1995 and 1994 II-110 to II-111
Combined Statements of Operations,
Years ended December 31, 1995, 1994 and 1993 II-112
Combined Statements of Equity,
Years ended December 31, 1995, 1994 and 1993 II-113
Combined Statements of Cash Flows,
Years ended December 31, 1995, 1994 and 1993 II-114
Notes to Combined Financial Statements,
December 31, 1995, 1994 and 1993 II-115 to II-141
</TABLE>
IV-1
<PAGE> 309
<TABLE>
<S> <C>
"TCI Group":
Independent Auditors' Report II-142
Combined Balance Sheets,
December 31, 1995 and 1994 II-143 to II-144
Combined Statements of Operations,
Years ended December 31, 1995, 1994 and 1993 II-145
Combined Statements of Equity,
Years ended December 31, 1995, 1994 and 1993 II-146 to II-148
Combined Statements of Cash Flows,
Years ended December 31, 1995, 1994 and 1993 II-149
Notes to Combined Financial Statements,
December 31, 1995, 1994 and 1993 II-150 to II-185
Liberty Media Corporation:
Independent Auditors' Report II-186
Consolidated Statement of Operations,
Year ended December 31, 1993 II-187
Consolidated Statement of Stockholders' Equity,
Year ended December 31, 1993 II-188
Consolidated Statement of Cash Flows,
Year ended December 31, 1993 II-189 to II-190
Notes to Consolidated Financial Statements,
December 31, 1993 II-191 to II-210
</TABLE>
IV-2
<PAGE> 310
(a) (2) Financial Statement Schedules
Included in Part IV of this Report:
<TABLE>
<CAPTION>
(i) Financial Statement Schedules required to be filed: Page No.
--------
<S> <C>
Independent Auditors' Report IV-15
Schedule I - Condensed Information as to the
Financial Position of the Registrant, December 31, 1995
and 1994; Condensed Information as to the Operations
and Cash Flows of the Registrant, Years ended
December 31, 1995 and 1994 IV-16 to IV-18
Schedule II - Valuation and Qualifying Accounts,
Years ended December 31, 1995, 1994 and 1993 IV-19
</TABLE>
IV-3
<PAGE> 311
(ii) Separate financial statements for TeleWest plc:
<TABLE>
<CAPTION>
Consolidated Financial Statements Page No.
--------------------------------- --------
<S> <C>
Independent Auditors' Report IV-20
Consolidated Statements of Operations IV-21
Consolidated Balance Sheets IV-22
Consolidated Statements of Cash Flows IV-23
Consolidated Statement of Shareholders' Equity IV-24
Notes to Consolidated Financial Statements IV-25 to IV-43
</TABLE>
IV-4
<PAGE> 312
(a) (3) Exhibits
Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):
3 - Articles of Incorporation and Bylaws:
3.1 The Restated Certificate of Incorporation, dated August 4, 1994,
as amended on August 4, 1994, August 16, 1994, October 11,
1994, October 21, 1994, January 26, 1995, August 3, 1995,
August 3, 1995, January 25, 1996 and January 25, 1996.
3.2 The Bylaws as adopted June 16, 1994.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994, as amended by Form 10-K/A (Commission File No.
0-20421).
10 - Material Contracts:
10.1 Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Form S-4
Registration Statement (Commission File No. 33-54263).
10.2 Tele-Communications, Inc. 1995 Employee Stock Incentive Plan.*
10.3 Tele-Communications, Inc. 1996 Stock Incentive Plan.*
10.4 Restated and Amended Employment Agreement, dated as of November 1,
1992, between the Company and Bob Magness.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.5 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and Bob Magness.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994, as amended by Form 10-K/A (Commission File No.
0-20421).
10.6 Restated and Amended Employment Agreement, dated as of November 1,
1992, between the Company and John C. Malone.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.7 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and John C. Malone.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994, as amended by Form 10-K/A (Commission File No.
0-20421).
10.8 Employment Agreement, dated as of January 1, 1992, between
Tele-Communications, Inc. and Donne F. Fisher.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992, as amended by Form 10-K/A for the
year ended December 31, 1992 (Commission File No.
0-5550).
(continued)
IV-5
<PAGE> 313
10 - Material contracts, continued:
10.9 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and Donne F. Fisher.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
10.10 Restricted Stock Award Agreement, made as of December 10, 1992,
among Tele-Communications, Inc., Donne F. Fisher and WestMarc
Communications, Inc.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.11 Consulting Agreement, dated as of January 1, 1996, between
Tele-Communications, Inc. and Donne F. Fisher.
10.12 Deferred Compensation Plan for Non-Employee Directors, effective
on November 1, 1992.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.13 Amended and Restated Employment Agreement, dated as of July 18,
1995, among Tele-Communications, Inc., Tele-Communications
International, Inc. and Fred A. Vierra.*
Incorporated herein by reference to Tele-Communications
International, Inc.'s Registration Statement on Form S-1
(Commission File No. 33-80491).
10.14 Employment Agreement, dated as of January 1, 1993, between
Tele-Communications, Inc. and Larry E. Romrell.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
10.15 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and Larry E. Romrell.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
10.16 Form of 1992 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0-5550).
(continued)
IV-6
<PAGE> 314
10 - Material contracts, continued:
10.17 Form of 1993 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0-5550).
10.18 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement, dated as of November 12, 1993, by and between
Tele-Communications, Inc. and Jerome H. Kern.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0-5550).
10.19 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, Liberty Media Corporation and grantee
relating to stock appreciation rights granted pursuant to
letter dated September 17, 1991.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.20 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, Liberty Media Corporation and grantee
relating to the assumption of options and related stock
appreciation rights granted under the Liberty Media
Corporation 1991 Stock Incentive Plan pursuant to letter dated
July 26, 1993.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.21 Assumption and Amended and Restated Stock Option Agreement between
the Company, TCI/Liberty Holding Company and a director of
Tele-Communications, Inc. relating to assumption of options
and related stock appreciation rights granted outside of an
employee benefit plan pursuant to Tele-Communications, Inc.'s
1993 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.22 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, TCI/Liberty Holding Company and grantee
relating to assumption of options and related stock
appreciation rights granted under Tele-Communications, Inc.'s
1992 Stock Incentive Plan pursuant to Tele-Communications,
Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
(continued)
IV-7
<PAGE> 315
10 - Material contracts, continued:
10.23 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, TCI/Liberty Holding Company and grantee
relating to assumption of grants pursuant to the Agreement and
Plan of Merger dated June 6, 1991 between United Artists
Entertainment Company and Tele-Communications, Inc.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.24 Form of letter dated September 17, 1991 from Liberty Media
Corporation to grantee relating to grant of stock appreciation
rights.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.25 Form of letter dated July 26, 1993 from Liberty Media Corporation
to grantee relating to grant of options and stock appreciation
rights.*
Incorporated by reference to Tele-Communications, Inc.'s
Post Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.26 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, TCI/Liberty Holding Company and grantee
relating to assumption of options and related stock
appreciation rights under Tele- Communications, Inc.'s 1992
Stock Incentive Plan pursuant to Tele-Communications, Inc.'s
1992 Non- Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.27 Forms of Assumption and Amended and Restated Stock Option
Agreements relating to options granted under the United
Artists Entertainment Company 1988 Incentive and Non-Qualified
Stock Option Plan and executed by employees who did not have
employment agreements with United Artists Entertainment
Company.*
Incorporated herein by reference to Tele-Communications,
Inc.'s Post-Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration
Statement (Commission File No. 33- 43009).
10.28 Form of Indemnification Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0- 5550).
10.29 Form of 1994 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
(continued)
IV-8
<PAGE> 316
10- Material contracts, continued:
10.30 Qualified Employee Stock Purchase Plan of Tele-Communications,
Inc., as amended.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-57635).
10.31 Form of Restricted Stock Award Agreement for 1995 Award of Series
A TCI Group Restricted Stock pursuant to the
Tele-Communications, Inc. 1994 Stock Incentive Plan.*
10.32 Form of Restricted Stock Award Agreement for 1995 Award of Series
A Liberty Media Group Restricted Stock pursuant to the
Tele-Communications, Inc. 1994 Stock Incentive Plan.*
10.33 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A TCI Group common
stock pursuant to the Tele- Communications, Inc. 1994 Stock
Incentive Plan.*
10.34 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Liberty Media Group
common stock pursuant to the Tele-Communications, Inc. 1994
Stock Incentive Plan.*
10.35 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A TCI Group common
stock pursuant to the Tele- Communications, Inc. 1995 Stock
Incentive Plan.*
10.36 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Liberty Media Group
common stock pursuant to the Tele-Communications, Inc. 1995
Stock Incentive Plan.*
10.37 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A TCI Group common
stock pursuant to the Tele- Communications, Inc. 1996 Stock
Incentive Plan.*
10.38 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Liberty Media Group
common stock pursuant to the Tele-Communications, Inc. 1996
Stock Incentive Plan.*
10.39 The Tele-Communications International, Inc. 1995 Stock Incentive
Plan.
Incorporated herein by reference to Tele-Communications
International, Inc. Registration Statement on Form S-1
(Commission File No. 33-91876).
10.40 Form of Restricted Stock Award Agreement for 1995 Award of Series A
Tele-Communications International, Inc. Restricted Stock
pursuant to the Tele-Communications International 1995 Stock
Incentive Plan.
(continued)
IV-9
<PAGE> 317
10- Material contracts, continued:
10.41 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock pursuant to the
Tele-Communications International, Inc. 1995 Stock Incentive
Plan.*
10.42 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock.*
10.43 Employee Stock Purchase Plan for Bargaining Unit Employees of
United Cable Television of Baltimore Limited Partnership.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-60839).
10.44 Employee Stock Purchase Plan for Bargaining Unit Employees of
Heritage Cable Vision Associates, L.P. D/B/A TCI of Michiana.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-60843).
10.45 Employee Stock Purchase Plan for Bargaining Unit Employees of UACC
Midwest, Inc. d/b/a TCI of Central Indiana.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-64827).
10.46 The Settlement Plan and Rabbi Trust Agreement Entered into
Pursuant to Thomas Adams, Mark Adamski, et. al. v. TCI of
Northern New Jersey, Inc. and the Tele-Communications, Inc.
Employee Stock Purchase Plan.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-64829).
10.47 Employee Stock Purchase Plan for Bargaining Unit Employees of TCI
of Northern New Jersey, Inc.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-64831).
10.48 Amended and Restated Agreement of Limited Partnership of MajorCo,
L.P., dated as of January 31, 1996, among Sprint Spectrum,
L.P., TCI Network Services, Comcast Telephony Services and Cox
Telephony Partnership.
Second Amended and Restated Joint Venture Formation Agreement,
dated as of January 31, 1996, by and between Sprint
Corporation, Tele-Communications, Inc., Comcast Corporation
and Cox Communications, Inc.
Parents Agreement, dated as of January 31, 1996, by
Tele-Communications, Inc. and Sprint Corporation.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated February 9, 1996 (Commission
File No. 0-20421).
(continued)
IV-10
<PAGE> 318
10- Material contracts, continued:
10.49 Amended and Restated Stock Purchase Agreement, dated as of April
25, 1995, by and among Eduardo Eurnekian, stockholders of
shares of the Common Stock of Cablevision S.A., Televisora
Belgrano S.A., Construred S.A., Univent's S.A., and TCI
International Holdings, Inc.
Amended and Restated Stockholders Agreement, dated April 25, 1995,
between Eduardo Eurnekian and TCI International Holdings, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated May 4, 1995, as amended by
Form 8-K/A (Commission File No. 0-20421).
10.50 Parents Agreement, dated as of July 24, 1995, among Viacom, Inc.,
Tele-Communications, Inc. and TCI Communications, Inc.
Subscription Agreement, dated as of July 24, 1995, among Viacom
International, Inc., Tele-Communications, Inc. and TCI
Communications, Inc.
Implementation Agreement, dated as of July 24, 1995, between Viacom
International, Inc. and Viacom International Services, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated July 26, 1995 (Commission File
No. 0-20421).
10.51 Agreement and Plan of Merger, dated as of January 27, 1994, by and
among Tele-Communications, Inc., Liberty Media Corporation,
TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty
Mergeco, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated February 15, 1994 (Commission
File No. 0-5550).
10.52 Amendment No. 1, dated as of March 30, 1994, to Agreement and Plan
of Merger, dated as of January 27, 1994, by and among
Tele-Communications, Inc., Liberty Media Corporation,
TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty
Mergeco, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated April 6, 1994 (Commission File
No. 0-5550).
10.53 Amendment No. 2, dated as of August 4, 1994, to Agreement and Plan
of Merger, dated as of January 27, 1994, by and among
Tele-Communications, Inc., Liberty Media Corporation,
TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty
Mergeco, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated August 18, 1994 (Commission
File No. 0-20421).
10.54 Agreement and Plan of Merger, dated as of August 8, 1994, among
Tele-Communications, Inc., TCI Communications, Inc. and
TeleCable Corporation
Incorporated herein by reference to Tele-Communications,
Inc.'s Current Report on Form 8-K, dated August 18, 1994
(Commission File No. 0-20421).
10.55 Agreement of Purchase and Sale of Partnership Interest, dated as
of January 31, 1996, among Halcyon Communications, Inc., ECP
Holdings, Inc. and Fisher Communications Associates, L.L.C.
(continued)
IV-11
<PAGE> 319
10- Material contracts, continued:
10.56 Consent and Amendment of Amended Agreement of Partnership for
Halcyon Communications Partners, dated as of January 31, 1996,
by and among Halcyon Communications, Inc., ECP Holdings, Inc.
and Fisher Communications Associates, L.L.C.
10.57 Assignment and Assumption Agreement, made as of January 31, 1996,
between ECP Holdings, Inc. and Fisher Communications
Associates, L.L.C.
10.58 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and ECP Holdings, Inc.
10.59 Agreement of Purchase and Sale of Partnership Interests, dated as
of January 31, 1996, among Halcyon Communications, Inc.,
American Televenture of Minersville, Inc., TCI Cablevision of
Nevada, Inc., TCI Cablevision of Utah, Inc., TEMPO Cable, Inc.
and Fisher Communications Associates, L.L.C.
10.60 Consent and First Amendment of Amended and Restated Agreement of
Limited Partnership for Halcyon Communications Limited
Partnership, dated as of January 31, 1996, by and among
Halcyon Communications, Inc., American Televenture of
Minersville, Inc., TCI Cablevision of Nevada, Inc., TCI
Cablevision of Utah, Inc., TEMPO Cable, Inc. and Fisher
Communications Associates, L.L.C.
10.61 Assignment and Assumption Agreement, made as of January 31, 1996,
between TCI Cablevision of Utah, Inc. and Fisher
Communications Associates, L.L.C.
10.62 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and TCI Cablevision of Utah,
Inc.
10.63 Assignment and Assumption Agreement, made as of January 31, 1996,
between TCI Cablevision of Nevada, Inc. and Fisher
Communications Associates, L.L.C.
10.64 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and TCI Cablevision of
Nevada, Inc.
10.65 Assignment and Assumption Agreement, made as of January 31, 1996,
between American Televenture of Minersville, Inc. and Fisher
Communications Associates, L.L.C.
10.66 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and American Televenture of
Minersville, Inc.
10.67 Assignment and Assumption Agreement, made as of January 31, 1996,
between TEMPO Cable, Inc. and Fisher Communications
Associates, L.L.C.
10.68 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and TEMPO Cable, Inc.
(continued)
IV-12
<PAGE> 320
21- Subsidiaries of Tele-Communications, Inc.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of KPMG
27- Financial data schedule
*Constitutes management contract or compensatory arrangement.
IV-13
<PAGE> 321
(b) Reports on Form 8-K filed during the quarter ended December 31, 1995:
Item
Date of Report Reported Financial Statements Filed
-------------- -------- --------------------------
December 18, 1995 Item 5 None
IV-14
<PAGE> 322
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Tele-Communications, Inc.:
Under date of March 18, 1996, we reported on 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, which are included in the December 31, 1995 annual report on Form
10-K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement schedules
as listed in the accompanying index. These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
March 18, 1996
IV-15
<PAGE> 323
Schedule I
Page 1 of 3
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Information as to the
Financial Position of the Registrant
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994*
------ -------- --------
amounts in millions
<S> <C> <C>
Investments in and advances to consolidated
subsidiaries - eliminated upon consolidation $ 6,879 4,708
Other assets, at cost, net of amortization 4 3
------- -------
$ 6,883 4,711
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Accrued liabilities $ 109 23
Minority interests in equity of consolidated subsidiaries 201 --
Redeemable preferred stocks 478 168
Stockholders' equity:
Series Preferred Stock, $.01 par value -- --
Class B 6% Cumulative Redeemable Exchangeable
Junior Preferred Stock, $.01 par value -- --
Tele-Communications, Inc. Series A TCI Group
common stock, $1 par value 672 --
Tele-Communications, Inc. Series B TCI Group
common stock, $1 par value 85 --
Tele-Communications, Inc. Series A Liberty Media
Group common stock, $1 par value 143 --
Tele-Communications, Inc. Series B Liberty Media
Group common stock, $1 par value 21 --
Class A common stock, $1 par value -- 577
Class B common stock, $1 par value -- 89
Additional paid-in capital 5,613 4,656
Cumulative foreign currency translation adjustment,
net of taxes (9) (4)
Unrealized holding gains for available-for-sale
securities, net of taxes 338 94
Accumulated deficit (454) (282)
------- -------
Treasury stock, at cost (314) (610)
------- -------
$ 6,883 4,711
======= =======
</TABLE>
* Restated - see notes 5 and 6 to the consolidated financial statements.
IV-16
<PAGE> 324
Schedule I
Page 2 of 3
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Information as to the
Operations of the Registrant
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994*
-------- --------
amounts in millions
<S> <C> <C>
Operating income (expenses):
Selling, general and administrative $ (21) (10)
Compensation relating to stock appreciation rights (21) --
Adjustment to compensation
relating to stock appreciation rights -- 1
Gain on sale of subsidiary stock 123 --
Minority interests in earnings of consolidated
subsidiaries (11) --
------ ------
Earnings (loss) before share
of earnings (loss) of consolidated subsidiaries 70 (9)
Share of earnings (loss) of consolidated subsidiaries (241) 71
------ ------
Net earnings (loss) (171) 62
====== ======
Preferred stock dividend requirements (34) (8)
------ ------
Net earnings (loss) attributable
to common stockholders $(205) 54
====== ======
</TABLE>
* Restated - see notes 5 and 6 to the consolidated financial statements.
IV-17
<PAGE> 325
Schedule I
Page 3 of 3
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Information as to
Cash Flows of the Registrant
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994*
-------- --------
amounts in millions
<S> <C> <C>
Cash flows from operating activities:
Earnings (loss) before share of earnings (loss)
of consolidated subsidiaries $ 70 (9)
Adjustments to reconcile earnings (loss) to net
cash provided by operating activities:
Compensation relating to stock
appreciation rights 21 --
Adjustment to compensation
relating to stock appreciation rights -- (1)
Gain on sale of subsidiary stock (123) --
Minority interests in earnings 11 --
Change in accrued liabilities 53 24
--------- ---------
Net cash provided by operating activities 32 14
--------- ---------
Cash flows from investing activities:
Reduction in or additional
investments in and advances to (430) (8)
consolidated subsidiaries, net
Other investing activities (9) (3)
--------- ---------
Net cash used by investing activities (439) (11)
--------- ---------
Cash flows from financing activities:
Preferred stock dividends (24) (4)
Issuances of common stock 431 1
--------- ---------
Net cash provided (used) by financing activities 407 (3)
--------- ---------
Change in cash -- --
Cash at beginning of year -- --
--------- ---------
Cash at end of year $ -- --
========= =========
</TABLE>
* Restated - see notes 5 and 6 to the consolidated financial statements.
See also note 3 to the consolidated financial statements.
IV-18
<PAGE> 326
Schedule II
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additions Deductions
--------- ----------
Balance at Charged to Write-offs Balance
beginning profit net of at end
Description of year and loss recoveries of year
----------- ------- -------- ---------- -------
amounts in millions
<S> <C> <C> <C> <C>
Year ended
December 31, 1995:
Allowance for doubtful
receivables - trade $ 23 86 (75) 34
==== ==== ==== ====
Year ended
December 31, 1994:
Allowance for doubtful
receivables - trade $ 19 58 (54) 23
==== ==== ==== ====
Year ended
December 31, 1993:
Allowance for doubtful
receivables - trade $ 15 58 (54) 19
==== ==== ==== ====
</TABLE>
IV-19
<PAGE> 327
Independent Auditors' Report
To the Board of Directors and Shareholders of
TeleWest plc
We have audited 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. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TeleWest plc and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1995, in conformity with generally accepted accounting
principles in the United States of America.
/s/ KPMG
KPMG
Chartered Accountants
Registered Auditors
March 6, 1996
London, England
IV-20
<PAGE> 328
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1995 1994 1993
$'000 L.'000 L.'000 L.'000
<S> <C> <C> <C>
REVENUE (note 2)
Cable television 100,574 64,740 35,875 20,729
Telephony - residential 89,477 57,597 23,471 11,261
Telephony - business 27,107 17,449 8,812 4,908
Other (L.1,451, L.1,481 and L.2,371 in 1995, 1994 and
1993, respectively, from related parties) 7,764 4,998 3,869 3,440
-------------------------------------------------------------------------------------------------
224,922 144,784 72,027 40,338
=================================================================================================
OPERATING COSTS AND EXPENSES:
Programing (50,013) (32,194) (15,500) (8,403)
Telephony (45,869) (29,526) (14,714) (10,203)
Selling, general and administrative (including
L.3,257, L.2,128 and L.4,451 in 1995, 1994 and
1993, respectively, to related parties) (163,720) (105,388) (60,414) (32,505)
Depreciation (93,240) (60,019) (30,320) (17,635)
Amortization of goodwill (12,201) (7,854) (1,827) (840)
-------------------------------------------------------------------------------------------------
(365,043) (234,981) (122,775) (69,586)
=================================================================================================
OPERATING LOSS (140,121) (90,197) (50,748) (29,248)
OTHER INCOME/(EXPENSE):
Interest income (including L.1,583, L.465
and L.1,504 in 1995, 1994 and 1993, respectively,
from related parties) 24,305 15,645 2,291 1,974
Interest expense (L.1,083 in 1994 to related
parties (41,399) (26,649) (10,069) (2,537)
Loss on disposal of interest rate swaps (13,374) (8,609) - -
Unrealized gain on interest rate swaps - - 1,636 -
Foreign exchange losses, net (22,642) (14,575) (21) (72)
Share of net losses of affiliates (19,849) (12,777) (8,466) (7,540)
(Loss)/gain on disposal of assets (651) (419) 26 (16)
Minority interests in losses of consolidated
subsidiaries, net (25) (16) 39 -
Other, net 127 82 (25) -
=================================================================================================
LOSS BEFORE INCOME TAXES (213,629) (137,515) (65,337) (37,439)
Income tax expense (note 14) (25) (16) - -
-------------------------------------------------------------------------------------------------
LOSS BEFORE EXTRAORDINARY GAIN (213,654) (137,531) (65,337) (37,439)
Extraordinary gain (note 15) - - 7,287 -
=================================================================================================
NET LOSS (213,654) (137,531) (58,050) (37,439)
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
Pro forma
1995 1995 1994
$ L. L.
(except number(except number (except number
of shares) of shares) of shares)
<S> <C> <C> <C>
LOSS PER ORDINARY SHARE
Weighted average number of ordinary shares outstanding 861,424,848 861,424,848 630,756,392
Loss per ordinary share before extraordinary gain (0.25) (0.16) (0.10)
Extraordinary gain - - 0.01
LOSS PER ORDINARY SHARE (0.25) (0.16) (0.09)
</TABLE>
See accompanying notes to consolidated financial statements.
IV-21
<PAGE> 329
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1995 1994
$'000 L.'000 L.'000
<S> <C> <C> <C>
ASSETS (note 2)
Cash and cash equivalents 722,095 464,818 248,002
Trade receivables (net of allowance for doubtful accounts
of L.4,695 and L.1,736) 35,921 23,123 6,182
Other receivables (note 7) 39,858 25,657 26,124
Prepaid expenses 9,528 6,133 1,544
Investments in affiliates, accounted for under the equity
method, and related receivables (note 8) 125,372 80,703 81,907
Other investments, at cost 32,105 20,666 20,666
Property and equipment (less accumulated depreciation
of L.182,142 and L.67,290) (note 9) 1,652,626 1,063,808 454,843
Goodwill (less accumulated amortization of
L.11,758 and L.3,904) 770,351 495,881 38,863
Other assets (less accumulated amortization of
L.742) (note 11) 169,224 108,931 25
-------------------------------------------------------------------------------------------------
TOTAL ASSETS 3,557,080 2,289,720 878,156
=================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 62,764 40,402 37,362
Other liabilities (note 12) 161,291 103,824 45,270
Debt (note 13) 1,230,784 792,265 3,886
Capital lease obligations 47,093 30,314 14,553
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,501,932 966,805 101,071
=================================================================================================
MINORITY INTERESTS 259 167 151
=================================================================================================
SHAREHOLDERS' EQUITY (note 16)
Convertible preference shares, 10p par value;
661,000,000 and 204,000,000 shares authorized
in 1995 and 1994, respectively; 496,066,708
and 153,000,000 shares issued and outstanding
in 1995 and 1994, respectively 77,064 49,607 15,300
Ordinary shares, 10p par value;
2,010,000,000 and 1,293,835,000 shares
authorized in 1995 and 1994, respectively;
919,963,400 and 848,244,940 issued and
outstanding in 1995 and 1994, respectively 142,916 91,996 84,824
Additional paid-in capital 2,055,235 1,322,971 686,276
Accumulated deficit (217,050) (139,717) (2,186)
-------------------------------------------------------------------------------------------------
2,058,165 1,324,857 784,214
Ordinary shares held in trust for The Telewest
Restricted Share Scheme (note 16) (3,276) (2,109) (7,280)
TOTAL STOCKHOLDERS' EQUITY 2,054,889 1,322,748 776,934
-------------------------------------------------------------------------------------------------
Commitments and contingencies (note 17)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 3,557,080 2,289,720 878,156
=================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
IV-22
<PAGE> 330
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1995 1994 1993
$'000 L.'000 L.'000 L.'000
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (note 2)
Loss before extraordinary gain (213,654) (137,531) (65,337) (37,439)
Adjustments to reconcile loss before
extraordinary gain to net cash used in
operating activities:
Depreciation 93,240 60,019 30,320 17,635
Amortization of goodwill 12,201 7,854 1,827 840
Amortization of deferred financing costs
and issue discount on senior discount
debentures 25,796 16,605 - -
Accrued interest on senior debentures 8,468 5,451 - -
Unrealized loss on foreign currency
translation 22,642 14,575 - -
Loss on disposal of interest rate swap 13,374 8,609 - -
Unrealized gain on interest rate swap - - (1,636) -
Share of losses of affiliates 19,849 12,777 8,466 7,540
Loss/(gain) on disposals of assets 651 419 (26) 16
Minority interests in profit/(loss) 25 16 (39) -
Changes in operating assets and liabilities,
net of effect of acquisition of subsidiaries:
Change in receivables (8,206) (5,282) (8,102) (4,981)
Change in prepaid expenses (5,231) (3,367) 1,004 (1,484)
Change in accounts payable (8,704) (5,603) 15,293 6,503
Change in liability relating to the
TeleWest Restricted Share Scheme 2,406 - 1,549 -
Change in other liabilities 27,430 19,206 7,518 1,530
Other (553) (356) - -
=================================================================================================
NET CASH USED IN OPERATING ACTIVITIES (10,266) (6,608) (9,163) (9,840)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for property and equipment (395,293) (254,453) (202,683) (102,962)
Cash paid for acquisition of subsidiaries (5,021) (3,232) (236) (45,465)
Additional investments in and loans
to affiliates (14,204) (9,143) (23,761) (24,250)
Proceeds from disposals of assets 1,069 688 294 166
Proceeds from disposals of interest
in affiliates - - - 2,552
Other investing activities 521 335 (5,505) (908)
-------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (412,928) (265,805) (231,891) (170,867)
=================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debenture issue 1,172,600 754,812 - -
Cash premium paid for foreign
currency option (136,817) (88,070) - -
Repayment of borrowings (245,344) (157,930) (219,700) (20,000)
Cash paid for debenture issue costs (31,962) (20,574) - -
Cash paid for share issue costs (9,540) (6,141) (28,543) -
Proceeds from share issues - - 511,800 -
Proceeds from borrowings - - 174,200 46,000
Capital element of finance lease
repayments (2,005) (1,291) (210) 170
Net contributions from Joint Venturers
and minorities - - 44,995 160,313
-------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 746,932 480,806 482,542 186,483
-------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 323,738 208,393 241,488 5,776
Effect of exchange rate changes on cash and
cash equivalents 13,086 8,423 - -
Cash and cash equivalents at beginning
of year 385,271 248,002 6,514 738
-------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR 722,095 464,818 248,002 6,514
=================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
IV-23
<PAGE> 331
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net assets of
the Joint Venture
L.'000
<S> <C>
JOINT VENTURE: (note 2)
Year ended December 31 1993
Balance at January 1 1993 189,015
Capital contributions 160,119
Net loss (37,439)
-------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31 1993 311,695
=================================================================================================
PERIOD FROM JANUARY 1 1994 TO NOVEMBER 22 1994
Balance at January 1 1994 311,695
Capital contribution 121,873
Repayment of the Joint Venturers' capital accounts (75,700)
Net loss (55,864)
-------------------------------------------------------------------------------------------------
BALANCE AT NOVEMBER 22 1994 302,004
=================================================================================================
</TABLE>
On November 22 1994 the net assets of Joint Venture were
contributed to the Company, as described in Note 1 to the
consolidated financial statements. The contribution appears as an
increase in additional paid-in capital in the following table.
<TABLE>
<CAPTION>
Convertible Additional
preference Ordinary Shares held paid-in Accumulated
shares shares in trust capital deficit Total
L.'000 L.'000 L.'000 L.'000 L.'000 L.'000
<S> <C> <C> <C> <C> <C> <C>
COMPANY:
Shares issued during the year 15,300 84,824 - 384,272 - 484,396
Ordinary shares held in trust
for Restricted Share Scheme - - (7,280) - - (7,280)
Contribution of Joint Venture
to the Company on
November 22 1994 - - - 302,004 - 302,004
Net loss - - - - (2,186) (2,186)
-------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31 1994 15,300 84,824 (7,280) 686,276 (2,186) 776,934
Conversion of ordinary
shares into convertible
preference shares 11,227 (11,227) - - - -
Accrued employee
compensation relating to
the Restricted Share Scheme - - 2,462 - - 2,462
Net loss for the period
to October 2 1995 - - - - (71,185) (71,185)
-------------------------------------------------------------------------------------------------------------
BALANCE AT
OCTOBER 2 1995 26,527 73,597 (4,818) 686,276 (73,371) 708,211
Shares issued in connection
with the acquisition of SBCC 23,080 18,399 - 636,695 - 678,174
Accrued employee compensation
relating to the Restricted
Share Scheme - - 2,709 - - 2,709
Net loss for the period to
December 31 1995 - - - - (66,346) (66,346)
-------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31 1995 49,607 91,996 (2,109) 1,322,971 (139,717) 1,322,748
=============================================================================================================
</TABLE>
The consolidated financial statements have been prepared on the
basis that the organization structure of TeleWest plc and its
subsidiaries as set out above on October 2 1995 had been in
existence throughout the periods covered by the consolidated
financial statements. Further details regarding the basis of
presentation are set out in Note 2 to the consolidated financial
statements.
See accompanying notes to consolidated financial statements.
IV-24
<PAGE> 332
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
years ended december 31, 1995 and 1994 (amounts in thousands)
NOTE 1 ORGANIZATION AND HISTORY
TELEWEST PLC
TeleWest plc ("the Company") is a cable television and telephony
operator which offers these services to business and residential
customers in the United Kingdom ("UK"). The Company derives its
cable television revenues from installation fees, monthly basic
and premium service fees and advertising charges. The Company
derives its telephony revenues from connection charges, monthly
line rentals, call charges, special residential service charges
and interconnection fees payable by other operators. Based on
revenue, the cable television and telephony services are
approximately equal in size although revenue is predominantly
derived from residential, rather than business, customers.
The Company was incorporated on October 20, 1994 under the laws of
England and Wales. On October 2, 1995, the entire issued share
capital of TeleWest Communications plc ("Old TeleWest") was
transferred to the Company in exchange for fully paid up shares of
the Company pursuant to a court-approved scheme of arrangement
(the "Scheme of Arrangement") made between Old TeleWest, the
Company and the shareholders of Old TeleWest. The organization and
history of Old TeleWest is described below. Details regarding the
basis upon which the consolidated financial statements are
presented are set out in Note 2.
Under the Scheme of Arrangement, the Company issued 735,468,440
ordinary shares of 10 pence each and 265,276,500 convertible
preference shares of 10 pence each in consideration for the
transfer of shares of Old TeleWest to the Company. Dealings in
ordinary shares and ADSs representing ordinary shares of Old
TeleWest ceased on the London Stock Exchange and NASDAQ National
Market immediately prior to the execution of the Scheme of
Arrangement, and upon completion of the Scheme of the Arrangement
on October 2, 1995, dealings in the ordinary shares and ADSs
representing ordinary shares of the Company commenced. Prior to
the execution of the Scheme of Arrangement, the Company did not
trade and hence did not incur any income or expenditure on its own
account.
On October 3, 1995, immediately following the completion of the
Scheme of the Arrangement, the Company acquired the entire issued
share capital of SBC CableComms (UK) ("SBCC"), a company that
holds cable television and telephony interests in the UK, from its
former shareholders in exchange for fully paid up shares of the
Company. Further details on this acquisition are described in Note
5 to the consolidated financial statements.
OLD TELEWEST
Old TeleWest was incorporated on January 1, 1994 under the laws of
England and Wales. On November 22, 1994, affiliates of
Tele-Communications, Inc. ("the TCI Affiliates") and affiliates of
U S WEST, Inc. ("the U S WEST Affiliates") contributed their UK
cable interests to Old TeleWest (the "Contribution"). These
interests were previously held by the TCI Affiliates and the U S
WEST Affiliates through TCI/U S WEST Cable Communications Group, a
general partnership which was formed on December 18, 1991. Old
TeleWest did not trade prior to November 22, 1994. TCI/U S WEST
Cable Communications Group and its subsidiaries collectively are
referred to herein as the "Joint Venture". The TCI Affiliates and
the U S WEST Affiliates are collectively referred to herein as the
"Joint Venturers".
On November 22, 1994, immediately following the Contribution, Old
TeleWest issued 604,000,000 ordinary shares and 153,000,000
convertible preference shares to the Joint Venturers and completed
an initial public offering ("the Global Offering") in which
239,744,940 ordinary shares were issued to the public market.
Immediately prior to the completion of the Scheme of Arrangement
on October 2, 1995, Old TeleWest restructured its share capital by
converting 112,276,500 ordinary shares of 10 pence each which were
held by the Joint Venturers into 112,276,500 convertible
preference shares of 10 pence each.
IV-25
<PAGE> 333
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 2 BASIS OF PRESENTATION
The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the
United States of America ("US GAAP"). The preparation of financial
statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The
Contribution and the transactions executed pursuant to the Scheme
of Arrangement are effectively internal reorganizations of the
Company and its subsidiaries and hence the consolidated financial
statements present the financial position, results of operations,
and cash flows of the Company as if the ownership structure
established on October 2, 1995, had been in existence throughout
the periods covered by the consolidated financial statements. The
acquisition of SBCC has been accounted for under the purchase
method of accounting and hence its results have been included in
the statement of operations only from the date of acquisition.
The Company's historical shareholders' equity for periods prior to
November 22, 1994, is the excess of the Joint Venture's assets
over the Joint Venture's liabilities and represents the historical
cost of the capital contributions made by the Joint Venturers less
the accumulated deficit arising from the Joint Venture's
operations. The Company's shareholders' equity for the period
November 22, 1994 to October 2, 1995 reflects the accumulated
deficit arising from the operations of Old TeleWest and the issue
of ordinary and convertible preference shares by Old TeleWest.
The economic environment and currency in which the Company
operates is the United Kingdom and hence its reporting currency is
Pounds Sterling (L.). Certain financial information for the year
ended December 31, 1995 has also been translated into US Dollars,
with such US Dollar amounts being unaudited and presented solely
for the convenience of the reader, at the rate of $1.5535 =
L.1.00, the Noon Buying Rate of the Federal Reserve Bank of New
York on December 29, 1995. The presentation of the US Dollar
amounts should not be construed as a representation that the
Pounds Sterling amounts could be so converted into US Dollars at
the rate indicated or at any other rate.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and those of all majority-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated upon consolidation.
All acquisitions have been accounted for under the purchase method
of accounting. Under this method, the results of subsidiaries and
affiliates acquired in the year are included in the consolidated
statement of operations from the date of acquisition.
Goodwill arising on consolidation (representing the excess of the
fair value of the consideration given over the fair value of the
identifiable net assets acquired) is amortized over the
acquisitions' useful life or over a maximum period of 40 years.
The Company assesses the recoverability of this intangible asset
by determining whether the amortization of the goodwill balance
over its remaining life can be recovered. The amount of goodwill
impairment, if any, is measured based on the expected undiscounted
cash flows of the acquired operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly-liquid investments with
original maturities of three months or less that are readily
convertible into cash.
IV-26
<PAGE> 334
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The Company uses foreign currency option contracts which permit,
but do not require, the Company to exchange foreign currencies at
a future date with another party at a contracted exchange rate.
The Company also enters into combined foreign currency and
interest rate swap contracts ("Foreign Currency Swaps"). Such
contracts are used to hedge against adverse changes in foreign
currency exchange rates associated with obligations denominated in
foreign currency.
The foreign currency option and Foreign Currency Swaps are
recorded on the balance sheet in other assets or other liabilities
at their fair value at the end of each reporting period with
changes in their fair value during the reporting period being
reported as part of the foreign exchange gain or loss in the
statement of operations. Such gains and losses are offset against
foreign exchange gains and losses on the obligations denominated
in foreign currencies which have been hedged.
Other interest rate swaps which are held as trading assets are
recorded on the balance sheet at their fair value at the end of
each reporting period with changes in their fair value being
recorded as gains and losses in the statement of operations.
INVESTMENTS
Investments in partnerships, joint ventures and subsidiaries in
which the Company's voting interest is 20% to 50%, and others
where the Company has significant influence, are accounted for
using the equity method. Investments which do not have a readily
determinable fair value, in which the Company's voting interest is
less than 20%, and in which the Company does not have significant
influence, are carried at cost and written down to the extent that
there has been an other-than-temporary diminution in value.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The amount of
advertising costs expensed was L.10,246,000, L.4,313,000 and
L.1,958,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, including the historical
carryover basis cost from the Contribution. Except during the
prematurity period as described below, depreciation is provided to
write off the cost, less estimated residual value, of property and
equipment by equal instalments over their estimated useful
economic lives as follows:
<TABLE>
<S> <C>
Freehold and long leasehold buildings 50 years
Cable and ducting 25-30 years
Electronic equipment
- System electronics 10 years
- Switching equipment 8 years
- Subscriber electronics 5 years
- Headend, studio and playback facilities 5 years
Other equipment
- Office furniture and fittings 5 years
- Motor vehicles 4 years
</TABLE>
IV-27
<PAGE> 335
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During the prematurity period, depreciation of cable and ducting
and system electronics is charged monthly to write off the
estimated cost at the end of the prematurity period over a useful
life of 30 and 10 years, respectively. In accordance with
Statement of Financial Accounting Standards ("SFAS") No 51,
"Financial Reporting by Cable Television Companies", the monthly
charge is scaled down by a ratio of average customers in the
current period to the estimated customer base at the end of the
prematurity period. The prematurity period covers the period
between connecting the first customer and substantial completion
of the network.
Preconstruction costs which are included within cable and ducting
are amortized over the life of the franchise from the date of the
first customer.
The Company accounts for costs, expenses and revenues applicable
to the construction and operation of its cable systems under SFAS
No. 51.
FRANCHISE COSTS
Expenditure incurred on successful applications for franchise
licences is included in property and equipment and is amortized
over the remaining life of the original franchise term, generally
15 years. Costs relating to unsuccessful applications are charged
to the statement of operations.
DEFERRED FINANCING COSTS
Costs incurred to issue debentures are deferred and amortized to
the consolidated statement of operations at a constant rate to the
carrying value of the debentures over the life of the debentures.
MINORITY INTERESTS
Recognition of the minority interests' share of losses of
consolidated subsidiaries is limited to the amount of such
minority interests' allocable portion of the equity of those
consolidated subsidiaries.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of
exchange in effect at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated
using the rate of exchange ruling at the balance sheet date and
the gains or losses on translation are included in the statement
of operations.
REVENUE RECOGNITION
Revenue is recognized as services are delivered. Other revenues
include connection fees which are recognized in the period of
connection to the extent that the fee is offset by direct selling
costs. The remainder is recognized over the estimated average
period that subscribers are expected to remain connected to the
system.
PENSION COSTS
The Company does not have a defined benefit pension plan but
operates a defined contribution scheme or contributes up to
specified limits to the third-party scheme of the employee's
choice. The amount included in losses in 1995, 1994 and 1993 of
L.1,538,000, L.839,000 and L.482,000, respectively, represents the
contributions payable to the selected schemes in respect of the
relevant accounting periods.
INCOME TAXES
Prior to November 22, 1994 no provision has been made for income
tax expense or benefit in the accompanying financial statements as
the earnings or losses of the Joint Venture are reported in the
respective income tax returns of the individual Joint Venturers.
IV-28
<PAGE> 336
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Following from the reorganization effective on November 22, 1994,
the Company became subject to UK taxation and adopted SFAS No 109,
"Accounting for Income Taxes". The adoption of SFAS No 109 does
not give rise to any cumulative adjustment to be made in the 1994
consolidated statement of operations. Under the asset and
liability method of SFAS No 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered.
RESTRICTED SHARE SCHEME
The Company operates the TeleWest Restricted Share Scheme to
provide for a portion of the future payments to employees under
the Company's existing compensation programs. Shares purchased by
the trust are valued at the market price on the date on which they
are purchased and are reflected as a reduction of shareholders'
equity in the balance sheet. This equity account is reduced based
on the original cost of the shares to the trust when the shares
are awarded to employees.
The value of awards of ordinary shares to be made to employees in
future years are charged to the statement of operations to the
extent that they have been awarded to and earned by employees in
the current accounting period. The value of shares which have been
awarded to, but have not been earned by employees, is included as
deferred compensation expense within other assets.
LOSS PER ORDINARY SHARE
Loss per ordinary share is based on the weighted average number of
ordinary shares outstanding during the year. Ordinary share
equivalents are not included in the computation as their effect
would be to decrease the loss per share. The pro forma loss per
ordinary share calculated for the year ended December 31, 1994
assumes that ordinary shares issued to the Joint Venturers in
return for the Contribution had been outstanding for the entire
year. Shares issued for cash in the Global Offering have been
treated as outstanding from that date.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued
SFAS No 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". The statement
requires that those assets to be held and used by an entity be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable, and those assets to be disposed of be reported
at the lower of carrying amount or fair value less cost to sell.
The Company is required to first comply with the requirements of
SFAS No 121 not later than in its consolidated financial
statements for the year ending December 31, 1996. The Company is
currently evaluating the effect that implementation of the new
standard will have on its results of operations and financial
position.
In October 1995, the Financial Accounting Standards Board issued
SFAS No 123 "Accounting for Stock-Based Compensation" which allows
companies to adopt a fair-value method for recognizing stock-based
expense in the financial statements. The Company is required to
first comply with the requirements of SFAS No 123 not later than
in its consolidated financial statements for the year ending
December 31, 1996. The Company is currently evaluating the effect
that implementation of the new standard will have on its results
of operations and financial position.
RECLASSIFICATIONS
Certain reclassifications have been made between asset categories
presented on the balance sheet as at December 31, 1994 to conform
with the 1995 presentation.
IV-29
<PAGE> 337
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 4 FINANCIAL INSTRUMENTS
FOREIGN CURRENCY OPTION CONTRACT
At December 31, 1995, the Company held a Pounds Sterling put
option to purchase US$1,537,000,000 to hedge its exposure to
adverse fluctuations in exchange rates on the principal amount at
maturity of its US Dollar-denominated Senior Discount Debentures
due 2007 ("Senior Discount Debentures"). The expiry date of this
option contract is September 28, 2000. The put option has a strike
price at expiration of L.1.00 = US$1.4520. The foreign currency
option has been included in other assets at its fair value on
December 31, 1995 of L.85,742,000.
FOREIGN CURRENCY SWAP
The Company has entered into a Foreign Currency Swap to hedge its
exposure to adverse fluctuations in exchange rates on the
principal amount of its US Dollar-denominated Senior Debentures
due 2006 ("Senior Debentures"). The terms of the contract provided
for the Company to make an initial exchange of principal of
US$300,000,000 in exchange for L.196,078,000. On expiry on October
1, 2000, the initial principal amounts will be re-exchanged. The
interest element of the Foreign Currency Swap requires the Company
to make Pounds Sterling fixed-rate interest payments and to
receive US Dollar fixed-rate interest payments on the initial
exchange amounts on a semi annual basis. The Foreign Currency Swap
has been included in other liabilities at its fair value on
December 31, 1995 of L.3,983,000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No 119 "Disclosures about Derivative Financial Instruments
and Fair Value of Financial Instruments" requires disclosure of an
estimate of the fair values of certain financial instruments. SFAS
No 119 defines the fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current
transaction between willing parties other than in a forced sale.
Fair value estimates are made at a specific point in time, based
upon relevant market information and information about the
financial instrument. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment, and
therefore cannot be determined precisely. Changes in assumptions
could significantly affect the estimates.
At December 31, 1995, the Company's significant financial
instruments include cash and cash equivalents, trade receivables,
the foreign currency option contract, the Foreign Currency Swap,
trade payables and long-term borrowings. The following table
summarizes the fair value of the foreign currency option contract,
the Foreign Currency Swap, the interest rate swaps, the Senior
Discount Debentures and the Senior Debentures. The fair value of
the other financial instruments held by the Company approximates
their recorded carrying amount due to the short maturity of these
instruments and these instruments are not presented in the
following table.
<TABLE>
<CAPTION>
AT DECEMBER 31,1995 AT DECEMBER 31,1994
CARRYING Carrying
AMOUNT FAIR VALUE amount Fair value
L.'000 L.'000 L.'000 L.'000
<S> <C> <C> <C> <C>
Assets:
Foreign currency option contract 85,742 85,742 - -
Interest rate swap agreement - - 9,568 9,568
Liabilities:
Interest rate swap agreement - - 645 645
Foreign Currency Swap 3,983 3,983 - -
Senior Discount Debentures 595,266 601,222 - -
Senior Debentures 193,113 196,975 - -
</TABLE>
Interest rate swaps held by the Company at December 31, 1994 were
sold during the year.
IV-30
<PAGE> 338
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 4 FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair value of the foreign currency option contract
and the Foreign Currency Swap are based on quotations received
from independent, third party financial institutions and represent
the net amount receivable or payable to terminate the position,
taking into consideration market rates and counterparty credit
risk. The estimated fair value of the Senior Discount Debentures
and the Senior Debentures are also based on quotations from
independent, third party financial institutions and are based on
discounting the future cash flows to net present values using
appropriate market interest rates prevailing at the year end.
MARKET RISK AND CONCENTRATIONS OF CREDIT RISK
Market risk is the sensitivity of the value of the financial
instruments to changes in related currency and interest rates.
Generally, the Company is not exposed to such market risk because
gains and losses on the financial instruments are offset by gains
and losses on the underlying assets and liabilities.
The Company may be exposed to potential losses due to the credit
risk of non-performance by the counterparties to its foreign
currency option and Foreign Currency Swap contracts; however, such
losses are not anticipated as these counterparties are major
international financial institutions.
Temporary cash investments also potentially expose the Company to
concentrations of credit risk, as defined by SFAS No. 105
"Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risks". The Company places its temporary
cash investments with major international financial institutions
and limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers
comprising the Company's customer base.
At December 31, 1995, the Company had no significant concentration
of credit risk.
NOTE 5 BUSINESS COMBINATIONS
On October 3, 1995, the Company acquired the entire issued share
capital of SBC CableComms (UK) ("SBCC"), a company which holds
cable television and telephony interests in the UK, from an
affiliate of Cox Communications, Inc. and affiliates of SBC
Communications, Inc. in exchange for an aggregate of 183,994,960
ordinary shares of 10 pence each and 230,790,208 convertible
preference shares of 10 pence each (the "SBCCShare Exchange
Agreement"). The value attributable to the shares issued was
L.1.635 per share, being the market price of the shares on June 8,
1995, the day the terms of the acquisition were agreed to and
announced. The fair value of the share consideration using this
share price was L.678,174,000. The aggregate cost of acquisition
was L.689,878,000 including the costs of acquisition.
This acquisition has been accounted for under the purchase method
of accounting. The goodwill arising on acquisition is
L.464,872,000 and is being amortized on a straight-line basis over
20 years.
On September 8, 1993, the Joint Venture acquired for cash
consideration of L.48,302,000 the entire issued share capital of
certain companies, which build and operate cable television and
telephony networks in Scotland. This acquisition has been
accounted for under the purchase method of accounting. The amount
of goodwill arising as a result of the acquisition is L.25,022,000
and is being amortized on a straight-line basis over 20 years.
The operating results of these acquisitions are included in the
Company's consolidated statement of operations from their
respective dates of acquisition. The following unaudited pro forma
information presents the consolidated results of operations of the
Company as if the acquisitions had occurred at the beginning of
1994, after giving effect to the amortization of goodwill arising
as a result of each of the acquisitions:
<TABLE>
<CAPTION>
1995 1994
L.'000 L.'0000
<S> <C> <C>
Revenue 191,195 108,038
Net loss (188,142) (113,247)
</TABLE>
IV-31
<PAGE> 339
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 5 BUSINESS COMBINATIONS (CONTINUED)
The above unaudited pro forma financial information is presented
for information purposes only and is not necessarily indicative of
the operating results that would have occurred had the acquisition
been completed as of the dates indicated above, nor is it
indicative of future results.
NOTE 6 SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash paid for interest was L.6,041,000, L.8,013,000 and
L.2,417,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Significant non-cash investing activities of the Company are
described below. The amounts stated for 1995 represent the
purchase of SBCC for largely share consideration, as described in
Note 5 to the consolidated financial statements. The amounts
stated for 1994 represent the contribution of UK cable interests
to the Company by the Joint Venturers.
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
L.'000 L.'000
<S> <C> <C>
Purchase of SBCC/contribution of cable interests:
Assets 428,080 3,967
Liabilities assumed (45,144) (2,744)
Debt assumed (157,930) -
Minority interest in subsidiaries - (44)
-----------------------------------------------------------------------------
Net assets acquired/contributed 225,006 1,179
Goodwill on acquisition 464,872 -
=============================================================================
689,878 1,179
=============================================================================
Share consideration/capital contribution 678,174 1,179
Costs of acquisition 11,704 -
-----------------------------------------------------------------------------
689,878 1,179
=============================================================================
</TABLE>
NOTE 7 OTHER RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
L.'000 L.'000
<S> <C> <C>
Value Added Tax refund 5,145 7,709
Interconnection receivables 3,019 2,624
Interest rate swaps - 9,568
Interest receivable 3,341 811
Accrued income 3,311 548
Recoverable expenses 2,808 1,951
Other 8,033 2,913
-----------------------------------------------------------------------------
25,657 26,124
=============================================================================
</TABLE>
IV-32
<PAGE> 340
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 8 INVESTMENTS
The Company has investments in affiliates accounted for under the
equity method at December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
L.'000 L.'000
<S> <C> <C>
Cable London plc 49.00% 48.90%
Birmingham Cable Corporation Limited 27.47% 27.47%
London Interconnect Limited 16.67% 16.67%
Central Cable Sales Limited 50.00% -
</TABLE>
The Company has accounted for its investment in London
Interconnect Limited under the equity method because it is in a
position to exercise a significant influence over London
Interconnect Limited.
Summarized financial information for such affiliates which operate
principally in the cable television and telephony industries is as
follows:
COMBINED FINANCIAL POSITION
<TABLE>
<CAPTION>
AT DECEMBER 31
1995 1994
L.'000 L.'000
<S> <C> <C>
Property and equipment, net 311,265 224,899
Intangible assets, net 4,644 16,201
Other assets, net 149,786 28,909
-----------------------------------------------------------------------------
TOTAL ASSETS 465,695 270,009
=============================================================================
Debt 247,653 25,500
Other liabilities 50,268 43,673
Owners' equity 167,774 200,836
-----------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY 465,695 270,009
=============================================================================
</TABLE>
COMBINED OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
1995 1994
L.'000 L.'000
<S> <C> <C>
Revenue 70,016 38,669
Operating expenses (99,184) (58,869)
-----------------------------------------------------------------------------
Operating loss (29,168) (20,200)
Interest income/(expense) (4,615) (488)
-----------------------------------------------------------------------------
NET LOSS (33,783) (20,688)
=============================================================================
</TABLE>
The Company's investments in affiliates are comprised as follows:
<TABLE>
<CAPTION>
1995 1994
L.'000 L.'000
<S> <C> <C>
Loans 24,593 13,163
Share of net assets 56,110 68,744
-----------------------------------------------------------------------------
80,703 81,907
=============================================================================
</TABLE>
Any excess of the purchase cost over the value of the net assets
acquired is included in goodwill and amortized over 20 years on a
straight-line basis.
IV-33
<PAGE> 341
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 9 PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Cable and Electronic Other
Land Buildings ducting equipment equipment Total
L.'000 L.'000 L.'000 L.'000 L.'000 L.'000
<S> <C> <C> <C> <C> <C>
ACQUISITION COSTS
Balance at January 1, 1995 4,055 16,643 321,208 149,652 30,575 522,133
On acquisition of SBCC 168 14,551 284,670 131,682 25,681 456,752
Additions - 4,811 161,439 78,729 24,097 269,076
Disposals - - (451) (446) (1,114) (2,011)
-------------------------------------------------------------------------------------------------
Balance at
December 31, 1995 4,223 36,005 766,866 359,617 79,239 1,245,950
=================================================================================================
ACCUMULATED DEPRECIATION
Balance at January 1, 1995 - 2,106 25,926 28,040 11,218 67,290
On acquisition of SBCC - 833 26,201 17,080 11,660 55,774
Charge for year - 1,981 22,507 25,791 9,740 60,019
Disposals - - (102) (101) (738) (941)
-------------------------------------------------------------------------------------------------
Balance at
December 31, 1995 - 4,920 74,532 70,810 31,880 182,142
=================================================================================================
1995 NET BOOK VALUE 4,223 31,085 692,334 288,807 47,359 1,063,808
=================================================================================================
ACQUISITION COSTS
Balance at January 1, 1994 2,950 6,591 208,812 71,095 18,806 308,254
Additions 1,105 10,052 113,182 78,898 12,220 215,457
Disposals - - (786) (341) (451) (1,578)
-------------------------------------------------------------------------------------------------
Balance at
December 31, 1994 4,055 16,643 321,208 149,652 30,575 522,133
=================================================================================================
ACCUMULATED DEPRECIATION
Balance at January 1, 1994 - 1,077 16,945 13,959 6,299 38,280
Charge for year - 1,029 9,767 14,386 5,138 30,320
Disposals - - (786) (305) (219) (1,310)
-------------------------------------------------------------------------------------------------
Balance at
December 31, 1994 - 2,106 25,926 28,040 11,218 67,290
=================================================================================================
1994 NET BOOK VALUE 4,055 14,537 295,282 121,612 19,357 454,843
=================================================================================================
</TABLE>
Cable and ducting consists principally of the civil engineering
and fibre optic costs. In addition, cable and ducting includes net
book value of preconstruction and franchise costs of L.14,388,000,
and L.15,586,000 as of December 31, 1995, and 1994, respectively.
Electronic equipment includes the Company's switching, headend and
converter equipment. Other equipment consists principally of
motor vehicles, office furniture and fixtures and leasehold
improvements.
IV-34
<PAGE> 342
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 10 VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS CHARGED TO
Balance at Acquisition Costs and Other Balance
January 1 of SBCC expenses accounts Deductions December 31
L.'000 L.'000 L.'000 L.'000 L.'000 L.'000
<S> <C> <C> <C> <C> <C> <C>
1995
Allowance for doubtful
accounts 1,736 1,063 5,920 - (4,024) 4,695
-------------------------------------------------------------------------------------------------
1994
Allowance for doubtful
accounts 577 - 3,392 26 (2,259) 1,736
-------------------------------------------------------------------------------------------------
1993
Allowance for doubtful
accounts 107 - 515 70 (115) 577
-------------------------------------------------------------------------------------------------
</TABLE>
NOTE 11 OTHER ASSETS
The components of other assets, net of amortization, are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
L.'000 L.'000
<S> <C> <C>
Deferred financing costs of debentures 20,716 -
Foreign currency option contract 85,742 -
Other 2,473 25
-----------------------------------------------------------------------------
108,931 25
=============================================================================
</TABLE>
NOTE 12 OTHER LIABILITIES
Other liabilities are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
L.'000 L.'000
<S> <C> <C>
Amount due to affiliated or other related parties 2,052 395
Accrued interest 5,740 1,507
Accrued construction costs 14,859 5,492
Accrued expenses and deferred income 58,507 25,976
Foreign Currency Swap 3,983 -
Other liabilities 18,683 11,900
-----------------------------------------------------------------------------
103,824 45,270
=============================================================================
</TABLE>
NOTE 13 DEBT
Debt is summarized as follows at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Weighted average
interest rate at 1995 1994
December 31 L.'000 L.'000
1995 1994
<S> <C> <C> <C> <C>
Senior Debentures 9.625% - 193,113 -
Senior Discount Debentures 11.000% - 595,266 -
Other debt 8.450% 6.600% 3,886 3,886
-----------------------------------------------------------------------------
792,265 3,886
=============================================================================
</TABLE>
IV-35
<PAGE> 343
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 13 DEBT (CONTINUED)
SENIOR DEBENTURES
In October 1995, the Company issued US$300,000,000 principal
amount of Senior Debentures with a yield to maturity of 9.625%.
The cash consideration received at the date of issue was
L.188,703,000. The Senior Debentures mature on October 1, 2006.
Interest on the Senior Debentures accrues semi annually and is
payable in arrears with the payments commencing on April 1, 1996.
The Senior Debentures are redeemable, in whole or in part, at the
option of the Company at any time on or after October 1, 2000 at
the redemption price of 104.813% of the principal amount during
the year commencing October 1, 2000, 102.406% of the principal
amount during the year commencing October 1, 2001 and thereafter
at 100% of the principal amount plus accrued and unpaid interest.
The Senior Debentures and the Senior Discount Debentures, which
are described below, were issued to finance general working
capital, capital expenditure, foreign currency swap and options to
hedge against adverse fluctuations in exchange rates and
additional investments in affiliated companies or other companies
engaged in the cable/telecommunications business. A portion of
the net proceeds of the issue also was used to repay the
L.157,930,000 indebtedness outstanding under the loan facility
held by SBCC at the date that it was acquired by the Company.
The indenture under which the Senior Debentures were issued
contains various covenants which, among other things, will
restrict the ability of the Company to incur additional
indebtedness, pay dividends, create certain liens, enter into
certain transactions with shareholders or affiliates, or sell
certain assets. The Company was in compliance with the covenants
at December 31, 1995.
The Company has entered into a Foreign Currency Swap to hedge its
exposure to adverse fluctuations in exchange rates on the
principal amount which will be outstanding on October 1, 2000, the
earliest redemption date, and the associated interest payments of
the Senior Debentures. The terms of the Foreign Currency Swap are
described in Note 4 to the consolidated financial statements.
The Senior Debentures are unsecured liabilities of the Company.
SENIOR DISCOUNT DEBENTURES
In October 1995, the Company issued US$1,536,413,000 principal
amount at maturity of Senior Discount Debentures with a yield to
maturity of 11%. The cash consideration received at the date of
issue was L.566,109,000 (US$900,000,000). At December 31, 1995,
the unamortized portion of the discount on issue was L.393,466,000
(US$611,250,000). The Senior Discount Debentures mature on October
1, 2007. Interest on the Senior Discount Debentures accrues semi
annually. Cash interest will not accrue on the Senior Discount
Debentures prior to October 1, 2000 and is thereafter payable in
arrears on April 1 and October 1 of each year at a rate of 11% per
annum. The Senior Discount Debentures are redeemable, in whole or
in part, at the option of the Company at any time on or after
October 1, 2000 at the redemption price of 100% of the principal
amount plus accrued and unpaid interest.
The indenture under which the Senior Discount Debentures were
issued contains various covenants as set out for the Senior
Debenture above with which the Company was in compliance with at
December 31, 1995.
The Company has purchased a five year Pounds Sterling put option
to purchase US$1,537,000,000 to hedge its exposure to adverse
fluctuations in exchange rates on the principal amount which will
be outstanding on October 1, 2000, the earliest redemption date,
of the Senior Discount Debentures. The terms of the foreign
currency option contract are described in Note 4 to the
consolidated financial statements.
The Senior Discount Debentures are unsecured liabilities of the
Company.
IV-36
<PAGE> 344
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 13 DEBT (CONTINUED)
REVOLVING CREDIT FACILITIES
Subsidiaries of the Company operating in the London South, Avon,
and Scotland Regional Franchise Areas are party to revolving
credit facilities available for future drawdowns to finance the
construction of the cable network in these Regional Franchise
Areas. The total amount available for drawdown is L.190,000,000
for the London South/Avon facility and L.195,000,000 for the
Scotland facility.
Borrowings under the credit facilities are secured by the assets
and shares of the London South, Avon, and Scotland Regional
Franchise Areas and bear interest at a floating rate based on
LIBOR. The credit facilities contain covenants regarding financial
and operating ratios and targets.
The credit facilities are divided into two tranches: a
non-recourse portion (Tranche A) and a recourse portion (Tranche
B). Any amounts outstanding under Tranche A must be repaid by
December 31, 2001 under the London South/Avon facility and by
December 31, 2003 under the Scotland facility. Any amounts
outstanding under Tranche B must be repaid by March 31, 1998 and
by December 31, 1999 for the London South/Avon facility and
Scotland facility, respectively. No amounts had been drawn under
these facilities at the date of these financial statements.
Commitment fees relating to the facilities paid for the years
ended December 31, 1995, 1994 and 1993 were L.1,863,000, L.801,000
and L.134,000, respectively.
OTHER DEBT
Other debt is represented by property loans which are secured on
freehold land and buildings held by the Company of which L.937,000
matures in 1996 and L.2,949,000 matures in 1997. The property
loans bear interest at a rate of 1.5% to 1.75% above LIBOR.
NOTE 14 INCOME TAXES
As discussed in Note 3 to the consolidated financial statements,
the Company has adopted SFAS No 109 as of November 22, 1994. The
adoption of this standard has no cumulative effect to be reported
in the 1994 consolidated statement of operations.
Loss before income taxes is solely attributable to the UK:
The provision for income tax is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
L.'000 L.'000
<S> <C> <C>
Currently payable 16 -
=============================================================================
</TABLE>
IV-37
<PAGE> 345
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 14 INCOME TAXES (CONTINUED)
A reconciliation of income taxes determined using the statutory UK
rate of 33% to the effective rate of income tax is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
1995 1994
% %
<S> <C> <C>
Corporate tax at UK statutory rates (33) (33)
Permanent differences 3 1
Valuation allowance 26 28
Share of losses of affiliates 4 4
-----------------------------------------------------------------------------
Effective rate - -
=============================================================================
</TABLE>
Deferred income tax assets and liabilities at December 31, 1995
and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
L.'000 L.'000
<S> <C> <C>
Deferred tax assets relating to:
Fixed assets 2,200 1,031
Net operating loss carryforward 97,000 41,582
Other 9,200 1,329
-----------------------------------------------------------------------------
Deferred tax asset 108,400 43,942
Valuation allowance (96,300) (40,537)
-----------------------------------------------------------------------------
12,100 3,405
Deferred tax liabilities relating to:
Liabilities and provisions - (460)
Other (12,100) (2,945)
-----------------------------------------------------------------------------
Deferred tax liabilities (12,100) (3,405)
-----------------------------------------------------------------------------
DEFERRED TAX ASSET PER BALANCE SHEET - -
=============================================================================
</TABLE>
Following the reorganization effective on November 22, 1994, the
Company became subject to UK taxation.
At December 31, 1995 and 1994 the Company estimates that is has,
subject to Inland Revenue agreement, net operating losses ("NOLs")
of L.294,000,000 and L.126,000,000, respectively, available to
relieve against future profits.
The NOLs have an unlimited carryforward period under UK tax law,
but are limited to their use to the type of business which has
generated the loss.
NOTE 15 EXTRAORDINARY GAIN
The Company had entered into interest rate swap agreements in
order to manage the interest rate risk on its revolving credit
facilities by swapping the interest rate on part of its variable
rate debt for a fixed interest rate. Following the Global Offering
of the Company in November 1994, the Company used a portion of the
proceeds from the offering to repay all amounts outstanding under
these credit facilities and the interest rate swap agreements
ceased to be a hedge of the interest rate liability. The interest
rate swaps were retained pending their use as hedges of interest
rates on future drawdowns of the credit facilities. They had been
placed on the balance sheet at their fair value at the date upon
which the debt was repaid and an extraordinary gain equal to the
aggregate fair value of the interest rate swaps at this date was
recognized in the consolidated statement of operations. Any change
in the aggregate fair value of the swap agreements since this date
had been recognized in the consolidated statement of operations.
On October 12, 1995, the Company sold the interest rate swaps,
recognizing a loss on disposal.
IV-38
<PAGE> 346
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 16 SHAREHOLDERS' EQUITY
As described in Note 2 to the consolidated financial statements,
the transactions executed under the Scheme of the Arrangement are
effectively internal reorganizations of the Company and its
subsidiaries. The transactions do not affect the composition or
amount of shareholders' equity and hence are not discussed below.
MOVEMENTS IN SHARE CAPITAL
On August 14, 1995, the authorized share capital of the Company
was increased to L.267,100,000 being 2,010,000,000 ordinary shares
of 10 pence each and 661,000,000 convertible preference shares of
10 pence each. On October 2, 1995, 112,276,500 ordinary shares of
10 pence each were converted into 112,276,500 convertible
preference shares of 10 pence each. Both transactions were made to
enable the Company to execute the Scheme of Arrangement.
On 3 October, 1995, pursuant to the SBCC Share Exchange Agreement,
the Company issued 183,994,960 ordinary shares of 10 pence each at
par and 230,790,208 convertible preference shares of 10 pence each
at par to the former shareholders of SBCC in consideration for the
transfer of the shares of SBCC to the Company. See Note 5 to the
consolidated financial statements.
CONVERTIBLE PREFERENCE SHARES
The convertible preference shares are convertible into fully paid
up ordinary shares at any time on the basis of one ordinary share
for every convertible preference share provided that, immediately
following the conversion, the percentage of the issued ordinary
share capital of the Company held by members of the public, as
defined by the listing rules of the London Stock Exchange, does
not fall below 25%. The ordinary shares arising on conversion will
rank pari passu in all respects with the ordinary shares then in
issue.
The holders of the convertible preference shares are entitled to
receive a dividend of such amount as is declared and paid in
relation to each ordinary share, subject to the dividend to be
paid not exceeding 20 pence per share net of any associated tax
credit.
In the event of a winding-up of the Company or other return of
capital, the assets of the Company available for distribution will
be paid first to the holders of the convertible preference shares
up to the sum of capital paid-up or credited as paid-up unless the
right of election upon a winding-up of the Company has been
exercised in respect of the convertible preference shares ("the
Elected Shares"). If the election has been exercised, the holders
of the ordinary shares and the Elected Shares will receive any
surplus in accordance with the amount paid-up or credited as
paid-up on the shares held.
The holders of the convertible preference shares are not entitled
to vote at any general meeting of the Company unless the meeting
includes the consideration of a resolution for winding up the
Company or a resolution modifying the rights or privileges
attaching to the convertible preference shares.
SHARES HELD IN TRUST FOR THE TELEWEST RESTRICTED SHARE SCHEME
The Company operates the TeleWest Restricted Share Scheme in
conjunction with an employment trust, which has been designed to
provide incentives to employees based on the performance of the
Company. The TeleWest Restricted Share Scheme enables ordinary
shares to be awarded to employees of the Company which will
normally be available for release to the employee three years
after the date of the award, subject to any price, which normally
will be only a nominal price, which the Trustees may specify.
4,000,000 ordinary shares are held in trust by the Trustees for
release as awards to employees participating in the TeleWest
Restricted Share Scheme. During the year, the Trustees awarded an
aggregate of 2,857,000 ordinary shares to employees of which an
award of 16,000 shares was cancelled leaving 2,841,000 ordinary
shares which had been awarded to employees at December 31, 1995.
IV-39
<PAGE> 347
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 16 SHAREHOLDERS' EQUITY (CONTINUED)
EMPLOYEE SHARE OPTION SCHEMES
Under the TeleWest Executive Share Option Scheme, certain officers
and key employees may be granted options to purchase ordinary
shares of the Company.
During the year, options were granted to employees to purchase an
aggregate of 8,871,398 ordinary shares of which 226,169 options
had been surrendered during the year, leaving 8,645,229 ordinary
shares under option at December 31, 1995. The exercise price of
the options ranges from 154.5 pence to 173.5 pence. The options
are exercisable between three and ten years after the date of the
grant with exercise conditional on the out-performance by the
price of the FT-SE100 Index over the three year period preceding
exercise.
The Company also operates the TeleWest Sharesave Scheme. At
December 31, 1995, options to purchase 1,177,784 ordinary shares,
exercisable in 2000 at an exercise price of 150 pence, and options
to purchase 2,168,157 ordinary shares, exercisable in 2001 at an
exercise price of 134 pence (the latter for which the related
savings contracts became effective February 1, 1996) were
outstanding.
NOTE 17 COMMITMENTS AND CONTINGENCIES
CAPITAL AND OPERATING LEASES
The Company leases a number of assets under arrangements accounted
for as capital leases, as follows:
<TABLE>
<CAPTION>
Acquisition Accumulated Net book
costs depreciation value
L.'000 L.'000 L.'000
<S> <C> <C> <C>
At December 31, 1995
Electronic equipment 27,148 (3,352) 23,796
Other equipment 1,512 (432) 1,080
At December 31, 1994
Electronic equipment 14,462 (1,438) 13,024
Other equipment 1,025 (650) 375
-----------------------------------------------------------------------------
</TABLE>
The Company leases business offices and uses certain equipment
under lease arrangements accounted for as operating leases.
Minimum rental expense under such arrangements amounted to
L.2,276,000, L.1,535,000 and L.1,229,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Future minimum lease payments under capital and operating leases
are summarized as follows as at December 31, 1995:
<TABLE>
<CAPTION>
Capital Operating
leases leases
L.'000 L.'000
<S> <C> <C>
1996 2,722 3,104
1997 3,433 2,726
1998 4,798 2,167
1999 6,293 1,620
2000 6,488 1,102
2001 and thereafter 16,277 9,681
===============================================================
40,011
---------------------------------------------------------------
Imputed interest (9,697)
---------------------------------------------------------------
TOTAL 30,314
===============================================================
</TABLE>
It is expected that, in the normal course of business, expiring
leases will be renewed or replaced.
IV-40
<PAGE> 348
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 17 COMMITMENTS AND CONTINGENCIES (CONTINUED)
MINORITY INTERESTS
In October 1993, the Company acquired all of the outstanding
minority interests in the London South Regional Franchise Area
from various shareholders other than the interest of one
shareholder holding an approximately 0.03% interest in the London
South Regional Franchise Area. In consideration for such minority
interests, the Company made an initial payment to the sellers of
approximately L.790,000 and may be required to make an additional
payment to one of the sellers upon the occurrence of certain
events (including the completion of certain share issuances by the
Company). The amount of this payment is based upon the valuation
of the London South Regional Franchise Area and the percentage of
such franchise formerly owned by the minority shareholders. The
Company does not expect any payments to have a material effect on
the liquidity or capital resources of the Company.
In connection with the Company's acquisition of the South East
Regional Franchise Area, the Company granted to Trans-Global (UK)
Limited an option to acquire up to 9.9% of the equity in the South
East Regional Franchise Area. If Trans-Global elects to exercise
its option in full, the Company's interest in the South East
Regional Franchise Area would decrease to 90.1% and the Company
would be entitled to a payment from Trans-Global pro rata share
(9.9%) of all funding provided by the Company to the South East
Regional Franchise Area through to the date of exercise. As of the
date of hereof, such option has not been exercised.
CONTINGENT LIABILITIES
The Company is a party of various legal proceedings in the
ordinary course of business which it does not believe will result,
in aggregate, in a material adverse effect on its financial
condition.
NOTE 18 RELATED PARTY TRANSACTIONS
The Company, in the normal course of providing cable television
services, purchases certain of its programing from certain UK
affiliates of Tele-Communications, Inc. ("TCI"). Such programing
is purchased on commercially-available terms.
The Company has management agreements with TCI and U S WEST, Inc.
("U S WEST") under which amounts are paid by the Company relating
to TCI and U S WEST employees who have been seconded to the
Company. For the years ended December 31, 1995, 1994, and 1993,
fees paid by the Company under the agreements were L.3,042,000,
L.2,128,000 and L.4,451,000, respectively. The Company has similar
management agreements with Cox Communications, Inc. and SBC
Communications, Inc. For the year ended December 31, 1995, fees
paid by the Company under these agreements were L.233,000.
IV-41
<PAGE> 349
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
NOTE 18 RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has entered into consulting agreements with its
affiliates pursuant to which the Company provides consulting
services relating to telephony operations. Under the agreements,
the Company receives an annual fee from each affiliate based upon
the affiliate's revenues. Fees received for the years ended
December 31, 1995, 1994 and 1993 were L.566,000, L.557,000 and
L.1,801,000, respectively. The Company also receives a fee for
providing switching support services, comprising of a fixed
element based on a number of switches, and a variable element
based on a number of lines. Fees received for the years ended
December 31, 1995 and 1994 were L.827,000 and L.822,000,
respectively.
NOTE 19 SUBSEQUENT EVENTS
On January 10, 1996, the Company purchased the entire issued share
capital of Bell Cablemedia (Worcester) Limited, owner of the
Worcester cable franchise, for cash consideration of L.9,800,000.
Bell Cablemedia (Worcester) Limited is otherwise a dormant company
with net assets of L.2 representing its called up share capital.
On January 18, 1996, The Independent Television Commission
notified the Company that it had been awarded the Southport cable
franchise.
NOTE 20 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1995
Fourth Third Second First
Total quarter quarter quarter quarter
L.'000 L.'000 L.'000 L.'000 L.'000
<S> <C> <C> <C> <C> <C>
Revenue 144,784 57,144 32,240 28,969 26,431
Operating loss (90,197) (33,464) (20,135) (19,209) (17,389)
Net loss (137,531) (66,346) (27,325) (23,547) (20,313)
Loss per ordinary share 16 pence 7 pence 3 pence 3 pence 2 pence
</TABLE>
The following summary of the financial information sets out
comparative figures for the fourth quarter ended December 31,
1994.
<TABLE>
<CAPTION>
9 months
Fourth ended
quarter September 30
Total 1994 1994
L.'000 L.'000 L.'000
<S> <C> <C> <C>
Revenue 72,027 22,727 49,300
Operating loss (50,748) (17,808) (32,940)
Unrealized gain on interest rate swap 1,636 1,636 -
Loss before extraordinary gain (65,337) (20,874) (44,463)
Extraordinary gain 7,287 7,287 -
Net loss (58,050) (13,587) (44,463)
Pro forma loss per ordinary share 9 pence - -
</TABLE>
IV-42
<PAGE> 350
SELECTED FINANCIAL INFORMATION - FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
Company Joint Venture(1) Predecessor Businesses(2)
1995(3) 1994 1993 1992 1991
L.'000 L.'000 L.'000 L.'000 L.'000
<S> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net 1,063,808 454,843 269,974 149,571 87,202
Total assets 2,289,720 878,156 413,865 236,474 114,602
Investment in affiliates 80,703 81,907 68,838 54,849 75
Debt(4) 792,265 3,886 49,386 23,386 13,885
Equity 1,322,748 776,934 311,695 189,015 57,023
INCOME STATEMENT DATA:
REVENUE
Cable television 64,740 35,875 20,729 12,600 8,400
Telephony - residential 57,597 23,471 11,261 3,462 630
Telephony - business 17,449 8,812 4,908 2,043 612
Other 4,998 3,869 3,440 602 502
--------------------------------------------------------------------------------------------------
TOTAL REVENUE 144,784 72,027 40,338 18,707 10,144
--------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Programing (32,194) (15,500) (8,403) (5,286) (2,656)
Telephony (29,526) (14,714) (10,203) (3,916) (1,568)
Selling, general and administrative (105,388) (60,414) (32,505) (17,411) (11,571)
Depreciation (60,019) (30,320) (17,635) (9,942) (6,002)
Amortization (7,854) (1,827) (840) (326) (163)
--------------------------------------------------------------------------------------------------
OPERATING LOSS (90,197) (50,748) (29,248) (18,174) (11,816)
--------------------------------------------------------------------------------------------------
Share of (loss)/income of affiliates (12,777) (8,466) (7,540) (6,905) 61
Financial expenses, net(4) (34,607) (6,137) (651) (1,057) (1,319)
Extraordinary gain - 7,287(5) - - -
Net loss (137,531) (58,050) (37,439) (26,136) (8,268)
Loss per ordinary share before
extraordinary gain (pro forma loss
for 1994) (16) pence (10) pence
Extraordinary gain - 1 pence
Loss per ordinary share (pro forma
loss for 1994) (16) pence (9) pence
</TABLE>
(1) See Note 1 (Organization and history) to the US GAAP
Consolidated Financial Statements
(2) Predecessor Businesses refers to certain businesses owned by
TCI prior to the formation of the Joint Venture and which are
now owned by the Company.
(3) See Note 5 (Business Combinations) to the USGAAP Consolidated
Financial Statements
(4) See Note 13 (Debt) to the USGAAP Consolidated Financial
Statements
(5) See Note 15 (Extraordinary Gain) to the US GAAP Consolidated
Financial Statements
IV-43
<PAGE> 351
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
TELE-COMMUNICATIONS, INC.
Dated: March 26, 1996 By /s/ John C. Malone
------------------------------------
John C. Malone
President and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Bob Magness Chairman of the Board March 26, 1996
- ----------------------------- and Director
Bob Magness
/s/ John C. Malone President, Chief Executive March 26, 1996
- ----------------------------- Officer and Director
John C. Malone
/s/ Jerome H. Kern Director March 26, 1996
- -----------------------------
Jerome H. Kern
/s/ John W. Gallivan Director March 26, 1996
- -----------------------------
John W. Gallivan
/s/ D. F. Fisher Director March 26, 1996
- -----------------------------
D. F. Fisher
/s/ Stephen M. Brett Executive Vice President March 26, 1996
- ----------------------------- and Secretary
Stephen M. Brett
/s/ Bernard W. Schotters Senior Vice President of March 26, 1996
- --------------------------- TCI Communications, Inc.
Bernard W. Schotters (Principal Financial Officer)
/s/ Gary K. Bracken Senior Vice President of March 26, 1996
- ----------------------------- TCI Communications, Inc.
Gary K. Bracken (Principal Accounting Officer)
</TABLE>
IV-44
<PAGE> 352
EXHIBIT INDEX
Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):
3 - Articles of Incorporation and Bylaws:
3.1 The Restated Certificate of Incorporation, dated August 4, 1994,
as amended on August 4, 1994, August 16, 1994, October 11,
1994, October 21, 1994, January 26, 1995, August 3, 1995,
August 3, 1995, January 25, 1996 and January 25, 1996.
3.2 The Bylaws as adopted June 16, 1994.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994, as amended by Form 10-K/A (Commission File No.
0-2041).
10 - Material Contracts:
10.1 Tele-Communications, Inc. 1994 Stock Incentive Plan.
Incorporated herein by reference to the Company's Form S-4
Registration Statement (Commission File No. 33-54263).
10.2 Tele-Communications, Inc. 1995 Employee Stock Incentive Plan.
10.3 Tele-Communications, Inc. 1996 Stock Incentive Plan.
10.4 Restated and Amended Employment Agreement, dated as of November 1,
1992, between the Company and Bob Magness.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.5 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and Bob Magness.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994, as amended by Form 10-K/A (Commission File No.
0-2041).
10.6 Restated and Amended Employment Agreement, dated as of November 1,
1992, between the Company and John C. Malone.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.7 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and John C. Malone.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994, as amended by Form 10-K/A (Commission File No.
0-2041).
10.8 Employment Agreement, dated as of January 1, 1992, between
Tele-Communications, Inc. and Donne F. Fisher.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
(continued)
<PAGE> 353
10 - Material contracts, continued:
10.9 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and Donne F. Fisher.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
10.10 Restricted Stock Award Agreement, made as of December 10, 1992,
among Tele-Communications, Inc., Donne F. Fisher and WestMarc
Communications, Inc.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.11 Consulting Agreement, dated as of January 1, 1996, between
Tele-Communications, Inc. and Donne F. Fisher.
10.12 Deferred Compensation Plan for Non-Employee Directors, effective
on November 1, 1992.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992, as amended by Form 10-K/A for the year ended
December 31, 1992 (Commission File No. 0-5550).
10.13 Amended and Restated Employment Agreement, dated as of July 18,
1995, among Tele-Communications, Inc., Tele-Communications
International, Inc. and Fred A. Vierra.*
Incorporated herein by reference to Tele-Communications
International, Inc.'s Registration Statement on Form S-1
(Commission File No. 33-80491).
10.14 Employment Agreement, dated as of January 1, 1993, between
Tele-Communications, Inc. and Larry E. Romrell.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
10.15 Assignment and Assumption Agreement, dated as of August 4, 1994,
among TCI/Liberty Holding Company, Tele- Communications, Inc.
and Larry E. Romrell.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
10.16 Form of 1992 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0-5550).
(continued)
<PAGE> 354
10 - Material contracts, continued:
10.17 Form of 1993 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0-5550).
10.18 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement, dated as of November 12, 1993, by and between
Tele-Communications, Inc. and Jerome H. Kern.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0-5550).
10.19 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, Liberty Media Corporation and grantee
relating to stock appreciation rights granted pursuant to
letter dated September 17, 1991.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.20 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, Liberty Media Corporation and grantee
relating to the assumption of options and related stock
appreciation rights granted under the Liberty Media
Corporation 1991 Stock Incentive Plan pursuant to letter dated
July 26, 1993.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.21 Assumption and Amended and Restated Stock Option Agreement between
the Company, TCI/Liberty Holding Company and a director of
Tele-Communications, Inc. relating to assumption of options
and related stock appreciation rights granted outside of an
employee benefit plan pursuant to Tele-Communications, Inc.'s
1993 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.22 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, TCI/Liberty Holding Company and grantee
relating to assumption of options and related stock
appreciation rights granted under Tele-Communications, Inc.'s
1992 Stock Incentive Plan pursuant to Tele-Communications,
Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
(continued)
<PAGE> 355
10 - Material contracts, continued:
10.23 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, TCI/Liberty Holding Company and grantee
relating to assumption of grants pursuant to the Agreement and
Plan of Merger dated June 6, 1991 between United Artists
Entertainment Company and Tele-Communications, Inc.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.24 Form of letter dated September 17, 1991 from Liberty Media
Corporation to grantee relating to grant of stock appreciation
rights.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.25 Form of letter dated July 26, 1993 from Liberty Media Corporation
to grantee relating to grant of options and stock appreciation
rights.*
Incorporated by reference to Tele-Communications, Inc.'s
Post Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.26 Form of Assumption and Amended and Restated Stock Option Agreement
between the Company, TCI/Liberty Holding Company and grantee
relating to assumption of options and related stock
appreciation rights under Tele- Communications, Inc.'s 1992
Stock Incentive Plan pursuant to Tele-Communications, Inc.'s
1992 Non- Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post
Effective Amendment No. 1 to Form S-4 Registration
Statement on Form S-8 Registration Statement (Commission
File No. 33-54263).
10.27 Forms of Assumption and Amended and Restated Stock Option
Agreements relating to options granted under the United
Artists Entertainment Company 1988 Incentive and Non-Qualified
Stock Option Plan and executed by employees who did not have
employment agreements with United Artists Entertainment
Company.*
Incorporated herein by reference to Tele-Communications,
Inc.'s Post-Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration
Statement (Commission File No. 33- 43009).
10.28 Form of Indemnification Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, as amended by Form 10-K/A for the year ended
December 31, 1993 (Commission File No. 0-5550).
10.29 Form of 1994 Non-Qualified Stock Option and Stock Appreciation
Rights Agreement.*
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1994, as amended
by Form 10-K/A (Commission File No. 0-20421).
(continued)
<PAGE> 356
10- Material contracts, continued:
10.30 Qualified Employee Stock Purchase Plan of Tele-Communications,
Inc., as amended.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-57635).
10.31 Form of Restricted Stock Award Agreement for 1995 Award of Series
A TCI Group Restricted Stock pursuant to the
Tele-Communications, Inc. 1994 Stock Incentive Plan.*
10.32 Form of Restricted Stock Award Agreement for 1995 Award of Series
A Liberty Media Group Restricted Stock pursuant to the
Tele-Communications, Inc. 1994 Stock Incentive Plan.*
10.33 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A TCI Group common
stock pursuant to the Tele- Communications, Inc. 1994 Stock
Incentive Plan.*
10.34 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Liberty Media Group
common stock pursuant to the Tele-Communications, Inc. 1994
Stock Incentive Plan.*
10.35 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A TCI Group common
stock pursuant to the Tele- Communications, Inc. 1995 Stock
Incentive Plan.*
10.36 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Liberty Media Group
common stock pursuant to the Tele-Communications, Inc. 1995
Stock Incentive Plan.*
10.37 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A TCI Group common
stock pursuant to the Tele- Communications, Inc. 1996 Stock
Incentive Plan.*
10.38 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Liberty Media Group
common stock pursuant to the Tele-Communications, Inc. 1996
Stock Incentive Plan.*
10.39 The Tele-Communications International, Inc. 1995 Stock Incentive
Plan.
Incorporated herein by reference to Tele-Communications
International, Inc. Registration Statement on Form S-1
(Commission File No. 33-91876).
10.40 Form of Restricted Stock Award Agreement for 1995 Award of Series
A Tele-Communications International, Inc. Restricted Stock
pursuant to the Tele-Communications International 1995 Stock
Incentive Plan.
(continued)
<PAGE> 357
10- Material contracts, continued:
10.41 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock pursuant to the
Tele-Communications International, Inc. 1995 Stock Incentive
Plan.*
10.42 Form of Non-Qualified Stock Option and Stock Appreciation Rights
Agreement for 1995 Grant of Options with tandem stock
appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock.*
10.43 Employee Stock Purchase Plan for Bargaining Unit Employees of
United Cable Television of Baltimore Limited Partnership.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-60839).
10.44 Employee Stock Purchase Plan for Bargaining Unit Employees of
Heritage Cable Vision Associates, L.P. D/B/A TCI of Michiana.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-60843).
10.45 Employee Stock Purchase Plan for Bargaining Unit Employees of UACC
Midwest, Inc. d/b/a TCI of Central Indiana.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-64827).
10.46 The Settlement Plan and Rabbi Trust Agreement Entered into
Pursuant to Thomas Adams, Mark Adamski, et. al. v. TCI of
Northern New Jersey, Inc. and the Tele-Communications, Inc.
Employee Stock Purchase Plan.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-64829).
10.47 Employee Stock Purchase Plan for Bargaining Unit Employees of TCI
of Northern New Jersey, Inc.*
Incorporated herein by reference to the
Tele-Communications, Inc. Registration Statement on Form
S-8 (Commission File No. 33-64831).
10.48 Amended and Restated Agreement of Limited Partnership of MajorCo,
L.P., dated as of January 31, 1996, among Sprint Spectrum,
L.P., TCI Network Services, Comcast Telephony Services and Cox
Telephony Partnership.
Second Amended and Restated Joint Venture Formation Agreement,
dated as of January 31, 1996, by and between Sprint
Corporation, Tele-Communications, Inc., Comcast Corporation
and Cox Communications, Inc.
Parents Agreement, dated as of January 31, 1996, by
Tele-Communications, Inc. and Sprint Corporation.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated February 9, 1996 (Commission File
No. 0-20421).
(continued)
<PAGE> 358
10- Material contracts, continued:
10.49 Amended and Restated Stock Purchase Agreement, dated as of April
25, 1995, by and among Eduardo Eurnekian, stockholders of
shares of the Common Stock of Cablevision S.A., Televisora
Belgrano S.A., Construred S.A., Univent's S.A., and TCI
International Holdings, Inc.
Amended and Restated Stockholders Agreement, dated April 25, 1995,
between Eduardo Eurnekian and TCI International Holdings, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated May 4, 1995, as amended by
Form 8-K/A (Commission File No. 0-20421).
10.50 Parents Agreement, dated as of July 24, 1995, among Viacom, Inc.,
Tele-Communications, Inc. and TCI Communications, Inc.
Subscription Agreement, dated as of July 24, 1995, among Viacom
International, Inc., Tele-Communications, Inc. and TCI
Communications, Inc.
Implementation Agreement, dated as of July 24, 1995, between
Viacom International, Inc. and Viacom International Services,
Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated July 26, 1995 (Commission File
No. 0-20421).
10.51 Agreement and Plan of Merger, dated as of January 27, 1994, by and
among Tele-Communications, Inc., Liberty Media Corporation,
TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty
Mergeco, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated February 15, 1994 (Commission
File No. 0-5550).
10.52 Amendment No. 1, dated as of March 30, 1994, to Agreement and Plan
of Merger, dated as of January 27, 1994, by and among
Tele-Communications, Inc., Liberty Media Corporation,
TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty
Mergeco, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated April 6, 1994 (Commission File
No. 0-5550).
10.53 Amendment No. 2, dated as of August 4, 1994, to Agreement and Plan
of Merger, dated as of January 27, 1994, by and among
Tele-Communications, Inc., Liberty Media Corporation,
TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty
Mergeco, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K, dated August 18, 1994 (Commission
File No. 0-20421).
10.54 Agreement and Plan of Merger, dated as of August 8, 1994, among
Tele-Communications, Inc., TCI Communications, Inc. and
TeleCable Corporation Incorporated herein by reference to
Tele-Communications, Inc.'s Current Report on Form 8-K, dated
August 18, 1994 (Commission File No. 0-20421).
10.55 Agreement of Purchase and Sale of Partnership Interest, dated as
of January 31, 1996, among Halcyon Communications, Inc., ECP
Holdings, Inc. and Fisher Communications Associates, L.L.C.
(continued)
<PAGE> 359
10- Material contracts, continued:
10.56 Consent and Amendment of Amended Agreement of Partnership for
Halcyon Communications Partners, dated as of January 31, 1996,
by and among Halcyon Communications, Inc., ECP Holdings, Inc.
and Fisher Communications Associates, L.L.C.
10.57 Assignment and Assumption Agreement, made as of January 31, 1996,
between ECP Holdings, Inc. and Fisher Communications
Associates, L.L.C.
10.58 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and ECP Holdings, Inc.
10.59 Agreement of Purchase and Sale of Partnership Interests, dated as
of January 31, 1996, among Halcyon Communications, Inc.,
American Televenture of Minersville, Inc., TCI Cablevision of
Nevada, Inc., TCI Cablevision of Utah, Inc., TEMPO Cable, Inc.
and Fisher Communications Associates, L.L.C.
10.60 Consent and First Amendment of Amended and Restated Agreement of
Limited Partnership for Halcyon Communications Limited
Partnership, dated as of January 31, 1996, by and among
Halcyon Communications, Inc., American Televenture of
Minersville, Inc., TCI Cablevision of Nevada, Inc., TCI
Cablevision of Utah, Inc., TEMPO Cable, Inc. and Fisher
Communications Associates, L.L.C.
10.61 Assignment and Assumption Agreement, made as of January 31, 1996,
between TCI Cablevision of Utah, Inc. and Fisher
Communications Associates, L.L.C.
10.62 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and TCI Cablevision of Utah,
Inc.
10.63 Assignment and Assumption Agreement, made as of January 31, 1996,
between TCI Cablevision of Nevada, Inc. and Fisher
Communications Associates, L.L.C.
10.64 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and TCI Cablevision of Nevada,
Inc.
10.65 Assignment and Assumption Agreement, made as of January 31, 1996,
between American Televenture of Minersville, Inc. and Fisher
Communications Associates, L.L.C.
10.66 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and American Televenture of
Minersville, Inc.
10.67 Assignment and Assumption Agreement, made as of January 31, 1996,
between TEMPO Cable, Inc. and Fisher Communications
Associates, L.L.C.
10.68 Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C. and TEMPO Cable, Inc.
(continued)
<PAGE> 360
21- Subsidiaries of Tele-Communications, Inc.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of KPMG
27- Financial data schedule
*Constitutes management contract or compensatory arrangement.
<PAGE> 1
Exhibit 3.1
State of Delaware
PAGE 1
Office of the Secretary of State
---------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"TCI/LIBERTY HOLDING COMPANY". CHANGING ITS NAME FROM "TCI/LIBERTY HOLDING
COMPANY" TO "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE FOURTH DAY
OF AUGUST, A.D. 1994, AT 4:14 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ EDWARD J. FREEL
Edward J. Freel, Secretary of State
AUTHENTICATION: 7202362
DATE: 08-04-94
2371729 8100
944145668
<PAGE> 2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:14 PM 08/04/1994
944145668 -- 2371729
RESTATED CERTIFICATE OF INCORPORATION
OF
TCI/LIBERTY HOLDING COMPANY
---------------------
TCI/LIBERTY HOLDING COMPANY, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
(1) The name of the Corporation is TCI/Liberty Holding Company. The
original Certificate of Incorporation of the Corporation was filed on
January 24, 1994. The name under which the Corporation was originally
incorporated is TCI/Liberty Holding Company.
(2) This Restated Certificate of Incorporation restates and amends the
Certificate of Incorporation of the Corporation.
(3) Pursuant to Section 242 and 245 of the General Corporation Law of
the State of Delaware, the text of the Certificate of Incorporation is
hereby restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Tele-Communications, Inc.
ARTICLE II
REGISTERED OFFICE
The location of the registered office of the Corporation in the State of
Delaware is the office of The Prentice-Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Dover, Kent County, Delaware 19904, and the name
of the registered agent at such address is The Prentice-Hall Corporation System,
Inc.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
<PAGE> 3
ARTICLE IV
AUTHORIZED STOCK
The total number of shares of capital stock which the Corporation shall
have authority to issue is one billion two hundred sixty two million three
hundred seventy five thousand ninety six (1,262,375,096) shares, of which one
billion two hundred fifty million (1,250,000,000) shares shall be common stock
("Common Stock") and twelve million three hundred seventy five thousand ninety
six (12,375,096) shares shall be preferred stock ("Preferred Stock"). Said
shares of Common Stock and Preferred Stock shall be divided into the following
classes:
(a) One billion one hundred million (1,100,000,000) shares of Common Stock
shall be of a class designated as Class A Common Stock with a par value of $1.00
per share;
(b) One hundred fifty million (150,000,000) shares of Common Stock shall be
of class designated as Class B Common Stock with a par value of $1.00 per share;
(c) Seven hundred thousand (700,000) shares of Preferred Stock shall be of
a class designated as Class A Preferred Stock with a par value of $.01 per
share;
(d) One million six hundred seventy five thousand and ninety six
(1,675,096) shares of Preferred Stock shall be of a class designated as Class B
6% Cumulative Redeemable Exchangeable Junior Preferred Stock with a par value of
$.01 per share; and
(e) Ten million (10,000,000) shares of Preferred Stock shall be of a class
designated as Series Preferred Stock with a par value of $.01 per share.
The description of the Common Stock and the Preferred Stock of the
Corporation, and the relative rights, preferences and limitations thereof, or
the method of fixing and establishing the same, are as hereinafter in this
Article IV set forth:
-2-
<PAGE> 4
SECTION A
CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in this Section A
shall have, for all purposes of this Article IV, the meanings herein specified:
"Board of Directors" shall mean the Board of Directors of the Corporation
and, unless the context indicates otherwise, shall also mean, to the extent
permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Corporation with respect to such matter.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, New York, are not required
to be open.
"capital stock" shall mean any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) corporate stock.
"Certificate" shall mean this Restated Certificate of Incorporation of the
Corporation, as it may from time to time hereafter be amended or restated.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or agency or political subdivision thereof, or other entity, whether
acting in an individual fiduciary or other capacity.
SECTION B
CLASS A PREFERRED STOCK
The Class A Preferred Stock shall have the following preferences,
limitations and relative rights:
1. Certain Definitions. Unless the context otherwise requires, the terms
defined in this paragraph 1 shall have, for all purposes of this Section B, the
meanings herein specified:
"Class A Common Stock" shall mean the Class A Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
A Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class A Common Stock, such capital
stock to which a holder of Class A Common Stock shall be entitled upon the
occurrence of such event.
-3-
<PAGE> 5
"Class A Preferred Stock" shall mean the Class A Preferred Stock, par value
$.01 per share, of the Corporation.
"Class B Common Stock" shall mean the Class B Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
B Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class B Common Stock, such capital
stock to which a holder of Class B Common Stock shall be entitled upon the
occurrence of such event.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock, par value $.01 per share, of the
Corporation.
"Dividend Payment Date" shall mean, for any Dividend Period, the last day
of such Dividend Period which shall be the first day of March of each year,
commencing with March 1, 1995, or the next succeeding Business Day if any such
day is not a Business Day.
"Dividend Period" shall mean the period from the Issue Date to and
including the first Dividend Payment Date and each annual period between
consecutive Dividend Payment Dates.
"Issue Date" shall mean the date on which shares of Class A Preferred Stock
are first issued.
"Junior Stock" shall mean (i) the Class A Common Stock, (ii) the Class B
Common Stock, (iii) the Class B Preferred Stock, (iv) any other class or series
of capital stock, whether now existing or hereafter created, of the Corporation,
other than (A) the Class A Preferred Stock, (B) any class or series of Parity
Stock (except to the extent provided under clause (v) hereof) and (C) any Senior
Stock, and (v) any class or series of Parity Stock to the extent that it ranks
junior to the Class A Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation, as the case may be. For purposes of clause
(v) above, a class or series of Parity Stock shall rank junior to the Class A
Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation if the holders of shares of Class A Preferred Stock shall be
entitled to dividend payment, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or series.
"Liquidation Preference" measured per share of the Class A Preferred Stock
as of any date in question (the "Determination Date") shall mean an amount equal
to the sum of (a) the Stated Liquidation Value of such share, plus (b) an amount
equal to all dividends accrued on such share which pursuant to paragraph 2(b) of
this Section B have been added to and remain a part of the Liquidation
Preference as of the Determination Date, plus (c) for purposes of determining
the amounts payable pursuant to paragraph 3 and paragraph 4 of this Section B
and the definition of Redemption Price, an amount equal to all unpaid dividends
accrued on such share during the period from the immediately preceding Dividend
Payment Date (or the Issue Date if the
-4-
<PAGE> 6
Determination Date is on or prior to the first Dividend Payment Date) through
and including the Determination Date, and, in the case of clauses (b) and (c)
hereof, whether or not such unpaid dividends have been earned or declared or
there are any unrestricted funds of the Corporation legally available for the
payment of dividends. In connection with the determination of the Liquidation
Preference of a share of Class A Preferred Stock upon redemption or upon
liquidation, dissolution or winding up of the Corporation, the Determination
Date shall be the applicable date of redemption or the date of distribution of
amounts payable to stockholders in connection with any such liquidation,
dissolution or winding up.
"Parity Stock" shall mean any class or series of capital stock, whether now
existing or hereafter created, of the Corporation ranking on a parity basis with
the Class A Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation. Capital stock of any class or series shall rank on a
parity as to dividend rights, rights of redemption or rights on liquidation with
the Class A Preferred Stock, whether or not the dividend rates, dividend payment
dates, redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different from those of the Class A Preferred
Stock, if the holders of shares of such class or series shall be entitled to
dividend payments, payments on redemption or payments of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as the case may
be, in proportion to their respective accumulated and accrued and unpaid
dividends, redemption prices or liquidations prices, respectively, without
preference or priority, one over the other, as between the holders of shares of
such class or series and the holders of Class A Preferred Stock. No class or
series of capital stock that ranks junior to the Class A Preferred Stock as to
rights on liquidation shall rank or be deemed to rank on a parity basis with the
Class A Preferred Stock as to dividend rights or rights of redemption, unless
the instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
"Record Date" for the dividends payable on any Dividend Payment Date means
the fifteenth day of the month preceding the month during which such Dividend
Payment Date shall occur, or if any such day is not a Business Day, then on the
next preceding Business Day, as and if designated by the Board of Directors.
"Redemption Date" as to any share of Class A Preferred Stock shall mean the
date fixed for redemption of such share pursuant to paragraph 4(a) or (b) of
this Section B, provided that no such date will be a Redemption Date unless the
applicable Redemption Price is actually paid in full on such date.
"Redemption Price" as to any share of Class A Preferred Stock which is to
be redeemed on any Redemption Date shall mean the Liquidation Preference thereof
on such Redemption Date.
"Senior Stock" shall mean any class or series of capital stock, whether now
existing or hereafter created, of the Corporation ranking prior to the Class A
Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation. Capital stock of any class or series shall rank prior to the Class
A Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation if the holders of shares of such class or series shall be entitled
to dividend
-5-
<PAGE> 7
payments, payments on redemption or payments of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of Class A Preferred Stock.
No class or series of capital stock that ranks on a parity basis with or junior
to the Class A Preferred Stock as to rights on liquidation shall rank or be
deemed to rank prior to the Class A Preferred Stock as to dividend rights or
rights of redemption, notwithstanding that the dividend rate, dividend payment
dates, sinking fund provisions, if any, or mandatory redemption provisions
thereof are different from those of the Class A Preferred Stock, unless the
instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
"Special Record Date" has the meaning ascribed to such term in paragraph
2(b) of this Section B.
"Stated Liquidation Value" of a share of Class A Preferred Stock means
$322.84.
"Subsidiary" of any Person shall mean (i) a corporation a majority of the
capital stock of which, having voting power under ordinary circumstances to
elect directors, is at the time, directly or indirectly, owned by such Person
and/or one or more Subsidiaries of such Person and (ii) any other Person (other
than a corporation) in which such Person and/or one or more Subsidiaries of such
Person, directly or indirectly, has (x) a majority ownership interest or (y) the
power to elect or direct the election of a majority of the members of the
governing body of such first-named Person.
2. Dividends.
(a) DIVIDEND RIGHTS; DIVIDEND PAYMENT DATES. Subject to the prior
preferences and other rights of any Senior Stock and the provisions of paragraph
5 hereof, the holders of Class A Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of unrestricted funds
legally available therefor, cumulative dividends, in preference to dividends on
any Junior Stock, that shall accrue on each share of Class A Preferred Stock at
the rate of 9 3/8% per annum of the Stated Liquidation Value of such share from
the Issue Date to and including the date on which the Liquidation Preference of
such share is made available (whether on liquidation, dissolution, or winding up
of the Corporation or, in the case of paragraph 4 of this Section B, upon the
applicable Redemption Date). Accrued dividends on the Class A Preferred Stock
will be payable, as provided in paragraph 2(c) below, annually on each Dividend
Payment Date to the holders of record of the Class A Preferred Stock as of the
close of business on the Record Date for such dividend payment. Dividends shall
be fully cumulative and shall accrue (without interest or compounding) on a
daily basis without regard to the occurrence of a Dividend Payment Date and
whether or not such dividends are declared and whether or not there are any
unrestricted funds of the Corporation legally available for the payment of
dividends. The amount of dividends "accrued" as of the first Dividend Payment
Date and as of any date that is not a Dividend Payment Date shall be calculated
on the basis of the foregoing rate per annum for the actual number of days
elapsed from the Issue Date (in the case of the first Dividend Payment Date and
any date prior to the first Dividend Payment Date) or the
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last preceding Dividend Payment Date (in the case of any other date) to and
including the date as of which such determination is to be made, based on a 365-
or 366-day year, as the case may be.
(b) SPECIAL RECORD DATE. On each Dividend Payment Date, all dividends that
have accrued on each share of Class A Preferred Stock during the immediately
preceding Dividend Period shall, to the extent not paid as provided in paragraph
2(c) below on such Dividend Payment Date for any reason (whether or not such
unpaid dividends have been earned or declared or there are any unrestricted
funds of the Corporation legally available for the payment of dividends), be
added to the Liquidation Preference of such share and will remain a part thereof
until such dividends are paid as provided in paragraph 2(c) below. No interest
or additional dividends will accrue or be payable with respect to any dividend
payment on the Class A Preferred Stock that may be in arrears or with respect to
that portion of any other payment on the Class A Preferred Stock that is in
arrears which consists of accumulated or accrued and unpaid dividends. Such
accumulated or accrued and unpaid dividends may be declared and paid at any time
(subject to the rights of any Senior Stock and, if applicable, to the concurrent
satisfaction of any dividend arrearages then existing with respect to any Parity
Stock which ranks on a parity basis with the Class A Preferred Stock as to the
payment of dividends) without reference to any regular Dividend Payment Date, to
holders of record as of the close of business on such date, not more than 45
days nor less than 10 days preceding the payment date thereof, as may be fixed
by the Board of Directors (the "Special Record Date"). Notice of each Special
Record Date shall be given, not more than 45 days nor less than 10 days prior
thereto, to the holders of record of the shares of Class A Preferred Stock.
(c) METHOD OF PAYMENT. All dividends payable with respect to the shares of
Class A Preferred Stock shall be declared and paid in cash. All dividends paid
with respect to the shares of Class A Preferred Stock pursuant to this paragraph
2 shall be paid pro rata to all the holders of shares of Class A Preferred Stock
outstanding on the applicable Record Date or Special Record Date, as the case
may be.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which
any Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Class A Preferred Stock shall be entitled to receive from the assets of the
Corporation available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an amount in cash
or property at its fair market value, as determined by the Board of Directors in
good faith, or a combination thereof, per share, equal to the Liquidation
Preference of a share of Class A Preferred Stock as of the date of payment or
distribution, which payment or distribution shall be made pari passu with any
such payment or distribution made to the holders of any Parity Stock ranking on
a parity basis with the Class A Preferred Stock with respect to distributions
upon liquidation, dissolution or winding up of the Corporation. The holders of
Class A Preferred Stock shall be entitled to no other or further distribution of
or participation in any remaining assets of the Corporation after receiving the
Liquidation Preference per share. If, upon distribution of the
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Corporation's assets in liquidation, dissolution or winding up, the assets of
the Corporation to be distributed among the holders of the Class A Preferred
Stock and to all holders of any Parity Stock ranking on a parity basis with the
Class A Preferred Stock with respect to distributions upon liquidation,
dissolution or winding up shall be insufficient to permit payment in full to
such holders of the respective preferential amounts to which they are entitled,
then the entire assets of the Corporation to be distributed to holders of the
Class A Preferred Stock and such Parity Stock shall be distributed pro rata to
such holders based upon the aggregate of the full preferential amounts to which
the shares of Class A Preferred Stock and such Parity Stock would otherwise
respectively be entitled. Neither the consolidation or merger of the Corporation
with or into any other corporation or corporations nor the sale, transfer or
lease of all or substantially all of the assets of the Corporation shall itself
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this paragraph 3. Notice of the liquidation, dissolution
or winding up of the Corporation shall be given, not less than 20 days prior to
the date on which such liquidation, dissolution or winding up is expected to
take place or become effective, to the holders or record of the shares of Class
A Preferred Stock.
4. Redemption.
(a) MANDATORY REDEMPTION. Subject to the rights of any Senior Stock and the
provisions of paragraph 5 of this Section B, the Corporation shall redeem, out
of funds legally available therefor, on the twelfth anniversary of the Issue
Date (or, if such day is not a Business Day, on the first Business Day
thereafter), all shares of Class A Preferred Stock remaining outstanding at the
Redemption Price on the Redemption Date. If the funds of the Corporation legally
available for redemption of shares of the Class A Preferred Stock or Parity
Stock then required to be redeemed are insufficient to redeem the total number
of such shares remaining outstanding, those funds which are legally available
shall, subject to the rights of any Senior Stock and the provisions of paragraph
5, be used to redeem the maximum possible number of shares of Class A Preferred
Stock and Parity Stock. Subject to the rights of any Senior Stock and the
provisions of paragraph 5 hereof, at any time and from time to time thereafter
when additional funds of the Corporation are legally available for such purpose,
such funds shall immediately be used to redeem the shares of Class A Preferred
Stock and Parity Stock which are required to be redeemed that the Corporation
failed to redeem until the balance of such shares has been redeemed. The
selection of shares to be redeemed pursuant to the two immediately preceding
sentences shall be made on a pro rata basis as among the different classes or
series and as among the holders of shares of a particular class or series.
(b) OPTIONAL REDEMPTION. Subject to the rights of any Senior Stock and the
provisions of paragraph 5 of this Section B, the shares of Class A Preferred
Stock may be redeemed, at the option of the Corporation by the action of the
Board of Directors, in whole or from time to time in part, on any Business Day
occurring after the Issue Date, at the Redemption Price on the Redemption Date.
If less than all outstanding shares of Class A Preferred Stock are to be
redeemed on any Redemption Date, the shares of Class A Preferred Stock to be
redeemed shall be chosen pro rata among all holders of Class A Preferred Stock.
The Corporation shall not be required to register a transfer of (i) any shares
of Class A Preferred Stock for a period of 15
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days next preceding any selection of shares of Class A Preferred Stock to be
redeemed or (ii) any shares of Class A Preferred Stock selected or called for
redemption.
(c) NOTICE OF REDEMPTION. Notice of redemption shall be given by or on
behalf of the Corporation, not more than 60 days nor less than 30 days prior to
the Redemption Date, to the holders of record of the shares of Class A Preferred
Stock to be redeemed; but no defect in such notice or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Class A Preferred Stock. In addition to any information required by law or by
the applicable rules of any national securities exchange or national interdealer
quotation system on which the Class A preferred Stock may be listed or admitted
to trading or quoted, such notice shall set forth the Redemption Price, the
Redemption Date, the number of shares to be redeemed and the place at which the
shares called for redemption will, upon presentation and surrender of the stock
certificates evidencing such shares, be redeemed. In the event that fewer than
the total number of shares of Class A Preferred Stock represented by a
certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(d) DEPOSIT OF REDEMPTION PRICE. If notice of any redemption by the
Corporation pursuant to this paragraph 4 shall have been given as provided in
paragraph 4(c) above, and if on or before the Redemption Date specified in such
notice an amount in cash sufficient to redeem in full on the Redemption Date at
the Redemption Price all shares of Class A Preferred Stock called for redemption
shall have been set apart so as to be available for such purpose and only for
such purpose, then effective as of the close of business on the Redemption Date,
the shares of Class A Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been surrendered for cancellation,
shall no longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all rights with respect to such
shares shall forthwith cease and terminate, except the right of the holders
thereof to receive the Redemption Price of such shares, without interest, upon
the surrender of certificates representing the same.
(e) STATUS OF REDEEMED SHARES. All shares of Class A Preferred Stock
redeemed, exchanged, purchased or otherwise acquired by the Corporation shall be
retired and shall not be reissued.
5. Limitations on Dividends and Redemptions.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends for all
prior dividends periods on any Parity Stock which by the terms of the instrument
creating or evidencing such Parity Stock is entitled to the payment of such
cumulative dividends prior to the redemption, exchange, purchase or other
acquisition of the Class A Preferred Stock, and until full cumulative dividends
on such Parity Stock for all prior dividend periods are paid, or declared and
the consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, neither the Corporation nor any
Subsidiary thereof shall redeem, exchange, purchase or
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otherwise acquire any shares of Class A Preferred Stock, Parity Stock or Junior
Stock, or set aside any money or assets for any such purpose, pursuant to
paragraph 4 hereof, a sinking fund or otherwise, unless all then outstanding
shares of Class A Preferred Stock, of such Parity Stock and of any other class
of series of Parity Stock that by the terms of the instrument creating or
evidencing such Parity Stock is required to be redeemed under such circumstances
are redeemed or exchanged pursuant to the terms hereof and thereof.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, neither the Corporation nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Class A Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 4 hereof, a
sinking fund or otherwise, unless all then outstanding shares of Class A
Preferred Stock and of any other class or series of Parity Stock that by the
terms of the instrument creating or evidencing such Parity Stock is required to
be redeemed under such circumstances are redeemed or exchanged pursuant to the
terms hereof and thereof.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside for such purpose
and no other purpose, the Corporation shall not declare or pay any dividend on
or make any distribution with respect to any Junior Stock or Parity Stock or set
aside any money or assets for any such purpose, except that the Corporation may
declare and pay a dividend on any Parity Stock ranking on a parity basis with
the Class A Preferred Stock with respect to the right to receive dividend
payments, contemporaneously with the declaration and payment of a dividend on
the Class A Preferred Stock, provided that such dividends are declared and paid
pro rata so that the amount of dividends declared and paid per share of the
Class A Preferred Stock and such Parity Stock shall in all cases bear to each
other the same ratio that accumulated and accrued and unpaid dividends per share
on the Class A Preferred Stock and such Parity Stock bear to each other.
If the Corporation shall fail to redeem on any date fixed for redemption or
exchange pursuant to paragraph 4 hereof any shares of Class A Preferred Stock
called for redemption on such date, and until such shares are redeemed in full,
the Corporation shall not redeem or exchange any Parity Stock or Junior Stock or
declare or pay any dividend on or make any distribution with respect to any
Junior Stock, or set aside any money or assets for any such purpose, and neither
the Corporation nor any Subsidiary thereof shall purchase or otherwise acquire
any Class A Preferred Stock, Parity Stock or Junior Stock, or set aside any
money or assets for any such purpose.
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Neither the Corporation nor any Subsidiary thereof shall redeem, exchange,
purchase or otherwise acquire any Parity Stock or Junior Stock, or set aside any
money or assets for any such purpose, if after giving effect to such redemption,
exchange, purchase or other acquisition, the amount (as determined by the Board
of Directors in good faith) that would be available for distribution to the
holders of the Class A Preferred Stock upon liquidation, dissolution or winding
up of the Corporation if such liquidation, dissolution or winding up were to
occur on the date fixed for such redemption, exchange, purchase or other
acquisition of such Parity Stock or Junior Stock would be less than the
aggregate Liquidation Preference as of such date of all shares of Class A
Preferred Stock then outstanding.
Nothing contained in the first, fourth or fifth paragraph of this paragraph
5 shall prevent (i) the payment of dividends on any Junior Stock solely in
shares of Junior Stock or the redemption, purchase or other acquisition of
Junior Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first and fifth
paragraphs hereof) through the application of the proceeds from the sale of,
shares of Junior Stock; or (ii) the payment of dividends on any Parity Stock
solely in shares of Parity Stock and/or Junior Stock or the redemption,
exchange, purchase or other acquisition of Class A Preferred Stock or Parity
Stock solely in exchange for (together with a cash adjustment for fractional
shares, if any), or (but only in the case of the first and fifth paragraphs
hereof) through the application of the proceeds from the sale of, shares of
Parity Stock and/or Junior Stock.
The provisions of the first paragraph of this paragraph 5 are for the sole
benefit of the holders of Class A Preferred Stock and Parity Stock having the
terms described therein and accordingly, at any time when there are no shares of
any such class or series of Parity Stock outstanding or if the holders of each
such class or series of Parity Stock have, by such vote or consent of the
holders thereof as may be provided for in the instrument creating or evidencing
such class or series, waived in whole or in part the benefit of such provisions
(either generally or in the specific instance), then the provisions of the first
paragraph of this paragraph 5 shall not (to the extent waived, in the case of
any partial waiver) restrict the redemption, exchange, purchase or other
acquisition of any shares of Class A Preferred Stock, Parity Stock or Junior
Stock. All other provisions of this paragraph 5 are for the sole benefit of the
holders of Class A Preferred Stock and accordingly, if the holders of shares of
Class A Preferred Stock shall have waived (as provided in paragraph 7 of this
Section B) in whole or in part the benefit of the applicable provisions, either
generally or in the specific instance, such provision shall not (to the extent
of such waiver, in the case of a partial waiver) restrict the redemption,
exchange, purchase or other acquisition of, or declaration, payment or making of
any dividends or distributions on the Class A Preferred Stock, any Parity Stock
or any Junior Stock.
6. Voting.
(a) VOTING RIGHTS. The holders of Class A Preferred Stock shall have no
voting rights whatsoever, except as required by law and except for the voting
rights described in this paragraph 6; provided, however, that the number of
authorized shares of Class A Preferred Stock may be increased or decreased (but
not below the number of shares of Class A preferred Stock then outstanding) by
the affirmative vote of the holders of at least 66 2/3 of the total voting
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power of the then outstanding Voting Securities (as defined in Section C of
Article V of this Certificate), voting together as a single class as provided in
Article IX of this Certificate. Without limiting the generality of the
foregoing, no vote or consent of the holders of Class A Preferred Stock shall be
required for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation or designation of any class or series of Senior
Stock, Parity Stock or Junior Stock, or (c) any amendment to this Certificate
that would increase the number of authorized shares of Preferred Stock or the
number of authorized shares of Class A Preferred Stock or that would decrease
the number of authorized shares of Class A Preferred Stock or the number of
authorized shares of Class A Preferred Stock (but not below the number of shares
of Preferred Stock or Class A Preferred Stock, as the case may be, then
outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Class A Preferred Stock shall
have the right to vote at any annual or special meeting of stockholders for the
purpose of electing directors. Each share of Class A Preferred Stock shall have
one vote for such purpose, and shall vote as a single class with any other class
or series of capital stock of the Corporation entitled to vote in any general
election of directors, unless the instrument creating or evidencing such class
or series of capital stock otherwise expressly provides.
7. Waiver.
Any provision of this Section B which, for the benefit of the holders of
Class A Preferred Stock, prohibits, limits or restricts actions by the
Corporation, or imposes obligations on the Corporation, may be waived in whole
or in part, or the application of all or any part of such provision in any
particular circumstance or generally may be waived, in each case with the
consent of the holders of at least a majority of the number of shares of Class A
Preferred Stock then outstanding (or such greater percentage thereof as may be
required by applicable law or any applicable rules of any national securities
exchange or national interdealer quotation system), either in writing or writing
or by vote at an annual meeting or a meeting called for such purpose at which
the holders of Class A Preferred Stock shall vote as a separate class.
8. Method of Giving Notices.
Any notice required or permitted by the provisions of this Section B to be
given to the holders of share of Class A Preferred Stock shall be deemed duly
given if deposited in the United States mail, first class mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation or supplied by him in writing to the Corporation for the purpose
of such notice.
9. Exclusion of Other Rights.
Except as may otherwise be required by law and except for the equitable
rights and remedies which may otherwise be available to holders of Class A
Preferred Stock, the shares of Class A Preferred Stock shall not have any
designations, preferences, limitations or relative rights other than those
specifically set forth in this Certificate.
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10. Heading of Subdivisions.
The headings of the various subdivisions of this Section are for
convenience of reference only and shall not affect the interpretation of any of
the provisions of this Section.
SECTION C
CLASS B 6% CUMULATIVE REDEEMABLE EXCHANGEABLE
JUNIOR PREFERRED STOCK
The Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
shall have the following preferences, limitations and relative rights:
1. Certain Definitions. Unless the context otherwise requires, the terms
defined in this paragraph 1 shall have, for all purposes of this Section C, the
meanings herein specified:
"Average Market Price" as of any Record Date or Special Record Date for a
dividend payment declared by the Board of Directors means the average of the
daily Current Market Prices of the Class A Common Stock for a period of 20
consecutive trading days ending on the tenth trading day prior to such Record
Date or Special Record Date, appropriately adjusted to take into account any
stock dividends on the Class A Common Stock, or any stock splits,
reclassifications or combinations of the Class A Common Stock, during the period
following the first of such 20 trading days and ending on the last full trading
day immediately preceding the Dividend Payment Date or other date fixed for the
payment of dividends to which such Record Date or Special Record Date, as the
case may be, relates.
"Class A Common Stock" shall mean the Class A Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
A Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class A Common Stock, such capital
stock to which a holder of Class A Common Stock shall be entitled upon the
occurrence of such event.
"Class A Preferred Stock" shall mean the Class A Preferred Stock, par value
$.01 per share, of the Corporation.
"Class B Common Stock" shall mean the Class B Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
B Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class B Common Stock, such capital
stock to which a holder of Class B Common Stock shall be entitled upon the
occurrence of such event.
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"Class B Preferred Stock" shall mean the Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock, par value $.01 per share, of the
Corporation.
"Current Market Price" of a share of Class A Common Stock on any day means
the last reported per share sale price (or, if no sale price is reported, the
average of the high and low bid prices) of the Class A Common Stock on such day
on the Nasdaq National Market or as quoted by the National Quotation Bureau
Incorporated, or if the Class A Common Stock is listed on an exchange, on the
principal exchange on which the Class A Common Stock is listed. In the event
that no such quotation is available for any day, the Board of Directors shall be
entitled to determine the Current Market Price on the basis of such quotations
as it considers appropriate.
"Dividend Payment Date" shall mean, for any Dividend Period, the last day
of such Dividend Period which shall be the first day of March of each year,
commencing with March 1, 995, or the next succeeding Business Day if any such
day is not a Business Day.
"Dividend Period" shall mean the period from the Initial Accrual Date to
and including the first Dividend Payment Date and each annual period between
consecutive Dividend Payment Dates.
"Initial Accrual Date", when used with respect to the shares of Class B
Preferred Stock, shall mean March 2, 1994.
"Issue Date" shall mean the date on which shares of Class B Preferred Stock
are first issued.
"Junior Exchange Notes" shall mean junior subordinated debt securities of
the Corporation of a series to be issued under the Junior Exchange Note
Indenture in exchange for shares of Class B Preferred Stock as contemplated by
paragraphs 4(d) and (f) of this Section C.
"Junior Exchange Note Indenture" shall mean an indenture substantially in
the form annexed as Exhibit 4.5 to the S-4 Registration Statement, as
supplemented by a supplemental indenture substantially in the form annexed as
Exhibit 1 to such form of indenture, as said indenture and supplemental
indenture may be amended or further supplemented from time to time (subject to
any applicable restrictions of this Certificate) and, unless the context
indicates otherwise, shall include the form and terms of the Junior Exchange
Notes established as contemplated thereunder.
"Junior Stock" shall mean (i) the Class A Common Stock, (ii) the Class B
Common Stock, (iii) any other class or series of capital stock, whether now
existing or hereafter created, of the Corporation, other than (A) the Class B
Preferred Stock, (B) the Class A Preferred Stock, (C) any class or series of
Parity Stock (except to the extent provided under clause (iv) hereof) and (D)
any Senior Stock, and (iv) any class or series of Parity Stock to the extent
that it ranks junior to the Class B Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation, as the case may be. For purposes
of clause (iv) above, a class or series of Parity
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Stock shall rank junior to the Class B Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation if the holders of shares of Class
B Preferred Stock shall be entitled to dividend payments, payments on redemption
or payments of amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in preference or priority to the holders
of shares of such class or series.
"Liquidation Preference" measured per share of the Class B Preferred Stock
as of any date in question (the "Determination Date") shall mean an amount equal
to the sum of (a) the Stated Liquidation Value of such share, plus (b) an amount
equal to all dividends accrued on such share which pursuant to paragraph 2(b) of
this Section C have been added to and remain a part of the Liquidation
Preference as of the Determination Date, plus (c) for purposes of determining
the amounts payable pursuant to paragraph 3 and paragraph 4 of this Section C
and the definition of Redemption Price, an amount equal to all unpaid dividends
accrued on such share during the period from the immediately preceding Dividend
Payment Date (or the Initial Accrual Date if the Determination Date is on or
prior to the first Dividend Payment Date) through and including the
Determination Date, and, in the case of clauses (b) and (c) hereof, whether or
not such unpaid dividends have been earned or declared or there are any
unrestricted funds of the Corporation legally available for the payment of
dividends. In connection with the determination of the Liquidation Preference of
a share of Class B Preferred Stock upon redemption or upon liquidation,
dissolution or winding up of the Corporation, the Determination Date shall be
the applicable date of redemption or the date of distribution of amounts payable
to stockholders in connection with any such liquidation, dissolution or winding
up.
"1933 Act" shall mean the Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations promulgated
thereunder.
"Optional Exchange Date" shall mean the date fixed for the exchange of
shares of Class Be Preferred Stock pursuant to paragraph 4(d) of this Section C,
provided that such date will not be the Optional Exchange Date unless on or
before such date all conditions to the issuance and delivery of Junior Exchange
Notes upon such exchange contained in paragraph 4(f) of this Section C have been
satisfied.
"Parity Stock" shall mean any class or series of capital stock, whether now
existing or hereafter created, of the Corporation ranking on a parity basis with
the Class B Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation. Capital stock of any class or series shall rank on a
parity as to dividend rights, rights of redemption or rights on liquidation with
the Class B Preferred Stock, whether or not the dividend rates, dividend payment
dates, redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different from those of the Class B Preferred
Stock, if the holders of shares of such class or series shall be entitled to
dividend payments, payments on redemption or payments of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as the case may
be, in proportion to their respective accumulated and accrued and unpaid
dividends, redemption prices or liquidations prices, respectively, without
preference or priority, one over the other, as between the holders of shares of
such class or series and the holders of Class B Preferred Stock. No class or
series of capital stock that ranks junior to the Class B Preferred
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<PAGE> 17
Stock as to rights on liquidation shall rank or be deemed to rank on a parity
basis with the Class B Preferred Stock as to dividend rights of redemption,
unless the instrument creating or evidencing such class or series of capital
stock otherwise expressly provides.
"Record Date" for the dividends payable on any Dividend Payment Date means
the fifteen day of the month preceding the month during which such Dividend
Payment Date shall occur, or if any such day is not a Business Day, then on the
next preceding Business Day, as and if designated by the Board of Directors.
"Redemption Agent" has the meaning ascribed to such term in paragraph 4(c)
of this Section C.
"Redemption Date" as to any share of Class B Preferred Stock shall mean the
date fixed for redemption of such share pursuant to paragraph 4(a) of this
Section C, provided that no such date will be a Redemption Date unless the
applicable Redemption Price is actually paid in full on such date or the
consideration sufficient for the payment thereof, and for no purpose, has been
set apart or deposited in trust as contemplated by paragraph 4(c) of this
Section C.
"Redemption Price" as to any share of Class B Preferred Stock which is to
be redeemed on any Redemption Date shall mean the Liquidation Preference thereof
on such Redemption Date.
"S-4 Registration Statement" shall mean the Corporation's Registration
Statement on Form S-4 (Reg. No. 33-54263) filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 and declared effective on June
28, 1994.
"Senior Stock" shall mean (i) the Class A Preferred Stock and (ii) any
other class or series of capital stock, whether now existing or hereafter
created, of the Corporation ranking prior to the Class B Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation. Capital stock of
any class or series shall rank prior to the Class B Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders of
shares of such class or series shall be entitled to dividend payments, payments
on redemption or payments of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of Class B Preferred Stock. No class or series of
capital stock that ranks on a parity basis with or junior to the Class B
Preferred Stock as to rights on liquidation shall rank or be deemed to rank
prior to the Class B Preferred Stock as to dividend rights or rights of
redemption, notwithstanding that the dividend rate, dividend payment dates,
sinking fund provisions, if any, or mandatory redemption provisions thereof are
different from those of the Class B Preferred Stock, unless the instrument
creating or evidencing such class or series of capital stock otherwise expressly
provides.
"Special Record Date" has the meaning ascribed to such term in paragraph
2(b) of this Section C.
"Stated Liquidation Value" of a share of Class B Preferred Stock means
$100.
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"Subsidiary" of any Person shall mean (i) a corporation a majority of the
capital stock of which, having voting power under ordinary circumstances to
elect directors, is at the time, directly or indirectly, owned by such Person
and/or one or more Subsidiaries of such Person and (ii) any other Person (other
than a corporation) in which such Person and/or one or more Subsidiaries of such
Person, directly or indirectly, has (x) a majority ownership interest or (y) the
power to elect or direct the election of a majority of the members of the
governing body of such first-named Person.
"TIA" shall mean the Trust Indenture Act of 1939 (or any successor statute)
as in effect on the date the Junior Exchange Note Indenture is or is required to
be qualified thereunder in accordance with paragraph 4 of this Section C.
2. Dividends.
(a) DIVIDEND RIGHTS; DIVIDEND PAYMENT DATES. Subject to the prior
preferences and other rights of any Senior Stock and the provisions of paragraph
5 hereof, the holders of Class B Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of unrestricted funds
legally available therefor, cumulative dividends, in preference to dividends on
any Junior Stock, that shall accrue on each share of Class B Preferred Stock at
the rate of 6.0% per annum of the Stated Liquidation Value of such share from
the Initial Accrual Date to and including the date on which the Liquidation
Preference of such share is made available (whether on liquidation, dissolution,
or winding up of the Corporation or, in the case of paragraph 4 of this Section
C, upon the applicable Redemption Date or Optional Exchange Date. Accrued
dividends on the Class B Preferred Stock will be payable, as provided in
paragraph 2(c) below, annually on each Dividend Payment Date to the holders of
record of the Class B Preferred Stock as of the close of business on the Record
Date for such dividend payment. Dividends shall be fully cumulative and shall
accrue (without interest or compounding) on a daily basis without regard to the
occurrence of a Dividend Payment Date and whether or not such dividends are
declared and whether or not there are any unrestricted funds of the Corporation
legally available for the payment of dividends. The amount of dividends
"accrued" as of the first Dividend Payment Date and as of any date that is not a
Dividend Payment Date shall be calculated on the basis of the foregoing rate per
annum for the actual number of days elapsed from the Initial Accrual Date (in
the case of the first Dividend Payment Date and any date prior to the first
Dividend Payment Date) or the last preceding Dividend Payment Date (in the case
of any other date) to and including the date as of which such determination is
to be made, based on a 365- or 366-day year, as the case may be.
(b) SPECIAL RECORD DATE. On each Dividend Payment Date, all dividends that
have accrued on each share of Class B Preferred Stock during the immediately
preceding Dividend Period shall, to the extent not paid as provided in paragraph
2(c) below on such Dividend Payment Date for any reason (whether or not such
unpaid dividends have been earned or declared or there are any unrestricted
funds of the Corporation legally available for the payment of dividends), be
added to the Liquidation Preference of such share and will remain a part thereof
until such dividends are paid as provided in paragraph 2(c) below. No interest
or additional dividends will accrue or be payable (whether in cash, shares of
Class A Common Stock
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or otherwise) with respect to any dividend payment on the Class B Preferred
Stock that may be in arrears or with respect to that portion of any other
payment on the Class B Preferred Stock that is in arrears which consists of
accumulated or accrued and unpaid dividends. Such accumulated or accrued and
unpaid dividends may be declared and paid at any time (subject to the rights of
any Senior Stock and, if applicable, to the concurrent satisfaction of any
dividend arrearages then existing with respect to any Parity Stock which ranks
on a parity basis with the Class B Preferred Stock as to the payment of
dividends) without reference to any regular Dividend Payment Date, to holders of
record as of the close of business on such date, not more than 45 days nor less
than 10 days preceding the payment date thereof, as may be fixed by the Board of
Directors (the "Special Record Date"). Notice of each Special Record Date shall
be given, not more than 45 days nor less than 10 days prior thereto, to the
holders of record of the shares of Class B Preferred Stock.
(c) METHOD OF PAYMENT. All dividends payable with respect to the shares of
Class B Preferred Stock may be declared and paid, in the sole discretion of the
Board of Directors, in cash, through the issuance of shares of Class A Common
Stock or in any combination of the foregoing, provided, however, that if on any
Dividend Payment Date or other date fixed for the payment of dividends declared
by the Board of Directors, the Corporation pursuant to applicable law or
otherwise is prohibited or restricted from paying in cash the full amount of
dividends declared payable to the holders of Class B Preferred Stock on such
date, then the portion of such dividends the payment of which in cash is so
prohibited or restricted (or such greater portion of such dividends as the Board
of Directors may determine) shall be paid through the issuance of shares of
Class A Common Stock. If any dividend payment declared by the Board of Directors
with respect to the shares of Class B Preferred Stock is to be paid in whole or
in part through the issuance of shares of Class A Common Stock, the amount of
such dividend payment to be paid per share of Class B Preferred Stock in shares
of Class A Common Stock (the "Stock Dividend Amount") shall be satisfied and
paid by the delivery to the holders of record of such shares of Class B
Preferred Stock on the Record Date or Special Record Date, as the case may be,
for such dividend payment, of a number of shares of Class A Common Stock
determined by dividing the Stock Dividend Amount by the Average Market Price of
a share of Class A Common Stock as of such Record Date or Special Record Date.
The Corporation shall not be required to issue any fractional share of Class A
Common Stock to which any holder of Class B Preferred Stock may become entitled
pursuant to this paragraph 2(c). The Board of Directors may elect to settle any
final fraction of a share of Class A Common Stock which a holder of one or more
shares of Class B Preferred Stock would otherwise be entitled to receive
pursuant to this paragraph 2(c) by having the Corporation pay to such holder, in
lieu of issuing such fractional share, cash in an amount (rounded upward to the
nearest whole cent) equal to the same fraction of the Average Market Price of a
share of Class A Common Stock as of the Record Date or Special Record Date, as
the case may be, for the dividend payment with respect to which such shares of
Class A Common Stock are being delivered. Such election, if made, shall be made
as to all holders of Class B Preferred Stock who would otherwise be entitled to
receive a fractional share of Class A Common Stock on the Dividend Payment Date
or other date fixed for the payment of such dividend.
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<PAGE> 20
All dividends paid with respect to the shares of Class B Preferred Stock
pursuant to this paragraph 2 shall be paid pro rata to all the holders of shares
of Class B Preferred Stock outstanding on the applicable Record Date or Special
Record Date, as the case may be.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which
any Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Class B Preferred Stock shall be entitled to receive from the assets of the
Corporation available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an amount in cash
or property at its fair market value, as determined by the Board of Directors in
good faith, or a combination thereof, per share, equal to the Liquidation
Preference of a share of Class B Preferred Stock of the date of payment or
distribution, which payment or distribution shall be made pari passu with any
such payment or distribution made to the holders of any Parity Stock ranking on
a parity basis with the Class B Preferred Stock with respect to distributions
upon liquidation, dissolution or winding up of the Corporation. The holders of
Class B Preferred Stock shall be entitled to no other or further distribution of
or participation in any remaining assets of the Corporation's assets in
liquidation, dissolution or winding up, the assets of the Corporation to be
distributed among the holders of the Class B Preferred Stock and to all holders
of any Parity Stock ranking on a parity basis with the Class B Preferred Stock
with respect to distributions upon liquidation, dissolution or winding up shall
be insufficient to permit payment in full to such holders of the respective
preferential amounts to which they are entitled, then the entire assets of the
Corporation to be distributed to holders of the Class B Preferred Stock and such
Parity Stock shall be distributed pro rata to such holders based upon the
aggregate of the full preferential amounts to which the shares of Class B
Preferred Stock and such Parity Stock would otherwise respectively be entitled.
Neither the consolidation or merger of the Corporation with or into any other
corporation or corporations nor the sale, transfer or lease of all or
substantially all of the assets of the Corporation shall itself be deemed to be
a liquidation, dissolution or winding up of the Corporation within the meaning
of this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be given, not less than 20 days prior to the date on which
such liquidation, dissolution or winding up is expected to take place or become
effective, to the holders of record of the shares of Class B Preferred Stock.
4. Redemption or Exchange.
(a) OPTIONAL REDEMPTION. Subject to the rights of any Senior Stock and the
provisions of paragraph 5 of this Section C, the shares of Class B Preferred
Stock may be redeemed, at the option of the Corporation by the action of the
Board of Directors, in whole or from time to time in part, on any Business Day
occurring after the Issue Date, at the Redemption Price on the Redemption Date.
