<PAGE>
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-27039
PROSPECTUS
TELE-COMMUNICATIONS, INC.
Tele-Communications, Inc. Series A TCI Group Common Stock ($1.00 par value)
Tele-Communications, Inc. Series A Liberty Media Group Common Stock ($1.00 par
value)
This Prospectus relates to shares of Tele-Communications, Inc. Series A TCI
Group Common Stock, par value $1.00 per share (the "TCI Group Series A Common
Stock"), of Tele-Communications, Inc., a Delaware corporation (the "Company" or
"TCI"), and shares of Tele-Communications, Inc. Series A Liberty Media Group
Common Stock, par value $1.00 per share (the "LMG Series A Common Stock"), of
the Company, to be issued from time to time upon conversion of up to $30,000,000
aggregate principal amount of certain convertible notes (the "Notes") of TCI UA,
Inc. ("TCI UA"), an indirect, wholly-owned subsidiary of the Company, and the
offering and sale of such shares by the holders thereof (each a "Selling
Stockholder") from time to time thereafter (all such shares being hereinafter
referred to collectively as the "Shares"). See "Shares Being Offered" and
"Selling Stockholders." As of the date of this Prospectus, the $30,000,000
aggregate principal amount of Notes are convertible at the current conversion
rate into an aggregate of approximately 5,042,017 shares of TCI Group Series A
Common Stock and approximately 1,890,757 shares of LMG Series A Group Common
Stock.
The Company's common stock, par value $1.00 per share (the "TCI Common
Stock"), is comprised of six series: TCI Group Series A Common Stock, Tele-
Communications, Inc. Series B TCI Group Common Stock (the "TCI Group Series B
Common Stock" and, together with the TCI Group Series A Common Stock, the "TCI
Group Common Stock"), LMG Series A Common Stock, Tele-Communications, Inc.
Series B Liberty Media Group Common Stock (the "LMG Series B Common Stock" and,
together with the LMG Series A Common Stock, the "Liberty Media Group Common
Stock"), Tele-Communications, Inc. Series A Telephony Group Common Stock (the
"Telephony Group Series A Common Stock") and Tele-Communications, Inc. Series B
Telephony Group Common Stock (the "Telephony Group Series B Common Stock" and
together with the Telephony Group Series A Common Stock, the "Telephony Group
Common Stock"). As of the date of this Prospectus no shares of Telephony Group
Series A Common Stock or Telephony Group Series B Common Stock have been issued
and are outstanding.
Both series of TCI Group Common Stock are identical in all respects, except
(i) each share of TCI Group Series B Common Stock has ten votes and each share
of TCI Group Series A Common Stock has one vote and (ii) each share of TCI Group
Series B Common Stock is convertible, at the option of the holder, into one
share of TCI Group Series A Common Stock. Similarly, both series of Liberty
Media Group Common Stock are identical in all respects, except (i) each share of
LMG Series B Common Stock has ten votes and each share of LMG Series A Common
Stock has one vote and (ii) each share of LMG Series B Common Stock is
convertible, at the option of the holder, into one share of LMG Series A Common
Stock. The shares of TCI Group Series A Common Stock and LMG Series A Common
Stock are not convertible into shares of TCI Group Series B Common Stock and LMG
Series B Common Stock, respectively. See "Description of TCI Common Stock."
Shares of the TCI Group Series A Common Stock, the TCI Group Series B Common
Stock, the LMG Series A Common Stock and the LMG Series B Common Stock are
traded on the Nasdaq National Market tier of The Nasdaq Stock Market under the
symbols "TCOMA," "TCOMB," "LBTYA" and "LBTYB," respectively.
SEE "RISK FACTOR" ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SHARES
OFFERED HEREBY.
Each of the Shares may be offered for sale and sold by the Selling
Stockholders from time to time in varying amounts, including in block
transactions, on the Nasdaq National Market at then prevailing prices or in
private transactions at prices and on terms to be determined at the time of
sale. The Shares may be sold by the Selling Stockholders directly, through an
underwritten offering, through agents designated from time to time or to or
through broker-dealers designated from time to time. See "Plan of
Distribution." To the extent required, the number and series of Shares to be
sold, the name of the Selling Stockholders, the purchase price, the public
offering price, if applicable, the name of any agent or broker-dealer, and any
applicable commissions, discounts or other items constituting compensation to
such underwriters, agents or broker-dealers with respect to a particular
offering will be set forth in a supplement or supplements to this Prospectus
(each, a "Prospectus Supplement"). The aggregate proceeds to the Selling
Stockholders from the sale of the Shares so offered will be the purchase price
of the Shares sold less (i) the aggregate commissions, discounts and other
compensation, if any, paid by the Selling Stockholders to underwriters, agents
or broker-dealers and (ii) certain other expenses of the offering and sale of
the Shares that will be the responsibility of the Selling Stockholders. See
"Selling Stockholders." The Selling Stockholders may also sell all or a portion
of the Shares pursuant to Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), to the extent that such sales may be made in
compliance with such Rule. See "Plan of Distribution." The Company will not
receive any proceeds from the sale of the Shares. The Company knows of no
selling arrangement between any underwriter, agent or broker-dealer and the
Selling Stockholders.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of any of the Shares may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any discount or commission received by them
and any profit on the resale of the Shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 13, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act, with respect to the Shares. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information pertaining to the
Shares and the Company, reference is made to the Registration Statement.
The Registration Statement, including any amendments, schedules and
exhibits filed or incorporated by reference as a part thereof, is available
for inspection and copying as set forth below. Statements contained herein
or in any document incorporated herein by reference concerning the
provisions of any contract or other document are not necessarily complete
and, in each instance, reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement or such
other document. Each such statement is qualified in its entirety by such
reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information
statements and other information with the Commission. Such reports, proxy
statements, information statements and other information (including the
Registration Statement) filed with the Commission by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-
2511; and at Suite 1300, 7 World Trade Center, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a site on the World Wide Web
that contains reports, proxy and information statements and other
information regarding registrants (including the Company) that file
electronically with the Commission. The address of the Commission's Web
site is http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the
Commission under the Exchange Act and are hereby incorporated into this
Prospectus by reference and made a part hereof (Commission File No. 0-
20421): (i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended by Form 10-K/A (Amendment No. 1) (ii) the
Company's Current Reports on Form 8-K, dated January 22, 1997 and March 5,
1997 and (iii) the financial statements and notes thereto of VII Cable
which appear in the Current Report on Form 8-K of the Company, dated June
19, 1996.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
hereof and prior to the termination of the offering of the Shares described
in this Prospectus shall be deemed to be incorporated herein by reference
and to be a part hereof from the respective dates of the filing of such
documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all of the documents
incorporated by reference herein, other than certain exhibits to such
documents (unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Such requests
should be addressed to Stephen M. Brett, Esq., Executive Vice President and
General Counsel, Tele-Communications, Inc., Terrace Tower II, 5619 DTC
Parkway, Englewood, Colorado 80111-3000; telephone (303) 267-5500.
2
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RISK FACTOR
The Company had net earnings of $278 million and $62 million for the
years ended December 31, 1996 and 1994, respectively. The Company incurred
a net loss of $171 million for the year ended December 31, 1995. The
Company has been able to, and expects to continue to be able to, satisfy
its debt service and other obligations as and when they become due. The
Company's operating cash flow (operating income before depreciation,
amortization, compensation relating to options and to stock appreciation
rights, adjustment to compensation relating to options and to stock
appreciation rights and restructuring charges) ($2,276 million, $1,988
million and $1,798 million for the years ended December 31, 1996, 1995 and
1994, respectively) has historically been sufficient to cover its interest
expense ($1,096 million, $1,010 million and $785 million for the years
ended December 31, 1996, 1995 and 1994, respectively). The Company's
interest coverage ratios for the years ended December 31, 1996, 1995 and
1994 were 208%, 197% and 229%, respectively. Operating cash flow is a
measure of value and borrowing capacity within the cable television
industry and is not intended to be a substitute for cash flows provided by
operating activities, a measure of performance prepared in accordance with
generally accepted accounting principles, and should not be relied upon as
such. Operating cash flow, as defined, does not take into consideration
substantial costs of doing business, such as interest expense, and should
not be considered in isolation to other measures of performance.
Another measure of liquidity is net cash provided by operating
activities as reflected in the Company's consolidated statements of cash
flows. Net cash provided by operating activities ($1,228 million, $957
million and $908 million for the years ended December 31, 1996, 1995 and
1994, respectively) reflects net cash from the operations of the Company
available for the Company's liquidity needs after taking into consideration
the aforementioned substantial costs of doing business not reflected in
operating cash flow. Amounts expended by the Company for its investing
activities exceed net cash provided by operating activities.
THE COMPANY
The Company, through its subsidiaries and affiliates, is principally
engaged in the construction, acquisition, ownership and operation of cable
television systems and the provision of satellite-delivered video
entertainment, information and home shopping programming services to
various video distribution media, principally cable television systems.
The Company is one of the largest providers of cable television services in
the United States. The Company also has 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 organized
into four principal business groups: Domestic Cable and Communications;
Programming; International Cable and Programming; and Technology/Venture
Capital. The Company is a Delaware corporation and its principal executive
offices are located at Terrace Tower II, 5619 DTC Parkway, Englewood,
Colorado 80111-3000; telephone (303) 267-5500.
SHARES BEING OFFERED
On July 9, 1986, the Company entered into a Stock Purchase Agreement
(the "Naify Agreement") with Marshall Naify, Robert A. Naify, a corporation
owned by them, certain members of their respective families and certain
trusts established for the benefit of such persons and certain other
members of their respective families (the "Naify Family"), pursuant to
which the Company acquired from the Naify Family in December of 1986 all of
the shares of common stock of United Artists Communications, Inc. ("UACI")
owned by them, which represented approximately 55% of the UACI shares then
outstanding. The consideration paid for each share of UACI common stock
acquired by the Company pursuant to the Naify Agreement was $18.498, of
which $6.64 was paid in cash and the balance of $11.858 per share was
represented by Notes.
The Notes are general unsecured obligations of TCI UA, the principal
amount of which is payable on December 12, 2021 and bears interest at the
rate of 1.85% per annum until December 12, 2003 and no interest thereafter.
The Notes are presently convertible at any time at the option of the holder
into (i) one share of TCI Group Series A Common Stock, (ii) .375 of a share
of LMG Series A Common Stock and (iii) one-tenth of a share of Series A
Common Stock, $1.00 par value per share, of TCI Satellite Entertainment,
Inc., a Delaware corporation which prior to December 4, 1996
3
<PAGE>
was a wholly owned subsidiary of TCI and is presently an independent
publicly traded company, for each $5.95 principal amount of Notes, subject
to adjustment under stated circumstances. The shares of TCI Group Series A
Common Stock and LMG Series A Common Stock issuable upon the conversion of
the Notes are hereinafter referred to collectively as the "TCI Conversion
Shares."
As of April 28, 1997, Notes in the aggregate principal amount of
approximately $207,856,030 are outstanding, which Notes are convertible at
the current conversion rate into an aggregate of approximately 34,933,772
shares of TCI Group Series A Common Stock and 13,100,153 shares of LMG
Series A Common Stock (excluding fractional shares issuable upon conversion
of any particular Note). The names of the members of the Naify Family who
currently hold the Notes, the aggregate principal amount of the Notes held
by each such holder and the number of whole shares of TCI Group Series A
Common Stock and LMG Series A Common Stock into which the Notes of such
holder are convertible at the current conversion rate are set forth under
"Selling Stockholders" below. In accordance with the terms of the Naify
Agreement, neither the Notes nor the TCI Conversion Shares may be
transferred unless they are registered under the Securities Act or an
exemption from registration is available. The Notes have not been
registered under the Securities Act and neither the Company nor TCI UA has
any obligation to register the Notes. The Naify Agreement provides the
holders of the Notes with certain demand and incidental or "piggyback"
registration rights with respect to the TCI Conversion Shares.
Specifically, the demand registration rights permit holders of the Notes
from time to time to require the Company to register TCI Conversion Shares
under the Securities Act for sale in an underwritten public offering,
except that the Company is not obligated to effect such registration more
than once in any six month period or if, in order to comply with such
request, the Company could be required to undergo a special interim audit
(unless the parties requesting registration agree to pay all fees and
expenses of such special interim audit). The incidental registration
rights permit the holders of the Notes to have their TCI Conversion Shares
included in certain types of registration statements proposed to be filed
by the Company. The Company's agreement to register the Shares covered by
this Prospectus as described below is contained in a letter agreement which
has been filed as an Exhibit to the Registration Statement and is separate
from the Company's obligation to register TCI Conversion Shares under the
Naify Agreement. The full text of the Naify Agreement has been filed as an
Exhibit to the Registration Statement of which this Prospectus forms a
part. See "Available Information."
The Company has agreed, for the benefit of the holders of the Notes,
to register the TCI Conversion Shares to be issued from time to time upon
conversion of up to $30,000,000 aggregate principal amount of the Notes and
the resale of such shares from time to time by the holders thereof. The
Shares offered hereby represent the number of TCI Conversion Shares
issuable upon conversion of such aggregate principal amount of Notes, as
such number and type of shares may be increased or decreased as a result of
adjustments to the conversion rate pursuant to the anti-dilution provisions
of the Notes. At the current conversion rate, approximately 5,042,017
shares of TCI Group Series A Common Stock and approximately 1,890,757
Shares of LMG Series A Common Stock are issuable upon conversion of
$30,000,000 aggregate principal amount of the Notes. The TCI Conversion
Shares will be included in the Shares covered by this Prospectus on the
basis of the order in which the Notes, up to an aggregate principal amount
of $30,000,000, are converted.
4
<PAGE>
SELLING STOCKHOLDERS
A member of the Naify Family, or any person to whom a member of the
Naify Family has transferred Notes in a transaction permitted by the Naify
Agreement, for whose account Shares are being offered hereby is referred to
herein as a "Selling Stockholder." It is anticipated that, from time to
time after the date hereof, record ownership of certain of the Notes that
are currently held in trust for the benefit of members of the Naify Family
will be transferred to the beneficiaries of the applicable trust and/or
that record ownership of certain of the Notes may be transferred to living
trusts of which the current record owner or (in the case of Notes currently
held in trust) beneficial owner would be a trustee with sole control and
complete discretion to revoke or amend such trust during such person's
lifetime. The table set forth below and the footnotes thereto provide the
following information: the names of the members of the Naify Family who
currently hold Notes, the aggregate principal amount of the Notes held by
each such holder, the number of whole shares of TCI Group Series A Common
Stock and LMG Series A Common Stock into which the Notes of such holder are
convertible at the current conversion rate and the number of shares of TCI
Group Series A Common Stock and LMG Series A Common Stock beneficially
owned as of April 28, 1997 by each such holder. The TCI Conversion Shares
to be included in the Shares covered by this Prospectus will be on the
basis of the order in which the Notes, up to an aggregate principal amount
of $30,000,000, are converted; therefore no estimate can be given as to the
number of shares of TCI Group Series A Common Stock and LMG Series A Common
Stock that will be held by each Selling Stockholder upon the termination of
this offering. However, to the extent required, the name of the Selling
Stockholder in connection with any particular sale of Shares, the number of
Shares to be sold and the number and (if one percent or more) the
percentage of the outstanding shares of TCI Group Series A Common Stock or
LMG Series A Common Stock to be owned by such Selling Stockholder after
completion of any offering hereunder will be specified in a Prospectus
Supplement.
<TABLE>
<CAPTION>
NO. OF WHOLE
SHARES OF
TCI GROUP NO. OF WHOLE
SERIES A NO. OF WHOLE SHARES OF LMG NO. OF WHOLE
COMMON SHARES OF TCI SERIES A SHARES OF LMG
AGGREGATE STOCK INTO GROUP SERIES A COMMON STOCK SERIES A
PRINCIPAL WHICH NOTES COMMON STOCK INTO WHICH COMMON STOCK
AMOUNT OF ARE BENEFICIALLY NOTES ARE BENEFICIALLY
NOTEHOLDER NOTES HELD CONVERTIBLE OWNED (1) CONVERTIBLE OWNED (1)
- ---------- ---------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Marshall Naify $ 53,099,889.75 8,924,351 9,279,699 (2) 3,346,631 4,228,084 (2)
Robert A. Naify as Trustee 133,559,215.23 22,446,926 23,176,843 (3) 8,417,597 8,688,156 (3)
under the Robert A. Naify
Living Trust dated
February 8, 1991
Valerie Naify 960,498.00 161,428 161,428 60,535 60,535
Leslie C. Naify 1,565,350.86 263,084 263,084 98,656 98,656
Christie M. Naify 1,383,117.12 232,456 263,083 (4) 87,171 98,656 (4)
Robert J. Naify 1,383,117.12 232,456 263,083 (5) 87,171 98,656 (5)
Marshall Naify, Robert A. 2,032,556.06 341,606 341,606 128,102 128,102
Naify and Georgette N.
Rosekrans, Trustees of
the Michael N. Naify
testamentary trust for
the benefit of Marshall
Naify
John M. Sherwood, as 182,233.74 30,627 30,627 11,485 11,485
Trustee of the Christie
M. Naify 1981 Trust
John M. Sherwood, as 182,233.74 30,627 30,627 11,485 11,485
Trustee of the Robert J.
Naify 1981 Trust
Christina C. Dierker as 112,364.67 18,884 18,884 7,081 7,081
Trustee of the Christina
C. Dierker Trust Dated
October 10, 1995
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
John M. Sherwood, as 139,734.67 23,484 23,484 8,806 8,806
Trustee of the Acela
Cortese 1983 Trust
John M. Sherwood, as 139,734.67 23,484 23,484 8,806 8,806
Trustee of the Christina
E. Naify 1985 Trust
John M. Sherwood, as 114,619.43 19,263 19,263 7,223 7,223
Trustee of the Drew
Michael Andrade 1986 Trust
John M. Sherwood and 132,856.16 22,328 22,328 8,373 8,373
Marsha J. Naify, as
Trustees of the Marsha J.
Naify Living Trust
John M. Sherwood, as 650,506.16 109,328 112,706 40,998 42,264
Trustee of the Michael S.
Naify 1981 Trust
John M. Sherwood, as 472,006.16 79,328 82,706 29,748 31,014
Trustee of the Christina
E. Naify 1981 Trust
Christina E. Naify 875,120.40 147,079 226,407 (6) 55,154 84,902 (6)
Marshall Naify, as Trustee 740,066.10 124,380 124,380 46,642 46,642
under the Michael Stephen
Naify 1963 Trust
Richard R. Naify 3,833,900.00 644,352 737,002 (7) 241,632 277,611 (7)
Josephine Naify 5,995,736.82 1,007,686 1,167,656 (7) 377,882 439,106 (7)
James Naify 301,172.93 50,617 60,617 18,981 22,506
--------------- ---------- ---------- --------- ---------
- ---------------------
</TABLE>
(1) The number of shares specified in this table as being beneficially owned
by each Selling Stockholder assumes the conversion of all Notes beneficially
owned by such Selling Stockholder, except as set forth in the footnotes.
(2) This number includes the number of shares issuable upon conversion of
Notes owned of record by Marshall Naify, Robert A. Naify and Georgette N.
Rosekrans, as Trustees under the Michael N. Naify testamentary trust for the
benefit of Marshall Naify (341,606 shares of TCI Group Series A Common Stock
and 128,102 shares of LMG Series A Common Stock). This number does not
include, although Marshall Naify may be deemed to beneficially own, (i) the
number of shares issuable upon conversion of Notes owned of record by Marshall
Naify as Trustee under the Michael Stephen Naify 1963 Trust (124,380 shares of
TCI Group Series A Common Stock and 46,642 shares of LMG Series A Common
Stock) and (ii) approximately 97,708 shares of TCI Group Series A Common Stock
and 38,413 shares of LMG Series A Common Stock held in the United Artists,
Inc. Employee Stock Ownership Plan for the benefit of Marshall Naify.
(3) This number does not include, although Robert A. Naify may be deemed to
beneficially own, (i) the number of shares issuable upon conversion of Notes
owned of record by Marshall Naify, Robert A. Naify and Georgette N. Rosekrans
as Trustees under the Michael N. Naify testamentary trust for the benefit of
Marshall Naify (341,606 shares of TCI Group Series A Common Stock and 128,102
shares of LMG Series A Common Stock) and (ii) approximately 170,411 shares of
TCI Group Series A Common Stock and 67,027 shares of LMG Series A Common Stock
held in the United Artists, Inc. Employee Stock Ownership Plan for the benefit
of Robert A. Naify.
(4) This number includes the number of shares issuable upon conversion of
Notes owned of record by the Christie M. Naify 1981 Trust (30,627 shares of
TCI Group Series A Common Stock and 11,485 shares of LMG Series A Common
Stock) of which Christie M. Naify is the sole beneficiary.
(5) This number includes the number of shares issuable upon conversion of
Notes owned of record by the Robert J. Naify 1981 Trust (30,627 shares of TCI
Group Series A Common Stock and 11,485 shares of LMG Series A Common Stock) of
which Robert J. Naify is the sole beneficiary.
(6) This number includes the number of shares issuable upon conversion of
Notes owned of record by John M. Sherwood as Trustee under the Christina E.
Naify 1981 Trust (79,328 shares of TCI Group Series A Common Stock and 29,748
shares of LMG Series A Common Stock) of which Christina E. Naify is sole
beneficiary.
(7) This number includes 92,650 shares of TCI Group Series A Common Stock and
35,979 shares of LMG Series A Common Stock owned by Richard R. Naify and
Josephine Naify as co-trustees of the Naify Family Trust f/b/o Richard R.
Naify and Josephine Naify, dated September 16, 1993.
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<PAGE>
Neither the Company nor any of its affiliates has had any material
relationship with any member of the Naify Family within the past three
years, except that Robert A. Naify has been a director of the Company since
June 12, 1987. Any other material relationship between the Company or any
of its affiliates, on the one hand, and a Selling Stockholder, on the
other, within three years prior to the date of a sale by such Selling
Stockholder hereunder will be described in the Prospectus Supplement
relating to such sale. The Company has agreed to bear all costs and
expenses of registering the Shares under the Securities Act and certain
state securities laws, including registration fees, its legal and
accounting fees and expenses and photocopying costs. The Selling
Stockholders will bear all other expenses of the offering and sale of the
Shares, including any underwriting discounts, selling commissions or other
compensation to underwriters, agents, or broker-dealers, transfer fees or
taxes, if any, and fees and expenses of counsel and other advisers, if any,
to the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain liabilities, including civil
liabilities under the Securities Act.