If less than all outstanding shares of Class B Preferred Stock are to be
redeemed on any Redemption Date, the shares of Class B Preferred Stock to be
redeemed shall be chosen by lot or by such other method as the Board of
Directors
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considers fair and appropriate (and which complies with the requirements, if
any, of any national securities exchange or national interdealer quotation
system on which the Class B Preferred Stock may be listed or admitted to trading
or quoted). The Corporation shall not be required to register a transfer of (i)
any shares of Class B Preferred Stock for a period of 15 days next preceding any
selection of shares of Class B Preferred Stock to be redeemed or (ii) any shares
of Class B Preferred Stock selected or called for redemption.
(b) NOTICE OF REDEMPTION. Notice of redemption shall be given by or on
behalf of the Corporation, not more than 60 days nor less than 30 days prior to
the Redemption Date, to the holders of record of the shares of Class B Preferred
Stock to be redeemed; but no defect in such notice or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Class B Preferred Stock. In addition to any information required by law or by
the applicable rules of any national securities exchange or national interdealer
quotation system on which the Class B Preferred Stock may be listed or admitted
to trading or quoted, such notice shall set forth the Redemption Price, the
Redemption Date, the number of shares to be redeemed and the place at which the
shares called for redemption will, upon presentation and surrender of the stock
certificates evidencing such shares, be redeemed, and if the Corporation has
elected to deposit the Redemption Price with a Redemption Agent in accordance
with paragraph 4(c) below, shall state the name and address of the Redemption
Agent and the date on which such deposit was or will be made. In the event that
fewer than the total number of shares of Class B Preferred Stock represented by
a certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(c) DEPOSIT OF REDEMPTION PRICE. If notice of any redemption by the
Corporation pursuant to this paragraph 4 shall have been given as provided in
paragraph 4(b) above, and if on or before the Redemption Date specified in such
notice an amount in cash sufficient to redeem in full on the Redemption Date at
the Redemption Price all shares of Class B Preferred Stock called for redemption
shall have been set apart so as to be available for such purpose and only for
such purpose, then effective as of the close of business on the Redemption Date,
the shares of Class B Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been surrendered for cancellation,
shall no longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all rights with respect to such
shares shall forthwith cease and terminate, except the right of the holders
thereof to receive the Redemption Price of such shares, without interest, upon
the surrender of certificates representing the same.
At its election, the Corporation on or prior to the Redemption Date (but no
more than 60 days prior to the Redemption Date) may deposit immediately
available funds in an amount equal to the aggregate Redemption Price of the
shares of Class B Preferred Stock called for redemption in trust for the holders
thereof with any bank or trust company organized under the laws of the United
States of America or any state thereof having capital, undivided profits and
surplus aggregating at least $50 million (the "Redemption Agent"), with
irrevocable instructions and authority to the Redemption Agent, on behalf and at
the expense of the Corporation, to mail the notice of redemption as soon as
practicable after receipt of such
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irrevocable instructions (or to complete such mailing previously commenced, if
it has not already been completed) and to pay, on and after the Redemption Date
or prior thereto, the Redemption Price of the shares of Class B Preferred Stock
to be redeemed to their respective holders upon the surrender of the
certificates therefor. A deposit made in compliance with the immediately
preceding sentence shall be deemed to constitute full payment for the shares of
Class B Preferred Stock to be redeemed and from and after the close of business
on the date of such deposit (although prior to the Redemption Date), the shares
of Class B Preferred Stock to be redeemed shall no longer be deemed outstanding
and the holders thereof shall cease to be stockholders with respect to such
shares and shall have no rights with respect to such shares except the right of
the holders thereof to receive the Redemption Price of such shares (calculated
through the Redemption Date), without interest, upon surrender of the
certificates therefor. Any interest accrued on the funds so deposited shall be
paid to the Corporation from time to time. Any funds so deposited with the
Redemption Agent which shall remain unclaimed by the holders of such shares of
Class B Preferred Stock at the end of one year after the Redemption Date shall
be returned by the Redemption Agent to the Corporation, after which repayment
the holders of such shares of Class B Preferred Stock called for redemption
shall look only to the Corporation for the payment thereof, without interest,
unless an applicable escheat or abandoned property law designates another
Person.
(d) OPTIONAL EXCHANGE FOR JUNIOR EXCHANGE NOTES. Subject to the rights of
any Senior Stock and the provisions of paragraph 5 of this Section C, the shares
of Class B Preferred Stock may be exchanged, out of funds legally available
therefor, at the option of the Corporation by action of the Board of Directors,
in whole but not in part, on any Business Day occurring after the Issue Date,
for Junior Exchange Notes. Each holder of outstanding shares of Class B
Preferred Stock shall be entitled to receive, in exchange for his shares of
Class B Preferred Stock pursuant to this paragraph 4(d), newly issued Junior
Exchange Notes of a series authorized and established for the purpose of such
exchange, the aggregate principal amount of which shall be equal to the
aggregate Liquidation Preference on the Optional Exchange Date of the shares of
Class B Preferred Stock so exchanged by such holder, provided that the Junior
Exchange Notes will be issuable only in principal amounts of $100 or any
integral multiple thereof and an adjustment will be paid by the Corporation, in
cash or by its check, in an amount equal to any excess principal amount
otherwise issuable.
(e) NOTICE OF EXCHANGE. Notice of the Corporation's election to exercise
its optional exchange right pursuant to paragraph 4(d) (an "Optional Exchange
Notice") shall be given by or on behalf of the Corporation, not more than 60
days nor less than 30 days prior to the Optional Exchange Date, to the holders
of record of the shares of Class B Preferred Stock; but no defect in such notice
or in the mailing thereof shall affect the validity of the proceedings for the
exchange of any shares of Class B Preferred Stock. In addition to any
information required by law or by the applicable rules of any national
securities exchange or national interdealer quotation system on which the shares
of Class B Preferred Stock may be listed or admitted to trading or quoted, such
notice shall set forth the Optional Exchange Date, the place at which shares of
Class B Preferred Stock will, upon presentation and surrender of the stock
certificates evidencing such shares, be exchanged for Junior Exchange Notes, and
the material terms (or, as to the rate per annum at which the Junior Exchange
Notes will bear
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interest, and, if applicable, as to any other of such terms, the method of
determining the same), consistent with the provisions hereof and of the Junior
Exchange Note Indenture, of the series of Junior Exchange Notes to be issued
upon such exchange.
Upon determination of the rate per annum at which the Junior Exchange Notes
to be issued upon such exchange will bear interest and any other terms of such
Junior Exchange Notes, the method of determining which was set forth in the
Optional Exchange Notice, the Corporation shall promptly give notice of such
determination to the holders of shares of Class B Preferred Stock, which notice
may be given by (or, if required by applicable law, shall be given by)
publication of such determination in a daily newspaper of national circulation.
(f) CONDITIONS TO EXCHANGE FOR JUNIOR EXCHANGE NOTE. Prior to the giving of
an Optional Exchange Notice, the Corporation shall execute and deliver, with a
bank or trust company selected by the Corporation, the Junior Exchange Note
Indenture, substantially in the form annexed to the S-4 Registration Statement
with only such changes as (i) are necessary to comply with law, any applicable
rules of any securities exchange or usage, (ii) are requested by the Corporation
and which would make any provisions of the Junior Exchange Note Indenture, or of
the Junior Exchange Notes of the series established thereunder for the purpose
of such exchange, more restrictive to the Corporation or beneficial to the
holders of the Junior Exchange Notes of such series, as determined by the Board
of Directors in good faith, such determination to be conclusive, (iii) are
requested by the Corporation to add to the covenants and agreements of the
Corporation contained in the Junior Exchange Note Indenture or to remove any
right or power therein reserved to or conferred upon the Corporation, (iv) are
requested by the Corporation in the event of any amendment to this Certificate
that effects a change in the terms of the Class B Preferred Stock, to conform
(as nearly as may be taking into account the differences between debt securities
and equity securities) the provisions of the Junior Exchange Note Indenture
(including, without limitation, the provisions relating to the establishment of
the terms of any series of Junior Exchange Notes authorized to be issued
thereunder) to the terms of the Class B Preferred Stock as so changed, (v) are
consented to by the holders of at least a majority of the number of shares of
Class B Preferred Stock then outstanding (or such greater percentage thereof as
may be required by applicable law or any applicable rules of any national
securities exchange or national interdealer quotation system), either in writing
or by vote at a meeting called for that purpose at which the holders of Class B
Preferred Stock shall vote as a separate class, or (vi) would not adversely
affect the rights of the holders of Junior Exchange Notes of such series
issuable thereunder.
Prior to the Optional Exchange Date, the Corporation shall (i) establish in
the manner contemplated by the Junior Exchange Note Indenture the terms of the
series of Junior Exchange Notes to be issued thereunder on the Optional Exchange
Date, and (ii) file at the office of the exchange agent for the Class B
Preferred Stock (or with the books of the Corporation if there is no exchange
agent) an opinion of counsel to the effect that (A) the Junior Exchange Note
Indenture has been duly authorized, executed and delivered by the Corporation,
and constitutes a valid and binding instrument enforceable against the
Corporation in accordance with its terms (subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
and
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except that the Corporation may be prohibited from making payments on the Junior
Exchange Notes of the series to be issued if and to the extent it would at the
time be prohibited from redeeming capital stock and subject to other
qualifications as are then customarily contained in opinions of counsel
experienced in such matters); (B) that the Junior Exchange Notes of such series
have been duly authorized and, when executed and authenticated in accordance
with the provisions of the Junior Exchange Note Indenture and delivered in
exchange for the shares of Class B Preferred Stock, will constitute valid and
binding obligations of the Corporation entitled to the benefits of the Junior
Exchange Note Indenture (subject as aforesaid); (C) that the issuance and
delivery of the Junior Exchange Notes of such series in exchange for the shares
of Class B Preferred Stock will not violate the laws of the state of
incorporation of the Corporation; and (D) that (x) the Junior Exchange Note
Indenture has been duly qualified under the TIA (or that such qualification is
not necessary) and (y) that the issuance and delivery of the Junior Exchange
Notes of such series in exchange for the shares of Class B Preferred Stock is
exempt from the registration or qualification requirements of the 1933 Act and
applicable state securities laws or, if no such exemption is available, that the
Junior Exchange Notes of such series have been duly registered or qualified for
such exchange under the 1933 Act and such applicable state securities laws.
(g) METHOD OF EXCHANGE. If an Optional Exchange Notice shall have been
given by the Corporation pursuant to paragraph 4(e) of this Section C, and if
the Corporation shall have satisfied the conditions to such exchange contained
in paragraph 4(f), then effective as of the close of business on the Optional
Exchange Date, the shares of Class B Preferred Stock, notwithstanding that any
certificate therefor shall not have been surrendered for cancellation, shall no
longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all rights with respect to such
shares shall forthwith cease and terminate, except the right of the holders
thereof upon the surrender of certificates evidencing the same to receive the
Junior Exchange Notes exchangeable therefor, and the cash adjustment, if any, in
lieu of Junior Exchange Notes in other than authorized denominations, without
interest.
Before any holder of shares of Class B Preferred Stock called for exchange
shall be entitled to receive the Junior Exchange Notes deliverable in exchange
therefor, such holder shall surrender the certificate or certificates
representing the shares to be exchanged at such place as the Corporation shall
have specified in the Optional Exchange Notice, which certificate or
certificates shall be duly endorsed to the Corporation or in blank (or
accompanied by duly executed instruments to transfer to the Corporation or in
blank) with signatures guaranteed (such endorsements or instruments of transfer
to be in form satisfactory to the Corporation), together with a written notice
to the Corporation, specifying the name or names (with addresses) in which the
Junior Exchange Notes are to be issued. If any transfer is involved in the
issuance or delivery of any Junior Exchange Notes in a name other than that of
the registered holder of the shares of Class B Preferred Stock surrendered for
exchange, such holder shall also deliver to the Corporation a sum sufficient for
all taxes payable in respect of such transfer or evidence satisfactory to the
Corporation that such taxes have been paid. Except as provided in the
immediately preceding sentence, the Corporation shall pay any issue, stamp or
other similar tax in respect of such issuance or delivery.
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As soon as practicable after the later of the Optional Exchange Date and
the proper surrender of the certificate(s) for such shares of Class B Preferred
Stock as provided above, the Corporation shall deliver at the place specified in
the Optional Exchange Notice, to the holder of the shares of Class B Preferred
Stock so surrendered, or to his nominee(s) or, subject to compliance with
applicable law, transferee(s), a Junior Exchange Note or Notes (of authorized
denominations) in the principal amount to which he shall be entitled upon such
exchange, together with a check in the amount of any cash adjustment as provided
in paragraph 4(d). The Person in whose name any Junior Exchange Note is issued
upon an exchange pursuant to paragraph 4(d) shall be treated for all purposes as
the holder of record thereof as of the close of business on the Optional
Exchange Date.
(h) STATUS OF REDEEMED SHARES. All shares of Class B Preferred Stock
redeemed, exchanged, purchased or otherwise acquired by the Corporation shall be
retired and shall not be reissued.
5. Limitations on Dividends and Redemptions.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends for all
prior dividend periods on any Parity Stock which by the terms of the instrument
creating or evidencing such Parity Stock is entitled to the payment of such
cumulative dividends prior to the redemption, exchange, purchase or other
acquisition of the Class B Preferred Stock, and until full cumulative dividends
on such Parity Stock for all prior dividend periods are paid, or declared and
the consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, neither the Corporation nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Class B Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 4 hereof, a
sinking fund or otherwise, unless all then outstanding shares of Class B
Preferred Stock, of such Parity Stock and of any other class of series of Parity
Stock that by the terms of the instrument creating or evidencing such Parity
Stock is required to be redeemed under such circumstances are redeemed or
exchanged pursuant to the terms hereof and thereof.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class B Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Class B Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, neither the Corporation nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Class B Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 4 hereof, a
sinking fund or otherwise, unless all then outstanding shares of Class B
Preferred Stock and of any other class or series of Parity Stock that by the
terms of the instrument creating or evidencing such Parity Stock is required to
be redeemed under such circumstances are redeemed or exchanged pursuant to the
terms hereof and thereof.
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If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class B Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until the full cumulative
dividends on the Class B Preferred Stock for all Dividend Periods ending on or
before the immediately preceding Dividend Payment Date are paid, or declared and
the consideration sufficient to pay the same in full is set aside for such
purpose and no other purpose, the Corporation shall not declare or pay any
dividend on or make any distribution with respect to any Junior Stock or Parity
Stock or set aside any money or assets for any such purpose, except that the
Corporation may declare and pay a dividend on any Parity Stock ranking on a
parity basis with the Class B Preferred Stock with respect to the right to
receive dividend payments, contemporaneously with the declaration and payment of
a dividend on the Class B Preferred Stock, provided that such dividends are
declared and paid pro rata so that the amount of dividends declared and paid per
share of the Class B Preferred Stock and such Parity Stock shall in all cases
bear to each other the same ratio that accumulated and accrued and unpaid
dividends per share on the Class B Preferred Stock and such Parity Stock bear to
each other.
If the Corporation shall fail to redeem or exchange on any date fixed for
redemption or exchange pursuant to paragraph 4(a) or 4(d) hereof any shares of
Class B Preferred Stock called for redemption or exchange on such date, and
until such shares are redeemed or exchanged in full, the Corporation shall not
redeem or exchange any Parity Stock or Junior Stock or declare or pay any
dividend on or make any distribution with respect to any Junior Stock, or set
aside any money or assets for any such purpose, and neither the Corporation nor
any Subsidiary thereof shall purchase or otherwise acquire any Class B Preferred
Stock, Parity Stock or Junior Stock, or set aside any money or assets for any
such purpose.
Neither the Corporation nor any Subsidiary thereof shall redeem, exchange,
purchase or otherwise acquire any Parity Stock or Junior Stock, or set aside any
money or assets for any such purpose, if after giving effect to such redemption,
exchange, purchase or other acquisition, the amount (as determined by the Board
or Directors in good faith) that would be available for distribution to the
holders of the Class B Preferred Stock upon liquidation, dissolution or winding
up of the Corporation if such liquidation, dissolution or winding up were to
occur on the date fixed for such redemption, exchange, purchase or other
acquisition of such Parity Stock or Junior Stock would be less than the
aggregate Liquidation Preference as of such date of all shares of Class B
Preferred Stock then outstanding.
Nothing contained in the first, fourth or fifth paragraph of this paragraph
5 shall prevent (i) the payment of dividends on any Junior Stock solely in
shares of Junior Stock or the redemption, purchase or other acquisition of
Junior Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first and fifth
paragraphs hereof) through the application of the proceeds from the sale of,
shares of Junior Stock; or (ii) the payment of dividends on any Parity Stock
solely in shares of Parity Stock and/or Junior Stock or the redemption,
exchange, purchase or other acquisition of Class B Preferred Stock or Parity
Stock solely in exchange for (together with a cash adjustment for fractional
shares, if any), or (but only in the case of the first and fifth paragraphs
hereof) through the application of the proceeds from the sale of, shares of
Parity Stock and/or Junior Stock.
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The provisions of the first paragraph of this paragraph 5 are for the sole
benefit of the holders of Class B Preferred Stock and Parity Stock having the
terms described therein and accordingly, at any time when there are no shares of
any such class or series of Parity Stock outstanding or if the holders of each
such class or series of Parity Stock have, by such vote or consent of the
holders thereof as may be provided for in the instrument creating or evidencing
such class or series, waived in whole or in part the benefit of such provisions
(either generally or in the specific instance), then the provisions of the first
paragraph of this paragraph 5 shall not (to the extent waived, in the case of
any partial waiver) restrict the redemption, exchange, purchase or other
acquisition of any shares of Class B Preferred Stock, Parity Stock or Junior
Stock. All other provisions of this paragraph 5 are for the sole benefit of the
holders of Class B Preferred Stock and accordingly, if the holders of shares of
Class B Preferred Stock shall have waived (as provided in paragraph 7 of this
Section C) in whole or in part the benefit of the applicable provisions, either
generally or in the specific instance, such provision shall not (to the extent
of such waiver, in the case of a partial waiver) restrict the redemption,
exchange, purchase or other acquisition of, or declaration, payment or making of
any dividends or distributions on the Class B Preferred Stock, any Parity Stock
or any Junior Stock.
6. Voting
(a) VOTING RIGHTS. The holders of Class B preferred Stock shall have no
voting rights whatsoever, except as required by law and except for the voting
rights described in this paragraph 6; provided, however, that the number of
authorized shares of Class B Preferred Stock may be increased or decreased (but
not below the number of shares of Class B Preferred Stock then outstanding) by
the affirmative vote of the holders of at least 66 2/3% of the total voting
power of the then outstanding Voting Securities (as defined in Section C of
Article V of this Certificate), voting together as a single class as provided in
Article IX of this Certificate. Without limiting the generality of the
foregoing, no vote or consent of the holders of Class B Preferred Stock shall be
required for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation or designation of any class or series of Senior
Stock, Parity Stock or Junior Stock, or (c) any amendment to this Certificate
that would increase the number of authorized shares of Preferred Stock or the
number of authorized shares of Class B Preferred Stock or that would decrease
the number of authorized shares of Preferred Stock or the number of authorized
shares of Class B Preferred Stock (but not below the number of shares of
Preferred Stock or Class B Preferred Stock, as the case may be, then
outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Class B Preferred Stock shall
have the right to vote at any annual or special meeting of stockholders for the
purpose of electing directors. Each share of Class B Preferred Stock shall have
one vote for such purpose, and shall vote as a single class with any other class
or series of capital stock of the Corporation entitled to vote in any general
election of directors, unless the instrument creating or evidencing such class
or series of capital stock otherwise expressly provides.
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7. Waiver.
Any provision of this Section C which, for the benefit of the holders of
Class B Preferred Stock, prohibits, limits or restricts actions by the
Corporation, or imposes obligations on the Corporation, may be waived in
whole or in part, or the application of all or any part of such provision in any
particular circumstance or generally may be waived, in each case with the
consent of the holders of at least a majority of the number of shares of Class B
Preferred Stock then outstanding (or such greater percentage thereof as may be
required by applicable law or any applicable rules of any national securities
exchange or national interdealer quotation system), either in writing or by vote
at an annual meeting or a meeting called for such purpose at which the holders
of Class B Preferred Stock shall vote as a separate class.
8. Method of Giving Notices.
Any notice required or permitted by the provisions of this Section C to be
given to the holders of shares of Class B Preferred Stock shall be deemed duly
given if deposited in the United States mail, first class mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation or supplied by him in writing to the Corporation for the purpose
of such notice.
9. Exclusion of Other Rights.
Except as may otherwise be required by law and except for the equitable
rights and remedies which may otherwise be available to holders of Class B
Preferred Stock, the shares of Class B Preferred Stock shall not have any
designations, preferences, limitations or relative rights other than those
specifically set forth in this Certificate.
10. Heading of Subdivisions.
The headings of the various subdivisions of this Section C are for
convenience of reference only and shall not affect the interpretation of any of
the provisions of this Section C.
SECTION D
SERIES PREFERRED STOCK
The Series Preferred Stock may be issued, from time to time, in one or more
series, with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in a resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors. The Board of Directors, in such resolution or resolutions (a copy of
which shall be filed and recorded as required by law), is also expressly
authorized to fix:
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(i) the distinctive serial designations and the division of such
shares into series and the number of shares of a particular series, which
may be increased or decreased, but not below the number of shares thereof
then outstanding, by a certificate made, signed, filed and recorded as
required by law;
(ii) the annual dividend rate, if any, for the particular series, and
the date or dates from which dividends on all shares of such series shall
be cumulative, if dividends on stock of the particular series shall be
cumulative:
(iii) the redemption price or prices for the particular series:
(iv) the right, if any, of the holders of a particular series to
convert or exchange such stock into or for other classes of stock or
indebtedness of the Corporation, and the terms and conditions of such
conversion;
(v) the voting rights, if any, of the holders of a particular series;
and
(vi) the obligation, if any, of the Corporation to purchase and retire
and redeem shares of a particular series as a sinking fund or redemption or
purchase account, the terms thereof and the redemption price or prices per
share for such series redeemed pursuant to the sinking fund or redemption
account.
All shares of any one series of the Series Preferred Stock shall be alike
in every particular and all series shall rank equally and be identical in all
respects except insofar as they may vary with respect to the matters which the
Board of Directors is hereby expressly authorized to determine in the resolution
or resolutions providing for the issue of any series of the Series Preferred
Stock.
SECTION E
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Each share of the Class A Common Stock, par value $1.00 per share (the
"Class A Common Stock"), and each share of the Class B Preferred Stock, par
value $1.00 per share (the "Class B Common Stock"), of the Corporation shall,
except as otherwise provided in this Section E, be identical in all respects and
shall have equal rights and privileges.
1. Voting Rights.
Holders of Class A Common Stock shall be entitled to one vote for each
share of such stock held, and holders of Class B Preferred Stock shall be
entitled to ten votes for each share of such stock held, on all matters
presented to such stockholders. Except as may otherwise be required by the laws
of the State of Delaware or in the instrument creating or evidencing any class
or series of Preferred Stock the holders of shares of Class A Common Stock
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and the holders of shares of Class B Common Stock shall vote with the holders of
Preferred Stock, if any, as one class with respect to the election of directors
and with respect to all other matters to be voted on by stockholders of the
Corporation (including, without limitations, any proposed amendment to this
Certificate that would increase the number of authorized shares of Class A
Common Stock, of Class B Common Stock or of any class or series of Preferred
Stock or decrease the number of authorized shares of any such class or series of
stock (but not below the number of shares thereof then outstanding)), and no
separate vote or consent of the holders of shares of Class A Common Stock, the
holders of shares of Class B Common Stock or the holders of shares of Preferred
Stock shall be required for the approval of any such matter.
2. Conversion Rights.
Each share of Class B Common Stock shall be convertible, at the option of
the holder thereof, into one share of Class A Common Stock. Any such conversion
may be effected by any holder of Class B Common Stock by surrendering such
holder's certificate or certificates for the Class B Common Stock to be
converted, duly endorsed, at the office of the Corporation or any transfer agent
for the Class B Common Stock, together with a written notice to the Corporation
at such office that such holder elects to convert all or a specified number of
shares of Class B Common Stock represented by such certificate and stating the
name or names in which such holder desires the certificate or certificates for
Class A Common Stock to be issued. If so required by the Corporation, any
certificate for shares surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such shares or the duly authorized representative of such
holder. Promptly thereafter, the Corporation shall issue and deliver to such
holder or such holder's nominee or nominees, a certificate or certificates for
the number of shares of Class A Common Stock to which such holder shall be
entitled as herein provided. Such conversion shall be deemed to have been made
at the close of business on the date of receipt by the Corporation or any such
transfer agent of the certificate or certificates, notice and, if required,
instruments of transfer referred to above, and the person or persons entitled to
receive the Class A Common Stock issuable on such conversion shall be treated
for all purposes as the record holder or holders of such Class A Common Stock on
that date. A number of shares of Class A Common Stock equal to the number of
shares of Class B Common Stock outstanding from time to time shall be set aside
and reserved for issuance upon conversion of shares of Class B Common Stock.
Shares of Class B Common Stock that have been converted hereunder shall remain
treasury shares to be disposed of by resolution of the Board of Directors.
Shares of Class A Common Stock shall not be convertible into shares of Class B
Common Stock.
3. Dividends. Subject to paragraph 4 of this Section E, whenever a dividend
is paid to the holders of Class A Common Stock, the Corporation also shall pay
to the holders of Class B Common Stock a dividend per share at least equal to
the dividend per share paid to the holders of the Class A Common Stock. Subject
to paragraph 4 of this Section E, whenever a dividend is paid to the holders of
Class B Common Stock, the Corporation shall also pay to the holders of the Class
A Common Stock a dividend per share at least equal to the dividend per share
paid to the holders of the Class B Common Stock. Dividends shall be payable only
as and when declared by the Board of Directors.
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4. Share Distributions. If at any time a distribution on the Class A Common
Stock or Class B Common Stock is to be paid in Class A Common Stock, Class B
Common Stock or any other securities of the Corporation (hereinafter sometimes
called a "share distribution"), such share distribution may be declared and paid
only as follows:
(a) a share distribution consisting of Class A Common Stock to holders of
Class A Common Stock and Class B Common Stock, on an equal per share basis; or
to holders of Class A Common Stock only, but in such event there shall also be a
simultaneous share distribution to holders of Class B Common Stock consisting of
shares of Class B Common Stock on an equal per share basis:
(b) a share distribution consisting of Class B Common Stock to holders of
Class B Common Stock and Class A Common Stock, on an equal per share basis; or
to holders of Class B Common Stock only, but in such event there shall also be a
simultaneous share distribution to holders of Class A Common Stock consisting of
shares of Class A Common Stock on an equal per share basis; and
(c) a share distribution consisting of any class of securities of the
Corporation other than Common Stock, to the holders of Class A Common Stock and
the holders of Class B Common Stock on an equal per share basis.
The Corporation shall not reclassify, subdivide or combine one class of its
Common Stock without reclassifying, subdividing or combining the other class of
Common Stock, on an equal per share basis.
5. Liquidation and Mergers. Subject to the prior payment in full of the
preferential amounts to which any Preferred Stock is entitled, the holders of
Class A Common Stock and the holders of Class B Common Stock shall share
equally, on a share for share basis, in any distribution of the Corporation's
assets upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment or provisions for payment of the
debts and other liabilities of the Corporation. Neither the consolidation or
merger of the Corporation with or into any other corporation or corporations nor
the sale, transfer or lease of all or substantially all of the assets of the
Corporation shall itself be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this paragraph 5.
SECTION F
UNCLAIMED DIVIDENDS
Any and all right, title, interest and claim in or to any dividends
declared by the Corporation, whether in cash, stock or otherwise, which are
unclaimed for a period of four years after the close of business on the payment
date, shall be and be deemed extinguished and abandoned; and such unclaimed
dividends in the possession of the Corporation, its transfer agent
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or other agents or depositories, shall at such time become the absolute property
of the Corporation, free and clear of any and all claims of any Persons
whatsoever.
ARTICLE V
DIRECTORS
SECTION A
NUMBER OF DIRECTORS
The governing body of the Corporation shall be a Board of Directors.
Subject to any rights of the holders of any class or series of Preferred Stock
to elect additional directors, the number of directors shall not be less than
three (3) and the exact number of directors shall be fixed by the Board of
Directors by resolution. Election of directors need not be by written ballot.
SECTION B
CLASSIFICATION OF THE BOARD
Except as otherwise fixed by or pursuant to the provisions of Article IV
hereof relating to the rights of the holders of any class or series of Preferred
Stock to separately elect additional directors, which additional directors are
not required to be classified pursuant to the terms of such class or series of
Preferred Stock, the Board of Directors of the Corporation shall be divided into
three classes: Class I, Class II and Class III. Each class shall consist, as
nearly as possible, of a number of directors equal to one-third (33 1/3%) of the
then authorized number of members of the Board of Directors. The term of office
of the initial Class I directors shall expire at the annual meeting of
stockholders in 1995; the term of office of the initial Class II directors shall
expire at the annual meeting of stockholders in 1996; and term of office of the
initial Class III directors shall expire at the annual meeting of stockholders
in 1997. At each annual meeting of stockholders of the Corporation the
successors of that class of directors whose term expires at that meeting shall
be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election. The
directors of each class will hold office until their respective successors are
elected and qualified.
SECTION C
REMOVAL OF DIRECTORS
Subject to the rights of the holders of any class or series of Preferred
Stock, directors may be removed from office only for cause (as hereinafter
defined) upon the affirmative vote of the
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holders of at least 66 2/3% of the total voting power of the then outstanding
Voting Securities (as hereinafter defined), voting together as a single class.
Except as may otherwise to provided by law, "cause" for removal, for purposes of
this Section C, shall exist only if: (i) the director whose removal is proposed
has been convicted of a felony, or has been granted immunity to testify in an
action where another has been convicted of a felony, by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal; (ii)
such director has become mentally incompetent, whether or not so adjudicated,
which mental incompetence directly affects his ability as a director of the
Corporation, as determined by at least 66 2/3% of the members of the Board of
Directors then in office (other than such director); or (iii) such director's
actions or failure to act have been determined by at least 66 2/3% of the
members of the Board of Directors then in office (other than such director) to
be in derogation of the director's duties. The term "Voting Securities" shall
include the Class A Common Stock, the Class B Common Stock and any class or
series of Preferred Stock entitled to vote with the holders of Common Stock
generally upon all matters which may be submitted to a vote of stockholders at
any annual meeting or special meeting thereof.
SECTION D
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Subject to the rights of the holders of any class or series of Preferred
Stock, vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or other cause, and newly created directorships
resulting from any increase in the number of directors on the Board of
Directors, shall be filled by the affirmative vote of a majority of the
remaining directors then in office (even though less than a quorum) or by the
sole remaining director. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the vacancy occurred or to which the new directorship is
apportioned, and until such director's successor shall have been elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director, except as may be
provided in the terms of any class or series of Preferred Stock with respect to
any additional director elected by the holders of such class or series of
Preferred Stock.
SECTION E
LIMITATION ON LIABILITY AND INDEMNIFICATION
1. Limitation On Liability.
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the Corporation shall
not be liable to the Corporation or any of its stockholders for monetary damages
for breach of fiduciary duty as a director. Any repeal or modification of this
paragraph 1 shall be prospective only and shall not
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adversely affect any limitation, right or protection of a director of the
Corporation existing at the time of such repeal or modification.
2. Indemnification.
(a) RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. Such right of
indemnification shall inure whether or not the claim asserted is based on
matters which antedate the adoption of this Section E. The Corporation shall be
required to indemnify a person in connection with a proceeding (or part thereof)
initiated by such person only if the proceeding (or part thereof) was authorized
by the Board of Directors of the Corporation.
(b) PREPAYMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of expenses incurred
by a director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the director or officer to
repay all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this paragraph or
otherwise.
(c) CLAIMS. If a claim for indemnification or payment of expenses under
this paragraph is not paid in full within 60 days after a written claim therefor
has been received by the Corporation, the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification or payment of expenses under
applicable law.
(d) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
paragraph shall not be exclusive of any other rights which such person may or
hereafter acquire under any statute, provision of this Certificate, the Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
(e) OTHER INDEMNIFICATION. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit entity.
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3. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of this Section E
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
SECTION F
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than 75% of the members of the Board of Directors
then in office, is hereby expressly authorized and empowered to adopt, amend or
repeal any provision of the Bylaws of this Corporation.
ARTICLE VI
TERM
The term of existence of this Corporation shall be perpetual.
ARTICLE VII
STOCK NOT ASSESSABLE
The capital stock of this Corporation shall not be assessable. It shall be
issued as fully paid, and the private property of the stockholders shall not be
liable for the debts, obligations or liabilities of this Corporation. This
Certificate shall not be subject to amendment in this respect.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS
SECTION A
ANNUAL AND SPECIAL MEETINGS
Subject to the rights of the holders of any class or series of Preferred
Stock, stockholder action may be taken only at an annual or special meeting.
Except as otherwise provided in the
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terms of any class or series of Preferred Stock or unless otherwise prescribed
by law or by another provision of this Certificate, special meetings of the
stockholders of the Corporation, for any purpose or purposes, shall be called by
the Secretary of the Corporation (i) upon the written request of the holders of
not less than 66 2/3% of the total voting power of the outstanding Voting
Securities (as defined in Section C of Article V of this Certificate) or (ii) at
the request of at least 75% of the members of the Board of Directors then in
office.
SECTION B
ANNUAL AND SPECIAL MEETINGS
Except as otherwise provided in the terms of any class or series of
Preferred Stock, no action required to be taken or which may be taken at any
annual meeting or special meeting of stockholders may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
is specifically denied.
ARTICLE IX
ACTIONS REQUIRING SUPERMAJORITY STOCKHOLDER VOTE
Subject to the rights of the holders of any class or series of Preferred
Stock, the affirmative vote of the holders of at least 66 2/3% of the total
voting power of the then outstanding Voting Securities (as defined in Section C
of Article V of this Certificate), voting together as a single class at a
meeting specifically called for such purpose, shall be required in order for the
Corporation to take any action to authorize:
(a) the amendment, alteration or repeal of any provision of this
Certificate or the addition or insertion of other provisions herein;
(b) the adoption, amendment or repeal of any provision of the Bylaws of the
Corporation; provided, however, that this clause (b) shall not apply to, and no
vote of the stockholders of the Corporation shall be required to authorize, the
adoption, amendment or repeal of any provision of the Bylaws of the Corporation
by the Board of Directors in accordance with the power conferred upon it
pursuant to Section F of Article V of this Certificate;
(c) the merger or consolidation of this Corporation with or into any other
corporation; provided, however, that this clause (c) shall not apply to any
merger or consolidation (i) as to which the laws of the State of Delaware, as
then in effect, do not require the consent of this Corporation's stockholders,
or (ii) which at least 75% of the members of the Board of Directors then in
office have approved;
(d) the sale, lease or exchange of all, or substantially all, of the
property and assets of the Corporation; or
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(e) the dissolution of the Corporation.
All rights at any time conferred upon the stockholders of the Corporation
pursuant to this Certificate are granted subject to the provisions of this
Article IX.
# # # #
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IN WITNESS WHEREOF, the undersigned has signed this Restated Certificate of
Incorporation this 4th DAY OF August, 1994.
TCI/LIBERTY HOLDING COMPANY
By: /s/ Brendan R. Clouston
Brendan R. Clouston
Title: Executive Vice President
ATTEST:
By: /s/ Stephen M. Brett
Stephen M. Brett
Title: Secretary
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<PAGE> 39
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
--------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE FOURTH
DAY OF AUGUST, A.D. 1994, AT 4:18 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ EDWARD J. FREEL
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION:
7202383
DATE: 08-04-94
<PAGE> 40
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
--------------------
SETTING FORTH A COPY OF A RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED
AS "CONVERTIBLE PREFERRED STOCK,
SERIES C" ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
--------------------
The undersigned Executive Vice President of Tele-Commumcations, Inc.,
a Delaware corporation (the "Corporation"), hereby certifies that the Board of
Directors duly adopted the following resolutions creating a series of preferred
stock designated as "Convertible Preferred Stock, SERIES C":
"BE IT RESOLVED, that, pursuant to authority expressly granted by the
provisions of the Restated Certificate of Incorporation of this Corporation,
the Board of Directors hereby creates and authorizes the issuance of a series
of preferred stock, par value $1.00 per share, of this Corporation, to consist
of 80,000 shares, and hereby fixes the designations, dividend rights, voting
powers, rights on liquidation and other preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereof of the shares of such series (in addition
to the designations, preferences and relative, participating, limitations or
restrictions thereof set forth in the Restated Certificate of Incorporation
that are applicable to preferred stock of all series) as follows:
1. Designation. The designation of the series of preferred stock,
par value $1.00 per share, of this Corporation authorized hereby is
"Convertible Preferred Stock, Series C" (the "Convertible Preferred Stock").
2. Certain Definitions. Unless the context otherwise requires,
the terms defined in this Section 2 shall have the meanings herein specified:
Affiliate: As defined in Section 7(b).
<PAGE> 41
Board of Directors: The Board of Directors of this Corporation and any
authorized committee thereof.
Capital Stock: Any and all shares, interests, participations or other
equivalents (however designated) of corporate stock of this Corporation.
Class A Common Stock: The Class A Common Stock, par value $1.00 per
share, of this Corporation as such exists on the date of this Certificate of
Designations, and Capital Stock of any other class into which such Class A
Common Stock may thereafter have been changed.
Class B Common Stock: The Class B Common Stock, par value $1.00 per
share, of this Corporation as such exists on the date of this Certificate of
Designations, and Capital Stock of any other class into which such Class B
Common Stock may thereafter have been changed.
Conversion Rate: As defined in Section 5(b).
Convertible Preferred Holder: As defined in Section 7(a).
Convertible Securities: Securities, other than the Class B Common
Stock, that are convertible into Class A Common Stock.
Debt Instrument: Any bond, debenture, note, indenture, guarantee or
other instrument or agreement evidencing any Indebtedness, whether existing
at the Issue Date or thereafter created, incurred, assumed or guaranteed.
Dividend Payment Date: As defined in Section 3(b).
Dividend Period: The period from but excluding the First Accrual Date
to and including the first Dividend Payment Date and each three-month period
from but excluding the Dividend Payment Date for the preceding Dividend Period
to and including the Dividend Payment Date for such Dividend Period.
First Accrual Date: August 8, 1994.
Indebtedness: Any (i) liability, contingent or otherwise, of this
Corporation (x) for borrowed money whether or not the recourse of the lender is
to the whole of the assets of this Corporation or only to a portion thereof),
(y) evidenced by a note, debenture or similar instrument (including a purchase
money obligation) given other than in connection with the acquisition of
inventory or similar property in the ordinary course of business, or (z) for
the payment of money relating to an obligation under a lease that is required
to be capitalized for financial accounting purposes in accordance with
generally accepted accounting principles; (ii) liability of others described in
the preceding clause (i) which this Corporation has guaranteed or which is
otherwise its legal liability; (iii) obligations secured by a mortgage,
pledge, lien, charge or other encumbrance
2
<PAGE> 42
to which the property or assets of this Corporation are subject whether or not
the obligations secured thereby shall have been assumed by or shall otherwise
be this Corporation's legal liability; and (iv) any amendment, renewal,
extension or refunding of any liability of the types referred to in clauses
(i), (ii) and (iii) above.
Issue Date: The first date on which any shares of the Convertible
Preferred Stock are first issued or deemed to have been issued.
Junior Securities: All shares of Class A Common Stock, Class B Common
Stock, and any other class or series of stock of this Corporation not entitled
to receive any dividends unless all dividends required to have been paid or
declared and set apart for payment on the Convertible Preferred Stock shall
have been so paid or declared and set apart for payment and, for purposes of
Section 4 hereof. any class or series of stock of this Corporation not entitled
to receive any assets upon liquidation, dissolution or winding up of the
affairs of this Corporation until the Convertible Preferred Stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
Liquidation Value: Measured per Share of the Convertible Preferred
Stock as of any particular date, the sum of(i) $2.375 plus an amount equal to
all dividends accrued on such Share through the Dividend Payment Date
immediately preceding the date on which the Liquidation Value is being
determined, which pursuant to Section 3(c) have been added to and remain a part
of the Liquidation Value as of such date, plus (iii), for purposes of
determining amounts payable pursuant to Sections 4 and 6 hereof, an amount
equal to all unpaid dividends accrued on the sum of the amounts specified in
clauses (i) and (ii) above to the date as of which the Liquidation Value is
being determined.
Original Holder: As defined in Section 7(a).
Parity Securities: Any class or series of stock of this Corporation
entitled to receive payment of dividends on a parity with the Convertible
Preferred Stock or entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of this Corporation on a parity with the Convertible
Preferred Stock.
Permitted Transferee: As defined in Section 7(a).
Record Date: For dividends payable on any Dividend Payment Date, the
fifteenth day of the month preceding the month during which such Dividend
Payment Date shall occur.
Redemption Date: As to any Share, the date fixed for redemption of
such Share as specified in the notice of redemption given in accordance with
Section 6(c), provided that no such date will be a Redemption Date unless the
applicable Redemption Price is actually paid on such date or the consideration
sufficient for the payment thereof, and for no other purpose, has been set
apart, and if the Redemption Price is not so paid in full or the consideration
sufficient therefor so set apart
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then the Redemption Date will be the date on which such Redemption Price is
fully paid or the consideration sufficient for the payment thereof, and for no
other purpose, has been set apart.
Redemption Price: As to any Share that is to be redeemed on any
Redemption Date, the Liquidation Value as in effect on such Redemption Date.
Senior Securities: Any class or series of stock of this Corporation
ranking senior to the Convertible Preferred Stock in respect of the right to
receive payment of dividends or the right to participate in any distribution
upon liquidation, dissolution or winding up of the affairs of this Corporation.
Share: As defined in Section 3(a).
Special Record Date: As defined in Section 3(C).
3. Dividends.
(a) Subject to the rights of any Parity Securities with respect to
dividends, the holders of the Convertible Preferred Stock shall be entitled to
receive, and, subject to any prohibition or restriction contained in any Debt
Instrument, this Corporation shall be obligated to pay, but only out of funds
legally available therefor, preferential cumulative cash dividends which shall
accrue as provided herein. Except as otherwise provided in Sections 3(c) or
3(d) hereof, dividends on each share of Convertible Preferred Stock
(hereinafter referred to as a "Share") shall accrue on a daily basis at the
rate of 5 1/2% per annum of the Liquidation Value to and including the date of
conversion thereof pursuant to Section 5 or the date on which the Liquidation
Value or Redemption Price of such Share is made available pursuant to Section 4
or 6 hereof, respectively. Dividends on the Convertible Preferred Stock shall
accrue as provided herein, whether or not such dividends have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally or contractually available for the payment of dividends.
(b) Accrued dividends on the Convertible Preferred Stock shall be
payable quarterly on the first day of each January, April, July and October, or
the immediately preceding business day if such first day is a Saturday, Sunday
or legal holiday (each such payment date being hereinafter referred to as a
"Dividend Payment Date"), commencing on October 1, 1994 to the holders of
record of the Convertible Preferred Stock as of the close of business on the
applicable Record Date. For purposes of determining the amount of dividends
"accrued" as of any date that is not a Dividend Payment Date, such amount shall
be calculated on the basis of the rate per annum specified in Section 3(a) for
actual days elapsed from but excluding the First Accrual Date (in the case of
any date prior to the first Dividend Payment Date) or the last preceding
Dividend Payment Date (in the case of any other date) to and including the date
as of which such determination is to be made, based on a 365-day year.
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(c) If on any Dividend Payment Date this Corporation pursuant to
applicable law or the terms of any Debt Instrument shall be prohibited or
restricted from paying in cash the full dividends to which holders of the
Convertible Preferred Stock and any Parity Securities shall be entitled, the
amount available for such payment pursuant to applicable law and which is not
restricted by the terms of any Debt instrument shall be distributed among the
holders of the Convertible Preferred Stock and such Parity Securities ratably
in proportion to the full amounts to which they would otherwise be entitled. To
the extent not paid on each Dividend Payment Date, all dividends which have
accrued on each Share during the Dividend Period ending on such Dividend
Payment Date will be added cumulatively to the Liquidation Value of such Share
and will remain a part thereof until such dividends are paid. In the event that
dividends are not paid in full on two consecutive Dividend Payment Dates,
dividends on that portion of the Liquidation Value of each Share which consists
of accrued dividends that have theretofore been or thereafter are added to, and
remain a part of, the Liquidation Value in accordance with the preceding
sentence shall accrue cumulatively on a daily basis at the rate of fifteen
percent (15%) per annum, from and after such second consecutive Dividend
Payment Date to and including the date of conversion of such Share pursuant to
Section 5 or the date on which the Liquidation Value or Redemption Price of
such Share is made available pursuant to Section 4 or 6 hereof, respectively,
unless such portion of the Liquidation Value that consists of accrued unpaid
dividends shall be earlier paid in full. Such portion of the Liquidation Value
as consists of accrued unpaid dividends, may be declared and paid at any time
without reference to any regular Dividend Payment Date, to holders of record as
of the close of business on such date, not more than 50 days nor less than 10
days preceding the payment date thereof, as may be fixed by the Board of
Directors of this Corporation (the "Special Record Date").
(d) In the event that on any date fixed for redemption of Shares
pursuant to Section 6 (other than on any date fixed for a redemption of Shares
pursuant to Section 6(a)), this Corporation shall fail to pay the Redemption
Price due and payable upon presentation and surrender of the stock certificates
evidencing Shares to be redeemed, then dividends on such Shares shall accrue
cumulatively on a daily basis at the rate of fifteen percent (15%) per annum of
the Liquidation Value thereof from and after such Redemption date to and
including the date of conversion of such Shares pursuant to Section 5 or the
date on which the Liquidation Value or Redemption Price of such Shares is made
available pursuant to Section 4 or 6 hereof, respectively.
(e) Notice of each Special Record Date shall be mailed, in the
manner provided in Section 6(c), to the holders of record of the Convertible
Preferred Stock not less than 15 days prior thereto.
(f) As long as any Convertible Preferred Stock shall be outstanding,
no dividend, whether in cash or property, shall be paid or declared, nor shall
any other distribution be made, on any Junior Security, nor shall any shares
of any Junior Security be purchased, redeemed, or otherwise acquired for value
by the Corporation, unless the holders of the Convertible Preferred Stock shall
have received all dividends to which they are entitled pursuant to Section 3(a)
hereof for all the Dividend Periods preceding the date on which such dividend
on the Junior Securities is to
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<PAGE> 45
occur, or such dividends shall have been declared and the consideration
sufficient for the payment thereof set apart so as to be available for the
payment in full thereof and for no other purpose. The provisions of this
Section 3(f) shall not apply (i) to a dividend payable in any Junior Security,
or (ii) to the repurchase, redemption or other acquisition of shares of any
Junior Security solely through the issuance of Junior Securities (together
with a cash adjustment for tractional shares, if any) or through the
application of the proceeds from the sale of Junior Securities.
4. Liquidation. Upon any liquidation, dissolution or winding up
of this Corporation, whether voluntary or involuntary, the holders of
Convertible Preferred Stock shall be entitled to be paid an amount in cash
equal to the aggregate Liquidation Value at the date fixed for liquidation of
all Shares outstanding before any distribution or payment is made upon any
Junior Securities, which payment shall be made pari passu with any such payment
made to the holders of any Parity Securities. The holders of Convertible
Preferred Stock shall be entitled to no other or further distribution of or
participation in any remaining assets of this Corporation after receiving the
Liquidation Value per Share. If upon such liquidation, dissolution or winding
up, the assets of this Corporation to be distributed among the holders of
Convertible Preferred Stock and to all holders of Parity Securities are
insufficient to permit payment in full to such holders of the aggregate
preferential amounts which they are entitled to be paid, then the entire assets
of this Corporation to be distributed to such holders shall be distributed
ratably among them based upon the full preferential amounts to which the shares
of Convertible Preferred Stock and such Parity Securities would otherwise
respectively be entitled. Upon any such liquidation, dissolution or winding up,
after the holders of Convertible Preferred Stock and Parity Securities have
been paid in full the amounts to which they are entitled, the remaining assets
of this Corporation may be distributed to the holders of Junior Securities.
This Corporation shall mail written notice of such liquidation, dissolution or
winding up to each record holder of Convertible Preferred Stock not less than
30 days prior to the payment date stated in such written notice. Neither the
consolidation or merger of this Corporation into or with any other corporation
or corporations, nor the sale, transfer or lease by this Corporation of all or
any part of its assets, shall be deemed to be a liquidation, dissolution or
winding up of this Corporation within the meaning of this Section 4.
5. Conversion.
(a) Unless previously called for redemption as provided in Section
6 hereof, the Convertible Preferred Stock may be converted at any time or from
time to time, in such manner and upon such terms and conditions as hereinafter
provided in this Section 5 into fully paid and nonassessable full shares of
Class A Common Stock. In the case of Shares called for redemption by this
Corporation pursuant to Section 6(a) hereof, the conversion right provided by
this Section 5 shall terminate at the close of business on the fifteenth day
preceding the date fixed for redemption. In the case of Shares required to be
redeemed pursuant to Section 6(b), the conversion right provided by this
Section 5 shall terminate immediately upon receipt by this Corporation of a
notice given pursuant to said Section. In case cash, securities or property
other than Class A Common Stock shall be payable, deliverable or issuable upon
conversion as provided herein, then all references to Class A
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<PAGE> 46
Common Stock in this Section 5 shall be deemed to apply, so far as appropriate
and as nearly as may be, to such cash, property or other securities.
(b) Subject to the provisions for adjustment hereinafter set forth
in this Section 5, the Convertible Preferred Stock may be convened into Class A
Common Stock at the initial conversion rate of 100 fully paid and
non-assessable shares of Class A Common Stock for one share of the Convertible
Preferred Stock. (This conversion rate as from time to time adjusted
cumulatively pursuant to the provisions of this Section is hereinafter referred
to as the "Conversion Rate").
(c) In case this Corporation shall (i) pay a dividend or make a
distribution on its outstanding shares of Class A Common Stock in shares of its
Capital Stock, (ii) subdivide the then outstanding shares of Class A Common
Stock into a greater number of shares of Class A Common Stock, (iii) combine
the then outstanding shares of Class A Common Stock into a smaller number of
shares of Class A Common Stock, or (iv) issue by reclassification of its shares
of Class Common Stock any shares of any other class of Capital Stock of this
Corporation (including any such reclassification in connection with a merger in
which this Corporation is the continuing corporation), then the Conversation
Rate in effect immediately prior to the opening of business on the record date
for such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that the holder of each
share of the Convertible Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number and kind of shares of Capital Stock of
this Corporation that such holder would have owned or been entitled to receive
immediately following such action had such shares of Convertible Preferred
Stock been converted immediately prior to such time. An adjustment made
pursuant to this Section 5(c) for a dividend or distribution shall become
effective immediately after the record date for the dividend or distribution
and an adjustment made pursuant to this Section 5(c) for a subdivision,
combination or reclassification shall become effective immediately after the
effective date of the subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any action listed above shall be
taken.
(d) In case this Corporation shall issue any rights or warrants to
all holders of shares of Class A Common Stock entitling them (for a period
expiring within 45 days after the record date for the determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Class A Common Stock (or Convertible Securities) at a price
per share of Class A Common Stock (or having an initial exercise price or
conversion price per share of Class A Common Stock) less than the then current
market price per share of Class A Common Stock (as determined in accordance
with the provisions of Section 5(f) below) on such record date, the number of
shares of Class A Common Stock into which each Share shall thereafter be
convertible shall be determined by multiplying the number of shares of Class A
Common Stock into which such Share was theretofore convertible immediately
prior to such record date by a fraction of which the numerator shall be the
number of shares of Class A Common Stock outstanding on such record date plus
the number of additional shares of Class A Common Stock offered for
subscription or purchase (or into which the Convertible Securities so offered
are initially convertible) and of
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<PAGE> 47
which the denominator shall be the number of shares of Class A Common Stock
outstanding on such record date plus the number of shares of Class A Common
Stock which the aggregate offering price of the total number of shares of Class
A Common Stock so offered (or the aggregate initial conversion or exercise
price of the Convertible Securities so offered) would purchase at the then
current market price per share of Class A Common Stock (as determined in
accordance with the provisions of Section 5(f) below) on such record date. Such
adjustment shall be made successively whenever any such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. In
the event that all of the shares of Class A Common Stock (or all of the
Convertible Securities) subject to such rights or warrants have not been issued
when such rights or warrants expire (or, in the case of rights or warrants to
purchase Convertible Securities which have been exercised, all of the shares of
Class A Common Stock issuable upon conversion of such Convertible Securities
have not been issued prior to the expiration of the conversion right thereof),
then the Conversion Rate shall be readjusted retroactively to be the Conversion
Rate which would then be in effect had the adjustment upon the issuance of such
rights or warrants been made on the basis of the actual number of shares of
Class A Common Stock (or Convertible Securities) issued upon the exercise of
such rights or warrants (or the conversion of such Convertible Securities); but
such subsequent adjustment shall not affect the number of shares of Class A
Common Stock issued upon the conversion of any Share prior to the date such
subsequent adjustment is made.
(e) In case this Corporation shall distribute to all holders of
shares of Class A Common Stock (including any such distribution made in
connection with a merger in which this Corporation is the continuing
corporation, other than a merger to which Section 5(g) is applicable) any
evidences of its indebtedness or assets (other than cash dividends or Capital
Stock) or rights or warrants to purchase shares of Class A Common Stock or
Class B Common Stock or securities convertible into shares of Class A Common
Stock or Class B Common Stock (excluding those referred to in Section 5(d)
above), then in each such case the number of shares of Class A Common Stock
into which each Share shall thereafter be convertible shall be determined by
multiplying the number of shares of Class A Common Stock into which such Share
was theretofore convertible immediately prior to the record date for the
determination of stockholders entitled to receive the distribution by a
fraction of which the numerator shall be the then current market price per share
of Class A Common Stock (as determined accordance with the provisions of
Section 5(f) below) on such record date and of which the denominator shall be
such current market price per share of Class A Common Stock less the fair
market value on such record date (as determined by the Board of Directors of
this Corporation, whose determination shall be conclusive) of the portion of
the assets or evidences of indebtedness or rights and warrants so to be
distributed applicable to one share of Class A Common Stock. Such adjustment
shall be made successively whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(f) For the purpose of any computation under Section 5(d), (e) or
(k), the current market price per share of Class A Common Stock at any date
shall be deemed to be the average of the daily closing prices for a share of
Class A Common Stock for the ten (10) consecutive trading
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<PAGE> 48
days before the day in question. The closing price or each day shall be the
last reported sale price regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the composite tape, or if the shares of Class A
Common Stock are not quoted on the composite tape, on the principal United
States securities exchange registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), on which the shares of Class A Common
Stock are listed or admitted to trading, or if they are not listed or admitted
to trading on any such exchange, the last reported sale price (or the average
of the quoted closing bid and asked prices if there were no reported sales) as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system, or if the Class A Common Stock is
not quoted on NASDAQ or any comparable system, the average of the closing bid
and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by this Corporation for
that purpose or, in the absence of such quotations, such other method of
determining market value as the Board of Directors shall from time to time deem
to be fair.
(g) In case of any reclassification or change in the Class A
Common Stock (other than any reclassification or change referred to in Section
5(c) and other than a change in par value) or in case of any consolidation of
this Corporation with any other corporation or any merger of this Corporation
into another corporation or of another corporation into this Corporation (other
than a merger in which this Corporation is the continuing corporation and which
does not result in any reclassification or change (other than a change in par
value or any reclassification or change to which Section 5(c) is applicable) in
the outstanding Class A Common Stock), or in case of any sale or transfer to
another corporation or entity (other than by mortgage or pledge) of all or
substantially all of the properties and assets of this Corporation, this
Corporation (or its successor in such consolidation or merger) or the purchaser
of such properties and assets shall make appropriate provision so that the
holder of a Share shall have the right thereafter to convert such Share into
the kind and amount of shares of stock and other securities and property that
such holder would have owned immediately after such reclassification, change,
consolidation, merger, sale or transfer if such holder had converted such Share
into Class A Common Stock immediately prior to the effective date of such
reclassification, change, consolidation, merger, sale or transfer (assuming for
this purpose (to the extent applicable) that such holder failed to exercise any
rights of election and received per share of Class A Common Stock the kind and
amount of shares of stock and other securities and property received per share
by a plurality of the non-electing shares), and the holders of the Convertible
Preferred Stock shall have no other conversion rights under these provisions;
provided, that effective provision shall be made, in the Articles or
Certificate of Incorporation of the resulting or surviving corporation or
otherwise or in any contracts of sale or transfer, so that the provisions set
forth herein for the protection of the conversion rights of the Convertible
Preferred Stock shall thereafter be made applicable, as nearly as reasonably
may be to any such other shares of stock and other securities and property
deliverable upon conversion of the Convertible Preferred Stock remaining
outstanding or other convertible preferred stock or other Convertible
Securities received by the holders of Convertible Preferred Stock in place
thereof; and provided, further, that any such resulting or surviving
corporation or purchaser shall expressly assume the obligation to deliver, upon
the exercise of the conversion privilege, such shares, securities or property
as the holders of the
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Convertible Preferred Stock remaining outstanding, or other convertible
preferred stock or other convertible securities received by the holders in
place thereof, shall be entitled to receive pursuant to the provisions hereof,
and to make provisions for the protection of the conversion rights as above
provided.
(h) Whenever the Conversion Rate or the conversion privilege shall
be adjusted as provided in Sections 5(c), (d), (e) or(g), this Corporation
shall promptly cause a notice to be mailed to the holders of record of the
Convertible Preferred Stock describing the nature of the event requiring such
adjustment, the Conversion Rate in effect immediately thereafter and the kind
and amount of stock or other securities or property into which the
Convertible Preferred Stock shall be convertible after such event. Where
appropriate, such notice may be given in advance and included as a part of a
notice required to be mailed under the provisions of Section 5(j).
(i) This Corporation may, but shall not be required to, make any
adjustment of the Conversion Rate if such adjustment would require an increase
or decrease of less than 1% in such Conversion Rate; provided, however, that
any adjustments which by reason of this Section 5(i) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 5 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be. In any case in
which this Section 5(i) shall require that an adjustment shall become effective
immediately after a record date for such event, the Corporation may defer until
the occurrence of such event (x) issuing to the holder of any shares of
Convertible Preferred Stock converted after such record date and before the
occurrence of such event the additional shares of Class A Common Stock or other
Capital Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Class A Common Stock, or
other Capital Stock issuable upon such conversion before giving effect to such
adjustment and (y) paying to such holder cash in lieu of any fractional
interest to which such holder is entitled pursuant to Section 5(n); provided,
however, that, if requested by such holder, this Corporation shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares of Class A Common Stock or other
Capital Stock, and such cash, upon the occurrence of the event requiring such
adjustment.
(j) In case at any time:
(i) this Corporation shall take any action which would
require an adjustment in the Conversion Rate pursuant to this Section;
(ii) there shall be any capital reorganization or
reclassification of the Class A Common Stock (other than a change in
par value), or any consolidation or merger to which the Corporation is
a party and for which approval of any shareholders of this Corporation
is required, or any sale, transfer or lease of all or substantially
all of the properties and assets of the Corporation, or a tender offer
for shares of Class A Common Stock representing,
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together with any shares of Class B Common Stock tendered for in such
tender offer, at least a majority of the total voting power
represented by the outstanding shares of Class A Common Stock and
Class B Common Stock which has been recommended by the Board of
Directors as being in the best interests of the holders of Class A
Common Stock; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of this Corporation;
then, in any such event, this Corporation shall give written notice, in the
manner provided in Section 6(c) hereof, to the holders of the Convertible
preferred Stock at their respective addresses as the same appear on the books
of the Corporation, at least twenty days (or ten days in the case of a
recommended tender offer as specified in clause (ii) above) prior to any record
date for such action, dividend or distribution or the date as of which it is
expected that holders of Class A Common Stock of record shall be entitled to
exchange their shares of Class A Common Stock for securities or other property,
if any, deliverable upon such reorganization, reclassification, consolidation,
merger, sale, transfer, lease, tender offer, dissolution, liquidation or
winding up; provided, however, that any notice required by any event described
in clause (ii) of this Section 5(j) shall be given in the manner and at the
time that such notice is given to the holders of Class A Common Stock. Without
limiting the obligations of this Corporation to provide notice of corporate
actions hereunder, the failure to give the notice required by this Section 5(j)
or any defect therein shall not affect the legality or validity of any such
corporate action of the Corporation or the vote upon such action.
(k) Before any holder of Convertible Preferred Stock shall be
entitled to convert the same into Class A Common Stock, such holder shall
surrender the certificate or certificates for such Convertible Preferred Stock
at the office of this Corporation or at the office of the transfer agent for
the Convertible Preferred Stock, which certificate or certificates, if this
Corporation shall so request, shall be duly endorsed to this Corporation or in
blank or accompanied by proper instruments of transfer to this Corporation or
in blank (such endorsements or instruments of transfer to be in form
satisfactory to this Corporation), and shall given written notice to this
Corporation at said office that it elects to convert all or a part of the
Shares represented by said certificate or certificates in accordance with the
terms of this Section 5, and shall state in writing therein the name or names
in which such holder wishes the certificates for Class A Common Stock to be
issued. Every such notice of election to convert shall constitute a contract
between the holder of such Convertible Preferred Stock and the Corporation,
whereby the holder of such Convertible Preferred Stock shall be deemed to
subscribe for the amount of Class A Common Stock which such holder shall be
entitled to receive upon conversion of the number of shares of Convertible
Preferred Stock to be converted, and, in satisfaction of such subscription, to
deposit the shares of Convertible Preferred Stock to be converted, and thereby
this Corporation shall be deemed to agree that the surrender of the shares of
Convertible Preferred Stock to be converted shall constitute full payment of
such subscription for Class A Common Stock to be issued upon such conversion.
This Corporation will as soon as practicable after such deposit of a
certificate or certificates for Convertible Preferred
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Stock, accompanied by the written notice and the statement above prescribed,
issue and deliver at the office of this Corporation or of said transfer agent
to the person for whose account such Convertible Preferred Stock was so
surrendered, or to his nominee(s) or, subject to compliance with applicable
law, transferee(s), a certificate or certificates for the number of full shares
of Class A Common Stock to which such holder shall be entitled, together with
cash in lieu of any fraction of a share as hereinafter provided. If surrendered
certificates for Convertible Preferred Stock are converted only in part, this
Corporation will issue and deliver to the holder, or to his nominee(s) without
charge therefor, a new certificate or certificates representing the aggregate
of the unconverted Shares. Such conversion shall be deemed to have been made as
of the date of such surrender of the Convertible Preferred Stock to be
converted; and the person or persons entitled to receive the Class A Common
Stock issuable upon conversion of such Convertible Preferred Stock shall be
treated for all purposes as the record holder or holders of such Class A Common
Stock on such date.
Upon the conversion of any Share, this Corporation shall pay, to the
holder of record of such Share on the immediately preceding Record Date, all
accrued but unpaid dividends on such Share to the date of the surrender of such
Share for conversion. Such payment shall be made in cash or, at the election of
this Corporation, the issuance of certificates representing such number of
shares of Class A Common Stock as have an aggregate current market price (as
determined in accordance with Section 5(f)) on the date of issuance equal to
the amount of such accrued but unpaid dividends. Upon the making of such
payment to the person entitled thereto as determined pursuant to the first
sentence of this paragraph, no further dividends shall accrue on such Share or
be payable to any other person.
The issuance of certificates for shares of Class A Common Stock upon
conversion of shares of Convertible Preferred Stock shall be made without
charge for any issue, stamp or other similar tax in respect of such issuance,
provided, however, if any such certificate is to be issued in a name other than
that of the registered holder of the share or shares of Convertible Preferred
Stock converted, the person or persons requesting the issuance thereof shall
pay to this Corporation the amount of any tax which may be payable in respect
of any transfer involved in such issuance or shall establish to the
satisfaction of this Corporation that such tax has been paid.
This Corporation shall not be required to convert any shares of
Convertible Preferred Stock, and no surrender of Convertible Preferred Stock
shall be effective for that purpose, while the stock transfer books of this
Corporation are closed for any purpose; but the surrender of Convertible
Preferred Stock for conversion during any period while such books are so closed
shall become effective for conversion immediately upon the reopening of such
books, as if the conversion had been made on the date such Convertible
Preferred Stock was surrendered.
(l) This Corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Convertible Preferred Stock, such number of shares of
Class A Common Stock as shall be issuable upon the conversion of all
outstanding Shares, provided that nothing contained herein shall be construed
to preclude this
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Corporation from satisfying its obligations in respect of the conversion of the
outstanding shares of Convertible Preferred Stock by delivery of shares of
Class A Common Stock which are held in the treasury of this Corporation. This
Corporation shall take all such corporate and other actions as from time to
time may be necessary to insure that all shares of Class A Common Stock
issuable upon conversion of shares of Convertible Preferred Stock at the
Conversion Rate in effect from time to time will, upon issue, be duly and
validly authorized and issued, fully paid and nonassessable and free of any
preemptive or similar rights.
(m) All shares of Convertible Preferred Stock received by this
Corporation upon conversion thereof into Class A Common Stock shall be retired
and shall be restored to the status of authorized and issued shares of
preferred stock (and may be reissued as part of another series of the preferred
stock of this Corporation, but such shares shall not be reissued as Convertible
Preferred Stock).
(n) This Corporation shall not be required to issue fractional
shares of Class A Common Stock or scrip upon conversion of the Convertible
Preferred Stock. As to any final fraction of a share of Class A Common Stock
which a holder of one or more Shares would otherwise be entitled to receive
upon conversion of such Shares in the same transaction, this Corporation shall
pay a cash adjustment in respect of such final fraction in an amount equal to
the same fraction of the market value of a full share of Class A Common Stock.
For purposes of this Section 5(n), the market value of a share of Class A
Common Stock shall be the last reported sale price regular way on the business
day immediately preceding the date of conversion, or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices regular way on such day, in either case on the composite tape, or if the
shares of Class A Common Stock are not quoted on the composite tape, on the
principal United States securities exchange registered under the Exchange Act
on which the shares of Class A Common Stock are listed or admitted to trading,
or if the shares of Class A Common Stock are not listed or admitted to trading
on any such exchange, the last reported sale price (or the average of the
quoted last reported bid and asked prices if there were no reported sales) as
reported by NASDAQ or any comparable system, or if the Class A Common Stock is
not quoted on NASDAQ or any comparable system, the average of the closing bid
and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by this Corporation for
that purpose or, in the absence of such quotations, such other method of
determining market value as the Board of Directors shall from time to time deem
to be fair.
6. Redemption.
(a) Subject to the provisions of Section 6(f), the shares of
Convertible Preferred Stock may be redeemed out of funds legally available
therefor, at the option of this Corporation by action of the Board of
Directors, in whole or from time to time in part, at any time after August 8.
2001 at the Redemption Price per share as of the applicable Redemption Date. If
less than all outstanding Shares are to be redeemed, Shares shall be redeemed
ratably among the holders thereof.
13
<PAGE> 53
(b) Subject to the rights of any Parity Securities and the
provisions of Section 6(f) and subject to any prohibitions or restrictions
contained in any Debt Instrument, at any time on or after August 8,2001, any
holder shall have the right, at such holder's option, to require redemption by
this Corporation at the Redemption Price per Share as of the applicable
Redemption Date of all or any portion of his Shares having an aggregate
Liquidation Value in excess of $1,000,000, by written notice to this
Corporation stating the number of Shares to be redeemed. This Corporation shall
redeem, out of funds legally available therefor and not restricted in
accordance with the first sentence of this Section 6(b), the Shares so
requested to be redeemed on such date within 60 days following this
Corporation's receipt of such notice as this Corporation shall state in its
notice given pursuant to Section 6(c). If the funds of this Corporation legally
available for redemption of Shares and not restricted in accordance with the
first sentence of this Section 6(b) are insufficient to redeem the total number
of shares required to be redeemed pursuant to this Section 6(b), those funds
which are legally available for redemption of such Shares and not so restricted
will be used to redeem the maximum possible number of such Shares ratably among
the holders who have required Shares to be redeemed under this Section 6(b). At
any time thereafter when additional funds of this Corporation are legally
available and not so restricted for such purpose, such funds will immediately
be used to redeem the Shares this Corporation failed to redeem on such
Redemption Date until the balance of such Shares are redeemed.
(c) Notice of any redemption pursuant to this Section shall be
mailed, first class, postage prepaid, not less than 30 days nor more than 60
days prior to the Redemption Date, to the holders of record of the shares of
Convertible Preferred Stock to be redeemed, at their respective addresses as
the same appear upon the books of this Corporation or are supplied by them in
writing to this Corporation for the purpose of such notice (with telephonic or
facsimile confirmation of notice to Bill Daniels so long as he is a holder of
record); but no failure to mail such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of any shares of the Convertible Preferred Stock. Such notice shall set forth
the Redemption Price, the Redemption Date, the number of Shares to be redeemed
and the place at which the Shares called for redemption will, upon presentation
and surrender of the stock certificates evidencing such Shares, be redeemed. In
case fewer than the total number of shares of Convertible Preferred Stock
represented by any certificate are redeemed, a new certificate representing the
number of unredeemed Shares will be issued to the holder thereof without cost
to such holder.
(d) If notice of any redemption by this Corporation pursuant to
this Section 6 shall have been mailed as provided in Section 6(c) and if on or
before the Redemption Date specified in such notice the consideration necessary
for such redemption shall have been set apart so as to be available therefor
and only therefor, then on and after the close of business on the Redemption
Date, the Shares called for redemption, notwithstanding that any certificate
therefor shall not have been surrendered for cancellation, shall no longer be
deemed outstanding, and all rights with respect to such Shares shall forthwith
cease and terminate, except the right of the holders thereof to receive upon
surrender of their certificates the consideration payable upon redemption
thereof.
14
<PAGE> 54
(e) All shares of Convertible Preferred Stock redeemed, retired,
purchased or otherwise acquired by this Corporation shall be retired and shall
be restored to the status of authorized and unissued shares of preferred stock
(and may be reissued as part of another series of the preferred stock of this
Corporation, but such shares shall not be reissued as Convertible Preferred
Stock).
(f) If at any time this Corporation shall have failed to pay, or
declare and set apart the consideration sufficient to pay, all dividends
accrued up to and including the immediately preceding Dividend Payment Date on
the Convertible Preferred Stock, and until all dividends accrued up to and
including the immediately preceding Dividend Payment Date on the Convertible
Preferred Stock shall have been paid or declared and set apart so as to be
available for the payment in full thereof and for no other purpose, this
Corporation shall not redeem, pursuant to a sinking fund or otherwise, any
shares of Convertible Preferred Stock or Junior Securities, unless all then
outstanding shares of Convertible Preferred Stock are redeemed, and shall not
purchase or otherwise acquire any shares of Convertible Preferred Stock or
Junior Securities. If and so long as this Corporation shall fail to redeem on a
Redemption Date pursuant to Section 6(b) all shares of Convertible Preferred
Stock required to be redeemed on such date, this Corporation shall not redeem,
or discharge any sinking fund obligation with respect to, any Junior
Securities, unless all then outstanding shares of Convertible Preferred Stock
are redeemed, and shall not purchase or otherwise acquire any shares of
Convertible Preferred Stock or Junior Securities. Nothing contained in this
Section 6(f) shall prevent the purchase or acquisition of shares of Convertible
Preferred Stock pursuant to a purchase or exchange offer or offers made to
holders of all outstanding shares of Convertible Preferred Stock, provided that
as to holders of all outstanding shares of Convertible Preferred Stock, the
terms of the purchase or exchange offer for all such shares are identical. The
provisions of this Section 6(f) are for the benefit of holders of Convertible
Preferred Stock and accordingly the provisions of this Section 6(f) shall not
restrict any redemption by this Corporation of Shares held by any holder,
provided that all other holders of Shares shall have waived in writing the
benefits of this provision with respect to such redemption.
7. Transfer.
(a) Without the prior written consent of this Corporation, no
person holding shares of Convertible Preferred Stock of record (hereinafter
called a "Convertible Preferred Holder") may transfer, and this Corporation
shall not register the transfer of, such shares of Convertible Preferred Stock,
whether by sale, assignment, or otherwise, except to a Permitted Transferee.
(i) In the case of a Convertible Preferred Holder
acquiring record and beneficial ownership of the shares of Convertible
Preferred Stock in question upon initial issuance by this Corporation
(an "Original Holder"), a "Permitted Transferee" shall mean:
(x) any Affiliate (as defined in Section 7(b)) of
such Original Holder.
15
<PAGE> 55
(y) any other Original Holder (or any Affiliate
of any such other Original Holder), or
(z) any person or entity to whom Shares are
transferred by an Original Holder pursuant to
a gift or bequest or pursuant to the laws of
intestacy.
(ii) In the case of a Convertible Preferred Holder which
is a Permitted Transferee of an Original Holder, a "Permitted
Transferee" shall mean:
(x) any Original Holder,
(y) any Permitted Transferee of an Original
Holder, except any transferee referred to in
clause (i)(z) above, or
(z) any person or entity to whom Shares are
transferred by a Permitted Transferee
pursuant to a gift or bequest or pursuant to
the laws of intestacy.
(b) For purposes of this Section 7, the term "Affiliate" shall
mean (i) any person or corporation that owns beneficially and of record at
least a majority of the outstanding securities representing the right, other
than as affected by events of default, to vote for the election of directors
("voting securities") of an Original Holder or (ii) any person or corporation
at least a majority of the voting securities of which are owned beneficially
and of record by an Original Holder, where in the case of both (i) and (ii),
voting securities will be deemed "owned" by a person or corporation if either
owned directly or if owned indirectly through one or more intermediary
corporations at least a majority of the voting securities of which are owned
beneficially and of record by that person or corporation or by an intermediary
corporation in such a majority or more chain of ownership.
(c) This Corporation may, in connection with preparing a list of
stockholders entitled to vote at any meeting of stockholders, or as a condition
to the transfer or the registration of shares of Convertible Preferred Stock on
this Corporation's books, require the furnishing of such affidavits or other
proof as it deems necessary to establish that any person is the beneficial
owner of shares of Convertible Preferred Stock or is a Permitted Transferee.
(d) Shares of Convertible Preferred Stock shall be registered in
the names of the beneficial owners thereof and not in "street" or "nominee"
name. For this purpose, a "beneficial owner" of any shares of Convertible
Preferred Stock shall mean a person who, or any entity which, possesses the
power, either singly or jointly, to direct the voting or disposition of such
shares. Certificates for shares of Convertible Preferred Stock shall bear a
legend referencing the restrictions on transfer imposed by this Section 7.
16
<PAGE> 56
8. Voting Rights. The holders of the Convertible Preferred Stock
shall be entitled to vote on all matters submitted to a vote of the holders of
the Capital Stock of this Corporation which is entitled to vote generally on
the election of directors. Each Share shall entitle the registered holder
thereof to such number of votes as is equal to the number of shares of Class A
Common Stock into which such Share is then convertible. Holders of Convertible
Preferred Stock shall vote together with holders of common stock and shall not
be entitled to vote as a class except as otherwise required by law or this
Corporation's Restated Certificate of Incorporation.
9. Amendment. No amendment or modification of the designation,
rights, preferences, and limitations of the Shares set forth herein shall be
binding or effective without the prior consent of the holders of record of
Shares representing 66 2/3% of the Liquidation Value of all Shares outstanding
at the time such action is taken.
10. Preemptive RightS. The holders of the Convertible Preferred
Stock will not have any preemptive right to subscribe for or purchase any
shares of stock or any other securities which may be issued by this
Corporation.
11. Senior Securities. The Convertible Preferred Stock shall not
rank junior to any other classes or series of stock of this Corporation in
respect of the right to receive dividends or the right to participate in any
distribution upon liquidation, dissolution or winding up of this Corporation.
Without the prior consent of the holders of record of Shares representing
66 2/3% of the Liquidation Value of all Shares then outstanding, this
Corporation shall not issue any Senior Securities.
12. Exclusion of Other Rights. Except as may otherwise be required
by law and for the equitable rights and remedies that may otherwise be
available to holders of Convertible Preferred Stock, the shares of Convertible
Preferred Stock shall not have any designations, preferences, limitations or
relative rights, other than those specifically set forth in these resolutions
(as such resolutions may, subject to Section 9, be amended from time to time)
and in the Restated Certificate of Incorporation of this Corporation.
13. Headings. The headings of the various sections and subsections
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
17
<PAGE> 57
FURTHER RESOLVED, that the appropriate officers of this Corporation
are hereby authorized to execute and acknowledge a certificate setting forth
these resolutions and to cause such certificate to be filed and recorded, in
accordance with the requirements of Section 151(g) of the General Corporation
Law of the State of Delaware."
/s/ FRED A VIERRA
Fred A. Vierra
Executive Vice President
18
<PAGE> 58
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
-------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
CORRECTION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-SECOND DAY OF AUGUST, A.D. 1994, AT 9 O'CLOCK A.M.
[SEAL]
/s/ Edward J. Freel
Edward J. Freel, Secretary Of State
AUTHENTICATION: 7278684
DATE: 10-24-94
2371729 8100
944202094
<PAGE> 59
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 08/22/1994
944156379 - 2371729
CERTIFICATE OF CORRECTION
Filed pursuant to Section 103(f)
of the Delaware General Corporation Law
with respect to a
CERTIFICATE OF DESIGNATION
of
TELE-COMMUNICATIONS, INC.
Whereas, on August 4, 1994, Tele-Communications, Inc. (the
"Corporation") filed with the Delaware Secretary of State a Certificate of
Designation (the "Certificate of Designation") authorizing the issuance of a
series of preferred stock of the Corporation designated "Convertible Preferred
Stock, Series C;"
Whereas, such Certificate of Designation inaccurately stated that the
par value of the Convertible Preferred Stock, Series C, is $1.00 per share,
when in fact the par value of the Convertible Preferred Stock, Series C, is
S.01 per share;
Therefore, the Certificate of Designation is hereby corrected in
accordance with the provisions of Section 103(f) of the Delaware General
Corporation Law as follows:
1. The words "par value $l.00 per share" shall be deleted from the
third line of the second (unnumbered) paragraph of the Certificate of
Designation and the words "par value S.01 per share" shall be substituted in
their place.
2. The words "par value $1.00 per share" shall be deleted from
paragraph number 1 of the Certificate of Designation and the words "par value
$.O1 per share" shall be substituted in their place.
Executed on the date set forth below by the undersigned duly
authorized officer of the Corporation.
Date: August 16, 1994
Signature: /s/ Stephen M. Brett
Stephen M. Brett
Title: Executive Vice President
<PAGE> 60
State of Delaware
Office of the Secretary of State PAGE 1
-------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE
ELEVENTH DAY OF OCTOBER, A.D. 1994, AT 4 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
(SEAL) /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7265951
2371729 8100 DATE: 10-12-94
944192934
<PAGE> 61
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:00 PM 10/11/1994
944192934 - 2371729
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
--------------------------
SETTING FORTH A COPY OF A RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED
AS "REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES E" ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
--------------------------
The undersigned Executive Vice President of Tele-Communications, Inc.,
a Delaware corporation (the "Corporation"), hereby certifies that the Board of
Directors duly adopted the following resolutions creating a series of preferred
stock designated as "Redeemable Convertible Preferred Stock, Series E":
BE IT RESOLVED, that pursuant to authority expressly granted by the
provisions of Article IV, Section D of the Restated Certificate of
Incorporation of the Corporation, the Board of Directors hereby creates and
authorizes the issuance of a series of preferred stock, par value $.01 per
share, of the Corporation, to consist of 400,000 shares, and hereby fixes the
designations, dividend rights, voting powers, rights on liquidation, conversion
rights, redemption rights and other preferences and relative, particiating,
optional or other special rights and the qualifications, limitations or
restrictions of the shares of such series (in addition to the designations,
preferences and relative, participating, limitations or restrictions thereof
set forth in the Restated Certificate of Incorporation that are applicable to
preferred stock of all series) as follows:
1. Designation. The designation of the series of preferred stock,
par value $1.00 per share, of the Corporation authorized hereby is "Redeemable
Convertible Preferred Stock, Series E" (the "Series E Preferred Stock").
2. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 2 shall have, for all purposes, the meanings
herein specified;
"Amendment Date" shall mean the date of the effectiveness under
applicable law of a duly approved amendment to the Corporation's Restated
Certificate of Incorporation
<PAGE> 62
increasing the number of shares of capital stock and the number of shares of
capital stock designated as "Class A Common Stock" to an amount which, after
giving effect to the exercise, exchange or conversion of all Convertible
Securities then outstanding and the conversion of all shares of Class B Common
Stock then outstanding into shares of Class A Common Stock, would be sufficient
to permit the conversion, at the then applicable Conversion Rate, of all shares
of Series E Preferred Stock then outstanding into shares of Class A Common
Stock.
"Average Quoted Price", when used with respect to the Class A Common
Stock, shall mean the average of the Quoted Prices of the Class A Common Stock
for the most recent period of five trading days on which shares of such class
trade ending three Business Days prior to the Redemption Date, appropriately
adjusted to take into account the actual occurrence, during the period
following the first of such five trading days and ending on the Business Day
immediately preceding such Special Redemption Date, of any event of a type
described in paragraph 7. The "Quoted Price" of a share of Class A Common Stock
on any day means the last sale price (or, if no sale price is reported, the
average of the high and low bid prices) of the Class A Common Stock, on such
day as reported on the National Association of Securities Dealers, Inc.
Automated Quotation System, or if the Class A Common Stock is listed on an
exchange, as reported in the composite transactions for the principal exchange
on which such stock is listed.
"Board of Directors" shall mean the Board of Directors of the
Corporation and, unless the context indicates otherwise, shall also mean, to
the extent permitted by law, any committee thereof authorized, with respect to
any particular matter, to exercise the power of the Board of Directors of the
Corporation with respect to such matter.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in Denver, Colorado are not required to be
open.
"Capital stock shall mean any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Certificate" shall mean the Restated Certificate of Incorporation of
the Corporation, as it may from time to time hereafter be amended or restated.
"Class A Common Stock" shall mean the Class A Common Stock, par value
$1.00 per share, of the Corporation, which term shall include, where
appropriate, in the case of any reclassification, recapitalization or other
change in the Class A Common Stock, or in the case of a consolidation or merger
of the Corporation with or into another Person affecting the Class A Common
Stock, such capital stock to which a holder of Class A Common Stock shall be
entitled upon the occurrence of such event.
"Class A Preferred Stock shall mean the Class A Preferred Stock, par
value $.01 per share, of the Corporation.
-2-
<PAGE> 63
"C[ass B Common Stock" shall mean the Class B Common Stock, par value
$1.00 per share, of the Corporation, which term shall include, where
appropriate, in the case of any reclassification, recapitalization or other
change in the Class B Common Stock, or in the case of a consolidation or merger
of the Corporation with or into another Person affecting the Class B Common
Stock, such capital stock to which a holder of Class B Common Stock shall be
entitled upon the occurrence of such event.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.O1 per share, of
the Corporation.
"Convertible Securities" shall mean securities, other than the Class B
Common Stock, that are convertible into or exchangeable for Class A Common
Stock.
"Dividend Payment Date" shall mean, for any Dividend Period, the last
day of such Dividend Period which shall be the first day of March of each year,
commencing with March 1, 1995, or the next succeeding Business Day if any such
day is not a Business Day.
"Dividend Period" shall mean the period from the Issue Date to and
including the first Dividend Payment Date and each annual period between
consecutive Dividend Payment Dates.
"Issue Date" shall mean the date on which shares of Series E Preferred
Stock are first issued.
"Junior Stock" shall mean (i) the Class A Common Stock, (ii) the Class
B Common Stock, (iii) the Class B Preferred Stock, (iv) any other class or
series of capital stock, whether now existing or hereafter created, of the
Corporation, other than (A) the Series E Preferred Stock, (B) any class or
series of Parity Stock (except to the extent provided under clause (v) hereof)
and (C) any Senior Stock, and (v) any class or series of Parity Stock to the
extent that it ranks junior to the Series E Preferred Stock as to dividend
rights, rights of redemption or rights on liquidation, as the case may be. For
purposes of clause (v) above, a class or series of Parity Stock shall rank
junior to the Series E Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation if the holders of shares of Series E
Preferred Stock shall be entitled to dividend payments, payments on redemption
or payments of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or priority to the
holders of shares of such class or series.
"Liquidation Preference" measured per share of the Series E Preferred
Stock as of any date in question (the "Determination Date") shall mean an
amount equal to the sum of (a) the Stated Liquidation Value of such share, plus
(b) an amount equal to all dividends accrued on such share which pursuant to
paragraph 3(b) have been added to and remain a part of the Liquidation
Preference as of the Determination Date, plus (c) for purposes of determining
the amounts payable pursuant to paragraph 4 and paragraph 5 and the definition
of Redemption Price, an amount equal to all unpaid dividends accrued on such
share during the period from the immediately preceding Dividend Payment Date
(or the Issue Date if the Determination Date is
-3-
<PAGE> 64
on or prior to the first Dividend Payment Date) through and including the
Determination Date, and, in the case of clauses (b) and (c) hereof, whether or
not such unpaid dividends have been earned or declared or there are any
unrestricted funds of the Corporation legally available for the payment of
dividends. In connection with the determination of the Liquidation Preference
of a share of Series E Preferred Stock upon redemption or upon liquidation,
dissolution or winding up of the Corporation, the Determination Date shall be
the applicable date of redemption or the date of distribution of amounts
payable to stockholders in connection with any such liquidation, dissolution or
winding up.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"Officers' Certificate" shall mean a certificate signed by the
Chairman of the Board or the President of the Corporation and by the Treasurer
of the Corporation.
"Opinion of Counsel" shall mean a written opinion from legal counsel
selected by the Corporation. The counsel may be an employee of or counsel to
the Corporation.
"Parity Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created, of the Corporation ranking on a
parity basis with the Series E Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation. Capital stock of any class or series shall
rank on a parity as to dividend rights, rights of redemption or rights on
liquidation with the Series E Preferred Stock, whether or not the dividend
rates, dividend payment dates, redemption or liquidation prices per share or
sinking fund or mandatory redemption provisions, if any, are different from
those of the Series E Preferred Stock, if the holders of shares of such class
or series shall be entitled to dividend payments, payments on redemption or
payments of amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in proportion to their respective
accumulated and accrued and unpaid dividends, redemption prices or liquidations
prices, respectively, without preference or priority, one over the other, as
between the holders of shares of such class or series and the holders of Series
E Preferred Stock. No class or series of capital stock that ranks junior to the
Series E Preferred Stock as to rights on liquidation shall rank or be deemed to
rank on a parity basis with the Series E Preferred Stock as to dividend rights
or rights of redemption, unless the instrument creating or evidencing such
class or series of capita[ stock otherwise expressly provides.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or agency or political subdivision thereof, or other entity, whether
acting in an individual, fiduciary, or other capacity.
"Record Date" for the dividends payable on any Dividend Payment Date
means the fifteenth day of the month preceding the month during which such
Dividend Payment Date shall occur, or if any such day is not a Business Day,
then on the next preceding Business Day, as and if designated by the Board of
Directors.
-4-
<PAGE> 65
"Redemption Date" as to any share of Series E Preferred Stock shall
mean the date fixed for redemption of such share pursuant to paragraph 5(a),
provided that no such date will be a Redemption Date unless the applicable
Redemption Price is actually paid in full on such date.
"Redemption Price" as to any share of Series E Preferred Stock which
is to be redeemed on any Redemption Date shall mean the Liquidation Preference
thereof on such Redemption Date.
"Senior Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created, of the Corporation ranking prior to
the Series E Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation. Capital stock of any class or series shall rank prior
to the Series E Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation if the holders of shares of such class or series shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Corporation,
as the case may be, in preference or priority to the holders of shares of
Series E Preferred Stock. No class or series of capital stock that ranks on a
parity basis with or junior to the Series E Preferred Stock as to rights on
liquidation shall rank or be deemed to rank prior to the Series E Preferred
Stock as to dividend rights or rights of redemption, notwithstanding that the
dividend rate, dividend payment dates, sinking fund provisions, if any, or
mandatory redemption provisions thereof are different from those of the Series
E Preferred Stock, unless the instrument creating or evidencing such class or
series of capital stock otherwise expressly provides.
"Share" shall mean one share of Series E Preferred Stock of the
Corporation.
"Special Record Date" has the meaning ascribed to such term in
paragraph 3(b).
"Stated Liquidation Value" of a share of Series E Preferred Stock
means $22,303.
"Subsidiary" of any Person shall mean (i) a corporation a majority of
the capital stock of which, having voting power under ordinary circumstances to
elect directors, is at the time, directly or indirectly, owned by such Person
and/or one or more Subsidiaries of such Person and (ii) any other Person (other
than a corporation) in which such Person and/or one or more Subsidiaries of
such Person, directly or indirectly, has (x) a majority ownership interest or
(y) the power to elect or direct the election of a majority of the members of
the governing body of such first-named Person.
"TCI Holder" shall mean the Corporation and each Subsidiary of the
Corporation.
3. Dividends.
(a) Dividends Rights; Dividend Payment Dates.
Subject to the prior preferences and other rights of any Senior Stock and the
provisions of Paragraph 6 hereof, the holders of Series E Preferred Stock shall
be entitled to receive, when and as declared by the
-5-
<PAGE> 66
Board of Directors, out of unrestricted funds legally available therefor,
cumulative dividends, in preference to dividends on any Junior Stock, that
shall accrue on each share of Series E Preferred Stock at the rate of 5.0% per
annum of the Stated Liquidation Value of such share from the Issue Date to and
including the date on which the Liquidation Preference of such share is made
available (whether on liquidation, dissolution, or winding up of the
Corporation or, in the case of paragraph 5, upon the applicable Redemption
Date). Accrued dividends on the Series E Preferred Stock will be payable, as
provided in paragraph 3(c) below, annually on each Dividend Payment Date to the
holders of record of the Series E Preferred Stock as of the close of business
on the Record Date for such dividend payment. Dividends shall be fully
cumulative and shall accrue (without interest or compounding) on a daily basis
without regard to the occurrence of a Dividend Payment Date and whether or not
such dividends are declared and whether or not there are any unrestricted funds
of the Corporation legally available for the payment of dividends. The amount
of dividends "accrued" as of the first Dividend Payment Date and as of any date
that is not a Dividend Payment Date shall be calculated on the basis of the
foregoing rate per annum for the actual number of days elapsed from the Issue
Date (in the case of the first Dividend Payment Date and any date prior to the
first Dividend Payment Date) or the last preceding Dividend Payment Date (in
the case of any other date) to and including the date as of which such
determination is to be made, based on a 365- or 366-day year, as the case may
be.
(b) SPECIAL RECORD DATE. On each Dividend Payment
Date, all dividends that have accrued on each share of Series E Preferred Stock
during the immediately preceding Dividend Period shall, to the extent not paid
as provided in paragraph 3(c) below on such Dividend Payment Date for any
reason (whether or not such unpaid dividends have been earned or declared or
there are any unrestricted funds of the Corporation legally available for the
payment of dividends), be added to the Liquidation Preference of such share and
will remain a part thereof until such dividends are paid as provided in
paragraph 3(c) below. No interest or additional dividends will accrue or be
payable with respect to any dividend payment on the Series E Preferred Stock
that may be in arrears or with respect to that portion of any other payment on
the Series E Preferred Stock that is in arrears which consist of accumulated or
accrued and unpaid dividends. Such accumulated or accrued and unpaid dividends
may be declared and paid at any time (subject to the rights of any Senior Stock
and, if applicable, to the concurrent satisfaction of any dividend arrearages
then existing with respect to any Parity Stock which ranks on a parity basis
with the Series E Preferred Stock as to the payment of dividends) without
reference to any regular Dividend Payment Date, to holders of record as of the
close of business on such date, not more than 45 days nor less than 10 days
preceding the payment date thereof, as may be fixed by the Board of Directors
(the "Special Record Date"). Notice of each Special Record Date shall be given,
not more than 45 days nor less than of days prior thereto, to the holders of
record of the shares of Series E Preferred Stock.
(c) METHOD OF PAYMENT. AlI dividends payable with
respect to the shares of Series E Preferred Stock shall be declared and paid in
cash. All dividends paid with respect to the shares of Series E Preferred Stock
pursuant to this paragraph 3 shall be paid pro rata to all the holders of
shares of Series E Preferred Stock outstanding on the applicable Record Date or
Special Record Date, as the case may be.
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4. Distributions Upon Liquidation Dissolution or Winding Up.
Subject to the prior payment in full of the preferential
amounts to which any Senior Stock is entitled, in the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary, or
involuntary, the holders of Series E Preferred Stock shall be entitled to
receive from the assets of the Corporation available for distribution to
stockholders, before any payment or distribution, shall be made to the holders
of any Junior Stock, an amount in cash or property, at its fair market value, as
determined by the Board of Directors in good faith, or a combination thereof,
per share, equal to the Liquidation Preference of a share of Series E Preferred
Stock as of the date of payment or distribution, which payment or distribution
shall be made pari passu with any such payment or distribution made to the
holders of any Parity Stock ranking on a parity basis with the Series E
Preferred Stock with respect to distributions upon liquidation, dissolution or
winding up of the Corporation. The holders of Series E Preferred Stock shall be
entitled to no other or further distribution of or participation in any
remaining assets of the Corporation after receiving the Liquidation Preference
per share. If, upon distribution of the Corporation's assets in liquidation,
dissolution or winding up, the assets of the Corporation to be distributed
among the holders of the Series E Preferred Stock and to all holders of any
Parity Stock ranking on a parity basis with the Series E Preferred Stock with
respect to distributions upon liquidation, dissolution or winding up shall be
insufficient to permit payment in full to such holders of the respective
preferential amounts to which they are entitled, then the entire assets of the
Corporation to be distributed to holders of the Series E Preferred Stock and
such Parity Stock shall be distributed pro rata to such holders based upon the
aggregate of the full preferential amounts to which the shares of Series E
Preferred Stock and such Parity Stock would otherwise respectively be entitled.
Neither the consolidation or merger of the Corporation with or into any other
corporation or corporations nor the sale, transfer or lease of all or
substantially all of the assets of the Corporation shall itself be deemed to be
a liquidation, dissolution or winding up of the Corporation within the meaning
of this paragraph 4. Notice of the liquidation, dissolution or winding up of
the Corporation shall be given, not less than 20 days prior to the date on
which such liquidation, dissolution or winding up is expected to take place or
become effective, to the holders of record of the shares of Series E Preferred
Stock.
5. Redemption.
(a) OPTIONAL REDEMPTION. Subject to the rights of any
Senior Stock and the provisions of paragraph 6, the shares of Series E
Preferred Stock may be redeemed, at the option of the Corporation by the action
of the Board of Directors, in whole or from time to time in part, on any
Business Day occurring after the Issue Date, at the Redemption Price on the
Redemption Date. If less than all outstanding shares of Series E Preferred
Stock are to be redeemed on any Redemption Date, the shares of Series E
Preferred Stock to be redeemed shall be chosen pro rata among all holders of
Series E Preferred Stock. The Corporation shall not be required to register a
transfer of (i) any shares of Series E Preferred Stock for a period of 15 days
next preceding any selection of shares of Series E Preferred Stock to be
redeemed or (ii) any shares of Series E Preferred Stock selected or called for
redemption.
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(b) NOTICE OF REDEMPTION. Notice of redemption shall be
given by or on behalf of the Corporation, not more than 60 days nor less than 30
days prior to the Redemption Date, to the holders of record of the shares of
Series E Preferred Stock to be redeemed; but no defect in such notice or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of any shares of Series E Preferred Stock. In addition to any information
required by law or by the applicable rules of any national securities exchange
or national interdealer quotation system on which the Series E Preferred Stock
may be listed or admitted to trading or quoted, such notice shall set forth the
Redemption Price, the Redemption Date, the number of shares to be redeemed, the
portion of the Redemption Price, if any, which the Corporation has elected to
pay through the issuance of Class A Common Stock and the place which the shares
called for redemption will, upon presentation and surrender of the stock
certificates evidencing such shares, be redeemed. In the event that fewer than
the total number of shares of Series E Preferred Stock represented by a
certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(c) DEPOSIT OF REDEMPTION PRICE. If notice of any
redemption by the Corporation pursuant to this paragraph 5 shall have been
given as provided in paragraph 5(b) above, and if on or before the Redemption
Date specified in such notice an amount in cash sufficient to redeem in full on
the Redemption Date at the Redemption Price all shares of Series E Preferred
Stock called for redemption shall have been set apart so as to be available for
such purpose and only for such purpose, then effective as of the close of
business on the Redemption Date, the shares of Series E Preferred Stock called
for redemption, notwithstanding that any certificate therefor shall not have
been surrendered for cancellation, shall no longer be deemed outstanding, and
the holders thereof shall cease to be stockholders with respect to such shares
and all rights with respect to such shares shall forthwith cease and terminate,
except the right of the holders thereof to receive the Redemption Price of such
shares, without interest, upon the surrender of certificates representing the
same.
(d) REDEMPTION BY ISSUANCE OF CLASS A COMMON STOCK.
Subject to compliance with the conditions contained in this paragraph 5(d), the
Corporation may elect to pay the Redemption Price (or designated portion
thereof) of the shares of Series E Preferred Stock called for redemption by
issuing to the holder thereof, in respect of his shares to be redeemed, a number
of shares of Class A Common Stock equal to the aggregate Redemption Price (or
designated portion thereof) of such shares divided by the Average Quoted Price
of a share of Class A Common Stock. No fractional shares of Class A Common
Stock or scrip shall be issued upon such redemption. As to any final fraction
of a share of Class A Common Stock that would otherwise be issuable to a holder
upon redemption of his shares of Series E Preferred Stock (determined on the
basis of the total number of such holder's shares of Series E Preferred Stock
in respect of which shares of Class A Common Stock are issuable), the
Corporation shall pay an amount in cash or by its check equal to the same
fraction of the Average Quoted Price of a share of Class A Common Stock.
The Corporation's right to elect to pay the Redemption Price (or
designated portion thereof) of the shares of Series E preferred Stock through
the issuance of shares of Class A
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Common Stock shall be conditioned upon: (i) the Corporation's having timely
given a Redemption Notice setting forth such election as provided in paragraph
5(b), (ii) the Corporation's having obtained and filed, on or before the
Redemption Date, at the office of the redemption agent for the Series E
Preferred Stock (or with the books of the Corporation if there is no redemption
agent) an Opinion of Counsel to the effect that (A) the shares of Class A
Common Stock to be issued upon such redemption have been duly authorized and,
when issued and delivered in payment of the Redemption Price (or designated
portion thereof) of the shares of Series E Preferred Stock to be redeemed, will
be validly issued, fully paid and non-assessable and free from preemptive
rights, (B) that the issuance and delivery of such shares of Class A Common
Stock upon such redemption of shares of Series E Preferred Stock will not
violate the laws of the state of incorporation of the Corporation and (C),
unless at the time the Redemption Notice is given all shares of the Series E
Preferred Stock are owned by one or more TCI Holders, that the issuance and
delivery of the shares of Class A Common Stock upon such redemption of shares
of Series E Preferred Stock is exempt from the resignation or qualification
requirements of the 1933 Act and applicable state securities laws or, if no
such exemption is available, that the shares of Class A Common Stock to be
issued have been duly registered or qualified under the 1933 Act and such
applicable state securities laws, and (iii) the Corporation's having filed, on
or before the Redemption Date, at the office of such redemption agent (or with
the books of the Corporation if there is no redemption agent), an Officers'
Certificate setting forth the number of shares of Class A Common Stock to be
issued in payment of the Redemption Price (or designated portion thereof) of
each share of Series E Preferred Stock and the method of determining the same
(consistent with the provisions hereof). If the foregoing conditions have not
been satisfied prior to or on the Redemption Date, the Redemption Price for the
shares of Series E Preferred Stock (or portion thereof designated to be paid
in Class A Common Stock) shall be paid in cash.
(e) STATUS OF REDEEMED SHARES. All shares of Series E
Preferred Stock redeemed, exchanged, purchased or otherwise acquired by the
Corporation shall be retired and shall be restored to the status of authorized
and unissued shares of Series Preferred Stock (and may be reissued as part of
another series of the preferred stock of the Corporation, but such shares shall
not be reissued as Series E Preferred Stock).
6. Limitations on Dividends and Redemptions.
If at any time the Corporation shall have failed to pay, or
declare and set aside the consideration sufficient to pay, full cumulative
dividends for all prior dividend periods on any Parity Stock which by the terms
of the instrument creating or evidencing such Parity Stock is entitled to the
payment of such cumulative dividends prior to the redemption, exchange,
purchase or other acquisition of the Series E Preferred Stock, and until full
cumulative dividends on such Parity Stock for all prior dividend periods are
paid, or declared and the consideration sufficient to pay the same in full is
set aside so as to be available for such purpose and no other purpose, neither
the Corporation nor any Subsidiary thereof shall redeem, exchange, purchase or
otherwise acquire any shares of Series E Preferred Stock, Parity Stock or
Junior Stock, or set aside any money or assets for any such purpose pursuant to
paragraph 5 hereof. a sinking fund or otherwise, unless all then outstanding
shares of Series E Preferred Stock, of such Parity Stock
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and of any other class of series of Parity Stock that by the terms of the
instrument creating or evidencing such Parity Stock is required to be redeemed
under such circumstances are redeemed or exchanged pursuant to the terms hereof
and thereof.
If at any time the Corporation shall have failed to pay, or
declare and set aside the consideration sufficient to pay, full cumulative
dividends on the Series E Preferred Stock for all Dividend Periods ending on or
before the immediately preceding Dividend Payment Date, and until full
cumulative dividends on the Series E Preferred Stock for all Dividend Periods
ending on or before the immediately preceding Dividend Payment Date are paid,
or declared and the consideration sufficient to pay the same in full is set
aside so as to be available for such purpose and no other purpose, neither the
Corporation nor any Subsidiary thereof shall redeem, exchange, purchase or
otherwise acquire any shares of Series E Preferred Stock, Parity Stock or
Junior Stock, or set aside any money or assets for any such purpose, pursuant
to paragraph 5 hereof, a sinking fund or otherwise, unless all then outstanding
shares of Series E Preferred Stock and of any other class or series of Parity
Stock that by the terms of the instrument creating or evidencing such Parity
Stock is required to be redeemed under such circumstances are redeemed or
exchanged pursuant to the terms hereof and thereof.
If at any time the Corporation shall have failed to pay, or
declare and set aside the consideration sufficient to pay, full cumulative
dividends on the Series E Preferred Stock for all Dividend Periods ending on or
before the immediately preceding Dividend Payment Date, and until full
cumulative dividends on the Series E Preferred Stock for all Dividend Periods
ending on or before the immediately preceding Dividend Payment Date are paid,
or declared and the consideration sufficient to pay the same in full is set
aside for such purpose and no other purpose, the Corporation shall not declare
or pay any dividend on or make any distribution with respect to any Junior
Stock or Parity Stock or set aside any money or assets for any such purpose,
except that the Corporation may declare and pay a dividend on any Parity Stock
ranking on a parity basis with the Series E Preferred Stock with respect to
the right to receive dividend contemporaneously with the declaration and
payment of a dividend on the Series E Preferred Stock, provided that such
dividends are declared and paid pro rata so that the amount of dividends
declared and paid per share of the Series E Preferred Stock and such Parity
Stock shall in all cases bear to each other the same ratio that accumulated and
accrued and unpaid dividends per share on the Series E Preferred Stock and such
Parity Stock bear to each other.
If the Corporation shall fail to redeem on any date fixed for
redemption or exchange pursuant to paragraph 5 hereof any shares of Series E
Preferred Stock called for redemption on such date, and until such shares are
redeemed in full, the Corporation shall not redeem or exchange any Parity Stock
or Junior Stock or declare or pay any dividend on or make any distribution
with respect to any Junior Stock, or set aside any money or assets for any such
purpose, and neither the Corporation nor any Subsidiary thereof shall purchase
or otherwise acquire any Series E Preferred Stock, Parity Stock or Junior
Stock, or set aside any money or assets for any such purpose.
Neither the Corporation nor any Subsidiary thereof shall
redeem, exchange, purchase or otherwise acquire any Parity Stock or Junior
Stock, or set aside any money or assets
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for any such purpose, if after giving effect to such redemption, exchange,
purchase or other acquisition, the amount (as determined by the Board of
Directors in good faith) that would be available for distribution to the
holders of the Series E Preferred Stock upon liquidation, dissolution or
winding up of the Corporation if such liquidation, dissolution or winding up
were to occur on the date fixed for such redemption, exchange, purchase or
other acquisition of such Parity Stock or Junior Stock would be less than the
aggregate Liquidation Preference as of such date of all shares of Series E
Preferred Stock then outstanding.
Nothing contained in the first, fourth or fifth paragraph of
this paragraph 6 shall prevent (i) the payment of dividends on any Junior Stock
solely in shares of Junior Stock or the redemption, purchase or other
acquisition of Junior Stock solely in exchange for (together with a cash
adjustment for fractional shares, if any), or (but only in the case of the
first and fifth paragraphs hereof) through the application of the proceeds from
the sale of, shares of Junior Stock; or (ii) the payment of dividends on any
Parity Stock solely in shares of Parity Stock and/or Junior Stock or the
redemption, exchange, purchase or other acquisition of Series E Preferred Stock
or Parity Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first and fifth
paragraphs hereof) through the application of the proceeds from the sale of,
shares of Parity Stock and/or Junior Stock.
The provisions of the first paragraph of this paragraph 6 are
for the sole benefit of the holders of Series E Preferred Stock and Parity
Stock having the terms described therein and accordingly, at any time when
there are no shares of any such class or series of Parity Stock outstanding or
if the holders of each such class or series of Parity Stock have, by such vote
or consent of the holders thereof as may be provided for in the instrument
creating or evidencing such class or series, waived in whole or in part the
benefit of such provisions (either generally or in the specific instance), then
the provisions of the first paragraph of this paragraph 6 shall not (to the
extent waived, in the case of any partial waiver) restrict the redemption,
exchange, purchase or other acquisition of any shares of Series E Preferred
Stock, Parity Stock or Junior Stock. All other provisions of this paragraph 6
are for the sole benefit of the holders of Series E Preferred Stock and
accordingly, if the holders of shares of Series E Preferred Stock shall have
waived (as provided in paragraph 9) in whole or in part the benefit of the
applicable provisions, either generally or in the specific instance, such
provision shall not (to the extent of such waiver, in the case of a partial
waiver) restrict the redemption, exchange, purchase or other acquisition of or
declaration, payment or making of any dividends or distributions on the Series
E Preferred Stock, any Parity Stock or any Junior Stock.
7. Conversion.
(a) Unless previously called for redemption as provided
in Section 5 hereof, shares of Series E Preferred Stock shall be convertible,
at the option of the holder thereof, at any time subsequent to the Amendment
Date in such manner and upon such terms and conditions as hereinafter provided
in this paragraph 7, into fully paid and non-assessable full shares of Class A
Common Stock. No shares of Class A Common Stock shall be issued in respect of
the conversion of the Series E Preferred Stock after the fifteenth Business
Day (the "Cut-off Date") preceding the date fixed for redemption; provided that
the conversion of Shares
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surrendered for conversion in accordance with paragraph 7 after the Cut-off
Date shall be given effect as of the date of such surrender if the Redemption
Price to be paid, or to be irrevocably set apart in trust for the benefit of
the holders of Shares to be so redeemed, has not been paid or so set apart on
or before such date fixed for redemption. In case cash, securities or property
other than Class A Common Stock shall be payable, deliverable or issuable upon
conversion as provided herein, then all references to Class A Common Stock in
this paragraph 7 shall be deemed to apply, so far as appropriate and as nearly
as may be, to such cash, property or other securities.
(b) Subject to the provisions for adjustment hereinafter
set forth in this paragraph 7, the Series E Preferred Stock may be converted
into Class A Common Stock at the initial conversion rate of 1,000 fully paid
and non-assessable shares of Class A Common Stock for one share of the Series
E Preferred Stock. (This conversion rate as from time to time adjusted
cumulatively pursuant to the provisions of this paragraph is hereinafter
referred to as the "Conversion Rate").
(c) In case after the Issue Date the Corporation shall
(i) pay a dividend or make a distribution on its outstanding shares of Class A
Common Stock in shares of its capital block or capital stock of any Subsidiary,
(ii) subdivide the then outstanding shares of Class A Common Stock into a
greater number of shares of Class A Common Stock, (iii) combine the then
outstanding shares of Class A Common Stock into a smaller number of shares of
Class A Common Stock, or (iv) issue by reclassification of its shares of Class
A Common Stock any shares of any other class of capital stock of the
Corporation (including any such reclassification in connection with a merger in
which the Corporation is the continuing corporation), then the Conversation
Rate in effect immediately prior to the opening of business on the record date
for such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that the holder of each
share of the Series E Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number and kind of shares of capital stock of
the Corporation (or capital stock of a Subsidiary) that such holder would have
owned or been entitled to receive immediately following such action had such
shares of Series E Preferred Stock been converted immediately prior to such
time. An adjustment made pursuant to this paragraph 7(c) for a dividend or
distribution shall become effective immediately after the record date for the
dividend or distribution and an adjustment made pursuant to this paragraph 7(c)
for a subdivision, combination or classification shall become effective
immediately after the effective date of the subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any action
listed above shall be taken.
(d) In case the Corporation shall after the Issue Date
issue any rights or warrants to all holders of shares of Class A Common Stock
entitling them (for a period expiring within 45 days after the record date for
the determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Class A Common Stock (or Convertible
Securities) at a price per share of Class A Common Stock (or having an initial
exercise price or conversion price per share of Class A Common Stock) less than
the then current market price per share of Class A Common Stock (as determined
in accordance with the provisions of paragraph 7(f) below) on such record date,
the number of shares of Class A
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Common Stock into which each Share shall thereafter be convertible shall be
determined by multiplying the number of shares of Class A Common Stock into
which such Share was theretofore convertible immediately prior to such record
date by a fraction of which the numerator shall be the number of shares of
Class A Common Stock outstanding on such record date plus the number of
additional shares of Class A Common Stock offered for subscription or purchase
(or into which the Convertible Securities so offered are initially
convertible) and of which the denominator shall be the number of shares of
Class A Common Stock outstanding on such record date plus the number of shares
of Class A Common Stock which the aggregate offering price of the total number
of shares of Class A Common Stock so offered (or the aggregate initial
conversion or exercise price of the Convertible Securities so offered) would
purchase at the then current market price per share of Class A Common Stock (as
determined in accordance with the provisions of paragraph 7(f) below) on such
record date. Such adjustment shall be made successively whenever any such
rights or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. In the event that all of the shares of Class A Common Stock
(or all of the Convertible Securities) subject to such rights or warrants have
not been issued when such rights or warrants expire (or, in the case of rights
or warrants to purchase Convertible Securities which have been exercised, all
of the shares of Class A Common Stock issuable upon conversion of such
Convertible Securities have not been issued prior to the expiration of the
conversion right thereof), then the Conversion Rate shall be readjusted
retroactively to be the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such rights or warrants been made on the basis
of the actual number of shares of Class A Common Stock (or Convertible
Securities) issued upon the exercise of such right or warrants (or the
conversion of such Convertible Securities); but such subsequent adjustment
shall not affect the number of shares of Class A Common Stock issued upon the
conversion of any Share prior to the date such subsequent adjustment is made.
(e) In case the Corporation shall distribute after the
Issue Date to all holders of shares of Class A Common Stock (including any such
distribution made in connection with a merger in which the Corporation is the
continuing corporation, other than a merger to which paragraph 7(g) is
applicable) any securities, evidences of its indebtedness or assets (other than
cash dividends out of earnings since the Issue Date (determined without regard
to gains on the sale of significant capital assets) or capital stock in respect
of which an adjustment is made pursuant to paragraph 7(c) hereof) or rights or
warrants to purchase shares of Class A Common Stock or Class B Common Stock or
securities convertible into shares of Class A Common Stock or Class B Common
Stock (excluding those referred to in paragraph 7(d) above), then in each such
case the number of shares of Class A Common Stock into which each Share shall
thereafter be convertible shall be determined by multiplying the number of
shares of Class A Common Stock into which such Share was theretofore
convertible immediately prior to the record date for the determination of
stockholders entitled to receive the distribution by a fraction of which the
numerator shall be the then current market price per share of Class A Common
Stock (as determined accordance with the provisions of paragraph 7(f) below) on
such record date and of which the denominator shall be such current market
price per share of Class A Common Stock less the fair market value on such
record date (as determined by the Board of Directors of the Corporation whose
determination shall be conclusive) of the portion of the securities, assets or
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evidences of indebtedness or rights and warrants so to be distributed
applicable to one share of Class A Common Stock. Such adjustment shall be made
successively whenever any such distribution is made and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such distribution.
(f) For the purpose of any computation under paragraph
7(d), (e) or (k), the current market price per share of Class A Common Stock at
any date shall be deemed to be the average of the daily closing prices for a
share of Class A Common Stock for the ten (10) consecutive trading days before
the day in question. The closing price for each day shall be the last reported
sale price regular way or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices regular way, in
either case on the composite tape, or if the shares of Class A Common Stock are
not quoted on the composite tape, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") on which the shares of Class A Common Stock are listed or
admitted to trading, or if they are not listed or admitted to trading on any
such exchange, the last reported sale price (or the average of the quoted
closing bid and asked prices if there were no reported sales) as reported by
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or any comparable system, or if the Class A Common Stock is not
quoted on NASDAQ or any comparable system, the average of the closing bid and
asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose or, in the absence of such quotations, such other method of determining
market value as the Board of Directors shall from time to time deem to be fair.
(g) In case of any reclassification or change in the
Class A Common Stock (other than any reclassification or change referred to in
paragraph 7(c) and other than a change in par value) or in case of any
consolidation of the Corporation with any other corporation or any merger of
the Corporation into another corporation or of another corporation into the
Corporation (other than a merger in which the Corporation is the continuing
corporation and which does not result in any reclassification or change (other
than a change in par value or any reclassification or change to which paragraph
7(c) is applicable) in the outstanding Class A Common Stock), or in case of any
sale or transfer to another corporation or entity (other than by mortgage or
pledge) of all or substantially all of the properties and assets of the
Corporation, in any such case after the Issue Date, the Corporation (or its
successor in such consolidation or merger) or the purchaser of such properties
and assets shall make appropriate provision so that the holder of a Share shall
have the right thereafter to convert such Share into the kind and amount of
shares of stock and other securities and property that such holder would have
owned immediately after such reclassification, change, consolidation, merger,
sale or transfer if such holder had converted such Share into Class A Common
Stock immediately prior to the effective date of such reclassification, change,
consolidation, merger, sale or transfer (assuming for this purpose (to the
extent applicable) that such holder failed to exercise any, rights of election
and received per share of Class A Common Stock the kind and amount of shares of
stock and other securities and property received per share by a plurality of
the non-electing shares), and the holders of the Series E Preferred Stock shall
have no other conversion rights under these provisions; provided, that
effective provision shall be made, in the Articles or Certificate of
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Incorporation of the resulting or surviving corporation or otherwise or in any
contracts of sale or transfer, so that the provisions set forth herein for the
protection of the conversion rights of the Series E Preferred Stock shall
thereafter be made applicable, as nearly as reasonably may be to any such other
shares of stock and other securities and property deliverable upon conversion
of the Series E Preferred Stock remaining outstanding or other convertible
preferred stock or other Convertible Securities received by the holders of
Series E Preferred Stock in place thereof; and provided, further, that any such
resulting or surviving corporation or purchaser shall expressly assume the
obligation to deliver, upon the exercise of the conversion privilege, such
shares, securities or property as the holders of the Series E Preferred Stock
remaining outstanding or other convertible preferred stock or other
convertible securities received by the holders in place thereof, shall be
entitled to receive pursuant to the provisions hereof, and to make provisions
for the protection of the conversion rights as above provided.
(h) Whenever the Conversion Rate or the conversion
privilege shall be adjusted as provided in paragraphs 7(c), (d), (e) or (g),
the Corporation shall promptly cause a notice to be mailed to the holders of
record of the Series E Preferred Stock describing the nature of the event
requiring such adjustment, the Conversion Rate in effect immediately thereafter
and the kind and amount of stock or other securities or property into which the
Series E Preferred Stock shall be convertible after such event. Where
appropriate, such notice may be given in advance and included as a part of a
notice required to be mailed under the provisions of paragraph 7(j).
(i) The Corporation may, but shall not be required to,
make any adjustment of the Conversion Rate if such adjustment would require an
increase or decrease of less than 1% in such Conversion Rate; provided however,
that any adjustments which by reason of this paragraph 7(i) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. In any case
in which this paragraph 7(i) shall require that an adjustment shall become
effective immediately after a record date for such event, the Corporation may
defer until the occurrence of such event (x) issuing to the holder of any
shares of Series E Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class A Common Stock or
other capital stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Class A Common Stock, or
other capital stock issuable upon such conversion before giving effect to such
adjustment and (y) paying to such holder cash in lieu of any fractional
interest to which such holder is entitled pursuant to paragraph 7(n); provided,
however, that, if requested by such holder, the Corporation shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares of Class A Common Stock or other
capital stock, and such cash, upon the occurrence of the event requiring such
adjustment.
(j) In case at any time:
(i) the Corporation shall take any action which
would require an adjustment in the Conversion Rate pursuant to this
paragraph;
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<PAGE> 76
(ii) there shall be any capital reorganization or
reclassification of the Class A Common Stock (other than a change in
par value), or any consolidation or merger to which the Corporation is
a party and for which approval of any shareholders of the Corporation
is required, or any sale, transfer or lease of all or substantially
all of the properties and assets of the Corporation, or a tender offer
for shares of Class A Common Stock representing, together with any
shares of Class B Common Stock tendered for in such tender offer, at
least a majority of the total voting power represented by the
outstanding shares of Class A Common Stock and Class B Common Stock
which has been recommended by the Board of Directors as being in the
best interests of the holders of Class A Common Stock; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any such event, the Corporation shall give written notice, in the
manner provided in paragraph 5 hereof, to the holders of the Series E Preferred
Stock at their respective addresses as the same appear on the books of the
Corporation, at least twenty days (or ten days in the case of a recommended
tender offer as specified in clause (ii) above) prior to any record date for
such action, dividend or distribution or the date as of which it is expected
that holders of Class A Common Stock of record shall be entitled to exchange
their shares of Class A Common Stock for securities or other property, if any,
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, transfer, lease, tender offer, dissolution, liquidation or winding up;
provided, however, that any notice required by any event described in clause
(ii) of this paragraph 7(j) shall be given in the manner and at the time that
such notice is given to the holders of Class A Common Stock. Without limiting
the obligations of the Corporation to provide notice of corporate actions
hereunder, the failure to give the notice required by this paragraph 7(j) or
any defect therein shall not affect the legality or validity of any such
corporate action of the Corporation or the vote upon such action.
(k) Before any holder of Series E Preferred Stock shall
be entitled to convert the same in Class A Common Stock, such holder shall
surrender the certificate or certificates for such Series E Preferred Stock at
the office of the Corporation or at the office of the transfer agent for the
Series E Preferred Stock, which certificate or certificates, if the Corporation
shall so request, shall be duly endorsed to the Corporation or in blank or
accompanied by proper instruments of transfer to the Corporation or in blank
(such endorsements or instruments of transfer to be in form satisfactory to the
Corporation), and shall give written notice to the Corporation at said office
that such holder elects to convert all or a part of the Shares represented by
said certificate or certificates in accordance with the terms of this paragraph
7, and shall state in writing therein the name or names in which such holder
wishes the certificates for Class A Common Stock to be issued. Every such
notice of election to convert shall constitute a contract between the holder of
such Series E Preferred Stock and the Corporation, whereby the holder of such
Series E Preferred Stock shall be deemed to subscribe for the amount of Class A
Common Stock which such holder shall be entitled to receive upon
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<PAGE> 77
conversion of the number of shares of Series E Preferred Stock to be converted,
and, in satisfaction of such subscription, to deposit the shares of Series E
Preferred Stock to be converted, and thereby the Corporation shall be deemed to
agree that the surrender of the shares of Series E Preferred Stock to be
converted shall constitute full payment of such subscription for Class A Common
Stock to be issued upon such conversion. The Corporation will as soon as
practicable after such deposit of a certificate or certificates for Series E
Preferred Stock, accompanied by the written notice and the statement above
prescribed, issue and deliver at the office of the Corporation or of said
transfer agent to the person for whose account such Series E Preferred Stock
was so surrendered, or to his nominee(s) or, subject to compliance with
applicable law, transferee(s), a certificate or certificates for the number of
full shares of Class A Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share as hereinafter provided.
If surrendered certificates for Series E Preferred Stock are converted only in
part, the Corporation will issue and deliver to the holder, or to his
nominee(s), without charge therefor, a new certificate or certificates
representing the aggregate of the unconverted Shares. Such conversion shall be
deemed to have been made as of the date of such surrender of the Series E
Preferred Stock to be converted; and the person or persons entitled to receive
the Class A Common Stock issuable upon conversion of such Series E Preferred
Stock shall be treated for all purposes as the record holder or holders of such
Class A Common Stock on such date.
Upon the conversion of any Share, the Corporation shall pay,
to the holder of record of such Share on the immediately preceding Record Date,
all accrued but unpaid dividends on such Share to the date of the surrender of
such Share for conversion. Such payment shall be made in cash or, at the
election of the Corporation, the issuance of certificates representing such
number of shares of Class A Common Stock as have an aggregate current market
price (as determined in accordance with paragraph 7(f)) on the date of issuance
equal to the amount of such accrued but unpaid dividends. Upon the making of
such payment to the person entitled thereto as determined pursuant to the first
sentence of this paragraph, no further dividends shall accrue on such Share or
to be payable to any other person.
The issuance of certificates for shares of Class A Common
Stock upon conversion of shares of Series E Preferred Stock shall be made
without charge for any issue, stamp or other similar tax in respect of such
issuance, provided, however, if any such certificate is to be issued in a name
other than that of the registered holder of the share or shares of Series E
Preferred Stock converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax which may be payable
in respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid.
The Corporation shall not be required to convert any shares of
Series E Preferred Stock, and no surrender of Series E Preferred Stock shall be
effective for that purpose, while the stock transfer books of the Corporation
are closed for any purpose; but the surrender of Series E Preferred Stock for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if
the conversion had been made on the date such Series E Preferred Stock was
surrendered.
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<PAGE> 78
(l) Promptly following the Amendment Date the Corporation
shall reserve and keep available at all times thereafter, solely for the
purpose of issuance upon conversion of the outstanding shares of Series E
Preferred Stock, such number of shares of Class A Common Stock as shall be
issuable upon the conversion of all outstanding Shares, provided that nothing
contained herein shall be construed to preclude the Corporation from satisfying
its obligations in respect of the conversion of the outstanding shares of
Series E Preferred Stock by delivery of shares of Class A Common Stock which
are held in the treasury of the Corporation. Promptly following the Amendment
Date, the Corporation shall take all such corporate and other actions as from
time to time may be necessary to insure that all shares of Class A Common
Stock issuable upon conversion of shares of Series E Preferred Stock at the
Conversion Rate in effect from time to time will, upon issue, be duly and
validly authorized and issued, fully paid and nonassessable and free of any
preemptive or similar rights.
(m) All shares of Series E Preferred Stock received by
the Corporation upon conversion thereof into Class A Common Stock shall be
retired and shall be restored to status of authorized and unissued shares of
preferred stock (and may be reissued as part of another series of the preferred
stock of the Corporation), but such shares shall not be reissued as Series E
Preferred Stock
(n) The Corporation shall not be required to issue
fractional shares of Class A Common Stock or scrip upon conversion of the
Series E Preferred Stock. As to any final fraction of a share of Class A Common
Stock which a holder of one or more Shares would otherwise be entitled to
receive upon conversion of such Shares in the same transaction, the Corporation
shall pay a cash adjustment in respect of such final fraction in an amount
equal to the same fraction of the market value of a full share of Class A
Common Stock. For purposes of this paragraph 7(n), the market value of a share
of Class A Common Stock shall be the last reported sale price regular way on
the business day immediately preceding the date of conversion, or, in case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices regular way on such day, in either case on the composite
tape, or if the shares of Class A Common Stock are not quoted on the composite
tape, on the principal United States securities exchange registered under the
Exchange Act on which the shares of Class A Common Stock are listed or admitted
to trading, or if the shares of Class A Common Stock are not listed or admitted
to trading on any such exchange, the last reported sale price (or the average of
the quoted last reported bid and asked prices if there were no reported sales)
as reported by NASDAQ or any comparable system, or if the Class A Common Stock
is not quoted on NASDAQ or any comparable system, the average of the closing
bid and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose or, in the absence of such quotations, such other method of determining
market value as the Board of Directors shall from time to time deem to be fair.
(o) If any shares of Class A Common Stock which would be
issuable upon conversion of Shares require registration with or approval of any
governmental authority before such shares may be issued upon conversion, the
Corporation will in good faith and as expeditiously as possible cause such
shares to be duly registered or approved, as the case may be. The Corporation
will endeavor to list the shares of Class A Common Stock required to be
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<PAGE> 79
delivered upon conversion of Shares prior to such delivery upon the principal
national securities exchange upon which the outstanding, Class A Common Stock
is listed at the time of such delivery.
8. Voting
(a) VOTING RIGHTS. The holders of Series E Preferred
Stock shall have no voting rights whatsoever, except as required by law and
except for the voting rights described in this paragraph 8; provided, however,
that the number of authorized shares of Series E Preferred Stock may be
increased or decreased (but not below the number of shares of Series E
Preferred Stock then outstanding) by the affirmative vote of the holders of
at least 66 2/3 of the total voting power of the then outstanding Voting
Securities (as defined in Article V, Section C of the Corporation's Restated
Certificate of Incorporation), voting together as a single class as provided in
Article IX of the Certificate. Without limiting the generality of the
foregoing, no vote or consent of the holders of Series E Preferred Stock shall
be required for (a) the creation of any indebtedness of any kind of the
Corporation (b) the creation or designation of any class or series of Senior
Stock, Parity Stock or Junior Stock, or (c) any amendment to the Certificate
that would increase the number of authorized shares of Preferred Stock or the
number of authorized shares of Series E Preferred Stock or that would decrease
the number of authorized shares of Preferred Stock or the number of authorized
shares of Series E Preferred Stock (but not below the number of shares of
Preferred Stock or Series E Preferred Stock, as the case may be, then
outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Series E
Preferred Stock shall have the right to vote at any annual or special meeting
of stockholders for the purpose of electing directors. Each share of Series E
Preferred Stock shall have one vote for such purpose, and shall vote as a
single class with any other class or series of capital stock of the Corporation
entitled to vote in any general election of directors, unless the instrument
creating or evidencing such class or series of capital stock otherwise
expressly provides.
9. Waiver.
Any provision which for the benefit of the holders of Series
E Preferred Stock, prohibits, limits or restricts actions by the Corporation,
or imposes obligations on the Corporation, may be waived in whole or in part,
or the application of all or any part of such provision in any particular
circumstance or generally may be waived, in each case with the consent of the
holders of at least a majority of the number of shares of Series E Preferred
Stock then outstanding (or such greater percentage thereof as may be required
by applicable law or any applicable rules of any national securities exchange
or national interdealer quotation system), either in writing or by vote at an
annual meeting or a meeting called for such purpose at which the holders of
Series E Preferred Stock shall vote as a separate class.
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<PAGE> 80
10. Method of Giving Notices.
Any notice required or permitted hereby to be given to the
holders of shares of Series E Preferred Stock shall be deemed duly given if
deposited in the United States mail, first class mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation or supplied by him in writing to the Corporation for the purpose
of such notice.
11. Exclusion of Other Rights.
Except as may otherwise be required by law and except for the
equitable rights and remedies which may otherwise be available to holders of
Series E Preferred Stock, the shares of Series E Preferred Stock shall not have
any designations, preferences, limitations or relative rights other than those
specifically set forth herein.
12. Heading of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
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<PAGE> 81
FURTHER RESOLVED, that the appropriate officers of the Corporation are
hereby authorized to execute and acknowledge a certificate setting forth these
resolutions and to cause such certificate to be filed and recorded, in
accordance with the requirements of Section 151(g) of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, duly authorized officer has
executed this certificate on this 11 day of October, 1994.
/s/ Larry Romrell
Name: Larry Romrell
Title: Executive Vice President
Attest: /s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Secretary
<PAGE> 82
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
CORRECTION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FOURTH DAY OF OCTOBER, A.D. 1994, AT 8:30 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
[Seal]
/s/ Edward J. Freel
Edward J. Freel, Secretary of State
AUTHENTICATION: 7278574
DATE: 10-24-94
<PAGE> 83
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 08:30 AM 10/24/1994
944202081 - 2371729
CERTIFICATE OF CORRECTION
Filed pursuant to Section 103(f)
of the Delaware General Corporation Law
with respect to a
CERTIFICATE OF DESIGNATION
of
TELE-COMMUNICATIONS, INC.
Whereas, on October 11, 1994, Tele-Communications, Inc. (the
"Corporation") filed with the Delaware Secretary of State a Certificate of
Designation (the "Certificate of Designation") authorizing the issuance of a
series of preferred stock of the Corporation designated "Redeemable Convertible
Preferred Stock, Series E;"
Whereas, such Certificate of Designation inaccurately stated
that the par value of the Redeemable Convertible Preferred Stock, Series E, is
$1.00 per share, when in fact the par value of the Redeemable Convertible
Preferred Stock, Series E, is $.01 per share;
Therefore, the Certificate of Designation is hereby corrected
in accordance with the provisions of Section 103(f) of the Delaware General
Corporation Law as follows:
1. The words "par value $1.00 per share" shall be
deleted from paragraph number 1 of the Certificate of Designation and the words
"par value $.01 per share" shall be substituted in their place.
Executed on the date set forth below by the undersigned duly
authorized officer of the Corporation.
Date: October 21, 1994 Signature: /s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Executive President
and General Counsel
<PAGE> 84
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
-------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-SIXTH DAY OF JANUARY, A.D. 1995, AT 10:55 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ Edward J. Freel
Edward J. Freel, SECRETARY OF STATE
AUTHENTICATION: 7387640
DATE: 01-26-95
<PAGE> 85
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED lO:55 AM 01/26/1995
950019173 - 2371729
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
--------------------
SETTING FORTH A COPY OF A RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED
AS "CONVERTIBLE PREFERRED STOCK,
SERIES D" ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
--------------------
The undersigned Executive Vice President of Tele-Communications, Inc.,
a Delaware corporation (the "Corporation"), hereby certifies that the Board of
Directors duly adopted the following resolutions creating a series of preferred
stock designated as "Convertible Preferred Stock, Series D":
"BE IT RESOLVED, that, pursuant to authority expressly granted by the
provisions of the Restated Certificate of Incorporation of this Corporation,
the Board of Directors hereby creates and authorizes the issuance of a series
of preferred stock, par value $.01 per share, of this Corporation, to consist
of 1,000,000 shares, and hereby fixes the designations, dividend rights, voting
powers, rights on liquidation and other preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions of the shares of such series (in addition to the
designations, preferences and relative, participating, limitations or
restrictions thereof set forth in the Restated Certificate of Incorporation
that are applicable to preferred stock of all series) as follows:
1. Designation. The designation of the series of preferred stock,
par value $.01 per share, of this Corporation authorized hereby is "Convertible
Preferred Stock, Series D" (the "Convertible Preferred Stock").
2. Certain Definitions. Unless the context otherwise requires,
the terms defined this Section 2 shall have the meanings herein specified:
Affiliate: As to any person or, entity, any other person or entity
which. directly or indirectly, controls, or is under common control with, or is
controlled by, such person or entity. As
<PAGE> 86
used in this definition, "control" (including, with its correlative meanings,
"controlling," "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person (whether through the ownership
of securities, or partnership or other ownership interest, by contract or
otherwise).
Board of Directors: The Board of Directors of this Corporation and any
authorized committee thereof.
Business Day: Any day other than a Saturday, Sunday, or holiday in
which banking institutions in Denver, Colorado, are closed for business.
Capital Stock: Any and all shares, interests, participations or other
equivalents (however designated) of corporate stock of this Corporation.
Class A Common Stock: The Class A Common Stock, par value $1.00 per
share, of this Corporation as such exists on the date of this Certificate of
Designation, and Capital Stock of any other class into which such Class A
Common Stock may thereafter have been changed.
Class B Common Stock: The Class B Common Stock, par value $1.00 per
share, of this Corporation as such exists on the date of this Certificate of
Designation, and Capital Stock of any other class into which such Class B
Common Stock may thereafter have been changed.
Class B Preferred Stock: The Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock, par value $.01 per share of the
Corporation.
Class C Preferred Stock: The Convertible Preferred Stock, Series C,
par value $.01 per share, of the Corporation.
Class E Preferred Stock: The Convertible Preferred Stock, Series E,
par value $.01 per share, of the Corporation.
Common Stock: The Class A Common Stock. Class B Common Stock and any
other class of Capital Stock of this Corporation designated as Common Stock.
Conversion Rate: As defined in Section 5(b).
Convertible Securities: Securities, other than the Class B Common
Stock, that are convertible into or exchangeable for Class A Common Stock.
Debt Instrument: Any bond, debenture, note, indenture, guarantee or
other instrument or agreement evidencing any Indebtedness of this Corporation,
whether existing at the Issue Date or thereafter created, incurred, assumed or
guaranteed.
2
<PAGE> 87
Dividend Payment Date: As defined in Section 3(b).
Dividend Period: The period from but excluding the First Accrual Date
to and including the first Dividend Payment Date and each six-month period from
but excluding the Dividend Payment Date for the preceding Dividend Period to
and including the Dividend Payment Date for such Dividend Period.
Exchange Option. As defined in Section 7(a).
Expiration Date. As defined in Section 7(d).
First Accrual Date: The Issue Date.
Indebtedness: Any (i) liability, contingent or otherwise, of this
Corporation (x) for borrowed money whether or not the recourse of the lender is
to the whole of the assets of this Corporation or only to a portion thereof),
(y) evidenced by a note, debenture or similar instrument (including a purchase
money obligation) given other than in connection with the acquisition of
inventory or similar property in the ordinary course of business, or (z) for
the payment of money relating to an obligation under a lease that is required
to be capitalized for financial accounting purposes in accordance with
generally accepted accounting principles; (ii) liability of others described in
the preceeding clause (i) which this Corporation has guaranteed or which is
otherwise its legal liability; (iii) obligations secured by a mortgage, pledge,
lien, charge or other encumbrance to which the property or assets of this
Corporation are subject whether or not the obligations secured thereby shall
have been assumed by or shall otherwise be this Corporation's legal liability;
and (iv) any amendment, renewal, extension or refunding of any liability of the
types referred to in clauses (i), (il) and (iii) above.
Issue Date: The first date on which any shares of the Convertible
Preferred Stock are first issued or deemed to have been issued.
Junior Securities: All shares of Common Stock, Class B Preferred Stock
and any other class or series of stock of this Corporation not entitled to
receive any dividends unless all dividends required to have been paid or
declared and set apart for payment on the Convertible Preferred Stock shall
have been so paid or declared and set apart for payment and, for purposes of
Section 4 hereof, any class or series of stock of this Corporation not entitled
to receive any assets upon liquidation, dissolution or winding up of the
affairs of this Corporation until the Convertible Preferred Stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
Liquidation Value: Measured per Share of the Convertible Preferred
Stock as of any particular date, the sum of (i) S300 plus (ii) an amount equal
to all dividends accrued on such Share through the Dividend Payment Date
immediately preceding the date on which the Liquidation Value is being
determined, which pursuant to Section 3(c) or (d) have been added to and remain
a part of
3
<PAGE> 88
the Liquidation Value as of such date, plus (iii), for purposes of determining
amounts payable pursuant to Sections 4 and 6 hereof, an amount equal to all
unpaid dividends accrued on the sum of the amounts specified in clauses (i) and
(ii) above to the date as of which the Liquidation Value is being determined.
Merger Agreement: The Agreement and Plan of Merger, dated as of August
8, 1994 among this Corporation, TCI Communications, Inc. and TeleCable
Corporation.
Mirror Preferred Stock. As defined in Section 7(c).
Option Notice. As defined in Section 7(d).