PLAN OF DISTRIBUTION
The Shares may be offered for sale and sold by the Selling
Stockholders from time to time in one or more public or private
transactions, including block transactions, at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at prices determined on
a negotiated or competitive bid basis. The Shares may be sold by the
Selling Stockholders directly, through an underwritten offering, or through
agents designated from time to time or to or through broker-dealers
designated from time to time. The Shares may be sold through a broker-
dealer acting as agent or broker for the Selling Stockholders, or to a
broker-dealer acting as principal. In the latter case, the broker-dealer
may then resell such Shares to the public at varying prices to be
determined by such broker-dealer at the time of resale.
If any Shares are sold in an underwritten offering, such Shares may be
acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Unless otherwise indicated in the
applicable Prospectus Supplement, the obligations of any underwriters to
purchase Shares will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of the Shares specified in
such Prospectus Supplement if any are purchased.
The Company has been advised by the Selling Stockholders that they
have not, as of the date of this Prospectus, entered into any arrangement
with an underwriter, agent or broker-dealer for the sale of the Shares.
The Selling Stockholders may also sell all or a portion of the Shares
pursuant to Rule 144 promulgated under the Securities Act, to the extent
that such sales may be made in compliance with such Rule.
The Selling Stockholders and any agents or broker-dealers that
participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any discount or commission received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
In connection with a sale of Shares, the following information will,
to the extent then required, be provided in the Prospectus Supplement
relating to such sale: the number of Shares to be sold, the purchase
price, the public offering price, if applicable, the name of any
underwriter, agent or broker-dealer, and any applicable commissions,
discounts or other items constituting compensation to such underwriters,
agents or broker-dealers with respect to the particular sale.
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DESCRIPTION OF TCI COMMON STOCK
The following description of certain terms of the TCI Common Stock does
not purport to be complete and is qualified in its entirety by reference to the
Restated Certificate of Incorporation, as amended, of TCI (the "TCI Charter"),
which is an exhibit to the Registration Statement.
GENERAL
The TCI Charter currently provides, among other things, that TCI is
authorized to issue 3,602,375,096 shares of capital stock, including (i)
3,550,000,000 shares of common stock, par value $1.00 per share, of which
1,750,000,000 shares are designated TCI Group Series A Common Stock,
150,000,000 shares are designated TCI Group Series B Common Stock, 750,000,000
shares are designated LMG Series A Common Stock, 75,000,000 shares are
designated LMG Series B Common Stock, 750,000,000 shares are designated
Telephony Group Series A Common Stock and 75,000,000 shares are designated
Telephony Group Series B Common Stock and (ii) 52,375,096 shares of preferred
stock ("TCI Preferred Stock"), of which 700,000 shares are designated Class A
Preferred Stock, par value $.01 per share (the "Class A Preferred Stock"),
1,675,096 shares are designated Class B 6% Cumulative Redeemable Exchangeable
Junior Preferred Stock, par value $.01 per share (the "Class B Preferred
Stock") and 50,000,000 shares are designated as Series Preferred Stock, par
value $.01 per share (the "Series Preferred Stock"), issuable in series. Of
the Series Preferred Stock, 80,000 shares are designated as Convertible
Preferred Stock, Series C (the "Series C Preferred Stock"), 1,000,000 shares
are designated as Convertible Preferred Stock, Series D (the "Series D
Preferred Stock"), 400,000 shares are designated as Redeemable Convertible
Preferred Stock, Series E (the "Series E Preferred Stock"), 500,000 shares are
designated Convertible Redeemable Participating Preferred Stock, Series F (the
"Series F Preferred Stock"), 7,259,380 shares are designated as Redeemable
Convertible TCI Group Preferred Stock, Series G (the "Series G Preferred
Stock"), and 7,259,380 shares are designated as Redeemable Convertible Liberty
Media Group Preferred Stock, Series H (the "Series H Preferred Stock").
No shares of the Telephony Group Common Stock have been issued and are
outstanding. As of March 31, 1997, 598,204,963 shares of TCI Group Series A
Common Stock, 84,647,065 shares of TCI Group Series B Common Stock, 228,749,797
shares of LMG Series A Common Stock and 21,187,969 shares of LMG Series B
Common Stock (in each case net of shares held by subsidiaries of TCI) had been
issued and were outstanding and 116,853,196 shares of TCI Group Series A Common
Stock were held by subsidiaries of TCI. As of that date, 126,384,805 shares of
TCI Group Series A Common Stock and 30,616,358 shares of LMG Series A Common
Stock were reserved for issuance upon conversion, exchange or exercise of
outstanding convertible or exchangeable securities and options. In addition,
TCI has reserved a number of shares of TCI Group Series A Common Stock equal to
the number of shares of TCI Group Series B Common Stock outstanding and a
number of shares of LMG Series A Common Stock equal to the number of shares of
LMG Series B Common Stock outstanding, for issuance upon conversion, at the
option of the holder, of TCI Group Series B Common Stock and LMG Series B
Common Stock, respectively. Additionally, subsidiaries of TCI own shares of
Series F Preferred Stock, which are convertible into an aggregate of
416,528,172 shares of TCI Group Series A Common Stock. As of March 31, 1997,
1,620,026 shares of Class B Preferred Stock, 70,575 shares of Series C
Preferred Stock, 997,222 shares of Series D Preferred Stock, 278,307 shares of
Series F Preferred Stock, 6,693,117 shares of Series G Preferred Stock and
6,693,117 shares of Series H Preferred Stock had been issued and were
outstanding. All of the shares of Series E Preferred Stock have previously
been redeemed and retired with the effect that such shares have been restored
to the status of authorized and unissued shares of Series Preferred Stock and
may be reissued as shares of another series of Series Preferred Stock, but not
as Series E Preferred Stock. All of the outstanding shares of Series F
Preferred Stock are held by subsidiaries of TCI. Approximately 33,901,240
shares of Series Preferred Stock remain available for designation pursuant to
the TCI Charter as of March 31, 1997. The rights evidenced by the TCI Common
Stock are subject to the prior preferences and rights of the TCI Preferred
Stock.
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CERTAIN DEFINITIONS
As used herein, the following terms have the meanings specified below:
"Appraisal Date" means, with respect to any determination of the Liberty
Media Group Private Market Value or the Telephony Group Private Market Value,
the last day of the calendar month preceding the month in which the Selection
Date occurs.
"Appraiser" means each of the First Appraiser, the Second Appraiser and
the Mutually Designated Appraiser.
"Committed Acquisition Shares" means (i) the shares of LMG Series A
Common Stock that TCI had, prior to the record date for the LMG Distribution,
agreed to issue, but as of such record date had not issued, and (ii) the shares
of LMG Series A Common Stock that are issuable upon conversion, exercise or
exchange of Convertible Securities that TCI had, prior to the record date for
the LMG Distribution, agreed to issue, but as of such record date had not
issued, in each case including obligations of TCI to issue shares of TCI's
Class A Common Stock, par value $1.00 per share (which has been redesignated
TCI Group Series A Common Stock), which as a result of the LMG Distribution,
constitute obligations to issue, among other securities, LMG Series A Common
Stock or Convertible Securities which are convertible into or exercisable or
exchangeable for LMG Series A Common Stock; provided, however, that Committed
Acquisition Shares will not include any shares of Liberty Media Group Common
Stock issuable upon conversion, exercise or exchange of Pre-Distribution
Convertible Securities. The type and amount of Committed Acquisition Shares
issuable will be appropriately adjusted to reflect subdivisions and
combinations of the LMG Series A Common Stock and dividends or distributions of
shares of LMG Series A Common Stock or LMG Series B Common Stock to holders of
LMG Series A Common Stock and other reclassifications of the LMG Series A
Common Stock, in each case occurring (or the record date for which occurs)
after the LMG Distribution. The shares of LMG Series A Common Stock issuable
upon conversion of the Series H Preferred Stock will constitute Committed
Acquisition Shares.
"Convertible Securities" means any securities of TCI (other than any
series of TCI Common Stock) that are convertible into, exchangeable for or
evidence the right to purchase any shares of any series of TCI Common Stock,
whether upon conversion, exercise, exchange, pursuant to antidilution
provisions of such securities or otherwise.
"Corporation Earnings (Loss) Attributable to the Liberty Media Group"
means, for any period, the net earnings or loss of the Liberty Media Group for
such period determined on a basis consistent with the determination of the net
earnings or loss of the Liberty Media Group for such period as presented in the
combined financial statements of the Liberty Media Group for such period,
including income and expenses of TCI attributed to the operations of the
Liberty Media Group on a substantially consistent basis, including without
limitation, corporate administrative costs, net interest and income taxes.
"Corporation Earnings (Loss) Attributable to the TCI Group" means, for
any period, the net earnings or loss of the TCI Group for such period
determined on a basis consistent with the determination of the net earnings or
loss of the TCI Group for such period as presented in the combined financial
statements of the TCI Group for such period, including income and expenses of
TCI attributed to the operations of the TCI Group on a substantially consistent
basis, including without limitation, corporate administrative costs, net
interest and income taxes.
"Corporation Earnings (Loss) Attributable to the Telephony Group" means,
for any period, the net earnings or loss of the Telephony Group for such period
determined on a basis consistent with the determination of the net earnings or
loss of the Telephony Group for such period as presented in the combined
financial statements of the Telephony Group for such period, including income
and expenses of TCI attributed to the operations of the Telephony
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Group on a substantially consistent basis, including without limitation,
corporate administrative costs, net interest and income taxes.
"DGCL" means the General Corporation Law of the State of Delaware.
"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.
"First Appraiser" means, with respect to any determination of the Liberty
Media Group Private Market Value or the Telephony Group Private Market Value,
an investment banking firm of recognized national standing selected by TCI to
make such determination.
"Higher Appraised Amount" means, with respect to any determination of
the Liberty Media Group Private Market Value or the Telephony Group Private
Market Value, the higher of the respective final views of the First Appraiser
and the Second Appraiser as to such private market value.
"Independent Committee" shall mean a committee of the TCI Board (defined
below) all members of which are independent directors as determined under the
rules of the Nasdaq National Market.
The "Inter-Group Interest" of the TCI Group in the Liberty Media Group or
the Telephony Group means any common stockholders' equity value of TCI
attributable to the Liberty Media Group or the Telephony Group, as the case may
be, that is not represented by outstanding shares of Liberty Media Group Common
Stock or Telephony Group Common Stock, as the case may be. The TCI Group's
Inter-Group Interest in the Liberty Media Group is represented by the Number of
Shares Issuable with Respect to the Liberty Media Group Inter-Group Interest
and the TCI Group's Inter-Group Interest in the Telephony Group is represented
by the Number of Shares Issuable with Respect to the Telephony Group
Inter-Group Interest.