Parity Securities: Any class or series of stock of this Corporation
entitled to receive payment of dividends on a parity with the Convertible
Preferred Stock or entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of this Corporation on a parity with the Convertible
Preferred Stock. The Class A Preferred Stock, the Class C Preferred Stock and
Class E Preferred Stock rank on a parity basis with the Convertible Preferred
Stock.
Record Date: For dividends payable on any Dividend Payment Date, the
fifteenth day of the month preceding the month during which such Dividend
Payment Date shall occur.
Redemption Date: As to any Share, the date fixed for redemption of
such Share as specified in the notice of redemption given in accordance with
Section 6(d), provided that no such date will be a Redemption Date unless the
applicable Redemption Price is actually paid on such date or the consideration
sufficient for the payment thereof, and for no other purpose, has been
irrevocably set apart in trust for the benefit of the holders of Shares to be
redeemed, and if the Redemption Price is not so paid in full or the
consideration sufficient therefor so irrevocably set apart in trust for the
benefit of the holders of Shares to be redeemed, then the Redemption Date will
be the date on which such Redemption Price is fully paid or the consideration
sufficient for the payment thereof, and for no other purpose, has been
irrevocably set apart in trust for the benefit of the holders of Shares to be
redeemed; and provided, further that for purposes of Section 6(c) hereof, the
date fixed for redemption of Shares which are required to be redeemed pursuant
to such Section shall be the Business Day which is 20 Business Days after the
date this Corporation receives the notice referred to in such Section from the
holder of Shares therein specified.
Redemption Price: As to any Share that is to be redeemed on any
Redemption Date, the Liquidation Value as in effect on such Redemption Date;
provided, however, that for purposes of Section 5(p) hereof (but not Section
5(a) as it may refer to Section 5(p)) and this definition, the date otherwise
fixed for redemption of such Shares shall be deemed the Redemption Date in
respect of such Shares.
Rights. As defined in Section 7(a).
4
<PAGE> 89
Senior Securities: Any class or series of stock of this Corporation
ranking senior to the Convertible Preferred Stock in respect of the right to
receive payment of dividends or the right to participate in any distribution
upon liquidation, dissolution or winding up of the affairs of this Corporation.
Share: As defined in Section 3(a).
Special Liquidation Value: In respect of any Dividend Payment Date and
Shares, all accrued dividends not paid or irrevocably set apart in trust for
the benefit of the holders of Shares on or before such date.
Special Securities: Capital Stock (other than Class A Common Stock or
Class B Common Stock) of this Corporation or a Subsidiary thereof which (a) is
common stock of the issuer thereof or (b) participates in one or more business
operations of the issuer thereof in such a manner that if such operations were
owned by a corporation and such Capital Stock were issued thereby such Capital
Stock would be common stock of such corporation.
Special Record Date: As defined in Section 3(c).
Subsidiary: With respect to any person or entity, any corporation or
partnership more than 50% of whose outstanding voting securities or partnership
interests, as the case may be, are directly or indirectly owned by such person
or entity.
Successor Interest: As defined in Section S(g).
3. Dividends.
(a) Subject to the rights of any Parity Securities with respect to
dividends, the holders of the Convertible Preferred Stock shall be entitled to
receive, and, subject to any prohibition or restriction contained in any Debt
Instrument, this Corporation shall be obligated to pay, but only out of funds
legally available therefor, preferential cumulative cash dividends which shall
accrue as provided herein. Except as otherwise provided in Sections 3(c) or
3(d) hereof, dividends on each share of Convertible Preferred Stock
(hereinafter referred to as a "Share") shall accrue on a daily basis at the
rate of 51/2% per annum of the Liquidation Value to and including the date of
conversion thereof pursuant to Section 5 or the date on which the Liquidation
Value or Redemption Price of such Share is made available pursuant to Section 4
or 6 hereof, respectively. Dividends on the Convertible Preferred Stock shall
accrue as provided herein, whether or not such dividends have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally or contractually available for the payment of dividends and regardless
of the provisions of any Parity Securities or Debt Instrument.
(b) Accrued dividends on the Convertible Preferred Stock shall be
payable semiannually on the first day of each January and July or the
immediately succeeding Business Day.
5
<PAGE> 90
if such first day is not a Business Day (each such payment date being
hereinafter referred to as a "Dividend Payment Date"), commencing on July I,
1995 to the holders of record of the Convertible Preferred Stock as of the
close of business on the applicable Record Date. For purposes of determining
the amount of dividends "accrued" as of any date that is not a Dividend Payment
Date, such amount shall be calculated on the basis of the rate per annum
specified in Section 3(a) for actual days elapsed from but excluding the First
Accrual Date (in the case of any date prior to the first Dividend Payment Date)
or the last preceding Dividend Payment Date in respect of which dividends were
fully paid or irrevocably set apart in trust for the benefit of the holders of
Shares (or shares of Class A Common Stock were issued in respect of the Special
Liquidation Value as provided in Section 5(o) hereof), in the case of any other
date, to and including the date as of which such determination is to be made,
based on a 365-day year.
(c) If on any Dividend Payment Date this Corporation pursuant to
applicable law or the terms of any Debt Instrument shall be prohibited or
restricted from paying in cash the full dividends to which holders of the
Convertible Preferred Stock and any Parity Securities shall be entitled, the
amount available for such payment pursuant to applicable law and which is not
restricted by the terms of any Debt Instrument shall be distributed among the
holders of the Convertible Preferred Stock and such Parity Securities ratably
in proportion to the full amounts to which they would otherwise be entitled
except for the issuance of the Class A Common Stock issued in respect of the
partial conversion of Shares pursuant to Section 5(o) hereof. To the extent not
paid on each Dividend Payment Date, all dividends which have accrued on each
Share during the Dividend Period ending on such Dividend Payment Date will be
added cumulatively to the Liquidation Value of such Share and will remain a
part thereof until such dividends are paid. In the event that dividends are
not paid in full on two consecutive Dividend Payment Dates, dividends on that
portion of the Liquidation Value of each Share which consists of accrued
dividends that have theretofore been or thereafter are added to, and remain a
part of, the Liquidation Value in accordance with the preceding sentence shall
accrue cumulatively on a daily basis at the rate of ten percent (10%) per
annum, from and after such second consecutive Dividend Payment Date to and
including the date of conversion of such Share pursuant to Section 5 or the
date on which the Liquidation Value or Redemption Price of such Share is made
available pursuant to Section 4 or 6 hereof, respectively, unless such portion
of the Liquidation Value that consists of accrued unpaid dividends shall be
earlier paid in full. Such portion of the Liquidation Value as consists of
accrued unpaid dividends, may be declared and paid at any time on any Business
Day without reference to any regular Dividend Payment Date, to holders of
record as of the close of business on such date, not more than 50 days nor less
than 10 days preceding the payment date thereof, as may be fixed by the Board
of Directors of this Corporation (the "Special Record Date").
(d) In the event that on any date fixed for redemption of Shares
pursuant to Section 6 this Corporation shall fail to pay the Redemption Price
due and payable upon presentation and surrender of the stock certificates
evidencing Shares to be redeemed, then dividends on such Shares shall accrue
cumulatively on a daily basis at the rate of ten percent (10%) per annum of the
Liquidation Value thereof from and after such date fixed for redemption to and
including the date
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of conversion of such Shares pursuant to Section 5 or the date on which the
Liquidation Value or Redemption Price of such Shares is made available pursuant
to Section 4 or 6 hereof, respectively.
(e) Notice of each Special Record Date shall be mailed, in the
manner provided in Section 6(d), to the holders of record of the Convertible
Preferred Stock not less than 15 days prior thereto.
(f) As long as any Convertible Preferred Stock shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Security, nor
shall any shares of any Junior Security be purchased, redeemed, or otherwise
acquired for value by this Corporation, unless the holders of the Convertible
Preferred Stock shall have received all dividends to which they are entitled
pursuant to Section 3(a) hereof for all the Dividend Periods preceding the date
on which such dividend on the Junior Securities is to occur, or such dividends
shall have been declared and the consideration sufficient for the payment
thereof irrevocably set apart in trust for the benefit of the holders of Shares
so as to be available for the payment in full thereof and for no other purpose.
The provisions of this Section 3(f) shall not apply (i) to a dividend payable
in any junior Security, or (ii) to the repurchase, redemption or other
acquisition of shares of any Junior Security solely through the issuance of
Junior Securities (together with a cash adjustment for fractional shares, if
any) or through the application of the proceeds from the sale of Junior
Securities. This Corporation shall not permit a Subsidiary thereof to take any
action which this Corporation is prohibited by this Section 3(f) from taking.
4. Liquidation. Upon any liquidation, dissolution or winding up of
this Corporation, whether voluntary or involuntary, the holders of Convertible
Preferred Stock shall be entitled to be paid an amount in cash equal to the
aggregate Liquidation Value at the date fixed for liquidation of all Shares
outstanding before any distribution or payment is made upon any Junior
Securities, which payment shall be made pari passu with any such payment made
to the holders of any Parity Securities. The holders of Convertible Preferred
Stock shall be entitled to no other or further distribution of or participation
in any remaining assets of this Corporation after receiving the Liquidation
Value per Share. If upon such liquidation, dissolution or winding up, the
assets of this Corporation to be distributed among the holders of Convertible
Preferred Stock and to all holders of Parity Securities are insufficient to
permit payment in full to such holders of the aggregate preferential amounts
which they are entitled to be paid, then the entire assets of this Corporation
to be distributed to such holders shall be distributed ratably among them based
upon the full preferential amounts to which the shares of Convertible Preferred
Stock and such Parity Securities would otherwise respectively be entitled. Upon
any such liquidation, dissolution or winding up, after the holders of
Convertible Preferred Stock and Parity Securities have been paid in full the
amounts to which they are entitled, the remaining assets of this Corporation
may be distributed to holders of Junior Securities. This Corporation shall mail
written notice of such liquidation, dissolution or winding up to each record
holder of Convertible Preferred Stock not less than 30 days prior to the
payment date stated in such written notice. Neither the consolidation or merger
of this Corporation into or with any other corporation or corporations, nor the
sale, transfer or lease by this
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Corporation of all or any part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of this Corporation within the meaning
of this Section 4.
5. Conversion.
(a) Unless previously called for, or otherwise subject to,
redemption as provided in Section 6 hereof, the Convertible Preferred Stock may
be converted at any time or from time to time, in such manner and upon such
terms and conditions as hereinafter provided in this Section 5 into fully paid
and non-assessable full shares of Class A Common Stock. No Share of Class A
Common Stock shall be issued in respect of the conversion of the Convertible
Preferred Stock (other than pursuant to Section 5(o) or 5(p) hereof) after the
fifteenth Business Day (the "Cut-off Date") preceding the date fixed for
redemption; provided that the conversion of Shares surrendered for conversion
in accordance with Section 5 after the Cut-off Date shall be given effect as of
the date of such surrender if the Redemption Price to be paid, or to be
irrevocably set apart in trust for the benefit of the holders of Shares to be
so redeemed, has not been paid or so set apart on or before such date fixed for
redemption. In case cash, securities or property other than Class A Common
Stock shall be payable, deliverable or issuable upon conversion as provided
herein, then all references to Class A Common Stock in this Section 5 shall be
deemed to apply, so far as appropriate and as nearly as may be, to such cash,
property or other securities.
(b) Subject to the provisions for adjustment hereinafter set forth
in this Section 5, the Convertible Preferred Stock may be converted into Class
A Common Stock at the initial conversion rate of 10 fully paid and
non-assessable shares of Class A Common Stock for one share of the Convertible
Preferred Stock. (This conversion rate as from time to time adjusted
cumulatively pursuant to the provisions of this Section is hereinafter referred
to as the "Conversion Rate").
(c) In case after August 8, 1994 this Corporation shall (i) pay a
dividend or make a distribution on its outstanding shares of Class A Common
Stock in shares of its Capital Stock or capital stock of any Subsidiary, (ii)
subdivide the then outstanding shares of Class A Common Stock into a greater
number of shares of Class A Common Stock, (iii) combine the then outstanding
shares of Class A Common Stock into a smaller number of shares of Class A
Common Stock, or (iv) issue by reclassification of its shares of Class A Common
Stock any shares of any other class of Capital Stock of this Corporation
(including any such reclassification in connection with a merger in which this
Corporation is the continuing corporation), then the Conversion Rate in effect
immediately prior to the opening of business on the record date for such
dividend or distribution or the effective date of such subdivision, combination
or reclassification shall be adjusted so that the holder of each share of the
Convertible Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number and kind of shares of Capital Stock of this
Corporation (or capital stock of a Subsidiary) that such holder would have
owned or been entitled to receive immediately following such action had such
shares of Convertible Preferred Stock been converted immediately prior to such
time. An adjustment made pursuant to this Section 5(c) for a dividend or
distribution shall become effective immediately after the record date for the
dividend or distribution and an adjustment made pursuant
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to this Section 5(c) for a subdivision, combination or reclassification shall
become effective immediately after the effective date of the subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any action listed above shall be taken.
(d) In case this Corporation shall after August 8, 1994 issue any
rights or warrants to all holders of shares of Class A Common Stock entitling
them (for a period expiring within 45 days after the record date for the
determination of stockholders entitled to receive such rights or warrants) to
subscribe for or purchase shares of Class A Common Stock (or Convertible
Securities) at a price per share of Class A Common Stock (or having an initial
exercise price or conversion price per share of Class A Common Stock) less than
the then current market price per share of Class A Common Stock (as determined
in accordance with the provisions of Section 5(f) below) on such record date,
the number of shares of Class A Common Stock into which each Share shall
thereafter be convertible shall be determined by multiplying the number of
shares of Class A Common Stock into which such Share was theretofore
convertible immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of Class A Common Stock outstanding on
such record date plus the number of additional shares of Class A Common Stock
offered for subscription or purchase (or into which the Convertible Securities
so offered are initially convertible) and of which the denominator shall be the
number of shares of Class A Common Stock outstanding on such record date plus
the number of shares of Class A Common Stock which the aggregate offering price
of the total number of shares of Class A Common Stock so offered (or the
aggregate initial conversion or exercise price of the Convertible Securities so
offered) would purchase at the then current market price per share of Class A
Common Stock (as determined in accordance with the provisions of Section 5(f)
below) on such record date. Such adjustment shall be made successively whenever
any such rights or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such rights or warrants. In the event that all of the shares of Class A Common
Stock (or all of the Convertible Securities) subject to such rights or warrants
have not been issued when such rights or warrants expire (or, in the case of
rights or warrants to purchase Convertible Securities which have been
exercised, all of the shares of Class A Common Stock issuable upon conversion
of such Convertible Securities have not been issued prior to the expiration of
the conversion right thereof), then the Conversion Rate shall be readjusted
retroactively to be the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such rights or warrants been made on the basis
of the actual number of shares of Class A Common Stock (or Convertible
Securities) issued upon the exercise of such rights or warrants (or the
conversion of such Convertible Securities); but such subsequent adjustment
shall not affect the number of shares of Class A Common Stock issued upon the
conversion of any Share prior to the date such subsequent adjustment is made.
(e) In case this Corporation shall distribute after August 8, 1994
to all holders of shares of Class A Common Stock (including any such
distribution made in connection with a merger in which this Corporation is the
continuing corporation, other than a merger to which Section 5(g) is
applicable) any securities, evidences of its indebtedness or assets (other than
cash dividends out of earnings since July 1, 1994 (determined without regard to
gains on the sale of significant capital assets) or Capital Stock in respect of
which an adjustment is made pursuant to Section 5(c) hereof)
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or rights or warrants to purchase shares of Class A Common Stock or Class B
Common Stock or securities convertible into shares of Class A Common Stock or
Class B Common Stock (excluding those referred to in Section 5(d) above), then
in each such case the number of shares of Class A Common Stock into which each
Share shall thereafter be convertible shall be determined by multiplying the
number of shares of Class A Common Stock into which such Share was theretofore
convertible immediately prior to the record date for the determination of
stockholders entitled to receive the distribution by a fraction of which the
numerator shall be the then current market price per share of Class A Common
Stock (as determined in accordance with the provisions of Section 5(f) below)
on such record date and of which the denominator shall be such current market
price per share of Class A Common Stock less the fair market value on such
record date (as determined by the Board of Directors of this Corporation, whose
determination shall be conclusive) of the portion of the securities, assets or
evidences of indebtedness or rights and warrants so to be distributed
applicable to one share of Class A Common Stock. Such adjustment shall be made
successively whenever any such distribution is made and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such distribution.
(f) For the purpose of any computation under Section 5(d), (e),
(k), (o) or (p) or Section 7, the current market price per share of Class A
Common Stock at any date shall be deemed to be the average of the daily closing
prices for a share of Class A Common Stock for the ten (10) consecutive
trading days before the day in question. The closing price for each day shall
be the last reported sale price regular way or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the composite tape, or if the shares of
Class A Common Stock are not quoted on the composite tape, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on which the shares of Class A Common
Stock are listed or admitted to trading, or if they are not listed or admitted
to trading on any such exchange, the last reported sale price (or the average
of the quoted closing bid and asked prices if there were no reported sales) as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system, or if the Class A Common Stock is
not quoted on NASDAQ or any comparable system, the average of the closing bid
and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by this Corporation for
that purpose or, in the absence of such quotations, such other method of
determining market value as the Board of Directors shall from time to time deem
to be fair.
(g) In case of any reclassification or change in the Class A
Common Stock (other than any reclassification or change referred to in Section
5(c) and other than a change in par value) or in case of any consolidation of
this Corporation with any other corporation or any merger of this Corporation
into another corporation or of another corporation into this Corporation (other
than a merger in which this Corporation is the continuing corporation and which
does not result in any reclassificaiion or change (other than a change in par
value or any reclassification or change to which Section 5(c) is applicable) in
the outstanding Class A Common Stock), or in case of any sale or transfer to
another corporation or entity (other than by mortgage or pledge) of all or
substantially all of the properties and assets of this Corporation, in any
such case after August 8, 1994, this
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Corporation (or its successor in such consolidation or merger) or the purchaser
of such properties and assets shall make appropriate provision so that the
holder of a Share shall have the right thereafter to convert such Share into
the kind and amount of shares of stock and other securities and property (a
"Successor Interest") that such holder would have owned immediately after such
reclassification, change, consolidation, merger, sale or transfer if such
holder had converted such Share into Class A Common Stock immediately prior to
the effective date of such reclassification, change, consolidation, merger,
sale or transfer (assuming for this purpose (to the extent applicable) that
such holder failed to exercise any rights of election and received per share of
Class A Common Stock the kind and amount of shares of stock and other
securities and property received per share by a plurality of the non-electing
shares), and the holders of the Convertible Preferred Stock shall have no other
conversion rights under these provisions (other than pursuant to Section 5(o)
or 5(p) hereof, provided that upon any conversion effected pursuant to Section
5(o) or 5(p) after any event to which this Section 5(g) is applicable,
references in Section 5(o) and 5(o) to Class A Common Stock shall be deemed to
be references to Successor Interests); provided, that effective provision shall
be made, in the Articles or Certificate of Incorporation of the resulting or
surviving corporation or otherwise or in any contracts of sale or transfer, so
that the provisions set forth herein for the protection of the conversion
rights of the Convertible Preferred Stock shall thereafter be made applicable,
as nearly as reasonably may be to any such other shares of stock and other
securities and property deliverable upon conversion of the Convertible
Preferred Stock remaining outstanding or other convertible preferred stock or
other Convertible Securities received by the holders of Convertible Preferred
Stock in place thereof; and provided, further, that any such resulting or
surviving corporation or purchaser shall expressly assume the obligation to
deliver, upon the exercise of the conversion privilege, such shares, securities
or property as the holders of the Convertible Preferred Stock remaining
outstanding, or other convertible preferred stock or other convertible
securities received by the holders in place thereof, shall be entitled to
receive pursuant to the provisions hereof, and to make provisions for the
protection of the conversion rights as above provided.
(h) Whenever the Conversion Rate or the conversion privilege shall
be adjusted as provided in Sections 5(c), (d), (e) or (g), this Corporation
shall promptly cause a notice to be mailed to the holders of record of the
Convertible Preferred Stock describing the nature of the event requiring such
adjustment, the Conversion Rate in effect immediately thereafter and the kind
and amount of stock or other securities or property into which the Convcrtible
Preferred Stock shall be convertible after such event. Where appropriate, such
notice may be given in advance and included as a part of a notice required to
be mailed under the provisions of Section 5(j).
(i) This Corporation may, but shall not be required to, make any
adjustment of the Conversion Rate if such adjustment would require an increase
or decrease of less than 1% in such Conversion Rate; provided, however, that
any adjustments which by reason of this Section 5(i) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 5 shall be made to the nearest
cent or the nearest 1/100th of share, as the case may be. In any case in which
this Section 5(i) shall require that an adjustment shall become effective
immediately after a record date for such event, the Corporation
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may defer until the occurrence of such event (x) issuing to the holder of any
shares of Convertible Preferred Stock converted after such record date and
before the occurrence of such event the additional shares of Class A Common
Stock or other Capital Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of Class A Common
Stock, or other Capital Stock issuable upon such conversion before giving
effect to such adjustment and (y) paying to such holder cash in lieu of any
fractional interest to which such holder is entitled pursuant to Section 5(n);
provided, however, that, if requested by such holder, this Corporation shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares of Class A Common Stock
or other Capita] Stock, and such cash, upon the occurrence of the event
requiring such adjustment.
(j) In case at any time:
(i) this Corporation shall take any action which would
require an adjustment in the Conversion Rate pursuant to this Section;
(ii) there shall be any capital reorganization or
reclassification of the Class A Common Stock (other than a change in
par value), or any consolidation or merger to which the Corporation is
a party and for which approval of any shareholders of this Corporation
is required, or any sale, transfer or lease of all or substantially
all of the properties and assets of the Corporation, or a tender offer
for shares of Class A Common Stock representing, together with any
shares of Class B Common Stock tendered for in such tender offer, at
least a majority of the total voting power represented by the
outstanding shares of Class A Common Stock and Class B Common Stock
which has been recommended by the Board of Directors as being in the
best interests of the holders of Class A Common Stock; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of this Corporation;
then, in any such event, this Corporation shall give written notice, in the
manner provided in Section 6(d) hereof, to the holders of the Convertible
Preferred Stock at their respective addresses as the same appear on the books
of the Corporation, at least twenty days (or ten days in the case of a
recommended tender offer as specified in clause (ii) above) prior to any record
date for such action, dividend or distribution or the date as of which it is
expected that holders of Class A Common Stock of record shall be entitled to
exchange their shares of Class A Common Stock for securities or other property,
if any, deliverable upon such reorganization, reclassification, consolidation,
merger, sale, transfer, lease, tender offer, dissolution, liquidation or
winding up; provided, however, that any notice required by any event described
in clause (ii) of this Section 5(j) shall be given in the manner and at the
time that such notice is given to the holders of Class A Common Stock. Without
limiting
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the obligations of this Corporation to provide notice of corporate actions
hereunder, the failure to give the notice required by this Section 5(j) or any
defect therein shall not affect the legality or validity of any such corporate
action of the Corporation or the vote upon such action.
(k) Before any holder of Convertible Preferred Stock shall be
entitled to convert the same into Class A Common Stock (other than pursuant to
Section 5(o) hereof but including pursuant to Section 5(p) hereof), such holder
shall surrender the certificate or certificates for such Convertible Preferred
Stock at the office of this Corporation or at the office of the transfer agent
for the Convertible Preferred Stock, which certificate or certificates, if this
Corporation shall so request, shall be duly endorsed to this Corporation or in
blank or accompanied by proper instruments of transfer to this Corporation or
in blank (such endorsements or instruments of transfer to be in form
satisfactory to this Corporation), and shall give written notice to this
Corporation at said office that such holder elects to convert all or a part of
the Shares represented by said certificate or certificates in accordance with
the terms of this Section 5 (and in the case of a conversion pursuant to
Section 5(p) hereof, specifying that such conversion is made pursuant to
Section 5(p) hereof), and shall state in writing therein the name or names in
which such holder wishes the certificates for Class A Common Stock to be
issued. Every such notice of election to convert shall constitute a contract
between the holder of such Convertible Preferred Stock and this Corporation,
whereby the holder of such Convertible Preferred Stock shall be deemed to
subscribe for the amount of Class A Common Stock which such holder shall be
entitled to receive upon conversion of the number of shares of Convertible
Preferred Stock to be converted, and, in satisfaction of such subscription, to
deposit the shares of Convertible Preferred Stock to be converted, and thereby
this Corporation shall be deemed to agree that the surrender of the shares of
Convertible Preferred Stock to be converted shall constitute full payment of
such subscription for Class A Common Stock to be issued upon such conversion.
This Corporation will as soon as practicable after such deposit of a
certificate or certificates for Convertible Preferred Stock, accompanied by the
written notice and the statement above prescribed, or on the Dividend Payment
Date described in Section 5(o) hereof as contemplated in such Section, issue and
deliver at the office of this Corporation or of said transfer agent to the
person for whose account such Convertible Preferred Stock was so surrendered,
or to his nominee(s) or, subject to compliance with applicable law,
transferee(s), or the holders of Convertible Preferred Stock on the Record Date
in respect of the Dividend Payment Date described in Section 5(o) hereof, a
certificate or certificates for the number of full shares of Class A Common
Stock to which such holder shall be entitled, together with cash in lieu of any
fraction of a share as hereinafter provided. If surrendered certificates for
Convertible Preferred Stock are converted only in part, this Corporation will
issue and deliver to the holder, or to his nominee(s), without charge therefor,
a new certificate or certificates representing the aggregate of the unconverted
Shares. Such conversion shall be deemed to have been made as of the date of
such surrender of the Convertible Preferred Stock to be converted or on such
Dividend Payment Date described in Section 5(o) hereof, as the case may be; and
the person or persons entitled to receive the Class A Common Stock issuable
upon conversion of such Convertible Preferred Stock shall be treated for all
purposes as the record holder or holders of such Class A Common Stock on such
date.
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Upon the conversion of any Share (other than pursuant to Section 5(o)
or 5(p) hereof), this Corporation shall pay, to the holder of record of such
Share on the immediately preceding Record Date, if such date is after the most
recent Dividend Payment Date, or otherwise to the holder of record of such
Share as of the date of conversion, all accrued but unpaid dividends on such
Share to the date of the surrender of such Share for conversion. Such payment
shall be made in cash or, at the election of this Corporation, the issuance of
certificates representing such number of shares of Class A Common Stock as have
an aggregate current market price (as determined in accordance with Section
5(f)) on the date of issuance equal to the amount of such accrued but unpaid
dividends. Upon the making of such payment to the person entitled thereto as
determined pursuant to the first sentence of this paragraph, no further
dividends shall accrue on such Share or be payable to any other person.
The issuance of certificates for shares of Class A Common Stock upon
conversion of shares of Convertible Preferred Stock shall be made without
charge for any issue, stamp or other similar tax in respect of such issuance,
provided, however, if any such certificate is to be issued in a name other than
that of the registered holder of the share or shares of Converuble Preferred
Stock converted, the person or persons requesting the issuance thereof shall
pay to this Corporation the amount of any tax which may be payable in respect
of any transfer involved in such issuance or shall establish to the
satisfaction of this Corporation that such tax has been paid.
Except for conversion pursuant to Section 5(o) or 5(p) hereof, this
Corporation shall not be required to convert any shares of Convertible
Preferred Stock, and no surrender of Convertible Preferred Stock shall be
effective for that purpose, while the stock transfer books of this Corporation
are closed for any purpose; but the surrender of Convertible Preferred Stock
for conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if
the conversion had been made on the date such Convertible Preferred Stock was
surrendered.
(l) This Corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Convertible Preferred Stock, such number of shares of
Class A Common Stock as shall be issuable upon the conversion of all
outstanding Shares, provided that nothing contained herein shall be construed
to preclude this Corporation from satisfying its obligations in respect of the
conversion of the outstanding shares of Convertible Preferred Stock by delivery
of shares of Class A Common Stock which are held in the treasury of this
Corporation. This Corporation shall take all such corporate and other actions
as from time to time may be necessary to insure that aII shares of Class A
Common Stock issuable upon conversion of shares of Convertible Preferred Stock
al the Conversion Rate in effect from time to time will, upon issue, be duly
and validly authorized and issued, fully paid and nonassessable and free of any
preemptive or similar rights.
(m) All shares of Convertible Preferred Stock received by this
Corporation upon conversion thereof into Class A Common Stock shall be retired
and shall be restored to the status of authorized and unissued shares of
preferred stock (and may be reissued as part of another series
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of the preferred stock of this Corporation, but such shares shall not be
reissued as Convertible Preferred Stock).
(n) This Corporation shall not be required to issue fractional
shares of Class A Common Stock or scrip upon conversion of the Convertible
Preferred Stock. As to any final fraction of a share of Class A Common Stock
which a holder of one or more Shares would otherwise be entitled to receive
upon conversion of such Shares in the same transaction, this Corporation shall
pay a cash adjustment in respect of such final fraction in an amount equal to
the same fraction of the market value of a full share of Class A Common Stock.
For purposes of this Section 5(n), the market value of a share of Class A
Common Stock shall be the last reported sale price regular way on the business
day immediately preceding the date of conversion, or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices regular way on such day, in either case on the composite tape, or if the
shares of Class A Common Stock are not quoted on the composite tape, on the
principal United States securities exchange registered under the Exchange Act
on which the shares of Class A Common Stock are listed or admitted to trading,
or if the shares of Class A Common Stock are not listed or admitted to trading
on any such exchange, the last reported sale price (or the average of the
quoted last reported bid and asked prices if there were no reported sales) as
reported by NASDAQ or any comparable system, or if the Class A Common Stock is
not quoted on NASDAQ or any comparable system, the average of the closing bid
and asked prices as funfished by any member of the National Association
of Securities Dealers, Inc. selected from time to time by this Corporation for
that purpose or, in the absence of such quotations, such other method of
determining market value as the Board of Directors shall from time to time deem
to be fair.
(o) To the extent all cash dividends on the Convertible Preferred
Stock which have accrued on any Dividend Payment Date are not paid, or are not
irrevocably set apart in trust for the benefit of the holder of such Shares, on
such date, then each Share shall be deemed to be automatically partially
converted into a number of duly authorized, fully paid and non-assessable
shares of Class A Common Stock equal to the quotient obtained by dividing the
Special Liquidation Value in respect of such Share on such Dividend Payment
Date by 95% of the current market price of the Class A Common Stock on such
date (as determined in accordance with Section 5(f) hereof) and this
Corporation shall issue and deliver to the holder of record of such Share on
the Record Date in respect of such Dividend Payment Date a certificate
evidencing such number of shares of Class A Common Stock and payment in respect
of fractional shares as provided in Section 5(n) hereof. Upon the issuance of
such Class A Common Stock the dividend otherwise accrued on such Dividend
Payment Date shall for all purposes be deemed paid. Partial conversion of
Shares pursuant to this Section 5(o) shall not reduce Liquidation Value (except
for Special Liquidation Value to the extent included in Liquidation Value), or
(except as provided in the immediately preceding sentence) otherwise affect the
right of the holder of such Shares to convert the same pursuant to the other
provisions of this Section 5.
(p) If this Corporation fails on any Redemption Date to pay the
Redemption Price in respect of Shares otherwise called for redemption pursuant
to Section 6(a) or (b) hereof or which
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a holder elects to cause to be redeemed pursuant to Section 6(c) hereof, the
holder of such Shares may, in addition to any other right of conversion herein
contained, convert such Shares into a number of shares of Class A Common Stock
equal to the quotient obtained by dividing such Redemption Price by 95% of the
current market price (determined in accordance with Section 5(f) hereof) on
such Redemption Date. The holder's rights in this Section 5(p) shall be in
addition to any other rights such holder may have in respect of such failure.
(q) If any shares of Class A Common Stock which would be issuable
upon conversion of Shares require registration with or approval of any
governmental authority before such shares may be issued upon conversion
(whether or not, in the case of Section 5(o) or 5(p) hereof, any event giving
rise to such issuance has occurred or is likely to occur), this Corporation
will in good faith and as expeditiously as possible cause such shares to be
duly registered or approved, as the case may be. This Corporation will endeavor
to list the shares of Class A Common Stock required to be delivered upon
conversion of Shares prior to such delivery upon the principal national
securities exchange upon which the outstanding Common Stock is listed at the
time of such delivery.
6. Redemption.
(a) Subject to the provisions of Section 6(g), if at any time
after the third anniversary of the Issue Date the market value per share (as
defined below) of the Class A Common Stock shall have equaled or exceeded
$37.50 (as adjusted for dividends on Class A Common Stock payable in Class A
Common Stock, stock splits and reverse stock splits in respect of the Class A
Common Stock occurring after August 8, 1994) on any 20 out of a period of 30
consecutive Business Days ending within five days prior to the giving of a
notice of redemption pursuant to this Section, the shares of Convertible
Preferred Stock may be redeemed out of funds legally available therefor, at the
option of this Corporation by action of the Board of Directors, in whole or in
part, at the Redemption Price per Share as of the applicable Redemption Date.
If less than all Shares are to be redeemed, Shares shall be redeemed ratably
among the holders thereof. For purposes of this Section, the market values of
the Class A Common Stock shall be the last reported sale price of the Class A
Common Stock on the NASDAQ National Market System (or, if not quoted on the
NASDAQ National Market System, then on such exchange on which the Class A
Common Stock is listed as the Corporation may designate) on each such Business
Day or if there shall not have been a sale on any such Business Day, the market
value for that Business Day shall be the average of the bid and asked
quotations on the NASDAQ National Market System on that Business Day, or, if
the Class A Common Stock shall not then be quoted on the NASDAQ National Market
System or listed on any exchange, the market value shall be the highest bid
quotation in the over-the-counter market on such Business Day as reported by
National Quotation Bureau, Inc. or its successor or such other generally
accepted source of publicly reported bid and asked quotations as the
Corporation may reasonably designate.
(b) Subject to the provisions of Section 6(g), the shares of
Convertible Preferred Stock may be redeemed out of funds legally available
therefor, at the option of this Corporation by action of the Board of
Directors, in whole or from time to time in part, at any time after the
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<PAGE> 101
fifth anniversary of the Issue Date at the Redemption Price per Share as of the
applicable Redemption Date. If less than all outstanding Shares are to be
redeemed, Shares shall be redeemed ratably among the holders thereof.
(c) Subject to the rights of any Parity Securities and subject to
any prohibitions or restrictions contained in any Debt Instrument, at any time
on or after the tenth anniversary of the Issue Date, any holder of Shares shall
have the right, at such holder's option, to require redemption by this
Corporation at the Redemption Price per Share as of the applicable Redemption
Date of all or any portion of such holder's Shares having an aggregate
Liquidation Value in excess of $50,000 (or, if all of the Shares held by such
holder have an aggregate Liquidation Value of less than $50,000, all but not
less than all of such Shares) by written notice to this Corporation stating the
number of Shares to be redeemed. This Corporadon shall redeem, out of funds
legally available therefor, the Shares so requested to be redeemed on such date
within 20 Business Days following this Corporation's receipt of such notice;
provided, however, that notwithstanding the provisions of Section 5(p) hereof,
if this Corporation fails on the Redemption Date to pay the Redemption Price in
respect of Shares otherwise subject to redemption pursuant to this Section 6(c)
and fails irrevocably to set apart such Redemption Price in trust for the
benefit of the holders of such Shares, the holder of such Shares shall not
exercise the conversion rights provided for in Section 5(p) for a period of one
year from such date fixed for redemption (the "One-Year Period"); provided,
further, that nothing contained in this Section 6(c) shall (i) affect any other
rights of such holder, including, without limitation, the accrual of dividends
as provided in Section 3 hereof with respect to any Shares in respect of which
the Redemption Price has not been paid or funds irrevocably set apart in trust
for the benefit of the holders of such Shares, (ii) otherwise affect the right
of the holder to convert Shares or (iii) otherwise affect the right of the
holder of any Shares in respect of which the Redemption Price has not been paid
or funds irrevocably set apart in trust for the benefit of the holders of such
Shares to convert the same pursuant to the provisions of Section 5 following the
expiration of the One-Year Period. At any time during the One-Year-Period, this
Corporation may pay, out of funds legally available therefor, ratably among the
holders who have required Shares to be redeemed under this Section 6(c), the
Redemption Price for all or part of such Shares. If the funds of this
Corporation legally available for redemption of Shares are insufficient to
redeem the total number of shares required to be redeemed pursuant to this
Section 6(c), those funds which are legally available for redemption of such
Shares will be used to redeem the maximum possible number of such Shares ratably
among the holders who have required Shares to be redeemed under this Section
6(c). Without limiting the holders' rights pursuant to Section 5(p) hereof. at
any time thereafter when additional funds of this Corporation are legally
available and not so restricted for such purpose, such funds will immediately
be used to redeem the Shares this Corporation failed to redeem on such
Redemption Date (to the extent not previously converted) until the balance of
such Shares are redeemed.
(d) Notice of any redemption pursuant to Section 6(a) or 6(b)
shall be mailed, first class, postage prepaid, not less than 30 days nor more
than 60 days prior to the Redemption Date, to the holders of record of the
shares of Convertible Preferred Stock to be redeemed, at their respective
addresses as the same appear upon the books of this Corporation or are supplied
17
<PAGE> 102
by them in writing to this Corporation for the purpose of such notice; but no
failure to mail such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares
of the Convertible Preferred Stock; provided that this sentence shall not
prejudice the right of any holder to receive such damages which may result from
any such defective notice. Such notice shall set forth the Redemption Price, the
Redemption Date, the number of Shares to be redeemed and the place at which the
Shares called for redemption will, upon presentation and surrender of the stock
certificates evidencing such Shares. be redeemed. In case fewer than the total
number of shares of Convertible Preferred Stock represented by any certificate
are redeemed, a new certificate representing the number of unredeemed Shares
will be issued to the holder thereof without cost to such holder.
(e) If notice of any redemption by this Corporation pursuant to
this Section 6 shall have been mailed as provided in Section 6(d) and if on or
before the Redemption Date specified in such notice the consideration
necessary for such redemption shall have been irrevocably set apart in trust
for the benefit of the holders of Shares to be so redeemed so as to be
available therefor and only therefor, then on and after the close of business
on the Redemption Date, the Shares called for redemption, notwithstanding that
any certificate therefor shall not have been surrendered for cancellation,
shall no longer be deemed outstanding, and all rights with respect to such
Shares shall forthwith cease and terminate, except the right of the holders
thereof to receive upon surrender of their certificates the consideration
payable upon redemption thereof.
(f) All shares of Convertible Preferred Stock redeemed, retired,
purchased or otherwise acquired by this Corporation shall be retired and shall
be restored to the status of authorized and unissued shares of preferred stock
(and may be reissued as part of another series of the preferred stock of this
Corporation, but such shares shall not be reissued as Convertible Preferred
Stock).
(g) If at any time this Corporation shall have failed to pay, or
declare and irrevocably set apart in trust for the benefit of the holders of
Shares the consideration sufficient to pay, all dividends accrued up to and
including the immediately preceding Dividend Payment Date on the Convertible
Preferred Stock, and until all dividends accrued up to and including the
immediately preceding Dividend Payment Date on the Convertible Preferred Stock
shall have been paid or declared and irrevocably set apart in trust for the
benefit of the holders of Shares so as to be available for the payment in full
thereof and for no other purpose, this Corporation shall not redeem, pursuant
to a sinking fund or otherwise, any shares of Convertible Preferred Stock,
Parity, Securities or Junior Securities, unless all then outstanding shares of
Convertible Preferred Stock are redeemed, and shall not purchase or otherwise
acquire any shares of Convertible Preferred Stock, Parity Securities or Junior
Securities. If and so long as this Corporation shall fail to redeem on a
Redemption Date pursuant to Section 6(a), (b) and (c) all shares of Convertible
Preferred Stock required to be redeemed on such date, this Corporation shall
not redeem, or discharge any sinking fund obligation with respect to, any
Junior Securities, unless all then outstanding shares of Convertible Preferred
Stock are redeemed, and shall not purchase or otherwise acquire any shares of
Convertible Preferred Stock (other than by way of redemption or
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<PAGE> 103
conversion) or Junior Securities. Nothing contained in this Section 6(g) shall
prevent the purchase or acquisition of shares of Convertible Preferred Stock
pursuant to a purchase or exchange offer or offers made to holders of all
outstanding shares of Convertible Preferred Stock, provided that as to holders
of all outstanding shares of Convertible Preferred Stock, the terms of the
purchase or exchange offer for all such shares are identical and all accrued
dividends on all Shares have been paid or shall have been paid or declared and
irrevocably set apart in trust for the benefit of holders of Shares so as to be
available for the payment in full thereof and for no other purpose. The
provisions of this Section 6(g) are for the benefit of holders of Convertible
Preferred Stock and accordingly the provisions of this Section 6(g) shall not
restrict any redemption by this Corporation of Shares held by any holder,
provided that all other holders of Shares shall have waived in writing the
benefits of this provision with respect to such redemption. This Corporation
shall not permit any Subsidiary thereof to take any action which this
Corporation is prohibited from taking pursuant to this Section 6(g).
7. Exchange Option.
(a) In case this Corporation shall at any time distribute to all
holders of the Class A Common Stock any rights or warrants ("Rights") to
subscribe for or purchase Special Securities, each holder of Shares shall have
the option (the "Exchange Option"), in lieu of any adjustment to the Conversion
Rate pursuant to Section 5, to exchange shares of Convertible Preferred Stock
for shaes of Mirror Preferred Stock (as defined below) which shall have an
initial aggregate liquidation value determined as follows:
(i) in the case of Rights exercisable upon payment, in
whole or in part, of cash or property other than Class A Common Stock,
the maximum aggregate liquidation value of shares of Mirror Preferred
Stock issuable to a holder of Convertible Preferred Stock upon
exercise of the Exchange Option shall be equal to the product of (x)
the number shares of Special Securities issuable upon exercise of the
Rights which this Corporation would have distributed to such holder of
Convertible Preferred Stock had such holder's Shares been converted
immediately prior to the record date for the distribution of such
Rights, and (y) the amount of cash, or the fair market value of such
other property (as reasonably determined by the Board of Directors;
with respect to any Class A Common Stock that is included in such
property, the fair market value thereof shall be the current market
price as determined pursuant to Section 5(f) as of such record date),
payable by a holder of Class A Common Stock in respect of the purchase
of any such shares upon exercise of a Right; or
(ii) in the case of Rights exercisable upon the surrender
of Class A Common Stock without payment of additional
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<PAGE> 104
consideration, the maximum aggregate liquidation value of shares of
Mirror Preferred Stock issuable upon exercise of the Exchange Option
by the holder thereof shall be equal to the product of (x) the
Conversion Rate expressed in dollars of Liquidation Value per share of
Class A Common Stock as in effect on the record date for distribution
of the Rights, and (y) the maximum number of shares of Class A Common
Stock that would have been surrendered by such holder upon exercise of
Rights that would have been distributed to such holder had such holder
converted his Shares immediately prior to the record date for
distribution of the Rights.
(b) The exercise price of the Exchange Option shall be one
dollar in Liquidation Value of Shares of Convertible Preferred Stock for each
dollar of liquidation value of shares of Minor Preferred Stock to be purchased
upon exercise of the Exchange Option.
(c) "Mirror Preferred Stock" means convertible preferred stock
issued by the issuer of the Special Securities, such Mirror Preferred Stock to
have terms, conditions, designations, dividend rights, voting powers, rights on
liquidation and other preferences and relative, participating, optional or
other special rights, and qualifications, limitations, or restrictions thereof
which are identical, or as nearly so as is practicable in the reasonable
judgment of the Board of Directors, to those of the Convertible Preferred
Stock, except that the running of any time periods pursuant to the terms of
the Convertible Preferred Stock shall be tacked to such time periods in the
Mirror Preferred Stock and except that Mirror Preferred Stock shall be
convertible into shares of the Special Security in respect of which such Mirror
Preferred Stock is issued pursuant to the terms hereof in lieu of Class A
Common Stock. The rate at which Mirror Preferred Stock shall be convertible into
Special Securities, expressed in shares of the Special Security per dollar of
liquidation value of the Mirror Preferred Stock, shall:
(i) in the case of Mirror Preferred Stock issued in
respect of Rights exercisable upon payment, in whole or in part, of
cash or property other than Class A Common Stock, be determined by a
quotient, the numerator of which shall be the number of shares of
Special Securities issuable upon exercise of the Rights which this
Corporation would have distributed to all holders of Convertible
Preferred Stock had all of the Shares been converted immediately prior
to the record date for the distribution of such Rights and the
denominator of which shall be equal to the aggregate liquidation value
of Mirror Preferred Stock issuable (assuming exercise of all the
Exchange Options) to all holders of Convertible Preferred Stock in
respect of such Rights pursuant to Section 7(a)(i) above; or
(ii) in the case of Mirror Preferred Stock issued in
respect of Rights exercisable upon surrender of shares of Class A
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<PAGE> 105
Common Stock without payment of additional consideration, be
determined by the inverse of the product of (x) the Conversion Rate of
the Convertible Preferred Stock expressed in dollars of Liquidation
Value per share of Class A Common Stock as in effect immediately prior
to the record date for distribution of the Rights (without giving
effect to any antidilution adjustment pursuant to Section 6 in respect
of such Rights) and (y) the number of shares of Class A Common Stock
required to be surrendered upon the exercise of each Right.
(d) If this Corporation distributes Rights in respect of
which the holders of Convertible Preferred Stock are required to be granted an
Exchange Option hereunder, this Corporation shall, concurrently with the
distribution of such Rights to holders of Class A Common Stock, provide each
holder of Convertible Preferred Stock a notice (the "Option Notice") stating
that such holder may, on or before the date of expiration of the Rights (the
"Expiration Date"), exercise the Exchange Option in accordance herewith, and
setting forth a description of the Rights, the Special Securities, and the
Mirror Preferred Stock. Such notice shall be accompamed by any prospectus or
similar document provided to holders of Class A Common Stock in respect of the
distribution of the Rights and a copy of the certificate of designations (or
similar document) proposed to be filed by this Corporation or any Subsidiary
with the appropriate government official in order to establish the Mirror
Preferred Stock.
(e) If a transaction described in this Section 7 occurs
before the Issue Date, holders of the Convertible Preferred Stock may exercise
the rights in this Section 7 within 45 days after the Issue Date or, if later,
the date related Rights expire.
(f) Upon the exchange of any Share, this Corporation
shall pay, to the holder of record of such Share on the immediately preceding
Record Date, if such date is after the most recent Dividend Payment Date, or
otherwise, to the holder of record of such Share as of the date of exercise of
the Exchange Option, all accrued but unpaid dividends on such Share to the date
of the surrender of such Share for exchange. Such payment shall be made in cash
or, at the election of this Corporation, the issuance of certificates
representing such number of shares of Class A Common Stock as have an aggregate
current market price (as determined in accordance with Section 5(f)) on the
date of issuance equal to the amount of such accrued but unpaid dividends. Upon
the making of such payment to the person entitled thereto as determined
pursuant to the first sentence of this paragraph, no further dividends shall
accrue on such Share or be payable to any other person.
8. No Voting Rights. Except as required by law and Sections 9 and 11
hereof, the holders of the Convertible Preferred Stock shall not be entitled to
vote on any matters submitted to a vote of the holders of the Capital Stock of
this Corporation.
9. Amendment. No amendment or modification of the designation,
rights, preferences, and limitations of the Shares set forth herein shall be
binding or effective without the prior consent of the holders of record of
Shares representing 66 2/3 % of the Liquidation Value
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<PAGE> 106
of all Shares outstanding (excluding, for this purpose, Shares owned by this
Corporation or any of its Affiliates) at the time such action is taken.
10. Preemptive Rights. The holders of the Convertible Preferred Stock
will not have any preemptive right to subscribe for or purchase any shares of
stock or any other securities which may be issued by this Corporation, provided
that this Section 10 shall not limit the rights of holders of the Convertible
Preferred Stock pursuant to Sections 5 or 7 hereof.
11. Senior Securities. The Convertible Preferred Stock shall not rank
junior to any other classes or series of stock of this Corporation in respect
of the right to receive dividends or the right to participate in any
distribution upon liquidation, dissolution or winding up of this Corporation.
Without the prior consent of the holders of record of Shares representing
66 2/3% of the Liquidation Value of all Shares then outstanding (excluding, for
this purpose, Shares owned by this Corporation or any of its Affiliates), this
Corporation shall not issue any Senior Securities.
12. Exclusion of Other Rights. Except as may otherwise be required by
law and for the equitable rights and remedies that may otherwise be available
to holders of Convertible Preferred Stock, the shares of Convertible Preferred
Stock shall not have any designations, preferences, limitations or relative
rights, other than those specifically set forth in these resolutions (as such
resolutions may, subject to Section 9, be amended from time to time) and in the
Restated Certificate of Incorporation of this Corporation.
13. Headings. The headings of the various sections and subsections
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
FURTHER RESOLVED, that the appropriate officers of this Corporation are
hereby authorized to execute and acknowledge a certificate setting forth these
resolutions and to cause such certificate to be filed and recorded, in
accordance with the requirements of Section 151(g) of the General Corporation
Law of the State of Delaware."
/s/ STEPHEN M. BRETT
Stephen M. Brett
Executive Vice President
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<PAGE> 107
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE THIRD DAY
OF AUGUST, A.D. 1995, AT 12:45 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
EDWARD J. FREEL
----------------------------
Edward J. Freel,
Secretary of State
AUTHENTICATION: 7596118
DATE: 08-03-95
<PAGE> 108
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 12:45 PM 08/03/1995
950175231 - 2371729
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
TELE-COMMUNICATIONS, INC.
TELE-COMMUNICATIONS, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: That the Restated Certificate of Incorporation of the
Corporation is hereby amended as follows:
(i) THE FIRST PARAGRAPH OF ARTICLE IV OF THE RESTATED CERTIFICATE OF
INCORPORATION OF THE CORPORATION IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS
FOLLOWS:
"AUTHORIZED STOCK
The total number of shares of capital stock which the Corporation
shall have authority to issue is two billion seven hundred seventy-seven
million three hundred seventy-five thousand ninety-six (2,777,375,096) shares,
which shall be divided into the following classes:
(a) Two billion seven hundred twenty-five million
(2,725,000,000) shares shall be of a class designated Common Stock,
par value $1.00 per share ("Common Stock"), such class to be divided
into series as provided in Section E of this Article IV;
(b) Seven hundred thousand (700,000) shares shall be of a
class designated Class A Preferred Stock, par value $.01 per share
("Class A Preferred Stock");
(c) One million six hundred seventy-five thousand
ninety-six (1,675,096) shares shall be of a class designated Class B
6% Cumulative Redeemable Exchangeable Junior Preferred Stock, par
value $.01 per share ("Class B 6% Cumulative Redeemable Exchangeable
Junior Preferred Stock"); and
(d) Fifty million (50,000,000) shares shall be of a class
designated Series Preferred Stock, par value $.01 per share ("Series
Preferred Stock"), such class to be issuable in series as provided in
Section D of this Article IV.
<PAGE> 109
The Class A Preferred Stock, the Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock and the Series Preferred Stock are
collectively referred to as "Preferred Stock"."
(ii) SECTION D OF ARTICLE IV OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE
CORPORATION IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS:
"SECTION D
SERIES PREFERRED STOCK
The Series Preferred Stock may be issued, from time to time, in one or
more series, with such powers, designations, preferences and relative,
participating, optional or other rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in a resolution or
resolutions providing for the issue of each such series adopted by the Board of
Directors. The Board of Directors, in such resolution or resolutions (a copy of
which shall be filed and recorded as required by law), is also expressly
authorized to fix with respect to each series:
(i) the distinctive serial designations and the division
of such shares into series and the number of shares of a particular
series, which may be increased or decreased, but not below the number
of shares thereof then outstanding, by a certificate made, signed,
filed and recorded as required by law;
(ii) the dividend rate or amounts, if any, for the
particular series, the date or dates from which dividends on all
shares of such series shall be cumulative, if dividends on stock of
the particular series shall be cumulative and the relative rights of
priority, if any, or participation, if any, with respect to payment of
dividends on shares of that series;
(iii) the rights of the shares of each series in the event
of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of
payment of shares of each series;
(iv) the right, if any, of the holders of a particular
series to convert or exchange such stock into or for other classes or
series of a class of stock or indebtedness of the Corporation, and the
terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in
such events as the Board of Directors shall determine;
(v) the voting rights, if any, of the holders of a
particular series; and
(vi) the terms and conditions, if any, for the Corporation
to purchase or redeem shares of a particular series.
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<PAGE> 110
All shares of any one series of the Series Preferred Stock shall be
alike in every particular. Except to the extent otherwise provided in the
resolution or resolutions providing for the issue of any series of Series
Preferred Stock, the holders of shares of such series shall have no voting
rights except as may be required by the laws of the State of Delaware."
(iii) SECTION E OF ARTICLE IV OF THE RESTATED CERTIFICATE OF INCORPORATION OF
THE CORPORATION IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS:
"SECTION E
SERIES A TCI GROUP COMMON STOCK, SERIES B TCI GROUP COMMON
STOCK, SERIES A LIBERTY MEDIA GROUP COMMON STOCK
AND SERIES B LIBERTY MEDIA GROUP COMMON STOCK
One billion seven hundred fifty million (1,750,000,000) shares of
Common Stock shall be of a series designated Tele-Communications, Inc. Series A
TCI Group Common Stock (the "Series A TCI Group Common Stock"), one hundred
fifty million (150,000,000) shares of Common Stock shall be of a series
designated Tele-Communications, Inc. Series B TCI Group Common Stock (the
"Series B TCI Group Common Stock"), seven hundred fifty million (750,000,000)
shares of Common Stock shall be of a series designated Tele-Communications,
Inc. Series A Liberty Media Group Common Stock (the "Series A Liberty Media
Group Common Stock") and seventy-five million (75,000,000) shares of Common
Stock shall be of a series designated Tele-Communications, Inc. Series B
Liberty Media Group Common Stock (the "Series B Liberty Media Group Common
Stock").
Each share of Series A TCI Group Common Stock and each share of Series
B TCI Group Common Stock shall, except as otherwise provided in this Section E,
be identical in all respects and shall have equal rights, powers and
privileges.
Each share of Series A Liberty Media Group Common Stock and each share
of Series B Liberty Media Group Common Stock shall, except as otherwise
provided in this Section E, be identical in all respects and shall have equal
rights, powers and privileges.
1. Voting Rights.
Holders of Series A TCI Group Common Stock shall be entitled to one
vote for each share of such stock held, holders of Series B TCI Group Common
Stock shall be entitled to ten votes for each share of such stock held, holders
of Series A Liberty Media Group Common Stock shall be entitled to one vote for
each share of such stock held and holders of Series B Liberty Media Group
Common Stock shall be entitled to ten votes for each share of such stock held,
on all matters presented to such stockholders. Except as may otherwise be
required by the laws of the State of Delaware or, with respect to any class of
Preferred Stock or any series of such a class, in this
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<PAGE> 111
Certificate (including any resolution or resolutions providing for the
establishment of such class or series pursuant to authority vested in the Board
of Directors by this Certificate), the holders of shares of Series A TCI Group
Common Stock, the holders of shares of Series B TCI Group Common Stock, the
holders of shares of Series A Liberty Media Group Common Stock and the holders
of shares of Series B Liberty Media Group Common Stock and the holders of
shares of each class or series of Preferred Stock, if any, entitled to vote
thereon, shall vote as one class with respect to the election of directors and
with respect to all other matters to be voted on by stockholders of the
Corporation (including, without limitation, any proposed amendment to this
Certificate that would increase the number of authorized shares of Common Stock
or any series thereof or of any other class or series of stock or decrease the
number of authorized shares of any class or series of stock (but not below the
number of shares thereof then outstanding)), and no separate vote or consent of
the holders of shares of Series A TCI Group Common Stock, the holders of shares
of Series B TCI Group Common Stock, the holders of shares of Series A Liberty
Media Group Common Stock, the holders of shares of Series B Liberty Media Group
Common Stock or the holders of shares of any such class or series of Preferred
Stock shall be required for the approval of any such matter.
2. Conversion Rights.
(a) CONVERSION OF SERIES B TCI GROUP COMMON STOCK INTO SERIES A
TCI GROUP COMMON STOCK. Each share of Series B TCI Group Common Stock shall be
convertible, at the option of the holder thereof, into one share of Series A
TCI Group Common Stock. Any such conversion may be effected by any holder of
Series B TCI Group Common Stock by surrendering such holder's certificate or
certificates for the Series B TCI Group Common Stock to be converted, duly
endorsed, at the office of the Corporation or any transfer agent for the Series
B TCI Group Common Stock, together with a written notice to the Corporation at
such office that such holder elects to convert all or a specified number of
shares of Series B TCI Group Common Stock represented by such certificate and
stating the name or names in which such holder desires the certificate or
certificates for Series A TCI Group Common Stock to be issued. If so required
by the Corporation, any certificate for shares surrendered for conversion shall
be accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder of such shares or the duly authorized
representative of such holder. Promptly thereafter, the Corporation shall issue
and deliver to such holder or such holder's nominee or nominees, a certificate
or certificates for the number of shares of Series A TCI Group Common Stock to
which such holder shall be entitled as herein provided. Such conversion shall
be deemed to have been made at the close of business on the date of receipt by
the Corporation or any such transfer agent of the certificate or certificates,
notice and, if required, instruments of transfer referred to above, and the
person or persons entitled to receive the Series A TCI Group Common Stock
issuable on such conversion shall be treated for all purposes as the record
holder or holders of such Series A TCI Group Common Stock on that date. A
number of shares of Series A TCI Group Common Stock equal to the number of
shares of Series B TCI Group Common Stock outstanding from time to time shall
be set aside and reserved for issuance upon conversion of shares of Series B
TCI Group Common Stock. Shares of Series A TCI Group Common Stock shall not be
convertible into shares of Series B TCI Group Common Stock.
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<PAGE> 112
(b) CONVERSION OF SERIES B LIBERTY MEDIA GROUP COMMON STOCK INTO
SERIES A LIBERTY MEDIA GROUP COMMON STOCK. Each share of Series B Liberty
Media Group Common Stock shall be convertible, at the option of the holder
thereof, into one share of Series A Liberty Media Group Common Stock. Any such
conversion may be effected by any holder of Series B Liberty Media Group Common
Stock by surrendering such holder's certificate or certificates for the Series
B Liberty Media Group Common Stock to be converted, duly endorsed, at the
office of the Corporation or any transfer agent for the Series B Liberty Media
Group Common Stock, together with a written notice to the Corporation at such
office that such holder elects to convert all or a specified number of shares
of Series B Liberty Media Group Common Stock represented by such certificate
and stating the name or names in which such holder desires the certificate or
certificates for Series A Liberty Media Group Common Stock to be issued. If so
required by the Corporation, any certificate for shares surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder of such shares or
the duly authorized representative of such holder. Promptly thereafter, the
Corporation shall issue and deliver to such holder or such holder's nominee or
nominees, a certificate or certificates for the number of shares of Series A
Liberty Media Group Common Stock to which such holder shall be entitled as
herein provided. Such conversion shall be deemed to have been made at the close
of business on the date of receipt by the Corporation or any such transfer
agent of the certificate or certificates, notice and, if required, instruments
of transfer referred to above, and the person or persons entitled to receive
the Series A Liberty Media Group Common Stock issuable on such conversion shall
be treated for all purposes as the record holder or holders of such Series A
Liberty Media Group Common Stock on that date. A number of shares of Series A
Liberty Media Group Common Stock equal to the number of shares of Series B
Liberty Media Group Common Stock outstanding from time to time shall be set
aside and reserved for issuance upon conversion of shares of Series B Liberty
Media Group Common Stock. Shares of Series A Liberty Media Group Common Stock
shall not be convertible into shares of Series B Liberty Media Group Common
Stock.
(c) CONVERSION OF SERIES A LIBERTY MEDIA GROUP COMMON STOCK INTO
SERIES A TCI GROUP COMMON STOCK AND SERIES B LIBERTY MEDIA GROUP COMMON STOCK
INTO SERIES B TCI GROUP COMMON STOCK AT THE OPTION OF THE CORPORATION. (i) At
the option of the Corporation by action of its Board of Directors, (A) all
shares of Series A Liberty Media Group Common Stock shall be convertible into a
number (or fraction) of fully paid and nonassessable shares of Series A TCI
Group Common Stock equal to the Optional Conversion Ratio, and (B) all shares
of Series B Liberty Media Group Common Stock shall be convertible into a number
(or fraction) of fully paid and nonassessable shares of Series B TCI Group
Common Stock equal to the Optional Conversion Ratio.
(ii) For purposes of this paragraph 2(c), the "Optional Conversion
Ratio" shall mean the quotient (calculated to the nearest five decimal places)
obtained by dividing (A) the Liberty Media Group Common Stock Per Share Value
by (B) the average Market Value of one share of Series A TCI Group Common Stock
over the 20-Trading Day period ending on the Trading Day preceding the
Appraisal Date.
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(iii) The "Liberty Media Group Private Market Value" shall mean 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 the Corporation determines to establish the Liberty
Media Group Private Market Value, two investment banking firms of recognized
national standing shall be designated to determine the private market value of
the Liberty Media Group, one designated by the Corporation (the "First
Appraiser") and one designated by a committee of the Board of Directors all of
whose members are independent directors as determined under Nasdaq National
Market rules (the "Second Appraiser"). The date upon which the last of such
appraisers is selected is hereinafter referred to as the "Selection Date". Not
later than 20 days after the Selection Date, the First Appraiser and the Second
Appraiser shall each determine its initial view as to the private market value
of the Liberty Media Group as of the Appraisal Date and shall consult with one
another with respect thereto. Not later than the 30th day after the Selection
Date, the First Appraiser and the Second Appraiser shall 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 provided in
subparagraph (v) of this paragraph 2(c)) shall 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 shall 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 shall not be provided with any of the
work of the First Appraiser and Second Appraiser. The Mutually Designated
Appraiser shall, 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 provided in subparagraph (v) of this paragraph 2(c))
shall be (A) if the Mutually Appraised Amount is between the Lower Appraised
Amount and the Higher Appraised Amount, (I) 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 (II) the
Mutually Appraised Amount, if neither the Lower Appraised Amount nor the Higher
Appraised Amount is closer to the Mutually Appraised Amount, or (B) if the
Mutually Appraised Amount is greater than the Higher Appraised Amount or less
than the Lower Appraised Amount, the average of the Higher Appraised Amount and
the Lower Appraised Amount. For these purposes, if any such investment banking
firm expresses its final view of the private market value of the Liberty Media
Group as a range of values, such investment banking firm's final view of such
private market value shall be deemed to be the midpoint of such range of
values.
(iv) Each of the investment banking firms referred to in clause
(iii) of this paragraph 2(c) shall 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
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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.
(v) 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 shall 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" shall mean a number, as determined by such investment
banking firms as of the Appraisal Date, equal to the sum of the number of
shares of Series A Liberty Media Group Common Stock and Series B 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 Series A Liberty Media Group Common Stock and Series B
Liberty Media Group Common Stock issuable upon the conversion, exercise or
exchange of all Pre-Distribution Convertible Securities and the number of
shares of Series A Liberty Media Group Common Stock and Series B 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" shall mean 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 subparagraph (v),
the Liberty Media Group Common Stock Per Share Value shall be the average of
the quotients so obtained on the basis of the respective determinations of such
firms.
(vi) If the Corporation determines to convert shares of Series A
Liberty Media Group Common Stock into Series A TCI Group Common Stock and
shares of Series B Liberty Media Group Common Stock into Series B TCI Group
Common Stock at the Optional Conversion Ratio, such conversion shall occur on a
Conversion Date on or prior to the 120th day following the Appraisal Date. If
the Corporation determines not to undertake such conversion, the Corporation
may at any time thereafter undertake to reestablish the Liberty Media Group
Common Stock Per Share Value as of a subsequent date.
(vii) The Corporation shall not convert shares of Series A Liberty
Media Group Common Stock into shares of Series A TCI Group Common Stock without
converting shares of Series B Liberty Media Group Common Stock into shares of
Series B TCI Group Common Stock, and the Corporation shall not convert shares of
Series B Liberty Media Group Common Stock into shares of Series B TCI Group
Common Stock without converting shares of Series A Liberty Media Group Common
Stock into shares of Series A TCI Group Common Stock. The Series A Liberty Media
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Group Common Stock and the Series B Liberty Media Group Common Stock
shall also be convertible at the option of the Corporation in accordance with
paragraph 5(b)(iii) of this Section E.
3. Dividends.
(a) DIVIDENDS ON SERIES A TCI GROUP COMMON STOCK AND SERIES B TCI
GROUP COMMON STOCK. Dividends on the Series A TCI Group Common Stock and the
Series B TCI Group Common Stock may be declared and paid only out of the lesser
of (i) assets of the Corporation legally available therefor and (ii) the TCI
Group Available Dividend Amount. Subject to paragraph 4 of this Section E,
whenever a dividend is paid to the holders of Series A TCI Group Common Stock,
the Corporation shall also pay to the holders of Series B TCI Group Common
Stock a dividend per share equal to the dividend per share paid to the holders
of Series A TCI Group Common Stock, and whenever a dividend is paid to the
holders of Series B TCI Group Common Stock, the Corporation shall also pay to
the holders of Series A TCI Group Common Stock a dividend per share equal to
the dividend per share paid to the holders of Series B TCI Group Common Stock.
(b) DIVIDENDS ON SERIES A LIBERTY MEDIA GROUP COMMON STOCK AND
SERIES B LIBERTY MEDIA GROUP COMMON STOCK. Dividends on the Series A Liberty
Media Group Common Stock and the Series B Liberty Media Group Common Stock may
be declared and paid only out of the lesser of (i) assets of the Corporation
legally available therefor and (ii) the Liberty Media Group Available Dividend
Amount. Subject to paragraph 4 and the last sentence of paragraph 5(b) of this
Section E, whenever a dividend is paid to the holders of Series A Liberty Media
Group Common Stock, the Corporation shall also pay to the holders of Series B
Liberty Media Group Common Stock a dividend per share equal to the dividend per
share paid to the holders of Series A Liberty Media Group Common Stock, and
whenever a dividend is paid to the holders of Series B Liberty Media Group
Common Stock, the Corporation shall also pay to the holders of Series A Liberty
Media Group Common Stock a dividend per share equal to the dividend per share
paid to the holders of Series B Liberty Media Group Common Stock.
(c) DISCRIMINATION BETWEEN OR AMONG SERIES OF COMMON STOCK. The
Board of Directors, subject to the provisions of paragraph 3(a) and 3(b) of
this Section E, shall have the authority and discretion to declare and pay
dividends on the Series A TCI Group Common Stock and Series B TCI Group Common
Stock or the Series A Liberty Media Group Common Stock and Series B 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 the liquidation rights of, the Series A TCI Group
Common Stock and Series B TCI Group Common Stock or the Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock or any other
factor.
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4. Share Distributions.
(a) DISTRIBUTIONS ON SERIES A TCI GROUP COMMON STOCK AND SERIES B
TCI GROUP COMMON STOCK. The Corporation may provide for the initial issuance
of shares of Series A Liberty Media Group Common Stock and Series B Liberty
Media Group Common Stock by declaring and paying a distribution (the
"Distribution") consisting of shares of Series A Liberty Media Group Common
Stock to holders of Series A TCI Group Common Stock and, on an equal per share
basis, shares of Series B Liberty Media Group Common Stock to holders of Series
B TCI Group Common Stock. If at any time after the Distribution a distribution
paid in Series A TCI Group Common Stock, Series B TCI Group Common Stock,
Series A Liberty Media Group Common Stock, Series B Liberty Media Group Common
Stock or any other securities of the Corporation or any other Person
(hereinafter sometimes called a "share distribution") is to be made with
respect to the Series A TCI Group Common Stock or Series B TCI Group Common
Stock, such share distribution may be declared and paid only as follows:
(i) a share distribution consisting of shares of Series A
TCI Group Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of Series A TCI Group Common
Stock) to holders of Series A TCI Group Common Stock and Series B TCI
Group Common Stock, on an equal per share basis; or consisting of
shares of Series B TCI Group Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of Series B
TCI Group Common Stock) to holders of Series A TCI Group Common Stock
and Series B TCI Group Common Stock, on an equal per share basis; or
consisting of shares of Series A TCI Group Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of Series A TCI Group Common Stock) to holders of Series A
TCI Group Common Stock and, on an equal per share basis, shares of
Series B TCI Group Common Stock (or like Convertible Securities
convertible into or exercisable or exchangeable for shares of Series B
TCI Group Common Stock) to holders of Series B TCI Group Common Stock;
(ii) a share distribution consisting of shares of Series A
Liberty Media Group Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of Series A
Liberty Media Group Common Stock) to holders of Series A TCI Group
Common Stock and Series B TCI Group Common Stock, on an equal per
share basis; provided that the sum of (A) the aggregate number of
shares of Series A Liberty Media Group Common Stock to be so issued
(or the number of such shares which would be issuable upon conversion,
exercise or exchange of any Convertible 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
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(iii) a share distribution consisting of any class
or series of securities of the Corporation or any other Person other
than Series A TCI Group Common Stock, Series B TCI Group Common Stock,
Series A Liberty Media Group Common Stock or Series B Liberty Media
Group Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of Series A TCI Group Common
Stock, Series B TCI Group Common Stock, Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock), either on
the basis of a distribution of identical securities, on an equal per
share basis, to holders of Series A TCI Group Common Stock and Series B
TCI Group Common Stock or on the basis of a distribution of one class
or series of securities to holders of Series A TCI Group Common Stock
and another class or series of securities to holders of Series B TCI
Group Common Stock, provided that the securities so distributed (and,
if the distribution consists of Convertible Securities, the securities
into which such Convertible Securities are convertible or for which
they are exercisable or exchangeable) do not differ in any respect
other than their relative voting rights and related differences in
designation, conversion, redemption and share distribution provisions,
with holders of shares of Series B TCI Group Common Stock receiving the
class or series having the higher relative voting rights (without
regard to whether such rights differ to a greater or lesser extent than
the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the
Series A TCI Group Common Stock and the Series B TCI Group Common
Stock), provided that if the securities so distributed constitute
capital stock of a Subsidiary of the Corporation, such rights shall not
differ to a greater extent than the corresponding differences in voting
rights, designation, conversion, redemption and share distribution
provisions between the Series A TCI Group Common Stock and the Series B
TCI Group Common Stock, and provided in each case that such
distribution is otherwise made on an equal per share basis.
The Corporation shall not reclassify, subdivide or combine the Series
A TCI Group Common Stock without reclassifying, subdividing or combining the
Series B TCI Group Common Stock, on an equal per share basis, and the
Corporation shall not reclassify, subdivide or combine the Series B TCI Group
Common Stock without reclassifying, subdividing or combining the Series A TCI
Group Common Stock, on an equal per share basis.
(b) DISTRIBUTIONS ON SERIES A LIBERTY MEDIA GROUP COMMON STOCK AND
SERIES B LIBERTY MEDIA GROUP COMMON STOCK. If at any time a share distribution
is to be made with respect to the Series A Liberty Media Group Common Stock or
Series B Liberty Media Group Common Stock, such share distribution may be
declared and paid only as follows (or as permitted by paragraph 5 of this
Section E with respect to the redemptions and other distributions referred to
therein):
(i) a share distribution consisting of shares of Series A
Liberty Media Group Common Stock (or Convertible Securities convertible
into or exercisable or exchangeable for shares of Series A Liberty
Media Group Common Stock) to holders of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock, on an
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equal per share basis; or consisting of shares of Series B Liberty
Media Group Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of Series B Liberty Media Group
Common Stock) to holders of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock, on an equal per share
basis; or consisting of shares of Series A Liberty Media Group Common
Stock (or Convertible Securities convertible into or exercisable or
exchangeable for shares of Series A Liberty Media Group Common Stock)
to holders of Series A Liberty Media Group Common Stock and, on an
equal per share basis, shares of Series B Liberty Media Group Common
Stock (or like Convertible Securities convertible into or exercisable
or exchangeable for shares of Series B Liberty Media Group Common
Stock) to holders of Series B Liberty Media Group Common Stock; and
(ii) a share distribution consisting of any class or
series of securities of the Corporation or any other Person other than
as described in clause (i) of this paragraph 4(b) and other than
Series A TCI Group Common Stock or Series B TCI Group Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of Series A TCI Group Common Stock or Series B TCI Group
Common Stock) either on the basis of a distribution of identical
securities, on an equal per share basis, to holders of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock or on the basis of a distribution of one class or series
of securities to holders of Series A Liberty Media Group Common Stock
and another class or series of securities to holders of Series B
Liberty Media Group Common Stock, provided that the securities so
distributed (and, if the distribution consists of Convertible
Securities, the securities into which such Convertible Securities are
convertible or for which they are exercisable or exchangeable) do not
differ in any respect other than their relative voting rights and
related differences in designation, conversion, redemption and share
distribution provisions, with holders of shares of Series B Liberty
Media Group Common Stock receiving the class or series having the
higher relative voting rights (without regard to whether such rights
differ to a greater or lesser extent than the corresponding
differences in voting rights, designation, conversion, redemption and
share distribution provisions between the Series A Liberty Media Group
Common Stock and the Series B Liberty Media Group Common Stock),
provided that if the securities so distributed constitute capital
stock of a Subsidiary of the Corporation, such rights shall not differ
to a greater extent than the corresponding differences in voting
rights, designation, conversion, redemption and share distribution
provisions between the Series A Liberty Media Group Common Stock and
the Series B Liberty Media Group Common Stock, and provided in each
case that such distribution is otherwise made on an equal per share
basis.
The Corporation shall not reclassify, subdivide or combine the Series
A Liberty Media Group Common Stock without reclassifying, subdividing or
combining the Series B Liberty Media Group Common Stock, on an equal per share
basis, and the Corporation shall not reclassify, subdivide or combine the
Series B Liberty Media Group Common Stock without reclassifying, subdividing or
combining the Series A Liberty Media Group Common Stock, on an equal per share
basis.
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5. Redemption and Other Provisions Relating to the Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock.
(a) REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY. At any time
at which all of the assets and liabilities attributed to the Liberty Media
Group have become and continue to be held directly or indirectly by any one or
more corporations all of the capital stock of which is owned by the Corporation
(the "Liberty Media Group Subsidiaries"), the Board of Directors may, subject
to the availability of assets of the Corporation legally available therefor,
redeem, on a pro rata basis, all of the outstanding shares of Series A Liberty
Media Group Common Stock and Series B 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.
Any such redemption shall occur on a Redemption Date set forth in a notice to
holders of Series A Liberty Media Group Common Stock and Series B Liberty Media
Group Common Stock and 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)
pursuant to paragraph 5(d)(vi). In effecting such a redemption, the Board of
Directors may determine either to (i) redeem shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock in exchange
for shares of separate classes or series of common stock of each Liberty Media
Group Subsidiary with relative voting rights and related differences in
designation, conversion, redemption and share distribution provisions not
greater than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock,
with holders of shares of Series B Liberty Media Group Common Stock receiving
the class or series having the higher relative voting rights, or (ii) redeem
shares of Series A Liberty Media Group Common Stock and Series B Liberty Media
Group Common Stock in exchange for shares of a single class of common stock of
each Liberty Media Group Subsidiary without distinction between the shares
distributed to the holders of the Series A Liberty Media Group Common Stock and
Series B Liberty Media Group Common Stock. If the Corporation 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 Series A Liberty Media Group Common Stock or
Series B Liberty Media Group Common Stock shall consist solely of the class or
series having the lower relative voting rights.
(b) MANDATORY DIVIDEND, REDEMPTION OR CONVERSION IN CASE OF
DISPOSITION OF LIBERTY MEDIA GROUP ASSETS. In the event of the Disposition, in
one transaction or a series of related transactions, by the Corporation 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 (w)
in connection with the Disposition by the Corporation of all of the
Corporation's properties and assets in one transaction or a series of related
transactions in connection with the liquidation, dissolution or winding up of
the Corporation within the meaning of paragraph 6 of this Section E, (x) a
dividend, other distribution or redemption in accordance with any provision of
paragraph 3, paragraph 4,
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paragraph 5(a) or paragraph 6 of this Section E, (y) to any person, entity or
group which the Corporation, directly or indirectly, after giving effect to the
Disposition, controls or (z) in connection with a Related Business
Transaction), the Corporation shall, on or prior to the 85th Trading Day
following the consummation of such Disposition, either:
(i) subject to paragraph 3(b) of this Section E, declare
and pay a dividend in cash and/or in securities or other property
(other than a dividend or distribution of Common Stock) to the holders
of the outstanding shares of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock equally on a share for
share basis (subject to the last sentence of this Section 5(b)), 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; or
(ii) provided that there are assets of the Corporation
legally available therefor and the Liberty Media Group Available
Dividend Amount would have been sufficient to pay a dividend in lieu
thereof pursuant to clause (i) of this paragraph 5(b), then:
(A) if such Disposition involves all (not merely
substantially all) of the properties and assets of the Liberty
Media Group, redeem all outstanding shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group
Common Stock in exchange for cash and/or securities or other
property (other than Common Stock) in an aggregate amount
equal to the product of the Adjusted Outstanding Interest
Fraction as of the date of such redemption and the Net
Proceeds of such Disposition, such aggregate amount to be
allocated (subject to the last sentence of this paragraph
5(b)) to shares of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock in the ratio of
the number of shares of each such series outstanding (so that
the amount of consideration paid for the redemption of each
share of Series A Liberty Media Group Common Stock and each
share of Series B Liberty Media Group Common Stock is the
same); or
(B) if such Disposition involves substantially all
(but not all) of the properties and assets of the Liberty
Media Group, apply an aggregate amount of cash and/or
securities or other property (other than Common Stock) equal
to the product of the Outstanding Interest Fraction as of the
date shares are selected for redemption and the Net Proceeds
of such Disposition to the redemption of outstanding shares of
Series A Liberty Media Group Common Stock and Series B Liberty
Media Group Common Stock, such aggregate amount to be
allocated (subject to the last sentence of this paragraph
5(b)) to shares of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock in the ratio of
the number of shares of each such series outstanding, and the
number of shares of each such series to be redeemed to equal
the lesser of (x) the whole number nearest the number
determined by dividing the aggregate amount so allocated to
the redemption of such series by the average Market Value of
one share of Series A Liberty Media Group
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Common Stock during the ten-Trading Day period beginning on
the 16th Trading Day following the consummation of such
Disposition and (y) the number of shares of such series
outstanding (so that the amount of consideration paid for the
redemption of each share of Series A Liberty Media Group
Common Stock and each share of Series B Liberty Media Group
Common Stock is the same);
such redemption to be effected in accordance with the applicable
provisions of paragraph 5(d) of this Section E; or
(iii) convert (A) each outstanding share of Series A
Liberty Media Group Common Stock into a number (or fraction) of fully
paid and nonassessable shares of Series A TCI Group Common Stock and
(B) each outstanding share of Series B Liberty Media Group Common
Stock into a number (or fraction) of fully paid and nonassessable
shares of Series B TCI Group Common Stock, in each case equal to 110%
of the average daily ratio (calculated to the nearest five decimal
places) of the Market Value of one share of Series A Liberty Media
Group Common Stock to the Market Value of one share of Series A TCI
Group Common Stock during the ten-Trading Day period referred to in
clause (ii)(B) of this paragraph 5(b).
For purposes of this paragraph 5(b):
(x) as of any date, "substantially all of the properties
and assets of the Liberty Media Group" shall mean a portion of such
properties and assets that represents at least 80% of the then-current
market value (as determined by the Board of Directors) of the
properties and assets of the Liberty Media Group as of such date;
(y) in the case of a Disposition of properties and assets
in a series of related transactions, such Disposition shall not be
deemed to have been consummated until the consummation of the last of
such transactions; and
(z) the Corporation may pay the dividend or redemption
price referred to in clause (i) or (ii) of this subparagraph 5(b)
either in the same form as the proceeds of the Disposition were
received or in any other combination of cash or securities or other
property (other than Common Stock) that the Board of Directors
determines will have an aggregate market value on a fully distributed
basis, of not less than the amount of the Net Proceeds. If the
dividend or redemption price is paid in the form of securities of an
issuer other than the Corporation, the Board of Directors may
determine either to (1) pay the dividend or redemption price in the
form of separate classes or series of securities, with one class or
series of such securities to holders of Series A Liberty Media Group
Common Stock and another class or series of securities to holders of
Series B Liberty Media Group Common Stock, provided that such
securities (and, if such securities are convertible into or
exercisable or exchangeable for shares of another class or series of
securities, the securities so issuable upon such conversion, exercise
or exchange) do not differ in any respect other than their
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relative voting rights and related differences in designation,
conversion, redemption and share distribution provisions, with holders
of shares of Series B Liberty Media Group Common Stock receiving the
class or series having the higher relative voting rights (without
regard to whether such rights differ to a greater or lesser extent
than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the
Series A Liberty Media Group Common Stock and the Series B Liberty
Media Group Common Stock), provided that if such securities constitute
capital stock of a Subsidiary of the Corporation, such rights shall
not differ to a greater extent than the corresponding differences in
voting rights, designation, conversion, redemption and share
distribution provisions between the Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock, and
otherwise such securities shall be distributed on an equal per share
basis, or (2) pay the dividend or redemption price in the form of a
single class of securities without distinction between the shares
received by the holders of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock.
(c) 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 Series A Liberty Media Group Common Stock and Series B Liberty Media
Group Common Stock were converted or redeemed, any share of Series A Liberty
Media Group Common Stock or Series B 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 shall, immediately
upon issuance pursuant to such conversion, exercise or exchange and without any
notice or any other action on the part of the Corporation or its Board of
Directors or the holder of such share of Series A Liberty Media Group Common
Stock or Series B Liberty Media Group Common Stock, be converted into (in case
all such outstanding shares were converted) or redeemed in exchange for (in
case all such outstanding shares were redeemed) 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 Series A Liberty Media Group Common
Stock and Series B Liberty Media Group Common Stock would be adjusted so that
the holder of any such Pre-Distribution Convertible Securities or any
Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares thereafter surrendered for
conversion, exercise or exchange would be entitled to receive the kind and
amount of shares of capital stock, cash and/or other securities or property
such holder would have received as a result of such action had such securities
been converted, exercised or exchanged immediately prior thereto. With respect
to any Convertible Securities which are created, established or otherwise first
authorized for issuance subsequent to the record date for the Distribution
(other than
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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 Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock
were converted or redeemed, then upon such conversion, exercise or exchange of
such Convertible Securities, any share of Series A Liberty Media Group Common
Stock or Series B Liberty Media Group Common Stock that is issued on
conversion, exercise or exchange of any such Convertible Securities shall,
immediately upon issuance pursuant to such conversion, exercise or exchange and
without any notice or any other action on the part of the Corporation or its
Board of Directors or the holder of such share of Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock, be redeemed in
exchange for, to the extent assets of the Corporation are legally available
therefor, the amount of $.01 per share in cash.
(d) GENERAL.
(i) Not later than the 10th Trading Day following the consummation
of a Disposition referred to in subparagraph 5(b) of this Section E, the
Corporation shall announce publicly by press release (A) the Net Proceeds of
such Disposition, (B) the number of outstanding shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock, (C) the
number of shares of Series A Liberty Media Group Common Stock and Series B
Liberty Media Group Common Stock into or for which Convertible Securities are
then convertible, exercisable or exchangeable and the conversion, exercise or
exchange prices thereof (and stating which, if any, of such Convertible
Securities constitute Pre-Distribution Convertible Securities or Convertible
Securities which are convertible into or exercisable or exchangeable for
Committed Acquisition Shares) and the number of Committed Acquisition Shares
issuable, (D) the Outstanding Interest Fraction as of a recent date preceding
the date of such notice and (E) the Adjusted Outstanding Interest Fraction as
of a recent date preceding the date of such notice. Not earlier than the 26th
Trading Day and not later than the 30th Trading Day following the consummation
of such Disposition, the Corporation shall announce publicly by press release
which of the actions specified in clauses (i), (ii) or (iii) of paragraph 5(b)
of this Section E it has irrevocably determined to take.
(ii) If the Corporation determines to pay a dividend pursuant to
clause (i) of subparagraph 5(b) of this Section E, the Corporation shall, not
later than the 30th Trading Day following the consummation of such Disposition,
cause to be given to each holder of outstanding shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock, and to
each holder of Convertible Securities convertible into or exercisable or
exchangeable for shares of either such series (unless provision for notice is
otherwise made pursuant to the terms of such Convertible Securities), a notice
setting forth (A) the record date for determining holders entitled to receive
such dividend, which shall be not earlier than the 40th Trading Day and not
later than the 50th Trading Day following the consummation of such Disposition,
(B) the anticipated payment date
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of such dividend (which shall not be more than 85 Trading Days following the
consummation of such Disposition), (C) the kind of shares of capital stock,
cash and/or other securities or property to be distributed in respect of shares
of Series A Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock, (D) the Net Proceeds of such Disposition, (E) the Outstanding
Interest Fraction as of a recent date preceding the date of such notice, (F)
the number of outstanding shares of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock and the number of shares of
Series A Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock into or for which outstanding Convertible Securities are then
convertible, exercisable or exchangeable and the conversion, exercise or
exchange prices thereof and (G) in the case of a notice to holders of
Convertible Securities, a statement to the effect that holders of such
Convertible Securities shall be entitled to receive such dividend only if they
appropriately convert, exercise or exchange them prior to the record date
referred to in clause (A) of this sentence. Such notice shall be sent by
first-class mail, postage prepaid, at such holder's address as the same appears
on the transfer books of the Corporation.
(iii) If the Corporation determines to undertake a redemption of
shares of Series A Liberty Media Group Common Stock and Series B Liberty Media
Group Common Stock following a Disposition of all (not merely substantially
all) of the properties and assets of the Liberty Media Group pursuant to clause
(ii) (A) of paragraph 5(b) of this Section E, the Corporation shall cause to be
given to each holder of outstanding shares of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock and to each holder
of Convertible Securities convertible into or exercisable or exchangeable for
shares of either such series (unless provision for notice is otherwise made
pursuant to the terms of such Convertible Securities), a notice setting forth
(A) a statement that all shares of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock outstanding on the Redemption
Date shall be redeemed, (B) the Redemption Date (which shall not be more than
85 Trading Days following the consummation of such Disposition), (C) the kind
of shares of capital stock, cash and/or other securities or property to be paid
as a redemption price in respect of shares of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock outstanding on the
Redemption Date, (D) the Net Proceeds of such Disposition, (E) the Adjusted
Outstanding Interest Fraction as of a recent date preceding the date of such
notice, (F) the place or places where certificates for shares of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock,
properly endorsed or assigned for transfer (unless the Corporation waives such
requirement), are to be surrendered for delivery of certificates for shares of
such capital stock, cash and/or other securities or property, (G) the number of
outstanding shares of Series A Liberty Media Group Common Stock and Series B
Liberty Media Group Common Stock and the number of shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock into or
for which outstanding Convertible Securities are then convertible, exercisable
or exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, of such Convertible Securities constitute
Pre-Distribution Convertible Securities or Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition
Shares) and the number of Committed Acquisition Shares issuable, and (H) in the
case of a notice to holders of Convertible Securities, a statement to the
effect that holders of such Convertible Securities shall be entitled to
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participate in such redemption only if such holders appropriately convert,
exercise or exchange such Convertible Securities on or prior to the Redemption
Date referred to in clause (B) of this sentence and a statement as to what, if
anything, such holders shall be entitled to receive pursuant to the terms of
such Convertible Securities or, if applicable, paragraph 5(c) of this Section E
if such holders convert, exercise or exchange such Convertible Securities
following such Redemption Date. Such notice shall be sent by first-class mail,
postage prepaid, not less than 35 Trading Days nor more than 45 Trading Days
prior to the Redemption Date, at such holder's address as the same appears on
the transfer books of the Corporation.
(iv) If the Corporation determines to undertake a redemption of
shares of Series A Media Group Common Stock and Series B Liberty Media Group
Common Stock following a Disposition of substantially all (but not all) of the
properties and assets of the Liberty Media Group pursuant to clause (ii)(B) of
paragraph 5(b) of this Section E, the Corporation shall, not later than the
30th Trading Day following the consummation of such Disposition, cause to be
given to each holder of record of outstanding shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock, and to each
holder of Convertible Securities convertible into or exercisable or
exchangeable for shares of either such series (unless provision for notice is
otherwise made pursuant to the terms of such Convertible Securities), a notice
setting forth (A) a date not earlier than the 40th Trading Day and not later
than the 50th Trading Day following the consummation of such Disposition which
shall be the date on which shares of the Series A Liberty Media Group Common
Stock and Series B Liberty Media Group Common Stock then outstanding shall be
selected for redemption, (B) the anticipated Redemption Date (which shall not
be more than 85 Trading Days following the consummation of such Disposition),
(C) the kind of shares of capital stock, cash and/or other securities or
property to be paid as a redemption price in respect of shares of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock
selected for redemption, (D) the Net Proceeds of such Disposition, (E) the
Outstanding Interest Fraction as of a recent date preceding the date of such
notice, (F) the number of outstanding shares of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock and the number of
shares of Series A Liberty Media Group Common Stock and Series B Liberty Media
Group Common Stock into or for which outstanding Convertible Securities are
then convertible, exercisable or exchangeable and the conversion or exercise
prices thereof, (G) in the case of a notice to holders of Convertible
Securities, a statement to the effect that holders of such Convertible
Securities shall be entitled to participate in such selection for redemption
only if such holders appropriately convert, exercise or exchange such
Convertible Securities on or prior to the date referred to in clause (A) of
this sentence and a statement as to what, if anything, such holders shall be
entitled to receive pursuant to the terms of such Convertible Securities if
such holders convert, exercise or exchange such Convertible Securities
following such date and (H) a statement that the Corporation will not be
required to register a transfer of any shares of Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock for a period of 15
Trading Days next preceding the date referred to in clause (A) of this
sentence. Promptly following the date referred to in clause (A) of the
preceding sentence, but not earlier than the 40th Trading Day and not later
than the 50th Trading Day following the consummation of such Disposition, the
Corporation shall cause to be given to each holder of shares of Series A
Liberty Media Group
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Common Stock and Series B Liberty Media Group Common Stock to be so redeemed, a
notice setting forth (A) the number of shares of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock held by such holder
to be redeemed, (B) a statement that such shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock shall be
redeemed, (C) the Redemption Date (which shall not be more than 85 Trading Days
following the consummation of such Disposition), (D) 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 Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock to be
redeemed, including details as to the calculation thereof, and (E) the place or
places where certificates for shares of such Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock, properly endorsed or
assigned for transfer (unless the Corporation waives such requirement), are to
be surrendered for delivery of certificates for shares of such capital stock,
cash and/or other securities or property. The notices referred to in this
clause (iv) shall be sent by first-class mail, postage prepaid, at such
holder's address as the same appears on the transfer books of the Corporation.
The outstanding shares of Series A Liberty Media Group Common Stock and Series
B Liberty Media Group Common Stock to be redeemed shall be redeemed by the
Corporation pro rata among the holders of Series A Liberty Media Group Common
Stock and Series B Liberty Media Group Common Stock or by such other method as
may be determined by the Board of Directors to be equitable.
(v) In the event of any conversion pursuant to paragraph 2(c) of
this Section E or pursuant to this paragraph 5 (other than pursuant to
paragraph 5(c)), the Corporation shall cause to be given to each holder of
outstanding shares of Series A Liberty Media Group Common Stock and Series B
Liberty Media Group Common Stock and to each holder of Convertible Securities
convertible into or exercisable or exchangeable for shares of either such
series (unless provision for such notice is otherwise made pursuant to the
terms of such Convertible Securities), a notice setting forth (A) a statement
that all outstanding shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group Common Stock shall be converted, (B) the
Conversion Date (which shall not be more than 85 Trading Days following the
consummation of such Disposition in the event of a conversion pursuant to
paragraph 5(b) and which shall not be more than 120 days after the Appraisal
Date in the event of a conversion pursuant to paragraph 2(c)), (C) the per
share number of shares of Series A TCI Group Common Stock or Series B TCI Group
Common Stock, as applicable, to be received with respect to each share of
Series A Liberty Media Group Common Stock or Series B Liberty Media Group
Common Stock, including details as to the calculation thereof, (D) the place or
places where certificates for shares of Series A Liberty Media Group Common
Stock or Series B Liberty Media Group Common Stock, properly endorsed or
assigned for transfer (unless the Corporation shall waive such requirement),
are to be surrendered, (E) the number of outstanding shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock, the
number of Committed Acquisition Shares issuable and the number of shares of
Series A Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock into or for which outstanding Convertible Securities are then
convertible, exercisable or exchangeable and the conversion, exercise or
exchange prices thereof and (F) in the case of a notice to holders of
Convertible Securities, a statement to the effect that holders of such
Convertible
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Securities shall be entitled to participate in such conversion only if such
holders appropriately convert, exercise or exchange such Convertible Securities
on or prior to the Conversion Date referred to in clause (B) of this sentence
and a statement as to what, if anything, such holders shall be entitled to
receive pursuant to the terms of such Convertible Securities or, if applicable,
paragraph 5(c) of this Section E if such holders convert, exercise or exchange
such Convertible Securities following such Conversion Date. Such notice shall
be sent by first-class mail, postage prepaid, not less than 35 Trading Days nor
more than 45 Trading Days prior to the Conversion Date, at such holder's
address as the same appears on the transfer books of the Corporation.
(vi) If the Corporation determines to redeem shares of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock
pursuant to subparagraph (a) of this paragraph 5, the Corporation shall
promptly cause to be given to each holder of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock and to each holder
of Convertible Securities convertible into or exercisable or exchangeable for
shares of either such series (unless provision for such notice is otherwise
made pursuant to the terms of such Convertible Securities), a notice setting
forth (A) a statement that all outstanding shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock shall be
redeemed in exchange for shares of common stock of the Liberty Media Group
Subsidiaries, (B) the Redemption Date, (C) the Adjusted Outstanding Interest
Fraction as of a recent date preceding the date of such notice, (D) the place
or places where certificates for shares of Series A Liberty Media Group Common
Stock and Series B Liberty Media Group Common Stock, properly endorsed or
assigned for transfer (unless the Corporation shall waive such requirement),
are to be surrendered for delivery of certificates for shares of common stock
of the Liberty Media Group Subsidiaries, (E) the number of outstanding shares
of Series A Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock and the number of shares of Series A Liberty Media Group Common
Stock and Series B Liberty Media Group Common Stock into or for which
outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, of such Convertible Securities constitute
Pre-Distribution Convertible Securities or Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition
Shares) and the number of Committed Acquisition Shares issuable, and (F) in the
case of a notice to holders of Convertible Securities, a statement to the
effect that holders of such Convertible Securities shall be entitled to
participate in such redemption only if such holders appropriately convert,
exercise or exchange such Convertible Securities on or prior to the Redemption
Date referred to in clause (B) of this sentence and a statement as to what, if
anything, such holders shall be entitled to receive pursuant to the terms of
such Convertible Securities or, if applicable, paragraph 5(c) of this Section E
if such holders convert, exercise or exchange such Convertible Securities
following the Redemption Date. Such notice shall be sent by first-class mail,
postage prepaid, not less than 35 Trading Days nor more than 45 Trading Days
prior to the Redemption Date, at such holder's address as the same appears on
the transfer books of the Corporation.
(vii) Neither the failure to mail any notice required by this
paragraph 5(d) to any particular holder of Series A Liberty Media Group Common
Stock, Series B Liberty Media Group Common
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Stock or of Convertible Securities nor any defect therein shall affect the
sufficiency thereof with respect to any other holder of outstanding shares of
Series A Liberty Media Group Common Stock or Series B Liberty Media Group
Common Stock or of Convertible Securities, or the validity of any conversion or
redemption.
(viii) The Corporation shall not be required to issue or deliver
fractional shares of any class of capital stock or any fractional securities to
any holder of Series A Liberty Media Group Common Stock or Series B Liberty
Media Group Common Stock upon any conversion, redemption, dividend or other
distribution pursuant to paragraph 2(c) of this Section E or pursuant to this
paragraph 5. In connection with the determination of the number of shares of
any class of capital stock that shall be issuable or the amount of securities
that shall be deliverable to any holder of record upon any such conversion,
redemption, dividend or other distribution (including any fractions of shares
or securities), the Corporation may aggregate the number of shares of Series A
Liberty Media Group Common Stock or Series B 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 Series A Liberty Media Group Common Stock or
Series B Liberty Media Group Common Stock is a fraction, the Corporation shall,
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 shall be (A) in the case of any fraction of a
share of capital stock of the Corporation, the product of such fraction and the
Market Value of one share of such capital stock and (B) in the case of any
other fractional security, such value as is determined by the Board of
Directors.
(ix) No adjustments in respect of dividends shall be made upon the
conversion or redemption of any shares of Series A Liberty Media Group Common
Stock or Series B Liberty Media Group Common Stock; provided, however, that if
the Conversion Date or the Redemption Date with respect to the Series A Liberty
Media Group Common Stock or Series B Liberty Media Group Common Stock shall be
subsequent to the record date for the payment of a dividend or other
distribution thereon or with respect thereto, the holders of shares of Series A
Liberty Media Group Common Stock or Series B Liberty Media Group Common Stock
at the close of business on such record date shall 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 the Corporation's default in
payment of the dividend or distribution due on such date.
(x) Before any holder of shares of Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock shall 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 shares of Series A Liberty Media Group Common Stock or Series B Liberty
Media Group Common Stock pursuant to paragraph 2(c) of this Section E or
pursuant to this paragraph 5, such holder shall surrender at such place as the
Corporation shall specify certificates for such shares of Series A Liberty
Media Group Common Stock or Series B Liberty Media Group
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Common Stock, properly endorsed or assigned for transfer (unless the
Corporation shall waive such requirement). The Corporation shall as soon as
practicable after such surrender of certificates representing shares of Series
A Liberty Media Group Common Stock or Series B Liberty Media Group Common Stock
deliver to the person for whose account shares of Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock 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 shall be entitled as aforesaid, together
with any payment for fractional securities contemplated by paragraph
5(d)(viii). If less than all of the shares of Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock represented by any
one certificate are to be redeemed, the Corporation shall issue and deliver a
new certificate for the shares of Series A Liberty Media Group Common Stock or
Series B Liberty Media Group Common Stock not redeemed. The Corporation shall
not be required to register a transfer of (1) any shares of Series A Liberty
Media Group Common Stock or Series B Liberty Media Group Common Stock for a
period of 15 Trading Days next preceding any selection of shares of Series A
Liberty Media Group Common Stock or Series B Liberty Media Group Common Stock
to be redeemed or (2) any shares of Series A Liberty Media Group Common Stock
or Series B Liberty Media Group Common Stock selected or called for redemption.
Shares selected for redemption may not thereafter be converted pursuant to
paragraph 2(b) of this Section E.
(xi) From and after any applicable Conversion Date or Redemption
Date, all rights of a holder of shares of Series A Liberty Media Group Common
Stock or Series B Liberty Media Group Common Stock that were converted or
redeemed shall cease except for the right, upon surrender of the certificates
representing shares of Series A Liberty Media Group Common Stock or Series B
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 contemplated by paragraph 5(d)(viii) of this
Section E and such holder shall have no other or further rights in respect of
the shares of Series A Liberty Media Group Common Stock or Series B Liberty
Media Group Common Stock so converted or redeemed, including, but not limited
to, any rights with respect to any cash, securities or other properties which
are reserved or otherwise designated by the Corporation as being held for the
satisfaction of the Corporation's obligations to pay or deliver any cash,
securities or other property upon the conversion, exercise or exchange of any
Convertible Securities outstanding as of the date of such conversion or
redemption or any Committed Acquisition Shares which may then be issuable. No
holder of a certificate that, immediately prior to the applicable Conversion
Date or Redemption Date for the Series A Liberty Media Group Common Stock or
Series B Liberty Media Group Common Stock, represented shares of Series A
Liberty Media Group Common Stock or Series B Liberty Media Group Common Stock
shall 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 Series A
Liberty Media Group Common Stock or Series B 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 shall be paid to the holder the amount of any
dividends or other distributions (without interest) which
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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 Series A Liberty Media Group Common Stock or Series B
Liberty Media Group Common Stock, the Corporation shall, however, be entitled
to treat the certificates for shares of Series A Liberty Media Group Common
Stock or Series B 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 Series A Liberty Media Group Common Stock or Series B Liberty Media
Group Common Stock represented by such certificates shall have been converted
or redeemed, notwithstanding the failure to surrender such certificates.
(xii) The Corporation shall 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 Series A Liberty Media Group Common Stock or Series
B Liberty Media Group Common Stock pursuant to this Section E. The Corporation
shall 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 Series A Liberty Media
Group Common Stock or Series B Liberty Media Group Common Stock so converted or
redeemed were registered and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Corporation the amount
of any such tax, or has established to the satisfaction of the Corporation that
such tax has been paid.
6. Liquidation.
In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation and subject to
the prior payment in full of the preferential amounts to which any class or
series of Preferred Stock is entitled, (a) the holders of the shares of Series
A TCI Group Common Stock and the holders of the shares of Series B TCI Group
Common Stock shall share equally, on a share for share basis, in a percentage
of the funds of the Corporation 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 (b) the holders of the shares of Series A Liberty Media Group
Common Stock and the holders of the shares of Series B Liberty Media Group
Common Stock shall share equally, on a share for share basis, in a percentage
of the funds of the Corporation remaining for distribution to its common
stockholders equal to 100% multiplied by the average daily ratio (expressed as
a decimal) of Y/Z for such 20-Trading Day period, where X is the aggregate
Market Capitalization of the Series A TCI Group Common Stock and the Series B
TCI Group Common Stock, Y is the aggregate Market Capitalization of the Series
A Liberty Media Group Common Stock and the Series B Liberty Media Group Common
Stock, and Z is the aggregate Market Capitalization of the Series A TCI Group
Common Stock, the Series B
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TCI Group Common Stock, the Series A Liberty Media Group Common Stock and the
Series B Liberty Media Group Common Stock. Neither the consolidation or merger
of the Corporation with or into any other corporation or corporations nor the
sale, transfer or lease of all or substantially all of the assets of the
Corporation shall itself be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this paragraph 6.
7. Determinations by the Board of Directors.
Any determinations made by the Board of Directors under any provision
in this Section E shall be final and binding on all stockholders of the
Corporation, except as may otherwise be required by law. The Corporation shall
prepare a statement of any such determination by the Board of Directors
respecting the fair market value of any properties, assets or securities and
shall file such statement with the Secretary of the Corporation.
8. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph 8 shall have, for all purposes of this Section E, the meanings herein
specified:
"Adjusted Outstanding Interest Fraction", as of any date, shall mean a
fraction the numerator of which is the aggregate number of shares of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock
outstanding on such date and the denominator of which is the sum of (a) such
aggregate number of shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group Common Stock outstanding on such date, (b) the
Number of Shares Issuable with Respect to the Inter-Group Interest as of such
date, (c) the aggregate number of shares of Series A Liberty Media Group Common
Stock and Series B Liberty Media Group Common Stock issuable, determined as of
such date, upon conversion, exercise or exchange of Pre-Distribution
Convertible Securities and (d) the number of Committed Acquisition Shares
issuable, determined as of such date.
"Committed Acquisition Shares" shall mean (a) the shares of Series A
Liberty Media Group Common Stock that the Corporation has, prior to the record
date for the Distribution, agreed to issue, but as of such record date has not
issued, and (b) the shares of Series A Liberty Media Group Common Stock that
are issuable upon conversion, exercise or exchange of Convertible Securities
that the Corporation has, prior to the record date for the Distribution, agreed
to issue, but as of such record date has not issued, in each case including
obligations of the Corporation to issue shares of the Corporation's Class A
Common Stock, par value $1.00 per share, which as a result of the Distribution,
constitute obligations to issue, among other securities, Series A Liberty Media
Group Common Stock or Convertible Securities which are convertible into or
exercisable or exchangeable for Series A Liberty Media Group Common Stock;
provided, however that Committed Acquisition Shares shall not include any
shares of Series A Liberty Media Group Common Stock or Series B Liberty Media
Group Common Stock issuable upon conversion, exercise or exchange of
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Pre-Distribution Convertible Securities. The type and amount of Committed
Acquisition Shares issuable shall be appropriately adjusted to reflect
subdivisions and combinations of the Series A Liberty Media Group Common Stock
and dividends or distributions of shares of Series A Liberty Media Group Common
Stock or Series B Liberty Media Group Common Stock to holders of Series A
Liberty Media Group Common Stock and other reclassifications of the Series A
Liberty Media Group Common Stock, in each case occurring (or the record date
for which occurs) after the Distribution.
"Conversion Date" shall mean any date fixed by the Board of Directors
for a conversion of shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group Common Stock, as set forth in a notice to holders
of Series A Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock pursuant to paragraph 5(d) of this Section E.
"Convertible Securities" shall mean any securities of the Corporation
(other than any series of Common Stock) that are convertible into, exchangeable
for or evidence the right to purchase any shares of any series of Common Stock,
whether upon conversion, exercise, exchange, pursuant to antidilution
provisions of such securities or otherwise.
"Corporation Earnings (Loss) Attributable to the Liberty Media Group",
for any period, shall mean the net earnings or loss of the Liberty Media Group
for such period determined on a basis consistent with the determination of the
net earnings or loss of the Liberty Media Group for such period as presented in
the combined financial statements of the Liberty Media Group for such period,
including income and expenses of the Corporation 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.
"Corporation Earnings (Loss) Attributable to the TCI Group", for any
period, shall mean 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
the Corporation attributed to the operations of the TCI Group on a
substantially consistent basis, including without limitation, corporate
administrative costs, net interest and income taxes.
"Disposition" shall mean the sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of assets
or stock or otherwise) of properties or assets.
"Inter-Group Interest Fraction", as of any date, shall mean a fraction
the numerator of which is the Number of Shares Issuable with Respect to the
Inter-Group Interest as of such date and the denominator of which is the sum of
(a) such Number of Shares Issuable with Respect to the Inter-Group Interest as
of such date and (b) the aggregate number of shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock outstanding as
of such date.
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"Liberty Media Group" shall mean, as of any date that any shares of
Series A Liberty Media Group Common Stock or Series B Liberty Media Group
Common Stock have been issued and continue to be outstanding:
(a) the interest of the Corporation or of 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) and their respective properties
and assets,
(b) all assets and liabilities of the Corporation or any
of its subsidiaries to the extent attributed to any of the properties
or assets referred to in clause (a) of this sentence, whether or not
such assets or liabilities are assets and liabilities of Liberty Media
Corporation or any of its subsidiaries (or a successor as described in
clause (a) of this sentence),
(c) all assets and properties contributed or otherwise
transferred to the Liberty Media Group from the TCI Group, and
(d) the interest of the Corporation or any of its
subsidiaries in the businesses, assets and liabilities acquired by the
Corporation or any of its subsidiaries for the Liberty Media Group, as
determined by the Board of Directors;
provided that (i) from and after any dividend or other distribution with
respect to any shares of Series A Liberty Media Group Common Stock or Series B
Liberty Media Group Common Stock (other than a dividend or other distribution
payable in shares of Series A Liberty Media Group Common Stock or Series B
Liberty Media Group Common Stock, with respect to which adjustment shall be
made as provided in clause (a) of the definition of "Number of Shares Issuable
with Respect to the Inter-Group Interest", or in other securities of the
Corporation attributed to the Liberty Media Group for which provision shall be
made as set forth in the penultimate sentence of this definition), the Liberty
Media Group shall 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 Series A Liberty Media Group Common Stock or Series B 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 shall no longer include the assets or properties so
transferred. If the Corporation shall pay a dividend or make any other
distribution with respect to shares of Series A Liberty Media Group Common
Stock or Series B Liberty Media Group Common Stock payable in securities of the
Corporation attributed to the Liberty Media Group other than Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock, the TCI
Group shall 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
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interest or dividends are paid or other distributions are made on such other
securities so distributed to the holders of Series A Liberty Media Group Common
Stock and Series B Liberty Media Group Common Stock, the Liberty Media Group
shall no longer include a corresponding ratable amount of the kind of assets
paid as such interest or dividends or other distributions in respect of such
securities so deemed to be held by the TCI Group. The Corporation 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 shall 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 shall
no longer be deemed to be held by the TCI Group or attributed to the Liberty
Media Group.
"Liberty Media Group Available Dividend Amount", as of any date, shall
mean 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 Series
A Liberty Media Group Common Stock, Series B Liberty Media Group Common Stock
and each class or series of Preferred Stock attributed to the Liberty Media
Group or (b) in case there is no such excess, an amount equal to the
Corporation 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.
"Market Capitalization" of any class or series of capital stock of the
Corporation on any Trading Day shall mean 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.
"Market Value" of any class or series of capital stock of the
Corporation on any day shall mean the average of the high and low reported
sales prices regular way of a share of such class or series on such day (if
such day is a Trading Day, and if such day is not a Trading Day, on the Trading
Day immediately preceding such day) or in case no such reported sale takes
place on such Trading Day the average of the reported closing bid and asked
prices regular way of a share of such class or series on such Trading Day, in
either case on the Nasdaq National Market, or if the shares of such class or
series are not quoted on such Nasdaq National Market on such Trading Day, the
average of the closing bid and asked prices of a share of such class or series
in the over-the-counter market on such Trading Day as furnished by any New York
Stock Exchange member firm selected from time to time by the Corporation, or if
such closing bid and asked prices are not made available by any such New York
Stock Exchange member firm on such Trading Day, the market value of a share of
such class or series as determined by the Board of Directors; provided that for
purposes of determining the ratios set forth in paragraphs 2(c), 5(b) and 6 of
this Section E, (a) the "Market
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Value" of any share of any series of Common Stock on any day prior to the "ex"
date or any similar date for any dividend or distribution paid or to be paid
with respect to such series of Common Stock shall be reduced by the fair market
value of the per share amount of such dividend or distribution as determined by
the Board of Directors and (b) the "Market Value" of any share of any series of
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 Common Stock or (ii) the "ex" date or
any similar date for any dividend or distribution with respect to any such
series of Common Stock in shares of such series of Common Stock shall be
appropriately adjusted to reflect such subdivision, combination, dividend or
distribution.
"Net Proceeds" shall mean, as of any date, with respect to any
Disposition of any of the properties and assets of the Liberty Media Group, an
amount, if any, equal to the gross proceeds of such Disposition after any
payment of, or reasonable provision for, (a) any taxes payable by the
Corporation in respect of such Disposition or in respect of any resulting
dividend or redemption pursuant to clause (i) or (ii), respectively, of
paragraph 5(b) of this Section E (or which would have been payable but for the
utilization of tax benefits attributable to the TCI Group), (b) any transaction
costs, including, without limitation, any legal, investment banking and
accounting fees and expenses and (c) any liabilities and other obligations
(contingent or otherwise) of, or attributed to, the Liberty Media Group,
including, without limitation, any indemnity or guarantee obligations incurred
in connection with the Disposition or any liabilities for future purchase price
adjustments and any preferential amounts plus any accumulated and unpaid
dividends and other obligations (without duplication of amounts allocated for
the satisfaction of the Corporation's obligations with respect to
Pre-Distribution Convertible Securities and Committed Acquisition Shares
issuable which are included in the determination of the Adjusted Outstanding
Interest Fraction) in respect of Preferred Stock attributed to the Liberty
Media Group. For purposes of this definition, any properties and assets of the
Liberty Media Group remaining after such Disposition shall constitute
"reasonable provision" for such amount of taxes, costs and liabilities
(contingent or otherwise) as can be supported by such properties and assets. To
the extent the proceeds of any Disposition include any securities or other
property other than cash, the Board of Directors shall determine the value of
such securities or property, including for the purpose of determining the
equivalent value thereof if the Board of Directors determines to pay a dividend
or redemption price in cash or securities or other property as provided in
clause (z) of paragraph 5(b) of this Section E.
"Number of Shares Issuable with Respect to the Inter-Group Interest"
after the Distribution shall be zero and shall from time to time thereafter, as
applicable, be
(a) adjusted as appropriate to reflect subdivisions (by
stock split or otherwise) and combinations (by reverse stock split or
otherwise) of the Series A Liberty Media Group Common Stock and
dividends or distributions of shares of Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock to holders
of Series A Liberty Media Group Common Stock and other
reclassifications of Series A Liberty Media Group Common Stock,
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(b) decreased (but not to less than zero) by (i) the
aggregate number of shares of Series A Liberty Media Group Common
Stock issued or sold by the Corporation 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
Series A Liberty Media Group Common Stock issued or delivered upon
conversion, exercise or exchange of Convertible Securities (other than
Pre-Distribution Convertible Securities and Convertible Securities
which are convertible into or exercisable or exchangeable for
Committed Acquisition Shares), the proceeds of which are attributed to
the TCI Group, (iii) the aggregate number of shares of Series A
Liberty Media Group Common Stock issued or delivered by the
Corporation as a dividend or distribution to holders of Series A TCI
Group Common Stock and Series B TCI Group Common Stock, (iv) the
aggregate number of shares of Series A Liberty Media Group Common
Stock issued or delivered upon the conversion, exercise or exchange of
any Convertible Securities (other than Pre-Distribution Convertible
Securities and Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares) issued
or delivered by the Corporation after the Distribution as a dividend
or distribution or by reclassification or exchange to holders of
Series A TCI Group Common Stock and Series B TCI Group Common Stock
and (v) the aggregate number of shares of Series A Liberty Media Group
Common Stock (rounded, if necessary, to the nearest whole number),
equal to the aggregate fair value (as determined by the Board of
Directors) of assets or properties attributed to the Liberty Media
Group that are transferred from the Liberty Media Group to the TCI
Group in consideration of a reduction in the Number of Shares Issuable
with Respect to the Inter-Group Interest, divided by the Market Value
of one share of Series A Liberty Media Group Common Stock as of the
date of such transfer, and
(c) increased by (i) the aggregate number of any shares
of Series A Liberty Media Group Common Stock and Series B Liberty
Media Group Common Stock which are retired or otherwise cease to be
outstanding following their purchase with funds attributed to the TCI
Group, (ii) a number (rounded, if necessary, to the nearest whole
number), equal to the fair value (as determined by the Board of
Directors) of assets or properties, theretofore attributed to the TCI
Group that are contributed to the Liberty Media Group in consideration
of an increase in the Number of Shares Issuable with Respect to the
Inter-Group Interest, divided by the Market Value of one share of
Series A Liberty Media Group Common Stock as of the date of such
contribution and (iii) the aggregate number of shares of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock into or for which Convertible Securities are deemed to be
converted, exercised or exchanged pursuant to the last sentence of the
definition of "TCI Group" in this paragraph 8. The Corporation shall
not issue or sell shares of Series B Liberty Media Group Common Stock
in respect of a reduction in the Number of Shares Issuable with
Respect to the Inter-Group Interest.
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Whenever a change in the Number of Shares Issuable with Respect to the
Inter-Group Interest occurs, the Corporation shall prepare and file a statement
of such change with the Secretary of the Corporation.
"Outstanding Interest Fraction", as of any date, shall mean a fraction
the numerator of which is the aggregate number of shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock
outstanding on such date and the denominator of which is the sum of (a) such
aggregate number of shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group Common Stock outstanding on such date and (b) the
Number of Shares Issuable with Respect to the Inter-Group Interest as of such
date.
"Pre-Distribution Convertible Securities" shall mean Convertible
Securities that were outstanding on the record date for the Distribution and
were, prior to such date, convertible into or exercisable or exchangeable for
shares of the Class A Common Stock, par value $1.00 per share, of the
Corporation.
"Redemption Date" shall mean any date fixed for a redemption or
purchase of shares of Series A Liberty Media Group Common Stock or Series B
Liberty Media Group Common Stock, as set forth in a notice to holders of such
series pursuant to this Certificate.
"Related Business Transaction" shall mean any Disposition of all or
substantially all of the properties and assets of the Liberty Media Group in
which the Corporation receives as proceeds of such Disposition primarily equity
securities (including, without limitation, capital stock, convertible
securities, partnership or limited partnership interests and other types of
equity securities, without regard to the voting power or contractual or other
management or governance rights related to such equity securities) of the
purchaser or acquiror of such assets and properties of the Liberty Media Group,
any entity which succeeds (by merger, formation of a joint venture enterprise
or otherwise) to such assets and properties of the Liberty Media Group or a
third party issuer, which purchaser, acquiror or other issuer is engaged or
proposes to engage primarily in one or more businesses similar or complementary
to the businesses conducted by the Liberty Media Group prior to such
Disposition, as determined in good faith by the Board of Directors.
"Subsidiary" shall mean, with respect to any person or entity, any
corporation or partnership 50% or more of whose outstanding voting securities
or partnership interests, as the case may be, are directly or indirectly owned
by such person or entity.
"TCI Group" shall mean, as of any date:
(a) the interest of the Corporation or any of its
subsidiaries in all of the businesses in which the Corporation or any
of its subsidiaries (or any of their predecessors or successors) is or
has been engaged, directly or indirectly, and the respective assets
and liabilities of the Corporation or any of its subsidiaries, other
than any businesses, assets or liabilities of the Liberty Media Group;
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(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 Series A Liberty Media Group Common Stock or
Series B Liberty Media Group Common Stock (other than a dividend or
other distribution payable in shares of Series A Liberty Media Group
Common Stock or Series B Liberty Media Group Common Stock, with
respect to which adjustment shall be made as provided in clause (a) of
the definition of "Number of Shares Issuable with Respect to the
Inter-Group Interest", or in other securities of the Corporation
attributed to the Liberty Media Group, for which provision shall be
made as set forth 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 Series A Liberty Media Group Common Stock or
Series B 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 shall
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 pursuant to clause (b) above). If the Corporation
shall pay a dividend or make any other distribution with respect to shares of
Series A Liberty Media Group Common Stock or Series B Liberty Media Group
Common Stock payable in other securities of the Corporation attributed to the
Liberty Media Group, the TCI Group shall 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 Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock, the TCI Group shall
include a corresponding ratable amount of the kind of assets paid as such
interest or dividends or other distributions in respect of such securities so
deemed to be held by the TCI Group. The Corporation 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 shall 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
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the amount of the Convertible Securities deemed converted, exercised or
exchanged as if such Convertible Securities were outstanding), in which case
such Convertible Securities shall no longer be deemed to be held by the TCI
Group or attributed to the Liberty Media Group.
"TCI Group Available Dividend Amount", as of any date, shall mean
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 Series
A TCI Group Common Stock, Series B TCI Group Common Stock and each class or
series of Preferred Stock attributed to the TCI Group or (b) in case there is
no such excess, an amount equal to the Corporation Earnings (Loss) Attributable
to the TCI Group (if positive) for the fiscal year in which such date occurs
and/or the preceding fiscal year.
"Trading Day" shall mean each weekday other than any day on which any
relevant class or series of capital stock of the Corporation is not traded on
the Nasdaq National Market System or in the over-the-counter market."
(IV) SECTION C OF ARTICLE V OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE
CORPORATION IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS:
"SECTION C
REMOVAL OF DIRECTORS
Subject to the rights of the holders of any class or series of
Preferred Stock, directors may be removed from office only for cause (as
hereinafter defined) upon the affirmative vote of the holders of 66 2/3% of the
total voting power of the then outstanding shares of Series A TCI Group Common
Stock, Series B TCI Group Common Stock, Series A Liberty Media Group Common
Stock, Series B Liberty Media Group Common Stock and any class or series of
Preferred Stock entitled to vote at an election of directors, voting together
as a single class. Except as may be provided by law, "cause" for removal, for
purposes of this Section C, shall exist only if: (i) the director whose removal
is proposed has been convicted of a felony, or has been granted immunity to
testify in an action where another has been convicted of a felony, by a court
of competent jurisdiction and such conviction is no longer subject to direct
appeal; (ii) such director has become mentally incompetent, whether or not so
adjudicated, which mental incompetence directly affects his ability as a
director of the Corporation, as determined by at least 66 2/3% of the members
of the Board of Directors then in office (other than such director); or (iii)
such director's actions or failure to act have been determined by at least 66
2/3% of the members of the Board of Directors then in office (other than such
director) to be in derogation of the director's duties."
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(V) ARTICLE VIII OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE
CORPORATION IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS:
"ARTICLE VIII
MEETINGS OF STOCKHOLDERS
SECTION A
ANNUAL AND SPECIAL MEETINGS
Subject to the rights of the holders of any class or series of
Preferred Stock, stockholder action may be taken only at an annual or special
meeting. Except as otherwise provided in the terms of any class or series of
Preferred Stock or unless otherwise prescribed by law or by another provision
of this Certificate, special meetings of the stockholders of the Corporation,
for any purpose or purposes, shall be called by the Secretary of the
Corporation (i) upon the written request of the holders of not less than 66
2/3% of the total voting power of the outstanding Voting Securities (as
hereinafter defined) or (ii) at the request of at least 75% of the members of
the Board of Directors then in office. The term "Voting Securities" shall
include the Series A TCI Group Common Stock, the Series B TCI Group Common
Stock, the Series A Liberty Media Group Common Stock, the Series B Liberty
Media Group Common Stock and any class or series of Preferred Stock entitled to
vote with the holders of Common Stock generally upon all matters which may be
submitted to a vote of stockholders at any annual meeting or special meeting
thereof.
SECTION B
ACTION WITHOUT A MEETING
Except as otherwise provided in the terms of any class or series of
Preferred Stock, no action required to be taken or which may be taken at any
annual meeting or special meeting of stockholders may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, is specifically denied."
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<PAGE> 141
(VI) ARTICLE IX OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE CORPORATION
IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS:
"ARTICLE IX
ACTIONS REQUIRING SUPERMAJORITY STOCKHOLDER VOTE
Subject to the rights of the holders of any class or series of
Preferred Stock, the affirmative vote of the holders of at least 66 2/3% of the
total voting power of the then outstanding Voting Securities (as defined in
Section A of Article VIII of this Certificate), voting together as a single
class at a meeting specifically called for such purpose, shall be required in
order for the Corporation to take any action to authorize:
(a) the amendment, alteration or repeal of any provision
of this Certificate or the addition or insertion of other provisions
herein;
(b) the adoption, amendment or repeal of any provision of
the Bylaws of the Corporation; provided, however, that this clause (b)
shall not apply to, and no vote of the stockholders of the Corporation
shall be required to authorize, the adoption, amendment or repeal of
any provision of the Bylaws of the Corporation by the Board of
Directors in accordance with the power conferred upon it pursuant to
Section F of Article V of this Certificate;
(c) the merger or consolidation of this Corporation with
or into any other corporation; provided, however, that this clause (c)
shall not apply to any merger or consolidation (i) as to which the
laws of the State of Delaware, as then in effect, do not require the
consent of this Corporation's stockholders, or (ii) which at least 75%
of the members of the Board of Directors then in office have approved;
(d) the sale, lease or exchange of all, or substantially
all, of the property and assets of the Corporation; or
(e) the dissolution of the Corporation.
All rights at any time conferred upon the stockholders of the
Corporation pursuant to this Certificate are granted subject to the provisions
of this Article IX."
(vii) Upon the effectiveness of this Certificate of Amendment, (a) each share
of the Class A Common Stock, par value $1.00 per share, of the Corporation that
is issued and outstanding (including shares held in the treasury of the
Corporation) shall be redesignated and changed, ipso
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facto and without any other action on the part of the stockholders thereof, into
one share of Series A TCI Group Common Stock and (b) each share of Class B
Common Stock, par value $1.00 per share, of the Corporation that is issued and
outstanding (including shares held in the treasury of the Corporation) shall be
redesignated and changed, ipso facto and without any other action on the part of
the stockholders thereof, into one share of Series B TCI Group Common Stock.
SECOND: That said amendments were duly adopted by the Board of
Directors of the Corporation, and pursuant to resolution of the Board of
Directors of the Corporation, the annual meeting of the stockholders of the
Corporation was duly called and held, upon notice in accordance with Section
222 of the General Corporation Law of the State of Delaware, at which meeting
the necessary number of shares as required by statute and the Restated
Certificate of Incorporation of the Corporation were voted in favor of said
amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
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IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Amendment this 3rd day of August, 1995.
TELE-COMMUNICATIONS, INC.
By: BRENDON R. CLOUSTON
Name: Brendon R. Clouston
Title: Executive Vice President
ATTEST:
By: STEPHEN M. BRETT
Name: Stephen M. Brett
Title: Secretary
<PAGE> 144
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE THIRD
DAY OF AUGUST, A.D. 1995, AT 12:46 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
EDWARD J. FREEL
----------------------------
Edward J. Freel,
Secretary of State
AUTHENTICATION: 7596126
DATE: 08-03-95
<PAGE> 145
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 12:46 PM 08/03/1995
950175234 - 2371729
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
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SETTING FORTH A COPY OF A RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED
AS "CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK,
SERIES F" ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
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The undersigned Executive Vice President of
Tele-Communications, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that the Board of Directors of the Corporation duly adopted the
following resolutions creating a series of preferred stock designated as
"Convertible Redeemable Participating Preferred Stock, Series F":
BE IT RESOLVED, that pursuant to authority expressly granted by
the provisions of Article IV, Section D of the Restated Certificate of
Incorporation of the Corporation, the Board of Directors hereby creates and
authorizes the issuance of a series of preferred stock, par value $.01 per
share, of the Corporation, to consist of 500,000 shares, and hereby fixes the
designations, dividend rights, voting powers, rights on liquidation, conversion
rights, redemption rights and other preferences and relative, participating,
optional or other special rights and the qualifications, limitations or
restrictions of the shares of such series (in addition to the designations,
preferences and relative, participating, limitations or restrictions thereof set
forth in the Restated Certificate of Incorporation that are applicable to
preferred stock of all series) as follows:
1. Designation. The designation of the series of preferred
stock, par value $.01 per share, of the Corporation authorized hereby is
"Convertible Redeemable Participating Preferred Stock, Series F" (the "Series F
Preferred Stock").
2. Certain Definitions. Unless the context otherwise requires,
the terms defined in this paragraph 2 shall have, for all purposes, the meanings
herein specified:
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"Average Quoted Price", when used with respect to the Series A
TCI Group Common Stock, shall mean the average of the Quoted Prices of the
Series A TCI Group Common Stock for the most recent period of five trading days
on which shares of such series trade ending three Business Days prior to the
Redemption Date, appropriately adjusted to take into account the actual
occurrence, during the period following the first of such five trading days and
ending on the Business Day immediately preceding such Redemption Date, of any
event of a type described in paragraph 7. The "Quoted Price" of a share of
Series A TCI Group Common Stock on any day means the last sale price (or, if no
sale price is reported, the average of the high and low bid prices) of the
Series A TCI Group Common Stock, on such day as reported on the National
Association of Securities Dealers, Inc. Automated Quotation System, Inc.
("NASDAQ") or if the Series A TCI Group Common Stock is listed on an exchange,
as reported in the composite transactions for the principal exchange on which
such stock is listed.
"Board of Directors" shall mean the Board of Directors of the
Corporation and, unless the context indicates otherwise, shall also mean, to the
extent permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Corporation with respect to such matter.
"Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in Denver, Colorado are not required to
be open.
"capital stock" shall mean any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Certificate" shall mean the Restated Certificate of
Incorporation of the Corporation, as it may from time to time hereafter be
amended or restated.
"Class A Preferred Stock" shall mean the Class A Preferred
Stock, par value $.01 per share, of the Corporation.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.01 per share, of the
Corporation.
"Conversion Rate" shall have the meaning ascribed to such term
in paragraph 7(b) hereof.
"Convertible Securities" shall mean securities, other than the
Series B TCI Group Common Stock, that are convertible into or exchangeable for
Series A TCI Group Common Stock; provided, however, that neither the Series A
Liberty Media Group Common Stock nor the Series B Liberty Media Group Common
Stock shall be deemed to be a Convertible Security by virtue of the
Corporation's right to cause the outstanding shares of each such series of
Liberty Media Group Common Stock to be converted into Series A TCI Group Common
Stock and Series B TCI Group Common Stock, respectively, in accordance with
paragraphs 2(c) or 5(b)(iii) of Section E of Article IV of the Certificate.
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"Cut-Off Date" shall have the meaning ascribed to such term in
paragraph 7(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Issue Date" shall mean the date on which shares of Series F
Preferred Stock are first issued.
"Junior Stock" shall mean (i) the TCI Group Common Stock, (ii)
the Liberty Media Group Common Stock, (iii) the Class B Preferred Stock, (iv)
any other class or series of capital stock, whether now existing or hereafter
created, of the Corporation, other than (A) the Series F Preferred Stock, (B)
any class or series of Parity Stock (except to the extent provided under clause
(v) hereof) and (C) any Senior Stock, and (v) any class or series of Parity
Stock to the extent that it ranks junior to the Series F Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation, as the case may
be. For purposes of clause (v) above, a class or series of Parity Stock shall
rank junior to the Series F Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation if the holders of shares of Series F
Preferred Stock shall be entitled to dividend payments, payments on redemption
or payments of amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in preference or priority to the holders
of shares of such class or series.
"Liberty Media Group Common Stock" shall mean, collectively,
the Series A Liberty Media Group Common Stock and the Series B Liberty Media
Group Common Stock.
"Liquidation Preference" per share of Series F Preferred Stock
shall be $.01.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"Officers' Certificate" shall mean a certificate signed by the
Chairman of the Board or the President of the Corporation and by the Treasurer
of the Corporation.
"Opinion of Counsel" shall mean a written opinion from legal
counsel selected by the Corporation. The counsel may be an employee of or
counsel to the Corporation.
"Original Stated Amount" of a share of Series F Preferred Stock
means $24,875.
"Parity Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created, of the Corporation ranking on a
parity basis with the Series F Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation. Capital stock of any class or series shall
rank on a parity as to dividend rights, rights of redemption or rights on
liquidation with the Series F Preferred Stock, whether or not the dividend
rates, dividend payment dates, redemption or liquidation prices per share or
sinking fund or mandatory redemption provisions, if any, are different from
those of the Series F Preferred Stock, if the holders of shares of such class or
series shall be entitled to dividend payments, payments on redemption or
payments of amounts distributable upon dissolution, liquidation or winding up of
the Corporation, as the case may be, in proportion to their respective
accumulated and accrued and unpaid
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dividends, redemption prices or liquidation prices, respectively, without
preference or priority, one over the other, as between the holders of shares of
such class or series and the holders of Series F Preferred Stock. No class or
series of capital stock that ranks junior to the Series F Preferred Stock as to
rights on liquidation shall rank or be deemed to rank on a parity basis with the
Series F Preferred Stock as to dividend rights or rights of redemption, unless
the instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
"Participating Dividend" shall have the meaning ascribed to
such term in paragraph 3(a) hereof.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof, or other
entity, whether acting in an individual, fiduciary or other capacity.
"Redemption Date" as to any share of Series F Preferred Stock
shall mean the date fixed for redemption of such share by the Board of Directors
of the Corporation pursuant to paragraph 5(a); provided that no such date will
be a Redemption Date unless the applicable Redemption Price is actually paid or
deposited as provided in paragraph 5(d) hereof on such date.
"Redemption Price" as to any share of Series F Preferred Stock
which is to be redeemed on any Redemption Date shall mean the Stated Amount
thereof on such Redemption Date.
"Senior Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created, of the Corporation ranking prior to
the Series F Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation. Capital stock of any class or series shall rank prior to
the Series F Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation if the holders of shares of such class or series shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of Series F
Preferred Stock. No class or series of capital stock that ranks on a parity
basis with or junior to the Series F Preferred Stock as to rights on liquidation
shall rank or be deemed to rank prior to the Series F Preferred Stock as to
dividend rights or rights of redemption, notwithstanding that the dividend rate,
dividend payment dates, sinking fund provisions, if any, or mandatory redemption
provisions thereof are different from those of the Series F Preferred Stock,
unless the instrument creating or evidencing such class or series of capital
stock otherwise expressly provides.
"Series A Liberty Media Group Common Stock" shall have the
meaning ascribed to such term in Section E of Article IV of the Certificate.
"Series A TCI Group Common Stock" shall mean the Series A TCI
Group Common Stock, par value $1.00 per share, of the Corporation, which term
shall include, where appropriate,
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in the case of any reclassification, recapitalization or other change in the
Series A TCI Group Common Stock, or in the case of a consolidation or merger of
the Corporation with or into another Person affecting the Series A TCI Group
Common Stock, such capital stock to which a holder of Series A TCI Group Common
Stock shall be entitled upon the occurrence of such event; provided, however,
that with respect to any period prior to the date of filing of the amendment to
the Certificate redesignating the Class A Common Stock, par value $1.00 per
share, of the Corporation as "Series A TCI Group Common Stock," such term shall
be deemed to refer to the Class A Common Stock, par value $1.00 per share, of
the Corporation.
"Series B Liberty Media Group Common Stock" shall have the
meaning ascribed to such term in Section E of Article IV of the Certificate.
"Series B TCI Group Common Stock" shall mean the Series B TCI
Group Common Stock, par value $1.00 per share, of the Corporation, which term
shall include, where appropriate, in the case of any reclassification,
recapitalization or other change in the Series B TCI Group Common Stock, or in
the case of a consolidation or merger of the Corporation with or into another
Person affecting the Series B TCI Group Common Stock, such capital stock to
which a holder of Series B TCI Group Common Stock shall be entitled upon the
occurrence of such event; provided, however, that with respect to any period
prior to the date of filing of the amendment to the Certificate redesignating
the Class B Common Stock, par value $1.00 per share, of the Corporation as
"Series B TCI Group Common Stock," such term shall be deemed to refer to the
Class B Common Stock, par value $1.00 per share, of the Corporation.
"Stated Amount" per share of the Series F Preferred Stock as of
any date in question (the "Determination Date") shall mean an amount equal to
the sum of (a) the Original Stated Amount of such share, plus (b) an amount
equal to all dividends which have been declared on the shares of Series F
Preferred Stock (including, but not limited to, Participating Dividends) but
which, as of the Determination Date, are unpaid. In connection with the
determination of the Stated Amount of a share of Series F Preferred Stock upon
redemption, the Determination Date shall be the applicable date of redemption.
"Subsidiary" of any Person shall mean (i) a corporation a
majority of the capital stock of which, having voting power under ordinary
circumstances to elect directors, is at the time, directly or indirectly, owned
by such Person and/or one or more Subsidiaries of such Person and (ii) any other
Person (other than a corporation) in which such Person and/or one or more
Subsidiaries of such Person, directly or indirectly, has (x) a majority
ownership interest or (y) the power to elect or direct the election of a
majority of the members of the governing body of such first-named Person.
"TCI Group Common Stock" shall mean, collectively, the Series A
TCI Group Common Stock and the Series B TCI Group Common Stock.
"TCI Holder" shall mean the Corporation and each Subsidiary of
the Corporation.
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3. Dividends.
(a) CASH DIVIDEND RIGHTS. Subject to the prior preferences and
other rights of any Senior Stock and the provisions of paragraph 6 hereof, the
holders of Series F Preferred Stock shall be entitled to receive cash dividends
per share in an amount (the "Participating Dividend") equal to the product of
(x) the amount of the cash dividend declared and to be paid on a single share of
Series A TCI Group Common Stock (or any other security into which the Series F
Preferred Stock is then convertible) and (y) the number of shares of Series A
TCI Group Common Stock (or other security) into which a share of Series F
Preferred Stock may be converted as of the date such dividend is paid. The
Participating Dividends shall be the only dividends payable to holders of Series
F Preferred Stock and such Participating Dividends shall be declared and paid
only when, as and if a cash dividend is declared and paid upon the outstanding
shares of Series A TCI Group Common Stock. Dividends or distributions on the
Series A TCI Group Common Stock which are paid or made in securities, properties
or other assets of the Corporation other than cash shall not constitute
Participating Dividends and holders of Series F Preferred Stock shall have no
rights with respect thereto, other than as may be provided in paragraph 7.
Participating Dividends shall be payable prior and in preference to any dividend
payments to the holders of any Junior Stock. Participating Dividends shall be
payable to holders of record of shares of Series F Preferred Stock as of the
record date for the determination of holders of Series A TCI Group Common Stock
entitled to receive such dividend and shall be payable on the payment date
established by the Corporation for the payment of such cash dividend to holders
of Series A TCI Group Common Stock.