The "Liberty Media Group" means as of any date of determination thereof:
(i)the interest of TCI or any of its subsidiaries in Liberty Media
Corporation or any of its subsidiaries (including any successor thereto
by merger, consolidation or sale of all or substantially all of its
assets, whether or not in connection with a Related Business Transaction)
and their respective properties and assets;
(ii)all assets and liabilities of TCI or any of its subsidiaries to the
extent attributed to any of the properties or assets referred to in
clause (i) of this sentence, whether or not such assets or liabilities
are assets and liabilities of Liberty Media Corporation or any of its
subsidiaries (or a successor as described in clause (i) of this
sentence);
(iii)all assets and properties contributed or otherwise transferred to
the Liberty Media Group from the TCI Group; and
(iv)the interest of TCI or any of its subsidiaries in the businesses,
assets and liabilities acquired by TCI or any of its subsidiaries for the
Liberty Media Group, as determined by the Board of Directors of TCI (the
"TCI Board");
provided that (a) from and after any dividend or other distribution with
respect to any shares of Liberty Media Group Common Stock (other than a
dividend or other distribution payable in shares of Liberty Media Group Common
Stock, with respect to which adjustment will be made as described in clause (i)
of the definition of "Number of Shares Issuable with Respect to the Liberty
Media Group Inter-Group Interest," or in other securities of TCI attributed to
the Liberty Media Group for which provision will be made as described in the
penultimate sentence of this definition), the Liberty Media Group will no
longer include an amount of assets or properties equal to the aggregate amount
of such kind of
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assets or properties so paid in respect of shares of Liberty Media Group Common
Stock multiplied by a fraction the numerator of which is equal to the Liberty
Media Group 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 Liberty Media Group Outstanding Interest Fraction in effect
immediately prior to the record date for such dividend or other distribution and
(b) from and after any transfer of assets or properties from the Liberty Media
Group to the TCI Group, the Liberty Media Group will no longer include the
assets or properties so transferred. If TCI pays a dividend or makes any other
distribution with respect to shares of Liberty Media Group Common Stock payable
in securities of TCI attributed to the Liberty Media Group other than Liberty
Media Group Common Stock, the TCI Group will be deemed to hold an amount of such
other securities equal to the amount so distributed multiplied by the fraction
specified in clause (a) of this definition (determined as of a time immediately
prior to the record date for such dividend or other distribution), and to the
extent interest or dividends are paid or other distributions are made on such
other securities so distributed to the holders of Liberty Media Group Common
Stock, the Liberty Media Group will no longer include a corresponding ratable
amount of the kind of assets paid as such interest or dividends or other
distributions in respect of such securities so deemed to be held by the TCI
Group. TCI may also, to the extent any such other securities constitute
Convertible Securities which are at the time convertible, exercisable or
exchangeable, cause such Convertible Securities deemed to be held by the TCI
Group to be deemed to be converted, exercised or exchanged (and to the extent
the terms of such Convertible Securities require payment or delivery of
consideration in order to effect such conversion, exercise or exchange, the
Liberty Media Group will in such case include an amount of the kind of
properties or assets required to be paid or delivered as such consideration for
the amount of the Convertible Securities deemed converted, exercised or
exchanged as if such Convertible Securities were outstanding), in which case
such Convertible Securities will no longer be deemed to be held by the TCI Group
or attributed to the Liberty Media Group.
The "Liberty Media Group Inter-Group Interest Fraction" means a fraction
the numerator of which is the Number of Shares Issuable with Respect to the
Liberty Media Group Inter-Group Interest and the denominator of which is the
sum of such Number of Shares Issuable with Respect to the Liberty Media Group
Inter-Group Interest and the aggregate number of shares of Liberty Media Group
Common Stock outstanding.
"Liberty Media Group 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 TCI
in respect of such Disposition or in respect of any resulting dividend or
redemption pursuant to clause (i) or (ii), respectively, of the second paragraph
under "-Conversion and Redemption-Mandatory Dividend, Redemption or Conversion
of Liberty Media Group Common Stock" (or which would have been payable but for
the utilization of tax benefits attributable to the TCI Group or the Telephony
Group), (b) any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses and (c) any liabilities and
other obligations (contingent or otherwise) of, or attributed to, the Liberty
Media Group, including, without limitation, any indemnity or guarantee
obligations incurred in connection with the Disposition or any liabilities for
future purchase price adjustments and any preferential amounts plus any
accumulated and unpaid dividends and other obligations (without duplication of
amounts allocated for the satisfaction of TCI's obligations with respect to Pre-
Distribution Convertible Securities and Committed Acquisition Shares issuable
which are included in the determination of the Adjusted Liberty Media Group
Outstanding Interest Fraction) in respect of TCI 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 TCI Board shall determine the value of such
securities or property, including for the purpose of determining the equivalent
value thereof if the TCI Board determines to pay a dividend or redemption price
in cash or securities or other property as provided in the penultimate paragraph
under "-Conversion and Redemption-Mandatory Dividend, Redemption or Conversion
of Liberty Media Group Common Stock."
The "Liberty Media Group Outstanding Interest Fraction" means a fraction
the numerator of which is the aggregate number of shares of Liberty Media Group
Common Stock outstanding and the denominator of which is the
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<PAGE>
sum of such aggregate number of shares of Liberty Media Group Common Stock
outstanding and the Number of Shares Issuable with Respect to the Liberty Media
Group Inter-Group Interest.
The "LMG Distribution" means the distribution paid by TCI on August 10,
1995 of one-fourth of one share of LMG Series A Common Stock on each
outstanding share of TCI Group Series A Common Stock and one-fourth of
one share of LMG Series B Common Stock on each outstanding share of TCI Group
Series B Common Stock to holders of record on August 4, 1995.
"Lower Appraised Amount" means, with respect to any determination of the
Liberty Media Group Private Market Value or the Telephony Group Private Market
Value, the lower of the respective final views of the First Appraiser and the
Second Appraiser as to such private market value.
"Market Capitalization" of any class or series of capital stock of TCI 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 TCI 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 the Nasdaq
National Market on such trading day, the average of the closing bid and asked
prices of a share of such class or series in the over-the-counter market on
such trading day as furnished by any New York Stock Exchange member firm
selected from time to time by TCI, or if such closing bid and asked prices are
not made available by any such New York Stock Exchange member firm on such
trading day, the market value of a share of such class or series as determined
by the TCI Board; provided that for purposes of determining the ratios
described under "-Conversion and Redemption-Conversion of Liberty Media Group
Common Stock at the Option of TCI," "-Conversion of Telephony Group Common
Stock at the Option of TCI," "-Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock," and "-Mandatory Dividend, Redemption or
Conversion of Telephony Group Common Stock" and as described under
"-Liquidation Rights," (a) the "Market Value" of any share of any series of TCI
Common Stock on any day prior to the "ex" date or any similar date for any
dividend or distribution paid or to be paid with respect to such series of TCI
Common Stock shall be reduced by the fair market value of the per share amount
of such dividend or distribution as determined by the TCI Board and (b) the
"Market Value" of any share of any series of TCI Common Stock on any day prior
to (i) the effective date of any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of outstanding shares of such
series of TCI Common Stock or (ii) the "ex" date or any similar date for any
dividend or distribution with respect to any such series of TCI Common Stock in
shares of such series of TCI Common Stock shall be appropriately adjusted to
reflect such subdivision, combination, dividend or distribution; and provided,
further, that to the extent that any assets or properties of the TCI Group are
transferred to the Telephony Group prior to there being any shares of Telephony
Group Series A Common Stock or Telephony Group Series B Common Stock issued and
outstanding, the Market Value of a share of Telephony Group Series A Common
Stock shall be as determined in good faith by the TCI Board for purposes of
determining the increase in the Number of Shares Issuable in Respect of the
Telephony Group Inter-Group Interest.
"Mutually Appraised Amount" means, with respect to any determination of
the Liberty Media Group Private Market Value or the Telephony Group Private
Market Value, the determination by the Mutually Designated Appraiser of such
private market value.
"Mutually Designated Appraiser" shall mean, if required with respect to
any determination of the Liberty Media Group Private Market Value or the
Telephony Group Private Market Value, the investment banking firm of recognized
national standing jointly designated by the First Appraiser and the Second
Appraiser to make such determination.
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The "Number of Shares Issuable with Respect to the Liberty Media Group
Inter-Group Interest" is currently zero and will from time to time be
(i) adjusted as appropriate to reflect subdivisions (by stock
split or otherwise) and combinations (by reverse stock split or
otherwise) of the LMG Series A Common Stock and dividends or
distributions of shares of LMG Series A Common Stock or LMG Series B
Common Stock to holders of LMG Series A Common Stock and other
reclassifications of LMG Series A Common Stock,
(ii) decreased (but not to less than zero) by (a) the aggregate
number of shares of LMG Series A Common Stock issued or sold by TCI after
the Distribution other than Committed Acquisition Shares, the proceeds of
which are attributed to the TCI Group, (b) the aggregate number of shares
of LMG Series A Common Stock issued or delivered upon conversion,
exercise or exchange of Convertible Securities (other than
Pre-Distribution Convertible Securities and Convertible Securities which
are convertible into or exercisable or exchangeable for Committed
Acquisition Shares), the proceeds of which are attributed to the TCI
Group, (c) the aggregate number of shares of Liberty Media Group Common
Stock issued or delivered by TCI as a dividend or distribution to holders
of TCI Group Series A Common Stock and TCI Group Series B Common Stock,
(d) the aggregate number of shares of 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 TCI after the Distribution as a dividend or distribution or
by reclassification or exchange to holders of TCI Group Series A Common
Stock and TCI Group Series B Common Stock and (e) the aggregate number of
shares of LMG Series A Common Stock (rounded, if necessary, to the
nearest whole number), equal to the aggregate fair value (as determined
by the TCI Board) of 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 Liberty Media Group Inter-Group Interest, divided by the
Market Value of one share of LMG Series A Common Stock as of the date of
such transfer, and
(iii) increased by (a) the aggregate number of any shares of LMG
Series A Common Stock and LMG Series B Common Stock which are retired or
otherwise cease to be outstanding following their purchase with funds
attributed to the TCI Group, (b) a number (rounded, if necessary, to the
nearest whole number), equal to the fair value (as determined by the TCI
Board) 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 Liberty
Media Group Inter-Group Interest, divided by the Market Value of one
share of LMG Series A Common Stock as of the date of such contribution
and (c) the aggregate number of shares of LMG Series A Common Stock and
LMG Series B Common Stock into or for which Convertible Securities are
deemed to be converted, exercised or exchanged pursuant to the last
sentence of the definition of "TCI Group."
TCI will not issue or sell shares of LMG Series B Common Stock in respect of a
reduction in the Number of Shares Issuable with Respect to the Liberty Media
Group Inter-Group Interest. Whenever a change in the Number of Shares Issuable
with Respect to the Liberty Media Group Inter-Group Interest occurs, TCI will
prepare and file a statement of such change with the Secretary of TCI.
"Number of Shares Issuable with Respect to the Telephony Group
Inter-Group Interest" shall initially be that number of shares of Telephony
Group Common Stock which represents 100% of the common stockholders' equity
value of TCI attributable to the Telephony Group (which may be issued as shares
of Telephony Group Series A Common Stock or Telephony Group Series B Common
Stock), as determined by the TCI Board prior to the first issuance of shares of
Telephony Group Common Stock, and shall from time to time thereafter, as
applicable, be
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(i) adjusted as appropriate to reflect subdivisions (by stock
split or otherwise) and combinations (by reverse stock split or
otherwise) of the Telephony Group Series A Common Stock and Telephony
Group Series B Common Stock and dividends or distributions of shares of
Telephony Group Series A Common Stock or Telephony Group Series B Common
Stock to holders of Telephony Group Series A Common Stock and Telephony
Group Series B Common Stock and other reclassifications of the Telephony
Group Series A Common Stock and Telephony Group Series B Common Stock,
(ii) decreased (but not to less than zero) by (a) the aggregate
number of shares of Telephony Group Series A Common Stock or Telephony
Group Series B Common Stock issued or sold by TCI the proceeds of which
are attributed to the TCI Group, (b) the aggregate number of shares of
Telephony Group Series A Common Stock or Telephony Group Series B Common
Stock issued or delivered upon conversion, exercise or exchange of
Convertible Securities, the proceeds of which are attributed to the TCI
Group, (c) the aggregate number of shares of Telephony Group Series A
Common Stock or Telephony Group Series B Common Stock issued or delivered
by TCI as a dividend or distribution to holders of TCI Group Series A
Common Stock and TCI Group Series B Common Stock, (d) the aggregate
number of shares of Telephony Group Series A Common Stock or Telephony
Group Series B Common Stock issued or delivered upon the conversion,
exercise or exchange of any Convertible Securities issued or delivered by
TCI as a dividend or distribution or by reclassification or exchange to
holders of TCI Group Series A Common Stock and TCI Group Series B Common
Stock and (e) the aggregate number of shares of Telephony Group Series A
Common Stock and Telephony Group Series B Common Stock (rounded, if
necessary, to the nearest whole number), equal to the aggregate fair
value (as determined by the TCI Board) of assets or properties attributed
to the Telephony Group that are transferred from the Telephony Group to
the TCI Group in consideration of a reduction in the Number of Shares
Issuable with Respect to the Telephony Group Inter-Group Interest,
divided by the Market Value of one share of Telephony Group Series A
Common Stock as of the date of such transfer, and
(iii) increased by (a) the aggregate number of any shares of
Telephony Group Series A Common Stock and Telephony Group Series B Common
Stock which are retired or otherwise cease to be outstanding following
their purchase with funds attributed to the TCI Group, (b) a number
(rounded, if necessary, to the nearest whole number), equal to the fair
value (as determined by the TCI Board) of assets or properties,
theretofore attributed to the TCI Group that are contributed to the
Telephony Group in consideration of an increase in the Number of Shares
Issuable with Respect to the Telephony Group Inter-Group Interest,
divided by the Market Value of one share of Telephony Group Series A
Common Stock as of the date of such contribution and (c) the aggregate
number of shares of Telephony Group Series A Common Stock and Telephony
Group Series B Common Stock into or for which Convertible Securities are
deemed to be converted, exercised or exchanged pursuant to the last
sentence of the definition of "TCI Group."
Whenever a change in the Number of Shares Issuable with Respect to the
Telephony Group Inter-Group Interest occurs, TCI shall prepare and file a
statement of such change with the Secretary of TCI.
"Pre-Distribution Convertible Securities" means Convertible Securities
that were outstanding on the record date for the LMG Distribution and were,
prior to such date, convertible into or exercisable or exchangeable for shares
of TCI's Class A Common Stock, par value $1.00 per share (which has been
redesignated TCI Group Series A Common Stock).
"Qualifying Subsidiary" shall mean a subsidiary of TCI in which (x) TCI's
ownership and voting interest is sufficient to satisfy the requirements of the
Internal Revenue Service for a tax free distribution of TCI's interest in such
subsidiary to the holders of Telephony Group Series A Common Stock and
Telephony Group Series B Common Stock or (y) TCI owns, directly or indirectly,
all of the issued and outstanding capital stock.
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"Related Business Transaction" shall mean any Disposition of all or
substantially all of the properties and assets of the Liberty Media Group or
the Telephony Group, as the case may be, in which TCI receives as proceeds of
such Disposition primarily equity securities (including, without limitation,
capital stock, convertible securities, partnership or limited partnership
interests and other types of equity securities, without regard to the voting
power or contractual or other management or governance rights related to such
equity securities) of the purchaser or acquiror of such assets and properties
of the Liberty Media Group or the Telephony Group, as the case may be, 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 the
Telephony Group, as the case may be, 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 or the Telephony Group, as the case may be, prior to such
Disposition, as determined in good faith by the TCI Board.
"Second Appraiser" means, with respect to any determination of the
Liberty Media Group Private Market Value or the Telephony Group Private Market
Value, an investment banking firm of recognized national standing selected by
the Independent Committee to make such determination.
"Selection Date" means, with respect to any determination of the Liberty
Media Group Private Market Value or the Telephony Group Private Market Value,
the date upon which the Second Appraiser for such determination is selected by
the Independent Committee.
The "TCI Group" means as of any date of determination thereof:
(i) the interest of TCI or any of its subsidiaries in all of the
businesses in which TCI or any of its subsidiaries (or any of their
predecessors or successors) is or has been engaged, directly or
indirectly, and the respective assets and liabilities of TCI or any of
its subsidiaries, other than any businesses, assets or liabilities of the
Liberty Media Group or the Telephony Group;
(ii) a proportionate interest in the businesses, assets and
liabilities of the Liberty Media Group equal to the Liberty Media Group
Inter-Group Interest Fraction as of such date and a proportionate
interest in the businesses, assets and liabilities of the Telephony Group
equal to the Telephony Group Inter-Group Interest Fraction as of such
date;
(iii) from and after any dividend or other distribution with
respect to shares of Liberty Media Group Common Stock (other than a
dividend or other distribution payable in shares of Liberty Media Group
Common Stock, with respect to which adjustment will be made as described
in clause (i) of the definition of "Number of Shares Issuable with
Respect to the Liberty Media Group Inter-Group Interest," or in other
securities of TCI attributed to the Liberty Media Group, for which
provision will be made as described in the second sentence of this
definition), an amount of assets or properties theretofore included in
the Liberty Media Group equal to the aggregate amount of such kind of
assets or properties so paid in respect of such dividend or other
distribution with respect to shares of Liberty Media Group Common Stock
multiplied by a fraction the numerator of which is equal to the Liberty
Media Group 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 Liberty Media Group Outstanding
Interest Fraction in effect immediately prior to the record date for such
dividend or other distribution;
(iv) from and after any dividend or other distribution with
respect to shares of Telephony Group Common Stock (other than a dividend
or other distribution payable in shares of Telephony Group Common Stock,
with respect to which adjustment will be made as described in clause (i)
of the definition of "Number of Shares Issuable with Respect to the
Telephony Group Inter-Group Interest, or in other securities of TCI
attributed to the Telephony Group, for which provision will be made as
described in the penultimate sentence of this definition), an amount of
assets or properties theretofore included in the Telephony Group equal to
the
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aggregate amount of such kind of assets or properties so paid in
respect of such dividend or distribution with respect to shares of
Telephony Group Common Stock multiplied by a fraction the numerator of
which is equal to the Telephony Group 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 Telephony Group
Outstanding Interest Fraction in effect immediately prior to the record
date for such dividend or other distribution; and
(v) any assets or properties transferred from the Liberty Media
Group or the Telephony 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 or the Telephony
Group, the TCI Group will no longer include such assets or properties so
contributed or transferred (other than pursuant to its interest in the
businesses, assets and liabilities of the Liberty Media Group or the Telephony
Group, as applicable, described in clause (ii) above). If TCI pays a dividend
or makes any other distribution with respect to shares of Liberty Media Group
Common Stock payable in other securities of TCI attributed to the Liberty Media
Group, the TCI Group will be deemed to hold an amount of such other securities
equal to the amount so distributed multiplied by the fraction specified in
clause (iii) of this definition (determined as of a time immediately prior to
the record date for such dividend or other distribution), and to the extent
interest or dividends are paid or other distributions are made on such other
securities so distributed to holders of Liberty Media Group Common Stock, the
TCI Group will include a corresponding ratable amount of the kind of assets
paid as such interest or dividends or other distributions in respect of such
securities so deemed to be held by the TCI Group. If Telephony Group Common
Stock is issued and TCI pays a dividend or makes any other distribution with
respect to shares of Telephony Group Common Stock payable in other securities
of TCI attributed to the Telephony Group, the TCI Group will be deemed to hold
an amount of such other securities equal to the amount so distributed
multiplied by the fraction specified in clause (iv) 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 Telephony Group Common Stock, the TCI Group will include a corresponding
ratable amount of the kind of assets paid as such interest or dividends or
other distribution in respect of such securities so deemed to be held by the
TCI Group. TCI may also, to the extent any such other securities constitute
Convertible Securities which are at the time convertible, exercisable or
exchangeable, cause such Convertible Securities deemed to be held by the TCI
Group to be deemed to be converted, exercised or exchanged (and to the extent
the terms of such Convertible Securities require payment or delivery of
consideration in order to effect such conversion, exercise or exchange, the TCI
Group will in such case no longer include an amount of the kind of properties
or assets required to be paid or delivered as such consideration for the amount
of the Convertible Securities deemed converted, exercised or exchanged as if
such Convertible Securities were outstanding), in which case such Convertible
Securities will no longer be deemed to be held by the TCI Group or attributed
to the Liberty Media Group or Telephony Group, as applicable.
"Telephony Group" shall mean, as of any date that any shares of Telephony
Group Common Stock have been issued and continue to be outstanding:
(i) the interest of TCI or of any of its subsidiaries in TCI
Telephony Services, Inc., a Delaware corporation and an indirect wholly
owned subsidiary of TCI, 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;
(ii) all assets and liabilities of TCI or any of its subsidiaries
to the extent attributed to any of the properties or assets referred to
in clause (i) of this sentence, whether or not such assets or liabilities
are assets and liabilities of TCI Telephony Services, Inc. (together with
its consolidated subsidiaries) or any of its subsidiaries (or a successor
as described in clause (i) of this sentence);
(iii) all assets and properties contributed or otherwise
transferred to the Telephony Group from the TCI Group; and
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(iv) the interest of TCI or any of its subsidiaries in the
businesses, assets and liabilities acquired by TCI or any of its
subsidiaries for the Telephony Group, as determined by the TCI Board;
provided that (a) from and after any dividend or other distribution with
respect to any shares of Telephony Group Common Stock (other than a dividend or
other distribution payable in shares of Telephony Group Common Stock, with
respect to which adjustment shall be made as provided in clause (i) of the
definition of "Number of Shares Issuable with Respect to the Telephony Group
Inter-Group Interest," or in other securities of TCI attributed to the
Telephony Group for which provision shall be made as set forth in the
penultimate sentence of this definition), the Telephony 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 Telephony Group
Common Stock multiplied by a fraction the numerator of which is equal to the
Telephony Group 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 Telephony Group Outstanding Interest Fraction in effect
immediately prior to the record date for such dividend or other distribution and
(b) from and after any transfer of assets or properties from the Telephony
Group to the TCI Group, the Telephony Group shall no longer include the assets
or properties so transferred. If TCI shall pay a dividend or make any other
distribution with respect to shares of Telephony Group Common Stock payable in
securities of TCI attributed to the Telephony Group other than Telephony 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 interest or dividends are paid or other distributions are made on such
other securities so distributed to the holders of Telephony Group Common Stock,
the Telephony 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. TCI may also,
to the extent any such other securities constitute Convertible Securities which
are at the time convertible, exercisable or exchangeable, cause such Convertible
Securities deemed to be held by the TCI Group to be deemed to be converted,
exercised or exchanged (and to the extent the terms of such Convertible
Securities require payment or delivery of consideration in order to effect such
conversion, exercise or exchange, the Telephony 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 Telephony Group.