(b) METHOD OF PAYMENT. All dividends payable with respect to
the shares of Series F Preferred Stock shall be declared and paid in cash. All
dividends paid with respect to the shares of Series F Preferred Stock pursuant
to this paragraph 3 shall be paid pro rata to all the holders of shares of
Series F Preferred Stock outstanding on the applicable record date.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential
amounts to which any Senior Stock is entitled, in the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series F Preferred Stock shall be entitled to receive from the
assets of the Corporation available for distribution to stockholders, before any
payment or distribution shall be made to the holders of any Junior Stock, an
amount in cash or property at its fair market value, as determined by the Board
of Directors in good faith, or a combination thereof, per share, equal to the
Liquidation Preference of a share of Series F Preferred Stock as of the date of
payment or distribution, which payment or distribution shall be made pari passu
with any such payment or distribution made to the holders of any Parity Stock
ranking on a parity basis with the Series F Preferred Stock with respect to
distributions upon liquidation, dissolution or winding up of the Corporation.
Following the payment of all amounts owing to holders of each class or series of
capital stock of the Corporation having a preference or priority over the TCI
Group Common Stock as to distributions upon the liquidation, dissolution or
winding up of the Corporation, then the holders of the Series F Preferred
Stock
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shall be entitled to participate, with the holders of the TCI Group Common
Stock, pro rata, based upon the number of shares of Series A TCI Group Common
Stock into which the shares of Series F Preferred Stock are then convertible, as
to any amounts remaining for distribution to the holders of TCI Group Common
Stock upon the liquidation, dissolution or winding up of the Corporation. If,
upon distribution of the Corporation's assets in liquidation, dissolution or
winding up, the assets of the Corporation to be distributed among the holders of
the Series F Preferred Stock and to all holders of any Parity Stock ranking on a
parity basis with the Series F Preferred Stock with respect to distributions
upon liquidation, dissolution or winding up shall be insufficient to permit
payment in full to such holders of the respective preferential amounts to which
they are entitled, then the entire assets of the Corporation to be distributed
to holders of the Series F Preferred Stock and such Parity Stock shall be
distributed pro rata to such holders based upon the aggregate of the full
preferential amounts to which the shares of Series F Preferred Stock and such
Parity Stock would otherwise respectively be entitled. Neither the consolidation
or merger of the Corporation with or into any other corporation or corporations
nor the sale, transfer or lease of all or substantially all of the assets of the
Corporation shall itself be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this paragraph 4. Notice of the
liquidation, dissolution or winding up of the Corporation shall be given, not
less than 20 days prior to the date on which such liquidation, dissolution or
winding up is expected to take place or become effective, to the holders of
record of the shares of Series F Preferred Stock.
5. Redemption.
(a) OPTIONAL REDEMPTION. Subject to the rights of any Senior
Stock and the provisions of paragraph 6, the shares of Series F Preferred Stock
may be redeemed, at the option of the Corporation by the action of the Board of
Directors, in whole or from time to time in part, at the Redemption Price on any
Redemption Date occurring on or after the thirtieth Business Day following the
Issue Date. The Redemption Price shall be payable (except as provided in the
last sentence of paragraph 5(c) hereof) only in shares of Series A TCI Group
Common Stock. If less than all outstanding shares of Series F Preferred Stock
are to be redeemed on any Redemption Date, the shares of Series F Preferred
Stock to be redeemed shall be chosen pro rata among all holders of Series F
Preferred Stock. The Corporation shall not be required to register a transfer of
(i) any shares of Series F Preferred Stock for a period of 15 days next
preceding any selection of shares of Series F Preferred Stock to be redeemed or
(ii) any shares of Series F Preferred Stock selected or called for redemption.
(b) NOTICE OF REDEMPTION. Notice of redemption shall be given
by or on behalf of the Corporation, not more than 60 days nor less than 30 days
prior to the Redemption Date, to the holders of record of the shares of Series F
Preferred Stock to be redeemed; but no defect in such notice or in the mailing
thereof shall affect the validity of the proceedings for the redemption of any
shares of Series F Preferred Stock. In addition to any information required by
law or by the applicable rules of any national securities exchange or national
interdealer quotation system on which the Series F Preferred Stock may be listed
or admitted to trading or quoted, such notice shall set forth the Redemption
Price, the Redemption Date, the number of shares to be redeemed, the portion of
the Redemption Price, if any, which
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the Corporation has elected to pay through the issuance of Series A TCI Group
Common Stock and the place at which the shares of Series F Preferred Stock
called for redemption will, upon presentation and surrender of the stock
certificates evidencing such shares, be redeemed. In the event that fewer than
the total number of shares of Series F Preferred Stock represented by a
certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(c) ISSUANCE OF SERIES A TCI GROUP COMMON STOCK. Subject to
compliance with the conditions contained in this paragraph 5(c), the Corporation
shall pay the Redemption Price of the shares of Series F Preferred Stock called
for redemption by issuing to the holder thereof, in respect of its shares to be
redeemed, a number of shares of Series A TCI Group Common Stock equal to the
aggregate Redemption Price (or designated portion thereof) of such shares
divided by the Average Quoted Price of a share of Series A TCI Group Common
Stock. No fractional shares of Series A TCI Group Common Stock or scrip shall be
issued upon such redemption. As to any final fraction of a share of Series A TCI
Group Common Stock that would otherwise be issuable to a holder upon redemption
of his shares of Series F Preferred Stock (determined on the basis of the total
number of such holder's shares of Series F Preferred Stock in respect of which
shares of Series A TCI Group Common Stock are issuable), the Corporation shall
pay an amount in cash or by its check equal to the same fraction of the Average
Quoted Price of a share of Series A TCI Group Common Stock.
The Corporation's right to pay the Redemption Price of the
shares of Series F Preferred Stock through the issuance of shares of Series A
TCI Group Common Stock shall be conditioned upon: (i) the Corporation's having
timely given a notice of redemption setting forth such election as provided in
paragraph 5(b); (ii) the Corporation's having obtained and filed, on or before
the Redemption Date, at the office of the redemption agent for the Series F
Preferred Stock (or with the books of the Corporation if there is no redemption
agent) an Opinion of Counsel to the effect that (A) the shares of Series A TCI
Group Common Stock to be issued upon such redemption have been duly authorized
and, when issued and delivered in payment of the Redemption Price of the shares
of Series F Preferred Stock to be redeemed, will be validly issued, fully paid
and non-assessable and free from preemptive rights, (B) that the issuance and
delivery of such shares of Series A TCI Group Common Stock upon such redemption
of shares of Series F Preferred Stock will not violate the laws of the state of
incorporation of the Corporation, and (C) unless at the time the Redemption
Notice is given all shares of the Series F Preferred Stock are owned by one or
more TCI Holders, that the issuance and delivery of the shares of Series A TCI
Group Common Stock upon such redemption of shares of Series F Preferred Stock is
exempt from the registration or qualification requirements of the 1933 Act and
applicable state securities laws or, if no such exemption is available, that the
shares of Series A TCI Group Common Stock to be issued have been duly registered
or qualified under the 1933 Act and such applicable state securities laws; and
(iii) the Corporation's having filed, on or before the Redemption Date, at the
office of such redemption agent (or with the books of the Corporation if there
is no redemption agent), an Officers' Certificate setting forth the number of
shares of Series A TCI Group Common Stock to be issued in payment of the
Redemption Price of each share of Series F Preferred Stock and the method of
determining the same (consistent with the provisions hereof). If the foregoing
conditions have not been satisfied prior to or on the
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Redemption Date, the Corporation shall pay the Redemption Price for the shares
of Series F Preferred Stock to be redeemed in cash.
(d) DEPOSIT OF REDEMPTION PRICE. If notice of any redemption by
the Corporation pursuant to this paragraph 5 shall have been given as provided
in paragraph 5(b) above, and if on or before the Redemption Date specified in
such notice the Corporation shall have deposited with the redemption agent for
the Series F Preferred Stock (or if there is no redemption agent, shall have set
apart so as to be available for such purpose and only such purpose) shares of
Series A TCI Group Common Stock sufficient to redeem in full on the Redemption
Date at the Redemption Price all shares of Series F Preferred Stock called for
redemption and provided that the conditions set forth in paragraph 5(c) have
been satisfied, then effective as of the close of business on the Redemption
Date, the shares of Series F Preferred Stock called for redemption,
notwithstanding that any certificate therefor shall not have been surrendered
for cancellation, shall no longer be deemed outstanding, and the holders thereof
shall cease to be stockholders with respect to such shares, and all rights with
respect to such shares shall forthwith cease and terminate, except the right of
the holders thereof to receive the Series A TCI Group Common Stock (or cash, as
applicable) issuable (or payable) in payment of the Redemption Price of such
shares, without interest, upon the surrender of certificates representing the
same.
(e) STATUS OF REDEEMED SHARES. All shares of Series F Preferred
Stock redeemed, exchanged, purchased or otherwise acquired by the Corporation
shall be retired and shall be restored to the status of authorized and unissued
shares of Series Preferred Stock (and may be reissued as part of another series
of the preferred stock of the Corporation, but such shares shall not be reissued
as Series F Preferred Stock).
6. Limitations on Dividends and Redemptions.
If at any time the Corporation shall have declared a dividend on the
Series F Preferred Stock and failed to pay or set aside consideration sufficient
to pay such dividend, or if the Corporation declares a cash dividend on the
shares of Series A TCI Group Common Stock and fails to pay or set aside the
Participating Dividend required to be paid to the holders of the Series F
Preferred Stock, then (i) the Corporation shall not declare or pay any dividend
on or make any distribution with respect to any Parity Stock or Junior Stock or
set aside any money or assets for any such purpose until such dividend payable
to the holders of Series F Preferred Stock has been paid or consideration
sufficient to pay such dividend has been set aside for such purpose, and (ii)
neither the Corporation nor any Subsidiary thereof shall redeem, exchange,
purchase or otherwise acquire any shares of Series F Preferred Stock, Parity
Stock or Junior Stock, or set aside any money or assets for any such purpose,
pursuant to paragraph 5 hereof, a sinking fund or otherwise, unless all then
outstanding shares of any class or series of Parity Stock that by the terms of
the instrument creating or evidencing such Parity Stock is required to be
redeemed under such circumstances are redeemed or exchanged pursuant to the
terms hereof and thereof.
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If the Corporation shall fail to redeem on any date fixed for
redemption or exchange pursuant to paragraph 5 hereof any shares of Series F
Preferred Stock called for redemption on such date, and until such shares are
redeemed in full, the Corporation shall not redeem or exchange any Parity Stock
or Junior Stock or declare or pay any dividend on or make any distribution with
respect to any Junior Stock, or set aside any money or assets for any such
purpose, and neither the Corporation nor any Subsidiary thereof shall purchase
or otherwise acquire any Series F Preferred Stock, Parity Stock or Junior Stock,
or set aside any money or assets for any such purpose.
Neither the Corporation nor any Subsidiary thereof shall
redeem, exchange, purchase or otherwise acquire any Parity Stock or Junior
Stock, or set aside any money or assets for any such purpose, if after giving
effect to such redemption, exchange, purchase or other acquisition, the amount
(as determined by the Board of Directors in good faith) that would be available
for distribution to the holders of the Series F Preferred Stock upon
liquidation, dissolution or winding up of the Corporation if such liquidation,
dissolution or winding up were to occur on the date fixed for such redemption,
exchange, purchase or other acquisition of such Parity Stock or Junior Stock
would be less than the aggregate Liquidation Preference as of such date of all
shares of Series F Preferred Stock then outstanding.
Nothing contained in this paragraph 6 shall prevent (i) the
payment of dividends on any Junior Stock solely in shares of Junior Stock or the
redemption, purchase or other acquisition of Junior Stock solely in exchange for
(together with a cash adjustment for fractional shares, if any) shares of Junior
Stock, or (ii) the payment of dividends on any Parity Stock solely in shares of
Parity Stock and/or Junior Stock or the redemption, exchange, purchase or other
acquisition of Parity Stock solely in exchange for (together with a cash
adjustment for fractional shares, if any), or through the application of the
proceeds from the sale of, shares of Parity Stock and/or Junior Stock.
All provisions of this paragraph 6 are for the sole benefit of
the holders of Series F Preferred Stock and accordingly, if the holders of
shares of Series F Preferred Stock shall have waived (as provided in paragraph
9) in whole or in part the benefit of the applicable provisions, either
generally or in the specific instance, such provision shall not (to the extent
of such waiver, in the case of a partial waiver) restrict the redemption,
exchange, purchase or other acquisition of, or declaration, payment or making of
any dividends or distributions on the Series F Preferred Stock, any Parity Stock
or any Junior Stock.
7. Conversion.
(a) Unless previously called for redemption as provided in
Section 5 hereof, shares of Series F Preferred Stock shall be convertible, at
the option of the holder thereof, at any time in such manner and upon such terms
and conditions as hereinafter provided in this paragraph 7, into fully paid and
non-assessable full shares of Series A TCI Group Common Stock. No shares of
Series A TCI Group Common Stock shall be issued in respect of the conversion of
the Series F Preferred Stock after the fifteenth Business Day (the "Cut-off
Date") preceding the date fixed for redemption; provided that the conversion of
shares surrendered for
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conversion in accordance with this paragraph 7 after the Cut-off Date shall be
given effect as of the date of such surrender if the Redemption Price to be
paid, or to be irrevocably set apart in trust for the benefit of the holders of
shares to be so redeemed, has not been paid or so set apart on or before such
date fixed for redemption. In case cash, securities or property other than
Series A TCI Group Common Stock shall be payable, deliverable or issuable upon
conversion as provided herein, then all references to Series A TCI Group Common
Stock in this paragraph 7 shall be deemed to apply, so far as appropriate and as
nearly as may be, to such cash, property or other securities
(b) Subject to the provisions for adjustment hereinafter set
forth in this paragraph 7, the Series F Preferred Stock may be converted into
Series A TCI Group Common Stock at the initial conversion rate of 1,000 fully
paid and non-assessable shares of Series A TCI Group Common Stock for one share
of the Series F Preferred Stock. (This conversion rate as from time to time
adjusted cumulatively pursuant to the provisions of this paragraph is
hereinafter referred to as the "Conversion Rate").
(c) In case after the Issue Date the Corporation shall (i) pay
a dividend or make a distribution on its outstanding shares of Series A TCI
Group Common Stock in shares of Series A TCI Group Common Stock, (ii) subdivide
the then outstanding shares of Series A TCI Group Common Stock into a greater
number of shares of Series A TCI Group Common Stock, (iii) combine the then
outstanding shares of Series A TCI Group Common Stock into a smaller number of
shares of Series A TCI Group Common Stock, or (iv) issue by reclassification of
its shares of Series A TCI Group Common Stock any shares of any other class of
capital stock of the Corporation (including any such reclassification in
connection with a merger in which the Corporation is the continuing
corporation), then the Conversion Rate in effect immediately prior to the
opening of business on the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the holder of each share of Series F Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Series A TCI Group Common Stock (and the number and kind of other securities)
that such holder would have owned or been entitled to receive immediately
following such action had such shares of Series F Preferred Stock been converted
immediately prior to such time. An adjustment made pursuant to this paragraph
7(c) for a dividend or distribution shall become effective immediately after the
record date for the dividend or distribution and an adjustment made pursuant to
this paragraph 7(c) for a subdivision, combination or reclassification shall
become effective immediately after the effective date of the subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any action listed above shall be taken.
(d) In case the Corporation shall after the Issue Date issue
any rights or warrants to all holders of shares of Series A TCI Group Common
Stock entitling them (for a period expiring within 45 days after the record date
for the determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Series A TCI Group Common Stock
(or Convertible Securities) at a price per share of Series A TCI Group Common
Stock (or having an initial exercise price or conversion price per share of
Series A TCI Group Common Stock) less than the then current market price per
share of Series A TCI Group
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<PAGE> 156
Common Stock (as determined in accordance with the provisions of paragraph 7(f)
below) on such record date, the number of shares of Series A TCI Group Common
Stock into which each share of Series F Preferred Stock shall thereafter be
convertible shall be determined by multiplying the number of shares of Series A
TCI Group Common Stock into which such share of Series F Preferred Stock was
theretofore convertible immediately prior to such record date by a fraction of
which the numerator shall be the number of shares of Series A TCI Group Common
Stock outstanding on such record date plus the number of additional shares of
Series A TCI Group Common Stock offered for subscription or purchase (or into
which the Convertible Securities so offered are initially convertible) and of
which the denominator shall be the number of shares of Series A TCI Group Common
Stock outstanding on such record date plus the number of shares of Series A TCI
Group Common Stock which the aggregate offering price of the total number of
shares of Series A TCI Group Common Stock so offered (or the aggregate initial
conversion or exercise price of the Convertible Securities so offered) would
purchase at the then current market price per share of Series A TCI Group Common
Stock (as determined in accordance with the provisions of paragraph 7(f) below)
on such record date. Such adjustment shall be made successively whenever any
such rights or warrants are issued and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights or warrants. In the event that all of the shares of Series A TCI Group
Common Stock (or all of the Convertible Securities) subject to such rights or
warrants have not been issued when such rights or warrants expire (or, in the
case of rights or warrants to purchase Convertible Securities which have been
exercised, all of the shares of Series A TCI Group Common Stock issuable upon
conversion of such Convertible Securities have not been issued prior to the
expiration of the conversion right thereof), then the Conversion Rate shall be
readjusted retroactively to be the Conversion Rate which would then be in effect
had the adjustment upon the issuance of such rights or warrants been made on the
basis of the actual number of shares of Series A TCI Group Common Stock (or
Convertible Securities) issued upon the exercise of such rights or warrants (or
the conversion of such Convertible Securities); but such subsequent adjustment
shall not affect the number of shares of Series A TCI Group Common Stock issued
upon the conversion of any share of Series F Preferred Stock prior to the date
such subsequent adjustment is made.
(e) In case the Corporation shall distribute after the Issue
Date to all holders of shares of Series A TCI Group Common Stock (including any
such distribution made in connection with a merger in which the Corporation is
the continuing corporation, other than a merger to which paragraph 7(g) is
applicable) any securities, evidences of its indebtedness or assets (other than
cash dividends or Series A TCI Group Common Stock in respect of which an
adjustment is made pursuant to paragraph 7(c) hereof) or rights or warrants to
purchase shares of Series A TCI Group Common Stock or securities convertible
into shares of Series A TCI Group Common Stock (excluding those referred to in
paragraph 7(d) above), then in each such case the number of shares of Series A
TCI Group Common Stock into which each share of Series F Preferred Stock shall
thereafter be convertible shall be determined by multiplying the number of
shares of Series A TCI Group Common Stock into which such share was theretofore
convertible immediately prior to the record date for the determination of
stockholders entitled to receive the distribution by a fraction of which the
numerator shall be the then current market price per share of Series A TCI Group
Common Stock (as determined in accordance with the
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provisions of paragraph 7(f) below) on such record date and of which the
denominator shall be such current market price per share of Series A TCI Group
Common Stock less the fair market value on such record date (as determined by
the Board of Directors of the Corporation, whose determination shall be
conclusive) of the portion of the securities, assets or evidences of
indebtedness or rights or warrants so to be distributed applicable to one share
of Series A TCI Group Common Stock. Such adjustment shall be made successively
whenever any such distribution is made and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such distribution.
(f) For the purpose of any computation under paragraph 7(d),
(e) or (k), the current market price per share of Series A TCI Group Common
Stock at any date shall be deemed to be the average of the daily closing prices
for a share of Series A TCI Group Common Stock for the ten (10) consecutive
trading days before the day in question, appropriately adjusted to take into
account the actual occurrence during such period of any of the events specified
in paragraph 7(c) hereof. The closing price for each day shall be the last
reported sale price regular way or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices regular way,
in either case on the composite tape, or if the shares of Series A TCI Group
Common Stock are not quoted on the composite tape, on the principal United
States securities exchange registered under the Exchange Act on which the shares
of Series A TCI Group Common Stock are listed or admitted to trading, or if they
are not listed or admitted to trading on any such exchange, the last reported
sale price (or the average of the quoted closing bid and asked prices if there
were no reported sales) as reported by NASDAQ or any comparable system, or if
the Series A TCI Group Common Stock is not quoted on NASDAQ or any comparable
system, the average of the closing bid and asked prices as furnished by any
member of the National Association of Securities Dealers, Inc. selected from
time to time by the Corporation for that purpose or, in the absence of such
quotations, such other method of determining market value as the Board of
Directors shall from time to time deem to be fair. With respect to any
calculation of the current market price per share of Series A TCI Group Common
Stock relating to any period prior to the redesignation of the Corporation's
Class A Common Stock, par value $1.00 per share, into Series A TCI Group Common
Stock, such current market price shall be calculated based upon the closing
price of a share of such Class A Common Stock of the Corporation for periods
prior to such redesignation.
(g) In case of any reclassification or change in the Series A
TCI Group Common Stock (other than any reclassification or change referred to in
paragraph 7(c) and other than a change in par value) or in case of any
consolidation of the Corporation with any other corporation or any merger of the
Corporation into another corporation or of another corporation into the
Corporation (other than a merger in which the Corporation is the continuing
corporation and which does not result in any reclassification or change (other
than a change in par value or any reclassification or change to which paragraph
7(c) is applicable) in the outstanding Series A TCI Group Common Stock), or in
case of any sale or transfer to another corporation or entity (other than by
mortgage or pledge) of all or substantially all of the properties and assets of
the Corporation, in any such case after the Issue Date, the Corporation (or its
successor in such consolidation or merger) or the purchaser of such properties
and assets shall make appropriate provision so that the holder of a share of
Series F Preferred Stock shall have the right thereafter
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to convert such share into the kind and amount of shares of stock and other
securities and property that such holder would have owned immediately after such
reclassification, change, consolidation, merger, sale or transfer if such holder
had converted such share of Series F Preferred Stock into Series A TCI Group
Common Stock immediately prior to the effective date of such reclassification,
change, consolidation, merger, sale or transfer (assuming for this purpose (to
the extent applicable) that such holder failed to exercise any rights of
election and received per share of Series A TCI Group Common Stock the kind and
amount of shares of stock and other securities and property received per share
by a plurality of the non-electing shares), and the holders of the Series F
Preferred Stock shall have no other conversion rights under these provisions;
provided, that effective provision shall be made, in the Articles or Certificate
of Incorporation of the resulting or surviving corporation or otherwise or in
any contracts of sale or transfer, so that the provisions set forth herein for
the protection of the conversion rights of the Series F Preferred Stock shall
thereafter be made applicable, as nearly as reasonably may be practicable, to
any such other shares of stock and other securities and property deliverable
upon conversion of the Series F Preferred Stock remaining outstanding or other
convertible preferred stock or other Convertible Securities received by the
holders of Series F Preferred Stock in place thereof; and provided, further,
that any such resulting or surviving corporation or purchaser shall expressly
assume the obligation to deliver, upon the exercise of the conversion privilege,
such shares, securities or property as the holders of the Series F Preferred
Stock remaining outstanding, or other convertible preferred stock or other
convertible securities received by the holders in place thereof, shall be
entitled to receive pursuant to the provisions hereof, and to make provisions
for the protection of the conversion rights as above provided.
(h) Whenever the Conversion Rate or the conversion privilege
shall be adjusted as provided in paragraphs 7(c), (d), (e) or (g), the
Corporation shall promptly cause a notice to be mailed to the holders of record
of the Series F Preferred Stock describing the nature of the event requiring
such adjustment, the Conversion Rate in effect immediately thereafter and the
kind and amount of stock or other securities or property into which the Series F
Preferred Stock shall be convertible after such event. Where appropriate, such
notice may be given in advance and included as a part of a notice required to be
mailed under the provisions of paragraph 7(j).
(i) The Corporation may, but shall not be required to, make any
adjustment of the Conversion Rate if such adjustment would require an increase
or decrease of less than 1% in such Conversion Rate; provided, however, that any
adjustments which by reason of this paragraph 7(i) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this paragraph 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. In any case in which this
paragraph 7(i) shall require that an adjustment shall become effective
immediately after a record date for such event, the Corporation may defer until
the occurrence of such event (x) issuing to the holder of any shares of Series F
Preferred Stock converted after such record date and before the occurrence of
such event the additional shares of Series A TCI Group Common Stock or other
capital stock issuable upon such conversion by reason of the adjustment required
by such event over and above the shares of Series A TCI Group Common Stock or
other capital stock issuable upon such conversion before giving effect to such
adjustment and (y) paying to such
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<PAGE> 159
holder cash in lieu of any fractional interest to which such holder is entitled
pursuant to paragraph 7(n); provided, however, that, if requested by such
holder, the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares of Series A TCI Group Common Stock or other capital stock, and such cash,
upon the occurrence of the event requiring such adjustment.
(j) In case at any time:
(i) the Corporation shall take any action
which would require an adjustment in the Conversion Rate
pursuant to this paragraph;
(ii) there shall be any capital reorganization
or reclassification of the Series A TCI Group Common Stock
(other than a change in par value), or any consolidation or
merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation is required, or
any sale, transfer or lease of all or substantially all of the
properties and assets of the Corporation; or
(iii) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the
Corporation;
then, in any such event, the Corporation shall give written notice, in the
manner provided in herein, to the holders of the Series F Preferred Stock at
their respective addresses as the same appear on the books of the Corporation,
at least twenty days (or ten days in the case of a recommended tender offer as
specified in clause (ii) above) prior to any record date for such action,
dividend or distribution or the date as of which it is expected that holders of
Series A TCI Group Common Stock of record shall be entitled to exchange their
shares of Series A TCI Group Common Stock for securities or other property, if
any, deliverable upon such reorganization, reclassification, consolidation,
merger, sale, transfer, lease, dissolution, liquidation or winding up; provided,
however, that any notice required by any event described in clause (ii) of this
paragraph 7(j) shall be given in the manner and at the time that such notice is
given to the holders of Series A TCI Group Common Stock. Without limiting the
obligations of the Corporation to provide notice of corporate actions hereunder,
the failure to give the notice required by this paragraph 7(j) or any defect
therein shall not affect the legality or validity of any such corporate action
of the Corporation or the vote upon such action.
(k) Each share of Series F Preferred Stock that ceases to be
owned, of record and beneficially, by a TCI Holder will automatically be
converted without action by the holder thereof into shares of Series A TCI Group
Common Stock at the then applicable Conversion Rate; such conversion shall be
deemed effective immediately prior to the transfer or other event resulting in
such shares of Series F Preferred Stock ceasing to be held of record and
beneficially by a TCI Holder. A pledge or other grant of a security interest in
shares of Series F Preferred Stock shall not be deemed to constitute a direct or
indirect transfer of such shares or another event causing such automatic
conversion until such time as the pledgee or other holder of a security interest
initiates any action for the purpose of exercising on such pledge or security
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<PAGE> 160
interest or foreclosing upon the pledged securities, and from and after the time
of such transfer or other event such shares of Series F Preferred Stock will be
deemed to represent only the right to receive the number of shares of Series A
TCI Group Common Stock issuable upon such conversion.
(l) Before any holder of Series F Preferred Stock shall be
entitled to convert the same into Series A TCI Group Common Stock, such holder
shall surrender the certificate or certificates for such Series F Preferred
Stock at the office of the Corporation or at the office of the transfer agent
for the Series F Preferred Stock, which certificate or certificates, if the
Corporation shall so request, shall be duly endorsed to the Corporation or in
blank or accompanied by proper instruments of transfer to the Corporation or in
blank (such endorsements or instruments of transfer to be in form satisfactory
to the Corporation), and shall give written notice to the Corporation at said
office that such holder elects to convert all or a part of the shares
represented by said certificate or certificates in accordance with the terms of
this paragraph 7 (except that no such written notice shall be necessary in the
event of an automatic conversion pursuant to paragraph 7(k) hereof), and shall
state in writing therein the name or names in which such holder wishes the
certificates for Series A TCI Group Common Stock to be issued. Every such notice
of election to convert shall constitute a contract between the holder of such
Series F Preferred Stock and the Corporation, whereby the holder of such Series
F Preferred Stock shall be deemed to subscribe for the amount of Series A TCI
Group Common Stock which such holder shall be entitled to receive upon
conversion of the number of shares of Series F Preferred Stock to be converted,
and, in satisfaction of such subscription, to deposit the shares of Series F
Preferred Stock to be converted, and thereby the Corporation shall be deemed to
agree that the surrender of the shares of Series F Preferred Stock to be
converted shall constitute full payment of such subscription for Series A TCI
Group Common Stock to be issued upon such conversion. The Corporation will as
soon as practicable after such deposit of a certificate or certificates for
Series F Preferred Stock, accompanied by the written notice and the statement
above prescribed, issue and deliver at the office of the Corporation or of said
transfer agent to the Person for whose account such Series F Preferred Stock was
so surrendered, or to his nominee(s) or, subject to compliance with applicable
law, transferee(s), a certificate or certificates for the number of full shares
of Series A TCI Group Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share as hereinafter provided.
If surrendered certificates for Series F Preferred Stock are converted only in
part, the Corporation will issue and deliver to the holder, or to his
nominee(s), without charge therefor, a new certificate or certificates
representing the aggregate of the unconverted shares. Such conversion shall be
deemed to have been made as of the date of such surrender of the Series F
Preferred Stock to be converted or, in the case of an automatic conversion
pursuant to paragraph 7(k) hereof, as of the date of the transfer or other event
resulting in such automatic conversion, and the Person or Persons entitled to
receive the Series A TCI Group Common Stock issuable upon conversion of such
Series F Preferred Stock shall be treated for all purposes as the record holder
or holders of such Series A TCI Group Common Stock on such date.
Upon the conversion of any share, the Corporation shall pay, to
the holder of record of such share of Series F Preferred Stock, dividends on
such share which have been declared but have not been paid as of the date of the
surrender of such share for conversion or
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<PAGE> 161
the date such automatic conversion shall have been deemed to take place. Such
payment shall be made in cash or, at the election of the Corporation, the
issuance of certificates representing such number of shares of Series A TCI
Group Common Stock as have an aggregate current market price (as determined in
accordance with paragraph 7(f)) on the date of issuance equal to the amount of
such unpaid dividends. Upon the making of such payment to the Person entitled
thereto as determined pursuant to the first sentence of this paragraph, no
further dividends shall accrue on such share or be payable to any other Person.
The issuance of certificates for shares of Series A TCI Group
Common Stock upon conversion of shares of Series F Preferred Stock shall be made
without charge for any issue, stamp or other similar tax in respect of such
issuance; provided, however, if any such certificate is to be issued in a name
other than that of the registered holder of the share or shares of Series F
Preferred Stock converted, the Person or Persons requesting the issuance thereof
shall pay to the Corporation the amount of any such tax which may be payable in
respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid.
The Corporation shall not be required to convert any shares of
Series F Preferred Stock, and no surrender of Series F Preferred Stock shall be
effective for that purpose, while the stock transfer books of the Corporation
are closed for any purpose; but the surrender of Series F Preferred Stock for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such Series F Preferred Stock was
surrendered.
(m) The Corporation shall reserve and keep available
at all times thereafter, solely for the purpose of issuance upon conversion of
the outstanding shares of Series F Preferred Stock, such number of shares of
Series A TCI Group Common Stock as shall be issuable upon the conversion of all
outstanding shares of Series F Preferred Stock, provided that nothing contained
herein shall be construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of the outstanding shares of Series F
Preferred Stock by delivery of shares of Series A TCI Group Common Stock which
are held in the treasury of the Corporation. The Corporation shall take all such
corporate and other actions as from time to time may be necessary to insure that
all shares of Series A TCI Group Common Stock issuable upon conversion of shares
of Series F Preferred Stock at the Conversion Rate in effect from time to time
will, upon issue, be duly and validly authorized and issued, fully paid and
nonassessable and free of any preemptive or similar rights, and will be free and
clear of any liens, claims, charges or other encumbrances, except those created
by the holder of the shares of Series F Preferred Stock being converted or the
Person entitled to receive the shares of Series A TCI Group Common Stock
issuable upon such conversion.
(n) All shares of Series F Preferred Stock received by
the Corporation upon conversion thereof into Series A TCI Group Common Stock
shall be retired and shall be restored to the status of authorized and unissued
shares of Series F Preferred Stock (and may be reissued as part of another
series of the Preferred Stock of the Corporation), but such shares shall not be
reissued as shares of Series F Preferred Stock.
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<PAGE> 162
(o) The Corporation shall not be required to issue fractional
shares of Series A TCI Group Common Stock or scrip upon conversion of the Series
F Preferred Stock. As to any final fraction of a share of Series A TCI Group
Common Stock which a holder of one or more Shares would otherwise be entitled to
receive upon conversion of such Shares in the same transaction, the Corporation
shall pay a cash adjustment in respect of such final fraction in an amount equal
to the same fraction of the market value of a full share of Series A TCI Group
Common Stock. For purposes of this paragraph 7(o), the market value of a share
of Series A TCI Group Common Stock shall be the last reported sale price regular
way on the business day immediately preceding the date of conversion, or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way on such day, in either case on the
composite tape, or if the shares of Series A TCI Group Common Stock are not
quoted on the composite tape, on the principal United States securities exchange
registered under the Exchange Act on which the shares of Series A TCI Group
Common Stock are listed or admitted to trading, or if the shares of Series A TCI
Group Common Stock are not listed or admitted to trading on any such exchange,
the last reported sale price (or the average of the quoted last reported bid and
asked prices if there were no reported sales) as reported by NASDAQ or any
comparable system, or if the Series A TCI Group Common Stock is not quoted on
NASDAQ or any comparable system, the average of the closing bid and asked prices
as furnished by any member of the National Association of Securities Dealers,
Inc. selected from time to time by the Corporation for that purpose or, in the
absence of such quotations, such other method of determining market value as the
Board of Directors shall from time to time deem to be fair.
8. Voting.
(a) VOTING RIGHTS. The holders of Series F Preferred Stock
shall have no voting rights whatsoever, except as required by law and except for
the voting rights described in this paragraph 8. Without limiting the generality
of the foregoing, no vote or consent of the holders of Series F Preferred Stock
shall be required for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation or designation of any class or series of Senior
Stock, Parity Stock or Junior Stock, or (c) any amendment to the Certificate
that would increase the number of authorized shares of Preferred Stock or the
number of authorized shares of Series F Preferred Stock or that would decrease
the number of authorized shares of Preferred Stock or the number of authorized
shares of Series F Preferred Stock (but not below the number of shares of
Preferred Stock or Series F Preferred Stock, as the case may be, then
outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Series F
Preferred Stock will have the right to vote at any annual or special meeting of
stockholders for the purpose of electing directors. Each share of Series F
Preferred Stock shall have one vote for such purpose, and the holders of such
shares shall vote as a single class with any other class or series of capital
stock of the Corporation entitled to vote in any general election of directors,
unless the instrument creating or evidencing such other class or series of
capital stock otherwise expressly provides.
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9. Waiver.
Any provision which, for the benefit of the holders of Series F
Preferred Stock, prohibits, limits or restricts actions by the Corporation, or
imposes obligations on the Corporation, may be waived in whole or in part, or
the application of all or any part of such provision in any particular
circumstance or generally may be waived, in each case with the consent in
writing of the holders of at least a majority of the number of shares of Series
F Preferred Stock then outstanding (or such greater percentage thereof as may be
required by applicable law or any applicable rules of any national securities
exchange or national interdealer quotation system); provided, however, that no
such waiver shall be binding or be otherwise effective against any holder of
shares of Series F Preferred Stock which does not execute a written consent to
such waiver.
10. Method of Giving Notices.
Any notice required or permitted hereby to be given to the
holders of shares of Series F Preferred Stock shall be deemed duly given if
deposited in the United States mail, first class mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation or supplied by him in writing to the Corporation for the purpose of
such notice.
11. Exclusion of Other Rights.
Except as may otherwise be required by law and except for the
equitable rights and remedies which may otherwise be available to holders of
Series F Preferred Stock, the shares of Series F Preferred Stock shall not have
any designations, preferences, limitations or relative rights other than those
specifically set forth herein.
12. Heading of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
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<PAGE> 164
FURTHER RESOLVED, that the appropriate officers of the
Corporation are hereby authorized to execute and acknowledge a certificate
setting forth these resolutions and to cause such certificate to be filed and
recorded, in accordance with the requirements of Section 151(g) of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, duly authorized officer
has executed this certificate on this 3rd day of August, 1995.
By: BRENDON R. CLOUSTON
Name: Brendon R. Clouston
Title: Executive Vice President
Attest: STEPHEN M. BRETT
Name: Stephen M. Brett
Title: Secretary
<PAGE> 165
State of Delaware
PAGE 1
OFFICE OF THE SECRETARY OF STATE
_______________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FIFTH DAY OF JANUARY, A.D. 1996, AT 3:00 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OR DEEDS FOR RECORDING.
[SEAL]
/s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2371729 8100 DATE: 7804651
960024220 01-25-96
<PAGE> 166
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:00 PM 01/25/1996
960024220 - 2371729
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATIONS
-------------------
SETTING FORTH A COPY OF RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED AS
"REDEEMABLE CONVERTIBLE TCI GROUP PREFERRED STOCK, SERIES G"
ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
--------------------
The undersigned, an executive Vice President of TELE-COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), HEREBY CERTIFIES that the Board
of Directors of the Company on DECEMBER 13, 1995, duly adopted the following
resolutions creating a new series of the Company's Series Preferred Stock:
"BE IT RESOLVED, that pursuant to authority expressly granted by the
provisions of Article IV, Section D of the Restated Certificate of
Incorporation of the Company, the Board of Directors hereby creates and
authorizes the issuance of a new series of the Company's Series Preferred
Stock, par value $.01 per share (Series Preferred Stock"), and hereby fixes the
powers, designations, dividend rights, voting powers, rights on liquidation,
conversion rights, redemption rights and other preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions
thereof set forth in the Restated Certificate of Incorporation that are
applicable to each class and series of the Company's preferred stock, par value
$.01 per share ("Preferred Stock")) as follows:
1. Designation Number of Shares. The designation of the series of
Series Preferred Stock, par value $.01 per share, of the Company created hereby
shall be "Redeemable Convertible TCI Group Preferred Stock, Series G" ("Series
G Preferred Stock"). The designated number of shares of Series G Preferred
Stock shall be 7,259,380. Each share of Series G Preferred Stock shall have a
stated value of $21.60 ("Stated Value").
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<PAGE> 167
Any shares of Series G Preferred Stock redeemed, converted or
otherwise acquired by the Company shall be retired, shall not be reissued as
shares of Series G Preferred Stock and shall resume the status of authorized
and unissued shares of Series Preferred Stock, without designation as to
series, until such shares are once more designated as part of a particular
series of Series Preferred Stock by the Board of Directors.
2. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 2 shall have, for all purposes of this
Certificate of Designations, the meanings herein specified:
"Anniversary Date" shall mean JANUARY 25, 1997.
"Average Market Price" as of any Record Date or Special Record Date
for a dividend payment declared by the Board of Directors shall mean the
average of the daily Closing Prices of the Series A TCI Group Common Stock for
the period of ten (10) consecutive trading days ending on the tenth trading day
prior to such Record date or Special Record Date, appropriately adjusted in
such manner as the Board of Directors in good faith deems appropriate to take
into account any stock dividend on the Series A TCI Group Common Stock, or any
subdivision, combination or reclassification of the Series A TCI Group Common
Stock that occurs, or the Ex-Dividend date for which occurs, during the period
following the first trading day in such ten-trading day period and ending on
the last full trading day immediately preceding the Dividend Payment Date or
other date fixed for the payment of dividends to which such Record Date or
Special Record Date relates.
"Board of Directors" shall mean the Board of Directors of the Company,
and, unless the context indicates otherwise, shall also mean, to the extent
permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Company with respect to such matter.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in The City of New York, New York are not
required to be open.
"capital stock" shall mean any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.01 per share, of
the Company.
"Closing Price" of a share of Series A TCI Group Common Stock or of a
share of Series A Liberty Media Group Common Stock, or of a share of any other
class or series of capital stock of the Company into which the Series G
Preferred Stock may hereafter become convertible pursuant to paragraph 7, on
any day shall mean the last reported per share sale price (or, if no sale price
is reported, the average of the high and low bid prices) of the Series A TCI
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Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as the case may be, on such day on the Nasdaq Sock Market or as
quoted by the National Quotation Bureau Incorporated or, if the Series A TCI
Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as applicable, is listed on an exchange, on the principal
exchange on which the Series A TCI Group Common Stock, the Series A Liberty
Media Group Common Stock or such capital stock, as the case may be, is listed.
In the event that no such quotation is available for any day, the Board of
Directors shall be entitled to determine the Closing Price on the basis of such
quotations as it in good faith considers appropriate.
"Contingency" shall have the meaning set forth in paragraph 3(a).
"Conversion Date" of a share of Series G Preferred Stock shall mean
the date on which the requirements for conversion of such share set forth in
paragraph 7(b) of this Certificate of designations have been satisfied by the
holder thereof.
"Conversion Rate" shall mean the kind and amount of securities, assets
or other property that as of any date are issuable or deliverable upon
conversion of a share of Series G Preferred Stock. The Conversion Rate of a
share of Series G Preferred Stock shall initially be 1.05 shares of Series A
TCI Group Common Stock for each share of Series G Preferred Stock, subject to
adjustment as set forth in paragraph 7 of this Certificate of Designations. In
the event that pursuant to paragraph 7 the Series G Preferred Stock becomes
convertible into more than one class or series of capital stock of the Company,
the term Conversion Rate, when used with respect to any such class or series,
shall mean the number or fraction of shares or other units of such capital
stock that as of any date would be issued upon conversion of a share of Series
G Preferred Stock.
"Convertible Securities" shall mean any or all options, warrants,
securities and rights which are convertible into or exercisable or exchangeable
for Series A TCI Group Common Stock at the option of the holder thereof, or
which otherwise entitle the holder thereof to subscribe for, purchase or
otherwise acquire Series A TCI Group Common Stock; provided, however, that such
term shall not include the Series B TCI Group Common Stock.
"Career Market Price", on the Determination Date for any issuance of
rights, warrants or options or any distribution in respect of which the Current
Market Price is being calculated, shall mean the average of the daily Closing
Prices of the Series A TCI Group Common Stock for the shortest of:
(i) the period of 30 consecutive trading days commencing 45
trading days before such Determination Date,
(ii) the period commencing on the date next succeeding the
first public announcement of the issuance of rights, warrants or
options or the distribution in
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respect of which the Current Market Price is being calculated and
ending on the last full trading day before such Determination Date,
and
(iii) the period, if any, commencing on the date next
succeeding the Ex-Dividend Date with respect to the next preceding
issuance of rights, warrants or options or distribution for which an
adjustment is required by the provisions of paragraph 7(c)(iv), 7(d)
or 7(e), and ending on the last full trading day before such
Determination Date.
If the record date for an issuance of rights, warrants or options or a
distribution for which an adjustment is required by the provisions of paragraph
7(c)(iv), 7(d) or 7(e) (the "preceding adjustment event") precedes the record
date for the issuance or distribution in respect of which the Current Market
Price is being calculated and the Ex-Dividend Date for such preceding
adjustment event is on or after the Determination Date for the issuance or
distribution in respect of which the Current Market Price is being calculated,
then the Current Market Price shall be adjusted by deducting therefrom the fair
market value (on the record date for the issuance or distribution in respect of
which the Current Market Price is being calculated), as determined in good
faith by the Board of Directors, of the capital stock, rights, warrants or
options, assets or debt securities issued or distributed in respect of each
share of Series A TCI Group Common Stock in such preceding adjustment event.
Further, in the event that the Ex-Dividend Date (or in the case of a
subdivision, combination or reclassification, the effective date with respect
thereto) with respect to a dividend, subdivision, combination or
reclassification to which paragraph 7(c)(i), (ii), (iii) or (v) applies occurs
during the period applicable for calculating the Current Market Price, then the
Current Market Price shall be calculated for such period in a manner determined
in good faith by the Board of Directors to reflect the impact of such dividend,
subdivision, combination or reclassification on the Closing Prices of the
Series A TCI Group Common Stock during such period.
"Determination Date" for any issuance of rights, warrants or options
or any distribution to which paragraph 7(d) or 7(e) applies shall mean the
earlier of (i) the record date for the determination of stockholders entitled
to receive the rights, warrants or options or the distribution to which such
paragraph applies and (ii) the Ex-Dividend date for such rights, warrants or
options or distribution.
"Dividend Payment Date" shall mean the FIRST day of each FEBRUARY and
AUGUST, commencing with AUGUST 1, 1997, or the next succeeding Business Day if
any such day is not a Business Day.
"Dividend Period" shall mean the period from the Anniversary Date to
but excluding the first Dividend Payment Date and, thereafter, each semi-annual
period from and including a Dividend Payment Date to but excluding the next
Dividend Payment Date.
"Exchange Preferred Stock" shall have the meaning set forth in
paragraph 7(g).
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"Ex-Dividend Date" shall mean the date on which "ex-dividend" trading
commences for a dividend, an issuance of rights, warrants or options or a
distribution to which any of paragraph 7(c), (d), or (e) applies in the
over-the-counter market or on the principal exchange on which the Series A TCI
Group Common Stock is then quoted or listed.
"Issue Date" shall mean the date on which shares of Series G Preferred
Stock are first issued.
"Junior Stock" shall mean (i) the TCI Group Common Stock, (ii) the
Liberty Media Group Common Stock, (iii) the Class B Preferred Stock, (iv) any
other class or series of capital stock, whether now existing or hereafter
created, of the Company, other than (A) the Series G Preferred Stock, (B) any
class or series of Parity Stock (except to the extent provided under clause (v)
hereof) and (C) any class or series of Senior Stock, and (v) any class or
series of Parity Stock to the extent that it ranks junior to the Series G
Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation, as the case may be. For purposes of clause (v) above, a class or
series of Parity Stock shall rank junior to the Series G Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders
of shares of Series G Preferred Stock shall be entitled to dividend payments,
payments on redemption or payments of amounts distributable upon dissolution,
liquidation or winding up of the Company, as the case may be, in preference or
priority to the holders of shares of such class or series of Parity Stock.
"Liberty Media Group Common Stock" shall mean the Series A Liberty
Media Group Common Stock and the Series B Liberty Media Group Common Stock.
"Liquidation Preference" measured per share of the Series G Preferred
Stock as of any date in question (the "Relevant Date") shall mean an amount
equal to the sum of (a) the Stated Value of such share, plus (b) an amount
equal to all dividends accrued on such share which pursuant to paragraph 3(d)
of this Certificate of Designations have been added to and remain a part of the
Liquidation Preference as of the Relevant Date, plus (c) for purposes of
determining the amounts payable pursuant to paragraph 4 and paragraph 5 of this
Certificate of Designations and the definition of Redemption Price, an amount
equal to all unpaid dividends accrued on the sum of the amounts specified in
clauses (a) and (b) above during the period from and including the immediately
preceding Dividend Payment Date (or the Anniversary Date if the Relevant Date
is on or prior to the first Dividend Payment Date) to but excluding the
Relevant Date, and, in the case of clauses (b) and (c) hereof, whether or not
such unpaid dividends have been declared or there are any unrestricted funds of
the Company legally available for the payment of dividends. In connection
with the determination of the Liquidation Preference of a share of Series G
Preferred Stock upon redemption or upon liquidation, dissolution or winding up
of the Company, the Relevant Date shall be the applicable date of redemption or
the date of distribution of amounts payable to stockholders in connection with
any such liquidation, dissolution or winding up.
"Mirror Preferred Stock" shall have the meaning set forth in paragraph
7(g).
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"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time, or any successor statute, and the rules and regulations promulgated
thereunder.
"Officers' Certificate" shall mean a certificate signed by the
Chairman of the Board, President or any Senior Vice President of the Company
and by the Treasurer or an Assistant Treasurer of the Company.
"Parity Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created, of the Company ranking on a parity
basis with the Series G Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation. Capital stock of any class or series,
whether now existing or hereafter created, shall rank on a parity as to
dividend rights, rights of redemption or rights on liquidation with the Series
G Preferred Stock, whether or not the dividend rates, dividend payment dates,
redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different from those of the Series G
Preferred Stock, if the holders of shares of such class or series shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Company, as
the case may be, in proportion to their respective accumulated and accrued and
unpaid dividends, redemption prices or liquidations prices, respectively,
without preference or priority, one over the other, as between the holders of
shares of such class or series and the holders of Series G Preferred Stock. No
class or series of capital stock that ranks junior to the Series G Preferred
Stock as to rights on liquidation shall rank or be deemed to rank on a parity
basis with the Series G Preferred Stock as to dividend rights or rights of
redemption, unless the instrument creating or evidencing such class or series
of capital stock otherwise expressly so provides. The Series C Preferred
Stock, the Series D Preferred Stock, the Series F Preferred Stock and the
Series H Preferred Stock rank on a parity basis with the Series G Preferred
Stock as to dividend rights, rights of redemption and rights on liquidation and
constitute "Parity Stock" for purposes of this Certificate of Designations.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
"Record Date" for the dividends payable on any Dividend Payment Date
shall mean the 15th day of the month preceding the month during which such
Dividend Payment Date shall occur as and if designated by the Board of
Directors.
"Redeemable Capital Stock" shall have the meaning set forth in
paragraph 7(c).
"Redemption Date" as to any share of Series G Preferred Stock shall
mean the date fixed for redemption of such share pursuant to paragraph 5(a) or
5(b) of this Certificate of Designations, provided that no such date will be a
Redemption Date unless the applicable Redemption Price is actually paid in full
on such date or the consideration sufficient for the
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payment thereof, and for no other purpose, has been set apart or deposited in
trust as contemplated by paragraph 5(d) of this Certificate of Designations.
"Redemption Price", as to any share of Series G Preferred Stock that
is to be redeemed on any Redemption Date, shall mean the Liquidation Preference
thereof on such Redemption Date.
"Redemption Securities" shall have the meaning set forth in paragraph
7(g).
"Senior Stock" shall mean any class or series of capital stock of the
Company hereafter created ranking prior to the Series G Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation. Capital stock
of any class or series shall rank prior to the Series G Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders
of shares of such class or series shall be entitled to dividend payments,
payments on redemption or payments of amounts distributable upon dissolution,
liquidation or winding up of the Company, as the case may be, in preference or
priority to the holders of shares of Series G Preferred Stock. No class or
series of capital stock that ranks on a parity basis with or junior to the
Series G Preferred Stock as to rights on liquidation shall rank or be deemed to
rank prior to the Series G Preferred Stock as to dividend rights or rights of
redemption, notwithstanding that the dividend rate, dividend payment dates,
sinking fund provisions, if any, or mandatory redemption provisions thereof are
different from those of the Series G Preferred Stock, unless the instrument
creating or evidencing such class or series of capital stock otherwise
expressly so provides.
"Series A Liberty Media Group Common Stock" shall mean the
Tele-Communications, Inc. Series A Liberty Media Group Common Stock, par value
$1.00 per share, which term shall include, where appropriate, in the case of
any reclassification, recapitalization or other change in the Series A Liberty
Media Group Common Stock, or in the case of a consolidation or merger of the
Company with or into another Person affecting the Series A Liberty Media Group
Common Stock, such capital stock to which a holder of Series A Liberty Media
Group Common Stock shall be entitled upon the occurrence of such event.
"Series A TCI Group Common Stock" shall mean the Tele-Communications,
Inc. Series A TCI Group Common Stock, par value $1.00 per share, which term
shall include, where appropriate, in the case of any reclassification,
recapitalization or other change in the Series A TCI Group Common Stock, or in
the case of a consolidation or merger of the Company with or into another
Person affecting the Series A TCI Group Common Stock, such capital stock to
which a holder of Series A TCI Group Common Stock shall be entitled upon the
occurrence of such event.
"Series B Liberty Media Group Common Stock" shall mean the
Tele-Communications, Inc. Series B Liberty Media Group Common Stock, par value
$1.00 per share, which term shall include, where appropriate, in the case of
any reclassification, recapitalization or other change in the Series B Liberty
Media Group Common Stock, or in the case of a
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consolidation or merger of the Company with or into another Person affecting
the Series B Liberty Media Group Common Stock, such capital stock to which a
holder of Series B Liberty Media Group Common Stock shall be entitled upon the
occurrence of such event.
"Series B TCI Group Common Stock" shall mean the Tele-Communications,
Inc. Series B TCI Group Common Stock, par value $1.00 per share, which term
shall include, where appropriate, in the case of any reclassification,
recapitalization or other change in the Series B TCI Group Common Stock, or in
the case of a consolidation or merger of the Company with or into another
Person affecting the Series B TCI Group Common Stock, such capital stock to
which a holder of Series B TCI Group Common Stock shall be entitled upon the
occurrence of such event.
"Series C Preferred Stock" shall mean the Convertible Preferred Stock,
Series C, par value $.01 per share, of the Company.
"Series D Preferred Stock" shall mean the Convertible Preferred Stock,
Series D, par value $.01 per share, of the Company.
"Series F Preferred Stock" shall mean the Convertible Redeemable
Participating Preferred Stock, Series F, par value $.01 per share, of the
Company.
"Series G Preferred Stock" shall have the meaning set forth in
paragraph 1 of this Certificate of Designations.
"Series H Preferred Stock" shall mean the Redeemable Convertible
Liberty Media Group Preferred Stock, Series H, par value $.01 per share, of the
Company.
"Special Record Date" hall have the meaning set forth in paragraph
3(d) of this Certificate of Designations.
"Stated Value" of a share of Series G Preferred Stock shall have the
meaning set forth in paragraph 1 of this Certificate of Designations.
"Subsidiary" shall mean (i) a corporation (other than the Company) a
majority of the capital stock of which, having voting power under ordinary
circumstances to elect directors, is at the time, directly or indirectly, owned
by the Company and/or one or more Subsidiaries of the Company and (ii) any
other Person (other than a corporation) in which the Company and/or one or more
Subsidiaries of the Company, directly or indirectly, has (x) a majority
ownership interest and (y) the power to elect or direct the election of a
majority of the members of the governing body of such entity.
"Target Price" shall initially mean $27 and shall be appropriately
adjusted to take into account any stock dividends on the Series A TCI Group
Common Stock or the Series A Liberty Media Group Common Stock, or any stock
splits, reclassifications or combinations of
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the Series A TCI Group Common Stock or the Series A Liberty Media Group Common
Stock during the period following the Issue Date and ending on the Anniversary
Date or on such earlier date, if any, as of which the Contingency is met.
"TCI Group Common Stock" shall mean the Series A TCI Group Common
Stock and the Series B TCI Group Common Stock.
3. Dividends.
(a) The Contingency. If the sum of (i) the Closing Price of the
Series A TCI Group Common Stock, plus (ii) one-fourth of the Closing Price of
the Series A Liberty Media Group Common Stock equals or exceeds the Target
Price for any ten (10) consecutive trading days during the period of sixty-five
(65) consecutive trading days ending on and including the last trading day
immediately preceding the Anniversary Date (the "Contingency"), no dividends
will accrue or be payable with respect to the Series G Preferred Stock.
(b) Payment. In the event that the Contingency is not met, and
only in such event, the holders of Series G Preferred Stock shall, subject to
the prior preferences and other rights of any Senior Stock and to the
provisions of paragraph 6 hereof, be entitled to receive, when and as declared
by the Board of Directors out of unrestricted funds legally available therefor,
cumulative dividends, in preference to dividends on any Junior Stock, which
shall accrue as provided herein. Except as otherwise provided in paragraph
3(d) of this Certificate of Designations, dividends on each share of Series G
Preferred Stock will, if the Contingency is not met, accrue on a daily basis at
the rate of 4% per annum of the Liquidation Preference of such share from and
including the Anniversary Date to but excluding the date on which the
Liquidation Preference or Redemption Price of such share is made available
pursuant to paragraph 4 or 5, respectively, of this Certificate of Designations
or the date of conversion of such share pursuant to paragraph 7 hereof, as
applicable. Dividends shall accrue as provided herein whether or not such
dividends have been declared and whether or not there are any unrestricted
funds of the Company legally available for the payment of dividends. Accrued
dividends on the series G Preferred Stock shall be payable semiannually on each
Dividend Payment Date, commencing on AUGUST 1, 1997, to the holders of record
of the Series G Preferred Stock as of the close of business on the applicable
Record Date. For purposes of determining the amount of dividends "accrued" (i)
as of the first Dividend Payment Date and as of any date that is not a Dividend
Payment Date, such amount shall be calculated on the basis of the rate per
annum specified above in this paragraph 3(b) for the actual number of days
elapsed from and including the Anniversary Date (in the case of the first
Dividend Payment Date and any date prior to the first Dividend Payment Date) or
the last preceding Dividend Payment Date (in the case of any other date) to but
excluding the date as of which such determination is to be made, based on a
365-day year, and (ii) as of any Dividend Payment Date after the first Dividend
Payment Date, such amount shall be calculated on the basis of such rate per
annum based on a 360-day year of twelve 30-day months. For so long as the
Liquidation Preference of a share of Series G Preferred Stock is equal to the
Stated Value per share, the amount of the dividend payable per share on the
Dividend Payment Date for each full semi-annual Dividend Period shall be $.432.
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(c) Method of Payment. All dividends payable with respect to the
shares of Series G Preferred Stock may be declared and paid, in the sole
discretion of the Board of Directors, in cash, through the issuance of shares
of Series A TCI Group Common Stock or in any combination of the foregoing. If
any dividend payment declared by the Board of Directors with respect to the
shares of Series G Preferred Stock is to be paid in whole or in part through
the issuance of shares of Series A TCI Group Common Stock, the amount of such
dividend payment to be paid per share of Series G Preferred Stock in shares of
Series A TCI Group Common Stock (the "Stock Dividend Amount") shall be
satisfied and paid by the delivery to the holders of record of such shares of
Series G Preferred Stock on the Record Date or Special Record Date, as the case
may be, for such dividend payment, of a number of shares of Series A TCI Group
Common Stock determined by dividing the Stock Dividend Amount by the Average
Market Price of a share of Series A TCI Group Common Stock as of such Record
Date or Special Record Date. The Company shall not be required to issue any
fractional share of Series A TCI Group Common Stock to which any holder of
Series G Preferred Stock may become entitled pursuant to this paragraph 3(c).
The Board of Directors may elect to settle any final fraction of a share of
Series A TCI Group Common Stock which a holder of one or more shares of Series
G Preferred Stock would otherwise be entitled to receive pursuant to this
paragraph 3(c) by having the Company pay to such holder, in lieu of issuing
such fractional share, cash in any amount (rounded upward to the nearest whole
cent) equal to the same fraction of the Average Market Price of a share of
Series A TCI Group Common Stock as of the Record Date or Special Record Date,
as the case may be, for the dividend payment with respect to which such shares
of Series A TCI Group Common Stock are being delivered. Such election, if made,
shall be made as to all holders of Series G Preferred Stock who would otherwise
be entitled to receive a fractional share of Series A TCI Group Common Stock on
the Dividend Payment Date or other date fixed for the payment of such dividend.
All dividends paid with respect to the shares of Series G Preferred
Stock pursuant to this paragraph 3 shall be paid pro rata to all the holders of
shares of Series G Preferred Stock outstanding on the applicable Record Date or
Special Record Date, as the case may be.
(d) Unpaid Dividends. If on any Dividend Payment Date the Company,
pursuant to applicable law or otherwise, shall be prohibited or restricted from
paying the full dividends to which holders of Series G Preferred Stock, and any
Parity Stock ranking on a parity basis with the Series G Preferred Stock with
respect to the right to receive dividend payments, shall be entitled, the
amount available for such payment pursuant to applicable law and which is not
otherwise restricted (if any) shall be distributed among the holders of Series G
Preferred Stock and any such Parity Stock ratably in proportion to the full
amounts to which they would otherwise be entitled. On each Dividend Payment
Date, all dividends that have accrued on each share of Series G Preferred
Stock during the Dividend Period ending on such Dividend Payment Date shall, to
the extent not paid on such Dividend Payment Date for any reason (whether or
not such unpaid dividends have been declared or there are any unrestricted
funds of the Company legally available for the payment of dividends), be added
cumulatively to the Liquidation Preference of such share and will remain a
part thereof until such dividends are paid. The rate per annum at which
dividends accrue in respect of that portion of the Liquidation Preference of
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a share of Series G Preferred Stock that consists of accrued unpaid dividends
that have been added to the Liquidation Preference of such share on a Dividend
Payment Date pursuant to this paragraph 3(d) and remain unpaid on the next
succeeding Dividend Payment Date shall increase to 8.625% per annum from and
after such next succeeding Dividend Payment Date to and including the date on
which the Liquidation Preference or Redemption Price of such share is made
available pursuant to paragraph 4 or 5, respectively, of this Certificate of
Designations or the date of conversion of such share pursuant to paragraph 7
hereof, as applicable, unless the portion of the Liquidation Preference that
consists of such accrued unpaid dividends is earlier declared and paid or an
amount sufficient to pay the same in full is irrevocably set apart in trust for
such purpose. That portion of the Liquidation Preference of a share of Series
G Preferred Stock that consists of accrued unpaid dividends, together with all
dividends accrued in respect thereof, may be declared an paid at any time
(subject to the rights of any Senior Stock and to the concurrent satisfaction
of any dividend arrearage then existing with respect to any Parity Stock that
ranks on a parity basis with the Series G Preferred Stock as to the payment of
dividends), without reference to any regular Dividend Payment Date, to holders
of record as of the close of business on such date, not more than 45 days nor
less than 10 days preceding the payment date thereof, as may be fixed by the
Board of Directors (the "Special Record Date"). Notice of each Special Record
Date shall be given, not more than 45 days nor less than 10 days prior thereto,
to the holders of record of the shares of Series G Preferred Stock.
(e) Credit. Any dividend payment made on the shares of Series G
Preferred Stock shall first be credited against the earliest accrued but unpaid
dividend due with respect to the shares of Series G Preferred Stock.
(f) Authorized Shares. All shares of Series A TCI Group Common Stock
issued in payment of any dividend on the Series G Preferred Stock shall, when
issued, be duly and validly authorized, fully paid, nonassessable and free from
all preemptive or similar rights; the delivery of such shares shall be made in
compliance with all applicable Federal and state securities laws, and such
shares shall have been listed for trading on such national securities exchange
or national securities association, if any, on which the Series A TCI Group
Common Stock is then listed.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which any
Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of
Series G Preferred Stock shall be entitled to receive from the assets of the
Company available for distribution to stockholders before any payment or
distribution shall be made to the holders of any Junior stock, an amount in
cash (or, at the election of the Company, property at its fair market value, as
determined by the Board of Directors in good faith) per share, equal to the
Liquidation Preference of a share of Series G Preferred Stock as of the date of
payment or distribution, which payment or distribution shall be made pari
passu with, and if the Company has elected to pay in property, in the same form
of property as, any such payment or distribution made to the holders of any
Parity Stock ranking on a parity basis with the Series G Preferred Stock with
respect to distributions upon liquidation, dissolution or winding
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up of the Company. The holders of Series G Preferred Stock shall be entitled
to no other or further distribution of or participation in any remaining assets
of the Company after receiving the Liquidation Preference per share. If, upon
distribution of the Company's assets in liquidation, dissolution or winding up,
the assets of the Company to be distributed among the holders of the Series G
Preferred Stock and to all holders of any Parity Stock ranking on a parity
basis with the Series G Preferred Stock with respect to distributions upon
liquidation, dissolution or winding up shall be insufficient to permit payment
in full to such holders of the respective preferential amounts to which they
are entitled, then the entire assets of the Company to be distributed to holders
of the Series G Preferred Stock and such Parity Stock shall be distributed pro
rata to such holders based upon the aggregate of the full preferential amounts
to which the shares of Series G Preferred Stock and such Parity Stock would
otherwise respectively be entitled. Neither the consolidation or merger of the
Company with or into any other corporation or corporations nor the sale,
transfer, or lease of all or substantially all of the assets of the Company
shall itself be deemed a liquidation, dissolution or winding up of the Company
within the meaning of this paragraph 4. Notice of the liquidation, dissolution
or winding up of the Company shall be given, not less than twenty (20) days
prior to the date on which such liquidation, dissolution or winding up is
expected to take place or become effective to the holders of record of the
shares of Series G Preferred Stock.
5. Redemption.
(a) Optional Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designations, the
shares of Series G Preferred Stock may be redeemed, at the option of the
Company by action of the Board of Directors, in whole or from time to time in
part, on any Business Day occurring on or after FEBRUARY 1, 2001, at the
Redemption Price on the Redemption Date. If fewer than all of the outstanding
shares of Series G Preferred Stock are to be redeemed on any Redemption Date,
the shares of Series G Preferred Stock to be redeemed shall be chosen by the
Company pro rata (as nearly as may be practicable) among all holders of Series
G Preferred Stock. The Company shall not be required to register a transfer of
(i) any shares of Series G Preferred Stock for a period of 15 days next
preceding any selection of shares of Series G Preferred Stock to be redeemed or
(ii) any shares of Series G Preferred Stock selected or called for redemption.
(b) Mandatory Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designations, the
Company shall redeem, out of funds legally available therefor, on FEBRUARY 1,
2016 (or, if such day is not a Business Day, on the first Business Day
thereafter) all shares of Series G Preferred Stock remaining outstanding at the
Redemption Price on the Redemption Date. If the funds of the Company legally
available for redemption of shares of the Series G Preferred Stock and any
Parity Stock then required to be redeemed are insufficient to redeem the total
number of such shares remaining outstanding, those funds which are legally
available shall, subject to the rights of any Senior Stock and the provisions
of paragraph 6, to be used to redeem the maximum possible number of shares of
Series G Preferred Stock and each such other class or series of Parity Stock.
Subject to the rights of any Senior Stock and the provisions of paragraph 6
hereof, at any time and from time to time
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thereafter when additional funds of the Company are legally available for such
purpose, such funds shall immediately be used to redeem the shares of Series G
Preferred Stock and of each such other class or series of Parity Stock which
were required to be redeemed that the Company failed to redeem until the
balance of such shares have been redeemed. The selection of shares to be
redeemed pursuant to the two immediately preceding sentences shall be made, as
nearly as practicable, on a pro rata basis as among the different classes or
series and as among the holders of shares of a particular class or series.
(c) Notice of Redemption. Notice of redemption shall be given by or
on behalf of the Company at least sixty (60) days prior to the Redemption
Date, in the case of a redemption pursuant to paragraph 5(a), and not more than
sixty (60) days nor less than thirty (30) days prior to the Redemption Date, in
the case of the redemption pursuant to paragraph 5(b), to the holders of record
of the shares of Series G Preferred Stock to be redeemed; but no defect in such
notice or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any shares of Series G Preferred Stock. In addition to
any information required by law or by the applicable rules of any national
securities exchange or national interdealer quotation system on which the
Series G Preferred Stock may be listed or admitted to trading or quoted, such
notice shall set forth the Redemption Price, the Redemption Date, the number of
shares to be redeemed and the place at which the shares called for redemption
will, upon presentation and surrender of the stock certificates evidencing such
shares, be redeemed, and if the Company has elected to deposit the Redemption
Price with a Redemption Agent in accordance with paragraph 5(d), shall state
the name and address of the Redemption Agent and the date on which such deposit
was or will be made. Such notice shall also set forth the then current
Conversion Rate for the shares of Series G Preferred Stock and the place or
places to which a holder desiring to convert shares of Series G Preferred Stock
should deliver the certificate(s) evidencing such shares, together with such
other documents and instruments as are or may be required pursuant to paragraph
7 of this Certificate of Designations. In the event that fewer than the total
number of shares of Series G preferred Stock represented by a certificate are
redeemed, a new certificate representing the number of unredeemed shares will
be issued to the holder thereof without cost to such holder. If the shares of
series G Preferred Stock evidenced by a certificate selected for partial
redemption pursuant to paragraph 5(a) of this Certificate of Designations are
thereafter converted in part pursuant to paragraph 7 hereof, the shares so
converted (as far as may be) will be deemed to be the shares selected for
redemption.
(d) Deposit of Redemption Price. If notice of any redemption by the
Company pursuant to this paragraph 5 shall have been given as provided in
paragraph 5(c) of this Certificate of Designations and if on or before the
Redemption Date specified in such notice an amount in cash sufficient to redeem
in full on the Redemption Date at the Redemption Price all shares of Series G
Preferred Stock called for redemption or required to be redeemed shall have been
set apart so as to be available for such purpose and only for such purpose,
then effective as of the close of business on the Redemption Date, the shares
of Series G Preferred Stock called for redemption, notwithstanding that any
certificate therefor shall not have been surrendered for cancellation, shall no
longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all remaining rights with respect
to such shares shall
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forthwith cease and terminate, except the right of the holders thereof to
receive the Redemption Price of such shares, without interest, upon the
surrender of certificates representing the same.
At its election, the Company on or prior to the Redemption Date (but
no more than ninety (90) days prior to the Redemption Date) may deposit
immediately available funds in an amount equal to the aggregate Redemption
Price of the shares of Series G Preferred Stock called for redemption in trust
for the holders thereof with any bank or trust company organized under the laws
of the United States of America or any state thereof having capital, undivided
profits and surplus aggregating at least $450 million (the "Redemption Agent"),
with irrevocable instructions and authority to the Redemption Agent, on behalf
and at the expense of the Company, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the Redemption Date or prior thereto, the Redemption Price of the
shares of Series G Preferred Stock to be redeemed to their respective holders
upon the surrender of the certificates therefor. A deposit made in compliance
with the immediately preceding sentence shall be deemed to constitute full
payment for the shares of Series G Preferred Stock to be redeemed and from and
after the later of the close of business on the date of such deposit (although
prior to the Redemption Date) or the date notice of redemption is mailed, the
shares of Series G Preferred Stock to be redeemed shall no longer be deemed
outstanding and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect to such shares except (x)
the right of the holders thereof to receive the Redemption Price of such shares
(calculated through the Redemption Date), without interest, upon surrender of
the certificates therefor and (y) the right to convert such shares in
accordance with paragraph 7 prior to the close of business on the Business Day
immediately preceding the Redemption Date. Any funds so deposited which shall
not be required for the payment of the Redemption Price of any shares of Series
G Preferred Stock to be redeemed because of the conversion of such shares shall
after such conversion be repaid to the Company by the Redemption Agent. Any
interest accrued on the funds so deposited shall be paid to the Company from
time to time. Any funds so deposited with the Redemption Agent which shall
remain unclaimed by the holders of such shares of Series G Preferred Stock at
the end of one year after the Redemption Date shall be returned by the
Redemption Agent to the Company, after which repayment the holders of such
shares of Series G Preferred Stock called for redemption shall look only to the
Company for the payment thereof, without interest, unless an applicable escheat
or abandoned property law otherwise requires.
6. Limitations on Dividends and Redemptions. If at any time the
Company shall have failed to pay, or declare and set aside the consideration
sufficient to pay, full cumulative dividends for all prior dividend periods on
any Parity Stock which by the terms of the instrument creating or evidencing
such Parity Stock is entitled to the payment of such cumulative dividends prior
to the redemption, exchange, purchase or other acquisition of the Series G
Preferred Stock, and until full cumulative dividends on such Parity Stock for
all prior dividend periods are paid, or declared and the consideration
sufficient to pay the same in full is set aside so as to be available for such
purpose and no other purpose, neither the Company nor any Subsidiary thereof
shall redeem, exchange, purchase or otherwise acquire any shares of Series
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G Preferred Stock, Parity Stock or Junior Stock, or set aside any money or
assets for any such purpose pursuant to paragraph 5(d) hereof, any sinking fund
or otherwise, unless all then outstanding shares of Series G Preferred Stock,
of such Parity Stock and of any other class or series of parity Stock that by
the terms of the instrument creating or evidencing such parity Stock is
required to be redeemed under such circumstances are redeemed pursuant to the
terms hereof and thereof.
If at any time the Company shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Series G Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, (i) neither the Company nor
any Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire
any shares of Series G preferred Stock, Parity Stock, or Junior Stock, or set
aside any money or assets for any such purpose pursuant to paragraph 5(d)
hereof, any sinking fund or otherwise, unless all then outstanding shares of
Series G Preferred Stock and of any other class or series of Parity Stock that
by the terms of the instrument creating or evidencing such Parity Stock is
required to be redeemed under such circumstances are redeemed pursuant to the
terms hereof and thereof, and (ii) the Company shall not declare or pay any
dividend on or make any distribution with respect to any Junior stock or parity
Stock or set aside any money or assets for any such purpose, except that the
Company may declare and pay a dividend on any Parity Stock ranking on a parity
basis with the Series G Preferred Stock with respect to the right to receive
dividend payments, contemporaneously with the declaration and payment of a
dividend on the Series G Preferred Stock, provided that such dividends are
declared and paid pro rata so that the amount of dividends declared and paid
per share of Series G Preferred Stock and such Parity Stock shall in all cases
bear to each other the same ratio that accumulated and accrued and unpaid
dividends per share on the Series G Preferred Stock and such Parity Stock bear
to each other.
If the Company shall fail to redeem on any date fixed for redemption
pursuant to paragraph 5(a) or 5(b) of this Certificate of Designations any
shares of Series G Preferred Stock called for redemption or required to be
redeemed on such date, and until such shares are redeemed in full, the Company
shall not (x) redeem any Junior Stock or, except as provided in paragraph 5(b)
hereof, Parity Stock or (y) declare or pay any dividend on or make any
distribution with respect to any Junior Stock or, except as provided in the
second paragraph of this paragraph 6, parity Stock, or set aside any money or
assets for any such purpose, and neither the Company nor any Subsidiary thereof
shall purchase or otherwise acquire any Series G Preferred Stock, Parity Stock
or Junior Stock, or set aside any money or assets for any such purpose.
Nothing contained in the first or third paragraph of this paragraph 6
shall prevent (i) the payment of dividends on any Junior Stock solely in shares
of Junior Stock or the redemption, purchase or other acquisition of Junior
Stock solely in exchange for (together with
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a cash adjustment for fractional shares, if any), or (but only in the case of
the first paragraph of this paragraph 6) through the application of the
proceeds from the sale of, shares of Junior Stock; (ii) the payment of
dividends on any Parity Stock solely in shares of Parity Stock and/or Junior
Stock or the redemption, exchange, purchase or other acquisition of Series G
Preferred Stock or Parity Stock solely in exchange for (together with a cash
adjustment for fractional shares, if any), or (but only in the case of the
first paragraph of this paragraph 6) through the application of the proceeds
from the sale of, shares of Parity Stock and/or Junior Stock; or (iii) the
purchase or acquisition of shares of Series G Preferred Stock pursuant to a
purchase or exchange offer made to all holders of outstanding shares of Series
G Preferred Stock, provided that the terms of the purchase or exchange offer
shall be identical for all shares of Series G Preferred Stock and all accrued
dividends on such shares shall have been paid or shall have been declared and
irrevocably set apart in trust for the benefit of the holders of shares of
Series G Preferred Stock and for no other purpose.
The provisions of the first paragraph of this paragraph 6 are for the
sole benefit of the holders of Series G Preferred Stock and Parity Stock having
the terms described therein and accordingly, at any time when there are no
shares of any such class or series of Parity Stock outstanding or if the
holders of each such class or series of Parity Stock have, by such vote or
consent of the holders thereof as may be provided for in the instrument
creating or evidencing such class or series, waived in whole or in part the
benefit of such provisions (either generally or in the specific instance), then
the provisions of the first paragraph of this paragraph 6 shall not (to the
extent waived, in the case of any partial waiver) restrict the redemption,
exchange, purchase or other acquisition of any shares of Series G Preferred
Stock, Parity Stock or Junior Stock. All other provisions of this paragraph 6
are for the sole benefit of the holders of Series G Preferred Stock and
accordingly, if the holders of shares of Series G Preferred Stock shall have
waived as provided in paragraph 10 of this Certificate of Designations) in
whole or in part the benefit of the applicable provision, either generally or
in the specific instance, such provision shall not (to the extent of such
waiver, in the case of a partial waiver) restrict the redemption, exchange,
purchase or other acquisition of, or declaration, payment or making of any
dividends or distributions on, the Series G Preferred Stock, any Parity Stock
or any Junior Stock.
7. Conversion of Series G Preferred Stock.
(a) Right to Convert. Unless previously redeemed as provided in
paragraph 5 of this Certificate of Designations, shares of Series G Preferred
Stock may be converted at the option of the holder thereof, in the manner and
upon the terms and conditions set forth in this paragraph 7, into fully paid
and nonassessable whole shares of Series A TCI Group Common Stock at the
Conversion Rate in effect on the Conversion Date, at any time prior to the
close of business on the Business Day immediately preceding the Redemption Date
for the redemption of shares of Series G Preferred Stock pursuant to paragraph
5(a) or 5(b) of this Certificate of Designations.
(b) Mechanics of Conversion. In order to convert shares of Series G
Preferred Stock, the holder thereof shall surrender the certificate or
certificates representing the shares of
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Series G Preferred Stock to be converted at the office of the Company or the
office of any transfer agent for the Series G Preferred Stock, which
certificate or certificates shall be duly endorsed to the Company in blank (or
accompanied by duly executed instruments of transfer to the Company in blank)
with signatures guaranteed (such endorsements or instruments of transfer to be
in form satisfactory to the Company), together with a written notice to the
Company at said office of the election to convert the same, specifying the
number of shares of Series G Preferred Stock to be converted and the name or
names (with addresses) in which the certificate or certificates for shares of
Series A TCI Group Common Stock are to be issued. If any transfer is involved
in the issuance or delivery of any certificate or certificates for shares of
Series A TCI Group Common Stock in a name other than that of the registered
holder of the shares of Series G Preferred Stock surrendered for conversion,
such holder shall also deliver to the Company a sum sufficient to pay all
taxes, if any, payable in respect of such transfer or evidence satisfactory to
the Company that such taxes have been paid. Except as provided in the
immediately preceding sentence, the Company shall pay any issue, stamp or other
similar tax in respect of such issuance or delivery.
The Company shall, as soon as practicable after the Conversion Date,
deliver to the holder of the shares of Series G Preferred Stock so surrendered
for conversion, or to such holder's nominee(s) or, subject to compliance with
applicable law, transferee(s), a certificate or certificates for the number of
whole shares of Series A TCI Group Common Stock to which such holder shall be
entitled, together with cash or its check in lieu of any fractional share as
provided in paragraph 7(o). If the shares of Series G Preferred Stock
represented by a certificate surrendered for conversion are converted only in
part, the Company will also issue and deliver to the holder, or to such
holder's nominee(s) or, subject to compliance with applicable law,
transferee(s), without charge therefor, a new certificate or certificates
representing in the aggregate the unconverted shares of Series G Preferred
Stock.
The Person in whose name the certificate for shares of Series A TCI
Group Common Stock is issued upon such conversion shall be treated for all
purposes as the stockholder of record of such shares of Series A TCI Group
Common Stock as of the close of business on the Conversion Date; provided,
however, that no surrender of Series G Preferred Stock on any date when the
stock transfer books of the Company are closed for any purpose shall be
effective to constitute the Person or Persons entitled to receive the shares of
Series A TCI Group Common Stock on such date, but such surrender shall be
effective (assuming all other requirements of this paragraph 7 have been
satisfied) to constitute such Person or Persons as the record holders of such
shares of Series A TCI Group Common Stock for all purposes as of the opening of
business on the next succeeding day on which such stock transfer books are
open, and such conversion shall be at the Conversion Rate in effect on the date
that such shares of Series G Preferred Stock were surrendered for conversion
(and such other requirements satisfied) as if the stock transfer books of the
Company had not been closed on such date. Upon conversion of shares of Series
G Preferred stock, the rights of the holder of the shares so converted, as a
holder thereof, will cease.
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Notwithstanding the last sentence of the immediately preceding
paragraph, if the Board of Directors declares any dividend on the Series G
Preferred Stock pursuant to paragraph 3 of this Certificate of Designations,
and the Conversion Date for any shares of Series G Preferred Stock occurs on or
after the Record Date or Special Record Date, as the case may be, and before
the Dividend Payment Date for such dividend (or, in the case of a dividend
declared pursuant to Section 3(d), then the holder of such shares of Series G
Preferred Stock on such Record Date shall be entitled to receive such dividend
on such Dividend Payment Date (or such other date, as the case may be), as if
such Conversion Date had not occurred.
(c) Adjustments for Change in Capital Stock. If after the Issue
Date, the Company:
(i) pays a dividend or makes a distribution on the Series A
TCI Group Common Stock in shares of Series A TCI Group Common Stock;
(ii) subdivides combines the outstanding shares of Series A
TCI Group Common Stock into a greater number of shares;
(iii) combines the outstanding shares of Series A TCI Group
Common Stock into a smaller number of shares;
(iv) pays a dividend or makes a distribution on the Series A
TCI Group Common Stock in shares of its capital stock (other than
Series A TCI Group Common Stock or rights, warrants or options for
its capital stock); or
(v) issues by reclassification of its shares of Series A TCI
Group Common Stock (other than a reclassification by way of merger or
binding share exchange that is subject to paragraph 7(f)) any shares
of its capital stock (other than rights, warrants or options for its
capital stock),
then, subject to the following sentence and to paragraph 7(j), the conversion
privilege and the Conversion Rate in effect immediately prior to the opening of
businesses on the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the holder of any shares of Series G Preferred Stock
thereafter converted may receive the kind and number of shares of capital stock
of the Company which such holder would have owned immediately following such
event if such holder had converted his shares of Series G Preferred Stock
immediately prior to the record date for, or effective date of, as the case may
be, such event. Notwithstanding the foregoing, if an event listed in clause
(iv) or (v) above would result in the shares of Series G Preferred Stock being
convertible into shares or units (or a fraction thereof) of more than one class
or series of capital stock of the Company and any such class or series of
capital stock provides by its terms a right in favor the Company to call,
redeem, exchange or otherwise acquire all of the outstanding shares or units of
such class or series (such class or series of capital stock being herein
referred
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to as "Redeemable Capital Stock") then, at the option of the Company, the
conversion privilege and Conversion Rate of the Series G Preferred Stock shall
not be adjusted pursuant to this paragraph 7(c) and in lieu thereof, but
subject to paragraph 7(j), the adjustment to the Conversion Rate contemplated
by paragraph 7(e) shall be made with the same effect as if the dividend or
distribution of Redeemable Capital Stock or the issuance of the additional
class or series of Redeemable Capital Stock by reclassification had been a
distribution of assets of the Company.
The adjustment contemplated by this paragraph 7(c) shall be made
successively whenever any event listed above shall occur. For a dividend or
distribution, the adjustment shall become effective immediately after the
record date for the dividend or distribution. For a subdivision, combination
or reclassification, the adjustment shall become effective immediately after
the effective date of the subdivision, combination or reclassification.
If after an adjustment a holder of Series G Preferred Stock would be
entitled to receive upon conversion thereof shares of two or more classes or
series of capital stock of the Company, the Conversion Rate shall thereafter be
subject to adjustment upon the occurrence of an action taken with respect to
any such class or series of capital stock as is contemplated by this paragraph
7 with respect to the Series A TCI Group Common Stock, on terms comparable to
those applicable to the Series A TCI Group Common Stock pursuant to this
paragraph 7.
Any shares of Series A TCI Group Common Stock issuable in payment of a
dividend shall be deemed to have been issued immediately prior to the time of
the record date for such dividend for purposes of calculating the number of
outstanding shares of Series A TCI Group Common Stock under paragraphs 7(d) and
7(e) below.
(d) Adjustment for Rights Issue. If, after the Company distributes any
rights, warrants or options to holders of shares of Series A TCI Group Common
Stock entitling them, for a period expiring within 45 days after the record date
for the determination of stockholders entitled to receive such distribution, to
purchase shares of Series A TCI Group Common Stock (or Convertible Securities)
at a price per share (or having a conversion price per share, after adding
thereto an allocable portion of the exercise price of the right, warrant or
option to purchase such Convertible Securities, computed on the basis of the
maximum number of shares of Series A TCI Group Common Stock issuable upon
conversion of such Convertible Securities) less than the Current Market Price on
the Determination Date, the Conversion Rate shall be adjusted so that it shall
equal the rate determined by dividing the Conversion Rate in effect immediately
prior to the opening of business on such record date by a fraction, of which the
numerator shall be the number of shares of Series A TCI Group Common Stock
outstanding on such record date plus the number of shares of Series A TCI Group
Common Stock which the aggregate offering price of the total number of shares of
Series A TCI Group Common Stock so offered (or the aggregate conversion price
of the Convertible Securities to be so offered, after adding thereto the
aggregate exercise price of the rights, warrants or options to purchase such
Convertible Securities) to the holders of Series A TCI Group Common Stock (and
to the holders of Convertible Securities and Series B TCI Group Common Stock
referred to in the immediately succeeding paragraph of this paragraph 7(d) if
the distribution to which this
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paragraph 7(d) applies is also being made to such holders) would purchase at
such Current Market Price, and of which the denominator shall be the number of
shares of Series A TCI Group Common Stock outstanding on such record date plus
the number of additional shares of Series A TCI Group Common Stock so offered
to the holders of Series A TCI Group Common Stock (and to such holders of
Convertible Securities and Series B TCI Group Common Stock) for subscription or
purchase (or into which the Convertible Securities so offered are convertible).
Shares of Series A TCI Group Common Stock owned by or held for the account of
the Company shall not be deemed to be outstanding the purpose of any such
adjustment.
For purposes of this paragraph 7(d) the number of shares of Series A
TCI Group Common Stock outstanding on any record date shall be deemed to
include (i) the maximum number of shares of Series A TCI Group Common Stock the
issuance of which would be necessary to effect the full exercise, exchange or
conversion of all Convertible Securities outstanding on such record date which
are then exercisable, exchangeable or convertible at a price (before giving
effect to any adjustment to such price for the distribution to which this
paragraph 7(d) is being applied) equal or less than the Current Market Price
per share of Series A TCI Group Common Stock on the applicable Determination
Date, if all of such Convertible Securities were deemed to have been exercised,
exchanged or converted immediately prior to the opening of business on such
record date and (ii) if the Series B TCI Group Common Stock is then convertible
into Series A TCI Group Common Stock, the maximum number of shares of Series A
TCI Group Common Stock the issuance of which would be necessary to effect the
full conversion of all shares of Series B TCI Group Common Stock outstanding on
such record date, if all of such shares of Series B TCI Group Common Stock were
deemed to have been converted immediately prior to the opening of business on
such record date.
The adjustment contemplated by this paragraph 7(d) shall be made
successively whenever any such rights, warrants or options are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive the rights, warrants or options. If all of
the shares of Series A TCI Group Common Stock (or all of the Convertible
Securities) subject to such rights, warrants or options have not been issued
when such rights, warrants or options expire (or, in the case of rights,
warrants or options to purchase Convertible Securities which have been
exercised, if all of the shares of Series A TCI Group Common Stock issuable
upon conversion of such Convertible Securities have not been issued prior to
the expiration of the conversion right thereof), then the Conversion Rate shall
promptly be readjusted to the Conversion Rate which would then be in effect had
the adjustment upon the issuance of such rights, warrants or options been made
on the basis of the actual number of shares of Series A TCI Group Common Stock
(or Convertible Securities) issued upon the exercise of such rights, warrants
or options (or conversion of such Convertible Securities).
No adjustment shall be made under this paragraph 7(d) if the adjusted
Conversion Rate would be lower than the Conversion Rate in effect immediately
prior to such adjustment.
(e) Adjustments for Other Distributions. If, after the Issue Date
(i) the Company distributes to all holders of shares of Series A TCI Group
Common Stock any assets
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or debt securities or any rights, warrants or options to purchase securities
(excluding (x) dividends or distributions referred to in paragraph 7(c) (except
as otherwise provided in clause (ii) of this sentence) and distributions of
rights, warrants or options referred to in paragraph 7(d) and (y) cash
dividends or other cash distributions, unless such cash dividends or cash
distributions are Extraordinary Cash Dividends), or (ii) the Company makes a
dividend or distribution of Redeemable Capital Stock on, or issues Redeemable
Capital Stock by reclassification of, the Series A TCI Group Common Stock by
reclassification of, the Series A TCI Group Common Stock and determines
pursuant to paragraph 7(c) to treat the same as a distribution of assets of the
Company subject to this paragraph 7(e), then in each such event the Conversion
Rate shall be adjusted by dividing the Conversion Rate in effect immediately
prior to the opening of business on (A) the record date for the determination
of stockholders entitled to receive the distribution or (B) in the case of a
reclassification, the effective date of such reclassification by a fraction, of
which the numerator shall be the total number of shares of Series A TCI Group
Common Stock outstanding on such record date or immediately prior to such
effective date multiplied by the Current Market price on the Determination
Date, less the fair market value (as determined in good faith by the Board of
Directors) on such record date or effective date of said assets (or Redeemable
Capital Stock) or debt securities or rights, warrants or options so distributed
to the holders of Series A TCI Group Common Stock (and to the holders of
Convertible Securities and Series B TCI Group Common Stock referred to in the
immediately succeeding paragraph of this paragraph 7(e) if the distribution to
which this paragraph 7(e) applies is also being made to such holders), and of
which the denominator shall be the total number of shares of Series A TCI Group
Common Stock outstanding on such record date or immediately prior to such
effective date multiplied by such Current Market Price.
For purposes of this paragraph 7(e), the number of shares of Series A
TCI Group Common Stock outstanding on any relevant date shall be deemed to
include (i) the maximum number of shares of Series A TCI Group Common Stock the
issuance of which would be outstanding on such date which are then exercisable,
exchangeable or convertible at a price (before giving effect to any adjustment
to such price for the distribution to which this paragraph 7(e) is being
applied) equal to or less than the Current Market Price on the applicable
Determination Date, if all of such Convertible Securities were deemed to have
been exercised, exchanged or converted immediately prior to the opening of
business on such date and (ii) if the Series B TCI Group Stock is then
convertible into Series A TCI Group Common Stock the issuance of which would be
necessary to effect the full conversion of all shares of Series B TCI Group
Common Stock outstanding on such date, if all of such shares of Series B TCI
Group Common Stock were deemed to have been converted immediately prior to the
opening of business on such date.
For purposes of this paragraph 7(e), the term "Extraordinary Cash
Dividend" shall mean any cash dividend with respect to the Series A TCI Group
Common Stock the amount of which, together with the aggregate amount of cash
dividends on the Series A TCI Group Common Stock to be aggregated with such
cash dividend in accordance with the following provisions of this paragraph,
equals or exceeds the threshold percentage set forth below in the following
sentence. If, upon the date prior to the Ex-Dividend Date with respect to a
cash
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dividend on Series A TCI Group Common Stock, the aggregate of the amount of
such cash dividend together with the amounts of all cash dividends on the
Series A TCI Group Common Stock with Ex-Dividend Dates occurring in the 365
consecutive day period ending on the date prior to the Ex-Dividend Date with
respect to the cash dividend to which this provision is being applied (other
than any such other cash dividends with Ex-Dividend Dates occurring in such
period for which a prior adjustment in the Conversion Rate was previously made
under this paragraph 7(e)) equals or exceeds on a per share basis 10% of the
average of the Closing Prices during the period beginning on the date after the
first such Ex-Dividend Date in such period and ending on the date prior to the
Ex-Dividend Date with respect to the cash dividend to which this provision is
being applied (except that if no other cash dividend has had an Ex-Dividend
Date occurring in such period, the period for calculating the average of the
Closing Prices shall be the period commencing 365 days prior to the date
immediately prior to the Ex-Dividend Date with respect to the cash dividend to
which this provision is being applied), such cash dividend together with each
other cash dividend with an Ex-Dividend Date occurring in such 365-day period
that is aggregated with such cash dividend in accordance with this paragraph
shall be deemed to be an Extraordinary Cash Dividend.
The adjustment pursuant to the foregoing provisions of this paragraph
7(e) shall be made successively whenever any distribution to which this
paragraph 7(e) applies is made, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive the
distribution (or, in the case of a reclassification, the effective date).
Shares of Series A TCI Group Common Stock owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
adjustment.
No adjustment shall be made under this paragraph 7(e) if the adjusted
Conversion Rate would be lower than the Conversion Rate in effect prior to such
adjustment. In the event that, with respect to any distribution to which this
paragraph 7(e) would otherwise apply, the numerator of the fraction in the
formula set forth in the first paragraph of this paragraph 7(e) is zero or a
negative number, then the adjustment provided by this paragraph 7(e) shall not
be made. If the Company makes a distribution to all holders of its Series A
TCI Group Common Stock of any of its assets or debt securities or any rights,
warrants or options to purchase securities of the Company that, but for the
immediately preceding sentence, would otherwise result in an adjustment in the
Conversion Rate pursuant to the foregoing provisions of this paragraph 7(e),
then, from and after the record date for determining the holders of Series A
TCI Group Common Stock entitled to receive the distribution, a holder of Series
G Preferred Stock that converts such shares in accordance with the provisions of
this paragraph 7 will upon such conversion be entitled to receive, in addition
to the shares of Series A TCI Group Common Stock into which such shares of
Series G Preferred Stock are convertible, the kind and amount of securities,
cash or other assets comprising the distribution that such holder would have
received if such holder had converted such shares of Series G Preferred Stock
immediately prior to the record date for determining the holders of Series A
TCI Group Common Stock entitled to receive the distribution.
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(f) Consolidation, Merger or Sale of the Company. If the Company
consolidates with or merges into, or transfers (other than by mortgage or
pledge) the properties and assets substantially as an entirety to, another
Person or the Company is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Series A TCI Group Common Stock, the
Company (or its successor in such transaction) or the transferee of such
properties and assets shall make appropriate provision so that the holders of
the shares of Series G Preferred Stock then outstanding shall have the right
thereafter to convert such shares into the kind and amount of securities, cash
or other assets receivable upon such transaction by a holder of the number of
shares of Series A TCI Group Common Stock into which such shares of Series G
Preferred Stock could have been converted immediately before the effective date
of such transaction (assuming, to the extent applicable, that such holder
failed to exercise any rights of election with respect thereto and received per
share of Series A TCI Group Common Stock the kind and amount of securities,
cash or other assets received per share by a plurality of the non-electing
shares of Series A TCI Group Common Stock), and the holders of the Series G
Preferred Stock shall have no other conversion rights under these provisions;
provided that (i) effective provision shall be made, in the Articles or
Certificate of Incorporation of the resulting or surviving corporation or
otherwise or in any contracts of sale or transfer, so that the provisions set
forth herein for the protection of the conversion rights of Series G Preferred
Stock shall thereafter be made applicable, as nearly as reasonable may be, to
any such other securities and assets deliverable upon conversion of the Series
G Preferred Stock remaining outstanding or other convertible preferred stock or
other securities received by the holders of Series G Preferred Stock in place
thereof; and (ii) any such resulting or surviving corporation or transferee
shall expressly assume the obligation to deliver, upon the exercise of the
conversion privilege, such securities, cash or other assets as the holders of
the Series G Preferred Stock remaining outstanding, or other convertible
preferred stock or other securities received by the holders in place thereof,
shall be entitled to receive pursuant to the provisions hereof, and to make
provision for the protection of the conversion rights of the Series G Preferred
Stock, or of any other convertible preferred stock or other securities received
by the holders in place thereof, as provided in clause (i) of this sentence.
If this paragraph 7(f) applies, paragraphs 7(c), 7(d) and 7(e) shall
not apply.
(g) Effect of Redemption. Subject to paragraph 7(j) and to the
remaining provisions of this paragraph 7(g), in the event that a holder of
Series G Preferred Stock would be entitled to receive upon conversion thereof
pursuant to this paragraph 7 any Redeemable Capital Stock and the Company
redeems, exchanges or otherwise acquires all of the outstanding shares or other
units of such Redeemable Capital Stock (such event being a "Redemption Event"),
then, from and after the effective date of such Redemption Event, the holders
of shares of Series G Preferred Stock then outstanding shall be entitled to
receive upon conversion of such shares, in lieu of shares or units of such
Redeemable Capital Stock, the kind and amount of securities, cash or other
assets receivable upon the Redemption Event by a holder of the number of shares
or units of such Redeemable Capital Stock into which such shares of Series G
Preferred Stock could have been converted immediately prior to the effective
date of such Redemption Event (assuming, to the extent applicable, that such
holder failed to exercise any rights of election with
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respect thereto and received per share or unit of such Redeemable Capital Stock
the kind and amount of securities, cash or other assets received per share or
unit by a plurality of the non-electing shares or units of such Redeemable
Capital Stock), and (from and after the effective date of such Redemption
Event) the holders of the Series G Preferred Stock shall have no other
conversion rights under these provisions with respect to such Redeemable
Capital Stock.
Notwithstanding the foregoing, if the Redemption price for the shares
of such Redeemable Capital Stock is paid in whole or in part in Redemption
Securities, and the Mirror Preferred Stock Condition is met, the Series G
Preferred Stock shall not be convertible into such Redemption Securities and,
from and after the applicable redemption date, the holders of any shares of
Series G Preferred Stock that have not been exchanged for Mirror Preferred
Stock and Exchange Preferred Stock shall have no conversion rights under these
provisions except for any conversion right that may have existed immediately
prior to the effective date of the Redemption Event with respect to any
securities (including the Series A TCI Group Common Stock), cash or other
assets other than the Redeemable Capital Stock so Redeemed. The Mirror
Preferred Stock Condition will be met in connection with a redemption of any
Redeemable Capital Stock into which the Series G Preferred Stock is then
convertible, if the Company makes appropriate provision so that the holders of
the Series G Preferred Stock have the right to exchange their shares of Series
G Preferred Stock on the effective date of the Redemption Event for Exchange
Preferred Stock of the Company and Mirror Preferred Stock of the issuer of the
Redemption Securities. The sum of the initial liquidation preferences of the
shares of Exchange Preferred Stock and Mirror Preferred Stock delivered in
exchange for a share of Series G Preferred Stock will equal the Liquidation
Preference of a share of Series G Preferred Stock on the effective date of the
Redemption Event. The Mirror Preferred Stock will have an aggregate initial
liquidation preference equal to the product of the aggregate Liquidation
Preference of the shares of Series G Preferred Stock exchanged therefor and the
quotient of (x) the product of the Conversion Rate for the Redeemable Capital
Stock to be Redeemed (determined immediately prior to the effective date of the
Redemption Event) and the average of the daily Closing Prices of the Redeemable
Capital Stock for the period of ten consecutive trading days ending on the
third trading day prior to the effective date of the Redemption Event, divided
by (y) the sum of the amount determined pursuant to clause (x), plus the fair
value of the securities (other than those being Redeemed), cash or other assets
that would have been receivable by a holder of Series G Preferred Stock upon
conversion thereof immediately prior to the effective date of the Redemption
Event (such fair value to be determined in the case of securities with a
Closing Price in the same manner as provided in clause (x) and otherwise by the
Board of Directors in the exercise of its good faith judgment). The shares of
Exchange Preferred Stock will have an aggregate initial liquidation preference
equal to the difference between the aggregate Liquidation Preference of the
shares of Series G Preferred Stock exchanged therefore and the aggregate
initial liquidation preference of the Mirror Preferred Stock.
When used in connection with a redemption by the Company of any
Redeemable Capital Stock into which the Series G Preferred Stock is then
convertible, the following terms have the following meanings:
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(i) "Redemption Securities" means securities of an issuer
other than the Company that are distributed by the Company in
payment, in whole or in part, of the redemption price for such
Redeemable Capital Stock.
(ii) "Mirror Preferred Stock" means convertible preferred
stock issued by the issuer of the Redemption Securities and having
terms, conditions, designations, dividend rights, voting powers,
rights on liquidation and other preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof that are identical, or as nearly
so as is practicable in the good faith judgment of the Board of
Directors, to those of the Series G Preferred Stock for which such
Mirror Preferred Stock is exchanged, except that (x) the liquidation
preference will be determined as provided above in this paragraph
7(g), (y) the running of any time periods pursuant to the terms of the
Series G Preferred Stock shall be tacked to the corresponding time
periods in the Mirror Preferred Stock and (z) the Mirror Preferred
Stock shall be convertible into the kind and amount of Redemption
Securities, cash and other assets that the holder of a share of Series
G Preferred Stock in respect of which such Mirror Preferred Stock is
issued pursuant to the terms hereof would have received upon
redemption of the Redeemable Capital Stock had such shares of Series G
Preferred Stock been converted prior to the effective date of the
Redemption Event.
(iii) "Exchange Preferred Stock" means a series of
convertible preferred stock of the Company having terms, conditions,
designations, dividend rights, voting powers, rights on liquidation
and other preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof that are identical, or as nearly so as is practicable in the
good faith judgment of the Board of Directors, to those of the Series
G Preferred Stock for which such Exchange Preferred Stock is
exchanged, except that (x) the liquidation preference will be
determined as provided above in this paragraph 7(g), (y) the running
of any time periods pursuant to the terms of the Series G Preferred
Stock shall be tacked to the corresponding time period in the Exchange
Preferred Stock and (z) the Exchange Preferred Stock will not be
convertible into, and the holders will have no conversion rights
thereunder with respect to, the Redeemable Capital Stock redeemed in
the Redemption Event.
Notwithstanding the second paragraph of this paragraph 7(g), the Mirror
Preferred Stock Condition shall only be deemed to have been satisfied in
connection with any Redemption Event if, in the good faith determination of the
Board of Directors: (i) receipt of Mirror Preferred Stock and/or Exchange
Preferred Stock in exchange for Series G Preferred Stock pursuant to the second
paragraph of this paragraph 7(g) would not result in the recognition of gain or
loss by the holders of such Series G Preferred Stock for United States federal
income tax purposes; (ii) an adjustment made in the Conversion Rate of the
Series G Preferred Stock with respect to such Redemption Event, as provided in
the first paragraph of this paragraph 7(g), would result in the recognition of
gain or loss by the holders of Series G Preferred Stock for United States
federal
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<PAGE> 191
income tax purposes; or (iii) receipt of Redemption Securities in redemption of
the Redeemable Capital Stock to be redeemed in the Redemption Event would
result in the recognition of gain or loss by the holders of such Redeemable
Capital Stock, as the case may be.
(h) Simultaneous Adjustments. In the event that this paragraph 7
requires adjustments to the Conversion Rate under more than one of paragraph
7(c)(iv), (d) or (e), and the record dates for the distributions giving rise to
such adjustments shall occur on the same date, then such adjustments shall be
made by applying, first, the provisions of paragraph 7(c), second, the
provisions of paragraph 7(e) and, third, the provisions of paragraph 7(d).
(i) When Adjustment May Be Deferred. In any case in which this
paragraph 7 shall require that an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the occurrence of
such event (x) issuing to the holder of any shares of Series G Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of Series A TCI Group Common Stock issuable upon such
conversion by reason of the adjustment required by such event over and above
the shares of Series A TCI Group Common Stock issuable upon such conversion
before giving effect to such adjustment and (y) paying to such holder cash or
its check in lieu of any fractional interest to which he is entitled pursuant
to paragraph 7(o); provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares of Series A TCI Group Common Stock, and
such cash, upon the occurrence of the event requiring such adjustment.
(j) De Minimis Adjustment; When Adjustment Is Not Required. No
adjustments in the Conversion Rate need be made unless the adjustment would
require an increase or decrease of at least one percent (1%) in the Conversion
Rate. Any adjustment which is not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this paragraph 7 shall be made to the nearest
cent or to the nearest 1/1000th of a share, as the case may be.
No adjustment need be made for rights to purchase shares of Series A
TCI Group Common Stock or for sales of shares of Series A TCI Group Common
Stock which in either case are made pursuant to a Company plan providing for
reinvestment of dividends or interest or pursuant to a bona fide employee stock
option or stock purchase plan of the Company. No adjustment need be made for a
change in the par value of the Series A TCI Group Common Stock.
No adjustment need be made under this paragraph 7 for a transaction
referred to in paragraph 7(c), 7(d), 7(e) or 7(g) if holders of the Series G
Preferred Stock are to participate in the transaction on a basis and with
notice that the Board of Directors in good faith determines to be fair and
appropriate in light of the basis and notice on which holders of Series A TCI
Group Common Stock participate in the transaction; provided that the basis on
which the holders of shares of Series G Preferred Stock are to participate in
the transaction shall not be deemed to
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<PAGE> 192
be fair if it would require the holder to convert his shares of Series G
Preferred Stock, in order to participate, at any time prior to the expiration
of the conversion period specified for the shares of Series G Preferred Stock
pursuant to paragraph 7(a) of this Certificate of Designations. The
immediately preceding sentence shall apply to any transaction referred to in
paragraph 7(c), 7(d), 7(e) or 7(g) only if, in good faith determination of the
Board of Directors: (i) participation in such transaction by the holders of the
Series G Preferred Stock would not result in the recognition of gain or loss by
such holders of United States federal income tax purposes; (ii) an adjustment
made in the Conversion Rate of the Series G Preferred Stock in lieu of
participating in such transaction, pursuant to this paragraph 7, would result
in the recognition of gain or loss by holders of Series G Preferred Stock for
United States federal income tax purposes; or (iii) participation in such
transaction by the holders of the Series A TCI Group Common Stock would result
in the recognition of gain or loss by such holders for United States federal
income tax purposes.
To the extent the shares of Series G Preferred Stock become
convertible into cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.
(k) Company Determination Final. Any determination required to be
made pursuant to paragraph 7(c), 7(d), 7(e), 7(f), 7(g), 7(h), 7(j) or 7(o)
shall be made by the Board of Directors (whether or not reference to the Board
of Directors is expressly made in any such paragraph) and any determination so
made in good faith shall be conclusive and binding, absent manifest error, on
the holders of shares of Series G Preferred Stock. In making any determination
as to the expected tax treatment of any action, transaction or event referred
to herein, including, without limitation, the determinations provided for in
the last paragraph of Paragraph 7(g) and the last sentence of the fourth
paragraph of paragraph 7(j), the Board of Directors shall be entitled to rely
conclusively on (i) an opinion of counsel rendered by a law firm acceptable to
the Board of Directors, acting in good faith, or (ii) a private letter ruling
from the Internal Revenue Service, to such effect, which opinion of counsel or
private letter ruling may be based upon such assumptions, and be subject to
such qualifications, conditions and limitations, as the Board of Directors
shall in good faith determine to be appropriate under the circumstances. Any
such determination by the Board of Directors shall be based on the expected
United States federal income tax consequences applicable to the transaction in
question, without regard to special tax rules such as those applicable to
dealers in securities, foreign persons, mutual funds, insurance companies,
tax-exempt entities and holders ho do not hold the securities or other property
in question as capital assets, or the personal circumstances of any particular
stockholder.
(l) Notice of Adjustment. Whenever the provisions of this paragraph
7 require an adjustment of the Conversion Rate, the Company shall promptly
compute such adjustment and (i) file with the transfer agent for the Series G
Preferred Stock (or with the books of the Company if there is no transfer
agent) an Officers' Certificate setting forth a description of the event
requiring the adjustment, the new Conversion Rate (including a reasonable
detailed calculation thereof), and the kind and amount of capital stock or
other securities or cash or other assets into which the Series G Preferred
Stock shall be convertible after such event, and (ii) cause a notice containing
a summary of the information set forth in said certificate to be given to the
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<PAGE> 193
holders of Series G Preferred Stock. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be given
under the provisions of paragraph 7(m).
(m) Advance Notice of Certain Transactions. If the Company:
(i) takes any action which would require an adjustment in the
Conversion Rate;
(ii) is a party to a consolidation, merger or binding share
exchange, or transfers all or substantially all of its assets to
another Person, and any stockholders of the Company must approve the
transaction; or
(iii) voluntarily or involuntarily dissolves, liquidates or
winds up,
then, in any such event, the Company shall give the holders of the Series G
Preferred Stock, at least twenty (20) days prior to any record date or other
date set for definitive action if there shall be no record date, a notice
stating the record date for and the anticipated effective date of such action
or event and, if the event is a dividend or distribution or issuance by
reclassification of Redeemable Capital Stock, whether the Company has
determined to adjust the Conversion Rate pursuant to paragraph 7(c), or 7(e),
provided, however, that any notice required hereunder shall in any event be
given no later than the time that notice is given to the holders of Series A
TCI Group Common Stock. Without limiting the obligation of the Company to
provide notice of corporate actions hereunder, the failure to mail the notice
or any defect in it shall not affect the legality or validity or any corporate
action or the vote thereon.
(n) Reservation of Series A TCI Group Common Stock Issuable Upon
Conversion. The Company shall at all times on and after the Issue Date reserve
and keep available out of its authorized but unissued shares of Series A TCI
Group Common Stock, solely for the purpose of effecting the conversion of the
shares of Series G Preferred Stock, such number of its shares of Series A TCI
Group Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series G Preferred Stock; provided that
nothing contained herein shall be construed to preclude the Company from
satisfying its obligations in respect of the conversion of the outstanding
shares of Series G Preferred Stock by delivery of shares of Series A TCI Group
Common Stock which are held in the treasury of the Company. The Company shall
take all such corporate and other actions as from time to time may be necessary
to insure that all shares of Series A TCI Group Common Stock issuable upon
conversion of shares of Series G Preferred Stock at the Conversion Rate in
effect from time to time will, when issued, be duly and validly authorized and
issued, fully paid and nonassessable, and free from all preemptive or similar
rights. in order that the Company may issue shares of Company will in good
faith and as expeditiously as possible endeavor to comply with all applicable
Federal and state securities laws and will in good faith and as expeditiously
as possible endeavor to list such shares to be issued upon conversion on such
national securities exchange
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<PAGE> 194
or national securities association, if any, on which the Series A TCI Group
Common Stock is then listed.
(o) Fractional Shares. No fractional shares of Series A TCI Group
Common Stock or scrip shall be issued upon conversion of the Series G Preferred
Stock. Whether or not fractional shares would otherwise be required to be
issued to a holder of Series G Preferred Stock upon such conversion shall be
determined on the basis of the total number of shares of Series G Preferred
Stock the holder is at the time converting into Series A TCI Group Common Stock
and the total number of shares of Series A TCI Group Common Stock issuable
upon such conversion. In lieu of the issuance of fractional shares of Series A
TCI Group Common Stock, the Company shall pay instead an amount in cash or by
its check equal to the same fraction of the Closing Price of a full share of
Series A TCI Group Common Stock on the last full trading day prior to the
Conversion Date.
(p) Impairment. The Company will not, by amendment of this
Certificate of Designations or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, other than as expressly permitted by
this Certificate of Designations or approved by the requisite vote or written
consent of the holders of Series G Preferred Stock taken or given in accordance
with this Certificate, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this paragraph 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of Series
G Preferred Stock against impairment.
8. Voting.
(a) Voting Rights. The holders of Series G Preferred Stock shall
have no voting rights whatsoever, except as required by law and except for the
voting rights described in this paragraph 8; provided, however, that the number
of authorized shares of Series G Preferred Stock may be increased or decreased
(but not below the number of shares of Series G Preferred Stock then
outstanding) by the affirmative vote of the holders of at least 66 2/3% of the
total voting power of the then outstanding Voting Securities (as defined in
Section A of Article VIII of the Restated Certificate of Incorporation of the
Company (the "Restated Certificate")), voting together as a single class as
provided in Article IX of the Restated Certificate. Without limiting the
generality of the foregoing, no vote or consent of the holders of Series G
Preferred Stock shall be required for (a) the creation of any indebtedness of
any kind of the Company, (b) the creation or designation of any class or series
of Senior Stock, Parity Stock or Junior Stock, or (c) any amendment to the
Restated Certificate that would increase the number of authorized shares of
Preferred Stock or the number of authorized shares of Series G Preferred Stock
or that would decrease the number of authorized shares of Preferred Stock or
the number of authorized shares of Series G Preferred Stock (but not below the
number of shares of Preferred Stock or Series G Preferred Stock, as the case
may be, then outstanding).
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(b) Election of Directors. The holders of the Series G Preferred
Stock shall have the right to vote at any annual or special meeting of
stockholders for the purpose of electing directors. Each share of Series G
Preferred Stock shall have one vote for such purpose, and shall vote as a
single class with all other classes or series of capital stock of the Company
that are entitled to vote in any general election of directors, unless the
instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
9. No Preemptive Rights. The holders of shares of Series G Preferred
Stock shall have no preemptive rights, including preemptive rights with respect
to any shares of capital stock or other securities of the Company convertible
into or carrying rights or options to purchase any such shares.
10. Waiver. Any provision of this Certificate of Designations which,
for the benefit of the holders of Series G Preferred Stock, prohibits, limits
or restricts actions by the Company, or imposes obligations on the Company,
including but not limited to provisions relating to the obligation of the
Company to redeem or convert such shares, may be waived in whole or in part, or
the application of all or any part of such provision in any particular
circumstance or generally may be waived, in each case by the affirmative vote
or with the consent of the holders of at least a majority of the number of
shares of Series G Preferred Stock then outstanding (or such greater percentage
thereof as may be required by applicable law or any applicable rules of any
national securities exchange or national interdealer quotation system), either
in writing or by vote at an annual meeting or a special meeting called for such
purpose at which the holders of Series G Preferred Stock shall vote as a
separate class.
11. Method of Giving Notices. Any notice required or permitted by
the provisions of this Certificate of Designations to be given to the holders
of shares of Series G Preferred Stock shall be deemed duly given if deposited
in the United States mail, first class mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Company or
supplied by him in writing to the Company for the purpose of such notice.
12. Exclusion of Other Rights. Except as may otherwise be required
by law and except for the equitable rights and remedies which may otherwise be
available to holders of Series G Preferred Stock, the shares of Series G
Preferred Stock shall not have any designations, preferences, limitations or
relative rights other than those specifically set forth in this Certificate of
Designations.
13. Headings of Subdivisions. The headings of the various
subdivisions of this Certificate of Designations are for convenience of
reference only and shall not affect the interpretation of any of the provisions
of this Certificate of Designations.
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State of Delaware
OFFICE OF THE SECRETARY OF STATE PAGE 1
_______________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "TELE-COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FIFTH DAY OF JANUARY, A.D. 1996, AT 3:05 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OR DEEDS FOR RECORDING.
[SEAL]
/s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2371729 8100 DATE: 7804670
960024231 01-25-96
<PAGE> 197
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:05 PM 01/25/1996
980024220 - 2371729
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATIONS
-------------------
SETTING FORTH A COPY OF RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED AS
"REDEEMABLE CONVERTIBLE LIBERTY MEDIA GROUP
PREFERRED STOCK, SERIES H"
ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
-------------------
The undersigned, an executive Vice President of TELE-COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), HEREBY CERTIFIES that the Board
of Directors of the Company on December 13, 1995, duly adopted the following
resolutions creating a new series of the Company's Series Preferred Stock:
"BE IT RESOLVED, that pursuant to authority expressly granted by the
provisions of Article IV, Section D of the Restated Certificate of
Incorporation of the Company, the Board of Directors hereby creates and
authorizes the issuance of a new series of the Company's Series Preferred
Stock, par value $.01 per share ("Series Preferred Stock"), and hereby fixes
the powers, designations, dividend rights, voting powers, rights on
liquidation, conversion rights, redemption rights and other preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions of the shares of such series (in
addition to the powers, designations, preferences and relative, participating,
optional or other special rights and the qualifications, limitations or
restrictions thereof set forth in the Restated Certificate of Incorporation
that are applicable to each class and series of the Company's preferred stock,
par value $.01 per share ("Preferred Stock")) as follows:
1. Designation Number of Shares. The designation of the series of
Series Preferred Stock, par value $.01 per share, of the Company created hereby
shall be "Redeemable Convertible Liberty Media Group Common Stock, Series H"
("Series H Preferred Stock"). The designated number of shares of Series H
Preferred Stock shall be 7,259,380. Each share of Series H Preferred Stock
shall be 7,259,380. Each share of Series H Preferred Stock shall have a stated
value of $5.40 ("Stated Value").
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<PAGE> 198
Any shares of Series H Preferred Stock redeemed, converted or
otherwise acquired by the Company shall be retired, shall not be reissued as
shares of Series H Preferred Stock and shall resume the status of authorized
and unissued shares of Series Preferred Stock, without designation as to
series, until such shares are once more designated as part of a particular
series of Series Preferred Stock by the Board of Directors.
2. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 2 shall have, for all purposes of this
Certificate of Designations, the meanings herein specified:
"Anniversary Date" shall mean January 25, 1997.
"Average Market Price" as of any Record Date or Special Record Date
for a dividend payment declared by the Board of Directors shall mean the
average of the daily Closing Prices of the Series A TCI Group Common Stock for
the period of ten (10) consecutive trading days ending on the tenth trading day
prior to such Record date or Special Record Date, appropriately adjusted in
such manner as the Board of Directors in good faith deems appropriate to take
into account any stock dividend on the Series A TCI Group Common Stock, or any
subdivision, combination or reclassification of the Series A TCI Group Common
Stock that occurs, or the Ex-Dividend date for which occurs, during the period
following the first trading day in such ten-trading day period and ending on
the last full trading day immediately preceding the Dividend Payment Date or
other date fixed for the payment of dividends to which such Record Date or
Special Record Date relates.
"Board of Directors" shall mean the Board of Directors of the Company,
and, unless the context indicates otherwise, shall also mean, to the extent
permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Company with respect to such matter.
"Business Day" shall mean any day other than a Saturday Sunday, or a
day on which banking institutions in The City of New York, New York are not
required to be open.
"capital stock" shall mean any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.01 per share, of
the Company.
"Closing Price" of a share of Series A TCI Group Common Stock or of a
share of Series A Liberty Media Group Common Stock, or a share of any other
class or series of capital stock of the Company into which the Series H
Preferred Stock may hereafter become convertible pursuant to paragraph 7, on
any day shall mean the last reported per share sale price (or, if no sale price
is reported, the average of the high and low bid prices) of the Series A TCI
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Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as the case may be, on such day on the Nasdaq Stock Market or as
quoted by the National Quotation Bureau Incorporated or, if the Series A TCI
Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as applicable, is listed on an exchange, on the principal
exchange on which the Series A TCI Group Common Stock, the Series A Liberty
Media Group Common Stock or such capital stock, as the case may be, is listed.
In the event that no such quotation is available for any day, the Board of
Directors shall be entitled to determine the Closing Price on the basis of such
quotations as it in good faith considers appropriate.
"Contingency" shall have the meaning set forth in paragraph 3(a.).
"Conversion Date" of a share of Series H Preferred Stock shall mean
the date on which the requirements for conversion of such share set forth in
paragraph 7(b) of this Certificate of designations have been satisfied by the
holder thereof.
"Conversion Rate" shall mean the kind and amount of securities, assets
or other property that as of any date are issuable or deliverable upon
conversion of a share of Series H Preferred Stock. The Conversion Rate of a
share of Series H Preferred Stock shall initially be .2625 shares of Series A
Liberty Media Group Common Stock for each share of Series H Preferred Stock,
subject to adjustment as set forth in paragraph 7 of this Certificate of
Designations. In the event that pursuant to paragraph 7 of the Series H
Preferred Stock becomes convertible into more than one class or series of
capital stock of the Company, the term Conversion Rate, when used with respect
to any such class or series, shall mean the number or fraction of shares or
other units of such capital stock that as of any date would be issued upon
conversion of a share of Series H Preferred Stock.
"Convertible Securities" shall mean any or all options, warrants,
securities and rights which are convertible into or exercisable or exchangeable
for Series A Liberty Media Group Common Stock at the option of the holder
thereof, or which otherwise entitle the holder thereof to subscribe for,
purchase or otherwise acquire Series A Liberty Media Group Common Stock;
provided, however, that such term shall not include the Series B Liberty Media
Group Common Stock.
"Career Market Price", on the Determination Date for any issuance of
rights, warrants or options or any distribution in respect of which the Current
Market Price is being calculated, shall mean the average of the daily Closing
Prices of the Series A Liberty Media Group Common Stock for the shortest of:
(i) the period of 30 consecutive trading days commencing 45
trading days before such Determination Date.
(ii) the period commencing on the date next succeeding the
first public announcement of the issuance of rights, warrants or
options or the distribution in
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respect of which the Current Market Price is being calculated and
ending on the last full trading day before such Determination Date,
and
iii) the period, if any, commencing on the date next
succeeding the Ex-Dividend Date with respect to the next preceding
issuance of rights, warrants or options or distribution for which an
adjustment is required by the provisions of paragraph 7(c)(iv), 7(d)
or 7(e), and ending on the last full trading day before such
Determination Date.
If the record date for an issuance of rights, warrants or options or a
distribution for which an adjustment is required by the provisions of paragraph
7(c)(iv), 7(d) or 7(e) (the "preceding adjustment event") precedes the record
date for the issuance or distribution in respect of which the Current Market
Price is being calculated and the Ex-Dividend Date for such preceding
adjustment event is on or after the Determination Date for the issuance or
distribution in respect of which the Current Market Price is being calculated,
then the Current Market Price shall be adjusted by deducting therefrom the fair
market value (on the record date for the issuance or distribution in respect of
which the Current Market Price is being calculated), as determined in good
faith by the Board of Directors, of the capital stock, rights, warrants or
options, assets or debt securities issued or distributed in respect of each
share of Series A Liberty Media Group Common Stock in such preceding adjustment
event. Further, in the event that the Ex-Dividend Date (or in the case of a
subdivision, combination or reclassification to which paragraph 7(c)(i), (ii),
(iii) or (v) applies occurs during the period in a manner determined in good
faith by the Board of Directors to reflect the impact of such dividend,
subdivision, combination or reclassification on the Closing prices of the
Series A Liberty Media Group Common Stock during such period.
"Determination Date" for any issuance of rights, warrants or options
or any distribution to which paragraph 7(d) or 7(e) applies shall mean the
earlier of (i) the record date for the determination of stockholders entitled
to receive the rights, warrants or options or the distribution to which such
paragraph applies and (ii) the Ex-Dividend date for such rights, warrants or
options or distribution.
"Dividend Payment Date" shall mean the first day of each February and
August, commencing with August 1, 1997, or the next succeeding Business
Day if any such day is not a Business Day.
"Dividend Period" shall mean the period from the Anniversary Date to
but excluding the first Dividend Payment Date and, thereafter, each semi-annual
period from and including a Dividend Payment Date to but excluding the next
Dividend Payment Date.
"Exchange Preferred Stock" shall have the meaning set forth in
paragraph 7(g).
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<PAGE> 201
"Ex-Dividend Date: shall mean the date on which "ex-dividend" trading
commences for a dividend, an issuance of rights, warrants or options or a
distribution to which any of paragraph 7(c), (d), or (e) applies in the
over-the- counter market or on the principal exchange on which the Series A
Liberty Media Group Common Stock is then quoted or listed.
"Issue Date" shall mean the date on which shares of Series H Preferred
Stock are first issued.
"Junior Stock" shall mean (i) the TCI Group Common Stock, (ii) the
Liberty Media Group Common Stock, (iii) the Class B Preferred Stock, (iv) any
other class or series of capital stock, whether now existing or hereafter
created, of the Company, other than (A) the Series H Preferred Stock, (B) any
class or series of Parity Stock (except to the extent provided under clause (v)
hereof) and (C) any class or series of Senior Stock, and (v) above, a class or
series of Parity Stock shall rank junior to the Series H Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders
of shares of Series H Preferred Stock shall be entitled to dividend payments,
payments on redemption or payments of amounts distributable upon dissolution,
liquidation or winding up of the Company, as the case may be, in preference or
priority to the holders of shares of such class or series of Parity Stock.
"Liberty Media Group Common Stock" shall mean the Series A Liberty
Media Group Common Stock and the Series B Liberty Media Group Common Stock.
"Liquidation Preference" measured per share of the Series H Preferred
Stock as of any date in question (the "Relevant Date") shall mean an amount
equal to the sum of (a) the Stated Value of such share, plus (b) an amount
equal to all dividends accrued on such share which pursuant to paragraph 3(d)
of this Certificate of Designations have been added to and remain a part of the
Liquidation Preference as of the Relevant Date, plus (c) for purposes of
determining the amounts payable pursuant to paragraph 4 and paragraph 5 of this
Certificate of Designations and the definition of Redemption Price, an amount
equal to all unpaid dividends accrued on the sum of the amounts specified in
clauses (a) and (b) above during the period from and including the immediately
preceding Dividend Payment Date (or the Anniversary Date if the Relevant Date
is on or prior to the first Dividend Payment Date) to but excluding the
Relevant Date, and, in the case of clauses (b) and (c) hereof, whether or not
such unpaid dividends have been declared or there are any unrestricted funds of
the Company legally available for the payment of dividends, In connection with
the determination of the Liquidation Preference of a share of Series H
Preferred Stock upon redemption or upon liquidation, dissolution or winding up
of the company, the Relevant Date shall be the applicable date of redemption or
the date of distribution of amounts payable to stockholders in connection with
any such liquidation, dissolution or winding up.
"Mirror Preferred Stock" shall have the meaning set forth in paragraph
7(g).
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"1933 Act" shall mean the Securities act of 1933, as amended from time
to time, or any successor statute, and the rules and regulations promulgated
thereunder.
"Officers' Certificate" shall mean a certificate signed by the
chairman of the Board, President or any Senior Vice President of the Company
and by the Treasurer or any Assistant Treasurer of the Company.
"Parity Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created of the Company ranking on a parity
basis with the Series H Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation. Capital stock of any class or series,
whether now existing or hereafter created, shall rank on a parity as to
dividend rights, rights of redemption or rights on liquidation with the Series
H Preferred Stock, whether or not the dividend rates, dividend payment dates,
redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different form those of the Series H
Preferred Stock, if the holders of shares of such class or series shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Company, as
the case may be, in proportion to their respective accumulated and accrued and
unpaid dividends, redemption prices or liquidation prices, respectively,
without preference or priority, one over the other, as between the holders of
shares of such class or series and the holders of Series H Preferred Stock. No
class or series of capital stock that ranks junior to the Series H Preferred
Stock as to rights on liquidation shall rank or be deemed to rank on a parity
basis with the Series H Preferred Stock as to dividend rights or rights of
redemption, unless the instrument creating or evidencing such class or series
of capital stock otherwise expressly so provides. The Series C Preferred
Stock, the Series D Preferred Stock, the Series F Preferred Stock and the
Series G Preferred Stock rank on a parity basis with the Series H Preferred
Stock as to dividend rights, rights of redemption and rights on liquidation and
constitute "Parity Stock" for purposes of this Certificate of Designations.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
"Record Date" for the dividends payable on any Dividend Payment Date
shall mean the 15th day of the month preceding the month during which such
Dividend Payment Date shall occur as and if designated by the Board of
Directors.
"Redeemable Capital Stock" shall have the meaning set forth in
paragraph 7(c).
"Redemption Date" as to any share of Series H Preferred Stock shall
mean the date fixed for redemption of such share pursuant to paragraph 5(a) or
5(b) of this Certificate of Designation, provided that no such date will be a
Redemption Date unless the applicable Redemption Price is actually paid in full
on such date or the consideration sufficient for the
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payment thereof, and for no other purpose, has been set apart or deposited in
trust as contemplated by paragraph 5(d) of this Certificate of Designations.
"Redemption Price", as to any share of Series H Preferred Stock that
is to be redeemed on any Redemption Date, shall mean the Liquidation Preference
thereof on such Redemption Date.
"Redemption Securities" shall have the meaning set forth in paragraph
7(g).
"Senior Stock" shall mean any class or series of capital stock of the
Company hereafter created ranking prior the Series H Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation. Capital stock
of any class or series shall rank prior to the Series H Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders
of shares of such class or series shall be entitled to dividend payments,
payments of the Company, as the case may be, in preference or priority to the
holders of shares of Series H Preferred Stock. No class or series of capital
stock that ranks on a parity basis with or junior to the Series H Preferred
Stock as to rights on liquidation shall rank or be deemed to rank prior to the
Series H Preferred Stock as to dividend rights or rights of redemption,
notwithstanding that the dividend rate, dividend payment dates, sinking fund
provisions, if any, or mandatory redemption provisions thereof are different
from those of the Series H Preferred Stock, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly so
provides.
"Series A Liberty Media Group Common Stock" shall mean the Tele-
Communications, Inc. Series A Liberty Media Group Common Stock, par value
$1.00 per share, which term shall include, where appropriate, in the case of
any reclassification, recapitalization or other change in the Series A Liberty
Media Group Common Stock, or in the case of a consolidation or merger of the
Company with or into another Person affecting the Series A Liberty Media Group
Common Stock, such capital stock to which a holder of Series A Liberty Media
Group Common Stock shall be entitled upon the occurrence of such event.
"Series A TCI Group Common Stock" shall mean the Tele-Communications,
Inc. Series A TCI Group Common Stock, par value $1.00 per share, which term
shall include, where appropriate, in the case of any reclassification,
recapitalization or other change in the Series A TCI Group Common Stock, or in
the case of a consolidation or merger of the Company with or into another
Person affecting the Series A TCI Group Common Stock, such capital stock to
which a holder of Series A TCI Group Common Stock shall be entitled upon the
occurrence of such event.
"Series B Liberty Media Group Common Stock" shall mean the Tele-
Communications, Inc. Series B Liberty Media Group Common Stock par value
$1.00 per share, which term shall include, where appropriate, in the case of
any reclassification, recapitalization or other change in the Series B Liberty
Media Group Common Stock, or in the case of a
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<PAGE> 204
consolidation or merger of the Company with or into another Person affecting
the Series B Liberty Media Group Common Stock, such shall be entitled upon the
occurrence of such event.
"Series B TCI Group Common Stock" shall mean the Tele-Communications,
Inc. Series B TCI Group Common Stock, par value $1.00 per share, which term
shall include, where appropriate, in the case of any reclassification,
recapitalization or other change in the Series B TCI Group Common Stock, or in
the case of a consolidation or merger of the Company with or into another
Person affecting the Series B TCI Group Common Stock, such capital stock to
which a holder of Series B TCI Group Common Stock shall be entitled upon the
occurrence of such event.
"Series C Preferred Stock" shall mean the Convertible Preferred Stock,
Series C, par value $.01 per share, of the Company.
"Series D Preferred Stock" shall mean the Convertible Preferred Stock,
Series D, par value $.01 per share, of the Company.
"Series F Preferred Stock" shall mean the Convertible Redeemable
Participating Preferred Stock, Series F, par value $.01 per share, of the
Company.
"Series G Preferred Stock" shall have the meaning set forth in
paragraph 1 of this Certificate of Designations.
"Series H Preferred Stock" shall mean the Redeemable Convertible
Liberty Media Group Preferred Stock, Series H, par value $.01 per share, of the
Company.
"Special record Date" hall have the meaning set forth in paragraph
3(d) of this Certificate of Designations.
"Shared Value" of a share of Series H Preferred Stock shall have the
meaning set forth in paragraph 1 of this Certificate of Designations.
"Subsidiary" shall mean (i) a corporation (other than the Company) a
majority of the capital stock of which, having voting power under ordinary
circumstances to elect directors, is at the time, directly or indirectly, owned
by the Company and/or one or more Subsidiaries of the Company and (ii) any
other Person (other than a corporation) in which the Company and/or one or more
Subsidiaries of the Company, directly or indirectly, has (x) a majority
ownership interest and (y) the power to elect or direct the election of a
majority of the members of the governing body of such entity.
"Target Price" shall initially mean $27 and shall be appropriately
adjusted to take into account any stock dividends on the Series A TCI Group
Common Stock or the Series A Liberty Media Group Common Stock, or any stock
splits, reclassifications or combinations of
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<PAGE> 205
the Series A TCI Group Common Stock or the Series A Liberty Media Group Common
Stock during the period following the Issue Date and ending on the Anniversary
Date or on such earlier date, if any, as of which the Contingency is met.
"TCI Group Common Stock" shall mean the Series A TCI Group
Common Stock and the Series B TCI Group Common Stock.
3. Dividends
(a) The Contingency. If the sum of (i) the Closing Price of the
Series A TCI Group Common Stock, plus (ii) one-fourth of the Closing Price of
the Series A Liberty Media Group Common Stock equals or exceeds the Target
Price for any ten (10) consecutive trading days during the period of sixty-five
(65) consecutive trading days ending on and including the last trading day
immediately preceding the Anniversary Date (the "Contingency"), no dividends
will accrue or be payable with respect to the Series H Preferred Stock.
(b) Payment. In the event that the Contingency is not met, and
only in such event, the holders of Series H Preferred Stock shall, subject to
the prior preferences and other rights of any Senior Stock and to the
provisions of paragraph 6 hereof, be entitled to receive, when and as declared
by the Board of Directors out of unrestricted funds legally available therefor,
cumulative dividends, in preference to dividends on any Junior Stock, which
shall accrue as provided herein. Except as otherwise provided in paragraph
3(d) of this Certificate of Designations, dividends on each share of Series H
Preferred Stock will, if the Contingency is not met, accrue on a daily basis at
the rate of 4% per annum of the Liquidation Preference of such share from and
including the Anniversary Date to but excluding the date on which the
Liquidation Preference or Redemption Price of such share is made available
pursuant to paragraph 4 or 5, respectively, of this Certificate of Designations
or the date of conversion of such share pursuant to paragraph 7 hereof, as
applicable. Dividends shall accrue as provided herein whether or not such
dividends have been declared and whether or not there are any unrestricted
funds of the Company legally available for the payment of dividends. Accrued
dividends on the series H Preferred Stock shall be payable semiannually on each
Dividend Payment Date, commencing on August 1, 1997, to the holders of record
of the Series H Preferred Stock as of the close of business on the applicable
Record Date. For purposes of determining the amount of dividends "accrued" (i)
as of the first Dividend Payment Date and as of any date that is not a Dividend
Payment Date, such amount shall be calculated on the basis of the rate per
annum specified above in this paragraph 3(b) for the actual number of days
elapsed from and including the Anniversary Date (in the case of the first
Dividend Payment Date and any date prior to the first Dividend Payment Date) or
the last preceding Dividend Payment Date (in the case of any other date) to but
excluding the date as of which such determination is to be made, based on a
365-day year, and (ii) as of any Dividend Payment Date after the first Dividend
payment Date, such amount shall be calculated on the basis of such rate per
annum based on a 360-day year of twelve 30-day months. For so long as the
Liquidation Preference of a share of Series H Preferred Stock is equal to the
Stated Value per share, the amount of the dividend payable per share on the
Dividend Payment Date for each full semi-annual Dividend Period shall be $.108.
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<PAGE> 206
(c) Method of Payment. All dividends payable with respect to the
shares of Series H Preferred Stock may be declared and paid, in the sole
discretion of the Board of Directors, in cash, through the issuance of shares
of Series A TCI Group Common Stock or in any combination of the foregoing. If
any dividend payment declared by the Board of Directors with respect to the
shares of Series H Preferred Stock is to be paid in whole or in part through
the issuance of shares of Series A TCI Group Common Stock, the amount of such
dividend payment to be paid per share of Series H Preferred Stock in shares of
Series A TCI Group Common Stock (the "Stock Dividend Amount") shall be
satisfied and paid by the delivery to the holders of record of such shares of
Series H Preferred Stock on the Record Date or Special Record Date, as the case
may be, for such dividend payment, of a number of shares of Series A TCI Group
Common Stock determined by dividing the Stock Dividend Amount by the Average
Market Price of a share of Series A TCI Group Common Stock as of such Record
Date or Special Record Date. The Company shall not be required to issue any
fractional share of Series A TCI Group Common Stock to which any holder of
Series H Preferred Stock may become entitled pursuant to this paragraph 3(c).
The Board of Directors may elect to settle any final fraction of a share of
Series A TCI Group Common Stock which a holder of one or more shares of Series
H Preferred Stock would otherwise be entitled to receive pursuant to this
paragraph 3(c) by having the Company pay to such holder, in lieu of issuing
such fractional share, cash in an amount (rounded upward to the nearest whole
cent) equal to the same fraction of the Average Market Price of a share of
Series A TCI Group Common Stock as of the Record Date or Special Record Date,
as the case may be, for the dividend payment with respect to which such shares
of Series A TCI Group Common Stock who would otherwise be entitled to receive a
fractional share of Series A TCI Group Common Stock on the Dividend payment
Date or other date fixed for the payment of such dividend.
All dividends paid with respect to the shares of Series H Preferred
Stock pursuant to this paragraph 3 shall be paid pro rata to all the holders of
shares of Series H Preferred Stock outstanding on the applicable Record Date or
Special Record Date, as the case may be.
(d) Unpaid Dividends. If an any Dividend Payment Date the Company,
pursuant to applicable law or otherwise, shall be prohibited or restricted from
paying the full dividends of which holders of Series H Preferred Stock, and any
Parity Stock ranking on a parity basis with the Series H Preferred Stock with
respect to the right to receive dividend payments, shall be entitled, the
amount available for such payment pursuant to applicable law and which is not
otherwise restricted (if any) shall be distributed among the holders of Series H
Preferred Stock and any such Parity Stock ratably in proportion to the full
amounts to which they would otherwise be entitled. On each Dividend Payment
Date, all dividends that have accrued ton each share of Series H Preferred
Stock during the Dividend Period ending on such Dividend Payment Date shall, to
the extent not paid on such Dividend Payment Date for any reason (whether or
not such unpaid dividends have been declared or there are any unrestricted
funds of the Company legally available for the payment of dividends), be added
cumulatively to the Liquidation Preference of such share and will remain a part
thereof until such dividends are paid. The rate per annum at which dividends
accrue in respect of that portion of the Liquidation Preference of
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a share of Series H Preferred Stock that consists of accrued unpaid dividends
that have been added to the Liquidation Preference of such share on a Dividend
Payment Date pursuant to this paragraph 3(d) and remain unpaid on the next
succeeding Dividend Payment Date shall increase to 8.625% per annum from and
after such next succeeding Dividend Payment Date to and including the date on
which the Liquidation Preference or Redemption Price of such share is made
available pursuant to paragraph 4 or 5, respectively, of this Certificate of
Designations or the date of conversion of such share pursuant to paragraph 7
hereof, as applicable, unless the portion of the Liquidation Preference that
consists of such accrued unpaid dividends is earlier declared and paid or an
amount sufficient to pay the same in full is irrevocably set apart in trust for
such purpose. That portion of the Liquidation Preference of a share of Series
H Preferred Stock that consists of accrued unpaid dividends, together with all
dividends accrued in respect thereof, may be declared an paid at any time
(subject to the rights of any Senior Stock and to the concurrent satisfaction
of any dividend arrearages that existing with respect to any Parity Stock that
ranks on a parity basis with the Series H Preferred Stock as to the payment of
dividends), without reference to any regular Dividend Payment Date, to holders
of record as of the close of business, on such date, not more than 45 days nor
less than 10 days prior thereto, to the holders of record of the shares of
Series H Preferred Stock.
(e) Credit. Any dividend payment made on the shares of Series H
Preferred Stock shall first be credited against the earliest accrued but unpaid
dividend due with respect to the shares of Series H Preferred Stock.
(f) Authorized Shares. All shares of Series A TCI Group Common Stock
issued in payment of any dividend on the Series H Preferred Stock shall, when
issued, be duly and validly authorized, fully paid, nonassessable and free from
all preemptive or similar rights; the delivery of such shares shall be made in
compliance with all applicable Federal and state securities losses, and such
shares shall have been listed for trading on such national securities exchange
or national securities association, if any, on which the Series A TCI Group
Common Stock is then listed.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which any
Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of
Series H Preferred Stock shall be entitled to receive from the assets of the
company available for distribution to stockholders before any payment or
distribution shall be made to the holders of any Junior Stock, an amount in
cash (or, at the election of the Company, property at its fair market value, as
determined by the Board of Directors in good faith) per share, equal to the
Liquidation Preference of a share of Series H Preferred Stock as of the date of
payment or distribution, which payment or distribution shall be made pari
passu with, and if the Company has elected to pay in property, in the same form
of property as, any such payment or distribution made to the holders of any
Parity Stock ranking on a parity basis with the Series H Preferred Stock with
respect to distributions upon liquidation, dissolution or winding
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<PAGE> 208
up of the Company. The holders of Series H Preferred Stock shall be entitled
to no other or further distribution of or participation in any remaining assets
of the Company after receiving the Liquidation Preference per share. If, upon
distribution of the Company's assets in liquidation, dissolution or winding up,
the assets of the company to be distributed among the holders of the Series H
Preferred Stock and to all holders of any Parity Stock ranking on a parity
basis with the Series H Preferred Stock with respect to distributions upon
liquidation, dissolution or winding up shall be insufficient to permit payment
in full to such holders of the respective preferential amounts to which they
are entitled, then the entire assets of the Company to be distributed to holders
of the Series H Preferred Stock and such Parity Stock shall be distributed pro
rata to such holders based upon the aggregate of the full preferential amounts
to which the shares of Series H Preferred Stock and such Parity Stock would
otherwise respectively be entitled. Neither the consolidation or merger of the
Company with or into any other corporation or corporations nor the sale,
transfer, or lease of all or substantially all of the assets of the Company
shall itself be deemed a liquidation, dissolution or winding up of the Company
within the meaning of this paragraph 4. Notice of the liquidation, dissolution
or winding up of the Company shall be given, not less than twenty (20) days
prior to the date on which such liquidation, dissolution or winding up is
expected to take place or become effective to the holders of record of the
shares of Series H Preferred Stock.
5. Redemption.
(a) Optional Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designation, the
shares of Series H Preferred Stock may be redeemed, at the option of the
Company by action of the Board of Directors, in whole or from time to time in
part, on any Business Day occurring on or after February 1, 2001, at the
Redemption Price on the Redemption Date. If fewer than all of the outstanding
shares of Series H Preferred Stock are to be redeemed on any Redemption Date,
the shares of Series H Preferred Stock to be redeemed shall be chosen by the
Company pro rata (as nearly as may be practicable) among all holders of Series
H Preferred Stock. The Company shall not be required to register a transfer of
(i) any shares of Series H Preferred stock for a period of 15 days next
preceding any selection of shares of Series H Preferred Stock to be redeemed or
(ii) any shares of Series H Preferred Stock selected or called for redemption.
(b) Mandatory Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designations, the
Company shall redeem, out of funds legally available therefor, on February 1,
2016 (or, if such day is not a Business Day, on the first Business Day
thereafter) all shares of Series H Preferred Stock remaining outstanding at the
Redemption Price on the Redemption Date. If the funds of the Company legally
available for redemption of shares of the Series H Preferred Stock and any
Parity Stock then required to be redeemed are insufficient to redeem the total
number of such shares remaining outstanding, those funds which are legally
available shall, subject to the rights of any Senior Stock and the provisions
of paragraph 6, to be used to redeem the maximum possible number of shares of
Series H Preferred Stock and each such other class or series of Parity Stock.
Subject to the rights of any Senior Stock and the provisions of paragraph 6
hereof, at any time and from time to time
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<PAGE> 209
thereafter when additional funds of the Company are legally available for such
purpose, such funds shall immediately be used to redeem the shares of Series H
Preferred Stock and of each such other class or series of Parity Stock which
were required to be redeemed that the Company failed to redeem until the
balance of such shares have been redeemed. The selection of shares to be
redeemed pursuant to the two immediately preceding sentences shall be made, as
nearly as practicable, on a pro rata basis as among the different classes or
series and as among the holders of shares of a particular class or series.
(c) Notice of Redemption. Notice of redemption shall be given by or
on behalf other the Company at least sixty (60) days prior to the Redemption
Date, in the case of a redemption pursuant to paragraph 5(a) and not more than
sixty (60) days nor less than thirty (30) days prior to the Redemption Date, in
the case of the redemption pursuant to paragraph 5(b), to the holders of record
of the shares of Series H Preferred Stock to be redeemed; but no defect in such
notice or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any shares of Series H Preferred Stock. In addition to
any information required by law or by the applicable rules of an national
securities exchange or national interdealer quotation system on which the
Series H Preferred Stock may be listed or admitted to trading or quoted, such
notice shall set forth the Redemption Price, the Redemption Date, the number of
shares to be redeemed and the place at which the shares called for redemption
will, upon presentation and surrender of the stock certificates evidencing such
shares, be redeemed, and if the Company has elected to deposit the Redemption
Price with a Redemption Agent in accordance with paragraph 5(d), shall state
the name and address of the Redemption Agent and the date on which such deposit
was or will be made. Such notice shall also set forth the then current
Conversion Rate for the shares of Series H Preferred Stock and the place or
places to which a holder desiring to convert shares of Series H Preferred Stock
should deliver the certificate(s) evidencing such shares, together with such
other documents and instruments as are or may be required pursuant to paragraph
7 of this Certificate of Designations. In the event that fewer than the total
number of shares of Series H preferred Stock represented by a certificate are
redeemed, a new certificate representing the number of unredeemed shares will
be issued to the holder thereof without cost to such holder. If the shares of
Series H Preferred Stock evidenced by a certificate selected for partial
redemption pursuant to paragraph 5(a) of this Certificate of Designations are
thereafter converted in part pursuant to paragraph 7 hereof, the shares so
converted (as far as may be) will be deemed to be the shares selected for
redemption.
(d) Deposit of Redemption Price. If notice of any redemption by the
Company pursuant to this paragraph 5 shall have been given as provided in
paragraph 5(c) of this Certificate of Designations and if on or before the
Redemption Date specified in such notice an amount in cash sufficient to redeem
in full on the Redemption Date at the Redemption Price all shares of Series H
Preferred Stock call for redemption or required to be redeemed shall have been
set apart so as to be available for such purpose and only for such purpose,
then effective as of the close of business on the Redemption Date, the shares
of Series H Preferred Stock called for redemption, notwithstanding that any
certificate therefor shall not have been surrendered for cancellation, shall no
longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all remaining rights with respect
to such shares shall
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forthwith cease and terminate, except the right of the holders thereof to
receive the Redemption Price of such shares, without interest, upon the
surrender of certificates representing the same.
At its election, the Company on or prior to the Redemption Date (but
no more than ninety (90) days prior to the Redemption Date) may deposit
immediately available funds in an amount equal to the aggregate Redemption
Price of the shares of Series H Preferred Stock called for redemption in trust
for the holders thereof with any bank of trust company organized under the laws
of the United States of America or any state thereof having capital, undivided
profits and surplus aggregating at least $50 million (the "Redemption Agent"),
with irrevocable instructions and authority to the Redemption Agent on behalf
and at the expense of the Company, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the Redemption Date or prior thereto, the Redemption Price of the
shares of Series H Preferred Stock to be redeemed to their respective holders
upon the surrender of the certificates therefor. A deposit made in compliance
with the immediately receding sentence shall be deemed to constitute full
payment for the shares of Series H Preferred Stock to be redeemed and from and
after the later of the close of business on the date of such deposit (although
prior to the Redemption Date) or the date notice of redemption is mailed, the
shares of Series H Preferred Stock to be redeemed shall no longer be deemed
outstanding and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect to such shares except (x)
the right of the holders thereof to receive the Redemption Price of such shares
(calculated through the Redemption date), without interest, upon surrender of
the certificates therefor and (y) the right to convert such shares in
accordance with paragraph 7 prior to the close of business on the Business Day
immediately preceding the Redemption Date. Any funds so deposited which shall
not be required for the payment of the Redemption Price of any shares of Series
H Preferred Stock to be redeemed because of the conversion of such shares shall
after such conversion be repaid to the Company by the Redemption Agent. Any
interest accrued on the funds so deposited shall be paid to the Company from
time to time. Any funds so deposited with the Redemption Agent which shall
remain unclaimed by the holders of such shares of Series H Preferred Stock at
the end of one year after the Redemption Date shall be returned by the
Redemption Agent to the Company, after which repayment the holders of such
shares of Series H Preferred Stock called for redemption shall look only to the
Company for the payment thereof, without interest, unless an applicable escheat
or abandoned property law otherwise requires.
6. Limitations on Dividends and Redemptions. If at any time the
Company shall have failed to pay, or declare and set aside the consideration
sufficient to pay, full cumulative dividends for all prior dividend periods on
any Parity Stock which by the terms of the instrument creating or evidencing
such Parity Stock which by the terms of the instrument creating or evidencing
such Parity Stock is entitled to the payment of such cumulative dividends prior
to the redemption, exchange, purchase or other acquisition of the Series H
Preferred Stock, and until full cumulative dividends on such Parity Stock for
all prior dividend periods are paid, or declared and the consideration
sufficient to pay the same in full is set aside so as to be available for such
purpose and no other purpose, neither the Company nor any Subsidiary thereof
shall redeem, exchange, purchase or otherwise acquire any shares of Series
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H Preferred Stock, Parity Stock or Junior Stock, or set aside any money or
assets for any such purpose pursuant to paragraph 5(d) hereof, any sinking fund
or otherwise, unless all then outstanding shares of Series H Preferred Stock,
of such Parity Stock and of any other class or series of Parity Stock that by
the terms of the instrument creating or evidencing such Parity Stock is
required to be redeemed under such circumstances are redeemed pursuant to the
terms hereof and thereof.
If at any time the Company shall have failed to pay, or declare and
set aside the consideration sufficient to pay, full cumulative dividends on the
Series H Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative
dividends on the Series H Preferred Stock for all Dividend Periods ending on or
before the immediately preceding Dividend Payment Date, and until full
cumulative dividends on the Series H Preferred Stock for all dividend Periods
ending before the immediately preceding Dividend Payment Date are paid, or
declared and the consideration sufficient to pay the same in full is set aside
so as to be available for such purpose and no other purpose, (i) neither the
Company nor any Subsidiary thereof shall redeem, exchange, purchase or
otherwise acquire any shares of Series H Preferred Stock, Parity Stock, or
Junior Stock, or set aside any money or assets for any such purpose pursuant to
paragraph 5(d) hereof, any sinking fund or otherwise, unless all then
outstanding shares of Series H Preferred Stock and of any other class or series
of Parity Stock that by the terms of the instrument creating or evidencing such
Parity Stock is required to be redeemed under such circumstances are redeemed
or exchanged pursuant to the terms hereof and thereof, and (ii) the Company
shall not declare or pay any dividend on or make any distribution with respect
to any Junior Stock or Parity Stock or set aside any money or assets for any
such purpose, except that the Company may declare and pay a dividend on any
Parity Stock ranking on a parity basis with the Series H Preferred Stock with
respect to the right to receive dividend payments, contemporaneously with the
declaration and payment of a dividend on the Series H Preferred Stock, provided
that such dividends are declared and paid pro rata so that the amount of
dividends declared and paid per share of Series H Preferred Stock and such
Parity Stock shall in all cases bear to each other the same ratio that
accumulated and accrued and unpaid dividends per share on the Series H
Preferred Stock and such Parity Stock bear to each other.
If the Company shall fail to redeem on any date fixed for redemption
pursuant to paragraph 5(a) or 5(b) of this Certificate of Designations any
shares of Series H Preferred Stock called for redemption or required to be
redeemed on such date, and until such shares are redeemed in full, the Company
shall not (x) redeem any Junior Stock or, except as provided in paragraph 5(b)
hereof, Parity Stock or (y) declare or pay any dividend on or make any
distribution with respect to any Junior Stock or, except as provided in the
second paragraph of this paragraph 6, Parity Stock, or set aside any money or
assets for any such purpose, and neither the Company nor any Subsidiary thereof
shall purchase or otherwise acquire any Series H Preferred Stock, Parity Stock
or Junior Stock, or set aside any money or assets for any such purpose.
Nothing contained in the first or third paragraph of this paragraph 6
shall prevent (i) the payment of dividends on any Junior Stock solely in shares
of Junior Stock or the redemption, purchase or other acquisition of Junior
Stock solely in exchange for (together with
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a cash adjustment for fractional shares, if any), or (but only in the case of
the first paragraph of this paragraph 6) through the application of the
proceeds from the sale of shares of Junior Stock; (ii) the payment of dividends
on any Parity Stock solely in shares of Parity Stock and/or Junior Stock or the
redemption, exchange, purchase or other acquisition of Series H Preferred Stock
or Parity Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first paragraph of
this paragraph 6) through the application of the proceeds from the sale of,
shares of Parity Stock and/or Junior Stock; or (iii) the purchase or
acquisition of shares of Series H Preferred Stock pursuant to a purchase or
exchange offer made to all holders of outstanding shares of Series H Preferred
Stock, provided that the terms of the purchase or exchange offer shall be
identical for all shares of Series H Preferred Stock and all accrued dividends
on such shares shall have been paid or shall have been declared and irrevocably
set apart in trust for the benefit of the holders of shares of Series H
Preferred Stock and for no other purpose.
The provisions of the first paragraph of this paragraph 6 are for the
sole benefit of the holders of Series H Preferred Stock and Parity Stock having
the terns described therein and accordingly, at any time when there are no
shares of any such class or series of Parity Stock outstanding or if the
holders of each such class or series of Parity Stock have, by such vote or
consent of the holders thereof as may be provided for in the instrument
creating or evidencing such class or series, waived in whole or in part the
benefit of such provisions (either generally or in the specific instance), then
the provisions of the first paragraph of this paragraph 6 shall not (to the
extent waived, in the case of any partial waiver) restrict the redemption,
exchange, purchase or other acquisition of any shares of Series H Preferred
Stock, Parity Stock or Junior Stock. All other provisions of this paragraph 6
are for the sole benefit of the holders of Series H Preferred Stock and
accordingly, if the holders of shares of Series H Preferred Stock shall have
waived as provided in paragraph 10 of this Certificate of Designations) in
whole or in part the benefit of the applicable provision, either generally or
in the specific instance, such provision shall not (to the extent of such
waiver, in the case of a partial waiver) restrict the redemption, exchange,
purchase or other acquisition of, or declaration, payment or making of any
dividends or distributions on, the Series H Preferred Stock, any Parity Stock
or any Junior Stock.
7. Conversion of Series H Preferred Stock.
(a) Right to Convert. Unless previously redeemed as provided in
paragraph 5 of this Certificate of Designations, shares of Series H Preferred
Stock may be converted at the option of the holder thereof, in the manner and
upon the terms and conditions set forth in this paragraph 7, into fully paid
and nonassessable whole shares of Series A Liberty Media Group Common Stock at
the Conversion Rate in effect on the Conversion Date, at any time prior to the
close of business on the Business Day immediately preceding the Redemption Date
for the redemption of shares of Series H Preferred Stock pursuant to paragraph
5(a) or 5(b) of this Certificate of Designations.
(b) Mechanics of Conversion. In order to convert shares of Series H
Preferred Stock, the holder thereof shall surrender the certificate or
certificates representing the shares of
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Series H Preferred Stock to be converted at the office of the Company or the
office of any transfer agent for the Series H Preferred Stock, which
certificate or certificates shall be duly endorsed to the Company in blank (or
accompanied by duly executed instruments of transfer to the Company in blank)
with signatures guaranteed (such endorsements or instruments of transfer to be
in form satisfactory to the Company), together with a written notice to the
Company at said office of the election to convert the same, specifying the
number of shares of Series H Preferred Stock to be converted and the name or
names (with addresses) in which the certificate or certificates for shares of
Series A Liberty Media Group Common Stock are to be issued. If any transfer
certificates for shares of Series A Liberty Media Group Common Stock are to be
issued. If any transfer is involved in the issuance or delivery of any
certificate or certificates for shares of Series A Liberty Media Group Common
Stock in a name other than that of the registered holder of the shares of
Series H Preferred Stock surrendered for conversion, such holder shall also
deliver to the Company a sum sufficient to pay all taxes, if any, payable is
respect of such transfer or evidence satisfactory to the company that such
taxes have been paid. Except as provided in the immediately preceding
sentence, the Company shall pay any issue, stamp or other similar tax in
respect of such issuance or delivery.
The Company shall, as soon as practicable after the Conversion Date,
deliver to the holder of the shares of Series H Preferred Stock so surrendered
for conversion, or to such holder's nominee(s) or, subject to compliance with
applicable law, transferee(s), a certificate or certificates for the number of
whole shares of Series A Liberty Media Group Common Stock to which such holder
shall be entitled, together with cash or its check in lieu of any fractional
share as provided in paragraph 7(o). If the shares of Series H Preferred Stock
represented by a certificate surrendered for conversion are converted only in
part, the Company will also issue and deliver to the holder, or to such
holder's nominee(s) or, subject to compliance with applicable law,
transferee(s), without charge therefor, a new certificate or certificates
representing in the aggregate the unconverted shares of Series H Preferred
Stock.
The Person in whose name the certificate for shares of Series A
Liberty Media Group Common Stock is issued upon such conversion shall be
treated for all purposes as the stockholder of record of such shares of Series
A Liberty Media Group Common Stock as of the close of business on the
Conversion Date; provided, however, that no surrender of Series H Preferred
Stock on any date when the stock transfer books of the Company are closed for
any purpose shall be effective to constitute the Person or Persons entitled to
receive the shares of Series A Liberty Media Group Common Stock on such date,
but such surrender shall be effective (assuming all other requirements of this
paragraph 7 have been satisfied) to constitute such Person or Persons as the
record holders of such shares of Series A Liberty Media Group Common Stock for
all purposes as of the opening of business on the next succeeding day on which
such stock transfer books are open, and such conversion shall be at the
Conversion Rate in effect on the date that such shares of Series H Preferred
Stock were surrendered for conversion (and such other requirements satisfied)
as if the stock transfer books of the Company had not been closed on such date.
upon conversion of shares of Series H Preferred stock, the rights of the holder
of the shares so converted as a holder thereof, will cease.
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Notwithstanding the last sentence of the immediately preceding
paragraph, if the Board of Directors declares any dividend on the Series H
Preferred Stock pursuant to paragraph 3 of this Certificate of Designations,
and the Conversion Date for any shares of Series H Preferred Stock occurs on or
after the Record Date or Special Record Date, as the case may be, and before
the Dividend payment Date for such dividend (or, in the case of a dividend
declared pursuant to Section 3(d), then the holder of such shares of Series H
Preferred Stock on such Record Date shall be entitled to receive such dividend
on such Dividend Payment Date (or such other date, as the case may be), as if
such Conversion Date had not occurred.
(c) Adjustments for Change in Capital Stock. If after the Issue
Date, the Company:
(i) pays a dividend or makes a distribution on the Series A
Liberty Media Group Common Stock in shares of Series A Liberty Media
Group Common Stock;
(ii) subdivides the outstanding shares of Series A Liberty
Media Group Common Stock into a greater number of shares;
(iii) combines the outstanding shares of Series A Liberty
Media Group Common Stock into a smaller number of shares;
(iv) pays a dividend or makes a distribution on the Series A
Liberty Media Group Common Stock in shares of its capital stock (other
than Section A Liberty Media Group Common Stock or rights, warrants or
options for its capital stock), or
(v) issues by reclassification of its shares of Series A
Liberty Media Group Common Stock (other than a reclassification by way
of merger or binding share exchange that is subject to paragraph 7(f))
any shares of its capital stock (other than rights, warrants or
options for its capital stock).
then, subject to the following sentence and to paragraph 7(j), the conversion
privilege and the Conversion Rate in effect immediately prior to the opening of
business on the record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification shall be adjusted so
that the holder of any shares of Series H Preferred Stock thereafter converted
may receive the kind and number of shares of capital stock of the Company which
such holder would have owned immediately following such event if such holder
had converted his shares of Series H Preferred Stock immediately prior to the
record date for, or effective date of, as the case may be, such event.
Notwithstanding the foregoing, if an event listed in clause (iv) of (v) above
would result in the shares of Series H Preferred Stock being convertible into
shares or units (or a fraction thereof) of more than one class or series of
capital stock of the Company and any such class or series of capital stock
(other than Series A
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Liberty Media Group Stock) provides by its terms a right in favor the Company
to call, redeem, exchange or otherwise acquire all of the outstanding shares or
units of such class or series (such class or series of capital stock being
herein referred to as "Redeemable Capital Stock") then, at the option of the
Company, the conversion privilege and Conversion Rate of the Series H Preferred
Stock shall not be adjusted pursuant to this paragraph 7(c) and in lieu
thereof, but subject to paragraph (j), the adjustments to the Conversion Rate
contemplated by paragraph 7(e) shall be made with the same effect as if the
dividend or distribution of Redeemable Capital Stock or the issuance of the
additional class or series of Redeemable Capital stock by reclassification had
been a distribution of assets of the Company.
The adjustment contemplated by this paragraph 7(c) shall be made
successively whenever any event listed above shall occur. For a dividend or
distribution, the adjustment shall become effective immediately after the
record date for the dividend or distribution. For a subdivision, combination
or reclassification, the adjustment shall become effective immediately after
the effective date of the subdivision, combination or reclassification.
If after an adjustment a holder of Series H Preferred Stock would be
entitled to receive upon conversion thereof shares of two or more classes or
series of capital stock of the Company, the Conversion Rate shall thereafter be
subject to adjustment upon the occurrence of an action taken with respect to
any such class or series of capital stock as is contemplated by this paragraph
7 with respect to the Series A Liberty Media Group Common Stock, on terms
comparable to those applicable to the Series A Liberty Media Group Common Stock
pursuant to this paragraph 7.
Any shares of Series A Liberty Media Group Common Stock issuable in
payment of a dividend shall be deemed to have been issued immediately prior to
the time of the record date for such dividend for purposes of calculated the
number of outstanding shares of Series A Liberty Media Group Common Stock under
paragraphs 7(d) and 7(e) below.
(d) Adjustment for Rights Issue. If, after the Company distributes
any rights, warrant or options to holders of shares of Series A Liberty Media
Group Common Stock entitling them for a period expiring within 45 days after
the record date of the determination of stockholders entitled to receive such
distribution, to purchase shares of Series A Liberty Media Group Common Stock
(or Convertible Securities) as a price per share (or having a conversion price
per share, after adding thereto an allocable portion of the exercise price of
the right, warrant or option to purchase such Convertible Securities, computed
on the basis of the maximum number of shares of Series A Liberty Media Group
Common Stock issuable upon conversion of such Convertible Securities) less than
the Current Market Price on the Determination Date, the Conversion Rate in
effect immediately prior to the opening of business on such record date by a
fraction, of which the numerator shall be the number of shares of Series A
Liberty Media Group Common Stock outstanding on such record date plus the
number of shares of Series A Liberty Media Common Stock which the aggregate
offering price of the total number of shares of Series A Liberty Media Group
Common Stock so offered
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(or the aggregate conversion price of the Convertible Securities to be so
offered, after adding thereto the aggregate exercise price of the rights,
warrants or options to purchase such Convertible Securities) to the holders of
Series A Liberty Media Group Common Stock (and to the holders of Convertible
Securities and Series B Liberty Media Group Common Stock referred to in the
immediately succeeding paragraph of this paragraph 7(d) if the distribution to
which this paragraph 7(d) applies is also being made to such holders) would
purchase at such Current Market Price, and of which the denominator shall be
the number of shares of Series A Liberty Media Group Common Stock outstanding
on such record date plus the number of additional shares of Series A Liberty
Media Group Common Stock so offered to the holders of Series A Liberty Media
Group Common Stock (and to such holders of Convertible Securities and Series B
Liberty Media Group Common Stock) for subscription or purchase (or into which
the Convertible Securities so offered are convertible). Shares of Series A
Liberty Media Group Common Stock owned by or held for the account of the
Company shall not be deemed to be outstanding the propose of any such
adjustment.
For purposes of this paragraph 7(d) the number of shares of Series A
Liberty Media Group Common Stock outstanding on any record date shall be deemed
to include (i) the maximum number of shares of Series A Liberty Media Group
Common Stock the issuance of which would be necessary to effect the full
exercise, exchange or conversion of all Convertible Securities outstanding on
such record date which are then exercisable, exchangeable or convertible at a
price (before giving effect to any adjustment to such price for the
distribution to which this paragraph 7(d) is being applied) equal or less than
the Current Market Price per share of Series A Liberty Media Group Common Stock
on the applicable Determination Date, if all of such Convertible Securities
were deemed to have been exercised, exchanged or converted immediately prior to
the opening of business on such record date and (ii) if the Series B Liberty
Media Group Common Stock is then convertible into Series A Liberty Media Group
Common Stock, the maximum number of shares of Series A Liberty Media Group
Common Stock the issuance of which would be necessary to effect the full
conversion of all shares of Series B Liberty Media Group Common Stock
outstanding on such record date, if all of such shares of Series B Liberty
Media Group Common Stock were deemed to have been converted immediately prior
to the opening of business on such record date.
The adjustment contemplated by this paragraph 7(d) shall be made
successively whenever any such rights, warrants or options are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive the rights, warrants or options. If all of
the share of Series A Liberty Media Group Common Stock (or all of the
Convertible Securities) subject to such rights, warrants or options have not
been issued when such rights, warrants or options expire (or, in the case of
rights, warrants or options to purchase Convertible Securities which have been
exercised, if all of the shares of Series A Liberty Media Group Common Stock
issuable upon conversion of such Convertible Securities have not been issued
prior to the expiration of the conversion right hereof), then the Conversion
Rate shall promptly be readjusted to the Conversion Rate which would then be in
effect had the adjustment upon the issuance of such rights, warrants or options
been made on the basis of the actual number of shares of Series A Liberty Media
Group Common Stock (or Convertible Securities) issued
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upon the exercise of such rights, warrants or options (or conversion of such
Convertible Securities).
No adjustment shall be made under this paragraph 7(d) if the adjusted
Conversion Rate would be lower than the Conversion Rate in effect immediately
prior to such adjustment.
(e) Adjustments for Other Distributions. If, after the Issue Date
(i) the Company distributes to all holders of shares of Series A Liberty Media
Group Common Stock any assets or debt securities or any rights, warrants or
options to purchase securities (excluding (x) dividends or distributions
referred to in paragraph 7(c) (except as otherwise provide in clause (ii) of
this sentence) and distributions of rights, warrants or options referred to in
paragraph 7(d) and (y) cash dividends or other cash distributions, unless such
cash dividends or cash distributions are Extraordinary Cash Dividends), or (ii)
the Company makes a dividend or distribution of Redeemable Capital Stock on, or
issues Redeemable Capital Stock by reclassification of, the Series A Liberty
Media Group Common Stock by reclassification of, the Series A Liberty Media
Group Common Stock and determines pursuant to paragraph 7(c) to treat the same
as a distribution of assets of the Company subject to this paragraph 7(e),
then in each such event the Conversion Rate shall be adjusted by dividing the
Conversion Rate in effect immediately prior to the opening of business on (A)
the record date for the determination of stockholders entitled to receive the
distribution or (B) in the case of a reclassification, the effective date of
such reclassification by a fraction, of which the numerator shall be the total
number of shares or Series A Liberty Media Group Common Stock outstanding on
such record date or immediately prior to such effective date multiplied by the
Current Market price on the Determination Date, less the fair market value (as
determined in good faith by the Board of Directors) on such record date or
effective date of said assets (or Redeemable Capital Stock) or debt securities
or rights, warrants or options so distributed to the holders of Series A
Liberty Media Group Common Stock (and to the holders of Convertible Securities
and Series B Liberty Media Group Common Stock referred to in the immediately
succeeding paragraph of this paragraph 7(e) if the distribution to which this
paragraph 7(e) applies is also being made to such holders), and of which the
denominator shall be the total number of shares of Series A Liberty Media Group
Common Stock outstanding on such record date or immediately prior to such
effective date multiplied by such Current Market Price.
For purposes of this paragraph 7(e), the number of shares of Series A
Liberty Media Group Common Stock outstanding on any relevant date shall be
deemed to include (i) the maximum number of shares of Series A Liberty Media
Group Common Stock the issuance of which would be outstanding on such date
which are then exercisable, exchangeable or convertible at a price (before
giving effect to any adjustment to such price for the distribution to which
this paragraph 7(e) is being applied) equal to or less than the Current Market
Price on the applicable Determination Date, if all of such Convertible
Securities were deemed to have been exercised, exchanged or converted
immediately prior to the opening of business on such date and (ii) if the
Series B Liberty Media Group Stock is then convertible into Series A Liberty
Media Group Common Stock the issuance of which would be necessary to effect the
full conversion of all
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shares of Series B Liberty Media Group Common Stock outstanding on such date,
if all of such shares of Series B Liberty Media Group Common Stock were deemed
to have been converted immediately prior to the opening of business on such
date.
For purposes of this paragraph 7(e), the term "Extraordinary Cash
Dividend" shall mean any cash dividend with respect to the Series A Liberty
Media Group Common Stock the amount of which, together with the aggregate
amount of cash dividends on the Series A Liberty Media Group Common Stock to be
aggregated with such cash dividend in accordance with the following provisions
of this paragraph, equals or exceeds the threshold percentage set forth below
in the following sentence. If, upon the date prior to the Ex-Dividend Date
with respect to a cash dividend on Series A Liberty Media Group Common Stock,
the aggregate of the amount of such cash dividend together with the amounts of
all cash dividends on the Series A Liberty Media Group Common Stock with
Ex-Dividend Dates occurring in the 365 consecutive day period ending on the
date prior to the Ex-Dividend Date with respect to the cash dividend to which
this provision is being applied (other than any such other cash dividends with
Ex-Dividend Dates occurring in such period for which a prior adjustment in the
Conversion Rate was previously made under this paragraph 7(e)) equals or
exceeds on a per share basis 10% of the average of the Closing Prices during
the period beginning on the date after the first such Ex-Dividend Date in such
period and ending on the date prior to the Ex-Dividend Date with respect to the
cash dividend to which this provision is being applied (except that if no other
cash dividend has had an Ex-Dividend Date occurring in such period, the period
for calculating the average of the Closing Prices shall be the period
commencing 365 days prior to the date immediately prior to the Ex-Dividend Date
with respect to the cash dividend to which this provision has been applied),
such cash dividend together with each other cash dividend to which this
provision is being applied), such cash dividend with an Ex-Dividend Date
occurring in such 365-day period that is aggregated with such cash dividend in
accordance with this paragraph shall be deemed to be an Extraordinary Cash
Dividend.
The adjustment pursuant to the foregoing provisions of this paragraph
7(e) shall be made successively whenever any distribution to which this
paragraph 7(e) applies is made, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive the
distribution (or, in the case of a reclassification, the effective date).
Shares of Series A Liberty Media Group Common Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such adjustment.
No adjustment shall be made under this paragraph 7(e) if the adjusted
Conversion Rate would be lower than the conversion rate in effect prior to such
adjustment. In the event that, with respect to any distribution to which this
paragraph 7(e) would otherwise apply, the numerator of the fraction in the
formula set forth in the first paragraph of this paragraph 7(e) is zero or a
negative number, then the adjustment provided by this paragraph 7(e) shall not
be made. If the Company makes a distribution to all holders of its Series A
Liberty Media Group Common Stock of any of its assets or debt securities or any
rights, warrants or options to purchase securities of the Company that, but for
the immediately preceding sentence, would otherwise result in an adjustment in
the Conversion Rate pursuant to the foregoing provisions of this paragraph
7(e), then, from and after the record date for determining the holders of
Series A
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Liberty Media Group Common Stock entitled to receive the distribution, a holder
of Series H Preferred Stock that converts such shares in accordance with the
provisions of this paragraph 7 will upon such conversion be entitled to
receive, in addition to the shares of Series A Liberty Media Group Common
Stock into which such shares of Series H Preferred Stock are convertible, the
kind and amount of securities, cash or other assets comprising the distribution
that such holder would have received if such holder had converted such shares
of Series H Preferred Stock immediately prior to the record date for
determining the holders of Series A Liberty Media Group Common Stock entitled
to receive the distribution.
(f) Consolidation, Merger or Sale of the Company. If the Company
consolidates with or merges into, or transfers (other than by mortgage or
pledge) its properties and assets substantially as an entirety to, another
Person or Company is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Series A Liberty Media Group Common
Stock, the Company (or its successor in such transaction) or the transferee of
such properties and assets shall make appropriate provision so that the
holders of the shares of Series H Preferred Stock then outstanding shall have
the right thereafter to convert such shares into the kind and amount of
securities, cash or other assets receivable upon such transaction by a holder
of the number of shares of Series A Liberty Media Group Common Stock, the
Company (or its successor in such transaction) or the transferee of such
properties and assets shall make appropriate provision so that the holders of
the shares of Series H Preferred Stock then outstanding shall have the right
thereafter to convert such shares into the kind and amount of securities, cash
or other assets receivable upon such transaction by a holder of the number of
shares of Series A Liberty Media Group Common Stock into which such shares of
Series H Preferred Stock could have been converted immediately before the
effective date of such transaction (assuming, to the extent applicable, that
such holder failed to exercise any rights of election with respect thereto and
received per share of Series A Liberty Media Group Common Stock the kind and
amount of securities, cash or other assets received per share by a plurality of
the non-electing shares of Series A Liberty Media Group Common Stock), and the
holders of the Series H Preferred Stock shall have no other conversion rights
under these provisions; provided that (i) effective provision shall be made, in
the Articles or Certificate of Incorporation of the resulting or surviving
corporation or otherwise or in any contracts of sale or transfer, so that the
provisions set forth herein for the protection of the conversion rights of
Series H Preferred Stock shall thereafter be made applicable, as nearly as
reasonable may be, to any such other securities and assets deliverable upon
conversion of the Series H Preferred Stock remaining outstanding or other
convertible preferred stock or other securities received by the holders of
Series H Preferred Stock in place thereof, and (ii) any such resulting or
surviving corporation or transferee shall expressly assume the obligation to
deliver, upon the exercise of the conversion privilege, such securities, cash
or other assets as the holders of the Series H Preferred Stock remaining
outstanding, or other convertible preferred stock or other securities received
by the holders in place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provision for the protection of the conversion
rights of the Series H Preferred Stock, or of any other convertible preferred
stock or other securities received by the holders in place thereof, as provided
in clause (i) of this sentence.
If this paragraph 7(f) applies, paragraphs 7(c), 7(d) and 7(e) apply.
(g) Effect of Redemption. Subject to paragraph 7(j) and to the
remaining provisions of this paragraph 7(g), in the event that (i) the Company
redeems all, and not less than all, of the outstanding shares of Series A
Liberty Media Group Common Stock in accordance
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with the terms thereof or (ii) a holder of Series H Preferred Stock would be
entitled to receive upon conversion thereof pursuant to this paragraph 7 any
Redeemable Capital Stock and the Company redeems, exchanges or otherwise
acquires all of the outstanding shares or other units of such Redeemable
Capital Stock (such event referred to in clause (i) and (ii) being a
"Redemption Event"), then, from and after the effective date of such Redemption
Event, the holders of shares of Series H Preferred Stock then outstanding shall
be entitled to receive upon conversion of such shares, in lieu of shares or
units of such Redeemable Capital Stock, the kind and amount of securities cash
or other assets receivable upon the redemption Event by a holder of the number
of shares or units of such Redeemable Capital Stock into which such shares of
Series H Preferred Stock could have been converted immediately prior to the
effective date of such Redemption Event (assuming, to the extent applicable,
that such holder failed to exercise any rights of election with respect thereto
and received per share or unit of such Redeemable Capital Stock the kind and
amount of securities, cash or other assets received per shares or unit by a
plurality of the non-electing shares or units of such Redeemable Capital
Stock), and (from and after the effective date of such Redemption Event) the
holders of the Series H Preferred Stock shall have no other conversion rights
under these provisions with respect to such Redeemable Capital Stock, as the
case may be.
Notwithstanding the foregoing, if the redemption price for the shares
of Series A Liberty Media Group Common Stock or Redeemable Capital Stock
is paid in whole or in part in Redemption Securities, and the Mirror Preferred
Stock Condition is met, the Series H Preferred Stock shall not be convertible
into such Redemption Securities and, from and after the applicable redemption
date, the holders of any shares of Series H Preferred Stock that have not been
exchanged for Mirror Preferred Stock shall have no conversion rights under
these provisions except for any conversion right that may have existed
immediately prior to the effective date of the Redemption Event with respect to
any securities, cash or other assets other than the Series A Liberty Media
Group Common Stock or Redeemable Capital Stock so redeemed. The Mirror
Preferred Stock Condition will be met in connection with a redemption of the
Series A Liberty Media Group Common Stock or the Redeemable Capital Stock into
which the Series H Preferred Stock is then convertible, assuming that the
Series H Preferred Stock is not then convertible into any other security, cash
or other assets, if the Company makes appropriate provision so that the holders
of the Series H Preferred Stock have the right to exchange their shares of
Series H Preferred Stock on the effective date of the Redemption Event for
shares of Mirror Preferred Stock of the issuer of the Redemption Securities,
which Mirror Preferred Stock shall have an aggregate initial liquidation
preference equal to the aggregate Liquidation Preference of the shares of
Series H Preferred Stock exchanged therefor.
If before giving effect to a Redemption Even, a holder of Series H
Preferred Stock would be entitled to receive upon conversion of such Series H
Preferred Stock any Securities, cash (other than cash in lieu of fractional
securities) or other assets in addition to the Series A Liberty Media Group
Common Stock or Redeemable Capital Stock being redeemed, and
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the redemption price payable upon such Redemption Event will include Redemption
Securities, then to satisfy the Mirror Preferred Stock Condition, the Company
would be required to make appropriate provision so that the holders of the
Series H Preferred Stock have the right to exchange their shares of Series H
Preferred Stock on the effective date of the Redemption Event for Exchange
Preferred Stock of the Company and Mirror Preferred Stock of the issuer of the
Redemption Securities. The sum of the initial liquidation preferences of the
shares of Exchange Preferred Stock and Mirror Preferred Stock delivered in
exchange for a share of Series H Preferred Stock will equal the Liquidation
Preference of a share of Series H Preferred Stock on the effective date of the
Redemption Event. The Mirror Preferred Stock will have an aggregate initial
liquidation preference equal to the product of the aggregate Liquidation
Preference of the shares of Series H Preferred Stock exchanged therefor and the
quotient of (x) the product of the Conversion Rate for the Series A Liberty
Media Group Common Stock or Redeemable Capital stock to be redeemed (determined
immediately prior to the effective date of the Redemption Event) and the
average of the daily Closing Prices of the Series A Liberty Media Group Common
Stock or Redeemable Capital Stock, as the case may be, for the period of ten
consecutive trading days ending on the third trading day prior to the effective
date of the Redemption event, divided by (y) the sum of the amount determined
pursuant to clause (x), plus the fair value of the securities (other than those
being redeemed), cash or other assets that would have been receivable by a
holder of Series H Preferred Stock upon conversion thereof immediately prior to
the effective date of the Redemption event (such fair value to be determined in
the case of securities with a Closing Price in the same manner as provided in
clause (x) and otherwise by the Board of Directors in the exercise of its good
faith judgment). The shares of exchange Preferred stock will have an aggregate
initial liquidation preference equal to the difference between the aggregate
Liquidation Preference of the shares of Series H Preferred Stock exchanged
therefore and the aggregate initial liquidation preference of the Mirror
Preferred Stock.
When used in connection with a redemption by the Company of any
redeemable Capital Stock into which the Series H Preferred stock is then
convertible, the following terms have the following meanings:
(i) "Redemption Securities' means securities of an issuer
other than the Company that are distributed by the company, in
payment, in whole or in part, of the redemption price for the Series A
Liberty Media Group Common Stock or such Redeemable Capital Stock.
(ii) "Mirror Preferred Stock" means convertible preferred
stock issued by the issuer of the Redemption Securities and having
terms, conditions, designations, dividend rights, voting powers,
rights on liquidation and other preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof that are identical, or as nearly
so as is practicable in the good faith judgment of the Board of
Directors, to those of the Series H Preferred Stock for which such
Mirror Preferred Stock is exchanged, except that (x) the liquidation
preference will be determined as provided above in this paragraph
7(g), (y) the running of any time periods pursuant to the terms of
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<PAGE> 222
the Series H Preferred Stock shall be tacked to the corresponding time
periods in the Mirror Preferred stock and (z) the Mirror Preferred
stock shall be convertible into the kind and amount of Redemption
Securities, cash and other assets that the holder of a share of Series
H Preferred Stock in respect of which such Mirror Preferred Stock is
issued pursuant to the terms hereof would have received upon
redemption of the Series A Liberty Media Group Common Stock or
Redeemable Capital Stock, as the case may be, had such shares of
Series H Preferred Stock been converted prior to the effective date
of the Redemption Event.
(iii) "Exchange Preferred Stock" means a series of
convertible preferred stock of the company having terms, conditions,
designations, dividend rights, voting powers, rights on liquidation
and other preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof that are identical, or as nearly so as is practicable in the
good faith judgment of the Board of Directors, to those of the Series
H Preferred Stock for which such Exchange Preferred Stock is
exchanged, except that (x) the liquidation preference will be
determined as provided above in this paragraph 7 (g), (y) the running
of any time periods pursuant to the terms of the Series H Preferred
Stock and (z) the Exchange Preferred Stock will not be convertible
into, and the holders will have no conversion rights thereunder with
respect to, the Redeemable Capital Stock redeemed in th Redemption
Event.
Notwithstanding the second paragraph of this paragraph 7(g), the
Mirror Preferred Stock condition shall only be deemed to have been satisfied in
connection with any Redemption Event if, in the good faith determination of the
Board of Directors: (i) receipt of Mirror Preferred stock and/or Exchange
Preferred Stock in exchange for Series H Preferred Stock pursuant to the second
paragraph of this paragraph 7(g) would not result in the recognition of gain or
loss by the holders of such Series H Preferred Stock for United States federal
income tax purposes; (ii) an adjustment made in the Conversion Rate of the
Series H Preferred Stock with respect to such Redemption Event, as provided in
the first paragraph of this paragraph of this paragraph 7(g), would result in
the recognition of gain or loss by the holders of Series H Preferred Stock for
United States federal income tax purposes; or (iii) receipt of Redemption
Securities in redemption of the Series A Liberty Media Group Common Stock or
the Redeemable Capital Stock to be redeemed in the Redemption Event would
result in the recognition of gain or loss by the holders of such Redeemable
Capital Stock, as the case may be.
(h) Simultaneous Adjustments. In the event that this paragraph 7
requires adjustments to the conversion Rate under more than one of paragraph
7(c)(iv), (d) or (e), and the record dates of the distributions giving rise to
such adjustments shall occur on the same date, then such adjustments shall be
made by applying, first, the provisions of paragraph 7(c), second, the
provisions of paragraph 7(e) and, third, the provisions of paragraph 7(d).
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<PAGE> 223
(i) When Adjustment May be Deferred. In any case in which this
paragraph 7 shall require that an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the occurrence of
such event (x) issuing to the holder of any shares of Series H Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of Series A Liberty Media Group Common Stock issuable upon
such Series A Liberty Media Group Common Stock issuable upon such conversion
before giving effect to such adjustment and (y) paying to such holder cash or
its check in lieu of any fractional interest to which he is entitled pursuant
to paragraph 7(o); provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares of Series A Liberty Media Common Stock
and such cash, upon the occurrence of the event requiring such adjustment.
(j) De Minimis Adjustment; When Adjustment is Not Required. No
adjustments in the Conversion Rate need be made unless the adjustment would
require an increase or decrease of at least one percent (1%) in the Conversion
Rate. Any adjustment which is not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this paragraph 7 shall be made to the nearest
cent or to the nearest 1/1000th of a share, as the case may be.
No adjustment need be made for rights to purchase shares of Series A
Liberty Media Group Common Stock or for sales of shares of Series A Liberty
Media Group Common Stock which in either case are made pursuant to a Company
plan providing for reinvestment of dividends or interest or pursuant to a bona
fide employee stock option or stock purchase plan of the Company. No
adjustment need be made for a change in the par value of the Series A Liberty
Media Group Common Stock.
No adjustment need be made under this paragraph 7 for a transaction
referred to in paragraph 7(c), 7(d), 7(e), or 7(g) if holders of the Series H
Preferred stock are to participate in the transaction on a basis and with the
notice that the Board of Directors in good faith determines to be fair and
appropriate in light of the basis and notice on which holders of Series A
Liberty Media Group Common Stock participate in the transaction; provided that
the basis on which the holders of shares of Series H Preferred Stock are to
participate in the transaction shall not be deemed to be fair if it would
require the holder to convert his shares of Series H Preferred Stock, in order
to participate, at any time prior to the expiration of the conversion period
specified for the share of Series H Preferred Stock pursuant to paragraph 7(a)
of this Certificate of Designations. The immediately preceding sentence shall
apply to any transaction referred to in paragraph 7(c), 7(d), 7(e) or 7(g) only
if, in good faith determination of the Board of Directors: (i) participation in
such transaction by the holders of the Series H Preferred stock would not
result in the recognition of gain or loss by such holders of United States
federal income tax purposes, (ii) an adjustment made in the Conversion Rate of
the Series H Preferred Stock in lieu of participating in such transaction,
pursuant to this paragraph 7, would result in the recognition of gain or loss
by holders of Series H Preferred Stock for United States federal
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<PAGE> 224
income tax purposes; or (iii) participation in such transaction by the holders
of the Series A Liberty Media Group Common Stock would result in the
recognition of gain or loss by such holders for United States federal income
tax purposes.
To the extent the shares of Series H Preferred stock become
convertible into cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.
(k) Company Determination Final. Any determination required to be
made pursuant to paragraph 7(c), 7(d), 7(e), 7(f), 7(g), 7(g), 7(j) or 7(o)
shall be made by the Board of Directors (whether or not reference to the Board
of directors is expressly made in any such paragraph) and any determination so
made in good faith shall be conclusive and binding, absent manifest error, on
the holders of shares of Series H Preferred stock. In making any determination
as to the expected tax treatment of any action, transaction or event referred
to herein, including, without limitation, the determinations provided for in
the last paragraph of Paragraph 7(g) and the last sentence of the fourth
paragraph of paragraph 7(j), the Board of Directors shall be entitled to rely
conclusively on (i) an opinion of counsel rendered by a law firm acceptable to
the Board of Directors, acting in good faith, or (ii) a private letter ruling
from the Internal Revenue Service, to such effect, which opinion of counsel or
private letter ruling may be based upon such assumptions, and be subject to
such qualifications, conditions and limitations, as the Board of Directors
shall in good faith determine to be appropriate under the circumstances. Any
such determination by the Board of Directors shall be based on the expected
United States federal income tax consequences applicable to the transaction, in
question, without regard to special tax rules such as those applicable to
dealers in securities, foreign persons, mutual funds, insurance companies,
tax-exempt entities and holders ho do not hold the securities or other property
in question as capital assets, or the personal circumstances of any particular
stockholder.
(l) Notice of Adjustment. Whenever the provisions of this paragraph
7 require an adjustment of the Conversion rate, the Company shall promptly
compute such adjustment and (i) file with the transfer agent for the Series H
Preferred Stock (or with the books of the Company if there is no transfer
agent) an Officers' Certificate setting forth a description of the event
requiring the adjustment, the new Conversion Rate (including a reasonable
detailed calculation thereof), and the kind and amount of capital stock or
other securities or cash or other assets into which the Series H Preferred
Stock shall be convertible after such event, and (ii) cause a notice containing
a summary of the information set forth in said certificate to be given to the
holders of Series H Preferred Stock. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be given
under the provisions of paragraph 7(m).
(m) Advance Notice of Certain Transactions. If the Company:
(i) takes any action which would require an adjustment in the
Conversion Rate;
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<PAGE> 225
(ii) is a party to a consolidation, merger or binding share
exchange, or transfers all or substantially all of its assets to
another Person, and any stockholders of the Company must approve the
transaction; or
(iii) voluntarily or involuntarily dissolves, liquidates or
winds up.
then, in any such event, the Company shall give the holders of the Series H
Preferred Stock, at least twenty (20) days prior to any record date or other
date set for definitive action if there shall be no record date, a notice
stating the record date for and the anticipated effective date of such action
or event and, if the event is a dividend or distribution or issuance by
reclassification of Redeemable Capital Stock, whether the Company has
determined to adjust the Conversion Rate pursuant to paragraph 7(c), or 7(e),
provided, however, that any notice required hereunder shall in any event be
given no later than the time that notice is given to the holders of Series A
Liberty Media Group Common Stock. Without limiting the obligation of the
Company to provide notice of corporate actions hereunder, the failure to mail
the notice or any defect in it shall not affect the legality or validity or any
corporate action or the vote thereon.
(n) Reservation of Series A Liberty Media Group Common Stock Issuable
Upon Conversion. The Company shall at all times on and after the Issue Date
reserve and keep available out of its authorized but unissued shares of Series
A Liberty Media Group Common Stock, solely for the purpose of effecting the
conversion of the shares of Series H Preferred Stock, such number of its shares
of Series A Liberty Media Group Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series H
Preferred Stock; provided that nothing contained herein shall be construed to
preclude the Company from satisfying its obligations in respect of the
conversion of the outstanding shares of Series H Preferred Stock by delivery of
shares of Series A Liberty Media Group Common Stock which are held in the
treasury of the Company. The Company shall take all such corporate and other
actions as from time to time may be necessary to insure that all shares of
Series A Liberty Media Group Common Stock issuable upon conversion of shares of
Series H Preferred Stock at the Conversion Rate in effect from time to time
will, when issued, be duly and validly authorized and issued, fully paid and
nonassessable, and free from all preemptive or similar rights. in order that
the Company may issue shares of Series A Liberty Media Group Common Stock upon
conversion of the Series H Preferred Stock, the Company will in good faith and
as expeditiously as possible endeavor to comply with all applicable Federal
and state securities laws and will in good faith and as expeditiously as
possible endeavor to list such shares to be issued upon conversion on such
national securities exchange or national securities association, if any, on
which the Series A Liberty Media Group Common Stock is then listed.
(o) Fractional Shares. No fractional shares of Series A Liberty
Media Group Common Stock or scrip shall be issued upon conversion of the Series
H Preferred Stock. Whether or not fractional shares would otherwise be
required to be issued to a holder of Series H Preferred Stock upon such
conversion shall be determined on the basis of the total number of shares of
Series H Preferred Stock the holder is at the time converting into Series A
Liberty Media Group Common Stock and the total number of shares of Series A
Liberty Media Group
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<PAGE> 226
Common Stock issuable upon such conversion. In lieu of the issuance of
fractional shares of Series A Liberty Media Group Common Stock, the Company
shall pay instead an amount in cash or by its check equal to the same fraction
of the Closing Price of a full share of Series A Liberty Media Group Common
Stock on the last full trading day prior to the Conversion Date.
(p) Impairment. The Company will not, by amendment of this
Certificate of Designations or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, other than as expressly permitted by this Certificate of
Designations or approved by the requisite vote or written consent of the
holders of Series H Preferred Stock taken or given in accordance with this
Certificate, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
paragraph 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of Series
H Preferred Stock against impairment.
8. Voting.
(a) Voting Rights. The holders of Series H Preferred Stock shall
have no voting rights whatsoever, except as required by law and except for the
voting rights described in this paragraph 8; provided, however, that the number
of authorized shares of Series H Preferred Stock may be increased or decreased
(but not below the number of shares of Series H Preferred Stock then
outstanding) by the affirmative vote of the holders of at least 66 2/3% of the
total voting power of the then outstanding Voting Securities (as defined in
Section A of Article VIII of the Restated Certificate of Incorporation of the
Company (the "Restated Certificate")), voting together as a single class as
provided in Article IX of the Restated Certificate. Without limiting the
generality of the foregoing, no vote or consent of the holders of Series H
Preferred Stock shall be required for (a) the creation of any indebtedness of
any kind of the Company, (b) the creation or designation of any class or series
of Senior Stock, Parity Stock or Junior Stock, or (c) any amendment to the
Restated Certificate that would increase the number of authorized shares of
Preferred Stock or the number of authorized shares of Series H Preferred Stock
or that would decrease the number of authorized shares of Preferred Stock or
the number of authorized shares of Series H Preferred stock (but not below the
number of shares of Preferred Stock or Series H Preferred Stock, as the case
may be, then outstanding).
(b) Election of Directors. The holders of the Series H Preferred
Stock shall have the right to vote at any annual or special meeting of
stockholders for the purpose of electing director. Each shares of Series H
Preferred Stock shall have one vote for such purpose, and shall vote as a
single class with all other classes or series of capital stock of the Company
that are entitled to vote in any general election of directors, unless the
instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
9. No Preemptive Rights. The holders of shares of Series H Preferred
Stock shall have no preemptive rights, including preemptive rights with respect
to any shares of capital
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<PAGE> 227
stock or other securities of the Company convertible into or carrying rights or
options to purchase any such shares.
10. Waiver. Any provision of this Certificate of Designations which,
for the benefit of the holders of Series H Preferred Stock, prohibits, limits
or restricts actions by the Company, or imposes obligations on the Company,
including but not limited to provisions relating to the obligation of the
Company to redeem or convert such shares, may be waived in whole or in part, or
the application of all or any part of such provision in any particular
circumstance or generally may be waived, in each case by the affirmative vote
or with the consent of the holders of at least a majority of the number of
shares of Series H Preferred Stock then outstanding (or such greater percentage
thereof as may be required by applicable law or any applicable rules of any
national securities exchange or national interdealer quotation system), either
in writing or by vote at an annual meeting or a special meeting called for such
purpose at which the holders of Series H Preferred Stock shall vote as a
separate class.
11. Method of Giving Notices. Any notice required or permitted by
the provisions of this Certificate of Designations to be given to the holders
of shares of Series H Preferred Stock shall be deemed duly given if deposited
in the United States mail, first class mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Company or
supplied by him in writing to the Company for the purpose of such notice.
12. Exclusion of Other Rights. Except as may otherwise be required
by law and except for the equitable rights and remedies which may otherwise be
available to holders of Series H Preferred Stock, the shares of Series H
Preferred Stock shall not have any designations, preferences, limitations or
relative rights other than those specifically set forth in this Certificate of
Designations.
13. Headings of Subdivisions. The headings of the various
subdivisions of this Certificate of Designations are for convenience of
reference only and shall not affect the interpretation of any of the provisions
of this Certificate of Designations.
FURTHER RESOLVED, that the appropriate officers of this Company are
hereby authorized to execute and acknowledge a certificate setting forth these
resolutions and to cause such certificate to be filed and recorded in
accordance with the requirements of section 151(g) of the General Corporation
Law of the State of Delaware."
The undersigned has signed this Certificate of Designations on this
25th day of January, 1996.
/s/ STEPHEN M. BRETT
--------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
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<PAGE> 1
EXHIBIT 10.2
TELE-COMMUNICATIONS, INC.
1995 EMPLOYEE STOCK INCENTIVE PLAN
Article I
Purpose and Effectiveness
1.1 Purpose. The purpose of the Tele-Communications, Inc.
1995 Employee Stock Incentive Plan (the "Plan") is to promote the
success of Tele-Communications, Inc. (the "Company") by providing a
method whereby (i) eligible employees of the Company and its
Subsidiaries and (ii) independent contractors providing services to
the Company or its Subsidiaries may be awarded additional remuneration
for services rendered and encouraged to invest in capital stock of the
Company, thereby increasing their proprietary interest in the
Company's businesses, encouraging them to remain in the employ of the
Company or its Subsidiaries, and increasing their personal interest in
the continued success and progress of the Company or its Subsidiaries.
The Plan is also intended to aid (i) in attracting persons of
exceptional ability to become officers and employees of the Company
and its Subsidiaries and (ii) inducing independent contractors to
agree to provide services to the Company.
1.2 Effective Date. The Plan shall be effective
December 13, 1995.
Article II
Definitions
2.1 Certain Defined Terms. Capitalized terms not defined
elsewhere in the Plan shall have the following meanings (whether used
in the singular or plural):
"Affiliate" of the Company means any corporation,
partnership, or other business association that, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with the Company.
"Agreement" means a stock option agreement, stock
appreciation rights agreement, restricted shares agreement or
stock units agreement, or an agreement evidencing more than
one type of Award, specified in Section 10.5, as any such
Agreement may be supplemented or amended from time to time.
"Approved Transaction" means any transaction in which
the Board (or, if approval of the Board is not required as a
matter of law, the stockholders of the Company) shall approve
(i) any consolidation or merger of the Company, or binding
share exchange, pursuant to which shares of Common Stock would
be changed or converted into or exchanged for cash, securities
or other property, other than any
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<PAGE> 2
such transaction in which the common stockholders of the
Company immediately prior to such transaction have the same
proportionate ownership of the common stock of, and voting
power with respect to, the surviving corporation immediately
after such transaction, (ii) any merger, consolidation or
binding share exchange to which the Company is a party as a
result of which the persons who are common stockholders of the
Company immediately prior thereto have less than a majority of
the combined voting power of the outstanding capital stock of
the Company ordinarily (and apart from the rights accruing
under special circumstances) having the right to vote in the
election of directors immediately following such merger,
consolidation or binding share exchange, (iii) the adoption of
any plan or proposal for the liquidation or dissolution of the
Company, or (iv) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company.
"Award" means a grant of Options, SARs, Restricted
Shares and/or Stock Units under this Plan.
"Board" means the Board of Directors of the Company.
"Board Change" means, during any period of two
consecutive years, individuals who at the beginning of such
period constituted the entire Board cease for any reason to
constitute a majority thereof unless the election, or the
nomination for election, of each new director was approved by
a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or
statutes thereto. Reference to any specific Code section shall
include any successor section.
"Committee" means the committee of the Board
appointed pursuant to Section 3.1 to administer the Plan.
"Common Stock" means either TCOMA or LBTYA.
"Company" means Tele-Communications, Inc., a Delaware
corporation.
"Control Purchase" means any transaction (or series
of related transactions) in which (i) any person (as such term
is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), corporation or other entity (other than the Company, any
Subsidiary or any employee benefit plan sponsored by the
Company or any Subsidiary) shall purchase any Common Stock (or
securities convertible into Common Stock) for cash, securities
or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board, or
(ii) any person (as such term is so defined), corporation or
other entity (other than the Company, any
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Subsidiary, any employee benefit plan sponsored by the Company
or any Subsidiary, or any Controlling Person (as defined
below)) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from the
rights accruing under special circumstances) having the right
to vote in the election of directors (calculated as provided
in Rule 13d-3(d) under the Exchange Act in the case of rights
to acquire the Company's securities), other than in a
transaction (or series of related transactions) approved by
the Board. For purposes of this definition, "Controlling
Person" means each of (a) the Chairman of the Board, the
President and each of the directors of the Company as of the
Effective Date of this Plan, (b) the respective family
members, estates and heirs of each of the persons referred to
in clause (a) above and any trust or other investment vehicle
for the primary benefit of any of such persons or their
respective family members or heirs and (c) Keams-Tribune
Corporation, a Delaware corporation. As used with respect to
any person, the term "family member" means the spouse,
siblings and lineal descendants of such person.
"Disability" means the inability to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months.
"Dividend Equivalents" means, with respect to
Restricted Shares to be issued at the end of the Restriction
Period, to the extent specified by the Committee only, an
amount equal to all dividends and other distributions (or the
economic equivalent thereof) which are payable to stockholders
of record during the Restriction Period on a like number of
shares of Common Stock.
"Effective Date" means the date on which the Plan
becomes effective pursuant to Section 1.2.
"Equity Security" shall have the meaning ascribed to
such term in Section 3(a)(11) of the Exchange Act, and an
equity security of an issuer shall have the meaning ascribed
thereto in Rule 16a-1 promulgated under the Exchange Act, or
any successor Rule.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute
or statutes thereto. Reference to any specific Exchange Act
section shall include any successor section.
"Fair Market Value" of a share of Common Stock on any
day means the last sale price (or, if no last sale price is
reported, the average of the high bid and low asked prices)
for a share of the appropriate of TCOMA or LBTYA, on such day
(or,
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if such day is not a trading day, on the next preceding
trading day) as reported on NASDAQ or, if not reported on
NASDAQ, as quoted by the National Quotation Bureau
Incorporated, or if the appropriate of TCOMA or LBTYA Common
Stock is listed on an exchange, on the principal exchange on
which the appropriate of TCOMA or LBTYA Common Stock is
listed. If for any day the Fair Market Value of a share of the
appropriate of TCOMA or LBTYA Common Stock is not determinable
by any of the foregoing means, then the Fair Market Value for
such day shall be determined in good faith by the Committee on
the basis of such quotations and other considerations as the
Committee deems appropriate.
"Free Standing SAR" has the meaning ascribed thereto
in Section 7.1.
"Holder" means an employee of the Company or a
Subsidiary or an independent contractor who has received an
Award under this Plan.
"LBTYA" means the Series A Liberty Group Common
Stock, $1.00 par value per share, of the Company.
"NASDAQ" means the National Association of Securities
Dealers, Inc. Automated Quotation System.
"Nonqualified Stock Option" means a stock option
granted under Article VI.
"Option" means any Nonqualified Stock Option.
"Plan" has the meaning ascribed thereto in Section
1.1.
"Qualified domestic relations order" means a
qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the
rules thereunder.
"Restricted Shares" means shares of Common Stock or
the right to receive shares of Common Stock, as the case may
be, awarded pursuant to Article VIII.
"Restriction Period" means a period of time beginning
on the date of each award of Restricted Shares and ending on
the Vesting Date with respect to such award.
"Retained Distribution" has the meaning ascribed
thereto in Section 8.3.
"Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, or any successor Rule. References to paragraphs
of Rule 16b-3 shall include the comparable provisions of any
successor Rule.
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"SARs" means stock appreciation rights, awarded
pursuant to Article VII, with respect to shares of Common
Stock.
"Stock Unit Award" has the meaning ascribed thereto
in Section 9.1.
"Subsidiary" of the Company means any present or
future subsidiary (as defined in Section 424(f) of the Code)
of the Company or any business entity in which the Company
owns directly or indirectly, 50% or more of the voting,
capital or profits interests. An entity shall be deemed a
subsidiary of the Company for purposes of this definition only
for such periods as the requisite ownership or control
relationship is maintained.
"Tandem SARs" has the meaning ascribed thereto in
Section 7.1.
"TCOMA" means Series A TCI Group Common Stock, $1.00
par value per share, of the Company.
"Vesting Date" with respect to any Restricted Shares
awarded hereunder means the date on which such Restricted
Shares cease to be subject to a risk of forfeiture, as
designated in or determined in accordance with the Agreement
with respect to such award of Restricted Shares pursuant to
Article VIII. If more than one Vesting Date is designated for
an award of Restricted Shares, reference in the Plan to a
Vesting Date in respect of such Award shall be deemed to refer
to each part of such Award and the Vesting Date for such part.
Article III
Administration
3.1 Committee. The Plan shall be administered by the Compensation
Committee of the Board unless a different committee is appointed by the Board.
The Committee shall be comprised of not less than two persons. Each member of
the Committee shall be a member of the Board who during the one year period
prior to service on the Committee was not, and during such service is not,
granted or awarded equity securities pursuant to the Plan or any other plan of
the Company or any of its Affiliates if such grant or award or participation in
such plan would prevent such member from being a "disinterested person" with
respect to the Plan for purposes of Rule 16b-3. Subject to the foregoing, the
Board may from time to time appoint members of the Committee in substitution
for or in addition to members previously appointed, may fill vacancies in the
Committee and may remove members of the Committee. The Committee shall select
one of its members as its chairman and shall hold its meetings at such times
and places as it shall deem advisable. A majority of its members shall
constitute a quorum and all determinations shall be made by a majority of such
quorum. Any determination reduced to writing and signed by all of the members
shall be fully as effective as if it had been made by a majority vote at a
meeting duly called and held.
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3.2 Powers. The Committee shall have full power and authority to
grant to eligible persons Options under Article VI of the Plan, SARs under
Article VII of the Plan, Restricted Shares under Article VIII of the Plan
and/or Stock Units under Article IX of the Plan, to determine the terms and
conditions (which need not be identical) of all Awards so granted, to interpret
the provisions of the Plan and any Agreements relating to Awards granted under
the Plan, and to supervise the administration of the Plan. The Committee in
making an Award may provide for the granting or issuance of additional,
replacement or alternative Awards upon the occurrence of specified events,
including the exercise of the original Award. The Committee shall have sole
authority in the selection of persons to whom Awards may be granted under the
Plan and in the determination of the timing, pricing and amount of any such
Award, subject only to the express provisions of the Plan. In making
determinations hereunder, the Committee may take into account the nature of the
services rendered by the respective employees and independent contractors,
their present and potential contributions to the success of the Company and its
Subsidiaries and such other factors as the Committee in its discretion deems
relevant.
3.3 Interpretation. The Committee is authorized, subject to the
provisions of the Plan, to establish, amend and rescind such rules and
regulations as it deems necessary or advisable for the proper administration of
the Plan and to take such other action in connection with or in relation to the
Plan as it deems necessary or advisable. Each action and determination made or
taken pursuant to the Plan by the Committee, including any interpretation or
construction of the Plan, shall be final and conclusive for all purposes and
upon all persons. No member of the Committee shall be liable for any action or
determination made or taken by him or the Committee in good faith with respect
to the Plan.
Article IV
Shares Subject to the Plan
4.1 Number of shares. Subject to the provisions of this Article
IV, the maximum number of shares of TCOMA shares with respect to which Awards
may be granted during the term of the Plan shall be 3,000,000 shares. The
maximum number of LBTYA shares with respect to which Awards may be granted
during the term of the Plan shall be 1,000,000 shares. Shares of Common Stock
will be made available from the authorized but unissued shares of the Company
or from shares reacquired by the Company, including shares purchased in the
open market. The shares of Common Stock subject to (i) any Award granted under
the Plan that shall expire, terminate or be annulled for any reason without
having been exercised (or considered to have been exercised as provided in
Section 7.2), (ii) any Award of any SARs granted under the Plan that shall be
exercised for cash and (iii) any Award of Restricted Shares or Stock Units that
shall be forfeited prior to becoming vested (provided that the Holder received
no benefits of ownership of such Restricted Shares or Stock Units other than
voting rights and the accumulation of Retained Distributions and unpaid
Dividend Equivalents that are likewise forfeited), shall again be available for
purposes of the Plan.
4.2 Adjustments. If the Company subdivides its outstanding shares
of TCOMA or LBTYA into a greater number of shares of TCOMA or LBTYA (by stock
dividend, stock split,
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reclassification or otherwise) or combines its outstanding shares of TCOMA or
LBTYA into a smaller number of shares of TCOMA or LBTYA (by reverse stock
split, reclassification or otherwise), or if the Committee determines that any
stock dividend, extraordinary cash dividend, reclassification,
recapitalization, reorganization, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase TCOMA or LBTYA or other similar
corporate event (including mergers or consolidations other than those which
constitute Approved Transactions) affects TCOMA or LBTYA such that an
adjustment is required in order to preserve the benefits or potential benefits
intended to be made available under this Plan, then the Committee shall, in its
sole discretion and in such manner as the Committee may deem equitable and
appropriate, make such adjustments to any or all of (i) the number and kind of
shares which thereafter may be awarded, optioned, or otherwise made subject to
the benefits contemplated by the Plan, (ii) the number and kind of shares
subject to outstanding Awards, and (iii) the purchase or exercise price and the
relevant appreciation base with respect to any of the foregoing, provided,
however, that the number of shares subject to any Award shall always be a whole
number. The Committee may, if deemed appropriate, provide for a cash payment to
any Holder of an Award in connection with any adjustment made pursuant to this
Section 4.2.
Article V
Eligibility
5.1 General. The persons who shall be eligible to participate in
the Plan and to receive Awards under the Plan shall be such employees
(including officers and, subject to Section 5.2, directors) of the Company and
its Subsidiaries or independent contractors as the Committee shall select.
Awards may be made to employees or independent contractors who hold or have
held Awards under this Plan or any similar or other awards under any other plan
of the Company or any of its Affiliates.
5.2 Ineligibility. No member of the Committee, while serving as
such, shall be eligible to receive an Award.
Article VI
Stock Options
6.1 Grant of Options. Subject to the limitations of the Plan, the
Committee shall designate from time to time those eligible persons to be
granted Options, the time when each Option shall be granted to such eligible
persons, the number of shares subject to such Option, and, subject to Section
6.2, the purchase price of the shares of Common Stock subject to such Option.
6.2 Option Price. The price at which shares may be purchased upon
exercise of an Option shall be fixed by the Committee and may be more than,
less than or equal to the Fair Market Value of the Common Stock subject to the
Option as of the date the Option is granted.
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6.3 Limitation on Grants. Except for Awards described in Section
10.1, no Person may be granted in any calendar year Options covering more than
1,000,000 shares of either TCOMA or LBTYA (adjusted as provided in Section
4.2).
6.4 Term of Options. Subject to the provisions of the Plan with
respect to death, retirement and termination of employment, the term of each
Option shall be for such period as the Committee shall determine as set forth
in the applicable Agreement.
6.5 Exercise of Options. An Option granted under the Plan shall
become (and remain) exercisable during the term of the Option to the extent
provided in the applicable Agreement and this Plan and, unless the Agreement
otherwise provides, may be exercised to the extent exercisable, in whole or in
part, at any time and from time to time during such term; provided, however,
that subsequent to the grant of an Option, the Committee, at any time before
complete termination of such Option, may accelerate the time or times at which
such Option may be exercised in whole or in part (without reducing the term of
such Option).
6.6 Manner of Exercise.
(a) Form of payment. An Option shall be exercised
by written notice to the Company upon such terms and
conditions as the Agreement may provide and in accordance with
such other procedures for the exercise of Options as the
Committee may establish from time to time. The method or
methods of payment of the purchase price for the shares to be
purchased upon exercise of an Option and of any amounts
required by Section 10.10 shall be determined by the Committee
and may consist of (i) cash, (ii) check, (iii) promissory
note, (iv) whole shares of Common Stock already owned by the
Holder, (v) the withholding of shares of Common Stock issuable
upon such exercise of the Option, (vi) the delivery, together
with a properly executed exercise notice, of irrevocable
instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds required to pay the
purchase price, (vii) any combination of the foregoing methods
of payment, or such other consideration and method of payment
as may be permitted for the issuance of shares under the
Delaware General Corporation Law. The permitted method or
methods of payment of the amounts payable upon exercise of an
Option, if other than in cash, shall be set forth in the
applicable Agreement and may be subject to such conditions as
the Committee deems appropriate. Without limiting the
generality of the foregoing, if a Holder is permitted to elect
to have shares of Common Stock issuable upon exercise of an
Option withheld to pay all or any part of the amounts payable
in connection with such exercise, then the Committee shall
have the sole discretion to approve or disapprove such
election, which approval or disapproval shall be given after
such election is made.
(b) Value of shares. Shares of Common Stock
delivered in payment of all or any part of the amounts payable
in connection with the exercise of an Option, and shares of
Common Stock withheld for such payment, shall be valued for
such
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purpose at their Fair Market Value as of the exercise date.
Notwithstanding the foregoing, if a Holder who is permitted to
do so pursuant to the applicable Agreement elects to have
shares of Common Stock issuable upon exercise of an Option
withheld in payment of all or any part of the amounts payable
in connection with the exercise of such Option.
(c) Issuance of Shares. The Company shall effect
the transfer of the shares of Common Stock purchased under the
Option as soon as practicable after the exercise thereof and
payment in full of the purchase price therefor and of any
amounts required by Section 10.10, and within a reasonable
time thereafter such transfer shall be evidenced on the books
of the Company. No Holder or other person exercising an Option
shall have any of the rights of a stockholder of the Company
with respect to shares of Common Stock subject to an Option
granted under the Plan until due exercise and full payment has
been made. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to the date of
such due exercise and full payment.
6.7 Nontransferability. Unless otherwise determined by the
Committee and provided in the applicable Agreement, Options shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and, except as otherwise
required pursuant to a qualified domestic relations order, Options may be
exercised during the lifetime of the Holder thereof only by such Holder (or his
or her court appointed legal representative).
Article VII
SARs
7.1 Grant of SARs. Subject to the limitations of the Plan, SARs
may be granted by the Committee to such eligible persons in such numbers and at
such times during the term of the Plan as the Committee shall determine. An SAR
may be granted to a Holder of an Option (hereinafter called a "related Option")
with respect to all or a portion of the shares of Common Stock subject to the
related Option (a "Tandem SAR") or may be granted separately to an eligible
employee (a "Free Standing SAR"). Subject to the limitations of the Plan, SARs
shall be exercisable in whole or in part upon notice to the Company upon such
terms and conditions as are provided in the Agreement. Except for Awards
described in either of Sections 3.4 or 10.1, no Person may be granted in any
calendar year SARs covering more than 1,000,000 shares of either TCOMA or LBTYA
(adjusted as provided in Section 4.2).
7.2 Tandem SARS. A Tandem SAR may be granted either concurrently
with the grant of the related Option or (if the related Option is a
Nonqualified Option) at any time thereafter prior to the complete exercise,
termination, expiration or cancellation of such related Option. Tandem SARs
shall be exercisable only at the time and to the extent that the related Option
is exercisable (and may be subject to such additional limitations on
exercisability as the Agreement may provide), and in no event after the
complete termination or full exercise of the related Option. Upon the
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exercise or termination of the related Option, the Tandem SARs with respect
thereto shall be canceled automatically to the extent of the number of shares
of Common Stock with respect to which the related Option was so exercised or
terminated. Subject to the limitations of the Plan, upon the exercise of a
Tandem SAR, the Holder thereof shall be entitled to receive from the Company,
for each share of the appropriate of TCOMA or LBTYA with respect to which the
Tandem SAR is being exercised, consideration (in the form determined as
provided in Section 7.4) equal in value to the excess of the Fair Market Value
of a share of the appropriate of TCOMA or LBTYA on the date of exercise over
the related Option purchase price per share; provided, however, that the
Committee may, in any Agreement granting Tandem SARs, provide that the
appreciation realizable upon exercise thereof shall be measured from a base
higher than the related Option purchase price.
7.3 Free Standing SARs. Free Standing SARs shall be exercisable at
the time, to the extent and upon the terms and conditions set forth in the
applicable Agreement. The base price of a Free Standing SAR shall be not less
than 100% of the Fair Market Value of the appropriate of TCOMA or LBTYA on the
date of grant of the Free Standing SAR. Subject to the limitations of the
Plan, upon the exercise of a Free Standing SAR, the Holder thereof shall be
entitled to receive from the Company, for each share of Common Stock with
respect to which the Free Standing SAR is being exercised, consideration (in
the form determined as provided in Section 7.4) equal in value to the excess of
the Fair Market Value of a share of the appropriate of TCOMA or LBTYA on the
date of exercise over the base price per share of such Free Standing SAR.
7.4 Consideration. The consideration to be received upon the
exercise of an SAR by the Holder shall be paid in cash, shares of Common Stock
(valued at Fair Market Value on the date of exercise of such SAR) or a
combination of cash and shares of Common Stock as specified in the Agreement,
or, if so provided in the Agreement, either as determined by the Committee in
its sole discretion or as elected by the Holder, provided that the Committee
shall have the sole discretion to approve or disapprove the election by a
Holder to receive cash in full or partial settlement of an SAR, which approval
or disapproval shall be given after such election is made. The Company's
obligation arising upon the exercise of an SAR may be paid currently or on a
deferred basis with such interest or earnings equivalent as the Committee may
determine. No fractional shares of Common Stock shall be issuable upon exercise
of an SAR and, unless otherwise provided in the applicable Agreement, the
Holder will receive cash in lieu of fractional shares. Unless the Committee
shall otherwise determine, to the extent a Free Standing SAR is exercisable, it
will be exercised automatically for cash on its expiration date.
7.5 Limitations. The applicable Agreement may provide for a limit
on the amount payable to a Holder upon exercise of SARs at any time or in the
aggregate, for a limit on the number of SARs that may be exercised by the
Holder in whole or in part for cash during any specified period, for a limit on
the time periods during which a Holder may exercise SARs and for such other
limits on the rights of the Holder and such other terms and conditions of the
SAR as the Committee may determine, including, without limitation, a condition
that the SAR may be exercised only in accordance with rules and regulations
adopted by the Committee from time to time. Unless otherwise so provided in the
applicable Agreement, any such limit relating to a Tandem SAR shall not
restrict the exercisability of the related Option. Such rules and regulations
may govern the right
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to exercise SARs granted prior to the adoption or amendment of such rules and
regulations as well as SARs granted thereafter.
7.6 Exercise. For purposes of this Article VII, the date of
exercise of an SAR shall mean the date on which the Company shall have received
notice from the Holder of the SAR of the exercise of such SAR, except that, if
in order to meet the exemptive requirements of Rule 16b-3 a Holder exercises
any SAR in whole or in part for cash during a window period determined in
accordance with paragraph (e)(3) of such Rule, then such SAR shall be deemed to
have been exercised on the day during such window period on which the highest
reported last sale price of a share of Common Stock as reported on NASDAQ
occurred and the Fair Market Value of such shares shall be deemed to be such
highest reported last sale price.
7.7 Nontransferability. Unless otherwise determined by the
Committee and provided in the applicable Agreement, SARs shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and, except as otherwise
required pursuant to a qualified domestic relations order, SARs may be
exercised during the lifetime of the Holder thereof only by such Holder (or his
or her court appointed legal representative).
Article VIII
Restricted Shares
8.1 Grant. Subject to the limitations of the Plan, the Committee
shall designate those eligible persons to be granted awards of Restricted
Shares, shall determine the time when each such Award shall be granted, whether
shares of Common Stock covered by awards of Restricted Shares will be issued at
the beginning or the end of the Restriction Period and whether Dividend
Equivalents will be paid during the Restriction Period in the event shares of
the Common Stock are to be issued at the end of the Restriction Period, and
shall designate (or set forth the basis for determining) the Vesting Date or
Vesting Dates for each award of Restricted Shares and may prescribe other
restrictions, terms and conditions applicable to the vesting of such Restricted
Shares in addition to those provided in the Plan. The Committee shall determine
the price, if any, to be paid by the Holder for the Restricted Shares;
provided, however, that the issuance of Restricted Shares shall be made for at
least the minimum consideration necessary to permit such Restricted Shares to
be deemed fully paid and nonassessable. All determinations made by the
Committee pursuant to this Section 8.1 shall be specified in the Agreement.
8.2 Issuance of Restricted Shares at Beginning of the Restriction
Period. If shares of Common Stock are issued at the beginning of the
Restriction Period, the stock certificate or certificates representing such
Restricted Shares shall be registered in the name of the Holder to whom such
Restricted Shares shall have been awarded. During the Restriction Period,
certificates representing the Restricted Shares and any securities constituting
Retained Distributions shall bear a restrictive legend to the effect that
ownership of the Restricted Shares (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
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terms and conditions provided in the Plan and the applicable Agreement. Such
certificates shall remain in the custody of the Company and the Holder shall
deposit with the Company stock powers or other instruments of assignment, each
endorsed in blank, so as to permit retransfer to the Company of all or any
portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and the applicable Agreement.
8.3 Restrictions. Restricted Shares issued at the beginning of the
Restriction Period shall constitute issued and outstanding shares of Common
Stock for all corporate purposes. The Holder will have the right to vote such
Restricted Shares, to receive and retain such dividends and distributions, as
the Committee may in its sole discretion designate, paid or distributed on such
Restricted Shares and to exercise all other rights, powers and privileges of a
Holder of Common Stock with respect to such Restricted Shares; except, that (a)
the Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Shares until the Restriction Period
shall have expired and unless all other vesting requirements with respect
thereto shall have been fulfilled or waived; (b) the Company will retain
custody of the stock certificate or certificates representing the Restricted
Shares during the Restriction Period as provided in Section 8.2; (c) other than
such dividends and distributions as the Committee may in its sole discretion
designate, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Shares (and
such Retained Distributions will be subject to the same restrictions, terms and
vesting and other conditions as are applicable to the Restricted Shares) until
such time, if ever, as the Restricted Shares with respect to which such
Retained Distributions shall have been made, paid or declared shall have become
vested, and such Retained Distributions shall not bear interest or be
segregated in a separate account; (d) the Holder may not sell, assign,
transfer, pledge, exchange, encumber or dispose of the Restricted Shares or any
Retained Distributions or his interest in any of them during the Restriction
Period; and (e) a breach of any restrictions, terms or conditions provided in
the Plan or established by the Committee with respect to any Restricted Shares
or Retained Distributions will cause a forfeiture of such Restricted Shares and
any Retained Distributions with respect thereto.
8.4 Issuance of Stock at End of the Restriction Period. Restricted
Shares issued at the end of the Restriction Period shall not constitute issued
and outstanding shares of Common Stock and the Holder shall not have any of the
rights of a stockholder with respect to the shares of Common Stock covered by
such an award of Restricted Shares, in each case until such shares shall have
been transferred to the Holder at the end of the Restriction Period. If and to
the extent that shares of Common Stock are to be issued at the end of the
Restriction Period, the Holder shall be entitled to receive Dividend
Equivalents with respect to the shares of Common Stock covered thereby either
(i) during the Restriction Period or (ii) in accordance with the rules
applicable to Retained Distributions, as the Committee may specify in the
Agreement.
8.5 Cash Awards. In connection with any award of Restricted
Shares, an Agreement may provide for the payment of a cash amount to the Holder
of such Restricted Shares at any time after such Restricted Shares shall have
become vested. Such cash awards shall be payable in accordance with such
additional restrictions, terms and conditions as shall be prescribed by the
Committee in
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the Agreement and shall be in addition to any other salary, incentive, bonus or
other compensation payments which such Holder shall be otherwise entitled or
eligible to receive from the Company.
8.6 Completion of Restriction Period. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares
shall become vested to the extent that the Restricted Shares related thereto
shall have become vested and (c) any cash award to be received by the Holder
with respect to such Restricted Shares shall become payable, all in accordance
with the terms of the applicable Agreement. Any such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall not
become vested shall be forfeited to the Company and the Holder shall not
thereafter have any rights (including dividend and voting rights) with respect
to such Restricted Shares, Retained Distributions and any unpaid Dividend
Equivalents that shall have been so forfeited. The Committee may, in its
discretion, provide that the delivery of any Restricted Shares, Retained
Distributions and unpaid Dividend Equivalents that shall have become vested,
and payment of any cash awards that shall have become payable, shall be
deferred until such date or dates as the recipient may elect. Any election of a
recipient pursuant to the preceding sentence shall be filed in writing with the
Committee in accordance with such rules and regulations, including any deadline
for the making of such an election, as the Committee may provide.
Article IX
Stock Units
9.1 Grant. In addition to granting awards of Options, SARs and
Restricted Shares, the Committee shall have authority to grant to eligible
persons awards of Stock Units which may be in the form of Common Stock or
units, the value of which is based, in whole or in part, on the Fair Market
Value of the Common Stock. Subject to the provisions of the Plan, including any
rules established pursuant to Section 9.2, awards of Stock Units shall be
subject to such terms, restrictions, conditions, vesting requirements and
payment rules as the Committee may determine in its sole discretion, which need
not be identical for each Award. The determinations made by the Committee
pursuant to this Section 9.1 shall be specified in the applicable Agreement.
9.2 Rules. The Committee may, in its sole discretion, establish
any or all of the following rules for application to an award of Stock Units:
(a) Any shares of Common Stock which are part of
an award of Stock Units may not be assigned, sold,
transferred, pledged or otherwise encumbered prior to the date
on which the shares are issued, or if later, the date provided
by the Committee at the time of the Award.
(b) Such Awards may provide for the payment of
cash consideration by the person to whom such Award is granted
or provide that the Award, and Common
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Stock to be issued in connection therewith, if applicable,
shall be delivered without the payment of cash consideration;
provided, however, that the issuance of any shares of Common
Stock in connection with an award of Stock Units shall be for
at least the minimum consideration necessary to permit such
shares to be deemed fully paid and nonassessable.
(c) Awards of Stock Units may relate in whole or
in part to performance or other criteria established by the
Committee at the time of grant.
(d) Awards of Stock Units may provide for
deferred payment schedules, vesting over a specified period of
employment, the payment (on a current or deferred basis) of
dividend equivalent amounts with respect to the number of
shares of Common Stock covered by the Award, and elections by
the employee to defer payment of the Award or the lifting of
restrictions on the Award, if any.
(e) In such circumstances as the Committee may
deem advisable, the Committee may waive or otherwise remove,
in whole or in part, any restrictions or limitations to which
a Stock Unit Award was made subject at the time of grant.
Article X
General Provisions
10.1 Acceleration of Options, SARS, Restricted Shares and
Stock Units.
(a) Death or Disability. If a Holder's employment
shall terminate by reason of death or Disability,
notwithstanding any contrary waiting period, installment
period, vesting schedule or Restriction Period in any
Agreement or in the Plan, unless the applicable Agreement
provides otherwise: (i) in the case of an Option or SAR, each
outstanding Option or SAR granted under the Plan shall
immediately become exercisable in full in respect of the
aggregate number of shares covered thereby; (ii) in the case
of Restricted Shares, the Restriction Period applicable to
each such award of Restricted Shares shall be deemed to have
expired and all such Restricted Shares, any related Retained
Distributions and any unpaid Dividend Equivalents shall become
vested and any cash amounts payable pursuant to the applicable
Agreement shall be adjusted in such manner as may be provided
in the Agreement, and (iii) in the case of Stock Units, each
such award of Stock Units shall become vested in full.
(b) Approved Transactions; Board Change; Control
Purchase. In the event of any Approved Transaction, Board
Change or Control Purchase, notwithstanding any contrary
waiting period, installment period, vesting schedule or
Restriction Period in any Agreement or in the Plan, unless the
applicable Agreement
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provides otherwise: (i) in the case of an Option or SAR, each
such outstanding Option or SAR granted under the Plan shall
become exercisable in full in respect of the aggregate number
of shares covered thereby; (ii) in the case of Restricted
Shares, the Restriction Period applicable to each such award
of Restricted Shares shall be deemed to have expired and all
such Restricted Shares, any related Retained Distributions and
any unpaid Dividend Equivalents shall become vested and any
cash amounts payable pursuant to the applicable Agreement
shall be adjusted in such manner as may be provided in the
Agreement, and (iii) in the case of Stock Units, each such
award of Stock Units shall become vested in full, in each case
effective upon the Board Change or Control Purchase or
immediately prior to consummation of the Approved Transaction;
provided, however, that any Options, SARs or, if applicable,
Stock Units not theretofore exercised shall terminate upon
consummation of the Approved Transaction. Notwithstanding the
foregoing, unless otherwise provided in the applicable
Agreement, the Committee may, in its discretion, determine
that any or all outstanding Awards of any or all types granted
pursuant to the Plan will not vest or become exercisable on an
accelerated basis in connection with an Approved Transaction
and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall
have taken, or made effective provision for the taking of,
such action as in the opinion of the Committee is equitable
and appropriate to substitute a new Award for such Award or to
assume such Award and in order to make such new or assumed
Award, as nearly as may be practicable, equivalent to the old
Award (before giving effect to any acceleration of the vesting
or exercisability thereof), taking into account, to the extent
applicable, the kind and amount of securities, cash or other
assets into or for which the Common Stock may be changed,
converted or exchanged in connection with the Approved
Transaction.
10.2 Termination of Employment.
(a) General. If a Holder's employment shall
terminate prior to the complete exercise of an Option or SAR
(or deemed exercise thereof, as provided in Section 7.2) or
during the Restriction Period with respect to any Restricted
Shares or prior to the vesting or complete exercise of any
Stock Units, then such Option, SAR or Stock Unit shall
thereafter be exercisable, and the Holder's rights to any
unvested Restricted Shares, Retained Distributions, unpaid
Dividend Equivalents and cash amounts and any such unvested
Stock Units shall thereafter vest solely to the extent
provided in the applicable Agreement; provided, however, that
(i) no Option or SAR may be exercised after the scheduled
expiration date thereof, (ii) if the Holder's employment
terminates by reason of death or Disability, the Option or SAR
shall remain exercisable for a period of at least one year
following such termination (but not later than the scheduled
expiration of such Option or SAR); and (iii) any termination
by the Company for cause will be treated in accordance with
the provisions of Section 10.2.
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(b) Termination by Company for Cause. If a
Holder's employment with the Company or a Subsidiary shall be
terminated by the Company or such Subsidiary during the
Restriction Period with respect to any Restricted Shares, or
prior to the exercise of any Option or SAR, or prior to the
vesting or exercise of any Stock Unit, for cause (for these
purposes, cause shall have the meaning ascribed thereto in any
employment agreement to which such Holder is a party or, in
the absence thereof, shall include but not be limited to,
insubordination, dishonesty, incompetence, moral turpitude,
other misconduct of any kind and the refusal to perform his
duties and responsibilities for any reason other than illness
or incapacity; provided, however, that if such termination
occurs within 12 months after an Approved Transaction, Control
Purchase or Board Change, termination for cause shall mean
only a felony conviction for fraud, misappropriation or
embezzlement), then (i) all Options and SARs and all unvested
or unexercised Stock Units held by such Holder shall
immediately terminate and (ii) such Holder's rights to all
Restricted Shares, Retained Distributions, any unpaid Dividend
Equivalents and any cash awards shall be forfeited
immediately.
(c) Miscellaneous. The Committee may determine
whether any given leave of absence constitutes a termination
of employment; provided, however, that for purposes of the
Plan (i) a leave of absence, duly authorized in writing by the
Company for military service or sickness, or for any other
purpose approved by the Company if the period of such leave
does not exceed 90 days, and (ii) a leave of absence in excess
of 90 days, duly authorized in writing by the Company,
provided the employee's right to reemployment is guaranteed
either by statute or contract, shall not be deemed a
termination of employment. Awards made under the Plan shall
not be affected by any change of employment so long as the
Holder continues to be an employee of the Company or any
Subsidiary.
10.3 Right of company to Terminate Employment. Nothing contained in
the Plan or in any Award, and no action of the Company or the Committee with
respect thereto, shall confer or be construed to confer on any Holder any right
to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of the Holder at any time, with or without cause; subject,
however, to the provisions of any employment agreement between the Holder and
the Company or any Subsidiary.
10.4 Nonalienation of Benefits. No right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefits.
10.5 Written Agreement. Each grant of an Option under the Plan
shall be evidenced by a stock option agreement which shall designate the
Options granted thereunder as Nonqualified
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<PAGE> 17
Stock Options; each SAR shall be evidenced by a stock appreciation rights
agreement; each award of Restricted Shares shall be evidenced by a restricted
shares agreement and each award of Stock Units shall be evidenced by a stock
units agreement, each in such form and containing such terms and provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve; provided, however, that if more than one type of Award is made
to the same Holder, such Awards may be evidenced by a single agreement with
such Holder. Each grantee of an Option, SAR, Restricted Shares or Stock Units
shall be notified promptly of such grant and a written agreement shall be
promptly executed and delivered by the Company and the grantee, provided that,
in the discretion of the Committee, such grant of Options, SARS, Restricted
Shares or Stock Units shall terminate if such written agreement is not signed
by such grantee (or his attorney) and delivered to the Company within 60 days
after the date the Committee approved such grant. Any such written agreement
may contain (but shall not be required to contain) such provisions as the
Committee deems appropriate (i) to insure that the penalty provisions of
Section 4999 of the Code will not apply to any stock or cash received by the
Holder from the Company or (ii) to provide cash payments to the Holder to
mitigate the impact of such penalty provisions upon the Holder. Any such
agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b).
10.6 Designation of Beneficiaries. Each person who shall be granted
an Award under the Plan may designate a beneficiary or beneficiaries and may
change such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on a form to be prescribed by
it, provided that no such designation shall be effective unless so filed prior
to the death of such person.
10.7 Right of First Refusal. The Agreements may contain such
provisions as the Committee shall determine to the effect that if a Holder
elects to sell all or any shares of Common Stock that such Holder acquired upon
the exercise of an Option or SAR or upon the vesting of Restricted Shares or
Stock Units awarded under the Plan, then such Holder shall not sell such shares
unless such Holder shall have first offered in writing to sell such shares to
the Company at Fair Market Value on a date specified in such offer (which date
shall be at least three business days and not more than ten business days
following the date of such offer). In any such event, certificates representing
shares issued upon exercise of Options or SARs and the vesting of Restricted
Shares or Stock Units shall bear a restrictive legend to the effect that
transferability of such shares are subject to the restrictions contained in the
Plan and the applicable Agreement and the Company may cause the transfer agent
for the Common Stock to place a stop transfer order with respect to such
shares.
10.8 Termination and Amendment.
(a) General. Unless the Plan shall theretofore
have been terminated as hereinafter provided, no Awards may be
made under the Plan on or after the tenth anniversary of the
Effective Date. The Board or the Committee may at any time
prior to the tenth anniversary of the Effective Date terminate
the Plan, and may, from
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time to time, suspend or discontinue the Plan or modify or
amend the Plan in such respects as it shall deem advisable.
(b) Modification. No termination, modification or
amendment of the Plan may, without the consent of the person
to whom any Award shall theretofore have been granted,
adversely affect the rights of such person with respect to
such Award. No modification, extension, renewal or other
change in any Award granted under the Plan shall be made after
the grant of such Award, unless the same is consistent with
the provisions of the Plan. With the consent of the Holder and
subject to the terms and conditions of the Plan (including
Section 10.8(a)), the Committee may amend outstanding
Agreements with any Holder, including, without limitation, any
amendment which would (i) accelerate the time or times at
which the Award may be exercised and/or (ii) extend the
scheduled expiration date of the Award. Without limiting the
generality of the foregoing, the Committee may, but solely
with the Holder's consent unless otherwise provided in the
Agreement, agree to cancel any Award under the Plan and issue
a new Award in substitution therefor, provided that the Award
so substituted shall satisfy all of the requirements of the
Plan as of the date such new Award is made. Nothing contained
in the foregoing provisions of this Section 10.08(b) shall be
construed to prevent the Committee from providing in any
Agreement that the rights of the Holder with respect to the
Award evidenced thereby shall be subject to such rules and
regulations as the Committee may, subject to the express
provisions of the Plan, adopt from time to time, or impair the
enforceability of any such provision.
10.9 Government and Other Regulations. The obligation of the
Company with respect to Awards shall be subject to all applicable laws, rules
and regulations and such approvals by any governmental agencies as may be
required, including, without limitation, the effectiveness of any registration
statement required under the Securities Act of 1933, and the rules and
regulations of any securities exchange or association on which the Common Stock
may be listed or quoted. For so long as the Common Stock is registered under
the Exchange Act, the Company shall use its reasonable efforts to comply with
any legal requirements (i) to maintain a registration statement in effect under
the Securities Act of 1933 with respect to all shares of Common Stock that may
be issued to Holders under the Plan, and (ii) to file in a timely manner all
reports required to be filed by it under the Exchange Act.
10.10 Withholding. The Company's obligation to deliver shares of
Common Stock or pay cash in respect of any Award under the Plan shall be
subject to applicable federal, state and local tax withholding requirements.
Federal, state and local withholding tax due at the time of an Award, upon the
exercise of any Option or SAR or upon the vesting of, or expiration of
restrictions with respect to, Restricted Shares or Stock Units, as appropriate,
may, in the discretion of the Committee, be paid in shares of Common Stock
already owned by the Holder or through the withholding of shares otherwise
issuable to such Holder, upon such terms and conditions (including, without
limitation, the conditions referenced in Section 6.6) as the Committee shall
determine. If the Holder shall fail to pay, or make arrangements satisfactory
to the Committee for the payment, to the
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<PAGE> 19
Company of all such federal, state and local taxes required to be withheld by
the Company, then the Company shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due to such Holder an
amount equal to any federal, state or local taxes of any kind required to be
withheld by the Company with respect to such Award.
10.11 Separability. If any provision of this Plan is found not to be
in compliance with applicable law and thereby void or invalid, such provision
shall be null and void to the extent required by law but the other provisions
of this Plan shall remain unaffected.
10.12 Non-Exclusivity of the Plan. The adoption of the Plan by the
Board shall not be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding
of stock and cash otherwise then under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
10.13 Exclusion from Pension and Profit-Sharing Computation. By
acceptance of an Award, unless otherwise provided in the applicable Agreement,
each Holder shall be deemed to have agreed that such Award is special incentive
compensation that will not be taken into account, in any manner, as salary,
compensation or bonus in determining the amount of any payment under any
pension, retirement or other employee benefit plan, program or policy of the
Company or any Subsidiary. In addition, each beneficiary of a deceased Holder
shall be deemed to have agreed that such Award will not affect the amount of
any life insurance coverage, if any, provided by the Company on the life of the
Holder which is payable to such beneficiary under any life insurance plan
covering employees of the Company or any Subsidiary.
10.14 Unfunded Plan. Neither the Company nor any Subsidiary shall be
required to segregate any cash or any shares of Common Stock which may at any
time be represented by Awards and the Plan shall constitute an "unfunded" plan
of the Company. Except as provided in Article VII with respect to awards of
Restricted Shares and except as expressly set forth in writing, no employee
shall have voting or other rights with respect to shares of Common Stock prior
to the delivery of such shares. Neither the Company nor any Subsidiary shall,
by any provisions of the Plan, be deemed to be a trustee of any Common Stock or
any other property, and the liabilities of the Company and any Subsidiary to
any employee pursuant to the Plan shall be those of a debtor pursuant to such
contract obligations as are created by or pursuant to the Plan, and the rights
of any employee, former employee or beneficiary under the Plan shall be limited
to those of a general creditor of the Company or the applicable Subsidiary, as
the case may be. In its sole discretion, the Board may authorize the creation
of trusts or other arrangements to meet the obligations of the Company under
the Plan, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
10.15 Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
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10.16 Accounts. The delivery of any shares of Common Stock and the
payment of any amount in respect of an Award shall be for the account of the
Company or the applicable Subsidiary, as the case may be, and any such delivery
or payment shall not be made until the recipient shall have paid or made
satisfactory arrangements for the payment of any applicable withholding taxes
as provided in Section 10.10.
10.17 Legends. In addition to any legend contemplated by Section
10.7, each certificate evidencing Common Stock subject to an Award shall bear
such legends as the Committee deems necessary or appropriate to reflect or
refer to any terms, conditions or restrictions of the Award applicable to such
shares, including, without limitation, any to the effect that the shares
represented thereby may not be disposed of unless the Company has received an
opinion of counsel, acceptable to the Company, that such disposition will not
violate any federal or state securities laws.
10.18 Company's Rights. The grant of Awards pursuant to the Plan
shall not affect in any way the right or power of the Company to make
reclassifications, reorganizations or other changes of or to its capital or
business structure or to merge, consolidate, liquidate, sell or otherwise
dispose of all or any part of its business or assets.
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EXHIBIT 10.3
TELE-COMMUNICATIONS, INC.
1996 STOCK INCENTIVE PLAN
Article I
Purpose and Effectiveness
1.1 Purpose. The purpose of the Tele-Communications, Inc. 1996
Stock Incentive Plan (the "Plan") is to promote the success of
Tele-Communications, Inc. (the "Company") by providing a method whereby (i)
eligible employees of the Company and its Subsidiaries and (ii) independent
contractors providing services to the Company or its Subsidiaries may be
awarded additional remuneration for services rendered and encouraged to invest
in capital stock of the Company, thereby increasing their proprietary interest
in the Company's businesses, encouraging them to remain in the employ of the
Company or its Subsidiaries, and increasing their personal interest in the
continued success and progress of the Company or its Subsidiaries. The Plan is
also intended to aid (i) in attracting persons of exceptional ability to become
officers and employees of the Company and its Subsidiaries and (ii) inducing
independent contractors to agree to provide services to the Company.
1.2 Effective Date. The Plan shall be effective on December 13,
1995 but shall be subject to the approval by the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock of
the Company represented in person or by proxy and entitled to vote, at the 1996
annual meeting of stockholders of the Company. Any Awards under the Plan made
prior to such stockholder approval shall be conditioned upon such approval and
shall be null and void if such approval is not obtained.
Article II
Definitions
2.1 Certain Defined Terms. Capitalized terms not defined elsewhere
in the Plan shall have the following meanings (whether used in the singular or
plural):
"Affiliate" of the Company means any corporation,
partnership, or other business association that, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with the Company.
"Agreement" means a stock option agreement, stock
appreciation rights agreement, restricted shares agreement or stock
units agreement, or an agreement evidencing more than one type of
Award, specified in Section 10.5, as any such Agreement may be
supplemented or amended from time to time.
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"Approved Transaction" means any transaction in which
the Board (or, if approval of the Board is not required as a
matter of law, the stockholders of the Company) shall approve
(i) any consolidation or merger of the Company, or binding
share exchange, pursuant to which shares of Common Stock would
be changed or converted into or exchanged for cash, securities
or other property, other than any such transaction in which
the common stockholders of the Company immediately prior to
such transaction have the same proportionate ownership of the
common stock of, and voting power with respect to, the
surviving corporation immediately after such transaction, (ii)
any merger, consolidation or binding share exchange to which
the Company is a party as a result of which the persons who
are common stockholders of the Company immediately prior
thereto have less than a majority of the combined voting power
of the outstanding capital stock of the Company ordinarily
(and apart from the rights accruing under special
circumstances) having the right to vote in the election of
directors immediately following such merger, consolidation or
binding share exchange, (iii) the adoption of any plan or
proposal for the liquidation or dissolution of the Company, or
(iv) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company.
"Award" means a grant of Options, SARS, Restricted
Shares and/or Stock Units under this Plan.
"Board" means the Board of Directors of the Company.
"Board Change" means, during any period of two
consecutive years, individuals who at the beginning of such
period constituted the entire Board cease for any reason to
constitute a majority thereof unless the election, or the
nomination for election, of each new director was approved by
a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or
statutes thereto. Reference to any specific Code section shall
include any successor section.
"Committee" means the committee of the Board
appointed pursuant to Section 3.1 to administer the Plan.
"Common Stock" means either TCOMA or LBTYA.
"Company" means Tele-Communications, Inc., a Delaware
corporation.
"Control Purchase" means any transaction (or series
of related transactions) in which (i) any person (as such term
is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), corporation or other entity (other than the Company, any
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<PAGE> 3
Subsidiary or any employee benefit plan sponsored by the
Company or any Subsidiary) shall purchase any Common Stock (or
securities convertible into Common Stock) for cash, securities
or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board, or
(ii) any person (as such term is so defined), corporation or
other entity (other than the Company, any Subsidiary, any
employee benefit plan sponsored by the Company or any
Subsidiary, or any Controlling Person (as defined below))
shall become the "beneficial owner" (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 20% or more of the
combined voting power of the then outstanding securities of
the Company ordinarily (and apart from the rights accruing
under special circumstances) having the right to vote in the
election of directors (calculated as provided in Rule 13d-3(d)
under the Exchange Act in the case of rights to acquire the
Company's securities), other than in a transaction (or series
of related transactions) approved by the Board. For purposes
of this definition, "Controlling Person" means each of (a) the
Chairman of the Board, the President and each of the directors
of the Company as of the Effective Date of this Plan, (b) the
respective family members, estates and heirs of each of the
persons referred to in clause (a) above and any trust or other
investment vehicle for the primary benefit of any of such
persons or their respective family members or heirs and (c)
Keams-Tribune Corporation, a Delaware corporation. As used
with respect to any person, the term "family member" means the
spouse, siblings and lineal descendants of such person.
"Disability" means the inability to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months.
"Dividend Equivalents" means, with respect to
Restricted Shares to be issued at the end of the Restriction
Period, to the extent specified by the Committee only, an
amount equal to all dividends and other distributions (or the
economic equivalent thereof) which are payable to stockholders
of record during the Restriction Period on a like number of
shares of Common Stock.
"Effective Date" means the date on which the Plan
becomes effective pursuant to Section 1.2.
"Equity security" shall have the meaning ascribed to
such term in Section 3(a)(11) of the Exchange Act, and an
equity security of an issuer shall have the meaning ascribed
thereto in Rule 16a-1 promulgated under the Exchange Act, or
any successor Rule.
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<PAGE> 4
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute
or statutes thereto. Reference to any specific Exchange Act
section shall include any successor section.
"Fair Market Value" of a share of Common Stock on any
day means the last sale price (or, if no last sale price is
reported, the average of the high bid and low asked prices)
for a share of the appropriate of TCOMA or LBTYA, on such day
(or, if such day is not a trading day, on the next preceding
trading day) as reported on NASDAQ or, if not reported on
NASDAQ, as quoted by the National Quotation Bureau
Incorporated, or if the appropriate of TCOMA or LBTYA is
listed on an exchange, on the principal exchange on which the
appropriate of TCOMA or LBTYA is listed. If for any day the
Fair Market Value of a share of the appropriate of TCOMA or
LBTYA is not determinable by any of the foregoing means, then
the Fair Market Value for such day shall be determined in good
faith by the Committee on the basis of such quotations and
other considerations as the Committee deems appropriate.
"Free Standing SAR" has the meaning ascribed thereto
in Section 7.1.
"Holder" means an employee of the Company or a
Subsidiary or an independent contractor who has received an
Award under this Plan.
"Incentive Stock Option" means a stock option granted
under Article VI which is intended to be an incentive stock
option within the meaning of Section 422 of the Code.
"LBTYA" means the Series A Liberty Group Common
Stock, $1.00 par value per share, of the Company.
"NASDAQ" means the National Association of Securities
Dealers, Inc. Automated Quotation System.
"Nonqualified Stock Option" means a stock option
granted under Article VI that is designated a nonqualified
stock option.
"Option" means any Incentive Stock Option or
Nonqualified Stock Option.
"Plan" has the meaning ascribed thereto in Section
1.1.
"Qualified domestic relations order" means a
qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the
rules thereunder.
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"Restricted Shares" means shares of Common Stock or
the right to receive shares of Common Stock, as the case may
be, awarded pursuant to Article VIII.
"Restriction Period" means a period of time beginning
on the date of each award of Restricted Shares and ending on
the Vesting Date with respect to such award.
"Retained Distribution" has the meaning ascribed
thereto in Section 8.3.
"Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, or any successor Rule. References to paragraphs
of Rule 16b-3 shall include the comparable provisions of any
successor Rule.
"SARs" means stock appreciation rights, awarded
pursuant to Article VII, with respect to shares of Common
Stock.
"Stock Unit Award" has the meaning ascribed thereto
in Section 9.1.
"Subsidiary" of the Company means any present or
future subsidiary (as defined in Section 424(f) of the Code)
of the Company or any business entity in which the Company
owns directly or indirectly, 50% or more of the voting,
capital or profits interests. An entity shall be deemed a
subsidiary of the Company for purposes of this definition only
for such periods as the requisite ownership or control
relationship is maintained.
"Tandem SARs" has the meaning ascribed thereto in
Section 7.1.
"TCOMA" means Series A TCI Group Common Stock, $1.00
par value per share, of the Company.
"Vesting Date" with respect to any Restricted Shares
awarded hereunder means the date on which such Restricted
Shares cease to be subject to a risk of forfeiture, as
designated in or determined in accordance with the Agreement
with respect to such award of Restricted Shares pursuant to
Article VIII. If more than one Vesting Date is designated for
an award of Restricted Shares, reference in the Plan to a
Vesting Date in respect of such Award shall be deemed to refer
to each part of such Award and the Vesting Date for such part.
Article III
Administration
3.1 Committee. The Plan shall be administered by the Compensation
Committee of the Board unless a different committee is appointed by the Board.
The Committee shall be comprised
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of not less than two persons. Each member of the Committee shall be a member of
the Board who during the one year period prior to service on the Committee was
not, and during such service is not, granted or awarded equity securities
pursuant to the Plan or any other plan of the Company or any of its Affiliates
if such grant or award or participation in such plan would prevent such member
from being a "disinterested person" with respect to the Plan for purposes of
Rule 16b-3. Subject to the foregoing, the Board may from time to time appoint
members of the Committee in substitution for or in addition to members
previously appointed, may fill vacancies in the Committee and may remove
members of the Committee. The Committee shall select one of its members as its
chairman and shall hold its meetings at such times and places as it shall deem
advisable. A majority of its members shall constitute a quorum and all
determinations shall be made by a majority of such quorum. Any determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
3.2 Powers. The Committee shall have full power and authority to
grant to eligible persons Options under Article VI of the Plan, SARs under
Article VII of the Plan, Restricted Shares under Article VIII of the Plan
and/or Stock Units under Article IX of the Plan, to determine the terms and
conditions (which need not be identical) of all Awards so granted, to interpret
the provisions of the Plan and any Agreements relating to Awards granted under
the Plan, and to supervise the administration of the Plan. The Committee in
making an Award may provide for the granting or issuance of additional,
replacement or alternative Awards upon the occurrence of specified events,
including the exercise of the original Award. The Committee shall have sole
authority in the selection of persons to whom Awards may be granted under the
Plan and in the determination of the timing, pricing and amount of any such
Award, subject only to the express provisions of the Plan. In making
determinations hereunder, the Committee may take into account the nature of the
services rendered by the respective employees and independent contractors,
their present and potential contributions to the success of the Company and its
Subsidiaries and such other factors as the Committee in its discretion deems
relevant.
3.3 Interpretation. The Committee is authorized, subject to the
provisions of the Plan, to establish, amend and rescind such rules and
regulations as it deems necessary or advisable for the proper administration of
the Plan and to take such other action in connection with or in relation to the
Plan as it deems necessary or advisable. Each action and determination made or
taken pursuant to the Plan by the Committee, including any interpretation or
construction of the Plan, shall be final and conclusive for all purposes and
upon all persons. No member of the Committee shall be liable for any action or
determination made or taken by him or the Committee in good faith with respect
to the Plan.
Article IV
Shares Subject to the Plan
4.1 Number of Shares. Subject to the provisions of this Article
IV, the maximum number of shares of TCOMA with respect to which Awards may be
granted during the term of the Plan shall be 16,000,000 shares. The maximum
number of LBTYA shares with respect to which Awards may
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be granted during the term of the Plan shall be 4,000,000 shares. Shares of
Common Stock will be made available from the authorized but unissued shares of
the Company or from shares reacquired by the Company, including shares
purchased in the open market. The shares of Common Stock subject to (i) any
Award granted under the Plan that shall expire, terminate or be annulled for
any reason without having been exercised (or considered to have been exercised
as provided in Section 7.2), (ii) any Award of any SARs granted under the Plan
that shall be exercised for cash and (iii) any Award of Restricted Shares or
Stock Units that shall be forfeited prior to becoming vested (provided that the
Holder received no benefits of ownership of such Restricted Shares or Stock
Units other than voting rights and the accumulation of Retained Distributions
and unpaid Dividend Equivalents that are likewise forfeited), shall again be
available for purposes of the Plan.
4.2 Adjustments. If the Company subdivides its outstanding shares
of TCOMA or LBTYA into a greater number of shares of TCOMA or LBTYA (by stock
dividend, stock split, reclassification or otherwise) or combines its
outstanding shares of TCOMA or LBTYA into a smaller number of shares of TCOMA
or LBTYA (by reverse stock split, reclassification or otherwise), or if the
Committee determines that any stock dividend, extraordinary cash dividend,
reclassification, recapitalization, reorganization, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase TCOMA
or LBTYA, or other similar corporate event (including mergers or consolidations
other than those which constitute Approved Transactions) affects TCOMA or LBTYA
such that an adjustment is required in order to preserve the benefits or
potential benefits intended to be made available under this Plan, then the
Committee shall, in its sole discretion and in such manner as the Committee may
deem equitable and appropriate, make such adjustments to any or all of (i) the
number and kind of shares which thereafter may be awarded, optioned, or
otherwise made subject to the benefits contemplated by the Plan, (ii) the
number and kind of shares subject to outstanding Awards, and (iii) the purchase
or exercise price and the relevant appreciation base with respect to any of the
foregoing, provided, however, that the number of shares subject to any Award
shall always be a whole number. The Committee may, if deemed appropriate,
provide for a cash payment to any Holder of an Award in connection with any
adjustment made pursuant to this Section 4.2.
Article V
Eligibility
5.1 General. The persons who shall be eligible to participate in
the Plan and to receive Awards under the Plan shall be such employees
(including officers and, subject to Section 5.2, directors) of the Company and
its Subsidiaries or independent contractors as the Committee shall select.
Awards may be made to employees or independent contractors who hold or have
held Awards under this Plan or any similar or other awards under any other plan
of the Company or any of its Affiliates.
5.2 Ineligibility. No member of the Committee, while serving as
such, shall be eligible to receive an Award.
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Article VI
Stock Options
6.1 Grant of Options. Subject to the limitations of the Plan, the
Committee shall designate from time to time those eligible persons to be
granted Options, the time when each Option shall be granted to such eligible
persons, the number of shares subject to such Option, whether such Option is an
Incentive Stock Option or a Nonqualified Stock Option and, subject to Section
6.2, the purchase price of the shares of Common Stock subject to such Option.
Subject to the other provisions of the Plan, the same person may receive
Incentive Stock Options and Nonqualified Stock Options at the same time and
pursuant to the same Agreement, provided that Incentive Stock Options and
Nonqualified Stock Options are clearly designated as such.
6.2 Option Price. The price at which shares may be purchased upon
exercise of an Option shall be fixed by the Committee and may be more than,
less than or equal to the Fair Market Value of the Common Stock subject to the
Option as of the date the Option is granted.
6.3 Limitation on Grants. Except for Awards described in Section
10.1, no Person may be granted in any calendar year Options covering more than
2,000,000 shares of either TCOMA or LBTYA (adjusted as provided in Section
4.2).
6.4 Term of Options. Subject to the provisions of the Plan with
respect to death, retirement and termination of employment, the term of each
Option shall be for such period as the Committee shall determine as set forth
in the applicable Agreement.
6.5 Exercise of Options. An Option granted under the Plan shall
become (and remain) exercisable during the term of the Option to the extent
provided in the applicable Agreement and this Plan and, unless the Agreement
otherwise provides, may be exercised to the extent exercisable, in whole or in
part, at any time and from time to time during such term; provided however,
that subsequent to the grant of an Option, the Committee, at any time before
complete termination of such Option, may accelerate the time or times at which
such Option may be exercised in whole or in part (without reducing the term of
such Option).
6.6 Manner of Exercise.
(a) Form of payment. An Option shall be exercised
by written notice to the Company upon such terms and
conditions as the Agreement may provide and in accordance with
such other procedures for the exercise of Options as the
Committee may establish from time to time. The method or
methods of payment of the purchase price for the shares to be
purchased upon exercise of an Option and of any amounts
required by Section 10.10 shall be determined by the Committee
and may consist of (i) cash, (ii) check, (iii) promissory
note, (iv) whole shares of Common Stock already owned by the
Holder, (v) the withholding of shares of Common Stock issuable
upon such exercise of the Option, (vi) the delivery, together
with a properly executed
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exercise notice, of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan
proceeds required to pay the purchase price, (vii) any
combination of the foregoing methods of payment, or such other
consideration and method of payment as may be permitted for
the issuance of shares under the Delaware General Corporation
Law. The permitted method or methods of payment of the amounts
payable upon exercise of an Option, if other than in cash,
shall be set forth in the applicable Agreement and may be
subject to such conditions as the Committee deems appropriate.
Without limiting the generality of the foregoing, if a Holder
is permitted to elect to have shares of Common Stock issuable
upon exercise of an Option withheld to pay all or any part of
the amounts payable in connection with such exercise, then the
Committee shall have the sole discretion to approve or
disapprove such election, which approval or disapproval shall
be given after such election is made.
(b) Value of shares. Shares of Common Stock
delivered in payment of all or any part of the amounts payable
in connection with the exercise of an Option, and shares of
Common Stock withheld for such payment, shall be valued for
such purpose at their Fair Market Value as of the exercise
date. Notwithstanding the foregoing, if a Holder who is
permitted to do so pursuant to the applicable Agreement elects
to have shares of Common Stock issuable upon exercise of an
Option withheld in payment of all or any part of the amounts
payable in connection with the exercise of such Option and if,
in order to meet the exemptive requirements of Rule 16b-3,
such election is made during a window period determined in
accordance with paragraph (e)(3) of such Rule (or is made
prior thereto to become effective during such window period),
then for purposes of determining the Fair Market Value of the
shares of Common Stock withheld, such Option (other than an
Incentive Stock Option) shall be deemed to have been exercised
on the day during such window period on which the highest
reported last sale price of a share of the appropriate of
TCOMA or LBTYA as reported on NASDAQ occurred and the Fair
Market Value of such shares shall be deemed to be such highest
reported last sale price.
(c) Issuance of Shares. The Company shall effect
the transfer of the shares of Common Stock purchased under the
Option as soon as practicable after the exercise thereof and
payment in full of the purchase price therefor and of any
amounts required by Section 10.10, and within a reasonable
time thereafter such transfer shall be evidenced on the books
of the Company. No Holder or other person exercising an Option
shall have any of the rights of a stockholder of the Company
with respect to shares of Common Stock subject to an Option
granted under the Plan until due exercise and full payment has
been made. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to the date of
such due exercise and full payment.
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6.7 Nontransferability. Unless otherwise determined by the
Committee and provided in the applicable Agreement, Options shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and, except as otherwise
required pursuant to a qualified domestic relations order, Options may be
exercised during the lifetime of the Holder thereof only by such Holder (or his
or her court appointed legal representative).
Article VII
SARs
7.1 Grant of SARs. Subject to the limitations of the Plan, SARs
may be granted by the Committee to such eligible persons in such numbers and at
such times during the term of the Plan as the Committee shall determine. An SAR
may be granted to a Holder of an Option (hereinafter called a "related Option")
with respect to all or a portion of the shares of Common Stock subject to the
related Option (a "Tandem SAR") or may be granted separately to an eligible
employee (a "Free Standing SAR"). Subject to the limitations of the Plan, SARs
shall be exercisable in whole or in part upon notice to the Company upon such
terms and conditions as are provided in the Agreement. Except for Awards
described in either of Sections 3.4 or 10.1, no Person may be granted in any
calendar year SARs covering more than 2,000,000 shares of either TCOMA or LBTYA
(adjusted as provided in Section 4.2).
7.2 Tandem SARS. A Tandem SAR may be granted either concurrently
with the grant of the related Option or (if the related Option is a
Nonqualified Option) at any time thereafter prior to the complete exercise,
termination, expiration or cancellation of such related Option. Tandem SARs
shall be exercisable only at the time and to the extent that the related Option
is exercisable (and may be subject to such additional limitations on
exercisability as the Agreement may provide), and in no event after the
complete termination or full exercise of the related Option. Upon the exercise
or termination of the related Option, the Tandem SARs with respect thereto
shall be canceled automatically to the extent of the number of shares of Common
Stock with respect to which the related Option was so exercised or terminated.
Subject to the limitations of the Plan, upon the exercise of a Tandem SAR, the
Holder thereof shall be entitled to receive from the Company, for each share of
the appropriate of TCOMA or LBTYA with respect to which the Tandem SAR is being
exercised, consideration (in the form determined as provided in Section 7.4)
equal in value to the excess of the Fair Market Value of a share of the
appropriate of TCOMA or LBTYA on the date of exercise over the related Option
purchase price per share; provided, however, that the Committee may, in any
Agreement granting Tandem SARS, provide that the appreciation realizable upon
exercise thereof shall be measured from a base higher than the related Option
purchase price.
7.3 Free Standing SARS. Free Standing SARs shall be exercisable at
the time, to the extent and upon the terms and conditions set forth in the
applicable Agreement. The base price of a Free Standing SAR shall be not less
than 100% of the Fair Market Value of the appropriate of TCOMA or LBTYA on the
date of grant of the Free Standing SAR. Subject to the limitations of the
Plan, upon the exercise of a Free Standing SAR, the Holder thereof shall be
entitled to receive from the Company, for each share of the appropriate of
TCOMA or LBTYA with respect to which the
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Free Standing SAR is being exercised, consideration (in the form determined as
provided in Section 7.4) equal in value to the excess of the Fair Market Value
of a share of the appropriate of TCOMA or LBTYA on the date of exercise over
the base price per share of such Free Standing SAR.
7.4 Consideration. The consideration to be received upon the
exercise of an SAR by the Holder shall be paid in cash, shares of Common Stock
(valued at Fair Market Value on the date of exercise of such SAR) or a
combination of cash and shares of Common Stock as specified in the Agreement,
or, if so provided in the Agreement, either as determined by the Committee in
its sole discretion or as elected by the Holder, provided that the Committee
shall have the sole discretion to approve or disapprove the election by a
Holder to receive cash in full or partial settlement of an SAR, which approval
or disapproval shall be given after such election is made. The Company's
obligation arising upon the exercise of an SAR may be paid currently or on a
deferred basis with such interest or earnings equivalent as the Committee may
determine. No fractional shares of Common Stock shall be issuable upon exercise
of an SAR and, unless otherwise provided in the applicable Agreement, the
Holder will receive cash in lieu of fractional shares. Unless the Committee
shall otherwise determine, to the extent a Free Standing SAR is exercisable, it
will be exercised automatically for cash on its expiration date.
7.5 Limitations. The applicable Agreement may provide for a limit
on the amount payable to a Holder upon exercise of SARs at any time or in the
aggregate, for a limit on the number of SARs that may be exercised by the
Holder in whole or in part for cash during any specified period, for a limit on
the time periods during which a Holder may exercise SARs and for such other
limits on the rights of the Holder and such other terms and conditions of the
SAR as the Committee may determine, including, without limitation, a condition
that the SAR may be exercised only in accordance with rules and regulations
adopted by the Committee from time to time. Unless otherwise so provided in the
applicable Agreement, any such limit relating to a Tandem SAR shall not
restrict the exercisability of the related Option. Such rules and regulations
may govern the right to exercise SARs granted prior to the adoption or
amendment of such rules and regulations as well as SARs granted thereafter.
7.6 Exercise. For purposes of this Article VII, the date of
exercise of an SAR shall mean the date on which the Company shall have received
notice from the Holder of the SAR of the exercise of such SAR, except that, if
in order to meet the exemptive requirements of Rule 16b-3 a Holder exercises
any SAR (other than one granted in tandem with an Incentive Stock Option) in
whole or in part for cash during a window period determined in accordance with
paragraph (e)(3) of such Rule, then such SAR shall be deemed to have been
exercised on the day during such window period on which the highest reported
last sale price of a share of Common Stock as reported on NASDAQ occurred and
the Fair Market Value of such shares shall be deemed to be such highest
reported last sale price.
7.7 Nontransferability. Unless otherwise determined by the
Committee and provided in the applicable Agreement, SARs shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and, except as otherwise
required
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pursuant to a qualified domestic relations order, SARs may be exercised during
the lifetime of the Holder thereof only by such Holder (or his or her court
appointed legal representative).
Article VIII
Restricted Shares
8.1 Grant. Subject to the limitations of the Plan, the Committee
shall designate those eligible persons to be granted awards of Restricted
Shares, shall determine the time when each such Award shall be granted, whether
shares of Common Stock covered by awards of Restricted Shares will be issued at
the beginning or the end of the Restriction Period and whether Dividend
Equivalents will be paid during the Restriction Period in the event shares of
the Common Stock are to be issued at the end of the Restriction Period, and
shall designate (or set forth the basis for determining) the Vesting Date or
Vesting Dates for each award of Restricted Shares and may prescribe other
restrictions, terms and conditions applicable to the vesting of such Restricted
Shares in addition to those provided in the Plan. The Committee shall determine
the price, if any, to be paid by the Holder for the Restricted Shares;
provided, however, that the issuance of Restricted Shares shall be made for at
least the minimum consideration necessary to permit such Restricted Shares to
be deemed fully paid and nonassessable. All determinations made by the
Committee pursuant to this Section 8.1 shall be specified in the Agreement.
8.2 Issuance of Restricted Shares at Beginning of the Restriction
Period. If shares of Common Stock are issued at the beginning of the
Restriction Period, the stock certificate or certificates representing such
Restricted Shares shall be registered in the name of the Holder to whom such
Restricted Shares shall have been awarded. During the Restriction Period,
certificates representing the Restricted Shares and any securities constituting
Retained Distributions shall bear a restrictive legend to the effect that
ownership of the Restricted Shares (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the applicable Agreement. Such
certificates shall remain in the custody of the Company and the Holder shall
deposit with the Company stock powers or other instruments of assignment, each
endorsed in blank, so as to permit retransfer to the Company of all or any
portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and the applicable Agreement.
8.3 Restrictions. Restricted Shares issued at the beginning of the
Restriction Period shall constitute issued and outstanding shares of Common
Stock for all corporate purposes. The Holder will have the right to vote such
Restricted Shares, to receive and retain such dividends and distributions, as
the Committee may in its sole discretion designate, paid or distributed on such
Restricted Shares and to exercise all other rights, powers and privileges of a
Holder of Common Stock with respect to such Restricted Shares; except, that (a)
the Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Shares until the Restriction Period
shall have expired and unless all other vesting requirements with respect
thereto
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shall have been fulfilled or waived; (b) the Company will retain custody of the
stock certificate or certificates representing the Restricted Shares during the
Restriction Period as provided in Section 8.2; (c) other than such dividends
and distributions as the Committee may in its sole discretion designate, the
Company will retain custody of all distributions ("Retained Distributions")
made or declared with respect to the Restricted Shares (and such Retained
Distributions will be subject to the same restrictions, terms and vesting and
other conditions as are applicable to the Restricted Shares) until such time,
if ever, as the Restricted Shares with respect to which such Retained
Distributions shall have been made, paid or declared shall have become vested,
and such Retained Distributions shall not bear interest or be segregated in a
separate account; (d) the Holder may not sell, assign, transfer, pledge,
exchange, encumber or dispose of the Restricted Shares or any Retained
Distributions or his interest in any of them during the Restriction Period; and
(e) a breach of any restrictions, terms or conditions provided in the Plan or
established by the Committee with respect to any Restricted Shares or Retained
Distributions will cause a forfeiture of such Restricted Shares and any
Retained Distributions with respect thereto.
8.4 Issuance of Stock at End of the Restriction Period. Restricted
Shares issued at the end of the Restriction Period shall not constitute issued
and outstanding shares of Common Stock and the Holder shall not have any of the
rights of a stockholder with respect to the shares of Common Stock covered by
such an award of Restricted Shares, in each case until such shares shall have
been transferred to the Holder at the end of the Restriction Period. If and to
the extent that shares of Common Stock are to be issued at the end of the
Restriction Period, the Holder shall be entitled to receive Dividend
Equivalents with respect to the shares of Common Stock covered thereby either
(i) during the Restriction Period or (ii) in accordance with the rules
applicable to Retained Distributions, as the Committee may specify in the
Agreement.
8.5 Cash Awards. In connection with any award of Restricted
Shares, an Agreement may provide for the payment of a cash amount to the Holder
of such Restricted Shares at any time after such Restricted Shares shall have
become vested. Such cash awards shall be payable in accordance with such
additional restrictions, terms and conditions as shall be prescribed by the
Committee in the Agreement and shall be in addition to any other salary,
incentive, bonus or other compensation payments which such Holder shall be
otherwise entitled or eligible to receive from the Company.
8.6 Completion of Restriction Period. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares
shall become vested to the extent that the Restricted Shares related thereto
shall have become vested and (c) any cash award to be received by the Holder
with respect to such Restricted Shares shall become payable, all in accordance
with the terms of the applicable Agreement. Any such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall not
become vested shall be forfeited to the Company and the Holder shall not
thereafter have any rights (including dividend and voting rights) with respect
to such Restricted Shares, Retained Distributions and any unpaid Dividend
Equivalents that shall have been so forfeited. The Committee may, in its
discretion, provide that the delivery of any Restricted Shares, Retained
Distributions and unpaid Dividend
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Equivalents that shall have become vested, and payment of any cash awards that
shall have become payable, shall be deferred until such date or dates as the
recipient may elect. Any election of a recipient pursuant to the preceding
sentence shall be filed in writing with the Committee in accordance with such
rules and regulations, including any deadline for the making of such an
election, as the Committee may provide.
Article IX
Stock Units
9.1 Grant. In addition to granting awards of Options, SARs and
Restricted Shares, the Committee shall have authority to grant to eligible
persons awards of Stock Units which may be in the form of Common Stock or
units, the value of which is based, in whole or in part, on the Fair Market
Value of the Common Stock. Subject to the provisions of the Plan, including any
rules established pursuant to Section 9.2, awards of Stock Units shall be
subject to such terms, restrictions, conditions, vesting requirements and
payment rules as the Committee may determine in its sole discretion, which need
not be identical for each Award. The determinations made by the Committee
pursuant to this Section 9.1 shall be specified in the applicable Agreement.
9.2 Rules. The Committee may, in its sole discretion, establish
any or all of the following rules for application to an award of Stock Units:
(a) Any shares of Common Stock which are part of
an award of Stock Units may not be assigned, sold,
transferred, pledged or otherwise encumbered prior to the date
on which the shares are issued, or if later, the date provided
by the Committee at the time of the Award.
(b) Such Awards may provide for the payment of
cash consideration by the person to whom such Award is granted
or provide that the Award, and Common Stock to be issued in
connection therewith, if applicable, shall be delivered
without the payment of cash consideration; provided, however,
that the issuance of any shares of Common Stock in connection
with an award of Stock Units shall be for at least the minimum
consideration necessary to permit such shares to be deemed
fully paid and nonassessable.
(c) Awards of Stock Units may relate in whole or
in part to performance or other criteria established by the
Committee at the time of grant.
(d) Awards of Stock Units may provide for
deferred payment schedules, vesting over a specified period of
employment, the payment (on a current or deferred basis) of
dividend equivalent amounts with respect to the number of
shares of Common Stock covered by the Award, and elections by
the employee to defer payment of the Award or the lifting of
restrictions on the Award, if any.
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<PAGE> 15
(e) In such circumstances as the Committee may
deem advisable, the Committee may waive or otherwise remove,
in whole or in part, any restrictions or limitations to which
a Stock Unit Award was made subject at the time of grant.
Article X
General Provisions
10.1 Acceleration of Options, SARS, Restricted Shares and
Stock Units.
(a) Death or Disability. If a Holder's employment
shall terminate by reason of death or Disability,
notwithstanding any contrary waiting period, installment
period, vesting schedule or Restriction Period in any
Agreement or in the Plan, unless the applicable Agreement
provides otherwise: (i) in the case of an Option or SAR, each
outstanding Option or SAR granted under the Plan shall
immediately become exercisable in full in respect of the
aggregate number of shares covered thereby; (ii) in the case
of Restricted Shares, the Restriction Period applicable to
each such award of Restricted Shares shall be deemed to have
expired and all such Restricted Shares, any related Retained
Distributions and any unpaid Dividend Equivalents shall become
vested and any cash amounts payable pursuant to the applicable
Agreement shall be adjusted in such manner as may be provided
in the Agreement, and (iii) in the case of Stock Units, each
such award of Stock Units shall become vested in full.
(b) Approved Transactions; Board Change; Control
Purchase. In the event of any Approved Transaction, Board
Change or Control Purchase, notwithstanding any contrary
waiting period, installment period, vesting schedule or
Restriction Period in any Agreement or in the Plan, unless the
applicable Agreement provides otherwise: (i) in the case of an
Option or SAR, each such outstanding Option or SAR granted
under the Plan shall become exercisable in full in respect of
the aggregate number of shares covered thereby; (ii) in the
case of Restricted Shares, the Restriction Period applicable
to each such award of Restricted Shares shall be deemed to
have expired and all such Restricted Shares, any related
Retained Distributions and any unpaid Dividend Equivalents
shall become vested and any cash amounts payable pursuant to
the applicable Agreement shall be adjusted in such manner as
may be provided in the Agreement, and (iii) in the case of
Stock Units, each such award of Stock Units shall become
vested in full, in each case effective upon the Board Change
or Control Purchase or immediately prior to consummation of
the Approved Transaction; provided, however, that any Options,
SARs or, if applicable, Stock Units not theretofore exercised
shall terminate upon consummation of the Approved Transaction.
Notwithstanding the foregoing, unless otherwise provided in
the applicable Agreement, the Committee may, in its
discretion, determine that any or all outstanding Awards of
any or all types granted pursuant to
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the Plan will not vest or become exercisable on an accelerated
basis in connection with an Approved Transaction and/or will
not terminate if not exercised prior to consummation of the
Approved Transaction, if the Board or the surviving or
acquiring corporation, as the case may be, shall have taken,
or made effective provision for the taking of, such action as
in the opinion of the Committee is equitable and appropriate
to substitute a new Award for such Award or to assume such
Award and in order to make such new or assumed Award, as
nearly as may be practicable, equivalent to the old Award
(before giving effect to any acceleration of the vesting or
exercisability thereof), taking into account, to the extent
applicable, the kind and amount of securities, cash or other
assets into or for which the Common Stock may be changed,
converted or exchanged in connection with the Approved
Transaction.
10.2 Termination of Employment.
(a) General. If a Holder's employment shall
terminate prior to the complete exercise of an Option or SAR
(or deemed exercise thereof, as provided in Section 7.2) or
during the Restriction Period with respect to any Restricted
Shares or prior to the vesting or complete exercise of any
Stock Units, then such Option, SAR or Stock Unit shall
thereafter be exercisable, and the Holder's rights to any
unvested Restricted Shares, Retained Distributions, unpaid
Dividend Equivalents and cash amounts and any such unvested
Stock Units shall thereafter vest solely to the extent
provided in the applicable Agreement; provided, however, that
(i) no Option or SAR may be exercised after the scheduled
expiration date thereof; (ii) if the Holder's employment
terminates by reason of death or Disability, the Option or SAR
shall remain exercisable for a period of at least one year
following such termination (but not later than the scheduled
expiration of such Option or SAR); and (iii) any termination
by the Company for cause will be treated in accordance with
the provisions of Section 10.2.