"Telephony Group Inter-Group Interest Fraction" means, as of any date, a
fraction the numerator of which is the Number of Shares Issuable with Respect
to the Telephony Group 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
Telephony Group Inter-Group Interest as of such date and (b) the aggregate
number of shares of Telephony Group Common Stock outstanding as of such date.
"Telephony Group Net Proceeds" shall mean, as of any date, with respect
to any Disposition of any of the properties and assets of the Telephony 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 TCI in respect
of such Disposition or in respect of any resulting dividend or redemption
pursuant to clause (i) or (ii), respectively, of the second paragraph under "-
Conversion and Redemption-Mandatory Dividend, Redemption or Conversion of
Telephony Group Common Stock" (or which would have been payable but for the
utilization of tax benefits attributable to the TCI Group or the Liberty Media
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 Telephony
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 in respect of TCI Preferred Stock
attributed to the Telephony Group. For purposes of this definition, any
properties and assets of the Telephony 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
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securities or other property other than cash, the TCI Board shall
determine the value of such securities or property, including for the purpose
of determining the equivalent value thereof if the TCI Board determines to pay
a dividend or redemption price in cash or securities or other property as
provided in the third paragraph under "-Conversion and Redemption-Mandatory
Dividend, Redemption or Conversion of Telephony Group Common Stock."
"Telephony Group Outstanding Interest Fraction" means, as of any date, a
fraction the numerator of which is the aggregate number of shares of Telephony
Group Common Stock outstanding on such date and the denominator of which is the
sum of (a) such aggregate number of shares of Telephony Group Series A Common
Stock outstanding on such date and (b) the Number of Shares Issuable with
Respect to the Telephony Group Inter-Group Interest as of such date.
VOTING RIGHTS
Holders of TCI Group Series A Common Stock are entitled to one vote for
each share of such stock held, holders of TCI Group Series B Common Stock are
entitled to ten votes for each share of such stock held, holders of LMG Series
A Common Stock are entitled to one vote for each share of such stock held and
holders of LMG Series B Common Stock are entitled to ten votes for each share
of such stock held, on all matters presented to such stockholders. If the
Telephony Group Common Stock is issued, holders of Telephony Group Series A
Common Stock will be entitled to one vote for each share of such stock held and
holders of Telephony Group Series B Common Stock will 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 TCI Preferred Stock or any series of
such a class, in the TCI Charter (including any resolution or resolutions
providing for the establishment of such class or series pursuant to authority
vested in the TCI Board by the TCI Charter), the holders of TCI Group Common
Stock, the holders of Liberty Media Group Common Stock, the holders of
Telephony Group Common Stock, if any, and the holders of each class or series
of TCI Preferred Stock, if any, entitled to vote thereon will vote as one class
for all purposes. See " - Anti-Takeover Considerations."
None of the holders of TCI Group Series A Common Stock, TCI Group Series
B Common Stock, LMG Series A Common Stock or LMG Series B Common Stock have,
and, if Telephony Group Common Stock is issued, none of the holders of
Telephony Group Series A Common Stock or Telephony Group Series B Common Stock
would have, any rights to vote as a separate class or series on any matter
coming before the stockholders of TCI, except with respect to certain limited
class and series voting rights provided under the DGCL. Under the DGCL, the
approval of the holders of a majority of the outstanding shares of any class of
capital stock of a corporation, voting separately as a class, is required to
approve any amendment to the charter that would alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely, provided that, if any amendment would alter or change the powers,
preferences or special rights of one or more series of the class so as to
affect them adversely, but would not so affect the entire class, then only the
shares of the series so affected by the amendment would be entitled to vote
thereon separately as a class.
DIVIDENDS
Subject to the prior payment of dividends on, and other rights of, any of
the outstanding shares of TCI Preferred Stock, dividends may be paid as
determined by the TCI Board (i) on the TCI Group Common Stock out of the lesser
of (x) the TCI Group Available Dividend Amount and (y) funds of TCI legally
available therefor under the DGCL, (ii) on the Liberty Media Group Common Stock
out of the lesser of (x) the Liberty Media Group Available Dividend Amount and
(y) funds of TCI legally available therefor under the DGCL, and (iii) on the
Telephony Group Common Stock, if issued, out of the lesser of (x) the Telephony
Group Available Dividend Amount and (y) funds of TCI legally available therefor
under the DGCL. Under the DGCL, the amount of the funds of TCI legally
available for the payment of dividends on any series of TCI Common Stock is
determined on the basis of the entire corporation and not just the TCI Group,
the Liberty Media Group or the Telephony Group. Consequently, the amount of
legally available funds will be reduced by the amount of any net losses of the
TCI Group, the Liberty Media Group or the Telephony Group
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and any dividends or distributions on, or repurchases of, the TCI Group Common
Stock, the Liberty Media Group Common Stock or, if issued, the Telephony Group
Common Stock, if any, and any dividends or distributions on, or repurchases of,
the TCI Group Common Stock, the Liberty Media Group Common Stock or, if issued,
the Telephony Group Common Stock, if any, and dividends on, or certain
repurchases of, TCI Preferred Stock. Certain loan agreements to which certain
subsidiaries of TCI are parties or are subject contain restricted payment
provisions that limit the amount of dividends, other than stock dividends, that
those companies may pay. Future loan agreements may also contain similar
restrictions and limits.
The "TCI Group Available Dividend Amount" means, as of any date, either
(i) the excess of (a) an amount equal to the total assets of the TCI Group less
the total liabilities (not including preferred stock) of the TCI Group as of
such date over (b) the aggregate par value of, or any greater amount determined
to be capital in respect of, all outstanding shares of TCI Group Common Stock
and each class or series of TCI Preferred Stock attributed to the TCI Group or
(ii) 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. The "Corporation
Earnings (Loss) Attributable to the TCI Group," for any period, means the net
earnings or loss of the TCI Group for such period, including income and expenses
of TCI attributed to the operations of the TCI Group on a substantially
consistent basis, including, without limitation, corporate administrative costs,
net interest and income taxes. The TCI Group Available Dividend Amount is
intended to be similar to the amount that would be legally available for the
payment of dividends on the TCI Group Common Stock under the DGCL if the TCI
Group were a separate Delaware corporation. There can be no assurance that there
will be a TCI Group Available Dividend Amount.
The "Telephony Group Available Dividend Amount" means, as of any date,
the product of the Telephony Group Outstanding Interest Fraction and either (i)
the excess of (a) an amount equal to the total assets of the Telephony Group
less the total liabilities (not including preferred stock) of the Telephony
Group as of such date over (b) the aggregate par value of, or any greater
amount determined to be capital in respect of, all outstanding shares of
Telephony Group Common Stock and each class or series of TCI Preferred Stock
attributed to the Telephony Group or (ii) in case there is no such excess, an
amount equal to the Corporation Earnings (Loss) Attributable to the Telephony
Group (if positive) for the fiscal year in which such date occurs and/or the
preceding fiscal year. The "Corporation Earnings (Loss) Attributable to the
Telephony Group," for any period, means the net earnings or loss of the
Telephony Group for such period determined on a basis consistent with the
determination of the net earnings or loss of the Telephony Group for such
period as presented in the combined financial statements of the Telephony
Group, including income and expenses of TCI attributed to the operations of the
Telephony Group on a substantially consistent basis, including, without
limitation, corporate administrative costs, net interest and income taxes. The
Telephony Group Available Dividend Amount is intended to be similar to the
amount that would be legally available for the payment of dividends on the
Telephony Group Common Stock under the DGCL if the Telephony Group were a
separate Delaware corporation. There can be no assurance that there will be a
Telephony Group Available Dividend Amount.
The "Liberty Media Group Available Dividend Amount" means, as of any
date, the product of the Liberty Media Group Outstanding Interest Fraction and
either (i) the excess of (a) an amount equal to the total assets of the Liberty
Media Group less the total liabilities (not including preferred stock) of the
Liberty Media Group as of such date over (b) the aggregate par value of, or any
greater amount determined to be capital in respect of, all outstanding shares
of Liberty Media Group Common Stock and each class or series of TCI Preferred
Stock attributed to the Liberty Media Group or (ii) 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. The "Corporation Earnings (Loss)
Attributable to the Liberty Media Group," for any period, means the net
earnings or loss of the Liberty Media Group for such period determined on a
basis consistent with the determination of the net earnings or loss of the
Liberty Media Group for such period as presented in the combined financial
statements of the Liberty Media Group, including income and expenses of TCI
attributed to the operations of the Liberty Media Group on a substantially
consistent basis, including, without limitation, corporate administrative
costs, net interest and income taxes. The Liberty Media Group Available
Dividend Amount is intended to be similar to the amount that would be legally
available for the payment of dividends on the Liberty Media Group Common Stock
under the DGCL if the Liberty
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Media Group were a separate Delaware corporation. There is no assurance that
there will be a Liberty Media Group Available Dividend Amount.
Except for dividends declared or paid as described below under "-Share
Distributions" and "-Conversion and Redemption-Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock," any dividends
paid on the TCI Group Series A Common Stock or the TCI Group Series B Common
Stock will be paid only on both series, in equal amounts per share; any
dividends paid on the LMG Series A Common Stock or the LMG Series B Common
Stock will be paid only on both series, in equal amounts per share; and, if
Telephony Group Common Stock is issued, any dividends paid on the Telephony
Group Series A Common Stock or the Telephony Group Series B Common Stock will
be paid only on both series, in equal amounts per share.
The TCI Board, subject to the provisions described above and under
"-Share Distributions" below, has the authority and discretion to declare and
pay dividends on the TCI Group Common Stock, the Liberty Media Group Common
Stock or, if issued, the Telephony Group Common Stock, in equal or unequal
amounts, notwithstanding the relationship between the TCI Group Available
Dividend Amount, the Liberty Media Group Available Dividend Amount and the
Telephony Group Available Dividend Amount , the respective amounts of prior
dividends declared on, or liquidation rights of, the TCI Group Common Stock,
the Liberty Media Group Common Stock or, if issued, the Telephony Group Common
Stock or any other factor.
At the time of any dividend or other distribution on the outstanding
shares of Liberty Media Group Common Stock (including any dividend of Liberty
Media Group Net Proceeds from the Disposition of all or substantially all of
the properties and assets of the Liberty Media Group as described below under
"-Conversion and Redemption-Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock"), the TCI Group will (if at such time there
is an Inter-Group Interest in the Liberty Media Group) be credited, and the
Liberty Media Group will be charged (in addition to the charge for the dividend
or other distribution paid or distributed in respect of outstanding shares of
Liberty Media Group Common Stock), with an amount equal to the product of (i)
the aggregate amount of such dividend or distribution paid or distributed in
respect of outstanding shares of Liberty Media Group Common Stock times (ii) a
fraction the numerator of which is the Liberty Media Group Inter-Group Interest
Fraction and the denominator of which is the Liberty Media Group Outstanding
Interest Fraction.