(b) Termination by Company for Cause. If a
Holder's employment with the Company or a Subsidiary shall be
terminated by the Company or such Subsidiary during the
Restriction Period with respect to any Restricted Shares, or
prior to the exercise of any Option or SAR, or prior to the
vesting or exercise of any Stock Unit, for cause (for these
purposes, cause shall have the meaning ascribed thereto in any
employment agreement to which such Holder is a party or, in
the absence thereof, shall include but not be limited to,
insubordination, dishonesty, incompetence, moral turpitude,
other misconduct of any kind and the refusal to perform his
duties and responsibilities for any reason other than illness
or incapacity; provided, however, that if such termination
occurs within 12 months after an Approved Transaction, Control
Purchase or Board Change, termination for cause shall mean
only a felony conviction for fraud, misappropriation or
embezzlement), then (i) all Options and SARs and all unvested
or unexercised Stock Units held by such Holder shall
immediately terminate and (ii) such Holder's rights to all
Restricted Shares, Retained
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<PAGE> 17
Distributions, any unpaid Dividend Equivalents and any cash
awards shall be forfeited immediately.
(c) Miscellaneous. The Committee may determine
whether any given leave of absence constitutes a termination
of employment; provided, however, that for purposes of the
Plan (i) a leave of absence, duly authorized in writing by the
Company for military service or sickness, or for any other
purpose approved by the Company if the period of such leave
does not exceed 90 days, and (ii) a leave of absence in excess
of 90 days, duly authorized in writing by the Company,
provided the employee's right to reemployment is guaranteed
either by statute or contract, shall not be deemed a
termination of employment. Awards made under the Plan shall
not be affected by any change of employment so long as the
Holder continues to be an employee of the Company or any
Subsidiary.
10.3 Right of Company to Terminate Employment. Nothing contained in
the Plan or in any Award, and no action of the Company or the Committee with
respect thereto, shall confer or be construed to confer on any Holder any right
to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of the Holder at any time, with or without cause; subject,
however, to the provisions of any employment agreement between the Holder and
the Company or any Subsidiary.
10.4 Nonalienation of Benefits. No right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefits.
10.5 Written Agreement. Each grant of an Option under the Plan
shall be evidenced by a stock option agreement which shall designate the
Options granted thereunder as Incentive Stock Options or Nonqualified Stock
Options; each SAR shall be evidenced by a stock appreciation rights agreement;
each award of Restricted Shares shall be evidenced by a restricted shares
agreement and each award of Stock Units shall be evidenced by a stock units
agreement, each in such form and containing such terms and provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve; provided, however, that if more than one type of Award is made
to the same Holder, such Awards may be evidenced by a single agreement with
such Holder. Each grantee of an Option, SAR, Restricted Shares or Stock Units
shall be notified promptly of such grant and a written agreement shall be
promptly executed and delivered by the Company and the grantee, provided that,
in the discretion of the Committee, such grant of Options, SARS, Restricted
Shares or Stock Units shall terminate if such written agreement is not signed
by such grantee (or his attorney) and delivered to the Company within 60 days
after the date the Committee approved such grant. Any such written agreement
may contain (but shall not be required to contain) such provisions as the
Committee deems appropriate (i) to insure that the penalty provisions of
Section 4999 of the Code will not apply to any stock or cash received by the
Holder from the Company or
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<PAGE> 18
(ii) to provide cash payments to the Holder to mitigate the impact of such
penalty provisions upon the Holder. Any such agreement may be supplemented or
amended from time to time as approved by the Committee as contemplated by
Section 10.8(b).
10.6 Designation of Beneficiaries. Each person who shall be granted
an Award under the Plan may designate a beneficiary or beneficiaries and may
change such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on a form to be prescribed by
it, provided that no such designation shall be effective unless so filed prior
to the death of such person.
10.7 Right of First Refusal. The Agreements may contain such
provisions as the Committee shall determine to the effect that if a Holder
elects to sell all or any shares of Common Stock that such Holder acquired upon
the exercise of an Option or SAR or upon the vesting of Restricted Shares or
Stock Units awarded under the Plan, then such Holder shall not sell such shares
unless such Holder shall have first offered in writing to sell such shares to
the Company at Fair Market Value on a date specified in such offer (which date
shall be at least three business days and not more than ten business days
following the date of such offer). In any such event, certificates representing
shares issued upon exercise of Options or SARs and the vesting of Restricted
Shares or Stock Units shall bear a restrictive legend to the effect that
transferability of such shares are subject to the restrictions contained in the
Plan and the applicable Agreement and the Company may cause the transfer agent
for the Common Stock to place a stop transfer order with respect to such
shares.
10.8 Termination agreement.
(a) General. Unless the Plan shall theretofore
have been terminated as hereinafter provided, no Awards may be
made under the Plan on or after the tenth anniversary of the
Effective Date. The Board or the Committee may at any time
prior to the tenth anniversary of the Effective Date terminate
the Plan, and may, from time to time, suspend or discontinue
the Plan or modify or amend the Plan in such respects as it
shall deem advisable; except that no such modification or
amendment shall be effective prior to approval by the
Company's stockholders to the extent such approval is then
required pursuant to Rule 16b-3 in order to preserve the
applicability of any exemption provided by such rule to any
Award then outstanding (unless the holder of such Award
consents) or to the extent stockholder approval is otherwise
required by applicable legal requirements.
(b) Modification. No termination, modification or
amendment of the Plan may, without the consent of the person
to whom any Award shall theretofore have been granted,
adversely affect the rights of such person with respect to
such Award. No modification, extension, renewal or other
change in any Award granted under the Plan shall be made after
the grant of such Award, unless the same is consistent with
the provisions of the Plan. With the consent of the Holder and
subject to the terms and conditions of the Plan (including
Section 10.8(a)), the Committee may amend
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<PAGE> 19
outstanding Agreements with any Holder, including, without
limitation, any amendment which would (i) accelerate the time
or times at which the Award may be exercised and/or (ii)
extend the scheduled expiration date of the Award. Without
limiting the generality of the foregoing, the Committee may,
but solely with the Holder's consent unless otherwise provided
in the Agreement, agree to cancel any Award under the Plan and
issue a new Award in substitution therefor, provided that the
Award so substituted shall satisfy all of the requirements of
the Plan as of the date such new Award is made. Nothing
contained in the foregoing provisions of this Section 10.08(b)
shall be construed to prevent the Committee from providing in
any Agreement that the rights of the Holder with respect to
the Award evidenced thereby shall be subject to such rules and
regulations as the Committee may, subject to the express
provisions of the Plan, adopt from time to time, or impair the
enforceability of any such provision.
10.9 Government and Other Regulations. The obligation of the
Company with respect to Awards shall be subject to all applicable laws, rules
and regulations and such approvals by any governmental agencies as may be
required, including, without limitation, the effectiveness of any registration
statement required under the Securities Act of 1933, and the rules and
regulations of any securities exchange or association on which the Common Stock
may be listed or quoted. For so long as the Common Stock is registered under
the Exchange Act, the Company shall use its reasonable efforts to comply with
any legal requirements (i) to maintain a registration statement in effect under
the Securities Act of 1933 with respect to all shares of Common Stock that may
be issued to Holders under the Plan, and (ii) to file in a timely manner all
reports required to be filed by it under the Exchange Act.
10.10 Withholding. The Company's obligation to deliver shares of
Common Stock or pay cash in respect of any Award under the Plan shall be
subject to applicable federal, state and local tax withholding requirements.
Federal, state and local withholding tax due at the time of an Award, upon the
exercise of any Option or SAR or upon the vesting of, or expiration of
restrictions with respect to, Restricted Shares or Stock Units, as appropriate,
may, in the discretion of the Committee, be paid in shares of Common Stock
already owned by the Holder or through the withholding of shares otherwise
issuable to such Holder, upon such terms and conditions (including, without
limitation, the conditions referenced in Section 6.6) as the Committee shall
determine. If the Holder shall fail to pay, or make arrangements satisfactory
to the Committee for the payment, to the Company of all such federal, state and
local taxes required to be withheld by the Company, then the Company shall, to
the extent permitted by law, have the right to deduct from any payment of any
kind otherwise due to such Holder an amount equal to any federal, state or
local taxes of any kind required to be withheld by the Company with respect to
such Award.
10.11 Separability. It is the intent of the Company that this Plan
comply with Rule 16b-3 with respect to persons subject to Section 16 of the
Exchange Act unless otherwise provided herein or in an Award Agreement, that
any ambiguities or inconsistencies in the construction of this Plan be
interpreted to give effect to such intention, and that if any provision of this
Plan is found not to
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<PAGE> 20
be in compliance with Rule 16b-3, such provision shall be null and void to the
extent required to permit this Plan to comply with Rule 16b-3.
10.12 Non-Exclusivity of the Plan. Neither the adoption of the Plan
by the Board nor the submission of the Plan to the stockholders of the Company
for approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding
of stock and cash otherwise then under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
10.13 Exclusion from Pension and Profit-Sharing Computation. By
acceptance of an Award, unless otherwise provided in the applicable Agreement,
each Holder shall be deemed to have agreed that such Award is special incentive
compensation that will not be taken into account, in any manner, as salary,
compensation or bonus in determining the amount of any payment under any
pension, retirement or other employee benefit plan, program or policy of the
Company or any Subsidiary. In addition, each beneficiary of a deceased Holder
shall be deemed to have agreed that such Award will not affect the amount of
any life insurance coverage, if any, provided by the Company on the life of the
Holder which is payable to such beneficiary under any life insurance plan
covering employees of the Company or any Subsidiary.
10.14 Unfunded Plan. Neither the Company nor any Subsidiary shall be
required to segregate any cash or any shares of Common Stock which may at any
time be represented by Awards and the Plan shall constitute an "unfunded" plan
of the Company. Except as provided in Article VII with respect to awards of
Restricted Shares and except as expressly set forth in writing, no employee
shall have voting or other rights with respect to shares of Common Stock prior
to the delivery of such shares. Neither the Company nor any Subsidiary shall,
by any provisions of the Plan, be deemed to be a trustee of any Common Stock or
any other property, and the liabilities of the Company and any Subsidiary to
any employee pursuant to the Plan shall be those of a debtor pursuant to such
contract obligations as are created by or pursuant to the Plan, and the rights
of any employee, former employee or beneficiary under the Plan shall be limited
to those of a general creditor of the Company or the applicable Subsidiary, as
the case may be. In its sole discretion, the Board may authorize the creation
of trusts or other arrangements to meet the obligations of the Company under
the Plan, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
10.15 Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
10.16 Accounts. The delivery of any shares of Common Stock and the
payment of any amount in respect of an Award shall be for the account of the
Company or the applicable Subsidiary, as the case may be, and any such delivery
or payment shall not be made until the recipient shall have paid or made
satisfactory arrangements for the payment of any applicable withholding taxes
as provided in Section 10.10.
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10.17 Legends. In addition to any legend contemplated by Section
10.7, each certificate evidencing Common Stock subject to an Award shall bear
such legends as the Committee deems necessary or appropriate to reflect or
refer to any terms, conditions or restrictions of the Award applicable to such
shares, including, without limitation, any to the effect that the shares
represented thereby may not be disposed of unless the Company has received an
opinion of counsel, acceptable to the Company, that such disposition will not
violate any federal or state securities laws.
10.18 Company's Rights. The grant of Awards pursuant to the Plan
shall not affect in any way the right or power of the Company to make
reclassifications, reorganizations or other changes of or to its capital or
business structure or to merge, consolidate, liquidate, sell or otherwise
dispose of all or any part of its business or assets.
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<PAGE> 1
EXHIBIT 10.11
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of January 1, 1996, between
TELECOMMUNICATIONS, INC., a Delaware corporation (the "Company"), and DONNE F.
FISHER, now residing at 9513 Pinyon Trail, Littleton, Colorado 80124
("Consultant").
Effective as of the date hereof, the Company has accepted Consultant's
resignation as an officer and employee of the Company, its subsidiaries and its
other controlled affiliates. In order to continue to have available the benefit
of Consultant's knowledge of the Company and expertise, the Company wishes to
retain Consultant to provide consulting services on the terms set forth herein,
and Consultant has agreed to provide such services on such terms. The Company
and Consultant also desire to memorialize their agreement concerning certain
continuing rights and obligations under Consultant's prior employment
agreements.
In consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, do hereby agree as follows:
1. Term and Termination.
(a) Term. The term of Consultant's retention under this Agreement
(the "Term") shall commence as of January 1, 1996 (the "Commencement Date") and
shall end on January 1, 2006 (the "Expiration Date"), unless sooner terminated
as provided in this Agreement. During the Term, Consultant agrees to serve the
Company as a consultant as provided herein upon and subject to the terms and
conditions set forth in this Agreement.
(b) Termination by the Company. Consultant's retention by the
Company under this Agreement may be terminated by the Company only as provided
in the following clause (i) or (ii):
(i) In the event of an illness or disability
which incapacitates Consultant from providing any consulting services
hereunder actually requested by the CEO in accordance with Section
2(a) for an aggregate of one hundred and eighty consecutive days
during the twelve calendar months preceding the month in which the
notice of termination hereinafter referred to is given by the Company,
then the Company may terminate Consultant's retention under this
Agreement by giving Consultant written notice of such termination at
least six (6) months prior to the effective date thereof; provided,
however, that if, prior to the end of such six-month notice period,
Consultant recovers from such illness or other disability to an extent
permitting him to perform his services hereunder, the notice of
termination shall be of no further force or effect. All determinations
required under this clause (i) shall be made by the Company's Board of
Directors in good faith.
<PAGE> 2
(ii) The Company may terminate Consultant's
retention under this Agreement at any time by giving written notice of
such termination to Consultant at least two (2) months prior to the
effective date of such termination and paying to Consultant in a lump
sum upon such termination all remaining compensation that would have
been payable under Section 4 hereof if this Agreement remained in full
force and effect until the Expiration Date.
(c) Termination by Consultant. Consultant may terminate his
services under this Agreement at any time by giving the Company written notice
of such termination at least two weeks prior to the effective date of such
termination.
(d) Death of Consultant. Consultant's death shall result in
termination of the Term effective as of the date of his death. If Consultant
dies prior to January 1, 2005, the Company shall, as promptly as practicable
following Consultant's death, pay to Consultant's designated beneficiary or
beneficiaries in a lump sum an amount equal to one year's compensation under
Section 4(a) of this Agreement, calculated at the annual rate in effect at the
time of Consultant's death. The phrase "designated beneficiary or
beneficiaries" shall mean the person or persons named by Consultant from time
to time in a signed designation filed with the Company from time to time.
(e) Effects of Termination. Upon expiration of the Term or the
effective date of any termination in accordance with Section l(b), l(c) or l(d)
hereof, the obligations of the Company and Consultant under this Agreement
shall terminate, except for (i) the obligation of the Company to pay
compensation under Section 1(b)(ii) hereof or the second sentence of Section 1
(d) hereof, if applicable, (ii) the obligation of the Company to pay any
accrued but unpaid compensation under Section 4 hereof with respect to any
period prior to the date of such expiration or the effective date of such
termination (as the case may be), (iii) the obligations of the Company under
Section 7 hereof and (iv) any undischarged obligations of the Company under
Section 5 with respect to any period prior to the date of such expiration or
the effective date of such termination (as the case may be). The parties agree
that the provisions of Sections 7 and 13 hereof shall survive the expiration or
other termination for any reason of the Term and the termination of this
Agreement for any reason. In the event of any termination in accordance with
Section l(b), l(c) or l(d) hereof, the Term shall end on the effective date of
such termination.
2. Services to Be Rendered by Consultant.
(a) During the Term, Consultant shall, upon the request of the
Company's Chief Executive Officer (the "CEO"), consult with and advise the
Company with respect to issues and matters of the general types for which
Consultant had responsibility as an officer of the Company during calendar year
1995. If Consultant, with his consent, is elected or appointed as a director of
the Company or any of the Company's affiliates, Consultant will serve in each
such capacity without further compensation, except as may be decided by the
Company or such affiliate in its sole discretion.
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<PAGE> 3
(b) Consultant is agreeing to and shall provide his services under
this Agreement as an independent contractor, and neither this Agreement nor the
provision of Consultant's services hereunder is intended to create any
partnership, joint venture or employment relationship between Consultant and
the Company or any of its affiliates.
3. Time to Be Devoted by Consultant; Support by the Company; Location of
Services.
(a) Consultant shall not be obligated to make available consulting
services to the Company of more than 70 hours during any month or more than 700
hours during any period of twelve consecutive months. The actual times during
which Consultant performs consulting services shall be reasonably determined by
Consultant and the CEO, and the Company will, whenever practicable, give
Consultant at least fifteen (15) days prior notice of any request by the
Company for any consulting services. Unless otherwise agreed by the Company and
Consultant, the Company will in good faith endeavor to spread the time required
of Consultant relatively evenly throughout the Term, recognizing that
Consultant may not be available for certain periods of time or may agree (but
will not be obligated) to spend concentrated amounts of time on specific
projects during certain periods during the Term. It is expressly acknowledged
by the Company that the relationship between the Company and Consultant created
by this Agreement is non-exclusive, and nothing set forth in this Agreement
shall prohibit or restrict Consultant during or after the term hereof from
engaging in any business or activities in any capacity on behalf of any other
person, except as specifically set forth in Section 8, 9 or 11 hereof. As
such, the Company and Consultant will work together in good faith to schedule
the performance of Consultant's services hereunder so as not to unreasonably
interfere with any such other business or activities.
(b) During the Term, the Company shall, at the Company's expense,
provide Consultant on an as-needed basis with all office space, facilities,
equipment, supplies, services and secretarial and other staff support which
Consultant reasonably requires in order to provide the consulting services
requested of him by the CEO pursuant to Section 2(a) hereof.
(c) Consultant may perform his services hereunder in any location
which he deems to be appropriate and consistent with the needs of Company,
including the home of Consultant; provided, however, that Consultant
acknowledges that Company and its affiliates have offices throughout the world,
and Consultant agrees that he shall travel to such offices and to other
locations within and outside the United States of America at such time or times
during the Term as may reasonably be requested by Company or as may otherwise
be necessary or appropriate in order for Consultant to discharge his
responsibilities hereunder.
4. Compensation Payable to Consultant.
(a) During the Term, the Company shall pay Consultant compensation
at the following applicable rates: (i) during the period from January 1, 1996
through December 31, 2000, inclusive, the rate of $475,000 per annum, increased
annually by the amount of $25,000 per annum in each successive year of such
period commencing January 1, 1997 and (ii) from and
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<PAGE> 4
after January 1, 2001 throughout the balance of the Term, the rate of $500,000
per annum. Consultant shall be entitled to such compensation whether or not any
services are requested of him and regardless of the number of hours of such
service that may be rendered during any particular period.
(b) Consultant's annual payments shall be paid in accordance with
the Company's regular payroll policy for executives, but not less frequently
than once a month.
(c) The Company shall not withhold taxes from any payments due to
Consultant, except to the extent required by mandatory provisions of applicable
law.
5. Expenses.
The Company shall reimburse Consultant for the reasonable amount of
dining, hotel, traveling, entertainment and other expenses necessarily incurred
by Consultant in the discharge of his consulting obligations hereunder.
6. Executive Benefit Plans.
Until the latest of (i) the date of expiration or earlier termination
pursuant to this Agreement of the Term, (ii) the date of the expiration or
earlier termination pursuant to the 1992 Employment Agreement (as defined in
Section 13 of this Agreement), as the same has been amended by this Agreement
or may subsequently be amended, of the period that any deferred compensation is
payable to Consultant pursuant to Section 4 of the 1992 Employment Agreement,
as the same has been amended by this Agreement or may subsequently be amended,
and (iii) the date of the expiration or earlier termination pursuant to the
1983 Employment Agreement (as defined in Section 13 of this Agreement), as the
same has been amended by this Agreement or may subsequently be amended, of the
period that any deferred compensation is payable to Consultant pursuant to
Section 4 of the 1983 Employment Agreement, as the same has been amended by
this Agreement or may subsequently be amended, Consultant (x) subject to the
last sentence of this Section and provided that Consultant satisfies applicable
eligibility requirements other than any requirement that he be an employee of
the Company, shall continue to be entitled to participate in, and to be
accorded all rights and benefits under, all group insurance policies
(including, but not limited to, all disability, life, health and medical
insurance policies) maintained by the Company for the benefit of its employees,
and for this purpose Consultant shall be deemed to be a full-time employee of
the Company during such period, and (y) shall be entitled to free cable
television service if Consultant has residences located within areas serviced
by the Company's cable television services. Notwithstanding the foregoing,
Consultant shall not be entitled to participate in any benefit plan of the
Company which, under mandatory provisions of any applicable law, is available
only to employees of the Company.
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<PAGE> 5
7. Indemnification.
The Company will indemnify and hold harmless Consultant, to the
fullest extent permitted by applicable law, in respect of any liability,
damage, cost or expense (including reasonable counsel fees) incurred in
connection with the defense of any claim, action, suit or proceeding to which
he is a party, or threat thereof, by reason of his being or having been an
officer or director of, or a consultant to, the Company or any subsidiary of
the Company, or his serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, business organization, enterprise or other
entity, including service with respect to employee benefit plans. Without
limiting the generality of the foregoing, the Company will pay the expenses
(including reasonable counsel fees) of defending any such claim, action, suit
or proceeding in advance of its final disposition, upon receipt of an
undertaking by Consultant to repay all amounts advanced if it should ultimately
be determined that Consultant is not entitled to be indemnified under this
Section.
8. Noncompetition.
Consultant agrees that during the Term he will not, directly or
indirectly, as principal or agent, or in any other capacity, own, manage,
operate, participate in or be employed by or otherwise be interested in, or
connected in any manner with, any person, firm, corporation or other enterprise
which directly competes in a material respect with the business of the Company
or any of its majority-owned subsidiaries as it is then conducted. Nothing
herein contained shall be construed as denying Consultant (i) the right to own
securities of any such corporation of any class which is listed on a national
securities exchange or quoted in any automated quotation system of NASDAQ to
the extent of an aggregate of 5% of the amount of such securities outstanding
or (ii) provide consulting services to others which otherwise might violate the
provisions of the first sentence of this Section if the Company's Chief
Executive Officer approves in writing of such provision of consultancy services.
9. Confidentiality.
Consultant agrees that during the Term (otherwise than in the
performance of his duties hereunder) and thereafter, not to, directly or
indirectly, make use of, or divulge to any person, firm, corporation, entity or
business organization, and he shall use his best efforts to prevent the
publication or disclosure of, any confidential or proprietary information
concerning the business, accounts or finances of, or any of the methods of
doing business used by the Company or of the dealings, transactions or affairs
of the Company or any of its customers which have or which may have come to his
knowledge; however, this Section 9 shall not prevent Consultant from responding
to any subpoena, court order or threat of other legal duress, provided
Consultant notifies the Company thereof with reasonable promptness so that the
Company may seek a protective order or other appropriate relief.
10. Delivery of Materials.
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<PAGE> 6
Consultant agrees that, upon the expiration or other termination of
the Term, he will deliver to the Company all documents, papers, materials and
other property of the Company relating to its affairs which may then be in his
possession or under his control, other than any of the foregoing which are
available to the public generally from a source other than Consultant.
11. Noninterference.
Consultant agrees that he will not, during the Term, solicit the
employment of any employee of the Company on behalf of any other person, firm,
corporation, entity or business organization or otherwise interfere with the
employment relationship between any employee or officer of the Company and the
Company.
12. Use of Airplane. During the Term, Consultant will be permitted by the
Company to make use of the Company's aircraft and flight crew from time to time
for personal trips (each a "Consultant Flight"), subject to the conditions
hereinafter set forth and provided that the Consultant Flights shall be limited
to an aggregate Value (as defined below) of $35,000 per year. The Company will
bear the expense of each Consultant Flight permitted hereby and the Value of
each Consultant Flight shall be treated as additional compensation to
Consultant. For purposes of the foregoing, the "Value" of each Consultant
Flight shall be determined in accordance with Treasury Regulation Section
1.61-21(g) (or any successor regulation promulgated under the Internal Revenue
Code of 1986, as amended) as from time to time in effect. Consultant will give
the Company at least 48 hours notice of any desired Consultant Flight, stating
the proposed schedule, the points of origination and destination of the flight
and, if so required by the Company, such information about the general purpose
of the Consultant Flight as shall be sufficient for the Company to determine
that such flight does not violate any requirement of applicable law. The
Company will promptly thereafter inform Consultant of the availability of the
aircraft and its flight crew. The Company shall have no obligation to provide
the aircraft and a flight crew for any Consultant Flight at any time when (i) a
requested Consultant Flight would conflict with any actual or planned use of
the aircraft by the Company, (ii) the aircraft is undergoing any scheduled
maintenance or repairs or is otherwise not in a condition to be operated, or
(iii) a qualified flight crew is unavailable to operate the aircraft for a
requested Consultant Flight. In addition, the Company will have no obligation
hereunder to make the aircraft and its flight crew available for any use or
purpose, and Consultant agrees not to use the same for any use or purpose,
which, in the opinion of the Company, is in violation of or not permitted by
applicable law as applied to either the Company or Consultant, or is not
permitted under or stipulated in the insurance policies maintained by the
Company. The proposed schedule and points of origination and destination of
each Consultant Flight will be subject to the approval of the captain of the
flight crew, who shall at all times be in charge and control of the aircraft,
and in no event shall the aircraft be operated beyond the geographical limits
prescribed in the insurance policies maintained by the Company.
13. Certain Matters Relating to Previous Employment Agreements.
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<PAGE> 7
(a) The parties agree that, effective as of the Commencement Date,
all rights and obligations of either party under the Employment Agreement,
dated as of January 1, 1992, between the Company and Consultant (as it may have
previously been amended, the "1992 Employment Agreement") shall terminate,
except as follows:
(i) The obligation of the Company to pay any accrued but
unpaid compensation under Section 4(a) of the 1992 Employment
Agreement with respect to any period prior to the Commencement Date
shall continue until discharged in full.
(ii) The obligations of the Company under Section 7 of the
1992 Employment Agreement with respect to expenses incurred prior to
the Commencement Date shall continue until discharged in full.
(iii) The continuing rights and benefits, if any, of
Consultant under or with respect to any plans, policies or benefits
referred to in Section 8(a) of the 1992 Employment Agreement accrued
and vested as of December 31, 1995 shall be governed by the respective
terms of such plan, policy and benefits and, to the extent applicable,
Section 13(c) of this Agreement. If, pursuant to Section 6 of this
Agreement, Consultant is entitled to continued rights or benefits
under any group insurance policy under which he was entitled to rights
or benefits under the 1992 Employment Agreement, then to the extent
consistent with the terms of such plan and subject to the last
sentence of Section 6 of this Agreement, such continuation shall be on
a basis which does not result in any forfeiture or loss of rights or
benefits by reason of the resignation of Consultant as an officer and
employee of the Company or any of its affiliates.
(iv) The obligations of the Company and the rights of
Consultant under Section 9 of the 1992 Employment Agreement shall
continue indefinitely with respect to any claim, action, suit or
proceeding (whether known or unknown, asserted or unasserted or
commenced or uncommenced as of the Commencement Date) based upon,
arising out of or resulting from Consultant's services prior to the
Commencement Date in any capacity referred to in Section 9 of the 1992
Employment Agreement.
(v) The Company and Consultant acknowledge and agree that
Consultant did not elect, pursuant to Section 4(b) of the 1992
Employment Agreement, to defer any of his compensation under the 1992
Employment Agreement and, therefore, the Company has no further
obligations under the provisions of subsections (b) through (e),
inclusive, of Section 4 of the 1992 Employment Agreement.
(vi) The obligations of the Company under Section 5 of the
1992 Employment Agreement, as amended or modified by this clause (vi),
shall continue until discharged in full in accordance with the terms
and conditions thereof, except that the parties agree that the 240
monthly payments provided for therein shall commence on January 1,
2001 and shall be made in the equal monthly amount of $27,271.84,
without interest. The
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Company and Consultant hereby agree that subsection (c) of Section 5
of the 1992 Employment Agreement is amended to read in its entirety as
follows:
"The payment to Executive of the Benefit shall be
subject to the condition that Executive shall comply
with the provisions of Section 9 of the Consulting
Agreement during the entire payment period and shall
comply with the provisions of Sections 8 and 11 of
the Consulting Agreement during the first two years
of the payment period."
The foregoing obligations of the Company and rights and benefits of Consultant,
and the provisions of the 1992 Employment Agreement as they relate to such
obligations, rights and benefits, as such provisions may have been amended or
otherwise modified by this Section 13(a), shall survive the resignation of
Consultant as an officer and employee of the Company and the execution and
delivery of this Agreement and shall be unaffected thereby, notwithstanding any
provision of the 1992 Employment Agreement or this Agreement apparently to the
contrary.
(b) The provisions of Section 4 of the employment agreement, dated
as of January 1, 1983, between the Company and Consultant, as heretofore
amended (the "1983 Employment Agreement"), shall continue to govern with
respect to the calculation of, accrual of interest on, and payment of all
unpaid compensation thereunder the payment of which to Executive was deferred
in accordance with the terms of the 1983 Employment Agreement, except that the
parties agree that the payments provided for therein shall be made in 240
monthly payments commencing on January 1, 2001 and shall be made in the equal
monthly amount of $21,425.92, without interest. Such provisions, as modified by
the immediately preceding sentence, as they relate to such deferred
compensation shall survive the resignation of Consultant as an officer and
employee of the Company and the execution and delivery of this Agreement and
shall be unaffected thereby.
(c) The Company hereby agrees that, notwithstanding any provision
of such options to the contrary, (i) none of the options to acquire the
Company's capital stock, if any, currently held by Consultant shall terminate
or otherwise be affected by the resignation of Consultant as a director and
officer of the Company and (ii) all such options which by their terms are not
currently exercisable shall be exercisable from and after the date hereof,
unless or until they expire or otherwise terminate in accordance with their
terms (other than by reason of Consultant's resignation as an officer and
employee of the Company). The Company confirms that the provisions of this
Section 13(c) have been approved by the Compensation Committee of the Company's
Board of Directors.
(d) Effective as of January 1, 1996, the Restricted Stock Award
Agreement referred to in Section 6 of the 1992 Employment Agreement shall
terminate without further liability or obligation on the part of Consultant or
the Company, other than Sections 1(f), 1(g), 1(h) and 1(i), which shall
continue to be effective and binding upon Consultant and his transferees of any
of Consultant's vested Restricted Shares (as such term is defined in such
Restricted Stock
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<PAGE> 9
Agreement). The Company and Consultant acknowledge that the Initial Shares (as
defined in such Restricted Stock Agreement) have previously been converted into
124.03 shares of the 12% Series C Cumulative Compounding Preferred Stock, par
value $0.01 per share, of WestMarc Communications, Inc., a Nevada corporation
(the "WestMarc Series C Preferred Stock"). The parties agree that 37.209 of
such shares of WestMarc Series C Preferred Stock have vested and are the only
Restricted Shares which Consultant is entitled to receive and retain free of
the forfeiture provisions of such Restricted Stock Award Agreement, that the
only Restricted Share Distributions to which Consultant is entitled under such
Restricted Stock Award Agreement are the Restricted Share Distributions, if
any, with respect to such vested shares and that all other Restricted Shares
and Restricted Share Distributions, if any, were forfeited by Consultant upon
termination of his employment with the Company as of January 1, 1996.
14. Remedies of the Company.
Consultant agrees that, in the event of a material breach by
Consultant of this Agreement, in addition to any other rights that the Company
may have pursuant to this Agreement, the Company shall be entitled, if it so
elects, to institute and prosecute proceedings at law or in equity to obtain
damages with respect to such breach or to enforce the specific performance of
this Agreement by Consultant or to enjoin Consultant from engaging in any
activity in violation hereof. Consultant agrees that because Consultant's
services to the Company are of such a unique and extraordinary character, a
suit at law may be an inadequate remedy with respect to a breach by Consultant
of Sections 8, 9, 10 or 11 hereof, and that upon any such breach or threatened
breach by him of such Sections the Company shall be entitled, in addition to
any other lawful remedies that may be available to it, to injunctive relief.
15. Notices.
All notices to be given hereunder shall be deemed duly given when
delivered personally in writing or mailed, certified mail, return receipt
requested, postage prepaid and addressed as follows:
(a) If to be given to the Company:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Dr. John C. Malone
with a copy similarly addressed
and marked to the attention of
the Legal Department
(b) If to be given to Consultant:
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Mr. Donne F. Fisher
9513 Pinyon Trail
Littleton, Colorado 80124
or to such other address as a party may request by notice given in accordance
with this Section 15.
16. Entire Agreement; Amendments and Waivers. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and replaces and supersedes as of the date hereof any and all prior
agreements and understandings with respect to Consultant's employment by the
Company, whether oral or written, between the parties hereto, including,
without limitation, the 1992 Employment Agreement and the 1983 Employment
Agreement, except to the extent provided in Section 13 hereof. This Agreement
may not be changed nor may any provision hereof be waived except by an
instrument in writing duly signed by the party to be charged. This Agreement
shall be interpreted, governed and controlled by the law of the State of
Colorado without reference to principles of conflict of laws.
17. Headings. The headings provided herein are inserted for convenience
only and shall not be deemed to constitute a part hereof.
18. Counterparts. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together shall constitute the same agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
TELE-COMMUNICATIONS, INC.
By: /s/ JOHN C. MALONE
-------------------------
JOHN C. MALONE
/s/ DONNE F. FISHER
----------------------------
DONNE F. FISHER
ATTEST:
/s/ STEPHEN M. BRETT
- -------------------------
STEPHEN M. BRETT
10
<PAGE> 1
EXHIBIT 10.31
1994 PLAN
TCOMA
TELE-COMMUNICATIONS, INC.
1994 STOCK INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1994
Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. AWARD. Pursuant to the terms of the Plan and in consideration
of the covenants and promises of Grantee herein contained, the Company hereby
awards to Grantee as of the Grant Date, a total of ______ shares of Series A
TCI Group ("TCOMA") Common Stock, at the price per share set forth on Schedule
1 hereto, subject to the conditions and restrictions set forth below and in the
Plan (the "Restricted Shares").
2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION
PERIOD. Upon issuance of the Restricted Shares the stock certificate or
certificates representing such Restricted Shares shall be registered in the
name of Grantee. During the Restriction Period, certificates representing the
Restricted Shares and any securities constituting Retained Distributions shall
bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in the
Plan and this Agreement. Such certificates shall remain in the custody of the
Company and Grantee shall deposit with the Company stock powers or other
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instruments of assignment, each endorsed in blank, so as to permit retransfer
to the Company of all or any portion of the Restricted Shares and any
securities constituting Retained Distributions that shall be forfeited or
otherwise not become vested in accordance with the Plan and this Agreement.
3. RESTRICTIONS. Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. Grantee will
have the right to vote such Restricted Shares, to receive and retain such
dividends and distributions, as the Committee may in its sole discretion
designate, paid or distributed on such Restricted Shares and to exercise all
other rights, powers and privileges of a Holder of Common Stock with respect to
such Restricted Shares; except, that (a) Grantee will not be entitled to
delivery of the stock certificate or certificates representing such Restricted
Shares until the Restriction Period shall have expired and unless all other
vesting requirements with respect thereto shall have been fulfilled or waived;
(b) the Company will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period as provided in
Section 8.2 of the Plan; (c) other than such dividends and distributions as the
Committee may in its sole discretion designate, the Company will retain custody
of all distributions ("Retained Distributions") made or declared with respect
to the Restricted Shares (and such Retained Distributions will be subject to
the same restrictions, terms and vesting and other conditions as are applicable
to the Restricted Shares) until such time, if ever, as the Restricted Shares
with respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) Grantee may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the Restricted
Shares or any Retained Distributions or his interest in any of them during the
Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.
4. VESTING AND FORFEITURE OF RESTRICTED STOCK: Subject to earlier
vesting in accordance with the provisions of Paragraph 7(b) below, and subject
to shareholder approval of the Plan at the ____________ annual meeting of the
shareholders of the Company, Grantee shall become vested as to 50% of the
shares of Restricted Shares subject to this Agreement as of four years
following the Grant Date, and Grantee shall become vested as to the remaining
50% of the shares of Restricted Shares subject to this Agreement as of five
years following the Grant Date, each such date being a Vesting Date; provided,
however, that Grantee shall not vest, pursuant to this Paragraph 4, in shares
of Restricted Shares as to which Grantee would otherwise vest as of a given
date if Grantee has not been continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date (the vesting or
forfeiture of such shares to be governed instead by the provisions of Paragraph
5). Notwithstanding the foregoing, in the event that any date on which vesting
would otherwise occur is a Saturday, Sunday or a holiday, such vesting shall
instead occur on the business day next following such date.
5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the
Committee in its sole discretion, the Award shall terminate, to the extent not
theretofore vested, prior to the expiration of the Restricted Period, at the
time specified below:
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<PAGE> 3
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the Award, to the extent
not theretofore vested, shall terminate at the Close of Business on
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which any portion of the
Award remains unvested as provided in paragraph (a), then the Award,
to the extent not theretofore vested, shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the Award, to the extent not theretofore
vested, shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the Award, to the extent not
theretofore vested, shall terminate immediately upon such termination
of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the Award, to the extent not theretofore vested, shall terminate
early only as provided for in paragraph (b) above or 7(b) below.
In any event in which the Award remains outstanding for a
period of time following the Grantee's voluntary termination of his status as a
member of the Board, the Award may vest during such period of time only to the
extent the same would have vested as provided in paragraph 4 above on such date
of termination of Grantee's status. Notwithstanding any period of time
referenced in this paragraph 5 or any other provision of this paragraph that
may be construed to the
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contrary, restrictions upon the Award shall in any event terminate upon the
expiration of the Restriction Period.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof,
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares
shall become vested to the extent that the Restricted Shares related thereto
shall have become vested and (c) any cash award to be received by Grantee with
respect to such Restricted Shares shall become payable, all in accordance with
the terms of this Agreement. Any such Restricted Shares, Retained Distributions
and any unpaid Dividend Equivalents that shall not become vested shall be
forfeited to the Company and Grantee shall not thereafter have any rights
(including dividend and voting rights) with respect to such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall have been
so forfeited. The Committee may, in its discretion, provide that the delivery
of any Restricted Shares, Retained Distributions and unpaid Dividend
Equivalents that shall have become vested, and payment of any cash awards that
shall have become
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<PAGE> 5
payable, shall be deferred until such date or dates as the recipient may elect.
Any election of a recipient pursuant to the preceding sentence shall be filed
in writing with the Committee in accordance with such rules and regulations,
including any deadline for the making of such an election, as the Committee may
provide.
7. ADJUSTMENTS.
(a) The Restricted Shares shall be subject to adjustment
(including, without limitation, as to the number of Restricted Shares)
in the sole discretion of the Committee and in such manner as the
Committee may deem equitable and appropriate in connection with the
occurrence of any of the events described in Section 4.2 of the Plan
following the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the restrictions in Paragraph 3 shall
lapse; provided, however, that to the extent not theretofore vested
the Award shall terminate upon the first to occur of the consummation
of the Approved Transaction, the expiration of the Award Term or the
earlier termination of the Award pursuant to paragraph 7 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the restrictions in Paragraph 3 will not lapse on an
accelerated basis in connection with an Approved Transaction and/or
will not terminate if not exercised prior to consummation of the
Approved Transaction, if the Board or the surviving or acquiring
corporation, as the case may be, shall have taken or made effective
provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for
the Award evidenced by this Agreement or to assume this Agreement and
the Award evidenced hereby and in order to make such new or assumed
Award, as nearly as may be practicable, equivalent to the Award
evidenced by this Agreement as then in effect (but before giving
effect to any acceleration of the exercisability hereof unless
otherwise determined by the Committee), taking into account, to the
extent applicable, the kind and amount of securities, cash or other
assets into or for which the TCOMA Common Stock may be changed,
converted or exchanged in connection with the Approved Transaction.
8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the
Restriction Period, Grantee (or Beneficiary, as defined in Paragraph 10 below)
must remit to the Company the amount of all federal, state and other
governmental withholding tax requirements imposed upon the Company with respect
to the vesting of shares of Restricted Stock, unless provisions to so pay such
withholding requirements have been made to the satisfaction of the Committee.
Upon the payment of any cash dividends with respect to shares of Restricted
Stock during the Restriction Period, the amount of such dividends shall be
reduced to the extent necessary to satisfy any withholding tax requirements
applicable thereto prior to payment to Grantee.
9. DELIVERY BY THE COMPANY, As soon as practicable after vesting
in Restricted Shares pursuant to Paragraphs 4 or 5, and subject to the
withholding referred to in paragraph 8, the
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Company shall deliver to Grantee certificates issued in Grantee's name for the
number of Restricted Shares. If delivery is by mail, delivery of shares of
TCOMA Common Stock shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to Grantee, and any cash payment shall be deemed
effected when a Company check, payable to Grantee and in an amount equal to the
amount of the cash payment, shall have been deposited in the United States
mail, addressed to Grantee.
10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before
vesting and during Grantee's lifetime, the Restricted Shares are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the Restricted Shares shall pass upon
Grantee's death and may change such designation from time to time by filing a
written designation of beneficiary or beneficiaries with the Committee on the
form annexed hereto as Exhibit B or such other form as may be prescribed by the
Committee, provided that no such designation shall be effective unless so filed
prior to the death of Grantee. If no such designation is made or if the
designated beneficiary does not survive the Grantee's death, the Restricted
Shares shall pass by will or the laws of descent and distribution. Following
Grantee's death, the Restricted Shares shall pass accordingly to the designated
beneficiary and such person shall be deemed the Grantee for purposes of any
applicable provisions of this Agreement.
11. COMPANY'S RIGHTS. The existence of this Agreement shall not
affect in any way the right or power of the Company or its stockholders to
accomplish any corporate act, including, without limitation, the acts referred
to in Section 10.18 of the Plan.
12. LIMITATION OF RIGHTS: Nothing in this Agreement or the Plan
shall be construed to:
(a) give Grantee any right to be awarded any
further restricted stock other than in the sole discretion of
the Committee;
(b) give Grantee or any other person any interest
in any fund or in any specified asset or assets of the Company
or any subsidiary of the Company; or
(c) confer upon Grantee the right to continue in
the employment or service of the Company or any subsidiary of
the Company, or affect the right of the Company or any
subsidiary of the Company to terminate the employment or
service of Grantee at any time or for any reason.
13. PREREQUISITES TO BENEFITS: Neither Grantee nor any person
claiming through Grantee shall have any right or interest in the Restricted
Shares awarded hereunder, unless and until all the terms, conditions and
provisions of this Agreement and the Plan which affect the Grantee or such
other person shall have been complied with as specified herein.
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<PAGE> 7
14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, Grantee agrees that Grantee will not require the
Company to deliver any Restricted Shares and that the Company will not be
obligated to deliver any Restricted Shares or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TCOMA Common Stock is listed or quoted.
The Company shall in no event be obligated to take any affirmative action in
order to cause the delivery of any Restricted Shares or other payment to comply
with any such law, rule, regulation or agreement.
15. NOTICE. Unless the Company notifies Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following
address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from Grantee of a change of address.
16. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of Grantee,
(a) this Agreement may be amended or supplemented
(i) to cure any ambiguity or to correct or supplement any
provision herein which may be defective or inconsistent with
any other provision herein, or (ii) to add to the covenants
and agreements of the Company for the benefit of Grantee or
surrender any right or power reserved to or conferred upon the
Company in this Agreement, subject, however, to any required
approval of the Company's
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stockholders and, provided, in each case, that such changes or
corrections shall not adversely affect the rights of Grantee
with respect to the Award evidenced hereby, or (iii) to make
such other changes as the Company, upon advice of counsel,
determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation of,
any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and
any required approval of the Company's stockholders, the Award
evidenced by this Agreement may be canceled by the Committee
and a new Award made in substitution therefor, provided that
the Award so substituted shall satisfy all of the requirements
of the Plan as of the date such new Award is made and no such
action shall adversely affect the Restricted Shares to the
extent then vested.
17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on Grantee any right to continue in the employ of the
Company or any of its Subsidiaries or interfere in any way with the right of
the Company or any employing Subsidiary to terminate Grantee's employment at
any time, with or without cause; subject, however, to the provisions of any
employment agreement between Grantee and the Company or any Subsidiary.
18. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
19. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
20. DUPLICATE ORIGINALS. The Company and Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
21. RULES BY COMMITTEE. The rights of Grantee and obligations of
the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
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<PAGE> 9
22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
to the Restricted Shares and replaces and makes null and void any prior
agreements between Grantee and the Company regarding the Restricted Shares.
23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------------ -------------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------------
9
<PAGE> 10
Schedule 1 to Restricted Stock Award
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1994 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Restricted Shares: _____ shares of Series A TCI Group Common Stock ("TCOMA"),
$_____ par value per share.
10
<PAGE> 11
Exhibit B to Restricted Stock Award
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1994 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, (the "Grantee"), hereby declare
---------------------------------
that upon my death (the "Beneficiary") of
-----------------------------------
Name
- ------------------------------------------------------------------------------,
Street Address City State Zip Code
who is my shall be entitled to the
-------------------------------------------,
Relationship to Grantee
Restricted Shares and all other rights accorded the Grantee by the above-
referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------------ -----------------------------------
Date Grantee
11
<PAGE> 1
EXHIBIT 10.32
1994 PLAN
LBTYA
TELE-COMMUNICATIONS, INC.
1994 STOCK INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1994
Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. AWARD. Pursuant to the terms of the Plan and in consideration
of the covenants and promises of Grantee herein contained, the Company hereby
awards to Grantee as of the Grant Date, a total of ________ shares of Series A
Liberty Group ("LBTYA") Common Stock, at the price per share set forth on
Schedule 1 hereto, subject to the conditions and restrictions set forth below
and in the Plan (the "Restricted Shares").
2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION
PERIOD. Upon issuance of the Restricted Shares the stock certificate or
certificates representing such Restricted Shares shall be registered in the
name of Grantee. During the Restriction Period, certificates representing the
Restricted Shares and any securities constituting Retained Distributions shall
bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in the
Plan and this Agreement. Such certificates shall remain in the custody of the
Company and Grantee shall deposit with the Company stock powers or other
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<PAGE> 2
instruments of assignment, each endorsed in blank, so as to permit retransfer
to the Company of all or any portion of the Restricted Shares and any
securities constituting Retained Distributions that shall be forfeited or
otherwise not become vested in accordance with the Plan and this Agreement.
3. RESTRICTIONS. Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. Grantee will
have the right to vote such Restricted Shares, to receive and retain such
dividends and distributions, as the Committee may in its sole discretion
designate, paid or distributed on such Restricted Shares and to exercise all
other rights, powers and privileges of a Holder of Common Stock with respect to
such Restricted Shares; except, that (a) Grantee will not be entitled to
delivery of the stock certificate or certificates representing such Restricted
Shares until the Restriction Period shall have expired and unless all other
vesting requirements with respect thereto shall have been fulfilled or waived;
(b) the Company will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period as provided in
Section 8.2 of the Plan; (c) other than such dividends and distributions as the
Committee may in its sole discretion designate, the Company will retain custody
of all distributions ("Retained Distributions") made or declared with respect
to the Restricted Shares (and such Retained Distributions will be subject to
the same restrictions, terms and vesting and other conditions as are applicable
to the Restricted Shares) until such time, if ever, as the Restricted Shares
with respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) Grantee may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the Restricted
Shares or any Retained Distributions or his interest in any of them during the
Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.
4. VESTING AND FORFEITURE OF RESTRICTED STOCK: Subject to earlier
vesting in accordance with the provisions of Paragraph 7(b) below, and subject
to shareholder approval of the Plan at the ____________ annual meeting of the
shareholders of the Company, Grantee shall become vested as to 50% of the
shares of Restricted Shares subject to this Agreement as of four years
following the Grant Date, and Grantee shall become vested as to the remaining
50% of the shares of Restricted Shares subject to this Agreement as of five
years following the Grant Date, each such date being a Vesting Date; provided,
however, that Grantee shall not vest, pursuant to this Paragraph 4, in shares
of Restricted Shares as to which Grantee would otherwise vest as of a given
date if Grantee has not been continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date (the vesting or
forfeiture of such shares to be governed instead by the provisions of Paragraph
5). Notwithstanding the foregoing, in the event that any date on which vesting
would otherwise occur is a Saturday, Sunday or a holiday, such vesting shall
instead occur on the business day next following such date.
5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the
Committee in its sole discretion, the Award shall terminate, to the extent not
theretofore vested, prior to the expiration of the Restricted Period, at the
time specified below:
2
<PAGE> 3
(a) If Grantee's employment with the Company and its
Subsidiaries terminate (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan, (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of a
written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the Award, to the extent
not theretofore vested, shall terminate at the Close of Business on
first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which any portion of the
Award remains unvested as provided in paragraph (a), then the Award, to
the extent not theretofore vested, shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the Award, to the extent not theretofore
vested, shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the Award, to the extent not
theretofore vested, shall terminate immediately upon such termination
of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to terminate
such employment upon the occurrence of specified events (other than the
giving of notice and passage of time), or (ii) by the Company without
"cause" (as defined in Section 10.2(b) of the Plan), then the Award, to
the extent not theretofore vested, shall terminate early only as
provided for paragraph (b) above or 7(b) below.
In any event in which the Award remains outstanding for a period of
time following the Grantee's voluntary termination of his status as a member of
the Board, the Award may vest during such period of time only to the extent the
same would have vested as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 5 or any other provision of this paragraph that may be
construed to the
3
<PAGE> 4
contrary, restrictions upon the Award shall in any event terminate upon the
expiration of the Restriction Period.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof,
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares
shall become vested to the extent that the Restricted Shares related thereto
shall have become vested and (c) any cash award to be received by Grantee with
respect to such Restricted Shares shall become payable, all in accordance with
the terms of this Agreement. Any such Restricted Shares, Retained Distributions
and any unpaid Dividend Equivalents that shall not become vested shall be
forfeited to the Company and Grantee shall not thereafter have any rights
(including dividend and voting rights) with respect to such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall have been
so forfeited. The Committee may, in its discretion, provide that the delivery
of any Restricted Shares, Retained Distributions and unpaid Dividend
Equivalents that shall have become vested, and payment of any cash awards that
shall have become
4
<PAGE> 5
payable, shall be deferred until such date or dates as the recipient may elect.
Any election of a recipient pursuant to the preceding sentence shall be filed
in writing with the Committee in accordance with such rules and regulations,
including any deadline for the making of such an election, as the Committee may
provide.
7. ADJUSTMENTS.
(a) The Restricted Shares shall be subject to adjustment
(including, without limitation, as to the number of Restricted Shares)
in the sole discretion of the Committee and in such manner as the
Committee may deem equitable and appropriate in connection with the
occurrence of any of the events described in Section 4.2 of the Plan
following the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the restrictions in Paragraph 3 shall
lapse; provided, however, that to the extent not theretofore vested
the Award shall terminate upon the first to occur of the consummation
of the Approved Transaction, the expiration of the Award Term or the
earlier termination of the Award pursuant to paragraph 7 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the restrictions in Paragraph 3 will not lapse on an
accelerated basis in connection with an Approved Transaction and/or
will not terminate if not exercised prior to consummation of the
Approved Transaction, if the Board or the surviving or acquiring
corporation, as the case may be, shall have taken or made effective
provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for
the Award evidenced by this Agreement or to assume this Agreement and
the Award evidenced hereby and in order to make such new or assumed
Award, as nearly as may be practicable, equivalent to the Award
evidenced by this Agreement as then in effect (but before giving
effect to any acceleration of the exercisability hereof unless
otherwise determined by the Committee), taking into account, to the
extent applicable, the kind and amount of securities, cash or other
assets into or for which the LBTYA Common Stock may be changed,
converted or exchanged in connection with the Approved Transaction.
8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the
Restriction Period, Grantee (or Beneficiary, as defined in Paragraph 10 below)
must remit to the Company the amount of all federal, state and other
governmental withholding tax requirements imposed upon the Company with respect
to the vesting of shares of Restricted Stock, unless provisions to so pay such
withholding requirements have been made to the satisfaction of the Committee.
Upon the payment of any cash dividends with respect to shares of Restricted
Stock during the Restriction Period, the amount of such dividends shall be
reduced to the extent necessary to satisfy any withholding tax requirements
applicable thereto prior to payment to Grantee.
9. DELIVERY BY THE COMPANY. As soon as practicable after vesting
in Restricted Shares pursuant to Paragraphs 4 or 5, and subject to the
withholding referred to in paragraph 8, the
5
<PAGE> 6
Company shall deliver to Grantee certificates issued in Grantee's name for the
number of Restricted Shares. If delivery is by mail, delivery of shares of
LBTYA Common Stock shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to Grantee, and any cash payment shall be deemed
effected when a Company check, payable to Grantee and in an amount equal to the
amount of the cash payment, shall have been deposited in the United States
mail, addressed to Grantee.
10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before
vesting and during Grantee's lifetime, the Restricted Shares are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the Restricted Shares shall pass upon
Grantee's death and may change such designation from time to time by filing a
written designation of beneficiary or beneficiaries with the Committee on the
form annexed hereto as Exhibit B or such other form as may be prescribed by the
Committee, provided that no such designation shall be effective unless so filed
prior to the death of Grantee. If no such designation is made or if the
designated beneficiary does not survive the Grantee's death, the Restricted
Shares shall pass by will or the laws of descent and distribution. Following
Grantee's death, the Restricted Shares shall pass accordingly to the designated
beneficiary and such person shall be deemed the Grantee for purposes of any
applicable provisions of this Agreement.
11. COMPANY'S RIGHTS. The existence of this Agreement shall not
affect in any way the right or power of the Company or its stockholders to
accomplish any corporate act, including, without limitation, the acts referred
to in Section 10.18 of the Plan.
12. LIMITATION OF RIGHTS: Nothing in this Agreement or the Plan
shall be construed to:
(a) give Grantee any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give Grantee or any other person any interest in any
fund or in any specified asset or assets of the Company or any
subsidiary of the Company; or
(c) confer upon Grantee the right to continue in the
employment or service of the Company or any subsidiary of the Company,
or affect the right of the Company or any subsidiary of the Company to
terminate the employment or service of Grantee at any time or for any
reason.
13. PREREQUISITES TO BENEFITS: Neither Grantee nor any person
claiming through Grantee shall have any right or interest in the Restricted
Shares awarded hereunder, unless and until all the terms, conditions and
provisions of this Agreement and the Plan which affect the Grantee or such
other person shall have been complied with as specified herein.
6
<PAGE> 7
14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, Grantee agrees that Grantee will not require the
Company to deliver any Restricted Shares and that the Company will not be
obligated to deliver any Restricted Shares or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the LBTYA Common Stock is listed or quoted.
The Company shall in no event be obligated to take any affirmative action in
order to cause the delivery of any Restricted Shares or other payment to comply
with any such law, rule, regulation or agreement.
15. NOTICE. Unless the Company notifies Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.O. Box 5630
Denver, Colorado 80217
Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from Grantee of a change of address.
16. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's
7
<PAGE> 8
stockholders and, provided, in each case, that such changes or
corrections shall not adversely affect the rights of Grantee with
respect to the Award evidenced hereby, or (iii) to make such other
changes as the Company, upon advice of counsel, determines are
necessary or advisable because of the adoption or promulgation of, or
change in or of the interpretation of, any law or governmental rule or
regulation, including any applicable federal or state securities laws;
and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be canceled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the
Restricted Shares to the extent then vested.
17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on Grantee any right to continue in the employ of the
Company or any of its Subsidiaries or interfere in any way with the right of
the Company or any employing Subsidiary to terminate Grantee's employment at
any time, with or without cause; subject, however, to the provisions of any
employment agreement between Grantee and the Company or any Subsidiary.
18. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
19. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
20. DUPLICATE ORIGINALS. The Company and Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
21. RULES BY COMMITTEE. The rights of Grantee and obligations of
the Company hereunder shall be subject to such reasonable rules and regulations
as the Committee may adopt from time to time hereafter.
8
<PAGE> 9
22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
to the Restricted Shares and replaces and makes null and void any prior
agreements between Grantee and the Company regarding the Restricted Shares.
23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- ------------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
---------------------------------
9
<PAGE> 10
Schedule 1 to Restricted Stock Award
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1994 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Restricted Shares: ____________ shares of Series A Liberty Group Common
Stock ("LBTYA"), $______________ par value per share.
10
<PAGE> 11
Exhibit B to Restricted Stock Award
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC.1994 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ___________________________________ (the "Beneficiary") of
Name
_____________________________________________________________________________,
Street Address City State Zip Code
who is my __________________________________________, shall be entitled to the
Relationship to Grantee
Restricted Shares and all other rights accorded the Grantee by the
above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------- ------------------------------
Date Grantee
11
<PAGE> 1
EXHIBIT 10.33
1994 PLAN
TCOMA
TELE-COMMUNICATIONS, INC.
1994 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1994
Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 (the "Option Date") and expiring at 5:00 p.m., Denver, Colorado time
("Close of Business") on August 4, 2005 (the "Option Term"), subject to earlier
termination as provided in paragraphs 8 and 12(b) below, an option to purchase
from the Company, at the price per share set forth on Schedule 1 hereto (the
"TCOMA Option Price"), the number of shares of Series A TCI Group Common Stock
("TCOMA") set forth on said Schedule 1 (the "TCOMA Option Shares"). The TCOMA
Option Price and TCOMA Option Shares are subject to adjustment pursuant to
paragraph 12 below. This option is as a "Nonqualified Stock Option" and is
hereinafter referred to as the "TCOMA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the TCOMA Option, the Grantee shall also
have, during the TCOMA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock appreciation right with respect to
each TCOMA Option Share (individually, a "TCOMA Tandem
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<PAGE> 2
SAR" and collectively, the "TCOMA Tandem SARs"). Upon exercise of a TCOMA
Tandem SAR in accordance with this Agreement, the Company shall, subject to
paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the TCOMA Option Share on the date of
exercise if the TCOMA Tandem SAR exceeds the TCOMA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of TCOMA (valued at their Fair
Market Value as of the date of exercise of such TCOMA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of TCOMA.
3. REDUCTION UPON EXERCISE. The exercise of any number of TCOMA
Tandem SARs shall cause a corresponding reduction in the number of TCOMA Option
Shares which shall apply against the TCOMA Option Shares then available for
purchase. The exercise of the TCOMA Option to purchase any number of TCOMA
Option Shares shall cause a corresponding reduction in the number of TCOMA
Tandem SARs.
4. CONDITIONS OF EXERCISE. The TCOMA Option and TCOMA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the TCOMA Option
shall not be exercisable until August 4, 1996 and the TCOMA Option may
only be exercised to the extent the TCOMA Option Shares have become
available for purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of TCOMA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all TCOMA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company
which expressly permit the Grantee to terminate such
2
<PAGE> 3
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
(b) A TCOMA Tandem SAR with respect to an TCOMA Option
Share shall be exercisable only if the TCOMA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the TCOMA Option or TCOMA Tandem SARs
become exercisable, such TCOMA Option or TCOMA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the TCOMA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of TCOMA SARs and that the exercise by
Grantee of the TCOMA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The TCOMA Option or a TCOMA Tandem SAR
shall be considered exercised (as to the number of TCOMA Option Shares or TCOMA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of TCOMA Option Shares to be purchased and/or the number of
TCOMA Tandem SARs to be exercised;
(b) If the TCOMA Option is to be exercised, payment of
the TCOMA Option Price for each TCOMA Option Share to be purchased in
cash or in such other form, or combination of forms, of payment
contemplated by Section 6.6(a) of the Plan as the Committee may
permit; provided, however, that any shares of TCOMA delivered in
payment of the TCOMA Option Price, if such form of payment is so
permitted by the Committee, shall be shares that the Grantee has owned
for a period of at least six months prior to the date of exercise, and
provided, further, that, notwithstanding clause (v) of Section 6.6(a)
of the Plan, TCOMA Option Shares may not be withheld in payment or
partial payment of the TCOMA Option Price; and
(c) Any other documentation that the Committee may
reasonably require.
3
<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises TCOMA Tandem SARs
during a quarterly window period determined in accordance with paragraph (e)(3)
of such Rule (including by designating in a written notice of exercise
delivered prior thereto that such exercise is to be effective during such
window period), then the date of exercise of such TCOMA Tandem SARs shall be
deemed for purposes of this paragraph 5 and for purposes of the Fair Market
Value determinations to be made pursuant to paragraph 2 hereof, to be the day
during such window period on which the highest reported last sale price of a
share of TCOMA as reported on NASDAQ occurred and the Fair Market Value of such
share shall be deemed to be such highest reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of TCOMA
otherwise payable or deliverable upon exercise of the TCOMA Option or a TCOMA
Tandem SAR an amount of cash and/or number of shares of TCOMA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of TCOMA Option Shares
purchased by exercise of the TCOMA Option and for the number of shares of TCOMA
to which the Grantee is entitled by the exercise of TCOMA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of TCOMA Tandem
SARS. If delivery is by mail, delivery of shares of TCOMA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the TCOMA Option and TCOMA
Tandem SARs shall terminate, prior to the expiration of the TCOMA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the TCOMA Option and all
TCOMA Tandem SARs shall terminate at the Close of Business on
4
<PAGE> 5
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the TCOMA Option and
TCOMA Tandem SARs remain exercisable as provided in paragraph (a), the
TCOMA Option and all TCOMA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the TCOMA Option and all TCOMA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the TCOMA Option and all TCOMA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the TCOMA Option Term shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the TCOMA Option and TCOMA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the TCOMA Option and TCOMA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the TCOMA Option and all TCOMA Tandem SARS shall in
any event terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
5
<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof,
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF TCOMA TANDEM SARS. Immediately prior to
the termination of the TCOMA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining TCOMA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF TCOMA OPTION AND TCOMA TANDEM SARS.
During Grantee's lifetime, the TCOMA Option and TCOMA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the TCOMA Option and TCOMA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the TCOMA Option and TCOMA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the TCOMA Option and any
TCOMA Tandem SARS, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
6
<PAGE> 7
11. No SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of TCOMA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The TCOMA Option and TCOMA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of TCOMA Option Shares and the TCOMA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the TCOMA Option and all TCOMA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
TCOMA Option and all TCOMA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the TCOMA Option Term or the earlier termination of the
TCOMA Option and TCOMA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the TCOMA Option and TCOMA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the TCOMA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED by Law. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the TCOMA Option or any TCOMA Tandem SAR and that the Company will not be
obligated to deliver any shares of TCOMA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon
7
<PAGE> 8
which the TCOMA is listed or quoted. The Company shall in no event be obligated
to take any affirmative action in order to cause the exercise of the TCOMA
Option or any TCOMA Tandem SAR or the resulting delivery of shares of TCOMA or
other payment to comply with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation
8
<PAGE> 9
of, any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be cancelled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the TCOMA
Option or any TCOMA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
9
<PAGE> 10
to the TCOMA Options and TCOMA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the TCOMA
Options.
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
10
<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation
Rights Agreement dated as of
December 13, 1995
TELE-COMMUNICATIONS, INC. 1994 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Option Price: $17.00 per share
Option Shares: _______________ shares of Series A TCI Group Common Stock
("TCOMA"), $____________ par value per share.
11
<PAGE> 12
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights Agreement
dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1994 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ___________________________________ (the "Beneficiary") of
Name
_______________________________________________________________________________,
Street Address City State Zip Code
who is my ___________________________________________, shall be entitled to the
Relationship to Grantee
TCOMA Option, TCOMA Tandem SARs and all other rights accorded the Grantee by
the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------- ------------------------------
Date Grantee
12
<PAGE> 1
EXHIBIT 10.34
1994 PLAN
LBTYA
TELE-COMMUNICATIONS, INC.
1994 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc.1994
Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 (the "Option Date") and expiring at 5:00 p.m., Denver, Colorado time
("Close of Business") on August 4, 2005 (the "Option Term"), subject to earlier
termination as provided in paragraphs 8 and 12(b) below, an option to purchase
from the Company, at the price per share set forth on Schedule 1 hereto (the
"LBTYA Option Price"), the number of shares of Series A Liberty Group Common
Stock ("LBTYA") set forth on said Schedule 1 (the "LBTYA Option Shares"). The
LBTYA Option Price and LBTYA Option Shares are subject to adjustment pursuant
to paragraph 12 below. This option is as a "Nonqualified Stock Option" and is
hereinafter referred to as the "LBTYA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the LBTYA Option, the Grantee shall also
have, during the LBTYA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock appreciation right with respect to
each LBTYA Option Share (individually, a "LBTYA Tandem
1
<PAGE> 2
SAR" and collectively, the "LBTYA Tandem SARs"). Upon exercise of a LBTYA
Tandem SAR in accordance with this Agreement, the Company shall, subject to
paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the LBTYA Option Share on the date of
exercise if the LBTYA Tandem SAR exceeds the LBTYA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of LBTYA (valued at their Fair
Market Value as of the date of exercise of such LBTYA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of LBTYA.
3. REDUCTION UPON EXERCISE. The exercise of any number of LBTYA
Tandem SARs shall cause a corresponding reduction in the number of LBTYA Option
Shares which shall apply against the LBTYA Option Shares then available for
purchase. The exercise of the LBTYA Option to purchase any number of LBTYA
Option Shares shall cause a corresponding reduction in the number of LBTYA
Tandem SARS.
4. CONDITIONS OF EXERCISE. The LBTYA Option and LBTYA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the LBTYA Option
shall not be exercisable until August 4, 1996 and the LBTYA Option may
only be exercised to the extent the LBTYA Option Shares have become
available for purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of LBTYA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all LBTYA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company
which expressly permit the Grantee to terminate such
2
<PAGE> 3
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
(b) A LBTYA Tandem SAR with respect to an LBTYA Option
Share shall be exercisable only if the LBTYA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the LBTYA Option or LBTYA Tandem SARs
become exercisable, such LBTYA Option or LBTYA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the LBTYA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of LBTYA SARs and that the exercise by
Grantee of the LBTYA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The LBTYA Option or a LBTYA Tandem SAR
shall be considered exercised (as to the number of LBTYA Option Shares or LBTYA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of LBTYA Option Shares to be purchased and/or the number of
LBTYA Tandem SARs to be exercised;
(b) If the LBTYA Option is to be exercised, payment of
the LBTYA Option Price for each LBTYA Option Share to be purchased in
cash or in such other form, or combination of forms, of payment
contemplated by Section 6.6(a) of the Plan as the Committee may
permit; provided, however, that any shares of LBTYA delivered in
payment of the LBTYA Option Price, if such form of payment is so
permitted by the Committee, shall be shares that the Grantee has owned
for a period of at least six months prior to the date of exercise, and
provided, further, that, notwithstanding clause (v) of Section 6.6(a)
of the Plan, LBTYA Option Shares may not be withheld in payment or
partial payment of the LBTYA Option Price; and
(c) Any other documentation that the Committee may
reasonably require.
3
<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises LBTYA Tandem SARs
during a quarterly window period determined in accordance with paragraph (e)(3)
of such Rule (including by designating in a written notice of exercise
delivered prior thereto that such exercise is to be effective during such
window period), then the date of exercise of such LBTYA Tandem SARs shall be
deemed for purposes of this paragraph 5 and for purposes of the Fair Market
Value determinations to be made pursuant to paragraph 2 hereof, to be the day
during such window period on which the highest reported last sale price of a
share of LBTYA as reported on NASDAQ occurred and the Fair Market Value of such
share shall be deemed to be such highest reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of LBTYA
otherwise payable or deliverable upon exercise of the LBTYA Option or a LBTYA
Tandem SAR an amount of cash and/or number of shares of LBTYA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of LBTYA Option Shares
purchased by exercise of the LBTYA Option and for the number of shares of LBTYA
to which the Grantee is entitled by the exercise of LBTYA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of LBTYA Tandem
SARs. If delivery is by mail, delivery of shares of LBTYA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARs. Unless otherwise
determined by the Committee in its sole discretion, the LBTYA Option and LBTYA
Tandem SARs shall terminate, prior to the expiration of the LBTYA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the LBTYA Option and all
LBTYA Tandem SARs shall terminate at the Close of Business on
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<PAGE> 5
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the LBTYA Option and
LBTYA Tandem SARs remain exercisable as provided in paragraph (a), the
LBTYA Option and all LBTYA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the LBTYA Option and all LBTYA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the LBTYA Option and all LBTYA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the LBTYA Option Term shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the LBTYA Option and LBTYA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the LBTYA Option and LBTYA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the LBTYA Option and all LBTYA Tandem SARS shall in
any event terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
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<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof;
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF LBTYA TANDEM SARs. Immediately prior to
the termination of the LBTYA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining LBTYA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF LBTYA OPTION AND LBTYA TANDEM SARs.
During Grantee's lifetime, the LBTYA Option and LBTYA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the LBTYA Option and LBTYA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the LBTYA Option and LBTYA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the LBTYA Option and any
LBTYA Tandem SARS, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
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<PAGE> 7
11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of LBTYA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The LBTYA Option and LBTYA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of LBTYA Option Shares and the LBTYA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the LBTYA Option and all LBTYA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
LBTYA Option and all LBTYA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the LBTYA Option Term or the earlier termination of the
LBTYA Option and LBTYA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the LBTYA Option and LBTYA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the LBTYA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the LBTYA Option or any LBTYA Tandem SAR and that the Company will not be
obligated to deliver any shares of LBTYA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon
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<PAGE> 8
which the LBTYA is listed or quoted. The Company shall in no event be obligated
to take any affirmative action in order to cause the exercise of the LBTYA
Option or any LBTYA Tandem SAR or the resulting delivery of shares of LBTYA or
other payment to comply with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation
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<PAGE> 9
of, any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be canceled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the LBTYA
Option or any LBTYA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
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<PAGE> 10
to the LBTYA Options and LBTYA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the LBTYA
Options.
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided below
and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
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<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1994 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Option Price: $24.00 per share
Option Shares: ___________shares of Series A Liberty Group Common Stock
("LBTYA"), $____________ par value per share.
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<PAGE> 12
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1994 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ___________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________,
Street Address City State Zip Code
who is my ____________________________________________, shall be entitled to the
Relationship to Grantee
LBTYA Option, LBTYA Tandem SARs and all other rights accorded the Grantee by
the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------- ------------------------------
Date Grantee
12
<PAGE> 1
EXHIBIT 10.35
1995 PLAN
TCOMA
TELE-COMMUNICATIONS, INC.
1995 EMPLOYEE STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1995
Employee Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 (the "Option Date") and expiring at 5:00 p.m., Denver, Colorado time
("Close of Business") on August 4, 2005 (the "Option Term"), subject to earlier
termination as provided in paragraphs 8 and 12(b) below, an option to purchase
from the Company, at the price per share set forth on Schedule 1 hereto (the
"TCOMA Option Price"), the number of shares of Series A TCI Group Common Stock
("TCOMA") set forth on said Schedule 1 (the "TCOMA Option Shares"). The TCOMA
Option Price and TCOMA Option Shares are subject to adjustment pursuant to
paragraph 12 below. This option is as a "Nonqualified Stock Option" and is
hereinafter referred to as the "TCOMA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the TCOMA Option, the Grantee shall also
have, during the TCOMA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock
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<PAGE> 2
appreciation right with respect to each TCOMA Option Share (individually, a
"TCOMA Tandem SAR" and collectively, the "TCOMA Tandem SARs"). Upon exercise of
a TCOMA Tandem SAR in accordance with this Agreement, the Company shall,
subject to paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the TCOMA Option Share on the date of
exercise if the TCOMA Tandem SAR exceeds the TCOMA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of TCOMA (valued at their Fair
Market Value as of the date of exercise of such TCOMA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of TCOMA.
3. REDUCTION UPON EXERCISE. The exercise of any number of TCOMA
Tandem SARs shall cause a corresponding reduction in the number of TCOMA Option
Shares which shall apply against the TCOMA Option Shares then available for
purchase. The exercise of the TCOMA Option to purchase any number of TCOMA
Option Shares shall cause a corresponding reduction in the number of TCOMA
Tandem SARS.
4. CONDITIONS OF EXERCISE. The TCOMA Option and TCOMA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the TCOMA Option
shall not be exercisable until August 4, 1996 and thereafter the TCOMA
Option may only be exercised to the extent the TCOMA Option Shares
have become available for purchase in accordance with the following
schedule:
<TABLE>
<CAPTION>
Percentage of TCOMA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all TCOMA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any,
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<PAGE> 3
between the Grantee and the Company which expressly permit the Grantee
to terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (iii) if
Grantee dies while employed by the Company or a Subsidiary.
(b) A TCOMA Tandem SAR with respect to an TCOMA Option
Share shall be exercisable only if the TCOMA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the TCOMA Option or TCOMA Tandem SARs
become exercisable, such TCOMA Option or TCOMA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the TCOMA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of TCOMA SARs and that the exercise by
Grantee of the TCOMA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The TCOMA Option or a TCOMA Tandem SAR
shall be considered exercised (as to the number of TCOMA Option Shares or TCOMA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of TCOMA Option Shares to be purchased and/or the number of
TCOMA Tandem SARs to be exercised;
(b) If the TCOMA Option is to be exercised, payment of
the TCOMA Option Price for each TCOMA Option Share to be purchased in
cash or in such other form, or combination of forms, of payment
contemplated by Section 6.6(a) of the Plan as the Committee may
permit; provided, however, that any shares of TCOMA delivered in
payment of the TCOMA Option Price, if such form of payment is so
permitted by the Committee, shall be shares that the Grantee has owned
for a period of at least six months prior to the date of exercise, and
provided, further, that, notwithstanding clause (v) of Section 6.6(a)
of the Plan, TCOMA Option Shares may not be withheld in payment or
partial payment of the TCOMA Option Price; and
(c) Any other documentation that the Committee may
reasonably require.
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<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises TCOMA Tandem SARs
during a quarterly window period determined in accordance with paragraph (e)(3)
of such Rule (including by designating in a written notice of exercise
delivered prior thereto that such exercise is to be effective during such
window period), then the date of exercise of such TCOMA Tandem SARs shall be
deemed for purposes of this paragraph 5 and for purposes of the Fair Market
Value determinations to be made pursuant to paragraph 2 hereof, to be the day
during such window period on which the highest reported last sale price of a
share of TCOMA as reported on NASDAQ occurred and the Fair Market Value of such
share shall be deemed to be such highest reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of TCOMA
otherwise payable or deliverable upon exercise of the TCOMA Option or a TCOMA
Tandem SAR an amount of cash and/or number of shares of TCOMA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of TCOMA Option Shares
purchased by exercise of the TCOMA Option and for the number of shares of TCOMA
to which the Grantee is entitled by the exercise of TCOMA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of TCOMA Tandem
SARS. If delivery is by mail, delivery of shares of TCOMA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the TCOMA Option and TCOMA
Tandem SARs shall terminate, prior to the expiration of the TCOMA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the TCOMA Option and all
TCOMA Tandem SARs shall terminate at the Close of Business on
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<PAGE> 5
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the TCOMA Option and
TCOMA Tandem SARs remain exercisable as provided in paragraph (a), the
TCOMA Option and all TCOMA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the TCOMA Option and all TCOMA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the TCOMA Option and all TCOMA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the TCOMA Option Tenn shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the TCOMA Option and TCOMA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the TCOMA Option and TCOMA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the TCOMA Option and all TCOMA Tandem SARS shall in
any event terminate upon the expiration of the Option Tenn.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
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<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof,
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF TCOMA TANDEM SARS. Immediately prior to
the termination of the TCOMA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining TCOMA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF TCOMA OPTION AND TCOMA TANDEM SARS.
During Grantee's lifetime, the TCOMA Option and TCOMA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the TCOMA Option and TCOMA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the TCOMA Option and TCOMA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the TCOMA Option and any
TCOMA Tandem SARs, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
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<PAGE> 7
11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of TCOMA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The TCOMA Option and TCOMA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of TCOMA Option Shares and the TCOMA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the TCOMA Option and all TCOMA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
TCOMA Option and all TCOMA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the TCOMA Option Term or the earlier termination of the
TCOMA Option and TCOMA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the TCOMA Option and TCOMA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the TCOMA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the TCOMA Option or any TCOMA Tandem SAR and that the Company will not be
obligated to deliver any shares of TCOMA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon
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<PAGE> 8
which the TCOMA is listed or quoted. The Company shall in no event be obligated
to take any affirmative action in order to cause the exercise of the TCOMA
Option or any TCOMA Tandem SAR or the resulting delivery of shares of TCOMA or
other payment to comply with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation
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<PAGE> 9
of, any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be cancelled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the TCOMA
Option or any TCOMA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES by COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
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<PAGE> 10
to the TCOMA Options and TCOMA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the TCOMA
Options.
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
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<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation
Rights Agreement dated as of
December 13, 1995
TELE-COMMUNICATIONS, INC. 1995 EMPLOYEE STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Option Price: $17.00 per share
Option Shares: ____________ shares of Series A TCI Group Common Stock
("TCOMA"), $____________ par value per share.
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<PAGE> 12
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1995 EMPLOYEE STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ___________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________,
Street Address City State Zip Code
who is my __________________________________________, shall be entitled to the
Relationship to Grantee
TCOMA Option, TCOMA Tandem SARs and all other rights accorded the Grantee by
the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- --------------------------------- ----------------------------------
Date Grantee
12
<PAGE> 1
EXHIBIT 10.36
1995 PLAN
LBTYA
TELE-COMMUNICATIONS, INC.
1995 EMPLOYEE STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1995
Employee Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 (the "Option Date") and expiring at 5:00 p.m., Denver, Colorado time
("Close of Business") on August 4, 2005 (the "Option Term"), subject to earlier
termination as provided in paragraphs 8 and 12(b) below, an option to purchase
from the Company, at the price per share set forth on Schedule 1 hereto (the
"LBTYA Option Price"), the number of shares of Series A Liberty Group Common
Stock ("LBTYA") set forth on said Schedule 1 (the "LBTYA Option Shares"). The
LBTYA Option Price and LBTYA Option Shares are subject to adjustment pursuant
to paragraph 12 below. This option is as a "Nonqualified Stock Option" and is
hereinafter referred to as the "LBTYA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the LBTYA Option, the Grantee shall also
have, during the LBTYA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock
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<PAGE> 2
appreciation right with respect to each LBTYA Option Share (individually, a
"LBTYA Tandem SAR" and collectively, the "LBTYA Tandem SARs"). Upon exercise of
a LBTYA Tandem SAR in accordance with this Agreement, the Company shall,
subject to paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the LBTYA Option Share on the date of
exercise if the LBTYA Tandem SAR exceeds the LBTYA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of LBTYA (valued at their Fair
Market Value as of the date of exercise of such LBTYA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of LBTYA.
3. REDUCTION UPON EXERCISE. The exercise of any number of LBTYA
Tandem SARs shall cause a corresponding reduction in the number of LBTYA Option
Shares which shall apply against the LBTYA Option Shares then available for
purchase. The exercise of the LBTYA Option to purchase any number of LBTYA
Option Shares shall cause a corresponding reduction in the number of LBTYA
Tandem SARS.
4. CONDITIONS OF EXERCISE. The LBTYA Option and LBTYA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the LBTYA Option
shall not be exercisable until August 4, 1996 and thereafter the LBTYA
Option may only be exercised to the extent the LBTYA Option Shares
have become available for purchase in accordance with the following
schedule:
<TABLE>
<CAPTION>
Percentage of TCOMA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all LBTYA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any,
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<PAGE> 3
between the Grantee and the Company which expressly permit the Grantee
to terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (iii) if
Grantee dies while employed by the Company or a Subsidiary.
(b) A LBTYA Tandem SAR with respect to an LBTYA Option
Share shall be exercisable only if the LBTYA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the LBTYA Option or LBTYA Tandem SARs
become exercisable, such LBTYA Option or LBTYA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the LBTYA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of LBTYA SARs and that the exercise by
Grantee of the LBTYA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The LBTYA Option or a LBTYA Tandem SAR
shall be considered exercised (as to the number of LBTYA Option Shares or LBTYA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of LBTYA Option Shares to be purchased and/or the number of
LBTYA Tandem SARs to be exercised;
(b) If the LBTYA Option is to be exercised, payment of
the LBTYA Option Price for each LBTYA Option Share to be purchased in
cash or in such other form, or combination of forms, of payment
contemplated by Section 6.6(a) of the Plan as the Committee may
permit; provided, however, that any shares of LBTYA delivered in
payment of the LBTYA Option Price, if such form of payment is so
permitted by the Committee, shall be shares that the Grantee has owned
for a period of at least six months prior to the date of exercise, and
provided, further, that, notwithstanding clause (v) of Section 6.6(a)
of the Plan, LBTYA Option Shares may not be withheld in payment or
partial payment of the LBTYA Option Price; and
(c) Any other documentation that the Committee may
reasonably require.
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<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises
LBTYA Tandem SARs during a quarterly window period determined
in accordance with paragraph (e)(3) of such Rule (including by
designating in a written notice of exercise delivered prior
thereto that such exercise is to be effective during such
window period), then the date of exercise of such LBTYA Tandem
SARs shall be deemed for purposes of this paragraph 5 and for
purposes of the Fair Market Value determinations to be made
pursuant to paragraph 2 hereof, to be the day during such
window period on which the highest reported last sale price of
a share of LBTYA as reported on NASDAQ occurred and the Fair
Market Value of such share shall be deemed to be such highest
reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of LBTYA
otherwise payable or deliverable upon exercise of the LBTYA Option or a LBTYA
Tandem SAR an amount of cash and/or number of shares of LBTYA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of LBTYA Option Shares
purchased by exercise of the LBTYA Option and for the number of shares of LBTYA
to which the Grantee is entitled by the exercise of LBTYA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of LBTYA Tandem
SARs. If delivery is by mail, delivery of shares of LBTYA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the LBTYA Option and LBTYA
Tandem SARs shall terminate, prior to the expiration of the LBTYA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the LBTYA Option and all
LBTYA Tandem SARs shall terminate at the Close of Business on
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<PAGE> 5
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the LBTYA Option and
LBTYA Tandem SARs remain exercisable as provided in paragraph (a), the
LBTYA Option and all LBTYA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the LBTYA Option and all LBTYA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the LBTYA Option and all LBTYA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the LBTYA Option Term shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the LBTYA Option and LBTYA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the LBTYA Option and LBTYA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the LBTYA Option and all LBTYA Tandem SARS shall in
any event terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
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<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof;
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF LBTYA TANDEM SARS. Immediately prior to
the termination of the LBTYA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining LBTYA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF LBTYA OPTION AND LBTYA TANDEM SARS.
During Grantee's lifetime, the LBTYA Option and LBTYA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the LBTYA Option and LBTYA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the LBTYA Option and LBTYA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the LBTYA Option and any
LBTYA Tandem SARs, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
6
<PAGE> 7
11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of LBTYA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The LBTYA Option and LBTYA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of LBTYA Option Shares and the LBTYA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the LBTYA Option and all LBTYA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
LBTYA Option and all LBTYA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the LBTYA Option Term or the earlier termination of the
LBTYA Option and LBTYA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the LBTYA Option and LBTYA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the LBTYA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the LBTYA Option or any LBTYA Tandem SAR and that the Company will not be
obligated to deliver any shares of LBTYA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon
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<PAGE> 8
which the LBTYA is listed or quoted. The Company shall in no event be obligated
to take any affirmative action in order to cause the exercise of the LBTYA
Option or any LBTYA Tandem SAR or the resulting delivery of shares of LBTYA or
other payment to comply with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation
8
<PAGE> 9
of, any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be canceled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the LBTYA
Option or any LBTYA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
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<PAGE> 10
to the LBTYA Options and LBTYA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the LBTYA
Options.
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided below
and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
10
<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC.1995 EMPLOYEE STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Option Price: $24.00 per share
Option Shares: __________ shares of Series A Liberty Group Common Stock
("LBTYA"), $____________ par value per share.
11
<PAGE> 12
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC.1995 EMPLOYEE STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ____________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________,
Street Address City State Zip Code
who is my _________________________________________, shall be entitled to the
Relationship to Grantee
LBTYA Option, LBTYA Tandem SARs and all other rights accorded the Grantee by
the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ---------------------------- ---------------------------------------
Date Grantee
12
<PAGE> 1
EXHIBIT 10.37
1996 PLAN
TCOMA
TELE-COMMUNICATIONS, INC.
1996 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1996
Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 and expiring at 5:00 p.m., Denver, Colorado ("Close of Business") time on
August 4, 2005 (the "Option Term"), subject to earlier termination as provided
in paragraphs 8 and 12(b) below, an option to purchase from the Company, at the
price per share set forth on Schedule 1 hereto (the "TCOMA Option Price"), the
number of shares of Series A TCI Group Common Stock ("TCOMA") set forth on said
Schedule 1 (the "TCOMA Option Shares"). The TCOMA Option Price and TCOMA Option
Shares are subject to adjustment pursuant to paragraph 12 below. This option is
as a "Nonqualified Stock Option" and is hereinafter referred to as the "TCOMA
Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the TCOMA Option, the Grantee shall also
have, during the TCOMA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock appreciation right with respect to
each TCOMA Option Share (individually, a "TCOMA Tandem
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<PAGE> 2
SAR" and collectively, the "TCOMA Tandem SARs"). Upon exercise of a TCOMA
Tandem SAR in accordance with this Agreement, the Company shall, subject to
paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the TCOMA Option Share on the date of
exercise if the TCOMA Tandem SAR exceeds the TCOMA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of TCOMA (valued at their Fair
Market Value as of the date of exercise of such TCOMA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of TCOMA.
3. REDUCTION UPON EXERCISE. The exercise of any number of TCOMA
Tandem SARs shall cause a corresponding reduction in the number of TCOMA Option
Shares which shall apply against the TCOMA Option Shares then available for
purchase. The exercise of the TCOMA Option to purchase any number of TCOMA
Option Shares shall cause a corresponding reduction in the number of TCOMA
Tandem SARs.
4. CONDITIONS OF EXERCISE. The TCOMA Option and TCOMA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the TCOMA Option
shall not be exercisable until August 4, 1996 and the TCOMA Option may
only be exercised to the extent the TCOMA Option Shares have become
available for purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of TCOMA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all TCOMA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company
which expressly permit the Grantee to terminate such
2
<PAGE> 3
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
(b) A TCOMA Tandem SAR with respect to an TCOMA Option
Share shall be exercisable only if the TCOMA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the TCOMA Option or TCOMA Tandem SARs
become exercisable, such TCOMA Option or TCOMA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the TCOMA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of TCOMA SARs and that the exercise by
Grantee of the TCOMA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The TCOMA Option or a TCOMA Tandem SAR shall
be considered exercised (as to the number of TCOMA Option Shares or TCOMA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of TCOMA Option Shares to be purchased and/or the number of
TCOMA Tandem SARs to be exercised;
(b) If the TCOMA Option is to be exercised, payment of
the TCOMA Option Price for each TCOMA Option Share to be purchased in
cash or in such other form, or combination of forms, of payment
contemplated by Section 6.6(a) of the Plan as the Committee may
permit; provided, however, that any shares of TCOMA delivered in
payment of the TCOMA Option Price, if such form of payment is so
permitted by the Committee, shall be shares that the Grantee has owned
for a period of at least six months prior to the date of exercise, and
provided, further, that, notwithstanding clause (v) of Section 6.6(a)
of the Plan, TCOMA Option Shares may not be withheld in payment or
partial payment of the TCOMA Option Price; and
(c) Any other documentation that the Committee may
reasonably require.
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<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises TCOMA Tandem SARs
during a quarterly window period determined in accordance with paragraph (e)(3)
of such Rule (including by designating in a written notice of exercise
delivered prior thereto that such exercise is to be effective during such
window period), then the date of exercise of such TCOMA Tandem SARs shall be
deemed for purposes of this paragraph 5 and for purposes of the Fair Market
Value determinations to be made pursuant to paragraph 2 hereof, to be the day
during such window period on which the highest reported last sale price of a
share of TCOMA as reported on NASDAQ occurred and the Fair Market Value of such
share shall be deemed to be such highest reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of TCOMA
otherwise payable or deliverable upon exercise of the TCOMA Option or a TCOMA
Tandem SAR an amount of cash and/or number of shares of TCOMA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of TCOMA Option Shares
purchased by exercise of the TCOMA Option and for the number of shares of TCOMA
to which the Grantee is entitled by the exercise of TCOMA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of TCOMA Tandem
SARs. If delivery is by mail, delivery of shares of TCOMA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the TCOMA Option and TCOMA
Tandem SARs shall terminate, prior to the expiration of the TCOMA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the TCOMA Option and all
TCOMA Tandem SARs shall terminate at the Close of Business on
4
<PAGE> 5
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the TCOMA Option and
TCOMA Tandem SARs remain exercisable as provided in paragraph (a), the
TCOMA Option and all TCOMA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the TCOMA Option and all TCOMA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the TCOMA Option and all TCOMA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the TCOMA Option Term shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the TCOMA Option and TCOMA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the TCOMA Option and TCOMA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the TCOMA Option and all TCOMA Tandem SARS shall in
any event terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
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<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof,
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF TCOMA TANDEM SARs. Immediately prior to
the termination of the TCOMA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining TCOMA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF TCOMA OPTION AND TCOMA TANDEM SARS.
During Grantee's lifetime, the TCOMA Option and TCOMA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the TCOMA Option and TCOMA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the TCOMA Option and TCOMA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the TCOMA Option and any
TCOMA Tandem SARs, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
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<PAGE> 7
11. No SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of TCOMA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The TCOMA Option and TCOMA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of TCOMA Option Shares and the TCOMA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the TCOMA Option and all TCOMA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
TCOMA Option and all TCOMA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the TCOMA Option Term or the earlier termination of the
TCOMA Option and TCOMA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the TCOMA Option and TCOMA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the TCOMA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the TCOMA Option or any TCOMA Tandem SAR and that the Company will not be
obligated to deliver any shares of TCOMA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon
7
<PAGE> 8
which the TCOMA is listed or quoted. The Company shall in no event be obligated
to take any affirmative action in order to cause the exercise of the TCOMA
Option or any TCOMA Tandem SAR or the resulting delivery of shares of TCOMA or
other payment to comply with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation
8
<PAGE> 9
of, any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be canceled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the TCOMA
Option or any TCOMA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
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<PAGE> 10
to the TCOMA Options and TCOMA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the TCOMA
Options.
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
10
<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC.1996 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Option Price: $17.00 per share
Option Shares: _____________ shares of Series A TCI Group Common Stock
("TCOMA"), $____________ par value per share.
11
<PAGE> 12
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1996 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ___________________________________ (the "Beneficiary") of
Name
_____________________________________________________________________________,
Street Address City State Zip Code
who is my____________________________________________________________________,
Relationship to Grantee
be entitled to the TCOMA Option, TCOMA Tandem SARs and all other rights
accorded the Grantee by the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------- ------------------------------
Date Grantee
12
<PAGE> 1
EXHIBIT 10.38
1996 PLAN
LBTYA
TELE-COMMUNICATIONS, INC.
1996 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1996
Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 (the "Option Date") and expiring at 5:00 p.m., Denver, Colorado time
("Close of Business") on August 4, 2005 (the "Option Term"), subject to earlier
termination as provided in paragraphs 8 and 12(b) below, an option to purchase
from the Company, at the price per share set forth on Schedule 1 hereto (the
"LBTYA Option Price"), the number of shares of Series A Liberty Group Common
Stock ("LBTYA") set forth on said Schedule 1 (the "LBTYA Option Shares"). The
LBTYA Option Price and LBTYA Option Shares are subject to adjustment pursuant
to paragraph 12 below. This option is as a "Nonqualified Stock Option" and is
hereinafter referred to as the "LBTYA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the LBTYA Option, the Grantee shall also
have, during the LBTYA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock appreciation right with respect to
each LBTYA Option Share (individually, a "LBTYA Tandem
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<PAGE> 2
SAR" and collectively, the "LBTYA Tandem SARs"). Upon exercise of a LBTYA
Tandem SAR in accordance with this Agreement, the Company shall, subject to
paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the LBTYA Option Share on the date of
exercise if the LBTYA Tandem SAR exceeds the LBTYA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of LBTYA (valued at their Fair
Market Value as of the date of exercise of such LBTYA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of LBTYA.
3. REDUCTION UPON EXERCISE. The exercise of any number of LBTYA
Tandem SARs shall cause a corresponding reduction in the number of LBTYA Option
Shares which shall apply against the LBTYA Option Shares then available for
purchase. The exercise of the LBTYA Option to purchase any number of LBTYA
Option Shares shall cause a corresponding reduction in the number of LBTYA
Tandem SARS.
4. CONDITIONS OF EXERCISE. The LBTYA Option and LBTYA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the LBTYA Option
shall not be exercisable until August 4, 1996 and thereafter the LBTYA
Option may only be exercised to the extent the LBTYA Option Shares
have become available for purchase in accordance with the following
schedule:
<TABLE>
<CAPTION>
Percentage of LBTYA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all LBTYA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company
which expressly permit the Grantee to terminate such
2
<PAGE> 3
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
(b) A LBTYA Tandem SAR with respect to an LBTYA Option
Share shall be exercisable only if the LBTYA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the LBTYA Option or LBTYA Tandem SARs
become exercisable, such LBTYA Option or LBTYA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the LBTYA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of LBTYA SARs and that the exercise by
Grantee of the LBTYA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The LBTYA Option or a LBTYA Tandem SAR
shall be considered exercised (as to the number of LBTYA Option Shares or LBTYA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee
may require, designating, among other things, the date of
exercise, the number of LBTYA Option Shares to be purchased
and/or the number of LBTYA Tandem SARs to be exercised;
(b) If the LBTYA Option is to be exercised,
payment of the LBTYA Option Price for each LBTYA Option Share
to be purchased in cash or in such other form, or combination
of forms, of payment contemplated by Section 6.6(a) of the
Plan as the Committee may permit; provided, however, that any
shares of LBTYA delivered in payment of the LBTYA Option
Price, if such form of payment is so permitted by the
Committee, shall be shares that the Grantee has owned for a
period of at least six months prior to the date of exercise,
and provided, further, that, notwithstanding clause (v) of
Section 6.6(a) of the Plan, LBTYA Option Shares may not be
withheld in payment or partial payment of the LBTYA Option
Price; and
(c) Any other documentation that the Committee may
reasonably require.
3
<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises LBTYA Tandem SARs
during a quarterly window period determined in accordance with paragraph (e)(3)
of such Rule (including by designating in a written notice of exercise
delivered prior thereto that such exercise is to be effective during such
window period), then the date of exercise of such LBTYA Tandem SARs shall be
deemed for purposes of this paragraph 5 and for purposes of the Fair Market
Value determinations to be made pursuant to paragraph 2 hereof, to be the day
during such window period on which the highest reported last sale price of a
share of LBTYA as reported on NASDAQ occurred and the Fair Market Value of such
share shall be deemed to be such highest reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of LBTYA
otherwise payable or deliverable upon exercise of the LBTYA Option or a LBTYA
Tandem SAR an amount of cash and/or number of shares of LBTYA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of LBTYA Option Shares
purchased by exercise of the LBTYA Option and for the number of shares of LBTYA
to which the Grantee is entitled by the exercise of LBTYA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of LBTYA Tandem
SARs. If delivery is by mail, delivery of shares of LBTYA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the LBTYA Option and LBTYA
Tandem SARs shall terminate, prior to the expiration of the LBTYA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the LBTYA Option and all
LBTYA Tandem SARs shall terminate at the Close of Business on
4
<PAGE> 5
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the LBTYA Option and
LBTYA Tandem SARs remain exercisable as provided in paragraph (a), the
LBTYA Option and all LBTYA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the LBTYA Option and all LBTYA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the LBTYA Option and all LBTYA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the LBTYA Option Term shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the LBTYA Option and LBTYA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the LBTYA Option and LBTYA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the LBTYA Option and all LBTYA Tandem SARs shall in
any event terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
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<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof;
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF LBTYA TANDEM SARS. Immediately prior to
the termination of the LBTYA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining LBTYA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF LBTYA OPTION AND LBTYA TANDEM SARS.
During Grantee's lifetime, the LBTYA Option and LBTYA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the LBTYA Option and LBTYA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the LBTYA Option and LBTYA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the LBTYA Option and any
LBTYA Tandem SARs, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
6
<PAGE> 7
11. No SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of LBTYA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The LBTYA Option and LBTYA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of LBTYA Option Shares and the LBTYA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the LBTYA Option and all LBTYA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
LBTYA Option and all LBTYA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the LBTYA Option Term or the earlier termination of the
LBTYA Option and LBTYA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the LBTYA Option and LBTYA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the LBTYA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the LBTYA Option or any LBTYA Tandem SAR and that the Company will not be
obligated to deliver any shares of LBTYA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon
7
<PAGE> 8
which the LBTYA is listed or quoted. The Company shall in no event be obligated
to take any affirmative action in order to cause the exercise of the LBTYA
Option or any LBTYA Tandem SAR or the resulting delivery of shares of LBTYA or
other payment to comply with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation
8
<PAGE> 9
of, any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be cancelled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the LBTYA
Option or any LBTYA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
9
<PAGE> 10
to the LBTYA Options and LBTYA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the LBTYA
Options.
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided below
and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
10
<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS, INC. 1996 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Option Price: $24.00 per share
Option Shares: ___________ shares of Series A Liberty Group Common Stock
("LBTYA"), $_________ par value per share.
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<PAGE> 12
Exhibit B to Non-Qualified Stock
Option and Stock Appreciation
Rights Agreement dated as of
December 13, 1995
TELE-COMMUNICATIONS, INC.1996 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ____________________________________ (the "Beneficiary") of
Name
_____________________________________________________________________________
Street Address City State Zip Code
who is my _____________________________________________ shall be entitled to the
Relationship to Grantee
LBTYA Option, LBTYA Tandem SARs and all other rights accorded the Grantee by
the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------- -------------------------------
Date Grantee
12
<PAGE> 1
EXHIBIT 10.40
1995 PLAN
TINTA
TELE-COMMUNICATIONS INTERNATIONAL, INC.
1995 STOCK INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and the person
signing adjacent to the caption "Grantee" on the signature page hereof (the
"Grantee").
The Company has adopted the Tele-Communications International,
Inc. 1995 Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. AWARD. Pursuant to the terms of the Plan and in consideration
of the covenants and promises of Grantee herein contained, the Company hereby
awards to Grantee as of the Grant Date, a total of ___________ shares of
Series A Common Stock of the Company ("TINTA"), at the price per share set
forth on Schedule 1 hereto, subject to the conditions and restrictions set
forth below and in the Plan (the "Restricted Shares").
2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION
PERIOD. Upon issuance of the Restricted Shares the stock certificate or
certificates representing such Restricted Shares shall be registered in the
name of Grantee. During the Restriction Period, certificates representing the
Restricted Shares and any securities constituting Retained Distributions shall
bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in the
Plan and this Agreement. Such certificates shall remain in the
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<PAGE> 2
custody of the Company and Grantee shall deposit with the Company stock powers
or other instruments of assignment, each endorsed in blank, so as to permit
retransfer to the Company of all or any portion of the Restricted Shares and
any securities constituting Retained Distributions that shall be forfeited or
otherwise not become vested in accordance with the Plan and this Agreement.
3. RESTRICTIONS. Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. Grantee will
have the right to vote such Restricted Shares, to receive and retain such
dividends and distributions, as the Committee may in its sole discretion
designate, paid or distributed on such Restricted Shares and to exercise all
other rights, powers and privileges of a Holder of Common Stock with respect to
such Restricted Shares; except, that (a) Grantee will not be entitled to
delivery of the stock certificate or certificates representing such Restricted
Shares until the Restriction Period shall have expired and unless all other
vesting requirements with respect thereto shall have been fulfilled or waived;
(b) the Company will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period as provided in
Section 8.2 of the Plan; (c) other than such dividends and distributions as the
Committee may in its sole discretion designate, the Company will retain custody
of all distributions ("Retained Distributions") made or declared with respect
to the Restricted Shares (and such Retained Distributions will be subject to
the same restrictions, terms and vesting and other conditions as are applicable
to the Restricted Shares) until such time, if ever, as the Restricted Shares
with respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) Grantee may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the Restricted
Shares or any Retained Distributions or his interest in any of them during the
Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.
4. VESTING AND FORFEITURE OF RESTRICTED STOCK: Subject to earlier
vesting in accordance with the provisions of Paragraph 7(b) below, and subject
to shareholder approval of the Plan at the _____________ annual meeting of the
shareholders of the Company, Grantee shall become vested as to 50% of the
shares of Restricted Shares subject to this Agreement as of four years
following the Grant Date, and Grantee shall become vested as to the remaining
50% of the shares of Restricted Shares subject to this Agreement as of five
years following the Grant Date, each such date being a Vesting Date; provided,
however, that Grantee shall not vest, pursuant to this Paragraph 4, in shares
of Restricted Shares as to which Grantee would otherwise vest as of a given
date if Grantee has not been continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date (the vesting or
forfeiture of such shares to be governed instead by the provisions of Paragraph
5). Notwithstanding the foregoing, in the event that any date on which vesting
would otherwise occur is a Saturday, Sunday or a holiday, such vesting shall
instead occur on the business day next following such date.
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<PAGE> 3
5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the
Committee in its sole discretion, the Award shall terminate, to the extent not
theretofore vested, prior to the expiration of the Restricted Period, at the
time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the Award, to the extent
not theretofore vested, shall terminate at the Close of Business on
the first business day following the expiration of the 90-day period
which began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which any portion of the
Award remains unvested as provided in paragraph (a), then the Award,
to the extent not theretofore vested, shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the Award, to the extent not theretofore
vested, shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the Award, to the extent not
theretofore vested, shall terminate immediately upon such termination
of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the Award, to the extent not theretofore vested, shall terminate
early only as provided for in paragraph (b) above or 7(b) below.
3
<PAGE> 4
In any event in which the Award remains outstanding for a
period of time following the Grantee's voluntary termination of his status as a
member of the Board, the Award may vest during such period of time only to the
extent the same would have vested as provided in paragraph 4 above on such date
of termination of Grantee's status. Notwithstanding any period of time
referenced in this paragraph 5 or any other provision of this paragraph that
may be construed to the contrary, restrictions upon the Award shall in any
event terminate upon the expiration of the Restriction Period.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof,
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares
shall become vested to the extent that the Restricted Shares related thereto
shall have become vested and (c) any cash award to be received by Grantee with
respect to such Restricted Shares shall become payable, all in accordance with
the terms of this Agreement. Any such Restricted Shares, Retained Distributions
and any unpaid Dividend Equivalents that shall not become vested shall be
4
<PAGE> 5
forfeited to the Company and Grantee shall not thereafter have any rights
(including dividend and voting rights) with respect to such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall have been
so forfeited. The Committee may, in its discretion, provide that the delivery
of any Restricted Shares, Retained Distributions and unpaid Dividend
Equivalents that shall have become vested, and payment of any cash awards that
shall have become payable, shall be deferred until such date or dates as the
recipient may elect. Any election of a recipient pursuant to the preceding
sentence shall be filed in writing with the Committee in accordance with such
rules and regulations, including any deadline for the making of such an
election, as the Committee may provide.
7. ADJUSTMENTS.
(a) The Restricted Shares shall be subject to adjustment
(including, without limitation, as to the number of Restricted Shares)
in the sole discretion of the Committee and in such manner as the
Committee may deem equitable and appropriate in connection with the
occurrence of any of the events described in Section 4.2 of the Plan
following the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the restrictions in Paragraph 3 shall
lapse; provided, however, that to the extent not theretofore vested
the Award shall terminate upon the first to occur of the consummation
of the Approved Transaction, the expiration of the Award Term or the
earlier termination of the Award pursuant to paragraph 7 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the restrictions in Paragraph 3 will not lapse on an
accelerated basis in connection with an Approved Transaction and/or
will not terminate if not exercised prior to consummation of the
Approved Transaction, if the Board or the surviving or acquiring
corporation, as the case may be, shall have taken or made effective
provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for
the Award evidenced by this Agreement or to assume this Agreement and
the Award evidenced hereby and in order to make such new or assumed
Award, as nearly as may be practicable, equivalent to the Award
evidenced by this Agreement as then in effect (but before giving
effect to any acceleration of the exercisability hereof unless
otherwise determined by the Committee), taking into account, to the
extent applicable, the kind and amount of securities, cash or other
assets into or for which the TINTA Common Stock may be changed,
converted or exchanged in connection with the Approved Transaction.
8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the
Restriction Period, Grantee (or Beneficiary, as defined in Paragraph 10 below)
must remit to the Company the amount of all federal, state and other
governmental withholding tax requirements imposed upon the Company with respect
to the vesting of shares of Restricted Stock, unless provisions to so pay such
withholding requirements have been made to the satisfaction of the Committee.
Upon the payment of any cash dividends with respect to shares of Restricted
Stock during the Restriction Period, the
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<PAGE> 6
amount of such dividends shall be reduced to the extent necessary to satisfy
any withholding tax requirements applicable thereto prior to payment to
Grantee.
9. DELIVERY BY THE COMPANY. As soon as practicable after vesting
in Restricted Shares pursuant to Paragraphs 4 or 5, and subject to the
withholding referred to in paragraph 8, the Company shall deliver to Grantee
certificates issued in Grantee's name for the number of Restricted Shares. If
delivery is by mail, delivery of shares of TINTA Common Stock shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to Grantee, and
any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to Grantee.
10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before
vesting and during Grantee's lifetime, the Restricted Shares are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the Restricted Shares shall pass upon
Grantee's death and may change such designation from time to time by filing a
written designation of beneficiary or beneficiaries with the Committee on the
form annexed hereto as Exhibit B or such other form as may be prescribed by the
Committee, provided that no such designation shall be effective unless so filed
prior to the death of Grantee. If no such designation is made or if the
designated beneficiary does not survive the Grantee's death, the Restricted
Shares shall pass by will or the laws of descent and distribution. Following
Grantee's death, the Restricted Shares shall pass accordingly to the designated
beneficiary and such person shall be deemed the Grantee for purposes of any
applicable provisions of this Agreement.
11. COMPANY'S RIGHTS. The existence of this Agreement shall not
affect in any way the right or power of the Company or its stockholders to
accomplish any corporate act, including, without limitation, the acts referred
to in Section 10.18 of the Plan.
12. LIMITATION OF RIGHTS: Nothing in this Agreement or the Plan
shall be construed to:
(a) give Grantee any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give Grantee or any other person any interest in any
form or in any specified asset or assets of the Company or any
subsidiary of the Company; or
(c) confer upon Grantee the right to continue in the
employment or service of the Company or any subsidiary of the Company,
or affect the right of the Company or any subsidiary of the Company to
terminate the employment or service of Grantee at any time or for any
reason.
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<PAGE> 7
13. PREREQUISITES TO BENEFITS: Neither Grantee nor any person
claiming through Grantee shall have any right or interest in the Restricted
Shares awarded hereunder, unless and until all the terms, conditions and
provisions of this Agreement and the Plan which affect the Grantee or such
other person shall have been complied with as specified herein.
14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, Grantee agrees that Grantee will not require the
Company to deliver any Restricted Shares and that the Company will not be
obligated to deliver any Restricted Shares or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TINTA Common Stock is listed or quoted.
The Company shall in no event be obligated to take any affirmative action in
order to cause the delivery of any Restricted Shares or other payment to comply
with any such law, rule, regulation or agreement.
15. NOTICE. Unless the Company notifies Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from Grantee of a change of address.
16. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of Grantee,
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<PAGE> 8
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation of, any law
or governmental rule or regulation, including any applicable federal
or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be canceled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the
Restricted Shares to the extent then vested.
17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on Grantee any right to continue in the employ of the
Company or any of its Subsidiaries or interfere in any way with the right of
the Company or any employing Subsidiary to terminate Grantee's employment at
any time, with or without cause; subject, however, to the provisions of any
employment agreement between Grantee and the Company or any Subsidiary.
18. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Colorado.
19. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
20. DUPLICATE ORIGINALS. The Company and Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
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<PAGE> 9
21. RULES BY COMMITTEE. The rights of Grantee and obligations of
the Company hereunder shall be subject to such reasonable rules and regulations
as the Committee may adopt from time to time hereafter.
22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
to the Restricted Shares and replaces and makes null and void any prior
agreements between Grantee and the Company regarding the Restricted Shares.
23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS
INTERNATIONAL, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
---------------------------
9
<PAGE> 10
Schedule 1 to Restricted Stock Award
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS INTERNATIONAL, INC. 1995 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Restricted Shares: _____________ shares of Series A Common Stock
("TINTA"), $_____________________ par value per
share.
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<PAGE> 11
Exhibit B to Restricted Stock Award
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS INTERNATIONAL, INC. 1995 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death ___________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________,
Street Address City State Zip Code
who is my ______________________________________________ shall be entitled to
Relationship to Grantee
the Restricted Shares and all other rights accorded the Grantee by the above-
referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------------ -----------------------------------------
Date Grantee
11
<PAGE> 1
EXHIBIT 10.41
INTERNATIONAL
(PLAN)
TELE-COMMUNICATIONS INTERNATIONAL, INC.
1995 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and the person
signing adjacent to the caption "Grantee" on the signature page hereof (the
"Grantee").
The Company has adopted the Tele-Communications International,
Inc. 1995 Stock Incentive Plan (the "Plan"), a copy of which is appended to this
Agreement as Exhibit A and by this reference made a part hereof, for the
benefit of eligible employees of the Company and its Subsidiaries. Capitalized
terms used and not otherwise defined herein shall have the meaning ascribed
thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 (the "Option Date") and expiring at 5:00 p.m., Denver, Colorado time
("Close of Business") on August 4, 2005 (the "Option Term"), subject to earlier
termination as provided in paragraphs 8 and 12(b) below, an option to purchase
from the Company, at the price per share set forth on Schedule 1 hereto (the
"TINTA Option Price"), the number of shares of Series A Common Stock of the
Company ("TINTA") set forth on said Schedule 1 (the "TINTA Option Shares"). The
TINTA Option Price and TINTA Option Shares are subject to adjustment pursuant
to paragraph 12 below. This option is as a "Nonqualified Stock Option" and is
hereinafter referred to as the "TINTA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the TINTA Option, the Grantee shall also
have, during the TINTA Option Term,
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subject to earlier termination as provided in paragraphs 8 and 12(b)
below, a stock appreciation right with respect to each TINTA Option
Share (individually, a "TINTA Tandem SAR" and collectively, the "TINTA
Tandem SARs"). Upon exercise of a TINTA Tandem SAR in accordance with
this Agreement, the Company shall, subject to paragraph 6 below, make
payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the TINTA Option Share on the date of
exercise if the TINTA Tandem SAR exceeds the TINTA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of TINTA (valued at their Fair
Market Value as of the date of exercise of such TINTA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of TINTA.
3. REDUCTION UPON EXERCISE. The exercise of any number of TINTA
Tandem SARs shall cause a corresponding reduction in the number of TINTA Option
Shares which shall apply against the TINTA Option Shares then available for
purchase. The exercise of the TINTA Option to purchase any number of TINTA
Option Shares shall cause a corresponding reduction in the number of TINTA
Tandem SARS.
4. CONDITIONS OF EXERCISE. The TINTA Option and TINTA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the TINTA Option
shall not be exercisable until August 4, 1996 of the Option Date, and
thereafter the TINTA Option may only be exercised to the extent the
TINTA Option Shares have become available for purchase in accordance
with the following schedule:
<TABLE>
<CAPTION>
Percentage of TINTA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all TINTA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability,
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<PAGE> 3
(ii) shall terminate pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which expressly
permit the Grantee to terminate such employment upon the occurrence of
specified events (other than the giving of notice and passage of
time), or (iii) if Grantee dies while employed by the Company or a
Subsidiary.
(b) A TINTA Tandem SAR with respect to an TINTA Option
Share shall be exercisable only if the TINTA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the TINTA Option or TINTA Tandem SARs
become exercisable, such TINTA Option or TINTA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the TINTA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of TINTA SARs and that the exercise by
Grantee of the TINTA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The TINTA Option or a TINTA Tandem SAR shall
be considered exercised (as to the number of TINTA Option Shares or TINTA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of TINTA Option Shares to be purchased and/or the number of
TINTA Tandem SARs to be exercised;
(b) If the TINTA Option is to be exercised, payment of
the TINTA Option Price for each TINTA Option Share to be purchased in
cash or in such other form, or combination of forms, of payment
contemplated by Section 6.5(a) of the Plan as the Committee may
permit; provided, however, that any shares of TINTA delivered in
payment of the TINTA Option Price, if such form of payment is so
permitted by the Committee, shall be shares that the Grantee has owned
for a period of at least six months prior to the date of exercise, and
provided, further, that, notwithstanding clause (v) of Section 6.5(a)
of the Plan, TINTA Option Shares may not be withheld in payment or
partial payment of the TINTA Option Price; and
(c) Any other documentation that the Committee may
reasonably require.
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<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises TINTA Tandem SARs
during a quarterly window period determined in accordance with paragraph (e)(3)
of such Rule (including by designating in a written notice of exercise
delivered prior thereto that such exercise is to be effective during such
window period), then the date of exercise of such TINTA Tandem SARs shall be
deemed for purposes of this paragraph 5 and for purposes of the Fair Market
Value determinations to be made pursuant to paragraph 2 hereof, to be the day
during such window period on which the highest reported last sale price of a
share of TINTA as reported on NASDAQ occurred and the Fair Market Value of such
share shall be deemed to be such highest reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of TINTA
otherwise payable or deliverable upon exercise of the TINTA Option or a TINTA
Tandem SAR an amount of cash and/or number of shares of TINTA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of TINTA Option Shares
purchased by exercise of the TINTA Option and for the number of shares of TINTA
to which the Grantee is entitled by the exercise of TINTA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of TINTA Tandem
SARS. If delivery is by mail, delivery of shares of TINTA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the TINTA Option and TINTA
Tandem SARs shall terminate, prior to the expiration of the TINTA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the TINTA Option and all
TINTA Tandem SARs shall terminate at the Close of Business on the
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<PAGE> 5
first business day following the expiration of the 90-day period which
began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the TINTA Option and
TINTA Tandem SARs remain exercisable as provided in paragraph (a), the
TINTA Option and all TINTA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the TINTA Option and all TINTA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the TINTA Option and all TINTA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the TINTA Option Term shall terminate early only as provided
for,in paragraph 8(b) above or 12(b) below.
In any event in which the TINTA Option and TINTA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the TINTA Option and TINTA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the TINTA Option and all TINTA Tandem SARS shall in
any event terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
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<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof,
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF TINTA TANDEM SARS. Immediately prior to
the termination of the TINTA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining TINTA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF TINTA OPTION AND TINTA TANDEM SARS.
During Grantee's lifetime, the TINTA Option and TFNTA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the TINTA Option and TINTA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the TINTA Option and TINTA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the TINTA Option and any
TINTA Tandem SARS, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
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<PAGE> 7
11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of TINTA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The TINTA Option and TINTA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of TINTA Option Shares and the TINTA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the TINTA Option and all TINTA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
TINTA Option and all TINTA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the TINTA Option Term or the earlier termination of the
TINTA Option and TINTA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the TINTA Option and TINTA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the TINTA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the TINTA Option or any TINTA Tandem SAR and that the Company will not be
obligated to deliver any shares of TINTA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TINTA is listed or quoted. The Company
shall in no event be obligated to take any affirmative
7
<PAGE> 8
action in order to cause the exercise of the TINTA Option or any TINTA Tandem
SAR or the resulting delivery of shares of TINTA or other payment to comply
with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.O. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation
8
<PAGE> 9
of, any law or governmental rule or regulation, including any
applicable federal or state securities laws; and
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be cancelled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the TINTA
Option or any TINTA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
9
<PAGE> 10
to the TINTA Options and TINTA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the TINTA
Options.
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS INTERNATIONAL,
INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
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<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS INTERNATIONAL, INC. 1995 STOCK INCENTIVE PLAN
Grantee:
Grant Date: December 13, 1995
Option Price: $16.00 per share
Option Shares: _______________ shares of Series A Common Stock of
Tele-Communications, International, Inc. ("TINTA"),
$___________ par value per share.
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<PAGE> 12
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights
Agreement dated as of December 13, 1995
TELE-COMMUNICATIONS INTERNATIONAL, INC. 1995 STOCK INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, ____________________________________ (the "Grantee"), hereby declare
that upon my death ______________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________,
Street Address City State Zip Code
who is my ______________________________________________ shall be entitled to
Relationship to Grantee
theTINTA Option, TINTA Tandem SARs and all other rights accorded the Grantee
by the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ----------------------------- -----------------------------------
Date Grantee
12
<PAGE> 1
EXHIBIT 10.42
INTERNATIONAL
(NON-PLAN)
TELE-COMMUNICATIONS, INC.
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 13th day of
December, 1995 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
Tele-Communications International, Inc. has adopted the
Tele-Communications International, Inc.1995 Stock Incentive Plan (the "Plan"),
a copy of which is appended to this Agreement as Exhibit A and by this
reference made a part hereof. Capitalized terms used and not otherwise defined
herein shall have the meaning ascribed thereto in the Plan.
The Compensation Committee of the Board of the Company (the
"Committee"), which has been assigned responsibility for administering
executive compensation, has determined that it would be in the interest of the
Company and its stockholders to grant the options and rights provided herein in
order to provide Grantee with additional remuneration for services rendered and
to increase Grantee's personal interest in the continued success and progress
of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein,
the Company grants to the Grantee during the period commencing on December 13,
1995 and expiring at 5:00 p.m., Denver, Colorado time ("Close of Business") on
August 4, 2005 (the "Option Term"), subject to earlier termination as provided
in paragraphs 8 and 12(b) below, an option to purchase from the Company, at the
price per share set forth on Schedule 1 hereto (the "TINTA Option Price"), the
number of shares of Series A Common Stock of the Company ("TINTA") set forth on
said Schedule 1 (the "TINTA Option Shares"). The TINTA Option Price and TINTA
Option Shares are subject to adjustment pursuant to paragraph 12 below. This
option is as a "Nonqualified Stock Option" and is hereinafter referred to as
the "TINTA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the TINTA Option, the Grantee shall also
have, during the TINTA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock appreciation right with respect to
each TINTA Option Share (individually, a "TINTA Tandem SAR" and collectively,
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<PAGE> 2
the "TINTA Tandem SARs"). Upon exercise of a TINTA Tandem SAR in accordance
with this Agreement, the Company shall, subject to paragraph 6 below, make
payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the TINTA Option Share on the date of
exercise if the TINTA Tandem SAR exceeds the TINTA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of TINTA (valued at their Fair
Market Value as of the date of exercise of such TINTA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of TINTA.
3. REDUCTION UPON EXERCISE. The exercise of any number of TINTA
Tandem SARs shall cause a corresponding reduction in the number of TINTA Option
Shares which shall apply against the TINTA Option Shares then available for
purchase. The exercise of the TINTA Option to purchase any number of TINTA
Option Shares shall cause a corresponding reduction in the number of TINTA
Tandem SARS.
4. CONDITIONS OF EXERCISE. The TINTA Option and TINTA Tandem SARs
are exercisable only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in paragraph 12(b) below
or in the last sentence of this subparagraph (a), the TINTA Option
shall not be exercisable until August 4, 1996 and thereafter the TINTA
Option may only be exercised to the extent the TINTA Option Shares
have become available for purchase in accordance with the following
schedule:
<TABLE>
<CAPTION>
Percentage of TINTA Option
Date Shares Available for Purchase
-------------- -----------------------------
<S> <C>
August 4, 1996 20%
August 4, 1997 40%
August 4, 1998 60%
August 4, 1999 80%
August 4, 2000 100%
</TABLE>
Notwithstanding the foregoing, all TINTA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 10.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company
which expressly permit the Grantee to terminate such
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<PAGE> 3
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
(b) A TINTA Tandem SAR with respect to a TINTA Option
Share shall be exercisable only if the TINTA Option Share is then
available for purchase in accordance with subparagraph (a).
(c) To the extent the TINTA Option or TINTA Tandem SARs
become exercisable, such TINTA Option or TINTA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the TINTA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee
may, in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of TINTA SARs and that the exercise by
Grantee of the TINTA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The TINTA Option or a TINTA Tandem SAR shall
be considered exercised (as to the number of TINTA Option Shares or TINTA
Tandem SARs specified in the notice referred to in subparagraph (a) below) on
the latest of (i) the date of exercise designated in the written notice
referred to in subparagraph (a) below, (ii) if the date so designated is not a
business day, the first business day following such date or (iii) the earliest
business day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of TINTA Option Shares to be purchased and/or the number of
TINTA Tandem SARs to be exercised;
(b) If the TINTA Option is to be exercised, payment of
the TINTA Option Price for each TINTA Option Share to be purchased in
cash or in such other form, or combination of forms, of payment
contemplated by Section 6.5(a) of the Plan as the Committee may
permit; provided, however, that any shares of TINTA delivered in
payment of the TINTA Option Price, if such form of payment is so
permitted by the Committee, shall be shares that the Grantee has owned
for a period of at least six months prior to the date of exercise, and
provided, further, that, notwithstanding clause (v) of Section 6.5(a)
of the Plan, TINTA Option Shares may not be withheld in payment or
partial payment of the TINTA Option Price; and
(c) Any other documentation that the Committee may
reasonably require.
3
<PAGE> 4
Notwithstanding the foregoing, if in order to meet the
exemptive requirements of Rule 16b-3, the Grantee exercises TINTA Tandem SARs
during a quarterly window period determined in accordance with paragraph (e)(3)
of such Rule (including by designating in a written notice of exercise
delivered prior thereto that such exercise is to be effective during such
window period), then the date of exercise of such TINTA Tandem SARs shall be
deemed for purposes of this paragraph 5 and for purposes of the Fair Market
Value determinations to be made pursuant to paragraph 2 hereof, to be the day
during such window period on which the highest reported last sale price of a
share of TINTA as reported on NASDAQ occurred and the Fair Market Value of such
share shall be deemed to be such highest reported last sale price.
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and
agrees that the Company shall deduct from the cash and/or shares of TINTA
otherwise payable or deliverable upon exercise of the TINTA Option or a TINTA
Tandem SAR an amount of cash and/or number of shares of TINTA (valued at their
Fair Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in paragraph 5, and subject to the withholding
referred to in paragraph 6, the Company shall deliver to the Grantee
certificates issued in Grantee's name for the number of TINTA Option Shares
purchased by exercise of the TINTA Option and for the number of shares of TINTA
to which the Grantee is entitled by the exercise of TINTA Tandem SARs and any
cash payment to which the Grantee is entitled by the exercise of TINTA Tandem
SARs. If delivery is by mail, delivery of shares of TINTA shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Grantee,
and any cash payment shall be deemed effected when a Company check, payable to
Grantee and in an amount equal to the amount of the cash payment, shall have
been deposited in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the TINTA Option and TINTA
Tandem SARs shall terminate, prior to the expiration of the TINTA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the TINTA Option and all
TINTA Tandem SARs shall terminate at the Close of Business on the
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<PAGE> 5
first business day following the expiration of the 90-day period which
began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the TINTA Option and
TINTA Tandem SARs remain exercisable as provided in paragraph (a), the
TINTA Option and all TINTA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
(c) If Grantee's employment with the Company terminates
by reason of Disability, then the TINTA Option and all TINTA Tandem
SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the
date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the TINTA Option and all TINTA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee
(x) with "good reason" (as defined herein), (y) with the written
consent of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 10.2(b) of the Plan),
then the TINTA Option Term shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the TINTA Option and TINTA Tandem SARs
remain exercisable for a period of time following the Grantee's voluntary
termination of his status as a member of the Board, the TINTA Option and TINTA
Tandem SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such date of
termination of Grantee's status. Notwithstanding any period of time referenced
in this paragraph 8 or any other provision of this paragraph that may be
construed to the contrary, the TINTA Option and all TINTA Tandem SARs shall in
any event terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
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<PAGE> 6
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof;
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the
time of any reorganization, merger, consolidation, disposition of all
or substantially all of the assets of the Company or similar
transaction effective after the date hereof, in which the Company is
not the surviving person, the unconditional assumption in writing or
by operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF TINTA TANDEM SARS. Immediately prior to
the termination of the TINTA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining TINTA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF TINTA OPTION AND TINTA TANDEM SARS.
During Grantee's lifetime, the TINTA Option and TINTA Tandem SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a qualified
domestic relations order and, except as otherwise required pursuant to a
qualified domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the TINTA Option and TINTA Tandem SARs
shall pass upon Grantee's death and may change such designation from time to
time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the TINTA Option and TINTA Tandem SARs shall pass by will or the laws of
descent and distribution. Following Grantee's death, the TINTA Option and any
TINTA Tandem SARS, if otherwise exercisable, may be exercised by the person to
whom such option or right passes accordingly to the foregoing and such person
shall be deemed the Grantee for purposes of any applicable provisions of this
Agreement.
6
<PAGE> 7
11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of TINTA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 10.18 of the Plan.
12. ADJUSTMENTS.
(a) The TINTA Option and TINTA Tandem SARs shall be
subject to adjustment (including, without limitation, as to the number
of TINTA Option Shares and the TINTA Option Price per share) in the
sole discretion of the Committee and in such manner as the Committee
may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following
the Grant Date.
(b) In the event of any Approved Transaction, Board
Change or Control Purchase, the TINTA Option and all TINTA Tandem SARs
shall become exercisable in full without regard to paragraph 4(a);
provided, however, that to the extent not theretofore exercised the
TINTA Option and all TFNTA Tandem SARs shall terminate upon the first
to occur of the consummation of the Approved Transaction, the
expiration of the TINTA Option Term or the earlier termination of the
TINTA Option and TINTA Tandem SARs pursuant to paragraph 8 hereof.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the TINTA Option and TINTA Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of such action as in
the opinion of the Committee is equitable and appropriate to
substitute a new Award for the Award evidenced by this Agreement or to
assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the TINTA may be changed,
converted or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality
of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise
the TINTA Option or any TINTA Tandem SAR and that the Company will not be
obligated to deliver any shares of TINTA or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TINTA is listed or quoted. The Company
shall in no event be obligated to take any affirmative
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<PAGE> 8
action in order to cause the exercise of the TINTA Option or any TINTA Tandem
SAR or the resulting delivery of shares of TINTA or other payment to comply
with any such law, rule, regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of
a different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and
addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P.0. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to
or conferred upon the Company in this Agreement, subject, however, to
any required approval of the Company's stockholders and, provided, in
each case, that such changes or corrections shall not adversely affect
the rights of Grantee with respect to the Award evidenced hereby, or
(iii) to make such other changes as the Company, upon advice of
counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation of, any law
or governmental rule or regulation, including any applicable federal
or state securities laws; and
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<PAGE> 9
(b) subject to Section 10.8(b) of the Plan and any
required approval of the Company's stockholders, the Award evidenced
by this Agreement may be canceled by the Committee and a new Award
made in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action shall adversely affect the TINTA
Option or any TINTA Tandem SAR to the extent then exercisable.
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and
no action of the Company or the Committee with respect hereto, shall confer or
be construed to confer on the Grantee any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right
of the Company or any employing Subsidiary to terminate the Grantee's
employment at any time, with or without cause; subject, however, to the
provisions of any employment agreement between the Grantee and the Company or
any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
18. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the signed agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations
of the Company hereunder shall be subject to such reasonable rules and
regulations as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
to the TINTA Options and TINTA Tandem SARs and replaces and makes null and void
any prior agreements between Grantee and the Company regarding the TINTA
Options.
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<PAGE> 10
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ------------------------- -------------------------
Assistant Secretary Name:
Title:
ACCEPTED:
----------------------------
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<PAGE> 11
Schedule 1 to Non-Qualified Stock
Option and Stock Appreciation Rights
Agreement dated as of December 13, 1995
Grantee:
Grant Date: December 13, 1995
Option Price: $16.00 per share
Option Shares: __________ shares of Series A Common Stock of
Tele-Communications, International, Inc. ("TINTA"),
$_____________ par value per share.
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<PAGE> 12
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights
Agreement dated as of December 13, 1995
DESIGNATION OF BENEFICIARY
I, _________________________________ (the "Grantee"), hereby declare
that upon my death _________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________,
Street Address City State Zip Code
who is my _________________________________________, shall be entitled to to the
Relationship to Grantee
TINTA Option, TINTA Tandem SARs and all other rights accorded the Grantee by
the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------- ------------------------------
Date Grantee
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<PAGE> 1
EXHIBIT 10.55
AGREEMENT OF PURCHASE AND SALE OF
PARTNERSHIP INTEREST
AGREEMENT OF PURCHASE AND SALE OF PARTNERSHIP INTEREST, dated
as of January 31, 1996, among Halcyon Communications, Inc., an Oklahoma
corporation ("HCI"), ECP Holdings, Inc., an Oklahoma corporation ("Seller"),
and Fisher Communications Associates, L.L.C., a Colorado limited liability
company ("Buyer").
Halcyon Communications Partners is a general partnership
organized and existing under the laws of the State of Oklahoma (the
"Partnership"). The general partners of the Partnership are ECP and HCI.
Buyer desires to acquire from Seller a portion of Seller's
partnership interest in the Partnership and an option to acquire the balance of
such partnership interest of Seller, and Seller has agreed to sell such portion
of such partnership interest and to grant such option to Buyer on the terms and
subject to the conditions set forth herein.
Therefore, for and in consideration of the mutual promises,
upon the terms and subject to the conditions set forth herein and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged by each party, the parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
In addition to the terms defined elsewhere herein, as used
herein the following terms shall have the following respective meanings:
"Agreement" means this Agreement, including any Exhibits and Schedules
attached hereto.
"Business Day" means a day of the year on which banks are not required
or authorized to close in the State of Colorado.
"Closing" means the consummation of the transactions contemplated
hereby.
"Partners" means the Seller and HCI, in their capacities as partners
of the Partnership.
"Partnership Agreement" means the Partnership Agreement, dated as of
October 31, 1989, of the Partnership, as the same may have been amended or
modified through and including the date hereof.
"Partnership Interest" means, as to any partner of the Partnership,
the entire partnership interest of such partner in the Partnership, including
such partner's (i) right to a share of the income, gain, losses and deductions
of and distributions made by the Partnership, (ii) right to a share of
Partnership assets, (iii) rights with respect to initial and additional capital
contributions
<PAGE> 2
made to the Partnership by such partner, including such partner's rights with
respect to allocations of income, gain losses and deductions of and
distributions made by the Partnership which are based upon or determined by
reference to such capital contributions, (iv) rights with respect to the
management of the business and affairs of the Partnership, (v) voting, consent
and approval rights, (vi) rights to unpaid interest under Section 6.8 or 7.2 of
the Partnership Agreement, whether accrued as of or accruing on or after the
date hereof, (vii) rights with respect to such partner's Capital Account (as
defined in the Partnership Agreement), (viii) rights, if any, under Articles X,
XI and XII of the Partnership Agreement, (ix) any and all other rights,
interests and benefits to which such partner is or may become entitled by
reason of its status as a partner of the Partnership, and (x) all liabilities
and obligations of such partner by reason of its status as a partner of the
Partnership, in each case as provided in the Partnership Agreement or the
partnership laws of the state of the Partnership's organization.
"Person" means any individual, corporation, partnership, trust,
unincorporated association or other entity.
"Purchased Interest" means one-third of Seller's Partnership Interest.
"Related Instruments" means any and all agreements, instruments and
documents executed and delivered or required to be executed and delivered
pursuant to the terms of this Agreement or in connection with the transactions
contemplated hereby, including the Option Agreement executed and delivered
pursuant to Section 2.02 hereof.
"WestMarc" means WestMarc Communications, Inc., a Nevada corporation.
"WestMarc Preferred Stock" means the 12% Series C Cumulative
Compounding Preferred Stock, par value $0.01 per share, of WestMarc.
The definitions in this Article I and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The words "herein", "hereof" and "hereunder" and words of
similar import refer to this Agreement in its entirety and not to any part
hereof unless the context shall otherwise require. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Unless the context shall otherwise
require, any references to any agreement or other instrument or statute or
regulation are to it as amended and supplemented from time to time (and, in the
case of a statute or regulation, to any corresponding provisions of successor
statutes or regulations). Any reference in this Agreement to a "day" or number
of "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day,
and such calendar day is not a Business Day, then such action or notice shall
be deferred until, or may be taken or given on, the next Business Day.
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<PAGE> 3
ARTICLE II.
THE CLOSING
Section 2.01. The Closing. The Closing is taking place at
10:00 A.M., local time, as of the date hereof (the "Closing Date") at the
offices of Tele-Communications, Inc., Terrace Tower II, 5619 DTC Parkway,
Englewood, Colorado.
Section 2.02. Sale and Purchase of the Purchased Interest;
Grant of Option. On the terms and subject to the conditions set forth in this
Agreement, at the Closing Seller shall sell, convey, and assign to Buyer, and
Buyer shall purchase from Seller, for the consideration specified below in this
Section, all of Seller's right, title and interest in and to the Purchased
Interest. The consideration payable by Buyer to Seller in exchange for the
Purchased Interest shall be 14.8836 shares of WestMarc Preferred Stock set
forth on Schedule I hereto, together with the right to receive all unpaid
dividends or other distributions payable with respect to such shares. Such
sale, conveyance. assignment and purchase shall be effected by (i) the
delivery to Seller by Buyer at the Closing of (A) the stock certificate or
certificates representing the number of shares of WestMarc Preferred Stock to
which Seller is entitled as set forth in Schedule I hereto, duly endorsed in
blank and otherwise in proper form for transfer and with all necessary
documentary or transfer tax stamps affixed thereto and (B) such other documents
or instruments which may be necessary, or which Seller reasonably may request,
in order to effectively vest in Seller good and marketable title to such shares
and the right to receive such unpaid dividends or other distributions, (ii) the
execution and delivery by Buyer and Seller of a duly completed and executed
Assignment and Assumption Agreement substantially in the form of Exhibit A
hereto and (iii) the execution and delivery by such Seller or Buyer of such
other documents or instruments which may be necessary, or which the other such
party may reasonably request, in connection with the transactions contemplated
hereby. At the Closing, Seller also is granting to Buyer an option (the
"Option") on the part of Buyer to purchase the remaining Partnership Interest
of Seller for the consideration and on the terms and subject to the conditions
set forth in the form of Option Agreement attached hereto as Exhibit B.
Section 2.03. Amendment to Partnership Agreement. Each Partner
agrees that it shall, at the Closing, execute and deliver the Consent and
Amendment in the form of Exhibit C hereto and such other documents as may be
reasonably requested by Buyer in connection with the consummation of the
transactions contemplated hereby.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
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<PAGE> 4
(a) Seller is duly organized, validly existing and in good
standing as a corporation under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, hold
and operate its properties and assets, and to carry on its business as
presently conducted. Seller has all requisite corporate power and authority to
enter into this Agreement and each Related Instrument to which it is or shall
become a party and perform its obligations hereunder and thereunder.
(b) The execution, delivery and performance by Seller of this
Agreement and such Related Instruments and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of such Seller.
(c) This Agreement has been, and each such Related Instrument,
when executed and delivered, shall be, duly executed and delivered by Seller
and constitutes (or, in the case of such Related Instruments, when executed and
delivered will constitute) a valid and binding obligation of Seller,
enforceable in accordance with its terms, except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies.
(d) To the best knowledge of Seller, the Partnership is (i) duly
organized and validly, existing as a limited partnership under the laws of the
State of Oklahoma; (ii) has all requisite partnership power and authority to
own, hold and operate its properties and assets, and to carry on its business
as presently conducted; and (iii) treated as a "partnership" under the Code for
federal income tax purposes.
(e) At the Closing, Seller will transfer to Buyer the Purchased
Interest, free and clear of any lien, pledge, security interest, claim, or
charge or other encumbrance or any restriction on transfer voluntarily created
by Seller, other than as expressly set forth in the Partnership's Partnership
Agreement or existing or arising under applicable law and other than the
possible lien of taxes not yet due and payable and minor imperfections in title
and encumbrances and other minor matters, if any, which singly or in the
aggregate are not substantial in an amount, do not materially detract from the
value of such Purchased Interest.
Section 3.02. Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Buyer is duly organized, validly existing and in good standing
as a limited liability company under the laws of the State of Colorado and has
all requisite power and authority as a limited liability company to own, hold
and operate its properties and assets, and to carry on its business as
presently conducted. Buyer has all requisite power and authority as a limited
liability company to enter into this Agreement and each Related Instrument to
which it is or shall become a party and perform its obligations hereunder and
thereunder.
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<PAGE> 5
(b) The execution, delivery and performance by Buyer of this
Agreement and such Related Instruments and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of Buyer.