If Telephony Group Common Stock is issued, at the time of any dividend or
other distribution on the outstanding shares of Telephony Group Common Stock
(including any dividend of Telephony Group Net Proceeds from the Disposition of
all or substantially all of the properties and assets of the Telephony Group as
described under "-Conversion and Redemption-Mandatory Dividend, Redemption or
Conversion of Telephony Group Common Stock"), the TCI Group will (if at such
time there is an Inter-Group Interest in the Telephony Group) be credited, and
the Telephony Group will be charged (in addition to the charge for the dividend
or other distribution paid or distributed in respect of outstanding shares of
Telephony Group Common Stock), with an amount equal to the product of (i) the
aggregate amount of such dividend or distribution paid or distributed in
respect of outstanding shares of Telephony Group Common Stock times (ii) a
fraction the numerator of which is the Telephony Group Inter-Group Interest
Fraction and the denominator of which is the Telephony Group Outstanding
Interest Fraction.
SHARE DISTRIBUTIONS
DISTRIBUTIONS ON TCI GROUP COMMON STOCK. If at any time after the
LMG Distribution and the initial issuance of shares of Telephony Group Common
Stock a distribution is to be made with respect to the TCI Group Common Stock
in TCI Group Common Stock, Liberty Media Group Common Stock, Telephony Group
Common Stock, or any other securities of TCI or any other person (a "share
distribution"), such share distribution will be declared and paid only as
follows:
(i) a share distribution consisting of shares of TCI Group Series
A Common Stock (or Convertible Securities convertible into or exercisable
or exchangeable for shares of TCI Group Series A
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Common Stock) to holders of TCI Group Series A Common Stock and TCI Group
Series B Common Stock, on an equal per share basis; or consisting of
shares of TCI Group Series B Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of TCI Group
Series B Common Stock) to holders of TCI Group Series A Common Stock and
TCI Group Series B Common Stock, on an equal per share basis; or
consisting of shares of TCI Group Series A Common Stock (or Convertible
Securities convertible into or exercisable or exchangeable for shares of
TCI Group Series A Common Stock) to holders of TCI Group Series A Common
Stock and, on an equal per share basis, shares of TCI Group Series B
Common Stock (or like Convertible Securities convertible into or
exercisable or exchangeable for shares of TCI Group Series B Common Stock)
to holders of TCI Group Series B Common Stock;
(ii) a share distribution consisting of shares of LMG Series A
Common Stock (or Convertible Securities convertible into or exercisable
or exchangeable for shares of LMG Series A Common Stock) to holders of TCI
Group Series A Common Stock and TCI Group Series B Common Stock, on an
equal per share basis; provided that the sum of (A) the aggregate number
of shares of LMG Series A Common Stock to be so issued (or the number of
such shares which would be issuable upon conversion, exercise or exchange
of any Convertible Securities to be so issued) and (B) the number of
shares of such series that are subject to issuance upon conversion,
exercise or exchange of any Convertible Securities then outstanding that
are attributed to the TCI Group (other than Pre-Distribution Convertible
Securities and other than Convertible Securities convertible into or
exercisable or exchangeable for Committed Acquisition Shares) is less than
or equal to the Number of Shares Issuable with Respect to the Liberty
Media Group Inter-Group Interest;
(iii) a share distribution consisting of shares of Telephony Group
Series A Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of Telephony Group Series A Common
Stock) to holders of TCI Group Series A Common Stock and TCI Group Series
B Common Stock, on an equal per share basis; or consisting of shares of
Telephony Group Series B Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of Telephony
Group Series B Common Stock) to holders of TCI Group Series A Common
Stock and TCI Group Series B Common Stock, on an equal per share basis;
or consisting of shares of Telephony Group Series A Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of Telephony Group Series A Common Stock) to holders of TCI
Group Series A Common Stock and, on an equal per share basis, shares of
Telephony Group Series B Common Stock (or like Convertible Securities
convertible into or exercisable or exchangeable for shares of Telephony
Group Series B Common Stock) to holders of TCI Group Series B Common
Stock; provided that the sum of (A) the aggregate number of shares of
Telephony Group Series A Common Stock and Telephony Group Series B 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 Telephony
Group Series A Common Stock that are subject to issuance upon conversion,
exercise or exchange of any Convertible Securities then outstanding that
are attributed to the TCI Group is less than or equal to the Number of
Shares Issuable with Respect to the Telephony Group Inter-Group Interest;
and
(iv) a share distribution consisting of any class or series of
securities of TCI or any other person other than TCI Group Common Stock,
Liberty Media Group Common Stock or Telephony Group Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of TCI Group Common Stock, Liberty Media Group Common Stock or
Telephony Group Common Stock), either on the basis of a distribution of
identical securities, on an equal per share basis, to holders of TCI
Group Series A Common Stock and TCI Group Series B Common Stock or on the
basis of a distribution of one class or series of securities to holders
of TCI Group Series A Common Stock and another class or series of
securities to holders of TCI Group Series B Common Stock, provided that
the securities so distributed (and, if the distribution consists of
Convertible Securities, the securities into which such Convertible
Securities are convertible or for which they are exercisable or
exchangeable) do not differ in any respect other than their relative
voting rights and related differences in designation, conversion,
redemption and share distribution
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provisions, with holders of shares of TCI Group Series B Common Stock
receiving the class or series having the higher relative voting rights
(without regard to whether such rights differ to a greater or lesser
extent than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the TCI
Group Series A Common Stock and the TCI Group Series B Common Stock),
provided that if the securities so distributed constitute capital stock of
a subsidiary of TCI, such rights will not differ to a greater extent than
the corresponding differences in voting rights, designation, conversion,
redemption and share distribution provisions between the TCI Group Series
A Common Stock and the TCI Group Series B Common Stock, and provided in
each case that such distribution is otherwise made on an equal per share
basis.
TCI will not reclassify, subdivide or combine the TCI Group Series A
Common Stock without reclassifying, subdividing or combining the TCI Group
Series B Common Stock, on an equal per share basis, and TCI will not
reclassify, subdivide or combine the TCI Group Series B Common Stock without
reclassifying, subdividing or combining the TCI Group Series A Common Stock, on
an equal per share basis.
DISTRIBUTIONS ON LIBERTY MEDIA GROUP COMMON STOCK. If at any time a
share distribution is to be made with respect to the Liberty Media Group Common
Stock, such share distribution will be declared and paid only as follows (or as
described under the caption "-Conversion and Redemption" with respect to the
redemptions and other distributions referred to therein):
(i) a share distribution consisting of shares of LMG Series A
Common Stock (or Convertible Securities convertible into or exercisable
or exchangeable for shares of LMG Series A Common Stock) to holders of
LMG Series A Common Stock and LMG Series B Common Stock, on an equal per
share basis; or consisting of shares of LMG Series B Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of LMG Series B Common Stock) to holders of LMG Series A
Common Stock and LMG Series B Common Stock, on an equal per share basis;
or consisting of shares of LMG Series A Common Stock (or Convertible
Securities convertible into or exercisable or exchangeable for shares of
LMG Series A Common Stock) to holders of LMG Series A Common Stock and,
on an equal per share basis, shares of LMG Series B Common Stock (or like
Convertible Securities convertible into or exercisable or exchangeable
for shares of LMG Series B Common Stock) to holders of LMG Series B
Common Stock; and
(ii) a share distribution consisting of any class or series of
securities of TCI or any other person other than as described in the
immediately preceding clause (i) and other than TCI Group Common Stock or
Telephony Group Common Stock (or Convertible Securities convertible into
or exercisable or exchangeable for shares of TCI Group Series A Common
Stock, TCI Group Series B Common Stock, Telephony Group Series A Common
Stock or Telephony Group Series B Common Stock), either on the basis of a
distribution of identical securities, on an equal per share basis, to
holders of LMG Series A Common Stock and LMG Series B Common Stock or on
the basis of a distribution of one class or series of securities to
holders of LMG Series A Common Stock and another class or series of
securities to holders of LMG Series B Common Stock, provided that the
securities so distributed (and, if the distribution consists of
Convertible Securities, the securities into which such Convertible
Securities are convertible or for which they are exercisable or
exchangeable) do not differ in any respect other than their relative
voting rights and related differences in designation, conversion,
redemption and share distribution provisions, with holders of shares of
LMG Series B Common Stock receiving the class or series having the higher
relative voting rights (without regard to whether such rights differ to a
greater or lesser extent than the corresponding differences in voting
rights, designation, conversion, redemption and share distribution
provisions between the LMG Series A Common Stock and the LMG Series B
Common Stock), provided that if the securities so distributed constitute
capital stock of a subsidiary of TCI, such rights will not differ to a
greater extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions
between the LMG Series A Common Stock and the LMG Series B Common Stock,
and provided in each case that such distribution is otherwise made on an
equal per share basis.
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TCI will not reclassify, subdivide or combine the LMG Series A Common
Stock without reclassifying, subdividing or combining the LMG Series B Common
Stock, on an equal per share basis, and TCI will not reclassify, subdivide or
combine the LMG Series B Common Stock without reclassifying, subdividing or
combining the LMG Series A Common Stock, on an equal per share basis.
DISTRIBUTIONS ON TELEPHONY GROUP COMMON STOCK. If Telephony Group
Common Stock is issued, and if at any time a share distribution is to be made
with respect to the Telephony Group Common Stock, such share distribution will
be declared and paid only as follows (or as described under the caption
"-Conversion and Redemption" with respect to the redemptions and other
distributions referred to therein):
(i) a share distribution consisting of shares of Telephony Group
Series A Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of Telephony Group Series A Common
Stock) to holders of Telephony Group Series A Common Stock and Telephony
Group Series B Common Stock, on an equal per share basis; or consisting
of shares of Telephony Group Series B Common Stock (or Convertible
Securities convertible into or exercisable or exchangeable for shares of
Telephony Group Series B Common Stock) to holders of Telephony Group
Series A Common Stock and Telephony Group Series B Common Stock, on an
equal per share basis; or consisting of shares of Telephony Group Series A
Common Stock (or Convertible Securities convertible into or exercisable or
exchangeable for shares of Telephony Group Series A Common Stock) to
holders of Telephony Group Series A Common Stock and, on an equal per
share basis, shares of Telephony Group Series B Common Stock (or like
Convertible Securities convertible into or exercisable or exchangeable for
shares of Telephony Group Series B Common Stock) to holders of Telephony
Group Series B Common Stock; and
(ii) a share distribution consisting of any class or series of
securities of TCI or any other person other than as described in the
immediately preceding clause (i) and other than TCI Group Common Stock or
Liberty Media Group Common Stock (or Convertible Securities convertible
into or exercisable or exchangeable for shares of TCI Group Common Stock
or Liberty Media Group Common Stock), either on the basis of a
distribution of identical securities, on an equal per share basis, to
holders of Telephony Group Series A Common Stock and Telephony Group
Series B Common Stock or on the basis of a distribution of one class or
series of securities to holders of Telephony Group Series A Common Stock
and another class or series of securities to holders of Telephony Group
Series B Common Stock, provided that the securities so distributed (and,
if the distribution consists of Convertible Securities, the securities
into which such Convertible Securities are convertible or for which they
are exercisable or exchangeable) do not differ in any respect other than
their relative voting rights and related differences in designation,
conversion, redemption and share distribution provisions, with holders of
shares of Telephony Group Series B Common Stock receiving the class or
series having the higher relative voting rights (without regard to
whether such rights differ to a greater or lesser extent than the
corresponding differences in voting rights, designation, conversion,
redemption and share distribution provisions between the Telephony Group
Series A Common Stock and the Telephony Group Series B Common Stock),
provided that if the securities so distributed constitute capital stock
of a subsidiary of TCI, such rights will not differ to a greater extent
than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the
Telephony Group Series A Common Stock and the Telephony Group Series B
Common Stock, and provided in each case that such distribution is
otherwise made on an equal per share basis.