(c) This Agreement has been, and each such Related Instrument,
when executed and delivered, shall be, duly executed and delivered by Buyer and
constitutes (or, in the case of such Related Instruments, when executed and
delivered will constitute) a valid and binding obligation of Buyer, enforceable
in accordance with its terms, except insofar as enforceability may, be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally, or by principles governing the
availability of equitable remedies.
(d) Buyer understands that the Purchased Interest, the Option and
the interest in the Partnership subject to the Option (the "Option Interest")
have not been registered under the Securities Act of 1933, as amended (the
"Act"), nor qualified under any state securities law, and that, if and to the
extent that any thereof constitute securities subject to the Act or any,
applicable state securities law, they are being offered and sold pursuant to
exemptions from such registration and qualification based in part upon the
representations of Buyer contained herein.
(e) Buyer is familiar with the business and operations of the
Partnership and has been given the opportunity to obtain from the Partnership
all information that it has requested regarding its current operations,
business plans and prospects.
(f) Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment contemplated by this Agreement and Buyer is able to bear the
economic risk of such investment.
(g) Buyer understands that, if and to the extent that the
Purchased Interest, the Option and the Option Interest constitute securities
subject to the Act or any applicable state securities law, Buyer must bear the
economic risk of its investment therein indefinitely unless the same are
registered or qualified pursuant to the Act or such state securities law or an
exemption from such registration or qualification is available, and that the
Partnership has no obligation to effect any such registration or qualification.
Buyer further understands that there is no assurance that any such exemption
from registration or qualification will be available, or, if available, that
such exemption will allow Buyer to dispose of or otherwise transfer any or all
of the Purchased Interest, the Option or the Option Interest in the amounts, in
the manner or at the times Buyer might propose. Buyer further understands that
the Partnership Agreement contains significant restrictions on transfers of
interests in the Partnership.
(h) Buyer is acquiring the Purchased Interest and the Option (and
will acquire the Option Interest upon exercise of the Option) solely for its
own account for investment and not with a view toward the resale, transfer, or
distribution thereof, nor with any present intention of transferring any
thereof or any interest therein in any transaction which would constitute a
"distribution" within the meaning of the Securities Act. No other person has
any right with
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<PAGE> 6
respect to or interest in the Purchased Interest, the Option or the Option
Interest to be acquired by Buyer, nor has Buyer agreed to give any person any
such interest or right in the future.
(i) At the Closing, Buyer will transfer to Seller the shares
of WestMarc Preferred Stock to which Seller is entitled under Section 2.02,
free and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance or any restriction on transfer voluntarily created by Buyer,
other than any such restrictions as may be expressly set forth in the
resolution of the Board of Directors of WestMarc designating and establishing
the WestMarc Preferred Stock and in the certificate of incorporation and
by-laws of WestMarc or as may exist or arise under applicable federal and state
securities laws.
ARTICLE IV.
MISCELLANEOUS
Section 4.01. Survival of Representations, Warranties and
Covenants. The respective representations, warranties, agreements and
covenants of the parties contained in this Agreement will survive and continue
in full force and effect after the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
Section 4.02. Notices. All notices and other communications
required or permitted by this Agreement shall be in writing and given (i) if to
the Partnership, at the address of its principal executive offices or at such
other address as the Partnership may designate in a written notice to the other
parties and (ii) if to any other party, to such party at its address as it
appears on the records of the Partnership or to such other address as such
party may designate in a written notice to each other party. All notices and
other communications required or permitted by this Agreement shall be deemed to
have been duly given if personally delivered to the intended recipient at the
proper address determined pursuant to this Section 4.02 or sent to such
recipient at such address by registered or certified mail, return receipt
requested, Express Mail, Federal Express or similar overnight delivery service
for next Business Day delivery or by telegram, telex or facsimile transmission
and will be deemed given, unless earlier received: (1) if sent by certified or
registered mail, return receipt requested, five calendar days after being
deposited in the United States mail, postage prepaid; (2) if sent by Express
Mail, Federal Express or similar overnight delivery service for next Business
Day delivery, the next Business Day after being entrusted to such service, with
delivery charges prepaid or charged to the sender's account; (3) if sent by
telegram or telex or facsimile transmission, on the date sent and (4) if
delivered by hand, on the date of delivery.
Section 4.03. Expenses. Whether or not the transactions contemplated
hereby are consummated, each of the parties shall bear the fees and expenses
relating to its compliance with the various provisions of this Agreement and
the Related Instruments, and each of the parties agrees to pay all of its own
expenses (including, without limitation, all legal and accounting fees)
incurred in connection with this Agreement and the Related Instruments, the
transactions
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<PAGE> 7
contemplated hereby and thereby, the negotiations leading to the same and the
preparation made for carrying the same into effect.
Section 4.04. Headings. The headings of the Articles,
Sections and other subdivisions of this Agreement are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions of this Agreement.
Section 4.05. Governing Law. This Agreement shall be
construed in accordance with, and governed by, the internal laws of the State
of Colorado without regard to principles of conflict of laws, except to the
extent that the laws of the jurisdiction of organization of the Partnership
shall be mandatorily applicable.
Section 4.06. Severability. If any provision of this
Agreement shall be held to be illegal, invalid or unenforceable, that provision
will be enforced to the maximum extent permissible so as to effect the intent
of the parties and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If necessary,
to effect the intent of the parties hereto, the parties hereto will negotiate
in good faith to amend this Agreement to replace the unenforceable language
with enforceable language which as closely as possible reflects such intent.
Section 4.07. Amendments. This Agreement may be modified or
amended only by a written amendment signed by Persons authorized to so bind
each party hereto.
Section 4.08. Entire Agreement. The provisions of this
Agreement and the Related Instruments collectively set forth the entire
agreement and understanding between the parties hereto as to the subject matter
hereof and thereof and merge and supersede all prior discussions, agreements
and understandings, oral or written, of any and every nature among them with
respect to such subject matter. Except as and to the extent set forth in this
Agreement or a Related Instrument, no party makes any representation, warranty,
covenant or agreement whatsoever and each party disclaims all liability and
responsibility for any representation, warranty, covenant, agreement or
statement made or information communicated (orally or in writing) by any other
Person. Buyer expressly agrees and acknowledges that, in purchasing the
Purchased Interest and the Option and in making decisions regarding whether or
not to exercise the Option, Buyer (i) is not and will not be relying on the
representations and warranties of Seller or any other Person, (ii) has made and
will make its own inquiry and investigation into, and based thereon, has formed
an independent judgment concerning, the Partnership and the business conducted
by it, (iii) has been furnished or given adequate access to such information as
it has requested concerning the Partnership and the business conducted by it
and (iv) will not assert any claim against Seller or any of Seller's
affiliates, directors, officers, employees, agents, stockholders, advisors,
counsel or representatives, nor will seek to hold any of such other Persons
liable for any inaccuracies, misstatements or omissions with respect to
information concerning the Partnership and the business conducted by it,
provided that the foregoing shall not in any manner be construed or deemed to
limit the ability of Buyer to make any claim it may otherwise
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<PAGE> 8
have arising out of the breach of any express representation or warranty of
Seller contained in this Agreement or any Related Instrument.
Section 4.09. Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors, heirs, executors, legal representatives and permitted assigns;
provided, however, that, except as otherwise specifically permitted or
contemplated by this Agreement, neither this Agreement nor any of the rights,
interests or obligations of any party hereunder shall be assigned or delegated
without the prior written consent of all the parties.
Section 4.10. Further Assurances. Upon reasonable request
from time to time, each party, hereto shall execute and deliver all documents
and instruments and do all other acts that may be reasonably necessary or
desirable to carry out the intent and purposes of this Agreement and give
effect to the exercise by a party of its rights hereunder.
Section 4.11. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts shall have
been signed by each party hereto and delivered to the other party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
HALCYON COMMUNICATIONS, INC. EPC HOLDINGS, INC.
By: /s/ ROBERT E. PRICE By: /s/ STEPHEN M. BRETT
------------------------- -------------------------------
Name: ROBERT E. PRICE Name: STEPHEN M. BRETT
-------------------- -------------------------
Title: PRESIDENT Title:
------------------- ------------------------
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER 2-12-96
-------------------------------
Donne F. Fisher, Member
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<PAGE> 9
EXHIBIT A
ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made
as of January 31, 1996 between ECP HOLDINGS, INC., an Oklahoma corporation
("Assignor"), and FISHER COMMUNICATIONS ASSOCIATES, L.L.C., a Colorado limited
liability company ("Assignee").
WITNESSETH
WHEREAS, Assignor owns a partnership interest in HALCYON
COMMUNICATIONS PARTNERS, an Oklahoma limited partnership (the "Partnership");
WHEREAS, Assignor, the other partner of the Partnership and
Assignee have entered into an Agreement of Purchase and Sale of Partnership
Interest dated as of the date hereof (the "Purchase Agreement") providing for
the sale by Assignor of a portion of Assignor's partnership interest in the
Partnership (such portion of such interest is defined in the Purchase Agreement
as, and shall be referred to hereinafter as, the Assignor's "Purchased
Interest") and the assumption by Assignee of all liabilities and obligations of
Assignor by virtue thereof; and
WHEREAS, the execution and delivery of this Agreement for the
purpose of effecting such sale and such assumption has been authorized in all
respects as required by law;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the consideration specified in the Purchase
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Transferred Interests. Assignor by this
instrument does convey, sell, transfer, assign and deliver the Assignor's
Purchased Interest to Assignee, without any representation or warranty of any
nature whatsoever, except as may be expressly set forth in the Purchase
Agreement.
2. Assumption of Obligations with Respect to Transferred
Interests. Assignee hereby assumes, and agrees to indemnify Assignor for and
hold Assignor harmless from and against, all liabilities and obligations of any
nature whatsoever existing or arising under the Partnership's limited
partnership agreement or applicable law by virtue of the ownership of the
<PAGE> 10
Assignor's Purchased Interest, whether accrued or unaccrued, known or unknown,
disclosed or undisclosed and whether now existing or hereafter arising.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized signatories in their respective
names, all as of the day, and year first above written.
ASSIGNOR:
ECP HOLDINGS, INC.
ATTEST: By: /s/ STEPHEN M. BRETT
----------------------------------
Name: STEPHEN M. BRETT
- ----------------------------- --------------------------------
Title:
-------------------------------
ASSIGNEE
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
ATTEST: By: /s/ DONNE F. FISHER 2-12-96
----------------------------------
Donne F. Fisher, Member
- -----------------------------
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<PAGE> 11
EXHIBIT B
OPTION AGREEMENT
Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C., a Colorado limited liability company
("Purchaser"), and ECP Holdings, Inc., an Oklahoma corporation ("Seller").
Seller is a partner of Halcyon Communications Partners, a general
partnership organized and existing under the laws of the State of Oklahoma (the
"Partnership"). Pursuant to a certain Agreement of Purchase and Sale of
Partnership Interest, dated as of the date hereof, among Seller, the other
partner of the Partnership and Purchaser (as the same may be amended from time
to time in accordance with its terms, the "Purchase Agreement"), as of the date
hereof Purchaser is purchasing from Seller a portion of Seller's partnership
interest in the Partnership. Purchaser desires to acquire from Seller an option
to purchase the balance of the partnership interest in the Partnership that
Seller will continue to own immediately after giving effect to such purchase,
and Seller has agreed to grant such an option to Purchaser on the terms and
subject to the conditions set forth herein.
Therefore, in consideration of the payment of $100 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. Seller hereby grants to Purchaser an
irrevocable option (the "Option") to purchase all, but not less than all of the
Option Interest (as hereinafter defined). The exercise price of the Option (the
"Exercise Price") shall be an amount in cash equal to $1,200,000, without
interest. The Exercise Price will be payable by Purchaser at the Closing (as
hereinafter defined) by wire transfer or by certified or bank check in
immediately available funds.
2. Exercise Period; Exercise of the Option.
(a) The Option may be exercised, in whole but not in part, at any
time during the period (the "Exercise Period") commencing on the date hereof
and ending at 12:01 A.M., Denver, Colorado time, on the tenth anniversary of
the date hereof (the "Scheduled Expiration Date").
(b) Purchaser may exercise the Option by delivering written notice
thereof (an "Exercise Notice") to Seller at any time prior to the expiration of
the Exercise Period.
<PAGE> 12
Subject to paragraph 3 hereof, and unless the parties otherwise agree, the
closing of the sale of the Option Interest (the "Closing") shall occur on the
tenth Business Day (as hereinafter defined) following delivery of the Exercise
Notice. The date the Closing occurs is hereinafter referred to as the "Closing
Date". At the Closing, Seller shall, against receipt of the Exercise Price as
provided in paragraph 1 hereof, convey and deliver the Option Interest to
Purchaser by the delivery to Purchaser by such Seller of a duly completed and
executed instrument of assignment reasonably satisfactory to both parties and
such other documents or instruments which may be necessary, or which Purchaser
may reasonably request, in order to effectively vest in Purchaser beneficial
ownership of the Option Interest.
(c) Prior to the sale of the Option Interest to Purchaser pursuant
to this Agreement. Seller shall, subject only to the express provisions of
paragraph 5(a) of this Agreement, retain all rights as the holder of the Option
Interest, including all voting and consent rights as a partner of the
Partnership, and may exercise or refrain from exercising such rights as Seller
may determine in its sole discretion, even if the result is a diminution in the
value of the Option Interest and this Option to Purchaser.
3. Conditions to Closing. The Closing of the purchase of the
Option Interest pursuant to the exercise of the Option shall be subject to the
satisfaction of all of the following conditions:
(a) Each of the representations of Purchaser made in this
Agreement, in the Purchase Agreement and in each Related Instrument
(as defined in the Purchase Agreement) shall be true and correct in
all material respects at and as of the time of the Closing and
Purchaser shall have performed in all material respects each and every
covenant of Purchaser contained in this Agreement, in the Purchase
Agreement and in each Related Instrument required to be performed by
the time of or at the Closing. If requested by Seller, Purchaser shall
execute a certificate by which Purchaser confirms the satisfaction of
the foregoing condition.
(b) No order, preliminary or permanent injunction,
temporary restraining order, stay, judgment, decree or other order of
any court or governmental or regulatory body preventing the sale of
the Option Interest by the Seller or the consummation of the other
transactions contemplated hereby.
(c) All consents, orders and approvals of any
governmental authority, any partner or partners of the Partnership and
of any other third party that either Purchaser or Seller reasonably
deems necessary or advisable shall have been obtained and shall be in
full force and effect and any waiting period under applicable law
shall have expired. Without limiting the generality of the foregoing,
all such consents and approvals necessary to permit the withdrawal of
Seller from the Partnership without further obligation or liability as
a partner thereof shall have been obtained and shall be in full force
and effect.
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<PAGE> 13
(d) Purchaser shall, by written instrument in form and
substance reasonably satisfactory to Seller, assume and agree to
indemnify Seller for all obligations and liabilities of Seller under
the Partnership Agreement with respect to the Option Interest of every
kind or nature, whether accrued or unaccrued, asserted or unasserted,
known or unknown, disclosed or undisclosed, absolute or contingent,
arising by law, contract or otherwise and including any liability or
obligation arising out of any event, fact or circumstance existing or
occurring as of or prior to the date hereof that, with the passage of
time or the giving of notice, or otherwise, which constitutes a breach
or violation of or default under any contract or law binding upon or
applicable to the Partnership.
(e) If required by Seller, Purchaser will be obligated to
buy from Seller at the Closing, all evidences of indebtedness of the
Partnership held directly or indirectly by Seller or any subsidiary of
Seller, and the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time of the
Closing plus accrued and unpaid interest thereon which, unless
otherwise agreed by Seller and Purchaser, shall be paid in cash.
(f) Purchaser and Seller shall each execute and deliver
such other instruments as either party or the Partnership reasonably
deems necessary or appropriate to effect, and as a condition to, the
exercise of the Option, including amendments to the Partnership
Agreement or any other instrument filed with any governmental agency
or official.
(g) Purchaser shall have exercised all options to acquire
partnership interests in Halcyon Communications Limited Partnership,
an Oklahoma limited partnership ("HCLP"), granted to Purchaser by
partners of HCLP who are affiliates of Seller simultaneously with the
exercise of this Option, and the closings of the sale of all such
partnership interests pursuant to the exercise of all such other
options shall occur simultaneously with the Closing under this Option
Agreement.
(h) If the exercise of the Option requires any consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality or the expiration
of any waiting period imposed by applicable law, then the date fixed
for the Closing pursuant to paragraph 2(b) hereof shall be extended
for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization and the termination of
each such waiting period at the earliest reasonably practicable time
are diligently being made; provided, however, that, unless Seller and
Purchaser otherwise agree, the extension of such Closing date pursuant
to this paragraph may not exceed 180 days. Seller and Purchaser will,
and will use their commercially reasonable efforts to cause the
Partnership to, reasonably cooperate with each other in obtaining any
such consent, approval, waiver, or authorization and in obtaining the
termination of any such waiting period at the earliest practicable
time.
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<PAGE> 14
(i) If, in the opinion of legal counsel to Purchaser, the
immediate proposed transfer of the entire Option Interest would result
in the termination of the Partnership within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended (or any successor
provision of law), but an immediate transfer of less than all of the
Option Interest would not have such a result, Purchaser shall be
entitled to elect, in its sole discretion, to either (i) exercise the
Option in full notwithstanding such termination or (ii) to (A) require
Seller to immediately transfer only that portion of the Option Interest
as may, in the opinion of such counsel, be transferred without causing
such a result and (B) extend the Exercise Period of the Option with
respect to the balance of the Option Interest until the later of the
Scheduled Expiration Date or the last day of the period of thirteen
months after the date of the closing of the transfer referred to in
subclause (ii)(A) of this sentence, in which event, unless otherwise
agreed by Seller and Purchaser, the Exercise Price shall be allocated
proportionately between the portion of the Option Interest immediately
transfer and the remainder of the Option Interest as to which the
Exercise Period of the Option shall have been so extended.
4. Distributions After Exercise. Distributions declared or made
on or prior to the effective date of the exercise of the Option with respect to
the Option Interest shall be made to Seller, regardless of when such
distributions accrued on the books of the Partnership or the date fixed for
payment thereof.
5. Certain Covenants of Seller. Seller hereby covenants and
agrees with Purchaser as follows:
(a) During the Exercise Period, Seller shall not sell or
otherwise transfer or dispose of the Option Interest or any part
thereof or interest therein, other than a sale or transfer as to which
Seller gives Purchaser at least 14 days prior written notice and in
which the transferee agrees, pursuant to an instrument in form and
substance reasonably satisfactory to Purchaser, to be bound by the
terms of this Option Agreement with respect to such transferred
interest to the same extent as the transferor was so bound with
respect to such transferred interest.
(b) Upon the Closing, Seller shall convey to Purchaser
legal title to, and beneficial ownership of, the Option Interest, free
and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance and free of any restriction on transfer voluntarily
created by Seller, other than as expressly set forth in the
Partnership Agreement or existing or arising under applicable law and
other than the possible lien of taxes not yet due and payable and
minor imperfections in title and encumbrances and other minor matters,
if any, which singly or in the aggregate are not substantial in an
amount, do not materially detract from the value of the Option
Interest.
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<PAGE> 15
6. Binding Effect; Assignment. Subject to the following provision
of this paragraph 6, this Option Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors, heirs, legal
representatives and permitted assignees. Except as otherwise expressly provided
herein, this Option Agreement shall not be assigned by either party hereto
without the prior written consent of the other party. Purchaser may assign this
Option Agreement, in whole or in part, to any FCA Permitted Transferee (as
defined in the Partnership Agreement).
7. Notices. All notices and other communications required or
permitted by this Agreement shall be in writing and addressed to the intended
recipient at such person's address specified under its or his signature below
or at such other address as such person may designate in a written notice to
the other party hereto. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this paragraph 7 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received; (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business
Day after being entrusted to such service, with delivery charges prepaid or
charged to the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
8. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Agreement" or "Option Agreement" means this Option Agreement,
as the same may be amended from time to time in accordance with its terms.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of Colorado.
"Option Interest" means the entire partnership interest of
Seller as a partner of the Partnership, including such partner's (i) right to a
share of the income, gain, losses and deductions of and distributions made by
the Partnership, (ii) right to a share of Partnership assets, (iii) rights with
respect to initial and additional capital contributions made to the Partnership
by such partner, including such partner's rights with respect to allocations of
income, gain losses and deductions of and distributions made by the Partnership
which are based upon or determined by reference to such capital contributions,
(iv) rights with respect to the management of the business and affairs of the
Partnership, (v) voting, consent and approval rights, (vi) rights to unpaid
interest under Section 6.8 or 7.2 of the Partnership
-5-
<PAGE> 16
Agreement, whether accrued as of or accruing on or after the date hereof, (vii)
rights with respect to such partner's Capital Account (as defined in the
Partnership Agreement), (viii) rights, if any, under Articles X, XI and XII of
the Partnership Agreement, (ix) any and all other rights, interests and
benefits to which such partner is or may become entitled by reason of its
status as a partner of the Partnership, and (x) all liabilities and obligations
of such partner by reason of its status as a partner of the Partnership, in
each case as provided in the Partnership Agreement or the partnership laws of
the state of the Partnership's organization.
"Partnership Agreement" means the Partnership Agreement, dated
as of October 31, 1989, of the Partnership, as the same heretofore may have
been or hereafter may be amended or modified in accordance with its terms.
9. Terms Generally; Certain Rules of Construction. The
definitions in paragraph 8 and elsewhere in this Option Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Option Agreement in its entirety and not to any part hereof unless the context
shall otherwise require. All references herein to paragraphs shall be deemed
references to paragraphs of this Option Agreement unless the context shall
otherwise require. Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be deferred
until, or may be taken or given on, the next Business Day.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of Colorado without
regard to principles of conflict of laws, except to the extent that the laws of
the jurisdiction of organization of the Partnership shall be mandatorily
applicable.
11. Headings. The headings contained in this Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
12. Waivers; Amendment. Any term or provision of this Option
Agreement may be waived at any time by an instrument in writing signed by the
party which is entitled to the benefit thereof. This Option Agreement may be
amended or supplemented at any time only by an instrument in writing signed by
the parties hereto.
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<PAGE> 17
13. Counterparts. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Expenses. Each party hereto will pay its own expenses in
connection with the negotiation and execution of this Option Agreement and the
consummation of the transactions contemplated hereby, including all fees and
disbursements of its legal counsel.
15. Further Actions After the Closing. If, subsequent to the
Closing, further documents are reasonably requested in order to carry out the
provisions and purposes of this Option Agreement, the parties hereto shall
execute and deliver such further documents.
16. Severability. In the event that any part or parts of this
Option Agreement shall be held to be unenforceable to its or their full extent,
then it is the intention of the parties hereto that such part or parts shall be
enforced to the full extent permitted under the laws, and in any event, that
all other parts of this Option Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had never been a part hereof.
17. Entire Agreement. The provisions of this Agreement, the
Purchase Agreement and the Related Instruments collectively set forth the
entire agreement and understanding between the parties hereto as to the subject
matter hereof and thereof and merge and supersede all prior discussions,
agreements and understandings, oral or written, of any and every nature
between them with respect to such subject matter. Except as and to the extent
set forth in this Agreement, the Purchase Agreement or a Related Instrument,
neither party makes any representation, warranty, covenant or agreement
whatsoever and each party disclaims all liability and responsibility for any
representation, warranty, covenant, agreement or statement made or information
communicated (orally or in writing) by any other Person. Purchaser expressly
agrees and acknowledges that, in purchasing this Option and making decisions
regarding whether or not to exercise this Option, Purchaser (i) is not and will
not be relying on the representations and warranties of Seller or any other
Person, (ii) has made and will make its own inquiry and investigation into, and
based thereon, has formed an independent judgment concerning, the Partnership
and the business conducted by it, (iii) has been furnished or given adequate
access to such information as it has requested concerning the Partnership and
the business conducted by it and (iv) will not assert any claim against Seller
or any of its affiliates, directors, officers, employees, agents, stockholders,
advisors, counsel or representatives, nor will seek to hold any of such other
Persons liable for any inaccuracies, misstatements or omissions with respect to
information concerning the Partnership and the business conducted by it,
provided that the foregoing shall not in any manner be construed or deemed to
limit the ability of Purchaser to make any claim it may otherwise have arising
out
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<PAGE> 18
of the breach of any express representation or warranty of Seller contained in
this Agreement, the Purchase Agreement or any Related Instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
ECP HOLDINGS, INC.
By:
------------------------------
Name:
Title:
Terrace Tower 11
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: General Counsel
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By:
------------------------------
Donne F. Fisher, Member
9513 Pinyon Trail
Littleton, Colorado 80124
-8-
<PAGE> 19
EXHIBIT C
CONSENT AND AMENDMENT OF AMENDED AGREEMENT OF PARTNERSHIP FOR
HALCYON COMMUNICATIONS PARTNERS
THIS CONSENT AND AMENDMENT, dated as of January 31, 1996, is
made and entered into by and among the undersigned parties.
Halcyon Communications Partners, an Oklahoma general
partnership (the "Partnership"), was formed under the Oklahoma Uniform
Partnership Act pursuant to a Partnership Agreement dated as of October 31,
1989 (the "Original Agreement") between Halcvon Communications, Inc., an
Oklahoma corporation ("HCI"), and ECP Holdings, Inc., an Oklahoma corporation
("ECP"). The Original Agreement, as heretofore amended, is referred to herein
as the "Partnership Agreement").
The undersigned parties desire to (i) consent to the
assignment to Fisher Communications Associates, L.L.C., a Colorado limited
liability company, ("FCA") by ECP of one-third of its partnership interest in
the Partnership, (ii) consent to the grant to FCA by ECP of an option to acquire
the entire balance of ECP's partnership interest in the Partnership and any
future exercise of such option and (iii) consent to the admission of FCA to the
Partnership as a partner. The undersigned parties also desire to amend the
Partnership Agreement in certain respects.
Therefore, for and in consideration of the premises and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged by each party, the parties hereto agree as follows:
1. Certain Consents; Section 754 Election.
(a) HCI and ECP, in their capacities as, and constituting
all of, the partners of the Partnership hereby (i) consent to (A) the sale to
FCA, pursuant to the Agreement of Purchase and Sale of Partnership Interest,
dated as of the date hereof, among the parties hereto (the "Purchase
Agreement"), of the Purchased Interest (as defined in the Purchase Agreement)
of ECP, (B) the grant to FCA by ECP of an option to acquire the entire balance
of ECP's partnership interest in the Partnership pursuant to the Option
Agreements substantially in the form of Exhibit B to the Purchase Agreement
(the "Option Agreement"), (C) the admission of FCA, as the holder of the
Purchased Interest of ECP, to the Partnership as a partner effective as of the
date hereof and (D) any future exercise by FCA (or any of its permitted
assignees) of its option and rights under the Option Agreement pursuant to the
terms thereof and, upon such exercise, the transfer of the partnership interest
and consummation of the other transactions contemplated thereby (including,
without limitation, the withdrawal contemplated by the last sentence of
paragraph 3(c) of the Option Agreement); and (ii) agrees that the Partnership
shall file, in a timely manner for the tax year of the Partnership in which the
sale referred to in subclause (i)(A) of this sentence occurs, an election,
pursuant to Section 754 of the Internal Revenue Code of 1986, as amended (the
"Code") and applicable Treasury Regulations, to have the Partnership's assets
adjusted as
<PAGE> 20
provided in Section 743 of the Code, and if requested by FCA (or any of its
permitted assignees) upon any purchase of any additional partnership interest
in the Partnership in connection with the exercise of its option under the
Option Agreement, also shall make such election in a timely manner for the tax
year of the Partnership in which such exercise occurs. FCA hereby agrees to be
admitted to the Partnership as a Partner and, as such, to be bound by the
provisions of the Partnership Agreement, as amended hereby.
(b) Without in any way limiting the generality of the
definitions of the terms "Partnership Interest" and "Purchased Interest" in the
Purchase Agreement or the definition of "Option Interest" in the Option
Agreement, the parties acknowledge, confirm and agree that (i) for purposes of
Paragraphs 6.8 and 7.2 of the Partnership Agreement and any other provision of
the Partnership Agreement pursuant to which the rights of a partner of the
Partnership are based upon or determined by reference to such partner's initial
or additional Capital Contributions (as defined in the Partnership Agreement)
as of any time of determination, FCA shall be deemed to have made (in addition
to any Capital Contributions actually made by it) a pro rata portion of all
Capital Contributions made by ECP on or prior to the date hereof, with such
portion being equal to the aggregate percentage of the Partnership Interest of
ECP which FCA shall have acquired, at or before such time, pursuant to the
Purchase Agreement or the Option Agreement; and (ii) as of the date hereof,
automatically by virtue of the sale of the Purchased Interest to FCA, all
rights of ECP under or by virtue of the Management Agreement, dated as of
October 31, 1989, among the Partnership, ECP and HCI, as "Manager," as
heretofore amended (the "Management Agreement") shall be rights of each of ECP
and FCA; provided, however, that in the event of the removal of Manager
pursuant to Section 5.2 by the mutual consent of ECP and FCA, ECP shall serve
as manager of the Partnership unless ECP and FCA agree to select a new manager.
The parties further acknowledge, confirm and agree that, notwithstanding any
provision of the Purchase Agreement, the Option Agreement or this instrument
apparently to the contrary, ECP shall have no obligation, liability or
responsibility for any obligations of ECP pursuant to Paragraph 7.2 of the
Partnership Agreement.
2. Amendments to Restated Partnership Agreement. The
undersigned parties hereby agree that, effective as of the date hereof, the
Restated Partnership Agreement is hereby amended as follows:
(a) Paragraph 5.1 of the Partnership Agreement is amended
to read in its entirety as follows:
"5.1 'Affiliate,' when used with respect to a
specified Person, shall mean any other Person that
directly, indirectly or through one or more
intermediaries Controls, is Controlled by or is under
Common Control with such Person. For purposes of the
foregoing, 'Control,' as to any Person, means the
possession, directly or indirectly, of the power to
direct or cause the direction of the management and
policies of such Person (whether through ownership of
securities, partnership interests or
2
<PAGE> 21
other ownership interests, by contract, by
partnership or involvement in the board of directors,
management committee or other management structure of
such Person, or otherwise). The terms 'Controlled,'
'Controlling' and similar variations shall have
correlative meanings."
(b) The defined term "Partner" set forth in Paragraph
5.14 of the Partnership Agreement is amended to read in its entirety as
follows:
"5.14 'Partner' shall mean each of ECP
Holdings, Inc., an Oklahoma corporation, Halcyon
Communications, Inc., an Oklahoma corporation, Fisher
Communications, L.L.C, a Colorado limited liability
company, and each other Person, if any, who is
admitted as a successor or additional partner of the
Partnership in accordance with this Agreement, in
each case unless and until such Person ceases to be a
limited partner of the Partnership in accordance with
this Agreement."
(c) Article V of the Partnership Agreement is further
amended by adding thereto, immediately after Paragraph 5.3 thereof, a new
Paragraph 5.3(a) which shall read in its entirety as follows:
"5.3(a) 'FCA' shall mean Fisher
Communications Associates, L.L.C., a Colorado limited
liability company."
(d) Article V of the Partnership Agreement is further
amended by adding thereto, immediately after Paragraph 5.19 thereof, a new
Paragraph 5.19(a) which shall read in its entirety as follows:
"5.19(a) 'Person' shall mean any individual,
firm, corporation or other legal entity."
(e) The first sentence of Paragraph 8.7 of the
Partnership Agreement is amended to read in its entirety as follows:
"All distributions of Excess Cash Flow shall be
distributed seventy-five percent (75%) to ECP and FCA
(in proportion to their respective Capital Accounts)
and twenty-five percent (25%) to Halcyon."
(f) Paragraph 9.1 of the Partnership Agreement is amended
to read in its entirety as follows:
"9.1 Allocations of Profits. For bookkeeping
and income tax purposes, in the event of the sale of
all or substantially all of the Partnership Assets or
upon dissolution of the Partnership:
3
<PAGE> 22
"(a) Profit shall be allocated first to ECP
and FCA (in proportion to their respective Capital
Accounts) until such time as each has been allocated
Profits under this Paragraph 9.1(a) equal to the
amount of interest earned on its Capital
Contributions pursuant to Paragraphs 6.8 and 7.2;
"(b) Profit shall then be allocated to ECP
and FCA (in proportion to their respective Capital
Accounts) until such time as each has received the
excess, if any, of the Losses allocated previously to
such Partner under Article VIII over all Profits
allocated under Article VIII or this Paragraph
9.1(b);
"(c) Profit shall next be allocated to
Halcyon until such time as it has received the
excess, if any, of the Losses allocated previously to
Halcyon under Article VIII over all Profits allocated
under Article VIII or this Paragraph 9.1(c); and
"(d) Any remaining Profit or Loss shall be
allocated seventy-five percent (75%) to ECP and FCA
(in proportion to their respective Capital Accounts)
and twenty-five percent (25%) to Halcyon."
(g) Article IX of the Partnership Agreement is further
amended by deleting therefrom Paragraph 9.2 in its entirety.
(h) Article XV of the Partnership Agreement is amended to
read in its entirety as follows:
"ARTICLE XV
"Assignability of Partnership Interests; Admission of
Additional Partners.
"No Partner shall mortgage, pledge, hypothecate,
transfer, sell, assign or otherwise dispose of all or any part
of its interest in the Partnership, whether voluntarily, by
operation of law or otherwise, or any right, title or interest
in or to such interest without obtaining the prior written
consent of the other Partners, except as provided for in this
Agreement. Notwithstanding the foregoing, ECP or FCA shall
have the right, in its sole discretion, to transfer all or any
part of its interest in the Partnership to (i)
Tele-Communications, Inc., a Delaware corporation, or any
Affiliate thereof or (ii) FCA or any FCA Permitted Transferee
(as hereinafter defined). For purposes of this Agreement, the
term 'FCA Permitted Transferee' shall mean (i) any Affiliate
of Donne
4
<PAGE> 23
F. Fisher, currently a resident of Littleton, Colorado
("Fisher"), (ii) any member of Fisher's immediate family (ie.,
wife, parents, children, including those adopted before the
age of 18, grandchildren, brothers, sisters, and the spouses
or children of the foregoing), (iii) any custodian under the
Uniform Gifts to Minors Act or similar fiduciary for the
exclusive benefit of Fisher's children during their lives,
(iv) in the event of Fisher's adjudication of incompetency,
his legal representatives, (v) in the event of Fisher's death,
his executors or the administrators of his estate and his
heirs who are members of his immediate family, and (v) any
trust described in Section 664 of the I.R.C. of which Fisher
or one or more members of his immediate family (and no other
persons) are income beneficiaries. In the event of a permitted
transfer of any interest in the Partnership, the transferee
(other than, with respect to clauses (i) of this sentence
below, a transferee who was already a partner prior to the
permitted transfer) shall, by written instrument in form and
substance reasonably satisfactory to the non-transferring
Partners (i) agree to become a Partner and accept and adopt
the terms and provisions of this Agreement and (ii) assume the
obligations of the transferor Partner under this Agreement
with respect to the transferred partnership interest. If
required by the nontransferring Partners, the transferee shall
deliver to the Partnership an opinion, reasonably satisfactory
in form and substance to the nontransferring Partners, of
counsel reasonably satisfactory to the nontransferring
Partners to the effect that the transfer is in compliance with
applicable state and Federal securities laws. Upon completion
of any permitted transfer in accordance with the foregoing,
the transferee (if not already a Partner) shall be admitted as
a substituted Partner in the place and stead of the transferor
Partner with respect to the transferred partnership interest,
without any further action, and if such transfer is of the
entire partnership interest of the transferor Partner, such
transferor Partners shall be deemed to have withdrawn from the
Partnership without further action. Except for the transferee
of a partnership interest permitted by and in accordance with
this Article XV, no Person shall be admitted as a general or
limited partner of the Partnership without the prior written
consent of all the Partners."
(i) Paragraph 18.1 of the Partnership Agreement is amended by (i)
redesignating clause (iii) thereof as clause (iv) and (ii) adding, immediately
after clause (ii) thereof a new clause (iii) which shall read in its entirety
as follows:
"(iii) the sale of all or substantially all of the Partnership
Assets; or"
(j) Paragraph 19.2 of the Partnership Agreement is amended to read
in its entirety as follows:
5
<PAGE> 24
"19.2 Designation of Purchaser. Each of ECP and FCA
shall have the right to designate another entity to
exercise its purchase rights under this Agreement as
long as the designated entity is (i) ECP or an
Affiliate of ECP or (ii) FCA or an FCA Permitted
Transferee."
(k) Paragraph 19.3 of the Partnership Agreement is
amended by adding thereto, immediately before the words "in the case of ECP"
appearing therein, the following:
"in the case of FCA, at 9513 Pinyon Trail,
Littleton, CO 80124."
3. Reaffirmation. The undersigned parties hereby
acknowledge that the Partnership Agreement, as amended hereby, remains in full
force and effect and is hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned parties have duly executed and
delivered this Consent and Amendment as of the date first above written.
HALCCYON COMMUNICATIONS EPC HOLDINGS INC.
By: /s/ ROBERT E. PRICE By:
------------------------- -------------------------------
Name: ROBERT E. PRICE Name:
-------------------- -------------------------
Title: PRESIDENT Title:
------------------- ------------------------
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER 2-12-96
-------------------------------
Donne F. Fisher, Member
6
<PAGE> 1
EXHIBIT 10.56
CONSENT AND AMENDMENT OF AMENDED AGREEMENT OF PARTNERSHIP FOR
HALCYON COMMUNICATIONS PARTNERS
THIS CONSENT AND AMENDMENT, dated as of January 31, 1996, is
made and entered into by and among the undersigned parties.
Halcyon Communications Partners, an Oklahoma general
partnership (the "Partnership"), was formed under the Oklahoma Uniform
Partnership Act pursuant to a Partnership Agreement dated as of October 31,
1989 (the "Original Agreement") between Halcyon Communications, Inc., an
Oklahoma corporation ("HCI"), and ECP Holdings, Inc., an Oklahoma corporation
("ECP"). The Original Agreement, as heretofore amended, is referred to herein
as the "Partnership Agreement").
The undersigned parties desire to (i) consent to the
assignment to Fisher Communications Associates, L.L.C., a Colorado limited
liability company, ("FCA") by ECP of one-third of its partnership interest in
the Partnership, (ii) consent to the grant to FCA by ECP of an option to
acquire the entire balance of ECP's partnership interest in the Partnership and
any future exercise of such option and (iii) consent to the admission of FCA to
the Partnership as a partner. The undersigned parties also desire to amend the
Partnership Agreement in certain respects.
Therefore, for and in consideration of the premises and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged by each party, the parties hereto agree as follows:
1. Certain Consents; Section 754 Election.
(a) HCI and ECP, in their capacities as, and constituting
all of, the partners of the Partnership hereby (i) consent to (A) the sale to
FCA, pursuant to the Agreement of Purchase and Sale of Partnership Interest,
dated as of the date hereof, among the parties hereto (the "Purchase
Agreement"), of the Purchased Interest (as defined in the Purchase Agreement) of
ECP, (B) the grant to FCA by ECP of an option to acquire the entire balance of
ECP's partnership interest in the Partnership pursuant to the Option Agreements
substantially in the form of Exhibit B to the Purchase Agreement (the "Option
Agreement"), (C) the admission of FCA, as the holder of the Purchased Interest
of ECP, to the Partnership as a partner effective as of the date hereof and (D)
any future exercise by FCA (or any of its permitted assignees) of its option and
rights under the Option Agreement pursuant to the terms thereof and, upon such
exercise, the transfer of the partnership interest and consummation of the other
transactions contemplated thereby (including, without limitation, the withdrawal
contemplated by the last sentence of paragraph 3(c) of the Option Agreement);
and (ii) agrees that the Partnership shall file, in a timely manner for the tax
year of the Partnership in which the sale referred to in subclause (i)(A) of
this sentence occurs, an election, pursuant to Section 754 of the Internal
Revenue Code of 1986, as amended (the "Code") and applicable Treasury
Regulations, to have the Partnership's assets adjusted as
1
<PAGE> 2
provided in Section 743 of the Code, and if requested by FCA (or any of its
permitted assignees) upon any purchase of any additional partnership interest
in the Partnership in connection with the exercise of its option under the
Option Agreement, also shall make such election in a timely manner for the tax
year of the Partnership in which such exercise occurs. FCA hereby agrees to be
admitted to the Partnership as a Partner and, as such, to be bound by the
provisions of the Partnership Agreement, as amended hereby.
(b) Without in any way limiting the generality of the
intentions of the terms "Partnership Interest" and "Purchased Interest" in the
Purchase Agreement or the definition of "Option Interest" in the Option
Agreement, the parties acknowledge, confirm and agree that (i) for purposes of
Paragraphs 6.8 and 7.2 of the Partnership Agreement and any other provision of
the Partnership Agreement pursuant to which the rights of a partner of the
Partnership are based upon or determined by reference to such partner's initial
or additional Capital Contributions (as defined in the Partnership Agreement)
as of any time of determination, FCA shall be deemed to have made (in addition
to any Capital Contributions actually made by it) a pro rata portion of all
Capital Contributions made by ECP on or prior to the date hereof, with such
portion being equal to the aggregate percentage of the Partnership Interest of
ECP which FCA shall have acquired, at or before such time, pursuant to the
Purchase Agreement or the Option Agreement; and (ii) as of the date hereof,
automatically by virtue of the sale of the Purchased Interest to FCA, all
rights of ECP under or by virtue of the Management Agreement, dated as of
October 31, 1989, among the Partnership, ECP and HCI, as "Manager," as
heretofore amended (the "Management Agreement") shall be rights of each of ECP
and FCA; provided, however, that in the event of the removal of Manager
pursuant to Section 5.2 by the mutual consent of ECP and FCA, ECP shall serve
as manager of the Partnership unless ECP and FCA agree to select a new manager.
The parties further acknowledge, confirm and agree that, notwithstanding any
provision of the Purchase Agreement, the Option Agreement or this instrument
apparently to the contrary, ECP shall have no obligation, liability or
responsibility for any obligations of ECP pursuant to Paragraph 7.2 of the
Partnership Agreement.
2. Amendments to Restated Partnership Agreement. The
undersigned parties hereby agree that, effective as of the date hereof, the
Restated Partnership Agreement is hereby amended as follows:
(a) Paragraph 5.1 of the Partnership Agreement is amended
to read in its entirety as follows:
"5.1 'Affiliate,' when used with respect to a
specified Person, shall mean any other Person that
directly, indirectly or through one or more
intermediaries Controls, is Controlled by or is under
Common Control with such Person. For purposes of the
foregoing, 'Control,' as to any Person, means the
possession, directly or indirectly, of the power to
direct or cause the direction of the management and
policies of such Person (whether through ownership of
securities, partnership interests or
2
<PAGE> 3
other ownership interests, by contract, by
partnership or involvement in the board of directors,
management committee or other management structure of
such Person, or otherwise). The terms 'Controlled,'
'Controlling' and similar variations shall have
correlative meanings."
(b) The defined term "Partner" set forth in Paragraph
5.14 of the Partnership Agreement is amended to read in its entirety as
follows:
"5.14 'Partner' shall mean each of ECP
Holdings, Inc., an Oklahoma corporation, Halcyon
Communications, Inc., an Oklahoma corporation, Fisher
Communications, L.L.C, a Colorado limited liability
company, and each other Person, if any, who is
admitted as a successor or additional partner of the
Partnership in accordance with this Agreement, in
each case unless and until such Person ceases to be a
limited partner of the Partnership in accordance with
this Agreement."
(c) Article V of the Partnership Agreement is further
amended by adding thereto, immediately after Paragraph 5.3 thereof, a new
Paragraph 5.3(a) which shall read in its entirety as follows:
"5.3(a) 'FCA' shall mean Fisher
Communications Associates, L.L.C., a Colorado limited
liability company."
(d) Article V of the Partnership Agreement is further
amended by adding thereto, immediately after Paragraph 5.19 thereof, a new
Paragraph 5.19(a) which shall read in its entirety as follows:
"5.19(a) 'Person' shall mean any individual,
firm, corporation or other legal entity."
(e) The first sentence of Paragraph 8.7 of the
Partnership Agreement is amended to read in its entirety as follows:
"All distributions of Excess Cash Flow shall be
distributed seventy-five percent (75%) to ECP and FCA
(in proportion to their respective Capital Accounts)
and twenty-five percent (25%) to Halcyon."
(f) Paragraph 9.1 of the Partnership Agreement is amended
to read in its entirety as follows:
"9.1 Allocations of Profits. For bookkeeping
and income tax purposes, in the event of the sale of
all or substantially all of the Partnership Assets or
upon dissolution of the Partnership:
3
<PAGE> 4
"(a) Profit shall be allocated first to ECP
and FCA (in proportion to their respective Capital
Accounts) until such time as each has been allocated
Profits under this Paragraph 9.1(a) equal to the
amount of interest earned on its Capital
Contributions pursuant to Paragraphs 6.8 and 7.2;
"(b) Profit shall then be allocated to ECP
and FCA (in proportion to their respective Capital
Accounts) until such time as each has received the
excess, if any, of the Losses allocated previously to
such Partner under Article VIII over all Profits
allocated under Article VIII or this Paragraph
9.1(b);
"(c) Profit shall next be allocated to
Halcyon until such time as it has received the
excess, if any, of the Losses allocated previously to
Halcyon under Article VIII over all Profits allocated
under Article VIII or this Paragraph 9.1(c); and
"(d) Any remaining Profit or Loss shall be
allocated seventy-five percent (75%) to ECP and FCA
(in proportion to their respective Capital Accounts)
and twenty-five percent (25%) to Halcyon."
(g) Article IX of the Partnership Agreement is further
amended by deleting therefrom Paragraph 9.2 in its entirety.
(h) Article XV of the Partnership Agreement is amended to
read in its entirety as follows:
"ARTICLE XV
"Assignability of Partnership Interests; Admission of
Additional Partners.
"No Partner shall mortgage, pledge, hypothecate,
transfer, sell, assign or otherwise dispose of all or any part
of its interest in the Partnership, whether voluntarily, by
operation of law or otherwise, or any right, title or interest
in or to such interest without obtaining the prior written
consent of the other Partners, except as provided for in this
Agreement. Notwithstanding the foregoing, ECP or FCA shall
have the right, in its sole discretion, to transfer all or any
part of its interest in the Partnership to (i)
Tele-Communications, Inc., a Delaware corporation, or any
Affiliate thereof or (ii) FCA or any FCA Permitted Transferee
(as hereinafter defined). For purposes of this Agreement, the
term 'FCA Permitted Transferee' shall mean (i) any Affiliate
of Donne
4
<PAGE> 5
F. Fisher, currently a resident of Littleton, Colorado
('Fisher'), (ii) any member of Fisher's immediate family
(i.e., wife, parents, children, including those adopted before
the age of 18, grandchildren, brothers, sisters, and the
spouses or children of the foregoing), (iii) any custodian
under the Uniform Gifts to Minors Act or similar fiduciary for
the exclusive benefit of Fisher's children during their lives,
(iv) in the event of Fisher's adjudication of incompetency,
his legal representatives, (v) in the event of Fisher's death,
his executors or the administrators of his estate and his
heirs who are members of his immediate family, and (v) any
trust described in Section 664 of the I.R.C. of which Fisher
or one or more members of his immediate family (and no other
persons) are income beneficiaries. In the event of a permitted
transfer of any interest in the Partnership, the transferee
(other than, with respect to clauses (i) of this sentence
below, a transferee who was already a partner prior to the
permitted transfer) shall, by written instrument in form and
substance reasonably satisfactory to the non-transferring
Partners (i) agree to become a Partner and accept and adopt
the terms and provisions of this Agreement and (ii) assume the
obligations of the transferor Partner under this Agreement
with respect to the transferred partnership interest. If
required by the nontransferring Partners, the transferee shall
deliver to the Partnership an opinion, reasonably satisfactory
in form and substance to the nontransferring Partners, of
counsel reasonably satisfactory to the nontransferring
Partners to the effect that the transfer is in compliance with
applicable state and Federal securities laws. Upon completion
of any permitted transfer in accordance with the foregoing,
the transferee (if not already a Partner) shall be admitted as
a substituted Partner in the place and stead of the transferor
Partner with respect to the transferred partnership interest,
without any further action, and if such transfer is of the
entire partnership interest of the transferor Partner, such
transferor Partners shall be deemed to have withdrawn from the
Partnership without further action. Except for the transferee
of a partnership interest permitted by and in accordance with
this Article XV, no Person shall be admitted as a general or
limited partner of the Partnership without the prior written
consent of all the Partners."
(i) Paragraph 18.1 of the Partnership Agreement is
amended by (i) redesignating clause (iii) thereof as clause (iv) and (ii)
adding, immediately after clause (ii) thereof a new clause (iii) which shall
read in its entirety as follows:
"(iii) the sale of all or substantially all of the
Partnership Assets; or"
(j) Paragraph 19.2 of the Partnership Agreement is
amended to read in its entirety as follows:
5
<PAGE> 6
"19.2 Designation of Purchaser. Each of ECP and FCA
shall have the right to designate another entity to
exercise its purchase rights under this Agreement as
long as the designated entity is (i) ECP or an
Affiliate of ECP or (ii) FCA or an FCA Permitted
Transferee."
(k) Paragraph 19.3 of the Partnership Agreement is
amended by adding thereto, immediately before the words "in the case of ECP"
appearing therein, the following:
"in the case of FCA, at 9513 Pinyon Trail,
Littleton, CO 80124."
3. Reaffirmation. The undersigned parties hereby
acknowledge that the Partnership Agreement, as amended hereby, remains in full
force and effect and is hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned parties have duly executed
and delivered this Consent and Amendment as of the date first above written.
HALCYON COMMUNICATIONS EPC HOLDINGS INC.
By: /s/ ROBERT E. PRICE By: /s/ STEVE BRETT
------------------------- -------------------------------
Name: ROBERT E. PRICE Name: STEVE BRETT
-------------------- -------------------------
Title: PRESIDENT Title: EVP
------------------- ------------------------
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER 2-12-96
-------------------------------
Donne F. Fisher, Member
6
<PAGE> 1
EXHIBIT 10.57
ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made
as of January 31, 1996 between ECP HOLDINGS, INC., an Oklahoma corporation
("Assignor"), and FISHER COMMUNICATIONS ASSOCIATES, L.L.C., a Colorado limited
liability company ("Assignee").
WITNESSETH
WHEREAS, Assignor owns a partnership interest in HALCYON
COMMUNICATIONS PARTNERS, an Oklahoma limited partnership (the "Partnership");
WHEREAS, Assignor, the other partner of the Partnership and
Assignee have entered into an Agreement of Purchase and Sale of Partnership
Interest dated as of the date hereof (the "Purchase Agreement") providing for
the sale by Assignor of a portion of Assignor's partnership interest in the
Partnership (such portion of such interest is defined in the Purchase Agreement
as, and shall be referred to hereinafter as, the Assignor's "Purchased
Interest") and the assumption by Assignee of all liabilities and obligations of
Assignor by virtue thereof; and
WHEREAS, the execution and delivery of this Agreement for the
purpose of effecting such sale and such assumption has been authorized in all
respects as required by law;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the consideration specified in the Purchase
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Transferred Interests. Assignor by this
instrument does convey, sell, transfer, assign and deliver the Assignor's
Purchased Interest to Assignee, without any representation or warranty of any
nature whatsoever, except as may be expressly set forth in the Purchase
Agreement.
2. Assumption of Obligations with Resect to Transferred
Interests. Assignee hereby assumes, and agrees to indemnify Assignor for and
hold Assignor harmless from and against, all liabilities and obligations of any
nature whatsoever existing or arising under the Partnership's limited
partnership agreement or applicable law by virtue of the ownership of the
Assignor's Purchased Interest, whether accrued or unaccrued, known or unknown,
disclosed or undisclosed and whether now existing or hereafter arising.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized signatories in their
respective names, all as of the day and year first above written.
ASSIGNOR:
ECP HOLDINGS, INC
ATTEST: By: /s/ STEPHEN M. BRETT
------------------------------
/s/ MERLYN J. SCHUMACHER Name: STEPHEN M. BRETT
- ------------------------------ ----------------------------
Title:
---------------------------
ASSIGNEE:
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
ATTEST By: /s/ DONNE F. FISHER
/s/ SUE L. FISHER ------------------------------
- ------------------------------ Donne F. Fisher, Member
2-12-96 2-12-96
-2-
<PAGE> 1
EXHIBIT 10.58
OPTION AGREEMENT
Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C., a Colorado limited liability company
("Purchaser"), and ECP Holdings, Inc., an Oklahoma corporation ("Seller").
Seller is a partner of Halcyon Communications Partners, a general
partnership organized and existing under the laws of the State of Oklahoma (the
"Partnership"). Pursuant to a certain Agreement of Purchase and Sale of
Partnership Interest, dated as of the date hereof, among Seller, the other
partner of the Partnership and Purchaser (as the same may be amended from time
to time in accordance with its terms, the "Purchase Agreement"), as of the date
hereof Purchaser is purchasing from Seller a portion of Seller's partnership
interest in the Partnership. Purchaser desires to acquire from Seller an option
to purchase the balance of the partnership interest in the Partnership that
Seller will continue to own immediately after giving effect to such purchase,
and Seller has agreed to grant such an option to Purchaser on the terms and
subject to the conditions set forth herein.
Therefore, in consideration of the payment of $100 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. Seller hereby grants to Purchaser an
irrevocable option (the "Option") to purchase all, but not less than all of the
Option Interest (as hereinafter defined). The exercise price of the Option (the
"Exercise Price") shall be an amount in cash equal to $1,200,000, without
interest. The Exercise Price will be payable by Purchaser at the Closing (as
hereinafter defined) by wire transfer or by certified or bank check in
immediately available funds.
2. Exercise Period; Exercise of the Option.
(a) The Option may be exercised, in whole but not in part, at any
time during the period (the "Exercise Period") commencing on the date hereof
and ending at 12:01 A.M., Denver, Colorado time, on the tenth anniversary of
the date hereof (the "Scheduled Expiration Date").
(b) Purchaser may exercise the Option by delivering written notice
thereof (an "Exercise Notice") to Seller at any time prior to the expiration of
the Exercise Period.
<PAGE> 2
Subject to paragraph) hereof, and unless the parties otherwise agree, the
closing of the sale of the Option Interest (the "Closing") shall occur on the
tenth Business Day (as hereinafter defined) following delivery of the Exercise
Notice. The date the Closing occurs is hereinafter referred to as the "Closing
Date". At the Closing, Seller shall, against receipt of the Exercise Price as
provided in paragraph 1 hereof, convey and deliver the Option Interest to
Purchaser by the delivery to Purchaser by such Seller of a duly completed and
executed instrument of assignment reasonably satisfactory to both parties and
such other documents or instruments which may be necessary, or which Purchaser
may reasonably request, in order to effectively vest in Purchaser beneficial
ownership of the Option Interest.
(c) Prior to the sale of the Option Interest to Purchaser pursuant
to this Agreement, Seller shall, subject only to the express provisions of
paragraph 5(a) of this Agreement, retain all rights as the holder of the Option
Interest, including all voting and consent rights as a partner of the
Partnership, and may exercise or refrain from exercising such rights as Seller
may determine in its sole discretion, even if the result is a diminution in the
value of the Option Interest and this Option to Purchaser.
3. Conditions to Closing. The Closing of the purchase of the
Option Interest pursuant to the exercise of the Option shall be subject to the
satisfaction of all of the following conditions:
(a) Each of the representations of Purchaser made in this
Agreement, in the Purchase Agreement and in each Related Instrument
(as defined in the Purchase Agreement) shall be true and correct in
all material respects at and as of the time of the Closing and
Purchaser shall have performed in all material respects each and every
covenant of Purchaser contained in this Agreement, in the Purchase
Agreement and in each Related Instrument required to be performed by
the time of or at the Closing. If requested by Seller, Purchaser shall
execute a certificate by which Purchaser confirms the satisfaction of
the foregoing condition.
(b) No order, preliminary or permanent injunction,
temporary restraining order, stay, judgment, decree or other order of
any court or governmental or regulatory body preventing the sale of
the Option Interest by the Seller or the consummation of the other
transactions contemplated hereby.
(c) All consents, orders and approvals of any
governmental authority, any partner or partners of the Partnership and
of any other third party that either Purchaser or Seller reasonably
deems necessary or advisable shall have been obtained and shall be in
full force and effect and any waiting period under applicable law
shall have expired. Without limiting the generality of the foregoing,
all such consents and approvals necessary to permit the withdrawal of
Seller from the Partnership without further obligation or liability as
a partner thereof shall have been obtained and shall be in full force
and effect.
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<PAGE> 3
(d) Purchaser shall, by written instrument in form and
substance reasonably satisfactory to Seller, assume and agree to
indemnify Seller for all obligations and liabilities of Seller under
the Partnership Agreement with respect to the Option Interest of every
kind or nature, whether accrued or unaccrued, asserted or unasserted,
known or unknown, disclosed or undisclosed, absolute or contingent,
arising by law, contract or otherwise and including any liability or
obligation arising out of any event, fact or circumstance existing or
occurring as of or prior to the date hereof that, with the passage of
time or the giving of notice, or otherwise, which constitutes a
breach or violation of or default under any contract or law binding
upon or applicable to the Partnership.
(e) If required by Seller, Purchaser will be obligated to
buy from Seller at the Closing, all evidences of indebtedness of the
Partnership held directly or indirectly by Seller or any subsidiary of
Seller, and the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time of the
Closing plus accrued and unpaid interest thereon which, unless
otherwise agreed by Seller and Purchaser, shall be paid in cash.
(f) Purchaser and Seller shall each execute and deliver
such other instruments as either party or the Partnership reasonably
deems necessary or appropriate to effect, and as a condition to, the
exercise of the Option, including amendments to the Partnership
Agreement or any other instrument filed with any governmental agency
or official.
(g) Purchaser shall have exercised all options to acquire
partnership interests in Halcyon Communications Limited Partnership,
an Oklahoma limited partnership ("HCLP"), granted to Purchaser by
partners of HCLP who are affiliates of Seller simultaneously with the
exercise of this Option, and the closings of the sale of all such
partnership interests pursuant to the exercise of all such other
options shall occur simultaneously with the Closing under this Option
Agreement.
(h) If the exercise of the Option requires any consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality or the expiration
of any waiting period imposed by applicable law, then the date fixed
for the Closing pursuant to paragraph 2(b) hereof shall be extended
for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization and the termination of
each such waiting period at the earliest reasonably practicable time
are diligently being made; provided, however, that, unless Seller and
Purchaser otherwise agree, the extension of such Closing date pursuant
to this paragraph may not exceed 180 days. Seller and Purchaser will,
and will use their commercially reasonable efforts to cause the
Partnership to, reasonably cooperate with each other in obtaining any
such consent, approval, waiver, or authorization and in obtaining the
termination of any such waiting period at the earliest practicable
time.
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<PAGE> 4
(i) If, in the opinion of legal counsel to Purchaser, the
immediate proposed transfer of the entire Option Interest would result
in the termination of the Partnership within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended (or any successor
provision of law), but an immediate transfer of less than all of the
Option Interest would not have such a result, Purchaser shall be
entitled to elect, in its sole discretion, to either (i) exercise the
Option in full notwithstanding such termination or (ii) to (A) require
Seller to immediately transfer only that portion of the Option
Interest as may, in the opinion of such counsel, be transferred
without causing such a result and (B) extend the Exercise Period of
the Option with respect to the balance of the Option Interest until
the later of the Scheduled Expiration Date or the last day of the
period of thirteen months after the date of the closing of the
transfer referred to in subclause (ii)(A) of this sentence, in which
event, unless otherwise agreed by Seller and Purchaser, the Exercise
Price shall be allocated proportionately between the portion of the
Option Interest immediately transfer and the remainder of the Option
Interest as to which the Exercise Period of the Option shall have been
so extended.
4. Distributions After Exercise. Distributions declared or made
on or prior to the effective date of the exercise of the Option with respect to
the Option Interest shall be made to Seller, regardless of when such
distributions accrued on the books of the Partnership or the date fixed for
payment thereof.
5. Certain Covenants of Seller. Seller hereby covenants and
agrees with Purchaser as follows:
(a) During the Exercise Period, Seller shall not sell or
otherwise transfer or dispose of the Option Interest or any part
thereof or interest therein, other than a sale or transfer as to which
Seller gives Purchaser at least 14 days prior written notice and in
which the transferee agrees, pursuant to an instrument in form and
substance reasonably satisfactory to Purchaser, to be bound by the
terms of this Option Agreement with respect to such transferred
interest to the same extent as the transferor was so bound with
respect to such transferred interest.
(b) Upon the Closing, Seller shall convey to Purchaser
legal title to, and beneficial ownership of, the Option Interest, free
and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance and free of any restriction on transfer voluntarily
created by Seller, other than as expressly set forth in the
Partnership Agreement or existing or arising under applicable law and
other than the possible lien of taxes not yet due and payable and
minor imperfections in title and encumbrances and other minor matters,
if any, which singly or in the aggregate are not substantial in an
amount, do not materially detract from the value of the Option
Interest.
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<PAGE> 5
6. Binding Effect; Assignment. Subject to the following provision
of this paragraph 6, this Option Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors, heirs, legal
representatives and permitted assignees. Except as otherwise expressly
provided herein, this Option Agreement shall not be assigned by either party
hereto without the prior written consent of the other party. Purchaser may
assign this Option Agreement, in whole or in part, to any FCA Permitted
Transferee (as defined in the Partnership Agreement).
7. Notices. All notices and other communications required or
permitted by this Agreement shall be in writing and addressed to the intended
recipient at such person's address ispecified under its or his signature below
or at such other address as such person may designate in a written notice to
the other party hereto. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this paragraph 7 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received; (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; if sent by Express Mail, Federal Express or similar overnight
delivery service for next Business Day deliverY, the next Business Day after
being entrusted to such service, with delivery charges prepaid or charged to
the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
8. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Agreement" or "Option Agreement" means this Option Agreement,
as the same may be amended from time to time in accordance with its terms.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of Colorado.
"Option Interest" means the entire partnership interest of
Seller as a partner of the Partnership, including such partner's (i) right to a
share of the income, gain, losses and deductions of and distributions made by
the Partnership, (ii) right to a share of Partnership assets, (iii) rights with
respect to initial and additional capital contributions made to the Partnership
by such partner, including such partner's rights with respect to allocations of
income, gain losses and deductions of and distributions made by the Partnership
which are based upon or determined by reference to such capital contributions,
(iv) rights with respect to the management of the business and affairs of the
Partnership, (v) voting, consent and approval rights, (vi) rights to unpaid
interest under Section 6.8 or 7.2 of the Partnership
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<PAGE> 6
Agreement, whether accrued as of or accruing on or after the date hereof, (vii)
rights with respect to such partner's Capital Account (as defined in the
Partnership Agreement), (viii) rights, if any, under Articles X, XI and XII of
the Partnership Agreement, (ix) any and all other rights, interests and
benefits to which such partner is or may become entitled by reason of its
status as a partner of the Partnership, and (x) all liabilities and obligations
of such partner by reason of its status as a partner of the Partnership, in
each case as provided in the Partnership Agreement or the partnership laws of
the state of the Partnership's organization.
"Partnership Agreement" means the Partnership Agreement, dated
as of October 1, 1989, of the Partnership, as the same heretofore may have been
or hereafter may be amended or modified in accordance with its terms.
9. Terms Generally; Certain Rules of Construction. The
definitions in paragraph 8 and elsewhere in this Option Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Option Agreement in its entirety and not to any part hereof unless the context
shall otherwise require. All references herein to paragraphs shall be deemed
references to paragraphs of this Option Agreement unless the context shall
otherwise require. Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of Colorado without
regard to principles of conflict of laws, except to the extent that the laws of
the jurisdiction of organization of the Partnership shall be mandatorily
applicable.
11. Headings. The headings contained in this Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
12. Waivers; Amendment. Any term or provision of this Option
Agreement may be waived at any time by an instrument in writing signed by the
party which is entitled to the benefit thereof. This Option Agreement may be
amended or supplemented at any time only by an instrument in writing signed by
the parties hereto.
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<PAGE> 7
13. Counterparts. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Expenses. Each party hereto will pay its own expenses in
connection with the negotiation and execution of this Option Agreement and the
consummation of the transactions contemplated hereby, including all fees and
disbursements of its legal counsel.
15. Further Actions After the Closing. If, subsequent to the
Closing, further documents are reasonably requested in order to carry out the
provisions and purposes of this Option Agreement, the parties hereto shall
execute and deliver such further documents.
16. Severability. In the event that any part or parts of this
Option Agreement shall be held to be unenforceable to its or their full extent,
then it is the intention of the parties hereto that such part or parts shall be
enforced to the full extent permitted under the laws, and in any event, that
all other parts of this Option Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had never been a part hereof.
17. Entire Agreement. The provisions of this Agreement, the
Purchase Agreement and the Related Instruments collectively set forth the
entire agreement and understanding between the parties hereto as to the subject
matter hereof and thereof and merge and supersede all prior discussions,
agreements and understandings, oral or written, of any and every nature between
them with respect to such subject matter. Except as and to the extent set forth
in this Agreement, the Purchase Agreement or a Related Instrument, neither
party makes any representation, warranty, covenant or agreement whatsoever and
each party disclaims all liability and responsibility for any representation,
warranty, covenant, agreement or statement made or information communicated
(orally or in writing) by any other Person. Purchaser expressly agrees and
acknowledges that, in purchasing this Option and making decisions regarding
whether or not to exercise this Option, Purchaser (i) is not and will not be
relying on the representations and warranties of Seller or any other Person,
(ii) has made and will make its own inquiry and investigation into, and based
thereon, has formed an independent judgment concerning, the Partnership and the
business conducted by it, (iii) has been furnished or given adequate access to
such information as it has requested concerning the Partnership and the
business conducted by it and (iv) will not assert any claim against Seller or
any of its affiliates, directors, officers, employees, agents, stockholders,
advisors, counsel or representatives, nor will seek to hold any of such other
Persons liable for any inaccuracies, misstatements or omissions with respect to
information concerning the Partnership and the business conducted by it,
provided that the foregoing shall not in any manner be construed or deemed to
limit the ability of Purchaser to make any claim it may otherwise have arising
out
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<PAGE> 8
of the breach of any express representation or warranty of Seller contained in
this Agreement, the Purchase Agreement or any Related Instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
ECP HOLDINGS, INC.
By: /s/ STEPHEN M. BRETT
------------------------------
Name: Stephen M. Brett
Title:
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: General Counsel
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER
------------------------------
Donne F. Fisher, Member
9513 Pinyon Trail
Littleton, Colorado 80124
2-12-96
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<PAGE> 1
EXHIBIT 10.59
AGREEMENT OF PURCHASE AND SALE OF
PARTNERSHIP INTERESTS
AGREEMENT OF PURCHASE AND SALE OF PARTNERSHIP INTERESTS, dated
as of January 31, 1996, among Halcyon Communications, Inc., an Oklahoma
corporation ("HCI"), American Televenture of Minersville, Inc., a Colorado
corporation ("ATM"), TCI Cablevision of Nevada, Inc., a Nevada corporation
("TCINV"), TCI Cablevision of Utah, Inc., an Oklahoma corporation ("TCIU"),
TEMPO Cable, Inc., a Utah corporation ("Tempo") ("TCINV, with ATM, TCIU and
Tempo sometimes hereinafter being collectively referred to as "Sellers" or
individually as a "Seller"), and Fisher Communications Associates, L.L.C., a
Colorado limited liability company ("Buyer").
Halcyon Communications Limited Partnership is a limited
partnership organized and existing under the laws of the State of Oklahoma (the
"Partnership"). The general partners of the Partnership are ATM and HCI, and
the limited partners of the Partnership are TCINV, TCIU and Tempo.
Buyer desires to acquire from each Seller a portion of such
Seller's partnership interest in the Partnership and an option to acquire the
balance of such partnership interest of such Seller, and each of the Sellers
(severally and not jointly) have agreed to sell such portion of such
partnership interest and to grant such option to Buyer on the terms and subject
to the conditions set forth herein.
Therefore, for and in consideration of the mutual promises,
upon the terms and subject to the conditions set forth herein and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged by each party, the parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
In addition to the terms defined elsewhere herein, as used
herein the following terms shall have the following respective meanings:
"Agreement" means this Agreement, including any Exhibits and Schedules
attached hereto.
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<PAGE> 2
"Business Day" means a day of the year on which banks are not required
or authorized to close in the State of Colorado.
"Closing" means the consummation of the transactions contemplated
hereby.
"Partners" means the Sellers and HCI, in their capacities as partners
of the Partnership.
"Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement, dated as of June 22, 1994, of the Partnership, as the
same may have been amended or modified through and including the date hereof.
"Partnership Interest" means, as to any partner of the Partnership,
the entire partnership interest of such partner in the Partnership, including
such partner's (i) right to a share of the income, gain, losses and deductions
of and distributions made by the Partnership, (ii) right to a share of
Partnership assets, (iii) rights with respect to initial and additional capital
contributions made to the Partnership by such partner, including such partner's
rights with respect to allocations of income, gain losses and deductions of and
distributions made by the Partnership which are based upon or determined by
reference to such capital contributions, (iv) rights with respect to the
management of the business and affairs of the Partnership, (v) voting, consent
and approval rights, (vi) rights to unpaid interest under Section 12.6 of the
Partnership Agreement, whether accrued as of or accruing on or after the date
hereof, (vii) rights with respect to such partner's Capital Account (as defined
in the Partnership Agreement), (viii) rights, if any, under Sections 16, 17 and
18 of the Partnership Agreement, (ix) any and all other rights, interests and
benefits to which such partner is or may become entitled by reason of its
status as a partner of the Partnership, and (x) all liabilities and obligations
of such partner by reason of its status as a partner of the Partnership, in
each case as provided in the Partnership Agreement or the partnership laws of
the state of the Partnership's organization.
"Person" means any individual, corporation, partnership, trust,
unincorporated association or other entity.
"Purchased Interest" means, with respect to any Seller, one-third of
such Seller's Partnership Interest.
"Related Instruments" means any and all agreements, instruments and
documents executed and delivered or required to be executed and delivered
pursuant to the terms of this Agreement or in connection with the transactions
contemplated hereby, including all Option Agreements executed and delivered
pursuant to Section 2.02 hereof
"WestMarc" means WestMarc Communications, Inc., a Nevada corporation.
"WestMarc Preferred Stock" means the 12% Series C Cumulative
Compounding Preferred Stock, par value $0.01 per share, of WestMarc.
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<PAGE> 3
The definitions in this Article I and elsewhere in this
Agreement shall apply equally, to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The words "herein", "hereof" and "hereunder" and words of
similar import refer to this Agreement in its entirety and not to any part
hereof unless the context shall otherwise require. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Unless the context shall otherwise
require, any references to any agreement or other instrument or statute or
regulation are to it as amended and supplemented from time to time (and, in the
case of a statute or regulation, to any corresponding provisions of successor
statutes or regulations). Any reference in this Agreement to a "day" or number
of "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day,
and such calendar day is not a Business Day, then such action or notice shall
be deferred until, or may be taken or given on, the next Business Day.
Article II.
THE CLOSING
Section 2.01. The Closing. The Closing is taking place at
10:00 A.M., local time, on the date hereof (the "Closing Date") at the offices
of Tele-Communications, Inc., Terrace Tower II, 5619 DTC Parkway, Englewood,
Colorado.
Section 2.02. Sale and Purchase of the Purchased Interests,
Grant of Options. On the terms and subject to the conditions set forth in this
Agreement, at the Closing each Seller shall sell, convey, and assign to Buyer,
and Buyer shall purchase from such Seller, for the consideration specified
below in this Section, all of such Seller's right, title and interest in and to
such Seller's Purchased Interest. The consideration payable by Buyer to a
Seller in exchange for such Seller's Purchased Interest shall be the number of
whole or fractional shares of WestMarc Preferred Stock set forth opposite such
Seller's name on Schedule I hereto, together with the right to receive all
unpaid dividends or other distributions payable with respect to such shares.
Such sale, conveyance, assignment and purchase shall be effected by (i) the
delivery to such Seller by Buyer at the Closing of (A) the stock certificate or
certificates representing the number of shares of WestMarc Preferred Stock to
which such Seller is entitled as set forth in Schedule I hereto, duly endorsed
in blank and otherwise in proper form for transfer and with all necessary
documentary or transfer tax stamps affixed thereto and (B) such other documents
or instruments which may be necessary, or which such Seller reasonably may
request, in order to effectively vest in such Seller good and marketable title
to such shares and the right to receive such unpaid dividends or other
distributions, (ii) the execution and delivery by Buyer and such Seller of a
duly completed and executed Assignment and Assumption Agreement substantially
in the form of Exhibit A hereto and (iii) the execution and delivery by such
Seller or Buyer of
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<PAGE> 4
such other documents or instruments which may be necessary, or which the other
such party may reasonably request, in connection with the transactions
contemplated hereby. At the Closing, each Seller also is granting to Buyer an
option (each, an "Option" and collectively the "Options") on the part of Buyer
to purchase the remaining Partnership Interest of such Seller for the
consideration and on the terms and subject to the conditions set forth in the
form of Option Agreement attached hereto as Exhibit B (the "Option Form").
Section 2.03. Amendment to Partnership Agreement. Each Partner
agrees that it shall, at the Closing, execute and deliver the Consent and First
Amendment in the form of Exhibit C hereto and such other documents as may be
reasonably requested by Buyer in connection with the consummation of the
transactions contemplated hereby. Buyer and each Partner further agrees that,
unless otherwise requested by Buyer, any Partnership Interest purchased by
Buyer pursuant to this Agreement or upon exercise of any Option which is a
general partner's interest shall be converted into a limited partner's
interest.
Article III.
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of Each Seller.
Each of the Sellers, severally and not jointly, represents and warrants to
Buyer as follows:
(a) Such Seller is duly organized, validly existing and
in good standing as a corporation under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, hold
and operate its properties and assets, and to carry on its business as
presently conducted. Such Seller has all requisite corporate power and
authority to enter into this Agreement and each Related Instrument to which it
is or shall become a party and perform its obligations hereunder and
thereunder.
(b) The execution, delivery and performance by such
Seller of this Agreement and such Related Instruments and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of such Seller.
(c) This Agreement has been, and each such Related
Instrument, when executed and delivered, shall be, duly executed and delivered
by such Seller and constitutes (or, in the case of such Related Instruments,
when executed and delivered will constitute) a valid and binding obligation of
such Seller, enforceable in accordance with its terms, except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies.
(d) To the best knowledge of such Seller, the Partnership
is (i) duly organized and validly existing as a limited partnership under the
laws of the State of Oklahoma; (ii) has all
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<PAGE> 5
requisite partnership power and authority to own, hold and operate its
properties and assets, and to carry on its business as presently conducted; and
(iii) treated as a "partnership" under the Code for federal income tax
purposes.
(e) At the Closing, such Seller will transfer to Buyer
such Seller's Purchased Interest, free and clear of any lien, pledge, security
interest, claim, or charge or other encumbrance or any restriction on transfer
voluntarily created by Seller, other than as expressly set forth in the
Partnership's Partnership Agreement or existing or arising under applicable law
and other than the possible lien of taxes not yet due and payable and minor
imperfections in title and encumbrances and other minor matters, if any, which
singly or in the aggregate are not substantial in an amount, do not materially
detract from the value of such Purchased Interest.
Section 3.02. Representations and Warranties of Buyer. Buyer
represents and warrants to each Seller as follows:
(a) Buyer is duly organized, validly existing and in good
standing as a limited liability company under the laws of the State of Colorado
and has all requisite power and authority as a limited liability company to
own, hold and operate its properties and assets, and to carry on its business
as presently conducted. Buyer has all requisite power and authority as a
limited liability company to enter into this Agreement and each Related
Instrument to which it is or shall become a party and perform its obligations
hereunder and thereunder.
(b) The execution, delivery and performance by Buyer of
this Agreement and such Related Instruments and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of Buyer.
(c) This Agreement has been, and each such Related
Instrument, when executed and delivered, shall be, duly executed and delivered
by Buyer and constitutes (or, in the case of such Related Instruments, when
executed and delivered will constitute) a valid and binding obligation of
Buyer, enforceable in accordance with its terms, except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies.
(d) Buyer understands that the Purchased Interests, the
Options and the interests in the Partnership subject to the Options (the
"Option Interests") have not been registered under the Securities Act of 1933,
as amended (the "Act"), nor qualified under any state securities law, and that,
if and to the extent that any thereof constitute securities subject to the Act
or any applicable state securities law, they are being offered and sold
pursuant to exemptions from such registration and qualification based in part
upon the representations of Buyer contained herein.
(e) Buyer is familiar with the business and operations of
the Partnership and has been given the opportunity to obtain from the
Partnership all information that it has requested regarding its current
operations, business plans and prospects.
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<PAGE> 6
(f) Buyer has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the investment contemplated by this Agreement and Buyer is able to bear the
economic risk of such investment.
(g) Buyer understands that, if and to the extent that the
Purchased Interests, the Options and the Option Interests constitute securities
subject to the Act or any applicable state securities law, Buyer must bear the
economic risk of its investment therein indefinitely unless the same are
registered or qualified pursuant to the Act or such state securities law or an
exemption from such registration or qualification is available, and that the
Partnership has no obligation to effect any such registration or qualification.
Buyer further understands that there is no assurance that any such exemption
from registration or qualification will be available. or, if available, that
such exemption will allow Buyer to dispose of or otherwise transfer any or all
of the Purchased Interests, Options or Option Interests in the amounts, in the
manner or at the times Buyer might propose. Buyer further understands that the
Partnership Agreement contains significant restrictions on transfers of
interests in the Partnership.
(h) Buyer is acquiring the Purchased Interests and the
Options (and will acquire the Option Interests subject to any Options which
Buyer may elect to exercise) solely for its own account for investment and not
with a view toward the resale, transfer, or distribution thereof, nor with any
present intention of transferring any thereof or any interest therein in any
transaction which would constitute a "distribution" within the meaning of the
Securities Act. No other person has any right with respect to or interest in
the Purchased Interests, the Options or the Option Interests to be acquired by
Buyer, nor has Buyer agreed to give any person any such interest or right in
the future.
(i) At the Closing, Buyer will transfer to each Seller
the shares of WestMarc Preferred Stock to which such Seller is entitled under
Section 2.02, free and clear of any lien, pledge, security interest, claim, or
charge or other encumbrance or any restriction on transfer voluntarily created
by Buyer, other than any such restrictions as may be expressly set forth in the
resolution of the Board of Directors of WestMarc designating and establishing
the WestMarc Preferred Stock and in the certificate of incorporation and
by-laws of WestMarc or as may exist or arise under applicable federal and state
securities laws.
ARTICLE IV.
MISCELLANEOUS
Section 4.01. Survival of Representations, Warranties and
Covenants. The respective representations, warranties, agreements and
covenants of the parties contained in this Agreement will survive and continue
in full force and effect after the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
Section 4.02. Notices. All notices and other communications
required or permitted by this Agreement shall be in writing and given (i) if to
the Partnership, at the address
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<PAGE> 7
of its principal executive offices or at such other address as the Partnership
may designate in a written notice to the other parties and (ii) if to any other
party, to such party at its address as it appears on the records of the
Partnership or to such other address as such party may designate in a written
notice to each other party. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this Section 4.02 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received: (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business
Day after being entrusted to such service, with delivery charges prepaid or
charged to the sender's accounts; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
Section 4.03. Expenses. Whether or not the transactions
contemplated hereby are consummated, each of the parties shall bear the fees
and expenses relating to its compliance with the various provisions of this
Agreement and the Related Instruments, and each of the parties agrees to pay
all of its own expenses (including, without limitation, all legal and
accounting fees) incurred in connection with this Agreement and the Related
Instruments, the transactions contemplated hereby and thereby, the negotiations
leading to the same and the preparation made for carrying the same into effect.
Section 4.04. Headings. The headings of the Articles,
Sections and other subdivisions of this Agreement are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions of this Agreement.
Section 4.05. Governing Law. This Agreement shall be construed
in accordance with, and governed by, the internal laws of the State of Colorado
without regard to principles of conflict of laws, except to the extent that the
laws of the jurisdiction of organization of the Partnership shall be
mandatorily applicable.
Section 4.06. Severability. If any provision of this Agreement
shall be held to be illegal, invalid or unenforceable, that provision will be
enforced to the maximum extent permissible so as to effect the intent of the
parties and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If necessary
to effect the intent of the parties hereto, the parties hereto will negotiate
in good faith to amend this Agreement to replace the unenforceable language
with enforceable language which as closely as possible reflects such intent.
Section 4.07. Amendments. This Agreement may be modified or
amended only by a written amendment signed by Persons authorized to so bind
each party hereto.
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<PAGE> 8
Section 4.08. Entire Agreement. The provisions of this
Agreement and the Related Instruments collectively set forth the entire
agreement and understanding between the parties hereto as to the subject matter
hereof and thereof and merge and supersede all prior discussions, agreements
and understandings, oral or written, of any and every nature among them with
respect to such subject matter. Except as and to the extent set forth in this
Agreement or a Related Instrument, no party makes any representation, warranty,
covenant or agreement whatsoever and each party disclaims all liability and
responsibility for any representation, warranty, covenant, agreement or
statement made or information communicated (orally or in writing) by any other
Person. Buyer expressly agrees and acknowledges that, in purchasing the
Purchased Interests and the Options and in making decisions regarding whether
or not to exercise the Options. Buyer (i) is not and will not be relying on the
representations and warranties of any Seller or any other Person, (ii) has made
and will make its own inquiry and investigation into, and based thereon, has
formed an independent judgment concerning, the Partnership and the business
conducted by it, (iii) has been furnished or given adequate access to such
information as it has requested concerning the Partnership and the business
conducted by it and (iv) will not assert any claim against any Seller or any
Seller's affiliates, directors, officers, employees, agents, stockholders,
advisors, counsel or representatives, nor will seek to hold any of such other
Persons liable for any inaccuracies, misstatements or omissions with respect to
information concerning the Partnership and the business conducted by it,
provided that the foregoing shall not in any manner be construed or deemed to
limit the ability of Buyer to make any claim it may otherwise have arising out
of the breach of any express representation or warranty of any Seller contained
in this Agreement or any Related Instrument.
Section 4.09. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
heirs, executors, legal representatives and permitted assigns; provided,
however, that, except as otherwise specifically permitted or contemplated by
this Agreement, neither this Agreement nor any of the rights, interests or
obligations of any party hereunder shall be assigned or delegated without the
prior written consent of all the parties.
Section 4.10. Further Assurances. Upon reasonable request from
time to time, each party hereto shall execute and deliver all documents and
instruments and do all other acts that may be reasonably necessary or desirable
to carry out the intent and purposes of this Agreement and give effect to the
exercise by a party of its rights hereunder.
Section 4.11. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts shall have
been signed by each party hereto and
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<PAGE> 9
delivered to the other party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
HALCYON COMMUNICATIONS, INC. AMERICAN TELEVENTURE OF
MINERSVILLE, INC.
By: /s/ ROBERT E. PRICE By: /s/ STEPHEN M. BRETT
---------------------------- -----------------------------
Name: ROBERT E. PRICE Name: STEPHEN M. BRETT
Title: PRESIDENT Title:
TCI CABLEVISION OF NEVADA. INC. TCI CABLEVISION OF UTAH, INC.
By: /s/ STEPHEN M. BRETT By: /s/ STEPHEN M. BRETT
---------------------------- -----------------------------
Name: STEPHEN M. BRETT Name: STEPHEN M. BRETT
Title: Title:
TEMPO CABLE, INC. FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ STEPHEN M. BRETT By: /s/ DONNE F. FISHER 2-12-96
---------------------------- -----------------------------
Name: STEPHEN M. BRETT Donne F. Fisher, Member
Title:
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<PAGE> 10
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of WestMarc
Name of Seller Preferred Stock
- -------------- -----------------------------
<S> <C>
American Televenture of Minersville, Inc. 0.5224
TCI Cablevision of Nevada, Inc. 2.8911
TCI Cablevision of Utah, Inc. 4.3557
TEMPO Cable, Inc. 14.5562
</TABLE>
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<PAGE> 11
EXHIBIT A
ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made
as of January 31, 1996 between [insert name of Seller], a __________________
corporation ("Assignor"), and FISHER COMMUNICATIONS ASSOCIATES, L.L.C., a
Colorado limited liability company ("Assignee").
WITNESSETH
WHEREAS, Assignor owns a partnership interest in HALCYON
COMMUNICATIONS LIMITED PARTNERSHIP, an Oklahoma limited partnership (the
"Partnership");
WHEREAS, Assignor, the other partners of the Partnership and
Assignee have entered into an Agreement of Purchase and Sale of Partnership
Interests dated as of the date hereof (the "Purchase Agreement") providing for
the sale by Assignor of a portion of Assignor's partnership interest in the
Partnership (such portion of such interest is defined in the Purchase Agreement
as, and shall be referred to hereinafter as, the Assignor's "Purchased
Interest") and the assumption by Assignee of all liabilities and obligations of
Assignor by virtue thereof, and
"WHEREAS, the execution and delivery of this Agreement for the
purpose of effecting such sale and such assumption has been authorized in all
respects as required by law;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the consideration specified in the Purchase
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Transferred Interests. Assignor by this
instrument does convey, sell, transfer, assign and deliver the Assignor's
Purchased Interest to Assignee, without any representation or warranty of any
nature whatsoever, except as may be expressly set forth in the Purchase
Agreement.
2. Assumption of Obligations with Respect to Transferred
Interests. Assignee hereby assumes, and agrees to indemnify Assignor for and
hold Assignor harmless from and against, all liabilities and obligations of any
nature whatsoever existing or arising under the Partnership's limited
partnership agreement or applicable law by virtue of the ownership of the
Assignor's Purchased Interest, whether accrued or unaccrued, known or unknown,
disclosed or undisclosed and whether now existing or hereafter arising.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized signatories in their
respective names, all as of the day and year first above written.
ASSIGNOR:
[Insert name of Seller]
ATTEST: By:
------------------------------
- ------------------------------ Name:
----------------------------
Title:
---------------------------
ASSIGNEE:
FISHER COMMUNICATIONS ASSOCIATES, L.L.C.
ATTEST: By:
------------------------------
- ------------------------------ Donne F. Fisher, Member
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<PAGE> 13
EXHIBIT B
OPTION AGREEMENT
Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C., a Colorado limited liability company
("Purchaser"), and [insert Seller's name], a _______________ corporation
("Seller").
Seller is a partner of Halcyon Communications Limited Partnership, a
limited partnership organized and existing under the laws of the State of
Oklahoma (the "Partnership"). Pursuant to a certain Agreement of Purchase and
Sale of Partnership Interests, dated as of the date hereof, among Seller, the
other partners of the Partnership and Purchaser (as the same may be amended
from time to time in accordance with its terms, the "Purchase Agreement"), on
the date hereof Purchaser is purchasing from Seller and certain other partners
of the Partnership a portion of their respective partnership interests in the
Partnership. Purchaser desires to acquire from Seller an option to purchase the
balance of the partnership interest in the Partnership that Seller will
continue to own immediately after giving effect to such purchases, and Seller
has agreed to grant such an option to Purchaser on the terms and subject to the
conditions set forth herein.
Therefore, in consideration of the payment of $100 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. Seller hereby grants to Purchaser an irrevocable
option (the "Option") to purchase all, but not less than all of the Option
Interest (as hereinafter defined). The exercise price of the Option (the
"Exercise Price") shall be an amount in cash equal to $ , without
interest. The Exercise Price will be payable by Purchaser at the Closing (as
hereinafter defined) by wire transfer or by certified or bank check in
immediately available funds.
2. Exercise Period, Exercise of the Option.
(a) The Option may be exercised, in whole but not in part, at any
time during the period (the "Exercise Period") commencing on the date hereof
and ending at 12:01 A.M., Denver, Colorado time, on the tenth anniversary of
the date hereof (the "Scheduled Expiration Date").
(b) Purchaser may exercise the Option by delivering written notice
thereof (an "Exercise Notice") to Seller at any time prior to the expiration of
the Exercise Period. Subject to paragraph 3 hereof, and unless the parties
otherwise agree, the closing of the sale of the Option Interest (the
"Closing") shall occur on the tenth Business Day (as hereinafter defined)
following delivery of the Exercise Notice. The date the Closing occurs is
hereinafter referred to as the "Closing Date". At the Closing, Seller shall,
against receipt of the Exercise Price as provided in paragraph 1 hereof, convey
and deliver the Option Interest to Purchaser by the delivery to Purchaser by
such Seller of a duly completed and
<PAGE> 14
executed instrument of assignment reasonably satisfactory to both parties and
such other documents or instruments which may be necessary, or which Purchaser
may reasonably request, in order to effectively vest in Purchaser beneficial
ownership of the Option Interest.
(c) Prior to the sale of the Option Interest to Purchaser pursuant
to this Agreement, Seller shall, subject only to the express provisions of
paragraph 5(a) of this Agreement, retain all rights as the holder of the Option
Interest, including all voting and consent rights as a partner of the
Partnership, and may exercise or refrain from exercising such rights as Seller
may determine in its sole discretion, even if the result is a diminution in the
value of the Option Interest and this Option to Purchaser.
3. Conditions to Closing. The Closing of the purchase of the
Option Interest pursuant to the exercise of the Option shall be subject to the
satisfaction of all of the following conditions:
(a) Each of the representations of Purchaser made in this
Agreement, in the Purchase Agreement and in each Related Instrument
(as defined in the Purchase Agreement) shall be true and correct in
all material respects at and as of the time of the Closing and
Purchaser shall have performed in all material respects each and every
covenant of Purchaser contained in this Agreement, in the Purchase
Agreement and in each Related Instrument required to be performed by
the time of or at the Closing. If requested by Seller, Purchaser shall
execute a certificate by which Purchaser confirms the satisfaction of
the foregoing condition.
(b) No order, preliminary or permanent injunction,
temporary restraining order, stay, judgment, decree or other order of
any court or governmental or regulatory body preventing the sale of
the Option Interest by the Seller or the consummation of the other
transactions contemplated hereby.
(c) All consents, orders and approvals of any
governmental authority, any partner or partners of the Partnership and
of any other third party that either Purchaser or Seller reasonably
deems necessary or advisable shall have been obtained and shall be in
full force and effect and any waiting period under applicable law
shall have expired. Without limiting the generality of the foregoing,
all such consents and approvals necessary to permit the withdrawal of
Seller from the Partnership without further obligation or liability as
a partner thereof shall have been obtained and shall be in full force
and effect.
(d) Purchaser shall, by written instrument in form and
substance reasonably satisfactory to Seller, assume and agree to
indemnify Seller for all obligations and liabilities of Seller under
the Partnership Agreement with respect to the Option Interest of every
kind or nature, whether accrued or unaccrued, asserted or unasserted,
known or unknown, disclosed or undisclosed, absolute or contingent,
arising by law, contract or otherwise and including any liability or
obligation arising
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<PAGE> 15
out of any event, fact or circumstance existing or occurring as of or
prior to the date hereof that, with the passage of time or the giving
of notice, or otherwise, which constitutes a breach or violation of or
default under any contract or law binding upon or applicable to the
Partnership.
(e) If required by Seller, Purchaser will be obligated to
buy from Seller at the Closing, all evidences of indebtedness of the
Partnership held directly or indirectly by Seller or any subsidiary of
Seller, and the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time of the
Closing plus accrued and unpaid interest thereon which, unless
otherwise agreed by Seller and Purchaser, shall be paid in cash.
(f) Purchaser and Seller shall each execute and deliver
such other instruments as either party or the Partnership reasonably
deems necessary or appropriate to effect, and as a condition to, the
exercise of the Option, including amendments to the Partnership
Agreement or any other instrument filed with any governmental agency
or official.
(g) Purchaser shall have exercised all options to acquire
partnership interests in the Partnership granted by other partners of
the Partnership pursuant to the Purchase Agreement simultaneously with
the exercise of this Option, and the closings of the sale of all such
partnership interests pursuant to the exercise of all such other
options shall occur simultaneously with the Closing under this Option
Agreement.
(h) Purchaser shall have exercised all options to acquire
partnership interests in Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), granted to Purchaser by partners of HCP
who are affiliates of Seller simultaneously with the exercise of this
Option, and the closings of the sale of all such partnership interests
pursuant to the exercise of all such other options shall occur
simultaneously with the Closing under this Option Agreement.
(i) If the exercise of the Option requires any consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality or the expiration
of any waiting period imposed by applicable law, then the date fixed
for the Closing pursuant to paragraph 2(b) hereof shall be extended
for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization and the termination of
each such waiting period at the earliest reasonably practicable time
are diligently being made; provided, however, that, unless Seller and
Purchaser otherwise agree, the extension of such Closing date pursuant
to this paragraph may not exceed 180 days. Seller and Purchaser will,
and will use their commercially reasonable efforts to cause the
Partnership to, reasonably cooperate with each other in obtaining any
such consent, approval, waiver, or authorization and in obtaining the
termination of any such waiting period at the earliest practicable
time.
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<PAGE> 16
(j) If, in the opinion of legal counsel to Purchaser, the
immediate proposed transfer of the entire Option Interest would result
in the termination of the Partnership within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended (or any successor
provision of law), but an immediate transfer of less than all of the
Option Interest would not have such a result, Purchaser shall be
entitled to elect, in its sole discretion, to either (i) exercise the
Option in full notwithstanding such termination or (ii) to (A) require
Seller to immediately transfer only that portion of the Option
Interest as may, in the opinion of such counsel, be transferred
without causing such a result and (B) extend the Exercise Period of
the Option with respect to the balance of the Option Interest until
the later of the Scheduled Expiration Date or the last day of the
period of thirteen months after the date of the closing of the
transfer referred to in subclause (ii)(A) of this sentence, in which
event, unless otherwise agreed by Seller and Purchaser, the Exercise
Price shall be allocated proportionately between the portion of the
Option Interest immediately transferred and the remainder of the
Option Interest as to which the Exercise Period of the Option shall
have been so extended.
4. Distributions After Exercise. Distributions declared or made
on or prior to the effective date of the exercise of the Option with respect to
the Option Interest shall be made to Seller, regardless of when such
distributions accrued on the books of the Partnership or the date fixed for
payment thereof.
5. Certain Covenants of Seller. Seller hereby covenants and
agrees with Purchaser as follows:
(a) During the Exercise Period, Seller shall not sell or
otherwise transfer or dispose of the Option Interest or any part
thereof or interest therein, other than a sale or transfer as to which
Seller gives Purchaser at least 14 days prior written notice and in
which the transferee agrees, pursuant to an instrument in form and
substance reasonably satisfactory to Purchaser, to be bound by the
terms of this Option Agreement with respect to such transferred
interest to the same extent as the transferor was so bound with
respect to such transferred interest.
(b) Upon the Closing, Seller shall convey to Purchaser
legal title to, and beneficial ownership of, the Option Interest, free
and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance and free of any restriction on transfer voluntarily
created by Seller, other than as expressly set forth in the
Partnership Agreement or existing or arising under applicable law and
other than the possible lien of taxes not yet due and payable and
minor imperfections in title and encumbrances and other minor matters,
if any, which singly or in the aggregate are not substantial in an
amount, do not materially detract from the value of the Option
Interest.
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<PAGE> 17
6. Binding Effect; Assignment. Subject to the following provision
of this paragraph 6, this Option Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors, heirs, legal
representatives and permitted assignees. Except as otherwise expressly provided
herein, this Option Agreement shall not be assigned by either party hereto
without the prior written consent of the other party. Purchaser may assign this
Option Agreement, in whole or in part, to any FCA Permitted Transferee (as
defined in the Partnership Agreement).
7. Notices. All notices and other communications required or
permitted by this Agreement shall be in writing and addressed to the intended
recipient at such person's address specified under its or his signature below
or at such other address as such person may designate in a written notice to
the other party hereto. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this paragraph 7 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received; (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business
Day after being entrusted to such service, with delivery charges prepaid or
charged to the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
8. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Agreement" or "Option Agreement" means this Option Agreement,
as the same may be amended from time to time in accordance with its terms.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of Colorado.
"Option Interest" means the entire partnership interest of
Seller as a partner of the Partnership, including such partner's (i) right to a
share of the income, gain, losses and deductions of and distributions by the
Partnership, (ii) right to a share of Partnership assets, (iii) rights with
respect to initial and additional capital contributions made to the Partnership
by such partner, including such partner's rights with respect to allocations of
income, gain losses and deductions of and distributions made by the Partnership
which are based upon or determined by reference to such capital contributions,
(iv) rights with respect to the management of the business and affairs of the
Partnership, (v) voting, consent and approval rights, (vi) rights to unpaid
interest under Section 12.6 of the Partnership Agreement, whether accrued as of
or accruing on or after the date hereof, (vii) rights with
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<PAGE> 18
respect to such partner's Capital Account (as defined in the Partnership
Agreement), (viii) rights, if any, under Sections 16, 17 and 18 of the
Partnership Agreement, (ix) any and all other rights, interests and benefits to
which such partner is or may become entitled by reason of its status as a
partner of the Partnership, and (x) all liabilities and obligations of such
partner by reason of its status as a partner of the Partnership, in each case
as provided in the Partnership Agreement or the partnership laws of the state
of the Partnership's organization.
"Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement, dated as of June 22, 1994, of the Partnership, as the
same heretofore may have been or hereafter may be amended or modified in
accordance with its terms.
9. Terms Generally; Certain Rules of Construction. The
definitions in paragraph 8 and elsewhere in this Option Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Option Agreement in its entirety and not to any part hereof unless the context
shall otherwise require. All references herein to paragraphs shall be deemed
references to paragraphs of this Option Agreement unless the context shall
otherwise require. Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of Colorado without
regard to principles of conflict of laws, except to the extent that the laws of
the jurisdiction of organization of the Partnership shall be mandatorily
applicable.
11. Headings. The headings contained in this Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
12. Waivers; Amendment. Any term or provision of this Option
Agreement may be waived at any time by an instrument in writing signed by the
party which is entitled to the benefit thereof. This Option Agreement may be
amended or supplemented at any time only by an instrument in writing signed by
the parties hereto.
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<PAGE> 19
13. Counterparts. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Expenses. Each party hereto will pay its own expenses in
connection with the negotiation and execution of this Option Agreement and the
consummation of the transactions contemplated hereby, including all fees and
disbursements of its legal counsel.
15. Further Actions After the Closing. If, subsequent to the
Closing, further documents are reasonably requested in order to carry out the
provisions and purposes of this Option Agreement, the parties hereto shall
execute and deliver such further documents.
16. Severability. In the event that any part or parts of this
Option Agreement shall be held to be unenforceable to its or their full extent,
then it is the intention of the parties hereto that such part or parts shall be
enforced to the full extent permitted under the laws, and in any event, that
all other parts of this Option Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had never been a part hereof.
17. Entire Agreement. The provisions of this Agreement, the
Purchase Agreement and the Related Instruments collectively set forth the
entire agreement and understanding between the parties hereto as to the subject
matter hereof and thereof and merge and supersede all prior discussions,
agreements and understandings, oral or written, of any and every nature between
them with respect to such subject matter. Except as and to the extent set forth
in this Agreement, the Purchase Agreement or a Related Instrument, neither
party makes any representation, warranty, covenant or agreement whatsoever and
each party disclaims all liability and responsibility for any representation,
warranty, covenant, agreement or statement made or information communicated
(orally or in writing) by any other Person. Purchaser expressly agrees and
acknowledges that, in purchasing this Option and making decisions regarding
whether or not to exercise this Option, Purchaser (i) is not and will not be
relying on the representations and warranties of Seller or any other Person,
(ii) has made and will make its own inquiry and investigation into, and based
thereon, has formed an independent judgment concerning, the Partnership and the
business conducted by it, (iii) has been furnished or given adequate access to
such information as it has requested concerning the Partnership and the
business conducted by it and (iv) will not assert any claim against Seller or
any of its affiliates, directors, officers, employees, agents, stockholders,
advisors, counsel or representatives, nor will seek to hold any of such other
Persons liable for any inaccuracies, misstatements or omissions with respect to
information concerning the Partnership and the business conducted by it,
provided that the foregoing shall not in any manner be construed or deemed to
limit the ability of Purchaser to make any claim it may otherwise have arising
out of the breach of any express representation or warranty of Seller contained
in this Agreement, the Purchase Agreement or any Related Instrument.
-7-
<PAGE> 20
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
[Insert name of Seller]
By:
------------------------------
Name:
Title:
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: General Counsel
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By:
------------------------------
Donne F. Fisher, Member
9513 Pinyon Trail
Littleton, Colorado 80124
-8-
<PAGE> 21
EXHIBIT C
CONSENT AND FIRST AMENDMENT OF AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP FOR HALCYON COMMUNICATIONS LIMITED PARTNERSHIP
THIS CONSENT AND FIRST AMENDMENT, dated as of January 31,
1996, is made and entered into by and among the undersigned parties.
Halcyon Communications Limited Partnership, an Oklahoma
limited partnership (the "Partnership"), was formed under the Oklahoma Revised
Limited Partnership Act pursuant to a Limited Partnership Agreement dated as of
January 1, 1994 (the "Original Agreement") among Halcyon Communications, Inc.,
an Oklahoma corporation ("HCI"), TCI Cablevision of Nevada, Inc., a Nevada
corporation ("TCINV"), TCI Cablevision of Utah, Inc., a Utah corporation
("TCIU"), TEMPO Cable, Inc., an Oklahoma corporation ("Tempo"), American
Televenture of Minersville, Inc., a Colorado corporation ("ATM"), and pursuant
to a Certificate of Limited Partnership filed with the Oklahoma Secretary of
State on January 6, 1994. The Original Agreement was thereafter amended and
restated by an Amended and Restated Limited Partnership Agreement dated as of
June 22, 1994 (the "Restated Partnership Agreement"), among the parties to the
Original Agreement.
The undersigned parties desire to (i) consent to the
assignment to Fisher Communications Associates, L.L.C., a Colorado limited
liability company, ("FCA") by each of TCINV, TCIU and Tempo of one-third of
their respective limited partnership interests in the Partnership, (ii) consent
to the assignment by ATM to FCA of one-third of ATM's general partnership
interest in the Partnership and the conversion of such assigned interest into a
limited partnership interest, (iii) consent to the grant to FCA by TCINV, TCIU,
Tempo and ATM of options to acquire the entire balances of their respective
partnership interests in the Partnership and any future exercise of such
options and (iv) consent to the admission of FCA to the Partnership as a
limited partner. The undersigned parties also desire to amend the Restated
Partnership Agreement in certain respects.
Therefore, for and in consideration of the premises and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged by each party, the parties hereto agree as follows:
1. Certain Consents and Agreements; Section 754 Election.
(a) HCI, ATM, TCINV, TCIU and Tempo, in their capacities
as, and constituting all of, the partners of the Partnership hereby (i) consent
to (A) the sale to FCA, pursuant to the Agreement of Purchase and Sale of
Partnership Interests, dated as of the date hereof, among the parties hereto
(the "Purchase Agreement"), of the Purchased Interest (as defined in the
Purchase Agreement) of each of ATM, TCINV, TCIU and Tempo, (B) the grant to FCA
by each of ATM, TCFNV, TCIU and Tempo of options to acquire the entire balances
of their respective partnership interests in the Partnership pursuant to
separate Option Agreements, each substantially in the form of Exhibit B to the
Purchase Agreement
<PAGE> 22
(collectively, the "Option Agreements"), (C) the conversion of the Purchased
Interest of ATM from a general partnership interest into a limited partnership
interest in the Partnership, (D) the admission of FCA, as the holder of the
Purchased Interests of TCINV, TCIU and Tempo and the converted Purchased
Interest of ATM, to the Partnership as a limited partner effective as of the
date hereof and (E) any future exercise by FCA (or any of its permitted
assignees) of its option and rights under each of the Option Agreements
pursuant to the terms thereof and, upon such exercise, the transfer of the
partnership interests and consummation of the other transactions contemplated
thereby (including, without limitation, the withdrawal contemplated by the last
sentence of paragraph 3(c) of each such Option Agreement); and (ii) agrees that
the Partnership shall file, in a timely manner for the tax year of the
Partnership in which the sale referred to in subclause (i)(A) of this sentence
occurs, an election, pursuant to Section 754 of the Internal Revenue Code of
1986, as amended (the "Code") and applicable Treasury Regulations, to have the
Partnership's assets adjusted as provided in Section 743 of the Code, and if
requested by FCA (or any of its permitted assignees) upon any purchase of any
additional partnership interest or interests in the Partnership in connection
with the exercise of any option under any of the Option Agreements, also shall
make such election in a timely manner for the tax year of the Partnership in
which such exercise occurs. FCA hereby agrees to be admitted to the Partnership
as a Limited Partner and, as such, to be bound by the provisions of the
Restated Partnership Agreement, as amended hereby.
(b) Without in any way limiting the generality of the
definitions of the terms "Partnership Interest" and "Purchased Interest" in the
Purchase Agreement or the definition of "Option Interest" in any of the Option
Agreements, the parties acknowledge, confirm and agree that (i) for purposes of
Section 12.6 of the Restated Partnership Agreement and any other provision of
the Restated Partnership Agreement pursuant to which the rights of a partner of
the Partnership are based upon or determined by reference to such partner's
initial or additional Capital Contributions (as defined in the Restated
Partnership Agreement) as of any time of determination, FCA shall be deemed to
have made (in addition to any Capital Contributions actually made by it) a pro
rata portion of all Capital Contributions made by ATM, TCINV, TCIU or Tempo
prior to the date hereof, with such portion being equal to the aggregate
percentage of the Partnership Interest of ATM, TCINV, TCIU or Tempo (as the case
may be) which FCA shall have acquired, at or before such time, pursuant to the
Purchase Agreement or the applicable Option Agreement; and (ii) as of the date
hereof, automatically by virtue of the sale of the Purchased Interests to FCA,
all rights of ATM under or by virtue of the Amended and Restated Management
Agreement, dated as of June 22, 1994, between the Partnership and HCI, as
"Manager," as heretofore amended (the "Management Agreement") shall be rights
of each of ATM and FCA; provided, however, that in the event of the removal of
Manager pursuant to Section 5.2 by the mutual consent of ATM and FCA, then,
subject to the last sentence of Section 5.2 of the Management Agreement, ATM
shall serve as manager and the Managing Partner of the Partnership unless ATM
and FCA agree to select a new manager or new Managing Partner.
2. Amendments to Restated Partnership Agreement. The
undersigned parties hereby agree that, effective as of the date hereof, the
Restated Partnership Agreement is
2
<PAGE> 23
hereby amended as follows:
(a) Section 1.3 of the Restated Partnership Agreement is
amended to read in its entirety as follows:
"1.3 TCI Cablevision of Nevada, Inc., a
Nevada corporation, TCI Cablevision of Utah, Inc., a
Utah corporation, TEMPO Cable, Inc., an Oklahoma
corporation, and Fisher Communications Associates,
L.L.C., a Colorado limited liability company, are
sometimes hereinafter referred to as TCI/Nevada,
TCI/Utah, TEMPO and FCA, respectively."
(b) Section 2.3 of the Partnership Agreement is amended
to read in its entirety as follows:
"2.3 'Affiliate,' when used with respect to a
specified Person, means any other Person that
directly, indirectly or through one or more
intermediaries Controls, is Controlled by or is under
Common Control with such Person. For purposes of the
foregoing, 'Control,' as to any Person, means the
possession, directly or indirectly, of the power to
direct or cause the direction of the management and
policies of such Person (whether through ownership of
securities, partnership interests or other ownership
interests, by contract, by partnership or involvement
in the board of directors, management committee or
other management structure of such Person, or
otherwise). The terms 'Controlled,' 'Controlling' and
similar variations shall have correlative meanings."
(c) The defined term "Initial Limited Partners" set forth
in Section 2.18 of the Restated Partnership Agreement is amended to read in its
entirety as follows:
"2.18 'Initial Limited Partners' means
TCI/Nevada, TCI/Utah and TEMPO."
(d) The defined term "Limited Partner" set forth in
Section 2.19 of the Restated Partnership Agreement is amended to read in its
entirety as follows:
"2.19 'Limited Partner' means each Initial
Limited Partner, FCA and each other Person, if any,
who is admitted as a successor or additional limited
partner of the Partnership in accordance with this
Agreement, in each case unless and until such Person
ceases to be a limited partner of the Partnership in
accordance with this Agreement."
(e) Section 21 of the Restated Partnership Agreement is
amended to read in its entirety as follows:
3
<PAGE> 24
"Section 21. Assignability of Partnership Interests;
Admission of Additional Partners.
"21.1 No Partner shall mortgage, pledge,
hypothecate, transfer, sell, assign or otherwise
dispose of all or any part of its interest in the
Partnership, whether voluntarily, by operation of law
or otherwise, or any right, title or interest in or
to such interest without obtaining the prior written
consent of the other Partners, except as provided for
in this Agreement. Notwithstanding the foregoing, ATM
or any Limited Partner shall have the right, in its
sole discretion, to transfer all or any part of its
interest in the Partnership to (i)
Tele-Communications, Inc., a Delaware corporation, or
any Affiliate thereof or (ii) FCA or any FCA
Permitted Transferee (as hereinafter defined). For
purposes of this Agreement, the term 'FCA Permitted
Transferee' shall mean (i) any Affiliate of Donne F.
Fisher, currently a resident of Littleton, Colorado
('Fisher'), (ii) any member of Fisher's immediate
family (i.e., wife, parents, children, including
those adopted before the age of 18, grandchildren,
brothers, sisters, and the spouses or children of the
foregoing), (iii) any custodian under the Uniform
Gifts to Minors Act or similar fiduciary for the
exclusive benefit of Fisher's children during their
lives, (iv) in the event of Fisher's adjudication of
incompetency, his legal representatives, (v) in the
event of Fisher's death, his executors or the
administrators of his estate and his heirs who are
members of his immediate family, and (v) any trust
described in Section 664 of the Code of which Fisher
or one or more members of his immediate family (and
no other persons) are income beneficiaries. Subject
to the last sentence of this Section 21.1, in the
event of a permitted transfer of any interest in the
Partnership, the transferee (other than, with respect
to clauses (i) of this sentence below, a transferee
who was already a partner prior to the permitted
transfer) shall, by written instrument in form and
substance reasonably satisfactory to the
non-transferring Partners (i) agree to become a
Partner of the same class as the transferor and
accept and adopt the terms and provisions of this
Agreement and (ii) assume the obligations of the
transferor Partner under this Agreement with respect
to the transferred partnership interest. If required
by the nontransferring Partners, the transferee shall
deliver to the Partnership an opinion, reasonably
satisfactory in form and substance to the
nontransferring Partners, of counsel reasonably
satisfactory to the nontransferring Partners to the
effect that the transfer is in compliance with
applicable state and Federal securities laws. Upon
completion of any permitted transfer in accordance
with the foregoing, the transferee (if not already a
Partner) shall be admitted as a substituted Partner
in the place and stead of the transferor Partner with
respect to the transferred partnership interest
(subject to the last sentence of this Section 21.1),
without any further action, and if such transfer is
of the
4
<PAGE> 25
entire partnership interest of the transferor
Partner, such transferor Partners shall be deemed to
have withdrawn from the Partnership without further
action. If the partnership interest transferred in a
permitted transfer is a general partnership interest,
the transferred interest shall be converted into a
limited partnership interest if and to the extent
requested by the transferor Partner and the
transferee.
"21.2 Except for the transferee of a
partnership interest permitted by and in accordance
with Section 21.1, no Person shall be admitted as a
general or limited partner of the Partnership without
the prior written consent of all the Partners."
(f) Section 24.1 of the Restated Partnership Agreement is
amended by (i) deleting the word "or" at the end of subsection 24.1.2, (ii)
redesignating subsection 24.1.3 thereof as subsection 24.1.4, and (iii) adding,
immediately after subsection 24.1.2, a new subsection 24.1.3 which shall read
in its entirety as follows:
"24.1.3 The sale of all or substantially
all of the Partnership Assets; or"
(g) Clause (i) of the last sentence of Section 24.2 is
amended to read in its entirety as follows:
"(i) is an Affiliate of Tele-
Communications, Inc., a Delaware corporation ("TCI")
or is an Affiliate of Donne F. Fisher,"
(h) Section 25.4 of the Restated Partnership Agreement is
amended by substituting the word "Person" for the word "entity" appearing
therein and by adding at the end of clause (ii) thereof the following:
"or (iii) FCA or an FCA Permitted Transferee."
(i) Subsection 25.5.2 of the Restated Partnership
Agreement is amended to read in its entirety as follows:
"25.5.2 If to ATM or any Limited Partner
other than FCA, to such Person at:
Terrace Tower 11
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: General Counsel"
(j) Section 25.5 of the Restated Partnership Agreement is
further amended by adding a new subsection 25.5.3 which shall read in its
entirety as follows:
5
<PAGE> 26
"25.5.3 If to FCA, to it at:
9513 Pinyon Trail
Littleton, CO 80124"
3. Reaffirmation. The undersigned parties hereby
acknowledge that each of the Restated Partnership Agreement and the Management
Agreement, in each case as amended, modified or supplemented hereby, remains in
full force and effect and is hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned parties have duly executed
and delivered this Consent and First Amendment as of the date first above
written.
GENERAL PARTNERS:
HALCYON COMMUNICATIONS, INC. AMERICAN TELEVENTURE OF
MINERSVILLE, INC.
By: /s/ ROBERT E. PRICE By:
---------------------------- -----------------------------
Name: ROBERT E. PRICE Name:
----------------------- ------------------------
Title: PRESIDENT Title:
---------------------- -----------------------
EXISTING LIMITED PARTNERS:
TCI CABLEVISION OF NEVADA, INC. TCI CABLEVISION OF UTAH, INC.
By: By:
---------------------------- -----------------------------
Name: Name:
----------------------- ------------------------
Title: Title:
---------------------- -----------------------
TEMPO CABLE, INC. NEW LIMITED PARTNER:
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: By: /s/ DONNE F. FISHER
---------------------------- -----------------------------
Name: Donne F. Fisher, Member
----------------------- 2-12-96
Title:
----------------------
6
<PAGE> 1
EXHIBIT 10.60
CONSENT AND FIRST AMENDMENT OF AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP FOR HALCYON COMMUNICATIONS LIMITED PARTNERSHIP
THIS CONSENT AND FIRST AMENDMENT, dated as of January 31,
1996, is made and entered into by and among the undersigned parties.
Halcyon Communications Limited Partnership, an Oklahoma
limited partnership (the "Partnership"), was formed under the Oklahoma Revised
Limited Partnership Act pursuant to a Limited Partnership Agreement dated as of
January 1, 1994 (the "Original Agreement") among Halcyon Communications, Inc.,
an Oklahoma corporation ("HCI"), TCI Cablevision of Nevada, Inc., a Nevada
corporation ("TCINV"), TCI Cablevision of Utah, Inc., a Utah corporation
("TCIU"), TEMPO Cable, Inc., an Oklahoma corporation ("Tempo"), American
Televenture of Minersville, Inc., a Colorado corporation ("ATM"), and pursuant
to a Certificate of Limited Partnership filed with the Oklahoma Secretary of
State on January 6, 1994. The Original Agreement was thereafter amended and
restated by an Amended and Restated Limited Partnership Agreement dated as of
June 22, 1994 (the "Restated Partnership Agreement"), among the parties to the
Original Agreement.
The undersigned parties desire to (i) consent to the
assignment to Fisher Communications Associates, L.L.C., a Colorado limited
liability company, ("FCA") by each of TCINV, TCIU and Tempo of one-third of
their respective limited partnership interests in the Partnership, (ii) consent
to the assignment by ATM to FCA of one-third of ATM's general partnership
interest in the Partnership and the conversion of such assigned interest into a
limited partnership interest, (iii) consent to the grant to FCA by TCINV, TCIU,
Tempo and ATM of options to acquire the entire balances of their respective
partnership interests in the Partnership and any future exercise of such
options and (iv) consent to the admission of FCA to the Partnership as a
limited partner. The undersigned parties also desire to amend the Restated
Partnership Agreement in certain respects.
Therefore, for and in consideration of the premises and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged by each party, the parties hereto agree as follows:
1. Certain Consents and Agreements; Section 754 Election.
(a) HCI, ATM, TCINV, TCIU and Tempo, in their capacities
as, and constituting all of, the partners of the Partnership hereby (i) consent
to (A) the sale to FCA, pursuant to the Agreement of Purchase and Sale of
Partnership Interests, dated as of the date hereof, among the parties hereto
(the "Purchase Agreement"), of the Purchased Interest (as defined in the
Purchase Agreement) of each of ATM, TCINV, TCIU and Tempo, (B) the grant to FCA
by each of ATM, TCINV, TCIU and Tempo of options to acquire the entire balances
of their respective partnership interests in the Partnership pursuant to
separate Option Agreements, each substantially in the form of Exhibit B to the
Purchase Agreement
1
<PAGE> 2
(collectively, the "Option Agreements"), (C) the conversion of the Purchased
Interest of ATM from a general partnership interest into a limited partnership
interest in the Partnership, (D) the admission of FCA, as the holder of the
Purchased Interests of TCINV, TCIU and Tempo and the converted Purchased
Interest of ATM, to the Partnership as a limited partner effective as of the
date hereof and (E) any future exercise by FCA (or any of its permitted
assignees) of its option and rights under each of the Option Agreements
pursuant to the terms thereof and, upon such exercise, the transfer of the
partnership interests and consummation of the other transactions contemplated
thereby (including, without limitation, the withdrawal contemplated by, the
last sentence of paragraph 3(c) of each such Option Agreement); and (ii) agrees
that the Partnership shall file, in a timely manner for the tax year of the
Partnership in which the sale referred to in subclause (i)(A) of this sentence
occurs, an election, pursuant to Section 754 of the Internal Revenue Code of
1986, as amended (the "Code") and applicable Treasury Regulations, to have the
Partnership's assets adjusted as provided in Section 743 of the Code, and if
requested by FCA (or any of its permitted assignees) upon any purchase of any
additional partnership interest or interests in the Partnership in connection
with the exercise of any option under any of the Option Agreements, also shall
make such election in a timely manner for the tax year of the Partnership in
which such exercise occurs. FCA hereby agrees to be admitted to the Partnership
as a Limited Partner and, as such, to be bound by the provisions of the
Restated Partnership Agreement, as amended hereby.
(b) Without in any way limiting the generality of the
definitions of the terms "Partnership Interest" and "Purchased Interest" in the
Purchase Agreement or the definition of "Option Interest" in any of the Option
Agreements, the parties acknowledge, confirm and agree that (i) for purposes of
Section 12.6 of the Restated Partnership Agreement and any other provision of
the Restated Partnership Agreement pursuant to which the rights of a partner of
the Partnership are based upon or determined by reference to such partner's
initial or additional Capital Contributions (as defined in the Restated
Partnership Agreement) as of any time of determination, FCA shall be deemed to
have made (in addition to any Capital Contributions actually made by it) a pro
rata portion of all Capital Contributions made by ATM, TCINV, TCIU or Tempo
prior to the date hereof, with such portion being equal to the aggregate
percentage of the Partnership Interest of ATM, TCINV, TCIU or Tempo (as the
case may be) which FCA shall have acquired, at or before such time, pursuant to
the Purchase Agreement or the applicable Option Agreement; and (ii) as of the
date hereof, automatically by virtue of the sale of the Purchased Interests to
FCA, all rights of ATM under or by virtue of the Amended and Restated
Management Agreement, dated as of June 22, 1994, between the Partnership and
HCI, as "Manager," as heretofore amended (the "Management Agreement") shall be
rights of each of ATM and FCA; provided, however, that in the event of the
removal of Manager pursuant to Section 5.2 by the mutual consent of ATM and
FCA, then, subject to the last sentence of Section 5.2 of the Management
Agreement, ATM shall serve as manager and the Managing Partner of the
Partnership unless ATM and FCA agree to select a new manager or new Managing
Partner.
2. Amendments to Restated Partnership Agreement. The
undersigned parties hereby agree that, effective as of the date hereof, the
Restated Partnership Agreement is
2
<PAGE> 3
hereby amended as follows:
(a) Section 1.3 of the Restated Partnership Agreement is
amended to read in its entirety as follows:
"1.3 TCI Cablevision of Nevada, Inc., a
Nevada corporation, TCI Cablevision of Utah, Inc., a
Utah corporation, TEMPO Cable, Inc., an Oklahoma
corporation, and Fisher Communications Associates,
L.L.C., a Colorado limited liability company, are
sometimes hereinafter referred to as TCI/Nevada,
TCI/Utah, TEMPO and FCA, respectively."
(b) Section 2.3 of the Partnership Agreement is amended
to read in its entirety as follows:
"2.3 'Affiliate,' when used with respect to
a specified Person, means any other Person that
directly, indirectly or through one or more
intermediaries Controls, is Controlled by or is under
Common Control with such Person. For purposes of the
foregoing, 'Control,' as to any Person, means the
possession, directly or indirectly, of the power to
direct or cause the direction of the management and
policies of such Person (whether through ownership of
securities, partnership interests or other ownership
interests, by contract, by partnership or involvement
in the board of directors, management committee or
other management structure of such Person, or
otherwise). The terms 'Controlled,' 'Controlling' and
similar variations shall have correlative meanings."
(c) The defined term "Initial Limited Partners" set forth
in Section 2.18 of the Restated Partnership Agreement is amended to read in its
entirety as follows:
"2.18 'Initial Limited Partners' means
TCI/Nevada, TCI/Utah and TEMPO."
(d) The defined term "Limited Partner" set forth in
Section 2.19 of the Restated Partnership Agreement is amended to read in its
entirety as follows:
"2.19 'Limited Partner' means each Initial
Limited Partner, FCA and each other Person, if any,
who is admitted as a successor or additional limited
partner of the Partnership in accordance with this
Agreement, in each case unless and until such Person
ceases to be a limited partner of the Partnership in
accordance with this Agreement."
(e) Section 21 of the Restated Partnership Agreement is
amended to read in its entirety as follows:
3
<PAGE> 4
"Section 21. Assignability of Partnership Interests;
Admission of Additional Partners.
"21.1 No Partner shall mortgage, pledge,
hypothecate, transfer, sell, assign or otherwise
dispose of all or any part of its interest in the
Partnership, whether voluntarily, by operation of law
or otherwise, orany right, title or interest in or to
such interest without obtaining the prior written
consent of the other Partners, except as provided for
in this Agreement. Notwithstanding the foregoing, ATM
or any Limited Partner shall have the right, in its
sole discretion, to transfer all or any part of its
interest in the Partnership to (i) Tele-
Communications, Inc., a Delaware corporation, or any
Affiliate thereof or (ii) FCA or any FCA Permitted
Transferee (as hereinafter defined). For purposes of
this Agreement, the term 'FCA Permitted Transferee'
shall mean (i) any Affiliate of Donne F. Fisher,
currently a resident of Littleton, Colorado
('Fisher'), (ii) any member of Fisher's immediate
family (i.e., wife, parents, children, including
those adopted before the age of 18, grandchildren,
brothers, sisters, and the spouses or children of the
foregoing), (iii) any custodian under the Uniform
Gifts to Minors Act or similar fiduciary for the
exclusive benefit of Fisher's children during their
lives, (iv) in the event of Fisher's adjudication of
incompetency, his legal representatives, (v) in the
event of Fisher's death, his executors or the
administrators of his estate and his heirs who are
members of his immediate family, and (v) any trust
described in Section 664 of the Code of which Fisher
or one or more members of his immediate family (and
no other persons) are income beneficiaries. Subject
to the last sentence of this Section 21.1, in the
event of a permitted transfer of any interest in the
Partnership, the transferee (other than, with respect
to clauses (1) of this sentence below, a transferee
who was already a partner prior to the permitted
transfer) shall, by written instrument in form and
substance reasonably satisfactory to the
non-transferring Partners (i) agree to become a
Partner of the same class as the transferor and
accept and adopt the terms and provisions of this
Agreement and (ii) assume the obligations of the
transferor Partner under this Agreement with respect
to the transferred partnership interest. If required
by the nontransferring Partners, the transferee shall
deliver to the Partnership an opinion, reasonably
satisfactory in form and substance to the
nontransferring Partners, of counsel reasonably
satisfactory to the nontransferring Partners to the
effect that the transfer is in compliance with
applicable state and Federal securities laws. Upon
completion of any permitted transfer in accordance
with the foregoing, the transferee (if not already a
Partner) shall be admitted as a substituted Partner
in the place and stead of the transferor Partner with
respect to the transferred partnership interest
(subject to the last sentence of this Section 21.1),
without any further action, and if such transfer is
of the
4
<PAGE> 5
entire partnership interest of the transferor
Partner, such transferor Partners shall be deemed to
have withdrawn from the Partnership without further
action. If the partnership interest transferred in a
permitted transfer is a general partnership interest,
the transferred interest shall be converted into a
limited partnership interest if and to the extent
requested by the transferor Partner and the
transferee.
"21.2 Except for the transferee of a
partnership interest permitted by and in accordance
with Section 21.1, no Person shall be admitted as a
general or limited partner of the Partnership without
the prior written consent of all the Partners."
(f) Section 24.1 of the Restated Partnership Agreement is
amended by (i) deleting the word "or" at the end of subsection 24.1.2, (ii)
redesignating subsection 24.1.3 thereof as subsection 24.1.4, and (iii) adding,
immediately after subsection 24.1.2, a new subsection 24.1.3 which shall read
in its entirety as follows:
"24.1.3 The sale of all or substantially all
of the Partnership Assets: or"
(g) Clause (i) of the last sentence of Section 24.2 is
amended to read in its entirety as follows:
"(i) is an Affiliate of Tele-
Communications, Inc., a Delaware corporation ('TCI')
or is an Affiliate of Donne F. Fisher,"
(h) Section 25.4 of the Restated Partnership Agreement is
amended by substituting the word "Person" for the word "entity" appearing
therein and by adding at the end of clause (ii) thereof the following:
"or (iii) FCA or an FCA Permitted Transferee."
(i) Subsection 25.5.2 of the Restated Partnership
Agreement is amended to read in its entirety as follows:
"25.5.2 If to ATM or any Limited Partner
other than FCA, to such Person at:
Terrace Tower II
5619 DTC Parkway
Englewood, CO
80111-3000
Attention: General Counsel"
(j) Section 25.5 of the Restated Partnership Agreement is
further amended by adding a new subsection 25.5.3 which shall read in its
entirety as follows:
5
<PAGE> 6
"25.5.3 If to FCA, to it at:
9513 Pinyon Trail
Littleton, CO 80124"
3. Reaffirmation. The undersigned parties hereby
acknowledge that each of the Restated Partnership Agreement and the Management
Agreement, in each case as amended, modified or supplemented hereby, remains in
full force and effect and is hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned parties have duly executed
and delivered this Consent and First Amendment as of the date first above
written.
GENERAL PARTNERS:
HALCYON COMMUNICATIONS, INC. AMERICAN TELEVENTURE OF
MINERSVILLE, INC.
By: /s/ ROBERT E. PRICE By: /s/ STEPHEN M. BRETT
---------------------------- -----------------------------
Name: ROBERT E. PRICE Name: STEPHEN M. BRETT
----------------------- ------------------------
Title: PRESIDENT Title:
---------------------- -----------------------
EXISTING LIMITED PARTNERS:
TCI CABLEVISION OF NEVADA, INC. TCI CABLEVISION OF UTAH, INC.
By: /s/ STEPHEN M. BRETT By: /s/ STEPHEN M. BRETT
---------------------------- -----------------------------
Name: STEPHEN M. BRETT Name: STEPHEN M. BRETT
----------------------- ------------------------
Title: Title:
---------------------- -----------------------
TEMPO CABLE, INC. NEW LIMITED PARTNER:
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ STEPHEN M. BRETT By: /s/ DONNE F. FISHER
---------------------------- -----------------------------
Name: STEPHEN M. BRETT Donne F. Fisher, Member
----------------------- 2-12-96
Title:
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6
<PAGE> 1
EXHIBIT 10.61
ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made
as of January 31, 1996 between TCI CABLEVISION OF UTAH, INC., a Utah
corporation ("Assignor"), and FISHER COMMUNICATIONS ASSOCIATES, L.L.C., a
Colorado limited liabilty company ("Assignee").
WITNESSETH
WHEREAS, Assignor owns a partnership interest in HALCYON
COMMUNICATIONS LIMITED PARTNERSHIP, an Oklahoma limited partnership (the
"Partnership");
WHEREAS, Assignor, the other partners of the Partnership and
Assignee have entered into an Agreement of Purchase and Sale of Partnership
Interests dated as of the date hereof (the "Purchase Agreement") providing for
the sale by Assignor of a portion of Assignor's partnership interest in the
Partnership (such portion of such interest is defined in the Purchase Agreement
as, and shall be referred to hereinafter as, the Assignor's "Purchased
Interest") and the assumption by Assignee of all liabilities and obligations of
Assignor by virtue thereof, and
WHEREAS, the execution and delivery of this Agreement for the
purpose of effecting such sale and such assumption has been authorized in all
respects as required by law;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the consideration specified in the Purchase
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Transferred Interests. Assignor by this
instrument does convey, sell, transfer, assign and deliver the Assignor's
Purchased Interest to Assignee, without any representation or warranty of any
nature whatsoever, except as may be expressly set forth in the Purchase
Agreement.
2. Assumption of Obligations with Respect to Transferred
Interests. Assignee hereby assumes, and agrees to indemnify Assignor for and
hold Assignor harmless from and against, all liabilities and obligations of any
nature whatsoever existing or arising under the Partnership's limited
partnership agreement or applicable law by virtue of the ownership of the
Assignor's Purchased Interest, whether accrued or unaccrued, known or unknown,
disclosed or undisclosed and whether now existing or hereafter arising.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized signatories in their
respective names, all as of the day and year first above written.
ASSIGNOR:
TCI CABLEVISION OF UTAH, INC.
ATTEST: By: /s/ STEPHEN M. BRETT
------------------------------
/s/ MERLYN J. SCHUMACHER Name: STEPHEN M. BRETT
- ------------------------------ ----------------------------
Title:
---------------------------
ASSIGNEE:
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
ATTEST: By: /s/ DONNE F. FISHER
------------------------------
/s/ SUE L. FISHER Donne F. Fisher, Member
- ------------------------------ 2-12-96
2-12-96
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<PAGE> 1
EXHIBIT 10.62
OPTION AGREEMENT
Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C., a Colorado limited liability company
("Purchaser"), and TCI Cablevision of Utah, Inc., a Utah corporation
("Seller").
Seller is a partner of Halcyon Communications Limited Partnership, a
limited partnership organized and existing under the laws of the State of
Oklahoma (the "Partnership"). Pursuant to a certain Agreement of Purchase and
Sale of Partnership Interests, dated as of the date hereof, among Seller, the
other partners of the Partnership and Purchaser (as the same may be amended
from time to time in accordance with its terms, the "Purchase Agreement"), on
the date hereof Purchaser is purchasing from Seller and certain other partners
of the Partnership a portion of their respective partnership interests in the
Partnership. Purchaser desires to acquire from Seller an option to purchase the
balance of the partnership interest in the Partnership that Seller will
continue to own immediately after giving effect to such purchases, and Seller
has agreed to grant such an option to Purchaser on the terms and subject to the
conditions set forth herein.
Therefore, in consideration of the payment of $100 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. Seller hereby grants to Purchaser an
irrevocable option (the "Option") to purchase all, but not less than all of the
Option Interest (as hereinafter defined). The exercise price of the Option (the
"Exercise Price") shall be an amount in cash equal to $351,180, without
interest. The Exercise Price will be payable by Purchaser at the Closing (as
hereinafter defined) by wire transfer or by certified or bank check in
immediately available funds.
2. Exercise Period; Exercise of the Option.
(a) The Option may be exercised, in whole but not in part, at any
time during the period (the "Exercise Period") commencing on the date hereof
and ending at 12:01 A.M., Denver, Colorado time, on the tenth anniversary of
the date hereof (the "Scheduled Expiration Date").
(b) Purchaser may exercise the Option by delivering written notice
thereof (an "Exercise Notice") to Seller at any time prior to the expiration of
the Exercise Period. Subject to paragraph 3 hereof, and unless the parties
otherwise agree, the closing of the sale of the Option Interest (the
"Closing") shall occur on the tenth Business Day (as hereinafter defined)
following delivery of the Exercise Notice. The date the Closing occurs is
<PAGE> 2
hereinafter referred to as the "Closing Date". At the Closing, Seller shall,
against receipt of the Exercise Price as provided in paragraph 1 hereof, convey
and deliver the Option Interest to Purchaser by the delivery to Purchaser by
such Seller of a duly completed and executed instrument of assignment
reasonably satisfactory to both parties and such other documents or instruments
which may be necessary, or which Purchaser may reasonably request, in order to
effectively vest in Purchaser beneficial ownership of the Option Interest.
(c) Prior to the sale of the Option Interest to Purchaser pursuant
to this Agreement, Seller shall, subject only to the express provisions of
paragraph 5(a) of this Agreement, retain all rights as the holder of the Option
Interest, including all voting and consent rights as a partner of the
Partnership, and may exercise or refrain from exercising such rights as Seller
may determine in its sole discretion, even if the result is a diminution in the
value of the Option Interest and this Option to Purchaser.
3. Conditions to Closing. The Closing of the purchase of the
Option Interest pursuant to the exercise of the Option shall be subject to the
satisfaction of all of the following conditions:
(a) Each of the representations of Purchaser made in this
Agreement, in the Purchase Agreement and in each Related Instrument
(as defined in the Purchase Agreement) shall be true and correct in
all material respects at and as of the time of the Closing and
Purchaser shall have performed in all material respects each and every
covenant of Purchaser contained in this Agreement, in the Purchase
Agreement and in each Related Instrument required to be performed by
the time of or at the Closing. If requested by Seller, Purchaser shall
execute a certificate by which Purchaser confirms the satisfaction of
the foregoing condition.
(b) No order, preliminary or permanent injunction,
temporary restraining order, stay, judgment, decree or other order of
any court or governmental or regulatory body preventing the sale of
the Option Interest by the Seller or the consummation of the other
transactions contemplated hereby.
(c) All consents, orders and approvals of any
governmental authority, any partner or partners of the Partnership and
of any other third party that either Purchaser or Seller reasonably
deems necessary or advisable shall have been obtained and shall be in
full force and effect and any waiting period under applicable law
shall have expired. Without limiting the generality of the foregoing,
all such consents and approvals necessary to permit the withdrawal of
Seller from the Partnership without further obligation or liability as
a partner thereof shall have been obtained and shall be in full force
and effect.
(d) Purchaser shall, by written instrument in form and
substance reasonably satisfactory to Seller, assume and agree to
indemnify Seller for all obligations and
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<PAGE> 3
liabilities of Seller under the Partnership Agreement with respect to
the Option Interest of every kind or nature, whether accrued or
unaccrued, asserted or unasserted, known or unknown, disclosed or
undisclosed, absolute or contingent, arising by law, contract or
otherwise and including any liability or obligation arising out of any
event, fact or circumstance existing or occurring as of or prior to
the date hereof that, with the passage of time or the giving of
notice, or otherwise, which constitutes a breach or violation of or
default under any contract or law binding upon or applicable to the
Partnership.
(e) If required by Seller, Purchaser will be obligated to
buy from Seller at the Closing, all evidences of indebtedness of the
Partnership held directly or indirectly by Seller or any subsidiary of
Seller, and the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time of the
Closing plus accrued and unpaid interest thereon which, unless
otherwise agreed by Seller and Purchaser, shall be paid in cash.
(f) Purchaser and Seller shall each execute and deliver
such other instruments as either party or the Partnership reasonably
deems necessary or appropriate to effect, and as a condition to, the
exercise of the Option, including amendments to the Partnership
Agreement or any other instrument filed with any governmental agency
or official.
(g) Purchaser shall have exercised all options to acquire
partnership interests in the Partnership granted by other partners of
the Partnership pursuant to the Purchase Agreement simultaneously with
the exercise of this Option, and the closings of the sale of all such
partnership interests pursuant to the exercise of all such other
options shall occur simultaneously with the Closing under this Option
Agreement.
(h) Purchaser shall have exercised all options to acquire
partnership interests in Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), granted to Purchaser by partners of HCP
who are affiliates of Seller simultaneously with the exercise of this
Option, and the closings of the sale of all such partnership interests
pursuant to the exercise of all such other options shall occur
simultaneously with the Closing under this Option Agreement.
(i) If the exercise of the Option requires any consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality or the expiration
of any waiting period imposed by applicable law, then the date fixed
for the Closing pursuant to paragraph 2(b) hereof shall be extended
for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization and the termination of
each such waiting period at the earliest reasonably practicable time
are diligently being made; provided, however, that, unless Seller and
Purchaser otherwise agree, the extension of such Closing date pursuant
to this paragraph may not exceed 180 days. Seller and
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<PAGE> 4
Purchaser will, and will use their commercially reasonable efforts to
cause the Partnership to, reasonably cooperate with each other in
obtaining any such consent, approval, waiver, or authorization and in
obtaining the termination of any such waiting period at the earliest
practicable time.
(j) If, in the opinion of legal counsel to Purchaser, the
immediate proposed transfer of the entire Option Interest would result
in the termination of the Partnership within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended (or any successor
provision of law), but an immediate transfer of less than all of the
Option Interest would not have such a result, Purchaser shall be
entitled to elect, in its sole discretion, to either (i) exercise the
Option in full notwithstanding such termination or (ii) to (A) require
Seller to immediately transfer only that portion of the Option
Interest as may, in the opinion of such counsel, be transferred
without causing such a result and (B) extend the Exercise Period of
the Option with respect to the balance of the Option Interest until
the later of the Scheduled Expiration Date or the last day of the
period of thirteen months after the date of the closing of the
transfer referred to in subclause (ii)(A) of this sentence, in which
event, unless otherwise agreed by Seller and Purchaser, the Exercise
Price shall be allocated proportionately between the portion of the
Option Interest immediately transferred and the remainder of the
Option Interest as to which the Exercise Period of the Option shall
have been so extended.
4. Distributions After Exercise. Distributions declared or made
on or prior to the effective date of the exercise of the Option with respect to
the Option Interest shall be made to Seller, regardless of when such
distributions accrued on the books of the Partnership or the date fixed for
payment thereof.
5. Certain Covenants of Seller. Seller hereby covenants and agrees
with Purchaser as follows:
(a) During the Exercise Period, Seller shall not sell or
otherwise transfer or dispose of the Option Interest or any part
thereof or interest therein, other than a sale or transfer as to which
Seller gives Purchaser at least 14 days prior written notice and in
which the transferee agrees, pursuant to an instrument in form and
substance reasonably satisfactory to Purchaser, to be bound by the
terms of this Option Agreement with respect to such transferred
interest to the same extent as the transferor was so bound with
respect to such transferred interest.
(b) Upon the Closing, Seller shall convey to Purchaser
legal title to, and beneficial ownership of, the Option Interest, free
and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance and free of any restriction on transfer voluntarily
created by Seller, other than as expressly set forth in the
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<PAGE> 5
Partnership Agreement or existing or arising under applicable law and
other than the possible lien of taxes not yet due and payable and
minor imperfections in title and encumbrances and other minor matters,
if any, which singly or in the aggregate are not substantial in an
amount, do not materially detract from the value of the Option
Interest.
6. Binding Effect; Assignment. Subject to the following provision
of this paragraph 6, this Option Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors, heirs, legal
representatives and permitted assignees. Except as otherwise expressly
provided herein, this Option Agreement shall not be assigned by either party
hereto without the prior written consent of the other party. Purchaser may
assign this Option Agreement, in whole or in part, to any FCA Permitted
Transferee (as defined in the Partnership Agreement).
7. Notices. All notices and other communications required or
permitted by this Agreement shall be in writing and addressed to the intended
recipient at such person's address specified under its or his signature below
or at such other address as such person may designate in a written notice to
the other party hereto. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this paragraph 7 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given , unless
earlier received; (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business
Day after being entrusted to such service, with delivery charges prepaid or
charged to the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
8. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Agreement" or "Option Agreement" means this Option Agreement,
as the same may be amended from time to time in accordance with its terms.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of Colorado.
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<PAGE> 6
"Option Interest" means the entire partnership interest of
Seller as a partner of the Partnership, including such partner's (i) right to a
share of the income, gain, losses and deductions of and distributions by the
Partnership, (ii) right to a share of Partnership assets, (iii) rights with
respect to initial and additional capital contributions made to the Partnership
by such partner, including such partner's rights with respect to allocations of
income, gain losses and deductions of and distributions made by the Partnership
which are based upon or determined by reference to such capital contributions,
(iv) rights with respect to the management of the business and affairs of the
Partnership, (v) voting, consent and approval rights, (vi) rights to unpaid
interest under Section 12.6 of the Partnership Agreement, whether accrued as of
or accruing on or after the date hereof, (vii) rights with respect to such
partner's Capital Account (as deemed in the Partnership Agreement), (viii)
rights, if any, under Sections 16, 17 and 18 of the Partnership Agreement, (ix)
any and all other rights, interests and benefits to which such partner is or
may become entitled by reason of its status as a partner of the Partnership,
and (x) all liabilities and obligations of such partner by reason of its status
as a partner of the Partnership, in each case as provided in the Partnership
Agreement or the partnership laws of the state of the Partnership's
organization.
"Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement, dated as of June 22, 1994, of the Partnership, as the
same heretofore may have been or hereafter may be amended or modified in
accordance with its terms.
9. Terms Generally, Certain Rules of Construction. The
definitions in paragraph 8 and elsewhere in this Option Agreement shall apply
equally to both the singular and plural forms of the terms deemed. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Option Agreement in its entirety and not to any part hereof unless the context
shall otherwise require. All references herein to paragraphs shall be deemed
references to paragraphs of this Option Agreement unless the context shall
otherwise require. Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of Colorado without
regard to principles of conflict of laws, except to the extent that the laws of
the jurisdiction of organization of the Partnership shall be mandatorily
applicable.
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11. Headings. The headings contained in this Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
12. Waivers; Amendment. Any term or provision of this Option
Agreement may be waived at any time by an instrument in writing signed by the
party which is entitled to the benefit thereof. This Option Agreement may be
amended or supplemented at any time only by an instrument in writing signed by
the parties hereto.
13. Counterparts. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Expenses. Each party hereto will pay its own expenses in
connection with the negotiation and execution of this Option Agreement and the
consummation of the transactions contemplated hereby, including all fees and
disbursements of its legal counsel.
15. Further Actions After the Closing. If, subsequent to the
Closing, further documents are reasonably requested in order to carry out the
provisions and purposes of this Option Agreement, the parties hereto shall
execute and deliver such further documents.
16. Severability. In the event that any part or parts of this
Option Agreement shall be held to be unenforceable to its or their full extent,
then it is the intention of the parties hereto that such part or parts shall be
enforced to the full extent permitted under the laws, and in any event, that
all other parts of this Option Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had never been a part hereof.
17. Entire Agreement. The provisions of this Agreement, the
Purchase Agreement and the Related Instruments collectively set forth the
entire agreement and understanding between the parties hereto as to the subject
matter hereof and thereof and merge and supersede all prior discussions,
agreements and understandings, oral or written, of any and every nature between
them with respect to such subject matter. Except as and to the extent set forth
in this Agreement, the Purchase Agreement or a Related Instrument, neither
party makes any representation, warranty, covenant or agreement whatsoever and
each party disclaims all liability and responsibility for any representation,
warranty, covenant, agreement or statement made or information communicated
(orally or in writing) by any other Person. Purchaser expressly agrees and
acknowledges that, in purchasing this Option
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<PAGE> 8
and making decisions regarding whether or not to exercise this Option,
Purchaser (i) is not and will not be relying on the representations and
warranties of Seller or any other Person, (ii) has made and will make its own
inquiry and investigation into, and based thereon, has formed an independent
judgment concerning, the Partnership and the business conducted by it, (iii)
has been furnished or given adequate access to such information as it has
requested concerning the Partnership and the business conducted by it and (iv)
will not assert any claim against Seller or any of its affiliates, directors,
officers, employees, agents, stockholders, advisors, counsel or
representatives, nor will seek to hold any of such other Persons liable for any
inaccuracies, misstatements or omissions with respect to information concerning
the Partnership and the business conducted by it, provided that the foregoing
shall not in any manner be construed or deemed to limit the ability of
Purchaser to make any claim it may otherwise have arising out of the breach of
any express representation or warranty of Seller contained in this Agreement,
the Purchase Agreement or any Related Instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
TCI CABLEVISION OF UTAH, INC.
By: /s/ STEPHEN M. BRETT
------------------------------
Name: STEPHEN M. BRETT
Title:
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: General Counsel
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER
------------------------------
Donne F. Fisher, Member
9513 Pinyon Trail
Littleton, Colorado 80124
2-12-96
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<PAGE> 1
EXHIBIT 10.63
ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made
as of January 31, 1996 between TCI CABLEVISION OF NEVADA, INC., a Nevada
corporation ("Assignor"), and FISHER COMMUNICATIONS ASSOCIATES, L.L.C., a
Colorado limited liability company ("Assignee").
WITNESSETH
WHEREAS, Assignor owns a partnership interest in HALCYON
COMMUNICATIONS LIMITED PARTNERSHIP, an Oklahoma limited partnership (the
"Partnership");
WHEREAS, Assignor, the other partners of the Partnership and
Assignee have entered into an Agreement of Purchase and Sale of Partnership
Interests dated as of the date hereof (the "Purchase Agreement") providing for
the sale by Assignor of a portion of Assignor's partnership interest in the
Partnership (such portion of such interest is defined in the Purchase Agreement
as, and shall be referred to hereinafter as, the Assignor's "Purchased
Interest") and the assumption by Assignee of all liabilities and obligations of
Assignor by virtue thereof; and
WHEREAS, the execution and delivery of this Agreement for the
purpose of effecting such sale and such assumption has been authorized in all
respects as required by law;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the consideration specified in the Purchase
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Transferred Interests. Assignor by this
instrument does convey, sell, transfer, assign and deliver the Assignor's
Purchased Interest to Assignee, without any representation or warranty of any
nature whatsoever, except as may be expressly set forth in the Purchase
Agreement.
2. Assumption of Obligations with Respect to Transferred
Interests. Assignee hereby assumes, and agrees to indemnify Assignor for and
hold Assignor harmless from and against, all liabilities and obligations of any
nature whatsoever existing or arising under the Partnership's limited
partnership agreement or applicable law by virtue of the ownership of the
Assignor's Purchased Interest, whether accrued or unaccrued, known or unknown,
disclosed or undisclosed and whether now existing or hereafter arising.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized signatories in their
respective names, all as of the day and year first above written.
ASSIGNOR:
TCI CABLEVISION OF NEVADA, INC.
ATTEST: By: /s/ STEPHEN M. BRETT
------------------------------
Name: STEPHEN M. BRETT
- ------------------------------ ----------------------------
Title:
---------------------------
ASSIGNEE:
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
ATTEST: By: /s/ DONNE F. FISHER
/s/ SUE L. FISHER ------------------------------
- ------------------------------ Donne F. Fisher, Member
2-12-96 2-12-96
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<PAGE> 1
EXHIBIT 10.64
OPTION AGREEMENT
Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C., a Colorado limited liability company
("Purchaser"), and TCI Cablevision of Nevada, Inc., a Nevada corporation
("Seller").
Seller is a partner of Halcyon Communications Limited Partnership, a
limited partnership organized and existing under the laws of the State of
Oklahoma (the "Partnership"). Pursuant to a certain Agreement of Purchase and
Sale of Partnership Interests, dated as of the date hereof, among Seller, the
other partners of the Partnership and Purchaser (as the same may be amended
from time to time in accordance with its terms, the "Purchase Agreement"), on
the date hereof Purchaser is purchasing from Seller and certain other partners
of the Partnership a portion of their respective partnership interests in the
Partnership. Purchaser desires to acquire from Seller an option to purchase the
balance of the partnership interest in the Partnership that Seller will
continue to own immediately after giving effect to such purchases, and Seller
has agreed to grant such an option to Purchaser on the terms and subject to the
conditions set forth herein.
Therefore, in consideration of the payment of $100 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. Seller hereby grants to Purchaser an
irrevocable option (the "Option") to purchase all, but not less than all of the
Option Interest (as hereinafter defined). The exercise price of the Option (the
"Exercise Price") shall be an amount in cash equal to $233,100, without
interest. The Exercise Price will be payable by Purchaser at the Closing (as
hereinafter defined) by wire transfer or by certified or bank check in
immediately available funds.
2. Exercise Period; Exercise of the Option.
(a) The Option may be exercised, in whole but not in part, at any
time during the period (the "Exercise Period") commencing on the date hereof
and ending at 12:01 A.M., Denver, Colorado time, on the tenth anniversary of
the date hereof (the "Scheduled Expiration Date").
(b) Purchaser may exercise the Option by delivering written notice
thereof (an "Exercise Notice") to Seller at any time prior to the expiration of
the Exercise Period. Subject to paragraph 3 hereof, and unless the parties
otherwise agree, the closing of the sale of the Option Interest (the
"Closing") shall occur on the tenth Business Day (as hereinafter defined)
following delivery of the Exercise Notice. The date the Closing occurs is
<PAGE> 2
hereinafter referred to as the "Closing Date". At the Closing, Seller shall,
against receipt of the Exercise Price as provided in paragraph 1 hereof, convey
and deliver the Option Interest to Purchaser by the delivery to Purchaser by
such Seller of a duly completed and executed instrument of assignment
reasonably satisfactory to both parties and such other documents or instruments
which may be necessary, or which Purchaser may reasonably request, in order to
effectively vest in Purchaser beneficial ownership of the Option Interest.
(c) Prior to the sale of the Option Interest to Purchaser pursuant
to this Agreement, Seller shall, subject only to the express provisions of
paragraph 5(a) of this Agreement, retain all rights as the holder of the Option
Interest, including all voting and consent rights as a partner of the
Partnership, and may exercise or refrain from exercising such rights as Seller
may determine in its sole discretion, even if the result is a diminution in the
value of the Option Interest and this Option to Purchaser.
3. Conditions to Closing. The Closing of the purchase of the
Option Interest pursuant to the exercise of the Option shall be subject to the
satisfaction of all of the following conditions:
(a) Each of the representations of Purchaser made in this
Agreement, in the Purchase Agreement and in each Related Instrument
(as deemed in the Purchase Agreement) shall be true and correct in all
material respects at and as of the time of the Closing and Purchaser
shall have performed in all material respects each and every covenant
of Purchaser contained in this Agreement, in the Purchase Agreement
and in each Related Instrument required to be performed by the time of
or at the Closing. If requested by Seller, Purchaser shall execute a
certificate by which Purchaser confirms the satisfaction of the
foregoing condition.
(b) No order, preliminary or permanent injunction,
temporary restraining order, stay, judgment, decree or other order of
any court or governmental or regulatory body preventing the sale of
the Option Interest by the Seller or the consummation of the other
transactions contemplated hereby.
(c) All consents, orders and approvals of any
governmental authority, any partner or partners of the Partnership and
of any other third party that either Purchaser or Seller reasonably
deems necessary or advisable shall have been obtained and shall be in
full force and effect and any waiting period under applicable law
shall have expired. Without limiting the generality of the foregoing,
all such consents and approvals necessary to permit the withdrawal of
Seller from the Partnership without further obligation or liability as
a partner thereof shall have been obtained and shall be in full force
and effect.
(d) Purchaser shall, by written instrument in form and
substance reasonably satisfactory to Seller, assume and agree to
indemnify Seller for all obligations and
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<PAGE> 3
liabilities of Seller under the Partnership Agreement with respect to
the Option Interest of every kind or nature, whether accrued or
unaccrued, asserted or unasserted, known or unknown, disclosed or
undisclosed, absolute or contingent, arising by law, contract or
otherwise and including any liability or obligation arising out of any
event, fact or circumstance existing or occurring as of or prior to
the date hereof that, with the passage of time or the giving of
notice, or otherwise, which constitutes a breach or violation of or
default under any contract or law binding upon or applicable to the
Partnership.
(e) If required by Seller, Purchaser will be obligated to
buy from Seller at the Closing, all evidences of indebtedness of the
Partnership held directly or indirectly by Seller or any subsidiary of
Seller, and the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time of the
Closing plus accrued and unpaid interest thereon which, unless
otherwise agreed by Seller and Purchaser, shall be paid in cash.
(f) Purchaser and Seller shall each execute and deliver
such other instruments as either party or the Partnership reasonably
deems necessary or appropriate to effect, and as a condition to, the
exercise of the Option, including amendments to the Partnership
Agreement or any other instrument filed with any governmental agency
or official.
(g) Purchaser shall have exercised all options to acquire
partnership interests in the Partnership granted by other partners of
the Partnership pursuant to the Purchase Agreement simultaneously with
the exercise of this Option, and the closings of the sale of all such
partnership interests pursuant to the exercise of all such other
options shall occur simultaneously with the Closing under this Option
Agreement.
(h) Purchaser shall have exercised all options to acquire
partnership interests in Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), granted to Purchaser by partners of HCP
who are affiliates of Seller simultaneously with the exercise of this
Option, and the closings of the sale of all such partnership interests
pursuant to the exercise of all such other options shall occur
simultaneously with the Closing under this Option Agreement.
(i) If the exercise of the Option requires any consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality or the expiration
of any waiting period imposed by applicable law, then the date fixed
for the Closing pursuant to paragraph 2(b) hereof shall be extended
for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization and the termination of
each such waiting period at the earliest reasonably practicable time
are diligently being made; provided however, that, unless Seller and
Purchaser otherwise agree, the extension of such Closing date pursuant
to this paragraph may not exceed 180 days. Seller and
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<PAGE> 4
Purchaser will, and will use their commercially reasonable efforts to
cause the Partnership to, reasonably cooperate with each other in
obtaining any such consent, approval, waiver, or authorization and in
obtaining the termination of any such waiting period at the earliest
practicable time.
(j) If, in the opinion of legal counsel to Purchaser, the
immediate proposed transfer of the entire Option Interest would result
in the termination of the Partnership within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended (or any successor
provision of law), but an immediate transfer of less than all of the
Option Interest would not have such a result, Purchaser shall be
entitled to elect, in its sole discretion, to either (i) exercise the
Option in full notwithstanding such termination or (ii) to (A) require
Seller to immediately transfer only that portion of the Option
Interest as may, in the opinion of such counsel, be transferred
without causing such a result and (B) extend the Exercise Period of
the Option with respect to the balance of the Option Interest until
the later of the Scheduled Expiration Date or the last day of the
period of thirteen months after the date of the closing of the
transfer referred to in subclause (ii)(A) of this sentence, in which
event, unless otherwise agreed by Seller and Purchaser, the Exercise
Price shall be allocated proportionately between the portion of the
Option Interest immediately transferred and the remainder of the
Option Interest as to which the Exercise Period of the Option shall
have been so extended.
4. Distributions After Exercise. Distributions declared or made
on or prior to the effective date of the exercise of the Option with respect to
the Option Interest shall be made to Seller, regardless of when such
distributions accrued on the books of the Partnership or the date fixed for
payment thereof.
5. Certain Covenants of Seller. Seller hereby covenants and
agrees with Purchaser as follows:
(a) During the Exercise Period, Seller shall not sell or
otherwise transfer or dispose of the Option Interest or any part
thereof or interest therein, other than a sale or transfer as to which
Seller gives Purchaser at least 14 days prior written notice and in
which the transferee agrees, pursuant to an instrument in form and
substance reasonably satisfactory to Purchaser, to be bound by the
terms of this Option Agreement with respect to such transferred
interest to the same extent as the transferor was so bound with
respect to such transferred interest.
(b) Upon the Closing, Seller shall convey to Purchaser
legal title to, and beneficial ownership of, the Option Interest, free
and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance and free of any restriction on transfer voluntarily
created by Seller, other than as expressly set forth in the
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<PAGE> 5
Partnership Agreement or existing or arising under applicable law and
other than the possible lien of taxes not yet due and payable and
minor imperfections in title and encumbrances and other minor matters,
if any, which singly or in the aggregate are not substantial in an
amount, do not materially detract from the value of the Option
Interest.
6. Binding Effect; Assignment. Subject to the following provision
of this paragraph 6, this Option Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors, heirs, legal
representatives and permitted assignees. Except as otherwise expressly provided
herein, this Option Agreement shall not be assigned by either party hereto
without the prior written consent of the other party. Purchaser may assign this
Option Agreement, in whole or in part, to any FCA Permitted Transferee (as
defined in the Partnership Agreement).
7. Notices. All notices and other communications required or
permitted by this Agreement shall be in writing and addressed to the intended
recipient at such person's address specified under its or his signature below
or at such other address as such person may designate in a written notice to
the other party hereto. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this paragraph 7 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received; (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business
Day after being entrusted to such service, with delivery charges prepaid or
charged to the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
8. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Agreement" or "Option Agreement" means this Option Agreement,
as the same may be amended from time to time in accordance with its terms.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of Colorado.
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<PAGE> 6
"Option Interest" means the entire partnership interest of
Seller as a partner of the Partnership, including such partner's (i) right to a
share of the income, gain, losses and deductions of and distributions by the
Partnership, (ii) right to a share of Partnership assets, (iii) rights with
respect to initial and additional capital contributions made to the Partnership
by such partner, including such partner's rights with respect to allocations of
income, gain losses and deductions of and distributions made by the Partnership
which are based upon or determined by reference to such capital contributions,
(iv) rights with respect to the management of the business and affairs of the
Partnership, (v) voting, consent and approval rights, (vi) rights to unpaid
interest under Section 12.6 of the Partnership Agreement, whether accrued as of
or accruing on or after the date hereof, (vii) rights with respect to such
partner's Capital Account (as defined in the Partnership Agreement), (viii)
rights, if any, under Sections 16, 17 and 18 of the Partnership Agreement, (ix)
any and all other rights, interests and benefits to which such partner is or
may become entitled by reason of its status as a partner of the Partnership,
and (x) all liabilities and obligations of such partner by reason of its status
as a partner of the Partnership, in each case as provided in the Partnership
Agreement or the partnership laws of the state of the Partnership's
organization.
"Partnership Agreement" means the Amended and Restated
Limited Partnership Agreement, dated as of June 22, 1994, of the Partnership,
as the same heretofore may have been or hereafter may be amended or modified in
accordance with its terms.
9. Terms Generally; Certain Rules of Construction. The
definitions in paragraph 8 and elsewhere in this Option Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Option Agreement in its entirety and not to any part hereof unless the context
shall otherwise require. All references herein to paragraphs shall be deemed
references to paragraphs of this Option Agreement unless the context shall
otherwise require. Any reference in this Agreement to a "day" or number of
"days"(without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of Colorado without
regard to principles of conflict of laws, except to the extent that the laws of
the jurisdiction of organization of the Partnership shall be mandatorily
applicable.
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<PAGE> 7
11. Headings. The headings contained in this Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
12. Waivers; Amendment. Any term or provision of this Option
Agreement may be waived at any time by an instrument in writing signed by the
party which is entitled to the benefit thereof. This Option Agreement may be
amended or supplemented at any time only by an instrument in writing signed by
the parties hereto.
13. Counterparts. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Expenses. Each party hereto will pay its own expenses in
connection with the negotiation and execution of this Option Agreement and the
consummation of the transactions contemplated hereby, including all fees and
disbursements of its legal counsel.
15. Further Actions After the Closing. If, subsequent to the
Closing, further documents are reasonably requested in order to carry out the
provisions and purposes of this Option Agreement, the parties hereto shall
execute and deliver such further documents.
16. Severability. In the event that any part or parts of this
Option Agreement shall be held to be unenforceable to its or their full extent,
then it is the intention of the parties hereto that such part or parts shall be
enforced to the full extent permitted under the laws, and in any event, that
all other parts of this Option Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had never been a part hereof.
17. Entire Agreement. The provisions of this Agreement, the
Purchase Agreement and the Related Instruments collectively set forth the
entire agreement and understanding between the parties hereto as to the subject
matter hereof and thereof and merge and supersede all prior discussions,
agreements and understandings, oral or written, of any and every nature between
them with respect to such subject matter. Except as and to the extent set forth
in this Agreement, the Purchase Agreement or a Related Instrument, neither
party makes any representation, warranty, covenant or agreement whatsoever and
each party disclaims all liability and responsibility for any representation,
warranty, covenant, agreement or statement made or information communicated
(orally or in writing) by any other Person. Purchaser expressly agrees and
acknowledges that, in purchasing this Option
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<PAGE> 8
and making decisions regarding whether or not to exercise this Option,
Purchaser (i) is not and will not be relying on the representations and
warranties of Seller or any other Person, (ii) has made and will make its own
inquiry and investigation into, and based thereon, has formed an independent
judgment concerning, the Partnership and the business conducted by it, (iii)
has been furnished or given adequate access to such information as it has
requested concerning the Partnership and the business conducted by it and (iv)
will not assert any claim against Seller or any of its affiliates, directors,
officers, employees, agents, stockholders, advisors, counsel or
representatives, nor will seek to hold any of such other Persons liable for any
inaccuracies, misstatements or omissions with respect to information concerning
the Partnership and the business conducted by it, provided that the foregoing
shall not in any manner be construed or deemed to limit the ability of
Purchaser to make any claim it may otherwise have arising out of the breach of
any express representation or warranty of Seller contained in this Agreement,
the Purchase Agreement or any Related Instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
TCI CABLEVISION OF NEVADA, INC.
By: /s/ STEPHEN M. BRETT
------------------------------
Name: STEPHEN M. BRETT
Title:
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: General Counsel
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER
------------------------------
Donne F. Fisher, Member
9513 Pinyon Trail
Littleton, Colorado 80124
2-12-96
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<PAGE> 1
EXHIBIT 10.65
ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made
as of January 31, 1996 between AMERICAN TELEVENTURE OF MINERSVILLE, INC., a
Colorado corporation ("Assignor") and FISHER COMMUNICATIONS ASSOCIATES, L.L.C.,
a Colorado limited liability company ("Assignee").
WITNESSETH
WHEREAS, Assignor owns a partnership interest in HALCYON
COMMUNICATIONS LIMITED PARTNERSHIP, an Oklahoma limited partnership (the
"Partnership");
WHEREAS, Assignor, the other partners of the Partnership and
Assignee have entered into an Agreement of Purchase and Sale of Partnership
Interests dated as of the date hereof (the "Purchase Agreement") providing for
the sale by Assignor of a portion of Assignor's partnership interest in the
Partnership (such portion of such interest is defined in the Purchase Agreement
as, and shall be referred to hereinafter as, the Assignor's "Purchased
Interest") and the assumption by Assignee of all liabilities and obligations of
Assignor by virtue thereof; and
WHEREAS, the execution and delivery of this Agreement for the
purpose of effecting such sale and such assumption has been authorized in all
respects as required by law;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the consideration specified in the Purchase
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Transferred Interests. Assignor by this
instrument does convey, sell, transfer, assign and deliver the Assignor's
Purchased Interest to Assignee, without any representation or warranty of any
nature whatsoever, except as may be expressly set forth in the Purchase
Agreement.
2. Assumption of Obligations with Resect to Transferred
Interests. Assignee hereby assumes, and agrees to indemnify Assignor for and
hold Assignor harmless from and against, all liabilities and obligations of any
nature whatsoever existing or arising under the Partnership's limited
partnership agreement or applicable law by virtue of the ownership of the
Assignor's Purchased Interest, whether accrued or unaccrued, known or unknown,
disclosed or undisclosed and whether now existing or hereafter arising.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized signatories in their
respective names, all as of the day and year first above written.
ASSIGNOR:
AMERICAN TELEVENTURE OF
MINERSVILLE, INC.
ATTEST: By: /s/ STEPHEN M. BRETT
------------------------------
Name: STEPHEN M. BRETT
- ------------------------------ ----------------------------
Title:
---------------------------
ASSIGNEE:
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
ATTEST By: /s/ DONNE F. FISHER
/s/ SUE L. FISHER ------------------------------
- ------------------------------ Donne F. Fisher, Member
2-12-96 2-12-96
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<PAGE> 1
EXHIBIT 10.66
OPTION AGREEMENT
Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C., a Colorado limited liability company
("Purchaser"), and American Televenture of Minersville, Inc., a Colorado
corporation ("Seller").
Seller is a partner of Halcyon Communications Limited Partnership, a
limited partnership organized and existing under the laws of the State of
Oklahoma (the "Partnership"). Pursuant to a certain Agreement of Purchase and
Sale of Partnership Interests, dated as of the date hereof, among Seller, the
other partners of the Partnership and Purchaser (as the same may be amended
from time to time in accordance with its terms, the "Purchase Agreement"), on
the date hereof Purchaser is purchasing from Seller and certain other partners
of the Partnership a portion of their respective partnership interests in the
Partnership. Purchaser desires to acquire from Seller an option to purchase the
balance of the partnership interest in the Partnership that Seller will
continue to own immediately after giving effect to such purchases, and Seller
has agreed to grant such an option to Purchaser on the terms and subject to the
conditions set forth herein.
Therefore, in consideration of the payment of $100 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. Seller hereby grants to Purchaser an
irrevocable option (the "Option") to purchase all, but not less than all of
the Option Interest (as hereinafter defined"). The exercise price of the
Option (the "Exercise Price") shall be an amount in cash equal to $42,120,
without interest. The Exercise Price will be payable by Purchaser at the
Closing (as hereinafter defined) by wire transfer or by certified or bank
check in immediately available funds.
2. Exercise Period; Exercise of the Option.
(a) The Option may be exercised, in whole but not in part, at any
time during the period (the "Exercise Period") commencing on the date hereof
and ending at 12:01 A.M., Denver, Colorado time, on the tenth anniversary of
the date hereof (the "Scheduled Expiration Date").
(b) Purchaser may exercise the Option by delivering written notice
thereof (an "Exercise Notice") to Seller at any time prior to the expiration of
the Exercise Period. Subject to paragraph 3 hereof, and unless the parties
otherwise agree, the closing of the sale of the Option Interest (the
"Closing") shall occur on the tenth Business Day (as hereinafter defined)
following delivery of the Exercise Notice. The date the Closing occurs is
<PAGE> 2
hereinafter referred to as the "Closing Date". At the Closing, Seller shall,
against receipt of the Exercise Price as provided in paragraph 1 hereof, convey
and deliver the Option Interest to Purchaser by the delivery to Purchaser by
such Seller of a duly completed and executed instrument of assignment
reasonably satisfactory to both parties and such other documents or instruments
which may be necessary, or which Purchaser may reasonably request, in order to
effectively vest in Purchaser beneficial ownership of the Option Interest.
(c) Prior to the sale of the Option Interest to Purchaser pursuant
to this Agreement, Seller shall, subject only to the express provisions of
paragraph 5(a) of this Agreement, retain all rights as the holder of the Option
Interest, including all voting and consent rights as a partner of the
Partnership, and may exercise or refrain from exercising such rights as Seller
may determine in its sole discretion, even if the result is a diminution in the
value of the Option Interest and this Option to Purchaser.
3. Conditions to Closing. The Closing of the purchase of the
Option Interest pursuant to the exercise of the Option shall be subject to the
satisfaction of all of the following conditions:
(a) Each of the representations of Purchaser made in this
Agreement, in the Purchase Agreement and in each Related Instrument
(as defined in the Purchase Agreement) shall be true and correct in all
material respects at and as of the time of the Closing and Purchaser
shall have performed in all material respects each and every covenant
of Purchaser contained in this Agreement, in the Purchase Agreement
and in each Related Instrument required to be performed by the time of
or at the Closing. If requested by Seller, Purchaser shall execute a
certificate by which Purchaser confirms the satisfaction of the
foregoing condition.
(b) No order, preliminary or permanent injunction,
temporary restraining order, stay, judgment, decree or other order of
any court or governmental or regulatory body preventing the sale of
the Option Interest by the Seller or the consummation of the other
transactions contemplated hereby.
(c) All consents, orders and approvals of any
governmental authority, any partner or partners of the Partnership and
of any other third party that either Purchaser or Seller reasonably
deems necessary or advisable shall have been obtained and shall be in
full force and effect and any waiting period under applicable law
shall have expired. Without limiting the generality of the foregoing,
all such consents and approvals necessary to permit the withdrawal of
Seller from the Partnership without further obligation or liability as
a partner thereof shall have been obtained and shall be in full force
and effect.
(d) Purchaser shall, by written instrument in form and
substance reasonably satisfactory to Seller, assume and agree to
indemnify Seller for all obligations and
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<PAGE> 3
liabilities of Seller under the Partnership Agreement with respect to
the Option Interest of every kind or nature, whether accrued or
unaccrued, asserted or unasserted, known or unknown, disclosed or
undisclosed, absolute or contingent, arising by law, contract or
otherwise and including any liability or obligation arising out of any
event, fact or circumstance existing or occurring as of or prior to
the date hereof that, with the passage of time or the giving of
notice, or otherwise, which constitutes a breach or violation of or
default under any contract or law binding upon or applicable to the
Partnership.
(e) If required by Seller, Purchaser will be obligated to
buy from Seller at the Closing, all evidences of indebtedness of the
Partnership held directly or indirectly by Seller or any subsidiary of
Seller, and the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time of the
Closing plus accrued and unpaid interest thereon which, unless
otherwise agreed by Seller and Purchaser, shall be paid in cash.
(f) Purchaser and Seller shall each execute and deliver
such other instruments as either party or the Partnership reasonably
deems necessary or appropriate to effect, and as a condition to, the
exercise of the Option, including amendments to the Partnership
Agreement or any other instrument filed with any governmental agency
or official.
(g) Purchaser shall have exercised all options to acquire
partnership interests in the Partnership granted by other partners of
the Partnership pursuant to the Purchase Agreement simultaneously with
the exercise of this Option, and the closings of the sale of all such
partnership interests pursuant to the exercise of all such other
options shall occur simultaneously with the Closing under this Option
Agreement.
(h) Purchaser shall have exercised all options to acquire
partnership interests in Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), granted to Purchaser by partners of HCP
who are affiliates of Seller simultaneously with the exercise of this
Option, and the closings of the sale of all such partnership interests
pursuant to the exercise of all such other options shall occur
simultaneously with the Closing under this Option Agreement.
(i) If the exercise of the Option requires any consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality or the expiration
of any waiting period imposed by applicable law, then the date fixed
for the Closing pursuant to paragraph 2(b) hereof shall be extended
for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization and the termination of
each such waiting period at the earliest reasonably practicable time
are diligently being made; provided, however, that, unless Seller and
Purchaser otherwise agree, the extension of such Closing date pursuant
to this paragraph may not exceed 180 days. Seller and
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<PAGE> 4
Purchaser will, and will use their commercially reasonable efforts to
cause the Partnership to, reasonably cooperate with each other in
obtaining any such consent, approval, waiver, or authorization and in
obtaining the termination of any such waiting period at the earliest
practicable time.
(j) If, in the opinion of legal counsel to Purchaser, the
immediate proposed transfer of the entire Option Interest would result
in the termination of the Partnership within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended (or any successor
provision of law), but an immediate transfer of less than all of the
Option Interest would not have such a result, Purchaser shall be
entitled to elect, in its sole discretion, to either (i) exercise the
Option in full notwithstanding such termination or (ii) to (A) require
Seller to immediately transfer only that portion of the Option
Interest as may, in the opinion of such counsel, be transferred
without causing such a result and (B) extend the Exercise Period of
the Option with respect to the balance of the Option Interest until
the later of the Scheduled Expiration Date or the last day of the
period of thirteen months after the date of the closing of the
transfer referred to in subclause (ii)(A) of this sentence, in which
event, unless otherwise agreed by Seller and Purchaser, the Exercise
Price shall be allocated proportionately between the portion of the
Option Interest immediately transferred and the remainder of the
Option Interest as to which the Exercise Period of the Option shall
have been so extended.
4. Distributions After Exercise. Distributions declared or made
on or prior to the effective date of the exercise of the Option with respect to
the Option Interest shall be made to Seller, regardless of when such
distributions accrued on the books of the Partnership or the date fixed for
payment thereof.
5. Certain Covenants of Seller. Seller hereby covenants and
agrees with Purchaser as follows:
(a) During the Exercise Period, Seller shall not sell or
otherwise transfer or dispose of the Option Interest or any part
thereof or interest therein, other than a sale or transfer as to which
Seller gives Purchaser at least 14 days prior written notice and in
which the transferee agrees, pursuant to an instrument in form and
substance reasonably satisfactory to Purchaser, to be bound by the
terms of this Option Agreement with respect to such transferred
interest to the same extent as the transferor was so bound with
respect to such transferred interest.
(b) Upon the Closing, Seller shall convey to Purchaser
legal title to, and beneficial ownership of, the Option Interest, free
and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance and free of any restriction on transfer voluntarily
created by Seller, other than as expressly set forth in the
-4-
<PAGE> 5
Partnership Agreement or existing or arising under applicable law and
other than the possible lien of taxes not yet due and payable and
minor imperfections in title and encumbrances and other minor matters,
if any, which singly or in the aggregate are not substantial in an
amount, do not materially detract from the value of the Option
Interest.
6. Binding Effect, Assignment. Subject to the following
provision of this paragraph 6, this Option Agreement shall inure to the benefit
of, and be binding upon, the parties and their respective successors, heirs,
legal representatives and permitted assignees. Except as otherwise expressly
provided herein, this Option Agreement shall not be assigned by either party
hereto without the prior written consent of the other party. Purchaser may
assign this Option Agreement, in whole or in part, to any FCA Permitted
Transferee (as defined in the Partnership Agreement).
7. Notices. All notices and other communications required or
permitted by this Agreement shall be in writing and addressed to the intended
recipient at such person's address specified under its or his signature below
or at such other address as such person may designate in a written notice to
the other party hereto. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this paragraph 7 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received; (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business
Day after being entrusted to such service, with delivery charges prepaid or
charged to the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
8. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Agreement" or "Option Agreement" means this Option Agreement,
as the same may be amended from time to time in accordance with its terms.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of Colorado.
-5-
<PAGE> 6
"Option Interest" means the entire partnership interest of
Seller as a partner of the Partnership, including such partner's (i) right to a
share of the income, gain, losses and deductions of and distributions by the
Partnership, (ii) right to a share of Partnership assets, (iii) rights with
respect to initial and additional capital contributions made to the Partnership
by such partner, including such partner's rights with respect to allocations of
income, gain losses and deductions of and distributions made by the Partnership
which are based upon or determined by reference to such capital contributions,
(iv) rights with respect to the management of the business and affairs of the
Partnership, (v) voting, consent and approval rights, (vi) rights to unpaid
interest under Section 12.6 of the Partnership Agreement, whether accrued as of
or accruing on or after the date hereof, (vii) rights with respect to such
partner's Capital Account (as defined in the Partnership Agreement), (viii)
rights, if any, under Sections 16, 17 and 18 of the Partnership Agreement, (ix)
any and all other rights, interests and benefits to which such partner is or
may become entitled by reason of its status as a partner of the Partnership,
and (x) all liabilities and obligations of such partner by reason of its status
as a partner of the Partnership, in each case as provided in the Partnership
Agreement or the partnership laws of the state of the Partnership's
organization.
"Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement, dated as of June 22, 1994, of the Partnership, as the
same heretofore may have been or hereafter may be amended or modified in
accordance with its terms.
9. Terms Generally, Certain Rules of Construction. The
definitions in paragraph 8 and elsewhere in this Option Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Option Agreement in its entirety and not to any part hereof unless the context
shall otherwise require. All references herein to paragraphs shall be deemed
references to paragraphs of this Option Agreement unless the context shall
otherwise require. Any reference in this Agreement to a "day" or number of
"days"(without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of Colorado without
regard to principles of conflict of laws, except to the extent that the laws of
the jurisdiction of organization of the Partnership shall be mandatorily
applicable.
-6-
<PAGE> 7
11. Headings. The headings contained in this Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
12. Waivers; Amendment. Any term or provision of this Option
Agreement may be waived at any time by an instrument in writing signed by the
party which is entitled to the benefit thereof. This Option Agreement may be
amended or supplemented at any time only by an instrument in writing signed by
the parties hereto.
13. Counterparts. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Expenses. Each party hereto will pay its own expenses in
connection with the negotiation and execution of this Option Agreement and the
consummation of the transactions contemplated hereby, including all fees and
disbursements of its legal counsel.
15. Further Actions After the Closing. If, subsequent to the
Closing, further documents are reasonably requested in order to carry out the
provisions and purposes of this Option Agreement, the parties hereto shall
execute and deliver such further documents.
16. Severability. In the event that any part or parts of this
Option Agreement shall be held to be unenforceable to its or their full extent,
then it is the intention of the parties hereto that such part or parts shall be
enforced to the full extent permitted under the laws, and in any event, that
all other parts of this Option Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had never been a part hereof.
17. Entire Agreement. The provisions of this Agreement, the
Purchase Agreement and the Related Instruments collectively set forth the
entire agreement and understanding between the parties hereto as to the subject
matter hereof and thereof and merge and supersede all prior discussions,
agreements and understandings, oral or written, of any and every nature between
them with respect to such subject matter. Except as and to the extent set forth
in this Agreement, the Purchase Agreement or a Related Instrument, neither
party makes any representation, warranty, covenant or agreement whatsoever and
each party disclaims all liability and responsibility for any representation,
warranty, covenant, agreement or statement made or information communicated
(orally or in writing) by any other Person. Purchaser expressly agrees and
acknowledges that, in purchasing this Option
-7-
<PAGE> 8
and making decisions regarding whether or not to exercise this Option,
Purchaser (i) is not and will not be relying on the representations and
warranties of Seller or any other Person, (ii) has made and will make its own
inquiry and investigation into, and based thereon, has formed an independent
judgment concerning, the Partnership and the business conducted by it, (iii)
has been furnished or given adequate access to such information as it has
requested concerning the Partnership and the business conducted by it and (iv)
will not assert any claim against Seller or any of its affiliates, directors,
officers, employees, agents, stockholders, advisors, counsel or
representatives, nor will seek to hold any of such other Persons liable for any
inaccuracies, misstatements or omissions with respect to information concerning
the Partnership and the business conducted by it, provided that the foregoing
shall not in any manner be construed or deemed to limit the ability of
Purchaser to make any claim it may otherwise have arising out of the breach of
any express representation or warranty of Seller contained in this Agreement,
the Purchase Agreement or any Related Instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
AMERICAN TELEVENTURE OF
MINERSVILLE, INC.
By: /s/ STEPHEN M. BRETT
------------------------------
Name: STEPHEN M. BRETT
Title:
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: General Counsel
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER
------------------------------
Donne F. Fisher, Member
9513 Pinyon Trail
Littleton, Colorado 80124
2-12-96
-8-
<PAGE> 1
EXHIBIT 10.67
ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made
as of January 31, 1996 between TEMPO CABLE, INC., an Oklahoma corporation
("Assignor"), and FISHER COMMUNICATIONS ASSOCIATES, L.L.C., a Colorado limited
liability company ("Assignee").
WITNESSETH
WHEREAS, Assignor owns a partnership interest in HALCYON
COMMUNICATIONS LIMITED PARTNERSHIP, an Oklahoma limited partnership (the
"Partnership");
WHEREAS, Assignor, the other partners of the Partnership and
Assignee have entered into an Agreement of Purchase and Sale of Partnership
Interests dated as of the date hereof (the "Purchase Agreement") providing for
the sale by Assignor of a portion of Assignor's partnership interest in the
Partnership (such portion of such interest is defined in the Purchase Agreement
as, and shall be referred to hereinafter as, the Assignor's "Purchased
Interest") and the assumption by Assignee of all liabilities and obligations of
Assignor by virtue thereof, and
WHEREAS, the execution and delivery of this Agreement for the
purpose of effecting such sale and such assumption has been authorized in all
respects as required by law;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the consideration specified in the Purchase
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Transferred Interests. Assignor by this
instrument does convey, sell, transfer, assign and deliver the Assignor's
Purchased Interest to Assignee, without any representation or warranty of any
nature whatsoever, except as may be expressly set forth in the Purchase
Agreement.
2. Assumption of Obligations with Respect to Transferred
Interests. Assignee hereby assumes, and agrees to indemnify Assignor for and
hold Assignor harmless from and against, all liabilities and obligations of any
nature whatsoever existing or arising under the Partnership's limited
partnership agreement or applicable law by virtue of the ownership of the
Assignor's Purchased Interest, whether accrued or unaccrued, known or unknown,
disclosed or undisclosed and whether now existing or hereafter arising.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized signatories in their
respective names, All as of the day and year first above written.
ASSIGNOR:
TEMPO CABLE, INC.
ATTEST: By: /s/ STEPHEN M. BRETT
------------------------------
/s/ MERLYN J. SCHUMACHER Name: STEPHEN M. BRETT
- ------------------------------ ----------------------------
Title:
---------------------------
ASSIGNEE:
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
ATTEST By: /s/ DONNE F. FISHER
------------------------------
/s/ SUE L. FISHER Donne F. Fisher, Member
- ------------------------------ 2-12-96
2-12-96
-2-
<PAGE> 1
EXHIBIT 10.68
OPTION AGREEMENT
Option Agreement, dated as of January 31, 1996, between Fisher
Communications Associates, L.L.C.,a Colorado limited liability company
("Purchaser"), and TEMPO Cable, Inc., an Oklahoma corporation ("Seller").
Seller is a partner of Halcyon Communications Limited Partnership, a
limited partnership organized and existing under the laws of the State of
Oklahoma (the "Partnership"). Pursuant to a certain Agreement of Purchase and
Sale of Partnership Interests, dated as of the date hereof, among Seller, the
other partners of the Partnership and Purchaser (as the same may be amended
from time to time in accordance with its terms, the "Purchase Agreement"), on
the date hereof Purchaser is purchasing from Seller and certain other partners
of the Partnership a portion of their respective partnership interests in the
Partnership. Purchaser desires to acquire from Seller an option to purchase the
balance of the partnership interest in the Partnership that Seller will
continue to own immediately after giving effect to such purchases, and Seller
has agreed to grant such an option to Purchaser on the terms and subject to the
conditions set forth herein.
Therefore, in consideration of the payment of $100 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. Seller hereby grants to Purchaser an
irrevocable option (the "Option") to purchase all, but not less than all of the
Option Interest (as hereinafter defined). The exercise price of the Option (the
"Exercise Price") shall be an amount in cash equal to $1,173,600, without
interest. The Exercise Price will be payable by Purchaser at the Closing (as
hereinafter defined) by wire transfer or by certified or bank check in
immediately available funds.
2. Exercise Period; Exercise of the Option.
(a) The Option may be exercised, in whole but not in part, at any
time during the period (the "Exercise Period") commencing on the date hereof
and ending at 12:01 A.M., Denver, Colorado time, on the tenth anniversary of
the date hereof (the "Scheduled Expiration Date").
(b) Purchaser may exercise the Option by delivering written notice
thereof (an "Exercise Notice") to Seller at any time prior to the expiration of
the Exercise Period. Subject to paragraph 3 hereof, and unless the parties
otherwise agree, the closing of the sale of the Option Interest (the
"Closing")shall occur on the tenth Business Day (as hereinafter defined)
following delivery of the Exercise Notice. The date the Closing occurs is
<PAGE> 2
hereinafter referred to as the "Closing Date". At the Closing, Seller shall,
against receipt of the Exercise Price as provided in paragraph 1 hereof, convey
and deliver the Option Interest to Purchaser by the delivery to Purchaser by
such Seller of a duly completed and executed instrument of assignment
reasonably satisfactory to both parties and such other documents or instruments
which may be necessary, or which Purchaser may reasonably request, in order to
effectively vest in Purchaser beneficial ownership of the Option Interest.
(c) Prior to the sale of the Option Interest to Purchaser pursuant
to this Agreement, Seller shall, subject only to the express provisions of
paragraph 5(a) of this Agreement, retain all rights as the holder of the Option
Interest, including all voting and consent rights as a partner of the
Partnership, and may exercise or refrain from exercising such rights as Seller
may determine in its sole discretion, even if the result is a diminution in the
value of the Option Interest and this Option to Purchaser.
3. Conditions to Closing. The Closing of the purchase of the
Option Interest pursuant to the exercise of the Option shall be subject to the
satisfaction of all of the following conditions:
(a) Each of the representations of Purchaser made in this
Agreement, in the Purchase Agreement and in each Related Instrument
(as defined in the Purchase Agreement) shall be true and correct in
all material respects at and as of the time of the Closing and
Purchaser shall have performed in all material respects each and every
covenant of Purchaser contained in this Agreement, in the Purchase
Agreement and in each Related Instrument required to be performed by
the time of or at the Closing. If requested by Seller, Purchaser shall
execute a certificate by which Purchaser confirms the satisfaction of
the foregoing condition.
(b) No order, preliminary or permanent injunction,
temporary restraining order, stay, judgment, decree or other order of
any court or governmental or regulatory body preventing the sale of
the Option Interest by the Seller or the consummation of the other
transactions contemplated hereby.
(c) All consents, orders and approvals of any
governmental authority, any partner or partners of the Partnership and
of any other third party that either Purchaser or Seller reasonably
deems necessary or advisable shall have been obtained and shall be in
full force and effect and any waiting period under applicable law
shall have expired. Without limiting the generality of the foregoing,
all such consents and approvals necessary to permit the withdrawal of
Seller from the Partnership without further obligation or liability as
a partner thereof shall have been obtained and shall be in full force
and effect.
(d) Purchaser shall, by written instrument in form and
substance reasonably satisfactory to Seller, assume and agree to
indemnify Seller for all obligations and
-2-
<PAGE> 3
liabilities of Seller under the Partnership Agreement with respect to
the Option Interest of every kind or nature, whether accrued or
unaccrued, asserted or unasserted, known or unknown, disclosed or
undisclosed, absolute or contingent, arising by law, contract or
otherwise and including any liability or obligation arising out of any
event, fact or circumstance existing or occurring as of or prior to
the date hereof that, with the passage of time or the giving of
notice, or otherwise, which constitutes a breach or violation of or
default under any contract or law binding upon or applicable to the
Partnership.
(e) If required by Seller, Purchaser will be obligated to
buy from Seller at the Closing, all evidences of indebtedness of the
Partnership held directly or indirectly by Seller or any subsidiary of
Seller, and the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time of the
Closing plus accrued and unpaid interest thereon which, unless
otherwise agreed by Seller and Purchaser, shall be paid in cash.
(f) Purchaser and Seller shall each execute and deliver
such other instruments as either party or the Partnership reasonably
deems necessary or appropriate to effect, and as a condition to, the
exercise of the Option, including amendments to the Partnership
Agreement or any other instrument filed with any governmental agency
or official.
(g) Purchaser shall have exercised all options to acquire
partnership interests in the Partnership granted by other partners of
the Partnership pursuant to the Purchase Agreement simultaneously with
the exercise of this Option, and the closings of the sale of all such
partnership interests pursuant to the exercise of all such other
options shall occur simultaneously with the Closing under this Option
Agreement.
(h) Purchaser shall have exercised all options to acquire
partnership interests in Halcyon Communications Partners, an Oklahoma
general partnership ("HCP"), granted to Purchaser by partners of HCP
who are affiliates of Seller simultaneously with the exercise of this
Option, and the closings of the sale of all such partnership interests
pursuant to the exercise of all such other options shall occur
simultaneously with the Closing under this Option Agreement.
(i) If the exercise of the Option requires any consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality or the expiration
of any waiting period imposed by applicable law, then the date fixed
for the Closing pursuant to paragraph 2(b) hereof shall be extended
for the period of time during which efforts to obtain each such
consent, approval, waiver, or authorization and the termination of
each such waiting period at the earliest reasonably practicable time
are diligently being made; provided, however, that, unless Seller and
Purchaser otherwise agree, the extension of such Closing date pursuant
to this paragraph may not exceed 180 days. Seller and
-3-
<PAGE> 4
Purchaser will, and will use their commercially reasonable efforts to
cause the Partnership to, reasonably cooperate with each other in
obtaining any such consent, approval, waiver, or authorization and in
obtaining the termination of any such waiting period at the earliest
practicable time.
(j) If, in the opinion of legal counsel to Purchaser, the
immediate proposed transfer of the entire Option Interest would result
in the termination of the Partnership within the meaning of Section
708 of the Internal Revenue Code of 1986, as amended (or any successor
provision of law), but an immediate transfer of less than all of the
Option Interest would not have such a result, Purchaser shall be
entitled to elect, in its sole discretion, to either (i) exercise the
Option in full notwithstanding such termination or (ii) to (A) require
Seller to immediately transfer only that portion of the Option
Interest as may, in the opinion of such counsel, be transferred
without causing such a result and (B) extend the Exercise Period of
the Option with respect to the balance of the Option Interest until
the later of the Scheduled Expiration Date or the last day of the
period of thirteen months after the date of the closing of the
transfer referred to in subclause (ii)(A) of this sentence, in which
event, unless otherwise agreed by Seller and Purchaser, the Exercise
Price shall be allocated proportionately between the portion of the
Option Interest immediately transferred and the remainder of the
Option Interest as to which the Exercise Period of the Option shall
have been so extended.
4. Distributions After Exercise. Distributions declared or made
on or prior to the effective date of the exercise of the Option with respect to
the Option Interest shall be made to Seller, regardless of when such
distributions accrued on the books of the Partnership or the date fixed for
payment thereof.
5. Certain Covenants of Seller. Seller hereby covenants and
agrees with Purchaser as follows:
(a) During the Exercise Period, Seller shall not sell or
otherwise transfer or dispose of the Option Interest or any part
thereof or interest therein, other than a sale or transfer as to which
Seller gives Purchaser at least 14 days prior written notice and in
which the transferee agrees, pursuant to an instrument in form and
substance reasonably satisfactory to Purchaser, to be bound by the
terms of this Option Agreement with respect to such transferred
interest to the same extent as the transferor was so bound with
respect to such transferred interest.
(b) Upon the Closing, Seller shall convey to Purchaser
legal title to, and beneficial ownership of, the Option Interest, free
and clear of any lien, pledge, security interest, claim, or charge or
other encumbrance and free of any restriction on transfer voluntarily
created by Seller, other than as expressly set forth in the
-4-
<PAGE> 5
Partnership Agreement or existing or arising under applicable law and
other than the possible lien of taxes not yet due and payable and
minor imperfections in title and encumbrances and other minor matters,
if any, which singly or in the aggregate are not substantial in an
amount, do not materially detract from the value of the Option
Interest.
6. Binding Effect; Assignment. Subject to the following provision
of this paragraph 6, this Option Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors, heirs, legal
representatives and permitted assignees. Except as otherwise expressly provided
herein, this Option Agreement shall not be assigned by either party hereto
without the prior written consent of the other party. Purchaser may assign this
Option Agreement, in whole or in part, to any FCA Permitted Transferee (as
defined in the Partnership Agreement).
7. Notices. All notices and other communications required or
permitted by this Agreement shall be in writing and addressed to the intended
recipient at such person's address specified under its or his signature below
or at such other address as such person may designate in a written notice to
the other party hereto. All notices and other communications required or
permitted by this Agreement shall be deemed to have been duly given if
personally delivered to the intended recipient at the proper address determined
pursuant to this paragraph 7 or sent to such recipient at such address by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received; (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business
Day after being entrusted to such service, with delivery charges prepaid or
charged to the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent and (4) if delivered by hand, on the date of
delivery.
8. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Agreement" or "Option Agreement" means this Option Agreement,
as the same may be amended from time to time in accordance with its terms.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of Colorado.
-5-
<PAGE> 6
"Option Interest" means the entire partnership interest of
Seller as a partner of the Partnership, including such partner's (i) right to a
share of the income, gain, losses and deductions of and distributions by the
Partnership, (ii) right to a share of Partnership assets, (iii) rights with
respect to initial and additional capital contributions made to the Partnership
by such partner, including such partner's rights with respect to allocations of
income, gain losses and deductions of and distributions made by the Partnership
which are based upon or determined by reference to such capital contributions,
(iv) rights with respect to the management of the business and affairs of the
Partnership, (v) voting, consent and approval rights, (vi) rights to unpaid
interest under Section 12.6 of the Partnership Agreement, whether accrued as of
or accruing on or after the date hereof, (vii) rights with respect to such
partner's Capital Account (as defined in the Partnership Agreement), (viii)
rights, if any, under Sections 16, 17 and 18 of the Partnership Agreement, (ix)
any and all other rights, interests and benefits to which such partner is or
may become entitled by reason of its status as a partner of the Partnership,
and (x) all liabilities and obligations of such partner by reason of its status
as a partner of the Partnership, in each case as provided in the Partnership
Agreement or the partnership laws of the state of the Partnership's
organization.
"Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement, dated as of June 22, 1994, of the Partnership, as the
same heretofore may have been or hereafter may be amended or modified in
accordance with its terms.
9. Terms Generally; Certain Rules of Construction. The
definitions in paragraph 8 and elsewhere in this Option Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including
shall be deemed to be followed by the phrase" without limitation. The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Option Agreement in its entirety and not to any part hereof unless the context
shall otherwise require. All references herein to paragraphs shall be deemed
references to paragraphs of this Option Agreement unless the context shall
otherwise require. Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of Colorado without
regard to principles of conflict of laws, except to the extent that the laws of
the jurisdiction of organization of the Partnership shall be mandatorily
applicable.
-6-
<PAGE> 7
11. Headings. The headings contained in this Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
12. Waivers; Amendment. Any term or provision of this Option
Agreement may be waived at any time by an instrument in writing signed by the
party which is entitled to the benefit thereof. This Option Agreement may be
amended or supplemented at any time only by an instrument in writing signed by
the parties hereto.
13. Counterparts. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Expenses. Each party hereto will pay its own expenses in
connection with the negotiation and execution of this Option Agreement and the
consummation of the transactions contemplated hereby, including all fees and
disbursements of its legal counsel.
15. Further Actions After the Closing. If, subsequent to the
Closing, further documents are reasonably requested in order to carry out the
provisions and purposes of this Option Agreement, the parties hereto shall
execute and deliver such further documents.
16. Severability. In the event that any part or parts of this
Option Agreement shall be held to be unenforceable to its or their full extent,
then it is the intention of the parties hereto that such part or parts shall be
enforced to the full extent permitted under the laws, and in any event, that
all other parts of this Option Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had never been a part hereof.
17. Entire Agreement. The provisions of this Agreement, the
Purchase Agreement and the Related Instruments collectively set forth the
entire agreement and understanding between the parties hereto as to the subject
matter hereof and thereof and merge and supersede all prior discussions,
agreements and understandings, oral or written, of any and every nature between
them with respect to such subject matter. Except as and to the extent set forth
in this Agreement, the Purchase Agreement or a Related Instrument, neither
party makes any representation, warranty, covenant or agreement whatsoever and
each party disclaims all liability and responsibility for any representation,
warranty, covenant, agreement or statement made or information communicated
(orally or in writing) by any other Person. Purchaser expressly agrees and
acknowledges that, in purchasing this Option
-7-
<PAGE> 8
and making decisions regarding whether or not to exercise this Option,
Purchaser (i) is not and will not be relying on the representations and
warranties of Seller or any other Person, (ii) has made and will make its own
inquiry and investigation into, and based thereon, has formed an independent
judgment concerning, the Partnership and the business conducted by it, (iii)
has been furnished or given adequate access to such information as it has
requested concerning the Partnership and the business conducted by it and (iv)
will not assert any claim against Seller or any of its affiliates, directors,
officers, employees, agents, stockholders, advisors, counsel or
representatives, nor will seek to hold any of such other Persons liable for any
inaccuracies, misstatements or omissions with respect to information concerning
the Partnership and the business conducted by it, provided that the foregoing
shall not in any manner be construed or deemed to limit the ability of
Purchaser to make any claim it may otherwise have arising out of the breach of
any express representation or warranty of Seller contained in this Agreement,
the Purchase Agreement or any Related Instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
TEMPO CABLE, INC.
By: /s/ STEPHEN M. BRETT
------------------------------
Name: STEPHEN M. BRETT
Title:
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: General Counsel
FISHER COMMUNICATIONS
ASSOCIATES, L.L.C.
By: /s/ DONNE F. FISHER
------------------------------
Donne F. Fisher, Member
9513 Pinyon Trail
Littleton, Colorado 80124
2-12-96
-8-
<PAGE> 1
EXHIBIT 21
A table of the subsidiaries of the Tele-Communications, Inc. as of March 1,
1996, is set forth below, indicating as to each the state or the jurisdiction
of incorporation or organization and the names under which such subsidiaries do
business ("Trade Names"). Subsidiaries not included in the table are inactive
and, considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
A-1 TV, INC. CO CO
ACTC, L.P.
AMERICANA TELEVISION PRODUCTIONS LLC CO
ARC HOLDING, LTD TX HOME SPORTS ENTERTAINMENT
PRIME SPORTS SOUTHWEST
ASIAN TELEVISION AND COMMUNICATIONS INTERNATIONAL CO
BET FILM PRODUCTIONS DE
CAREERTRACK, INC. CO
CCC - TELEPORT SOUTHERN NEW JERSEY, INC. CO
CCC SUB, INC. CO
CCC-NJFT, INC. CO
CLJV, L.P DE
COMMUNICATION CAPITAL CORP DE COLORADO COMMUNICATION CAPITAL CORP
COMMUNITY CABLE TELEVISION WY TCI CABLEVISION OF SOUTHWEST TEXAS
TCI CABLEVISION OF WEST OAKLAND COUNTY
COUNTRY CABLE CO. CO SCI CABLE PARTNERS
COUNTRY CABLE II, INC. CO
COUNTRY CABLE III, INC. CO
COURTROOM TELEVISION NETWORK NY
CVN, INC. CA
DIGITAL FRONTIER STUDIOS, INC. DE
DISCOVERY COMMUNICATIONS, INC. [MD] DE
ENCORE ASIA MANAGEMENT LIMITED HKG
ENCORE AUSTRALIA MANAGEMENT, INC DE
ENCORE CHINA, INC. CO
ENCORE ICCP, INC. CO EMC ENTERTAINMENT INTERNATIONAL, INC.
ENCORE INTERNATIONAL, INC. CO
ENCORE MEDIA CORPORATION CO ENCORE
ENCORE ORIGINAL PRODUCTIONS, INC. CO
</TABLE>
-1-
<PAGE> 2
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ENCORE PICTURES, INC. CO
ENCORE QE PROGRAMMING CORP. CO
EPG JOINT VENTURE
GUIDE INVESTMENTS, INC. CO
INGENIUS CO
INTERMEDIA PARTNERS CA
INTERNATIONAL CABLE CHANNELS PARTNERSHIP, LTD. CO
INTRO PRODUCTION MANAGEMENT CORPORATION CO
KANSAS CITY CABLE PARTNERS CO AMERICAN CABLEVISION OF KANSAS CITY
KBL SPORTS NETWORK, INC. CO KBL ENTERTAINMENT NETWORK
KRC/CCC INVESTMENT PARTNERSHIP CO
LCNI, INC. DE
LIBERTY BROADCASTING, INC. OR
LIBERTY CABLE OF MISSOURI, INC. MO
LIBERTY CABLE PARTNER, INC. WY
LIBERTY CABLE, INC. CO
LIBERTY CAPITAL CORP. WY
LIBERTY CHC, INC. CO
LIBERTY CLUB, INC. CO
LIBERTY CNBC, INC. CO
LIBERTY COMPUTER VENTURES, INC. CO
LIBERTY COURT, INC. WY
LIBERTY DISTRIBUTION, INC. CO
LIBERTY DMX, INC. CO
LIBERTY EVANGOLA, INC. WY
LIBERTY HOLDINGS, INC. WY
LIBERTY HSN, INC. CO
LIBERTY IFE, INC. CO
LIBERTY LAKE, INC. WY
LIBERTY MEDIA CORPORATION DE
LIBERTY MICHIGAN, INC. DE
LIBERTY MLP, INC. CO
LIBERTY MTC, INC. WY
</TABLE>
-2-
<PAGE> 3
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
LIBERTY OF GREENWOOD, INC. CO
LIBERTY OF PATERSON, INC. NV
LIBERTY OF PATERSON II, INC. CO
LIBERTY OF SOUTH DAKOTA, INC. CO
LIBERTY PRODUCTIONS, INC. CO
LIBERTY PROGRAM INVESTMENTS, INC. WY
LIBERTY PROGRAM SUPPLY, INC. WY
LIBERTY PROGRAMMING CORPORATION WY
LIBERTY PROGRAMMING DEVELOPMENT CORPORATION WY
LIBERTY QVC, INC. CO
LIBERTY SPORTS AUSTRALIA PTY LIMITED AUS
LIBERTY SPORTS ILH, INC. CO
LIBERTY SPORTS INTERNATIONAL, B.V. NLD
LIBERTY SPORTS SALES, INC. CO
LIBERTY SPORTS, INC. CO
LIBERTY STARZ, INC. CO
LIBERTY TRI-COUNTY, INC. WY
LIBERTY VC, INC. CO
LIBERTY VJN, INC. CO
LIBERTY WOMEN'S SPORTS LEAGUE, INC. CO
LMC BAY AREA SPORTS, INC. CO BASN
BAY AREA SPORTS NETWORK
PSN
LMC BET, INC CO
LMC CABLE ADNET II, INC. WY
LMC CABLE ADNET, INC. PA CABLE ADNET
LMC CANADA, INC CAN
LMC CHICAGO SPORTS, INC. WY
LMC CLASSICS, INC. NV
LMC ENTERTAINMENT, INC. NV
LMC INFORMATION SERVICES, INC. NV X*PRESS INFORMATION SERVICES
LMC INTERNATIONAL, INC. CO
LMC LENFEST, INC. CO
</TABLE>
-3-
<PAGE> 4
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
LMC MUSIC, INC. CO
LMC NORTHWEST CABLE SPORTS, INC. CO NCS
NORTHWEST CABLE SPORTS
PRIME SPORTS NORTHWEST
PSN
LMC PRIME SPORTS NORTHWEST, INC. CO
LMC REGIONAL SPORTS, INC. CO
LMC SATCOM, INC. GA
LMC SILVER KING, INC. CO
LMC SOUTHEAST SPORTS, INC. CO
LMC SUNSHINE, INC. CO
LMC UPPER MIDWEST SPORTS, INC. CO
LMC UTAH SPORTS, INC. I CO
LSI DEPORTIVA, INC. CO
LSI FACILITIES, INC. CO
LSI NOSTALGIC SPORTS, INC. CO
LSI SHOWCASE, INC. CO
MACNEIL/LEHRER PRODUCTIONS NY
MCNS HOLDINGS, L.P. NY
NETLINK INTERNATIONAL, INC. CO
NETLINK USA CO
NEW CONCEPTS ENTERPRISES, INC. NJ
PPVN HOLDING COMPANY DE VIEWERS CHOICE
PREMIER SPORTS AUS
PREMIER SPORTS AUSTRALIA PTY LIMITED AUS
PRIME NETWORK LIMITED LIABILITY COMPANY WY
PRIME PHILADELPHIA SPORTS LIMITED LIABILITY COMPANY WY
PRIME SPORTS EVENTS, INC. CO LIBERTY PRIME SPORTS EVENTS, INC.
PRIME SPORTS FAN FAIR
PRIME SPORTS MERCHANDISING, INC. CO FAN FAIR
PRIME SPORTS NETWORK-UPPER MIDWEST
PRIME SPORTS NORTHWEST NETWORK DE
PRIME SPORTS WEST, L.P. CA
</TABLE>
-4-
<PAGE> 5
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIME SPORTSCHANNEL NETWORKS ASSOCIATES NEWSPORT
PRIME NETWORK
PRIME TICKET NETWORKS, L.P. CA
QE+ LTD. CO
QVC INVESTMENT, INC. CO
QVC, INC. DE
REISS MEDIA ENTERPRISE, INC. DE
REPUBLIC PICTURES TELEVISION CA
RL INGENIUS, INC. CO
ROCKY MOUNTAIN SPORTS AND LIFESYTLE CHANNEL, INC. DE
ROYAL COMMUNICATIONS, INC. CO
RTV ASSOCIATES, L.P. DE
SIOUX FALLS CABLE TELEVSION SD
SOUTHERN SATELLITE SYSTEMS, INC. GA TEMPO ONE-STOP SATELLITE PROGRAMMING
SPORTS HOLDING, INC. TX
SPORTSCHANNEL CHICAGO ASSOCIATES NY
SPORTSCHANNEL PACIFIC ASSOCIATES NY
SPORTSCHANNEL PRISM, ASSOCIATES
SPORTSOUTH NETWORK, LTD. DE
STT VIDEO PARTNERS, L.P. DE
TCI ACADEMIC SYSTEMS HOLDINGS, INC. CO
TCI CABLE EDUCATION, INC. CO
TCI CABLE INVESTMENTS, INC. DE
TCI CM HOLDINGS, INC. CO
TCI CT HOLDINGS, INC. DE
TCI CTRACK ASSET CORP. CO
TCI CUTTHROAT ISLAND, INC. CO
TCI DIGITAL SATELLITE ENTERTAINMENT, INC. CO PRIMESTAR BY TCI
TCI E! ENTERTAINMENT, INC. CO
TCI EDUCATIONAL TECHNOLOGIES, INC. CO
TCI FAROUDJA, INC. CO
TCI GAME TECHNOLOGY HOLDINGS, INC. CO
TCI GAMECO HOLDINGS, INC. CO
</TABLE>
-5-
<PAGE> 6
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C>
TCI GAMECO VENTURES, INC. CO
TCI GCI, INC. CO
TCI HEALTH, INC. CO
TCI HOLDINGS, INC. CO
TCI INTERACTIVE, INC. CO
TCI INTERACTIVE MEDIA GROUP, INC. CO
TCI INTERNET HOLDINGS, INC. CO
TCI INTERNET SERVICES, INC. CO
TCI LIGHTSPAN HOLDINGS, INC. CO
TCI MAGMA HOLDINGS, INC. CO
TCI MCNS HOLDINGS, INC. CO
TCI MERGER SUB, INC. DE
TCI MICROUNITY HOLDINGS, INC. CO
TCI NETSCAPE HOLDINGS, INC. CO
TCI ONLINE ENTERTAINMENT HOLDINGS, INC. CO
TCI ONLINE SERVICES, INC. CO
TCI ONLINE SPORTS HOLDINGS, INC. CO
TCI ONLINE VILLAGE HOLDINGS, INC. CO
TCI PRIME SPORTS, INC. CO
TCI PROGRAMMING HOLDING COMPANY III DE
TCI REPUBLIC PICTURES, INC. CO
TCI REQUEST, INC. CO
TCI SILLERMAN-MAGEE, INC. CO
TCI STARZ, INC. CO
TCI TECHNOLOGY VENTURES, INC. DE
TCI TECHNOLOGY, INC. CO
TCI TSX, INC. CO
TCI TURNER PREFERRED, INC. CO
TCI TVRO MANAGEMENT CORPORATION CO
TCI-TVGOS, INC. CO
TCI/FOX FUNDING PARTNERSHIP NY
TCID - WW, INC. CO
TCID GAMES, INC. CO
</TABLE>
-6-
<PAGE> 7
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCID VIRTUAL I/O, INC. CO
TCID, INC. CO
TECHNOLOGY PROGRAMMING VENTURES CO
TELLURIDE CABLEVISION, INC. DE
TEMPO DBS, INC. CO
THE FVTV CHANNEL LLC CO
THE NATIONAL REGISTRY DE
TKR CABLE COMPANY CO
TKR CABLE PARTNERS CO
TV NETWORK CORPORATION CO
U.S. CABLE OF ALLAMUCHY, L.P. NJ
U.S. CABLE OF NORTHERN INDIANA LIMITED PARTNERSHIP IN
UCT INVESTMENTS (COLORADO), INC. CO
UNITED CABLE TURNER INVESTMENT, INC. CO
UPPER MIDWEST CABLE PARTNERS MN
US CABLE OF EVANGOLA NJ
US CABLE OF LAKE COUNTY NJ
US CABLE OF PATERSON NJ
US CABLE OF TRI-COUNTY, LTD
VARTEC, L.P.
VIRTUAL I/O, INC. WA
VISION GROUP INCORPORATED CO
VVF, INC. CO
WESTLINK, INC. CO
X*PRESS ELECTRONIC SERVICES, LTD. CO
X*PRESS INFORMATION SERVICES, LTD. CO
- ------------------------------------
HOME SHOPPING NETWORK, INC.
HOME SHOPPING CLUB OUTLETS, INC. DE
HOME SHOPPING CLUB, INC. DE HOME SHOPPING CLUB
TELEMATION
</TABLE>
-7-
<PAGE> 8
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
HOME SHOPPING NETWORK ENTERTAINMENT, INC. DE
HOME SHOPPING SERVICES, INC DE HOME SHOPPING SERVICES OF DELAWARE, INC.
HOME SHOPPING VALUES
HSN CAPITAL CORP. NV
HSN CREDIT CORP. DE
HSN DIRECT FL
HSN DIRECT, INC. DE INNOVATIONS IN LIVING
HSN ENTERTAINMENT EVENTS, INC. DE
HSN ENTERTAINMENT HOLDING COMPANY, INC. DE
HSN ENTERTAINMENT JOINT VENTURES II, INC. DE PACIFIC MEDIA VENTURES
HSN ENTERTAINMENT JOINT VENTURES, INC. DE STAR PRODUCT GROUP
HSN FULFILLMENT OF IOWA, INC. DE
HSN FULFILLMENT OF NEVADA, INC. DE
HSN FULFILLMENT OFVIRGINIA, INC. DE
HSN FULFILLMENT, INC. DE
HSN HEALTH ASSIST, INC. DE
HSN HEALTH SERVICES, INC. DE
HSN INSURANCE, INC. FL
HSN INTERACTIVE, INC. DE
HSN LIFEWAY HEALTH PRODUCTS, INC. DE
HSN LIQUIDATION INC. OF FLORIDA DE
HSN LIQUIDATION INC. OF IOWA DE
HSN LIQUIDATION INC. OF NEVADA DE
HSN LIQUIDATION INC. OF VIRGINIA DE
HSN LIQUIDATION, INC DE
HSN MAIL ORDER, INC DE DESIGNER DIRECT
HEROES COLLECTOR'S CLUB
HSN MEDIA MERCHANDISE
PRIVATE SHOWING -- JEWELRY VALUES BY MAIL
THE ORTHO-VENT DIVISION, INC.
THOMAS OAK & SONS
HSN MISTIX CORPORATION DE HSN TELESEAT
HSN REALTY, INC. DE HSN REALTY OF DELAWARE, INC.
</TABLE>
-8-
<PAGE> 9
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
HSN REDIMED, INC. DE
HSN TELEVISION SHOPPING MALL, INC. DE
HSN TOURS, INC. DE HOME SHOPPING TOURS
HSN TRANSPORTATION, INC. DE
HSN TRAVEL, INC. DE
INTERNET SOFTWARE, INC CA
MARKETECH SERVICES, INC. DE PETALS & PRESENTS
NATIONAL CALL CENTER, INC. DE
ORTHO-VENT, INC. DE ORTHO-VENT
PACIFIC SPORTS NETWORK
STUART MCGUIRE
WORLD REZ, INC. DE WORLD REZ INC. OF DELAWARE
HOME SHOPPING TRAVEL
VELA RESEARCH, INC. DE
- ------------------------------------
LENFEST COMMUNICATIONS, INC. DE
ATLANTIC COMMUNICATIONS ENTERPRISES PA
BAY CABLE ADVERTISING CA
CABLE ADCOM PA
CABLE INVESTMENT PROPERTIES, INC. DE
CAH, INC. PA
CAM SYSTEMS DE
GARDEN STATE CABLE TV NJ
GLOBENET, INC. PA
L-TCI ASSOCIATES DE
LENFEST ATLANTIC, INC. NJ
LENFEST AUSTRALIA, INC. DE
LENFEST BAY AREA, INC. DE
LENFEST INTERNATIONAL, INC. DE
LENFEST JERSEY, INC. DE
LENFEST NEW CASTLE COUNTY DE
</TABLE>
-9-
<PAGE> 10
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
LENFEST PROGRAMMING SERVICES, INC. PA
LENFEST RAYSTAY HOLDINGS, INC. DE
LENFEST SOUTH JERSEY INVESTMENTS NJ
LENFEST WEST, INC. CA CABLE OAKLAND
LENFEST YORK, INC. DE
LENNET, INC. PA
METRONET PA
MICRONET ATLANTIC COMMUNICATIONS, INC. DE
MICRONET DELMARVA, INC. DE
MICRONET DIVERSIFIED INVESTMENTS, INC. DE
MICRONET PHILADELPHIA COMMUNICATIONS, INC. PA
MICRONET, INC. DE
MUMMERS PARADE PRODUCTIONS PA
PHILADELPHIA CABLE ADVERTISING PA
RAYSTAY COMPANY STOCK
SOUTH JERSEY CABLEVISION NJ
STARNET DEVELOPMENT, INC. UT
STARNET INTERACTIVE ENTERTAINMENT, INC. DE
STARNET, INC. DE
STARNET/CEA 11 DE
SUBURBAN CABLE TV CO. INC. PA
SUSQUENNA BROADCASTING CABLE DIVISION PA
TELESTAR MARKETING, INC. PA
VIDEO JUKEBOX NETWORK, INC. FL
VIDEOPOLE FRANCE
</TABLE>
-10-
<PAGE> 11
EXHIBIT 21
<TABLE>
<S> <C> <C>
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
</TABLE>
A table of the subsidiaries of the TCI Communications, Inc. as of March 1,
1996, is set forth below, indicating as to each the state or the jurisdiction
of incorporation or organization and the names under which such subsidiaries do
business ("Trade Names"). Subsidiaries not included in the table are inactive
and, considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
<TABLE>
<S> <C> <C>
ALABAMA T. V. CABLE, INC. AL
AMERICAN CABLE TV INVESTORS 4, LTD. CO SUN CABLEVISION
AMERICAN CABLE TV INVESTORS 5, LTD. CO AMERICAN CABLE TV OF LOWER DELAWARE
AMERICAN CABLE TV OF ST. MARY'S COUNTY
AMERICAN MICROWAVE & COMMUNICATIONS, INC MI
AMERICAN MOVIE CLASSICS INVESTMENT, INC CO
AMERICAN TELEVENTURE OF MINERSVILLE, INC CO
AMES CABLEVISION, INC. IA TCI OF CENTRAL IOWA
TCI OF EASTERN IOWA
ANTARES SATELLITE CORPORATION CO
ARP PARTNERSHIP DE
ATHENA CABLEVISION CORPORATION OF KNOXVILLE TN
ATHENA CABLEVISION OF TENNESSEE AND KENTUCKY, INC. TN
ATHENA REALTY, INC. NV
ATLANTIC AMERICAN CABLEVISION OF FLORIDA, INC. FL TCI CABLEVISION OF PASCO COUNTY
ATLANTIC AMERICAN CABLEVISION, INC. DE
ATLANTIC AMERICAN HOLDINGS, INC. FL
ATLANTIC CABLEVISION OF FLORIDA, INC. FL
BAY AREA INTERCONNECT CA BAY CABLE ADVERTISING
BCA
BEATRICE CABLE TV COMPANY NE TCI CABLE OF BEATRICE
BELLEVUE CABLEVISION, INC. DE
BILLINGS TELE-COMMUNICATIONS, INC. OR
BOB MAGNESS, INC. WY
BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP MI
BRIGAND PICTURES, INC. NY
</TABLE>
-1-
<PAGE> 12
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
BROOKHAVEN CABLE TV, INC. NY TCI CABLE OF BROOKHAVEN
BROOKINGS CABLEVISION CO
BROOKSIDE ANTENNA COMPANY OH
CABLE ACCOUNTING, INC. CO
CABLE ADNET PARTNERS DE CABLE ADNET
HUDSON VALLEY CABLE GROUP
CABLE ADVERTISING PARTNERS CA ADLINK
CABLE NETWORK TELEVISION, INC. NV
CABLE SHOPPING INVESTMENT, INC. CO
CABLE TELEVISION ADVERTISING GROUP, INC. WY
CABLE TELEVISION OF GARY, INC. IN
CABLETIME, INC. CO
CABLEVISION ASSOCIATES OF GARY JOINT VENTURE IN
CABLEVISION IV, LTD IA
CABLEVISION OF ARCADIA/SIERRA MADRE, INC. DE
CABLEVISION V, INC. IA
CABLEVISION VI, INC. IA TCI CABLEVISION OF THE ROCKIES, INC.
CABLEVISION VII, INC. IA TCI CABLEVISION OF THE ROCKIES, INC.
CAT PARTNERSHIP DE
CATV FACILITY CO., INC. CO
CHANNEL 64 ACQUISITION, INC. DE
CHICAGO CABLE NETWORK JOINT VENTURE IL
CLINTON CABLEVISION IA
CLINTON TV CABLE COMPANY, INC. IA
COCONUT CREEK CABLE T.V., INC. FL TCI OF NORTH BROWARD
COLORADO CABLEVISION COMPANY CO TCI OF COLORADO
COLORADO TERRACE TOWER II CORPORATION CO
COLUMBIA CABLE OF OREGON DE
COMMAND CABLE OF EASTERN ILLINOIS LIMITED PARTNERSHIP NJ
COMMUNICATION INVESTMENT CORPORATION VA
</TABLE>
-2-
<PAGE> 13
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS & CABLE OF CHICAGO, INC. IL CHICAGO CABLE TV
COMMUNICATIONS SERVICES, INC. KS TCI CABLEVISION OF CENTRAL TEXAS
TCI CABLEVISION OF EAST OKLAHOMA
TCI CABLEVISION OF NORTH TEXAS
TCI CABLEVISION OF NORTHEAST TEXAS
TCI CABLEVISION OF OKLAHOMA (CSI), INC.
TCI COMMUNICATIONS SERVICES, INC.
TCI OF ARKANSAS
TCI OF KANSAS (CSI), INC.
TCI OF LOUISIANA (CSI), INC.
TCI OF LOUISIANA
COMMUNITY CABLE TELEVISION WY TCI CABLEVISION OF SOUTHWEST TEXAS
TCI CABLEVISION OF WEST OAKLAND COUNTY
COMMUNITY REALTY, INC. NV NEVADA COMMUNITY REALTY, INC.
COMMUNITY TELEVISION SYSTEMS, INC. DE TCI CABLEVISION OF SOUTH CENTRAL
CONNECTICUT
CONSUMER ENTERTAINMENT SERVICES, INC. WY
CORSAIR PICTURES, INC. DE BRIGAND PICTURES, INC.
DANIELS-HAUSER HOLDINGS CO
DAVIS COUNTY CABLEVISION, INC. UT
DIGITAL DIRECT OF OREGON, INC. CO
DIGITAL DIRECT OF UTAH, INC. CO
DIGITAL DIRECT, INC. CO TCI TELEPHONY, INC.
DIRECT BROADCAST SATELLITE SERVICES, INC. DE
DISCOVERY PROGRAMMING INVESTMENT, INC. CO
DISTRICT CABLEVISION LIMITED PARTNERSHIP DC
EAST ARKANSAS CABLEVISION, INC. AR TCI OF ARKANSAS
EAST ARKANSAS INVESTMENTS, INC. CO
EASTEX MICROWAVE, INC. TX
ECP HOLDINGS, INC. OK
</TABLE>
-3-
<PAGE> 14
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ELBERT COUNTY CABLE PARTNERS, L. P. CO TCI OF COLORADO
FAB COMMUNICATIONS, INC. OK
FOUR FLAGS CABLE TV MI
FOUR FLAGS CABLEVISION MI
GENERAL COMMUNICATIONS AND ENTERTAINMENT COMPANY INC DE
GILL BAY INTERCONNECT, INC. CA
GREATER BIRMINGHAM INTERCONNECT AL GBI
GREATER PORTLAND INTERCONNECT OR
HALCYON COMMUNICATIONS LIMITED PARTNERSHIP OK TCI CABLEVISION OF EAST OKLAHOMA
TCI OF ARKANSAS
HALCYON COMMUNICATIONS PARTNERS OK
HARBOR COMMUNICATIONS JOINT VENTURE WA
HARRIS COUNTY CABLE TV, INC. VA
HAWKEYE COMMUNICATIONS OF CLINTON, INC. IA
HERITAGE CABLE PARTNERS, INC. IA
HERITAGE CABLEVISION ASSOCIATES, A LIMITED PARTNERSHIP IA TCI CABLE ADVERTISING
TCI OF BEDFORD
TCI OF MICHIGAN
HERITAGE CABLEVISION OF CALIFORNIA, INC. DE TCI CABLEVISION OF SAN JOSE
HERITAGE CABLEVISION OF COLORADO, INC. CO TCI CABLEVISION OF SOUTHERN COLORADO, INC.
HERITAGE CABLEVISION OF DALLAS, INC. IA
HERITAGE CABLEVISION OF DELAWARE, INC. DE TCI CABLEVISION OF NEW CASTLE COUNTY
TCI OF FORT COLLINS
HERITAGE CABLEVISION OF MAINE II, INC. ME
HERITAGE CABLEVISION OF MASSACHUSETTS, INC. MA TCI CABLEVISION OF ANDOVER
HERITAGE CABLEVISION OF SOUTH EAST MASSACHUSETTS, INC. MA
HERITAGE CABLEVISION OF TENNESSEE, INC. TN TCI OF COLORADO
HERITAGE CABLEVISION OF TEXAS, INC. IA TCI CABLEVISION OF SOUTH TEXAS
HERITAGE CABLEVISION, INC. (IA) IA TCI OF THE HEARTLANDS
HERITAGE CABLEVISION, INC. (TX) TX
</TABLE>
-4-
<PAGE> 15
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
HERITAGE CABLEVUE, INC. DE TCI CABLEVISION OF NEW ENGLAND
HERITAGE COMMUNICATIONS PRODUCTS CORP. IA
HERITAGE COMMUNICATIONS, INC. IA
HERITAGE INVESTMENTS, INC. IA
HERITAGE ROC HOLDINGS CORP. IA
HERITAGE/INDIANA CABLEVISION, INC. IA
HILLCREST CABLEVISION COMPANY OH
HOME SPORTS NETWORK, INC. CO
INDEPENDENCE CABLE TV COMPANY MI TCI CABLEVISION OF OAKLAND COUNTY, INC.
INTERMEDIA PARTNERS CA
INTERNATIONAL TELEMETER CORPORATION (NV) NV
IR-TCI PARTNERS II. L.P. CA
IR-TCI PARTNERS III, L.P. CA
IR-TCI PARTNERS IV, L.P. CO
IR-TCI PARTNERS V, L.P. CO
KANSAS CITY FIBER NETWORK, L.P. DE
KAUAI CABLEVISION
KNOX CABLE T.V., INC. TN
KTMA-TV INC. TX
LASALLE TELECOMMUNICATIONS, INC. IL CHICAGO CABLE TV-IV
LAWRENCE COUNTY CABLE PARTNERS CO
LIBERTY COMMAND II, INC. CO
LIBERTY COMMAND, INC. CO
LIBERTY OF NORTHERN INDIANA, INC. DE
LIBERTY-CSI, INC. CO
LVO CABLE PROPERTIES, INC. OK
LVOC MANAGEMENT, INC. OK
MAJORCO SUB, L.P. DE
MAJORCO, L.P. DE
MARGATE VIDEO SYSTEMS, INC. FL TCI OF NORTH BROWARD
</TABLE>
-5-
<PAGE> 16
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS HANDLING SERVICES, INC CO WESTERN COMMUNICATIONS MATERIALS
HANDLING SERVICE
MELANIE CABLE PARTNERS, L.P.
MIAMI TELE-COMMUNICATIONS, INC. FL
MICRO-RELAY, INC. MD
MID-KANSAS, INC. KS
MILE HI CABLE PARTNERS, L.P. CO TCI OF COLORADO
MINORCO, L.P. DE
MISSISSIPPI CABLEVISION, INC. MS TCI OF NORTH MISSISSIPPI
MOUNTAIN CABLE NETWORK, INC. NV MOUNTAIN CABLE ADVERTISING
MOUNTAIN STATES GENERAL PARTNER CO. CO
MOUNTAIN STATES LIMITED PARTNER CO. CO
MOUNTAIN STATES VIDEO CO TCI OF COLORADO
MOUNTAIN STATES VIDEO COMMUNICATIONS CO., INC. CO TCI OF COLORADO
MOUNTAIN STATES VIDEO, INC. CO TCI OF COLORADO
MSV SUBSIDIARY, INC. CO
MUSKEGON CABLE TV CO. MI TCI CABLEVISION OF GREATER MICHIGAN, INC.
NARRAGANSETT CABLEVISION CORPORATION RI HERITAGE CABLEVISION OF NARRAGANSETT
NEWPORT NEWS CABLEVISION ASSOCIATES, L.P. CO
NEWPORT NEWS CABLEVISION, LTD. CO UNITED ARTISTS CABLE OF NEWPORT NEWS
NEWTELCO, L.P. DE
NHT PARTNERSHIP NY
NORTHERN VIDEO, INC. MN TCI OF CENTRAL MINNESOTA
NORTHWEST CABLE ADVERTISING NY TV MART
NORTHWEST ILLINOIS CABLE CORPORATION DE
NORTHWEST ILLINOIS TV CABLE CO. DE TCI CABLEVISION OF GALESBURG/MONMOUTH
NORTHWEST ILLINOIS TV CABLE COMPANY IL
OHIO CABLEVISION NETWORK, INC. IA TCI CABLEVISION OF NORTHWESTERN OHIO
OTTUMWA CABLEVISION, INC. IA TCI OF SOUTHERN IOWA
PACIFIC MICROWAVE JOINT VENTURE CA
</TABLE>
-6-
<PAGE> 17
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
PARKLAND CABLEVISION, INC. FL TCI OF NORTH BROWARD
PHILLIECO, L.P. DE
PITTSBURG CABLE TV, INC. KS TCI OF PITTSBURG
PREVIEW MAGAZINE CORPORATION NY
PRIMESTAR PARTNERS L.P. DE
ROBERT FULK, LTD. DE
ROBIN CABLE SYSTEMS OF SIERRA VISTA, L.P. CA TCI OF SOUTHERN ARIZONA
ROBIN CABLE SYSTEMS OF TUCSON, AN ARIZONA LIMITED PARTNER AZ TCI OF TUCSON
S/D CABLE PARTNERS, LTD. CO TCI CABLEVISION OF PRINCETON, L.P.
TCI CABLEVISION OF ROCK FALLS, L.P.
SAN LEANDRO CABLE TELEVISION, INC. CA TCI CABLEVISION OF HAYWARD
SANTA FE CABLEVISION CO. NM
SANTA FE CABLEVISION COMPANY NM TCI CABLEVISION OF SANTA FE
SATELLITE SERVICES OF PUERTO RICO, INC. DE
SATELLITE SERVICES, INC. DE
SCC PROGRAMS, INC. IL
SEMAPHORE PARTNERS CO
SILVER SPUR LAND AND CATTLE CO. WY SILVER SPUR RANCH
SONIC COMMUNICATIONS SAN LUIS OBISPO AND SANTA CRUZ
SONIC PARTNERS, L.P.
SOUTH CHICAGO CABLE, INC. IL CHICAGO CABLE TV-V
SOUTH FLORIDA CABLE ADVERTISING FL
SOUTHWEST TELECABLE, INC. TX
SOUTHWEST WASHINGTON CABLE, INC. WA
SSI 2, INC. NV
ST. LOUIS TELE-COMMUNICATIONS, INC. MO TCI CABLEVISION OF ST. LOUIS
TAMPA BAY INTERCONNECT FL TBI
TCG CHICAGO NY
TCG CONNECTICUT NY
TCG DALLAS NY
</TABLE>
-7-
<PAGE> 18
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCG DALLAS SYSTEMS NY
TCG DETROIT NY
TCG ILLINOIS NY
TCG LOS ANGELES NY
TCG PARTNERS NY
TCG PHOENIX NY
TCG PITTSBURGH NY
TCG SAN FRANCISCO NY
TCG SEATTLE NY
TCG SOUTH FLORIDA NY
TCG ST. LOUIS NY
TCI AOL, INC. CO
TCI BATON ROUGE VENTURES, INC. CO
TCI CABLE ADNET, INC. CO
TCI CABLE MANAGEMENT CORPORATION CO
TCI CABLEPCS, INC. CO
TCI CABLEPHONE, INC. CO
TCI CABLEVISION ASSOCIATES, INC. DE
TCI CABLEVISION OF ALABAMA, INC. AL
TCI CABLEVISION OF ARIZONA, INC. AZ
TCI CABLEVISION OF BAKER/ZACHARY, INC. DE TCI OF LOUISIANA
TCI CABLEVISION OF CALIFORNIA, INC. CA
TCI CABLEVISION OF CANON CITY, LTD. CO
TCI CABLEVISION OF COLORADO, INC. CO TCI OF COLORADO
TCI CABLEVISION OF EAST SAN FERNANDO VALLEY, L.P. CO
TCI CABLEVISION OF DALLAS, INC. TX
TCI CABLEVISION OF FLORIDA, INC. FL TCI OF COLORADO
TCI SOUTHEAST - SOUTH REGION
TCI CABLEVISION OF GEORGIA, INC. GA TCI OF LOUISIANA
TCI CABLEVISION OF GREAT FALLS, INC. DE
</TABLE>
-8-
<PAGE> 19
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI CABLEVISION OF IDAHO, INC. ID
TCI CABLEVISION OF KENTUCKY, INC. KY TCI CABLE ADVERTISING
TCI CABLEVISION OF KIOWA, INC. CO
TCI CABLEVISION OF LEESVILLE, INC. DE
TCI CABLEVISION OF MARYLAND, INC. MD
TCI CABLEVISION OF MASSACHUSETTS, INC. MA
TCI CABLEVISION OF MICHIGAN, INC. MI TCI CABLE ADVERTISING
TCI CABLEVISION OF MINNESOTA, INC. MN TCI OF MINNESOTA
TCI CABLEVISION OF MISSOURI, INC. MO
TCI CABLEVISION OF MONTANA, INC. MT TCI CABLE ADVERTISING
TCI CABLEVISION OF NEBRASKA, INC. NE
TCI CABLEVISION OF NEVADA, INC. NV
TCI CABLEVISION OF NEW HAMPSHIRE, INC. NH
TCI CABLEVISION OF NEW MEXICO, INC. NM
TCI CABLEVISION OF NORTH CAROLINA, INC. NC
TCI CABLEVISION OF NORTH CENTRAL KENTUCKY, INC. KY
TCI CABLEVISION OF OHIO, INC. OH TCI CABLE ADVERTISING
TCI CABLEVISION OF OKANOGAN VALLEY, INC. WA
TCI CABLEVISION OF OKLAHOMA, INC. OK
TCI CABLEVISION OF OREGON, INC. OR
TCI CABLEVISION OF PASCO COUNTY FL
TCI CABLEVISION OF PINELLAS COUNTY, INC. FL
TCI CABLEVISION OF SIERRA VISTA II, INC. CO
TCI CABLEVISION OF SIERRA VISTA, INC. CO
TCI CABLEVISION OF SOUTH DAKOTA, INC. SD
TCI CABLEVISION OF SOUTHWEST WASHINGTON, INC. WA
TCI CABLEVISION OF ST. BERNARD, INC. LA TCI OF LOUISIANA
TCI CABLEVISION OF TEXAS, INC. TX
TCI CABLEVISION OF TUCSON II, INC. CO
TCI CABLEVISION OF TUCSON, INC. CO
</TABLE>
-9-
<PAGE> 20
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI CABLEVISION OF TWIN CITIES, INC. WA
TCI CABLEVISION OF UTAH, INC. UT
TCI CABLEVISION OF VERMONT, INC. DE
TCI CABLEVISION OF WASHINGTON, INC. WA PACCOM
TCI CABLEVISION OF WISCONSIN, INC. WI
TCI CABLEVISION OF WYOMING, INC. WY
TCI CABLEVISION OF YAKIMA VALLEY, INC. WA
TCI CABLEVISION OF YAKIMA, INC. WA
TCI CENTRAL, INC. DE
TCI COMMUNICATIONS, INC. DE TCI CABLEVISION OF DURANGO, INC.
TCI DEVELOPMENT CORPORATION CO
TCI EAST, INC. DE
TCI FLEET SERVICES, INC. CO
TCI GREAT LAKES, INC. DE
TCI HITS, INC. CO
TCI HOLDINGS II, INC. CO
TCI INVESTMENTS, INC. CO
TCI IP, INC. DE
TCI IP-1, INC. CO
TCI K-1, INC. CO
TCI LIBERTY, INC. DE
TCI MATERIALS MANAGEMENT, INC. CO
TCI MICROWAVE, INC. DE
TCI NETWORK SERVICES DE
TCI NEWS, INC. CO
TCI NEWS-DAMN RIGHT, INC. CO
TCI NEWS-PRESIDENTIAL, INC. CO
TCI NORTH CENTRAL REGION
TCI NORTH CENTRAL, INC. DE
TCI NORTHEAST, INC. DE
</TABLE>
-10-
<PAGE> 21
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI OF ARKANSAS, INC. AR
TCI OF ARLINGTON, INC. TX
TCI OF AUBURN, INC. DE
TCI OF BECKLEY, INC. WV
TCI OF BLOOMINGTON/NORMAL, INC. VA
TCI OF CLEVELAND, INC. TN
TCI OF CONNECTICUT, INC. CT
TCI OF COUNCIL BLUFFS, INC. IA
TCI OF D.C., INC. DC
TCI OF DECATUR, INC. AL
TCI OF DELAWARE, INC. DE
TCI OF GREENSBURG CO
TCI OF GREENVILLE, INC. SC
TCI OF HAWAII, INC. CO
TCI OF HOUSTON, INC. CO
TCI OF ILLINOIS, INC. IL TCI CABLE ADVERTISING
TCI CABLEVISION OF DUBUQUE, INC.
TCI OF INDIANA, INC. IN TCI CABLE ADVERTISING
TCI MIDWEST REGION
TCI OF IOWA, INC. IA TCI CABLEVISION OF DUBUQUE, INC.
TCI SOUTHEAST - NORTHWEST REGION
TCI OF KANSAS, INC. KS TCI CABLEVISION OF STILLWATER
TCI CABLEVISION OF TULSA
TCI OF KOKOMO, INC. CO
TCI OF LEE COUNTY, INC. AL
TCI OF LEXINGTON, INC KY
TCI OF MAINE, INC. ME
TCI OF MISSISSIPPI, INC. MS
TCI OF NEW JERSEY, INC. (NV) NV
</TABLE>
-11-
<PAGE> 22
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI OF NEW YORK, INC. NY TCI NORTHEAST REGION
TCI OF NORTH BROWARD, INC. FL
TCI OF NORTH CENTRAL KENTUCKY, INC. KY
TCI OF NORTH DAKOTA, INC. ND
TCI OF NORTHERN NEW JERSEY, INC. WA TCI CABLEVISION OF CENTRAL COLORADO
TCI CABLEVISION OF NORTHEASTERN OREGON
TCI CABLEVISION OF SOUTHEAST WASHINGTON
TCI CABLEVISION OF THE TREASURE COAST
TCI OF OVERLAND PARK, INC. KS
TCI OF PENNSYLVANIA, INC. PA TCI CABLE ADVERTISING
TCI EAST REGION
TCI OF CALIFORNIA
TCI OF PIEDMONT, INC. SC
TCI OF PLANO, INC. TX
TCI OF PRINCETON, INC. WV
TCI OF RACINE, INC. WI
TCI OF RADCLIFF, INC. KY
TCI OF RHODE ISLAND, INC. RI
TCI OF RICHARDSON, INC. TX
TCI OF ROANOKE RAPIDS, INC. VA
TCI OF SEATTLE, INC. DE
TCI OF SELMA, INC. AL
TCI OF SOUTH CAROLINA, INC. SC
TCI OF SOUTHERN MAINE, INC. ME
TCI OF SOUTHERN MINNESOTA, INC. DE TCI OF SOUTHERN MINNESOTA
TCI OF SOUTHERN WASHINGTON WA
TCI OF SPARTANBURG, INC. SC
TCI OF SPRINGFIELD, INC. MO
TCI OF TACOMA, INC. DE
TCI OF TENNESSEE, INC. TN
</TABLE>
-12-
<PAGE> 23
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI OF THE BLUFFLANDS, INC. DE TCI CABLE OF LA CROSSE
TCI OF SOUTHERN MINNESOTA
TCI OF TUALATIN VALLEY, INC. OR
TCI OF VANCOUVER, INC. CO
TCI OF VIRGINIA, INC. VA
TCI OF WATERTOWN, INC. IA
TCI OF WEST VIRGINIA, INC. WV TCI CABLE ADVERTISING
TCI OF WYTHEVILLE, INC. VA
TCI OSCAR I, INC. CO
TCI PACIFIC COMMUNICATIONS, INC.
TCI PACIFIC HOLDINGS, INC.
TCI PACIFIC MICROWAVE, INC. CO PACIFIC MICROWAVE
TCI PACIFIC, INC. DE
TCI PRIVATE VENTURES, INC. CO
TCI REALTY INVESTMENTS COMPANY DE
TCI SOUTHEAST DIVISIONAL HEADQUARTERS, INC. AL
TCI SOUTHEAST, INC. DE
TCI STS, INC. CO
TCI STS-MTVI, INC. TX
TCI TELEPHONY SERVICES, INC. CO
TCI TELEPHONY SERVICES OF CALIFORNIA, INC. CO
TCI TELEPHONY SERVICES OF CONNECTICUT, INC. CO
TCI TELEPHONY SERVICES OF ILLINOIS, INC. CO
TCI TELEPHONY SERVICES OF MINNESOTA, INC. CO
TCI TELEPHONY SERVICES OF WISCONSIN, INC. CO
TCI TELEPORT OF BALTIMORE, INC. MD
TCI TELEPORT OF BOSTON, INC. MA
TCI TELEPORT OF CHICAGO, INC. IL
TCI TELEPORT OF CHICAGO-SWITCH, INC. IL
TCI TELEPORT OF DALLAS, INC. TX
</TABLE>
-13-
<PAGE> 24
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI TELEPORT OF DALLAS-SWITCH, INC. TX
TCI TELEPORT OF DENVER, INC. CO
TCI TELEPORT OF DETROIT, INC. MI
TCI TELEPORT OF HARTFORD, INC. CT
TCI TELEPORT OF HOUSTON, INC. TX
TCI TELEPORT OF INDIANAPOLIS, INC. CO
TCI TELEPORT OF LOS ANGELES, INC. CA
TCI TELEPORT OF MIAMI, INC. FL
TCI TELEPORT OF PHOENIX, INC. AZ
TCI TELEPORT OF PITTSBURGH, INC. PA PENN ACCESS CORPORATION
TCI TELEPORT OF PROVIDENCE, INC. CO
TCI TELEPORT OF SAN FRANCISCO, INC. CA
TCI TELEPORT OF SEATTLE,INC. WA
TCI TELEPORT OF ST. LOUIS, INC. MO
TCI TELEPORT PARTNERS, INC. CO
TCI TELEPORT, INC. CO
TCI TKR CABLE I, INC DE
TCI TKR CABLE II, INC. DE
TCI TKR LIMITED PARTNERSHIP CO
TCI TKR OF ALABAMA, INC. DE TCI OF ALABAMA
TCI TKR OF CENTRAL FLORIDA, INC. FL TCI OF CENTRAL FLORIDA
TCI TKR OF DALLAS, INC. DE
TCI TKR OF FLORIDA, INC. DE
TCI TKR OF GEORGIA, INC. DE TCI OF GEORGIA
TCI TKR OF HOLLYWOOD, INC. DE TCI OF HOLLYWOOD
TCI TKR OF HOUSTON, INC. TX TCI CABLEVISION OF HOUSTON
TCI TKR OF JEFFERSON COUNTY, INC. KY TKR CABLE OF GREATER LOUISVILLE, INC.
TCI TKR OF KENTUCKY, INC. DE
TCI TKR OF METRO DADE, INC. DE
TCI TKR OF NORTHERN KENTUCKY, INC. KY MADISON AVENUE VIDEO PRODUCTIONS
</TABLE>
-14-
<PAGE> 25
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TKR CABLE OF NORTHERN KENTUCKY, INC.
TCI TKR OF SOUTH DADE, INC. FL TCI OF SOUTH DADE
TCI TKR OF SOUTH FLORIDA, INC. DE TCI OF SOUTH FLORIDA
TCI TKR OF SOUTHEAST TEXAS, INC. DE
TCI TKR OF SOUTHERN KENTUCKY, INC. DE TKR CABLE OF SOUTHERN KENTUCKY, INC.
TCI TKR OF THE GULF PLAINS, INC. DE TCI OF THE GULF PLAINS
TCI TKR OF THE METROPLEX, INC. TX TCI CABLEVISION OF THE METROPLEX
TCI TKR OF WYOMING, INC. WY
TCI TKR, INC. DE
TCI UA I, INC. CO
TCI UA, INC. DE
TCI VENTURES FIVE, INC. CO
TCI VENTURES FOUR, INC. CO
TCI VENTURES, INC. CO
TCI WASHINGTON ASSOCIATES, L.P. DE
TCI WEST, INC. DE
TCI WOODLANDS VENTURES, INC. CO
TCI-UC, INC. DE
TCI/CA ACQUISITION SUB CORP. CO
TCI/CI MERGER SUB CORP. DE
TCID DATA TRANSPORT, INC. CO
TCID KHC, INC. CO
TCID NEA, INC. CO
TCID NETWORKS, INC. DE
TCID OF CARSON, INC. CA
TCID OF CHICAGO, INC. IL
TCID OF FLORIDA, INC. FL TCI CABLEVISION OF PASCO COUNTY
TCID OF MICHIGAN, INC. NV
TCID OF SOUTH CHICAGO, INC. IL
TCID PARTNERS II, INC. CO
</TABLE>
-15-
<PAGE> 26
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCID PARTNERS, INC. CO
TCID VFC, INC. CO
TCID VIDEO ENTERPRISES, INC. CO
TCID X*PRESS, INC. CO
TCID-COMMERCIAL MUSIC, INC. CO
TCID-ICP III, INC. CO
TCID-IP III, INC. CO
TCID-IP IV, INC. CO
TCID-IP V, INC. CO
TCID-SVHH, INC. DE
TCIP, INC. CO
TELE-COMMUNICATIONS OF COLORADO, INC. CO TCI COLORADO COMMUNITY CABLE
TELEVISION, INC.
TELE-COMMUNICATIONS OF SOUTH SUBURBIA, INC. IL
TELECABLE KCFN HOLDING CORP. VA
TELECABLE OF COLUMBUS, INC. GA
TELECOMMUNICATIONS CABLE SYSTEMS, INC. LA TCI OF LOUISIANA
TCI SOUTHEAST - SOUTHWEST REGION
TELENOIS, INC. IL
TELEVENTS GROUP JOINT VENTURE CO TCI OF CENTRAL IOWA
TELEVENTS GROUP, INC. NV
TELEVENTS OF COLORADO, INC. CO
TELEVENTS OF EAST COUNTY, INC. WY TCI CABLEVISION OF EAST COUNTY
TELEVENTS OF FLORIDA, INC. WY
TELEVENTS OF POWDER RIVER, INC. WY
TELEVENTS OF SAN JOAQUIN, INC. WY TCI CABLEVISION OF SAN JOAQUIN
TELEVENTS OF WYOMING, INC. WY
TELEVENTS, INC. NV TCI CABLEVISION OF CONTRA COSTA COUNTY
TELEVESTER, INC. DE
TELEVISION CABLE SERVICE, INC. TX TCI CABLEVISION OF ABILENE
</TABLE>
-16-
<PAGE> 27
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI CABLEVISION OF EAST TEXAS
TCI CABLEVISION OF PERRYTON
TCI CABLEVISION OF WEST TEXAS
TEMPO CABLE, INC OK TCI CABLEVISION OF CENTRAL OKLAHOMA, INC.
TCI CABLEVISION OF NOCONA
TCI CABLEVISION OF OKLAHOMA (TEMPO), INC.
TCI OF ARKANSAS (TEMPO), INC.
TEMPO DEVELOPMENT CORPORATION OK
TEMPO ENTERPRISES, INC. OK TEMPO ENTERPRISES, INC. (OF OKLAHOMA)
TEMPO SATELLITE, INC. OK
TEMPO TELEVISION, INC. OK
THE CHICAGO CABLE INTERCONNECT IL GCCI
THE DETROIT CABLE INTERCONNECT L.P. DE THE DETROIT CABLE INTERCONNECT
LIMITED PARTNERSHIP
THE GREATER PHILADELPHIA CABLE INTERCONNECT PA PCA
PHILADELPHIA CABLE ADVERTISING
TRANS-MUSKINGUM, INCORPORATED WV
TRIBUNE COMPANY CABLE OF MICHIGAN, INC. DE TRIBUNE/UNITED CABLE OF OAKLAND COUNTY
TRIBUNE-UNITED CABLE OF OAKLAND COUNTY MI TCI CABLEVISION OF OAKLAND COUNTY, INC.
TULSA CABLE TELEVISION, INC. OK TCI CABLEVISION OF TULSA
TV MART
UA THINK, INC. CO
UA-COLUMBIA ALPINE TOWER, INC. NJ
UA-COLUMBIA CABLEVISION OF MASSACHUSETTS, INC. MA TCI CABLEVISION OF NORTH
ATTLEBORO/TAUNTON
UA-COLUMBIA CABLEVISION OF NEW JERSEY, INC. NJ
UA-COLUMBIA CABLEVISION OF WESTCHESTER, INC. NY TCI OF NORTHERN NEW JERSEY
UACC MIDWEST, INC. DE TCI CABLE ADVERTISING
TCI CABLEVISION OF ASHEVILLE
</TABLE>
-17-
<PAGE> 28
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI CABLEVISION OF CENTRAL ILLINOIS
TCI CABLEVISION OF DECATUR
TCI CABLEVISION OF MERCED COUNTY
TCI CABLEVISION OF NORTHSHORE
TCI CABLEVISION OF SANTA CRUZ COUNTY
TCI CABLEVISION OF TRACY
TCI CABLEVISION OF VACAVILLE
TCI CABLEVISION OF WALNUT CREEK
TCI CABLEVISION OF WEST MICHIGAN, INC.
TCI OF EVANSVILLE
TCI OF SOUTH MISSISSIPPI
UAII MERGER CORP. DE
UAII SUB NO. 24, INC. DE
UATC MERGER CORP. NY
UCT AIRCRAFT, INC. CO
UCT VIDEO, INC. CO
UCTC LP COMPANY DE
UCTC OF BALTIMORE, INC. DE
UCTC OF LOS ANGELES COUNTY, INC. DE TCI CABLEVISION OF LOS ANGELES COUNTY
UNITED ADVERTISING NETWORK, INC. CO
UNITED ARTISTS BROADCAST PROPERTIES, INC. DE
UNITED ARTISTS CABLE HOLDINGS, INC. CO
UNITED ARTISTS CABLE INVESTMENTS, INC. DE
UNITED ARTISTS CABLESYSTEMS CORPORATION DE
UNITED ARTISTS ENTERTAINMENT COMPANY DE
UNITED ARTISTS HOLDINGS, INC. DE
UNITED ARTISTS INVESTMENTS, INC. CO
UNITED ARTISTS K-1 INVESTMENTS, INC. CO
UNITED ARTISTS OPERATOR SERVICES CORPORATION CO
UNITED ARTISTS PAYPHONE CORPORATION CO
</TABLE>
-18-
<PAGE> 29
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED ARTISTS PREFERRED INVESTMENT, INC. CO
UNITED ARTISTS REPUBLIC INVESTMENTS, INC. CO
UNITED ARTISTS SATELLITE, INC. CO
UNITED ARTISTS TELECOMMUNICATIONS, INC. DE
UNITED CABLE AD-LINK, INC. CO
UNITED CABLE ADVERTISING, INC. CO
UNITED CABLE INVESTMENT OF BALTIMORE, INC. MD
UNITED CABLE PRODUCTIONS, INC. CO
UNITED CABLE REALTY CO. OF CALIFORNIA, INC. CO
UNITED CABLE SHOPPING CHANNEL, INC. CO
UNITED CABLE T.V. OF OAKLAND COUNTY, INC. MI TCI CABLEVISION OF OAKLAND COUNTY, INC.
UNITED CABLE TELEVISION ACQUISITION CORPORATION CO TCI OF COLORADO
UNITED CABLE TELEVISION CORP. OF EASTERN CONNECTICUT CT TCI CABLEVISION OF CENTRAL CONNECTICUT
UNITED CABLE TELEVISION CORPORATION DE TCI CABLE OF THE MIDLANDS
TCI CABLEVISION OF TREASURE VALLEY
UNITED CABLE TELEVISION CORPORATION OF MICHIGAN MI TCI CABLEVISION OF WOODHAVEN, INC.
UNITED CABLE TELEVISION CORPORATION OF NORTHERN ILLINOIS IL TCI CABLEVISION OF NORTHERN ILLINOIS
UNITED CABLE TELEVISION FINANCING CORPORATION CO
UNITED CABLE TELEVISION INVESTMENTS, LTD. CO
UNITED CABLE TELEVISION OF ALAMEDA, INC. CA TCI CABLEVISION OF ALAMEDA
UCT OF ALAMEDA, INC. #2
UNITED CABLE TELEVISION OF BALDWIN PARK, INC. CO TCI CABLEVISION OF LOS ANGELES COUNTY
UNITED CABLE TELEVISION OF BALTIMORE LIMITED PARTNERSHIP CO TCI COMMUNICATIONS OF BALTIMORE
UNITED CABLE TELEVISION OF BOSSIER CITY, INC. DE TCI OF LOUISIANA
UNITED CABLE TELEVISION OF CALIFORNIA, INC. CA TCI CABLEVISION OF CUPERTINO/LOS ALTOS
TCI CABLEVISION OF DAVIS
UNITED CABLE TELEVISION OF CHASKA, INC. CO
UNITED CABLE TELEVISION OF COLORADO, INC. CO TCI OF COLORADO
UNITED CABLE TELEVISION OF CUPERTINO, INC. CA TCI CABLEVISION OF CUPERTINO/LOS ALTOS
UNITED CABLE TELEVISION OF EASTERN SHORE, INC DE TCI CABLEVISION OF EASTERN SHORE
</TABLE>
-19-
<PAGE> 30
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED CABLE TELEVISION OF HILLSBOROUGH, INC. CO TCI CABLEVISION OF HAYWARD
UNITED CABLE TELEVISION OF ILLINOIS VALLEY, INC. IL TCI CABLEVISION OF ILLINOIS VALLEY
UNITED CABLE TELEVISION OF LOS ANGELES, INC. CA TCI CABLEVISION OF LOS ANGELES COUNTY
UNITED CABLE TELEVISION OF MID-MICHIGAN, INC. DE TCI CABLEVISION OF MID-MICHIGAN, INC.
UNITED CABLE TELEVISION OF NORTHERN INDIANA, INC. DE TCI OF NORTHERN INDIANA
UNITED CABLE TELEVISION OF OAKLAND COUNTY, LTD. CO
UNITED CABLE TELEVISION OF PICO RIVERA, INC. CO
UNITED CABLE TELEVISION OF SANTA CRUZ, INC. CO TCI CABLEVISION OF SANTA CRUZ COUNTY
UNITED CABLE TELEVISION OF SARPY COUNTY, INC. NE TCI CABLE OF THE MIDLANDS
UNITED CABLE TELEVISION OF SCOTTSDALE, INC. AZ TCI CABLE OF SCOTTSDALE
UNITED CABLE TELEVISION OF SOUTHERN ILLINOIS, INC. DE TCI CABLEVISION OF SOUTHERN ILLINOIS
UNITED CABLE TELEVISION OF WESTERN COLORADO, INC. CO TCI CABLEVISION OF WESTERN COLORADO, INC.
UNITED CABLE TELEVISION REAL ESTATE CORPORATION CO
UNITED CABLE TELEVISION SERVICES CORPORATION OK TCI CABLEVISION OF CENTRAL CONNECTICUT
UNITED CABLE TELEVISION SERVICES OF COLORADO, INC. CO
UNITED CABLE VIDEO INVESTMENT, INC. CO
UNITED CARPHONE CORPORATION CO
UNITED CATV, INC. MD TCI CABLEVISION OF ANNAPOLIS
UNITED CORPORATE COMMUNICATIONS COMPANY CO
UNITED ENTERTAINMENT CORPORATION CO
UNITED HOCKEY, INC. CO
UNITED MICROWAVE CORPORATION DE
UNITED OF OAKLAND, INC DE TCI CABLEVISION OF OAKLAND COUNTY, INC.
UNITED PAGING CORPORATION CO
UNITED TRIBUNE PAGING CORPORATION CO
UNITED'S HOME VIDEO CENTERS, INC. CO
UNIVERSAL TELECOM, INC. MD
UPPER VALLEY TELECABLE COMPANY, INC. ID TCI CABLEVISION OF IDAHO (UVTC), INC.
UTI PURCHASE COMPANY CO
VACATIONLAND CABLEVISION, INC. WI TCI OF SOUTH CENTRAL WISCONSIN
</TABLE>
-20-
<PAGE> 31
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
VALLEY CABLE TV, INC. TX
WALTHAM TELE-COMMUNICATIONS MA TCI CABLEVISION OF WALTHAM
WALTHAM TELE-COMMUNICATIONS, INC. CO
WASATCH COMMUNITY T.V., INCORPORATED UT
WENTRONICS, INC. NM TCI CABLEVISION OF CASPER
TCI CABLEVISION OF GALLUP
TCI CABLEVISION OF MOAB
TCI CABLEVISION OF WESTERN COLORADO, INC.
WESTARK CABLE
WESTERN COMMUNITY TV, INC. MT
WESTERN INFORMATION SYSTEMS, INC. CO WIS
WESTERN NEW YORK CABLE ADVERTISING L.P. NY
WESTERN SATELLITE 2, INC. CO
WESTERN TELE-COMMUNICATIONS, INC. DE NATIONAL DIGITAL TELEVISION CENTER
WESTERN TELE-COMMUNICATIONS, INC./RETAIL SALES GROUP CO
WESTMARC CABLE GROUP, INC. DE
WESTMARC CABLE HOLDING, INC. DE TCI OF CENTRAL MINNESOTA
TCI OF NORTHERN IOWA
TCI OF NORTHERN MINNESOTA
WESTMARC COMMUNICATIONS OF MINNESOTA, INC. DE TCI OF CENTRAL MINNESOTA
WESTMARC COMMUNICATIONS, INC. NV
WESTMARC DEVELOPMENT II, INC. CO
WESTMARC DEVELOPMENT III, INC. CO
WESTMARC DEVELOPMENT IV, INC. CO
WESTMARC DEVELOPMENT JOINT VENTURE CO TCI CABLE ADVERTISING
TCI CABLEVISION OF CAPE COD
TCI CABLEVISION OF GREATER MICHIGAN, INC.
TCI CABLEVISION OF NANTUCKET
TCI CABLEVISION OF NORTHWESTERN
CONNECTICUT
</TABLE>
-21-
<PAGE> 32
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
TCI TWIN STATE CABLE TV
TCI/TWIN VALLEY CABLE
WESTMARC DEVELOPMENT, INC. CO
WESTMARC REALTY, INC. CO
WIRELESSCO, L.P. DE
WTCI OF MONTANA, INC. CO
WTCI UPLINK, INC. PA
</TABLE>
-22-
<PAGE> 33
EXHIBIT 21
<TABLE>
<S> <C> <C>
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
</TABLE>
A table of the subsidiaries of Tele-Communications International, Inc. as
of March 1, 1996, is set forth below, indicating as to each the state or the
jurisdiction of incorporation or organization and the names under which such
subsidiaries do business ("Trade Names"). Subsidiaries not included in the
table are inactive and, considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary.
<TABLE>
<S> <C> <C>
ADMI, INC. DE
ANFEL - KABELKOM KABELKOMMUNIKACIOS KFT HUN
ASIAN BUSINESS NEWS (SINGAPORE) PTE LTD.
AUSTRALIS HOLDINGS LTD. AUS
AUSTRALIS INTERNATIONAL FINANCE LTD. AUS
AUSTRALIS MEDIA HOLDINGS PTY LTD. AUS
AUSTRALIS MEDIA LIMITED
AVON CABLE INVESTMENTS LIMITED UK
AVON CABLE JOINT VENTURE UK
AVON CABLE LIMITED PARTNERSHIP CO
BIRMINGHAM CABLE CORPORATION LIMITED UK
BIRMINGHAM CABLE LIMITED UK
BRAVO CLASSIC MOVIES LIMITED UK
BRESNAN INTERNATIONAL PARTNERS (CHILE), L.P. DE
BRESNAN INTERNATIONAL PARTNERS (POLAND), L.P. DE
BRESNAN INTERNATIONAL PARTNERS, COMMUNICACIONES DE CHILE CHL
CABLE ADNET OF PUERTO RICO, INC. DE CABLE ADNET
CABLE ALARMS LTD. UK
CABLE CAMDEN LIMITED UK
CABLE COMMUNICATIONS (CENTRAL LANCASHIRE) LTD UK
CABLE COMMUNICATIONS (HYDE & WYNN) LTD UK
CABLE COMMUNICATIONS (LIVERPOOL) LTD UK
CABLE COMMUNICATIONS (ST. HELENS & KNOWSLEY) LTD UK
CABLE COMMUNICATIONS (WIGAN) LTD UK
CABLE COMMUNICATIONS LIMITED UK
CABLE COMMUNICATIONS TELECOMM LTD UK
CABLE ENFIELD LIMITED UK
</TABLE>
-1-
<PAGE> 34
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C>
CABLE GUIDE LIMITED UK
CABLE HACKNEY AND ISLINGTON LIMITED UK
CABLE HARINGEY LIMITED UK
CABLE LONDON PLC UK
CABLE NORTH (FORTH DISTRICT) LTD UK
CABLE PROGRAMME PARTNERS (1) LTD UK
CABLE PROGRAMME PARTNERS-1 LIMITED PARTNERSHIP DE
CABLE SOFT NETWORK CORPORATION JPN
CABLE TELECOM LTD. UK
CABLEPHONE LTD UK
CABLEVISION S.A. ARG
CAGUAS/HUMACAO CABLE SYSTEMS NY
CAPITAL CITY CABLEVISION LIMITED SCT
CATHAY TELEVISION & COMMUNICATION COMPANY CO
CENTURY 21 CABLE COMMUNICATIONS LTD UK
CONSTRURED, S.A.
CONTINENTAL SHELF 16 LTD. UK
CORDILLERA COMUNICACIONES HOLDING LIMITADA CHL
CORDILLERA COMUNICACIONES LIMITADA CHL
COTSWOLDS CABLE LIMITED PARTNERSHIP CO
CRYSTAL PALACE RADIO LIMITED UK
CRYSTALVISION PRODUCTIONS LIMITED UK
DISCOVERY (UK) LIMITED UK
DMX-EUROPE (UK) LIMITED UK
DUNDEE CABLE AND SATELLITE LTD. UK
EDINBURGH CABLE LIMITED PARTNERSHIP CO
EDINBURGH CABLEVISION LIMITED SCT
ESTUARIES CABLE LIMITED PARTNERSHIP CO
EUROPEAN BUSINESS NETWORK LTD. UK
FIBERTEL-TCI2
FLEXIMEDIA LTD. UK
</TABLE>
-2-
<PAGE> 35
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C>
FLEXODRILLING HOLDINGS LTD. UK
FLEXTECH (1992) PLC UK
FLEXTECH BUSINESS NEWS LTD UK
FLEXTECH CHILDRENS CHANNEL LTD. UK
FLEXTECH COMMUNICATIONS LIMITED UK
FLEXTECH DISTRIBUTION LTD. UK
FLEXTECH FAMILY CHANNEL LTD. UK
FLEXTECH IVS LTD. UK
FLEXTECH (KINDERNET INVESTMENT) LTD UK
FLEXTECH MEDIA HOLDINGS LTD UK
FLEXTECH PLC UK
FLEXTECH-FLEXINVEST LTD. UK
HADJUKABELKOM KABELTELEVIZIO KFT HUN
HIERONYMOUS LIMITED SCT
HKP PARTNERS OF NEW ZEALAND, LIMITED NZL
JUPITER TELECOMMUNICATIONS CO., LTD. JPN
KINGDOM CABLEVISION LTD. UK
L - TCI ASSOCIATES DE
LONDON SOUTH CABLE PARTNERSHIP CO
LONDON SOUTH JOINT VENTURE UK
MIDDLESEX CABLE LIMITED UK
MIDLANDS CABLE COMMUNCIATIONS LTD UK
NETWORK 21 LTD. UK
NEW CENTURY TV HOLDINGS LTD UK
NORTH LONDON CHANNEL LTD. UK
NORTH WEST CABLE COMMUNICATIONS LTD UK
PAY TV MOVIES AUSTRALIA AUS
PERTH CABLE TELEVISION LTD. UK
PESCI KABELTELEVIZIO KFT HUN
PLAYBOY TV UK-BENELUX LTD. UK
SBC CABLE COMMUNICATIONS (BLACKPOOL) LTD. UK
</TABLE>
-3-
<PAGE> 36
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C>
SBC CABLECOMMS UNLIMITED COMPANY (LLC) UK
SCOTCABLE (CUMBERNAUD) LTD. UK
SCOTCABLE (DUMBARTON) LTD UK
SCOTCABLE (MOTHERWELL) LTD. UK
SCOTLAND (DUMBARTON) LTD. UK
SKY NETWORK TELEVISION, LIMITED NZL
SOUTHWESTERN BELL INTERNATIONAL HOLDINGS LTD UK
SOUTHWESTERN BELL TELECOM (EUROPE) LTD UK
TAKE FOUR BV
TAYSIDE CABLE SYSTEMS LTD. UK
TCI ARGENTINA, INC. CO
TCI CABLE HOLDING COMPANY I DE
TCI CABLE PROGRAMME PARTNERS, INC. CO
TCI CABLEVISION OF PUERTO RICO, INC. DE
TCI CATHAY TV, INC. CO
TCI CHILE, INC. CO
TCI INTERNATIONAL INVESTMENTS LTD. UK
TCI INTERNATIONAL PARTNERSHIP HOLDINGS, INC. CO
TCI JAPAN, INC. CO
TCI MOVIES AUSTRALIA PTY LIMITED AUS
TCI OF PR, INC. CO
TCI OF PUERTO RICO, INC. CO
TCI POLAND, INC. CO
TCI-AUSTRALIA, INC. CO
TCI-EUROMUSIC, INC. CO
TCI/US WEST CABLE COMMUNICATIONS GROUP CO
TCID OF NEW ZEALAND LIMITED NZL
TCID OF PUERTO RICO, INC. NV
TELE-COMMUNICATIONS DOMINICANA, INC. DE
TELEVISORA BELGRANO, S.A. ARG
TELEWEST (MOTHERWELL) LTD. UK
</TABLE>
-4-
<PAGE> 37
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C>
TELEWEST COMMUNICATIONS GROUP LTD. UK
TELEWEST COMMUNICATIONS NETWORKS LTD. UK
TELEWEST COMMUNICATIONS NETWORKS LTD. UK
TELEWEST COMMUNICATIONS PLC UK
TELEWEST EUROPE GROUP CO
TELEWEST HOLDINGS LTD. UK
TELEWEST PARLIAMENTARY HOLDINGS LIMITED UK
TELEWEST PLC UK
TELEWEST SCOTLAND HOLDINGS LTD. UK
TELEWEST SHARE TRUST LIMITED UK
TELFORD TELECOMMUNICATIONS LTD UK
TEVEL ISRAEL INTERNATIONAL COMMUNICATIONS LTD. ISR
THE CABLE CORPORATION LIMITED UK
THE PARLIAMENTARY CHANNEL LIMITED UK
THESEUS NO. 1 UK
THESEUS NO. 2 UK
TISHDORET ACHZAKOT LTD. ISR
TW HOLDINGS, L.L.C. CO
TYNESIDE CABLE LIMITED PARTNERSHIP CO
UA EUROPEAN THEATRES, INC. CO
UA-FRANCE, INC. CO
UA-UII MANAGEMENT, INC. CO
UA-UII, INC. CO
UAC EQUIPMENT LIMITED UK
UCT-NETHERLANDS, B.V. NTH
UII MANAGEMENT CO
UII-IRELAND LIMITED LIABILITY COMPANY UT
UII-IRELAND, LTD. CO
UK GOLD BROADCASTING LTD. UK
UK GOLD SERVICES LTD. UK
UK GOLD TELEVISION LTD. UK
</TABLE>
-5-
<PAGE> 38
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C>
UK LIVING LIMITED UK
UNITED ARTISTS (CHILDRENS CHANNEL) LIMITED UK
UNITED ARTISTS (LEARNING CHANNEL) LTD. UK
UNITED ARTISTS B. V. NTH
UNITED ARTISTS CABLE TELEVISION INTERNATIONAL HOLDINGS, INC. CO
UNITED ARTISTS CABLE TELEVISION INTERNATIONAL INVESTGMENTS INC CO
UNITED ARTISTS CABLE TELEVISION INTERNATIONAL LTD UK
UNITED ARTISTS CABLE TELEVISION INTERNATIONAL SERVICE COMPANY, INC. CO
UNITED ARTISTS CABLE TELEVISION UK HOLDINGS, INC. DE
UNITED ARTISTS COMMUNICATIONS (AVON) LTD. UK
UNITED ARTISTS COMMUNICATIONS (COTSWOLDS) LTD. UK
UNITED ARTISTS COMMUNICATIONS (COTSWOLDS) VENTURE UK
UNITED ARTISTS COMMUNICATIONS (LONDON SOUTH) LTD UK
UNITED ARTISTS COMMUNICATIONS (NOMINEES) LTD. UK
UNITED ARTISTS COMMUNICATIONS (NORTH EAST) LIMITED UK
UNITED ARTISTS COMMUNICATIONS (NORTH EAST) PARTNERSHIP UK
UNITED ARTISTS COMMUNICATIONS (SCOTLAND) LTD. SCT
UNITED ARTISTS COMMUNICATIONS (SCOTLAND) VENTURE UK
UNITED ARTISTS COMMUNICATIONS (SOUTH EAST) LTD. UK
UNITED ARTISTS COMMUNICATIONS (SOUTH EAST) PARTNERSHIP UK
UNITED ARTISTS COMMUNICATIONS (SOUTH THAMES ESTUARY) LTD. UK
UNITED ARTISTS COMMUNICATIONS (TYNESIDE) LTD. UK
UNITED ARTISTS ENTERTAINMENT (PROGRAMMING) LIMITED UK
UNITED ARTISTS EUROPEAN BROADCASTING LTD. UK
UNITED ARTISTS EUROPEAN HOLDINGS LIMITED UK
UNITED ARTISTS INTERNATIONAL, INC. CO
UNITED ARTISTS INVESTMENTS LTD. UK
UNITED ARTISTS PROGRAMMING INTERNATIONAL, INC. CO
UNITED ARTISTS PROGRAMMING-EUROPE, INC. CO
UNITED CABLE (LONDON SOUTH) LIMITED PARTNERSHIP CO
UNITED COMMUNICATIONS INTERNATIONAL CO
</TABLE>
-6-
<PAGE> 39
EXHIBIT 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARY ORGANIZATION TRADE NAME
- -----------------------------------------------------------------------------------------------------
<S> <C>
UNITED INTERNATIONAL INVESTMENTS CO
UNIVENT'S S.A.
VIDEOPOLE FRA
WINDSOR ALARMS LTD. UK
WINDSOR TELEVISION LIMITED UK
</TABLE>
-7-
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56271, 33-57177, 33-57399, 33- 57409, 33-57469, 33-59121, 33-63139,
33-64127, 33-65479, 33-65493, 33-65497 and 333-00765) on Form S-3, the
Registration Statement (No. 33-65311) on Form S-4, and the Registration
Statements (Nos. 33-44543, 33-54263, 33-57635, 33-60839, 33- 60843, 33-64827,
33-64829, 33-64831, 33-65483, 33-65485 and 33-65487) on Form S-8 of
Tele-Communications, Inc. of our reports dated March 18, 1996, relating to 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 schedules, which
reports appear in the December 31, 1995 annual report on Form 10-K of
Tele-Communications, Inc.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Denver, Colorado
March 26, 1996
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56271, 33-57177, 33-57399, 33- 57409, 33-57469, 33-59121, 33-63139,
33-64127, 33-65479, 33-65493, 33-65497 and 333-00765) on Form S-3, the
Registration Statement (No. 33-65311) on Form S-4, and the Registration
Statements (Nos. 33-44543, 33-54263, 33-57635, 33-60839, 33- 60843, 33-64827,
33-64829, 33-64831, 33-65483, 33-65485 and 33-65487) on Form S-8 of
Tele-Communications, Inc. of our report dated March 18, 1996, relating to 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 report
appears in the December 31, 1995 annual report on Form 10-K of Tele-
Communications, Inc.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Denver, Colorado
March 26, 1996
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56271, 33-57177, 33-57399, 33- 57409, 33-57469, 33-59121, 33-63139,
33-64127, 33-65479, 33-65493, 33-65497 and 333-00765) on Form S-3, the
Registration Statement (No. 33-65311) on Form S-4, and the Registration
Statements (Nos. 33-44543, 33-54263, 33-57635, 33-60839, 33- 60843, 33-64827,
33-64829, 33-64831, 33-65483, 33-65485 and 33-65487) on Form S-8 of
Tele-Communications, Inc. of our report dated March 18, 1996, relating to 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
report appears in the December 31, 1995 annual report on Form 10-K of Tele-
Communications, Inc.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Denver, Colorado
March 26, 1996
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56271, 33-57177, 33-57399, 33- 57409, 33-57469, 33-59121, 33-63139,
33-64127, 33-65479, 33-65493, 33-65497 and 333-00765) on Form S-3, the
Registration Statement (No. 33-65311) on Form S-4, and the Registration
Statements (Nos. 33-44543, 33-54263, 33-57635, 33-60839, 33- 60843, 33-64827,
33-64829, 33-64831, 33-65483, 33-65485 and 33-65487) on Form S-8 of
Tele-Communications, Inc. of our report dated March 18, 1994, relating to the
consolidated statement of operations, stockholders' equity, and cash flows of
Liberty Media Corporation and subsidiaries for the year ended December 31, 1993,
which report appears in the December 31, 1995 annual report on Form 10-K of
Tele-Communications, Inc.
Our report refers to a change in the method of accounting for income taxes in
1993. Our report also contains an explanatory paragraph that states that the
former parent of Liberty Media Corporation contributed certain assets in
exchange for certain preferred stock, resulting in the assets being accounted
for at predecessor cost basis.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Denver, Colorado
March 26, 1996
<PAGE> 1
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
TeleWest Communications plc
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56271, 33-57177, 33-57399, 33-57409, 33-57469, 33-59121, 33-63139,
33-64127, 33-65479, 33-65493, 33-65497 and 333-00765) on Form S-3, the
Registration Statement (No. 33-65311) on Form S-4, and the Registration
Statements (Nos. 33-44543, 33-54263, 33-57635, 33-60839, 33-60843, 33-64827,
33-64829, 33-64831, 33-65483, 33-65485 and 33-65487) on Form S-8 of
Tele-Communications, Inc. of our report dated March 6, 1996, relating to the
consolidated balance sheet of TeleWest Communications 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 report appears in the December 31, 1995 annual report
on Form 10-K of Tele-Communications, Inc.
/s/ KPMG
KPMG
London, England
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCLUDED IN TELE-COMMUNICATIONS, INC.'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENT. PRIMARY AND DILUTED EARNINGS PER SHARE
REPRESENT EARNINGS PER SHARE OF THE COMPANY'S TCI GROUP STOCK FROM AUGUST OF
1995 THROUGH DECEMBER 31, 1995. SEE THE COMPANY'S CONSOLIDATED STATEMENTS OF
OPERATIONS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 118
<SECURITIES> 0
<RECEIVABLES> 441
<ALLOWANCES> 34
<INVENTORY> 104
<CURRENT-ASSETS> 0
<PP&E> 10,679
<DEPRECIATION> 3,653
<TOTAL-ASSETS> 25,130
<CURRENT-LIABILITIES> 0
<BONDS> 13,211
<COMMON> 921
478
0
<OTHER-SE> 3,629
<TOTAL-LIABILITY-AND-EQUITY> 25,130
<SALES> 1,019
<TOTAL-REVENUES> 6,851
<CGS> 702
<TOTAL-COSTS> 6,309
<OTHER-EXPENSES> 833
<LOSS-PROVISION> 86
<INTEREST-EXPENSE> 1,010
<INCOME-PRETAX> (291)
<INCOME-TAX> (120)
<INCOME-CONTINUING> (171)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (171)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