Because under the TCI Charter the Telephony Group is not permitted to
have an Inter-Group Interest in either the TCI Group or the Liberty Media
Group, no distributions on the Telephony Group Common Stock of shares of TCI
Group Common Stock (or related Convertible Securities) or Liberty Media Group
Common Stock (or related Convertible Securities) are permitted.
TCI will not reclassify, subdivide or combine the Telephony Group Series
A Common Stock without reclassifying, subdividing or combining the Telephony
Group Series B Common Stock, on an equal per share basis, and
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TCI will not reclassify, subdivide or combine the Telephony Group Series B
Common Stock without reclassifying, subdividing or combining the Telephony Group
Series A Common Stock, on an equal per share basis.
CONVERSION AND REDEMPTION
CONVERSION AT THE OPTION OF THE HOLDER. Each share of TCI Group
Series B Common Stock is convertible, at the option of the holder thereof, into
one share of TCI Group Series A Common Stock. Each share of LMG Series B
Common Stock is convertible, at the option of the holder thereof, into one
share of LMG Series A Common Stock. If Telephony Group Common Stock is
issued, each share of Telephony Group Series B Common Stock would be
convertible, at the option of the holder thereof, into one share of Telephony
Group Series A Common Stock. Shares of TCI Group Series A Common Stock are not
convertible into shares of TCI Group Series B Common Stock; shares of LMG
Series A Common Stock are not convertible into shares of LMG Series B Common
Stock; and, if Telephony Group Common Stock is issued, shares of Telephony
Group Series A Common Stock would not be convertible into shares of Telephony
Group Series B Common Stock.
CONVERSION OF LIBERTY MEDIA GROUP COMMON STOCK AT THE OPTION OF TCI.
The TCI Board may at any time declare that (i) all of the outstanding shares of
LMG Series A Common Stock will be converted into a number (or fraction) of
fully paid and nonassessable shares of TCI Group Series A Common Stock equal to
the Liberty Media Group Optional Conversion Ratio, and (ii) all of the
outstanding shares of LMG Series B Common Stock will be converted into a number
(or fraction) of fully paid and nonassessable shares of TCI Group Series B
Common Stock equal to the Liberty Media Group Optional Conversion Ratio. As
more fully described below, the Liberty Media Group Optional Conversion Ratio
is the ratio of the private market value of a share of Liberty Media Group
Common Stock determined by appraisal to the public trading price of a share of
TCI Group Common Stock.
Under the TCI Charter, the "Liberty Media Group Optional Conversion
Ratio" means the quotient (calculated to the nearest five decimal places)
obtained by dividing (x) the Liberty Media Group Common Stock Per Share Value
by (y) the average Market Value of one share of TCI Group Series A Common Stock
over the 20-trading day period ending on the trading day preceding the
Appraisal Date. The Liberty Media Group Common Stock Per Share Value will
equal the quotient obtained by dividing the Liberty Media Group Private Market
Value by the Adjusted Outstanding Shares of Liberty Media Group Common Stock,
which will be determined in the manner described below.
The "Liberty Media Group Private Market Value" means an amount equal to
the private market value of the Liberty Media Group as of the Appraisal Date.
In the event that TCI determines to establish the Liberty Media Group Private
Market Value, TCI shall designate the First Appraiser and the Independent
Committee shall designate the Second Appraiser. Not later than 20 days after
the Selection Date, the First Appraiser and the Second Appraiser will each
determine its initial view as to the private market value of the Liberty Media
Group as of the Appraisal Date and will consult with one another with respect
thereto. Not later than the 30th day after the Selection Date, the First
Appraiser and the Second Appraiser will each have determined its final view as
to such private market value. If the Higher Appraised Amount is not more than
120% of the Lower Appraised Amount, the Liberty Media Group Private Market
Value (subject to any adjustment described in the second succeeding paragraph)
will be the average of those two amounts. If the Higher Appraised Amount is
more than 120% of the Lower Appraised Amount, the First Appraiser and the
Second Appraiser will agree upon and jointly designate the Mutually Designated
Appraiser to determine such private market value. The Mutually Designated
Appraiser will not be provided with any of the work of the First Appraiser and
the Second Appraiser. The Mutually Designated Appraiser will, no later than
the 20th day after the date the Mutually Designated Appraiser is designated,
determine the Mutually Appraised Amount, and the Liberty Media Group Private
Market Value (subject to any adjustment described in the second succeeding
paragraph) will be (i) if the Mutually Appraised Amount is between the Lower
Appraised Amount and the Higher Appraised Amount, (a) the average of (1) the
Mutually Appraised Amount and (2) the Lower Appraised Amount or the Higher
Appraised Amount, whichever is closer to the Mutually Appraised Amount, or (b)
the Mutually Appraised Amount, if neither the Lower Appraised Amount nor the
Higher Appraised Amount is closer to the Mutually Appraised Amount, or (ii) if
the Mutually Appraised Amount is greater than the Higher Appraised Amount or
less than the Lower Appraised Amount, the average
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<PAGE>
of the Higher Appraised Amount and the Lower Appraised Amount. For these
purposes, if any such investment banking firm expresses its final view of the
private market value of the Liberty Media Group as a range of values, such
investment banking firm's final view of such private market value will be deemed
to be the midpoint of such range of values.
Each of the investment banking firms referred to in the immediately
preceding paragraph will be instructed to determine the private market value of
the Liberty Media Group as of the Appraisal Date based upon the amount a
willing purchaser would pay to a willing seller, in an arm's-length
transaction, if it were acquiring the Liberty Media Group, as if the Liberty
Media Group were a publicly traded non-controlled corporation and the purchaser
was acquiring all of the capital stock of such corporation and without
consideration of any potential regulatory constraints limiting the potential
purchasers of the Liberty Media Group other than that which would have existed
if the Liberty Media Group were a publicly traded non-controlled entity.
Following the determination of the Liberty Media Group Private Market
Value, the investment banking firms whose final views of the private market
value of the Liberty Media Group were used in the calculation of the Liberty
Media Group Private Market Value will determine the Adjusted Outstanding Shares
of Liberty Media Group Common Stock together with any further appropriate
adjustments to the Liberty Media Group Private Market Value resulting from
such determination. The "Adjusted Outstanding Shares of Liberty Media Group
Common Stock" means a number, as determined by such investment banking firms as
of the Appraisal Date, equal to the sum of the number of shares of Liberty
Media Group Common Stock outstanding, the Number of Shares Issuable with
Respect to the Liberty Media Group Inter-Group Interest, the number of
Committed Acquisition Shares issuable, the number of shares of Liberty Media
Group Common Stock issuable upon the conversion, exercise or exchange of all
Pre-Distribution Convertible Securities and the number of shares of Liberty
Media Group Common Stock issuable upon the conversion, exercise or exchange of
those Convertible Securities (other than Pre-Distribution Convertible
Securities and other than Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares) the holders of
which would derive an economic benefit from conversion, exercise or exchange of
such Convertible Securities which exceeds the economic benefit of not
converting, exercising or exchanging such Convertible Securities. The "Liberty
Media Group Common Stock Per Share Value" means the quotient obtained by
dividing the Liberty Media Group Private Market Value by the Adjusted
Outstanding Shares of Liberty Media Group Common Stock, provided that if such
investment banking firms do not agree on the determinations provided for in
this paragraph, the Liberty Media Group Common Stock Per Share Value will be
the average of the quotients so obtained on the basis of the respective
determinations of such firms.
If TCI determines to convert shares of LMG Series A Common Stock into TCI
Group Series A Common Stock and shares of LMG Series B Common Stock into TCI
Group Series B Common Stock at the Liberty Media Group Optional Conversion
Ratio, such conversion will occur on a conversion date on or prior to the 120th
day following the Appraisal Date. If TCI determines not to undertake such
conversion, TCI may at any time thereafter undertake to reestablish the Liberty
Media Group Common Stock Per Share Value as of a subsequent date.
CONVERSION OF TELEPHONY GROUP COMMON STOCK AT THE OPTION OF TCI. If
Telephony Group Common Stock is issued, the TCI Board may at any time declare
that (i) all of the outstanding shares of Telephony Group Series A Common Stock
will be converted into a number (or fraction) of fully paid and nonassessable
shares of TCI Group Series A Common Stock equal to the Telephony Group Optional
Conversion Ratio, and (ii) all of the outstanding shares of Telephony Group
Series B Common Stock will be converted into a number (or fraction) of fully
paid and nonassessable shares of TCI Group Series B Common Stock equal to the
Telephony Group Optional Conversion Ratio. As more fully described below, the
Telephony Group Optional Conversion Ratio is the ratio of the private market
value of a share of Telephony Group Common Stock determined by appraisal to the
public trading price of a share of TCI Group Common Stock.
Under the TCI Charter, the "Telephony Group Optional Conversion Ratio"
means the quotient (calculated to the nearest five decimal places) obtained by
dividing (x) the Telephony Group Common Stock Per Share Value by (y)
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the average Market Value of one share of TCI Group Series A Common Stock over
the 20-trading day period ending on the trading day preceding the Appraisal
Date. The Telephony Group Common Stock Per Share Value will equal the quotient
obtained by dividing the Telephony Group Private Market Value by the Adjusted
Outstanding Shares of Telephony Group Common Stock, which will be determined in
the manner provided below.
The "Telephony Group Private Market Value" means an amount equal to the
private market value of the Telephony Group as of the Appraisal Date. In the
event that TCI determines to establish the Telephony Group Private Market
Value, TCI shall designate the First Appraiser and the Independent Committee
shall designate the Second Appraiser. Not later than 20 days after the
Selection Date, the First Appraiser and the Second Appraiser will each
determine its initial view as to the private market value of the Telephony
Group as of the Appraisal Date and will consult with one another with respect
thereto. Not later than the 30th day after the Selection Date, the First
Appraiser and the Second Appraiser will each have determined its final view as
to such private market value. If the Higher Appraised Amount is not more than
120% of the Lower Appraised Amount, the Telephony Group Private Market Value
(subject to any adjustment described in the second succeeding paragraph) will
be the average of those two amounts. If the Higher Appraised Amount is more
than 120% of the Lower Appraised Amount, the First Appraiser and the Second
Appraiser will agree upon and jointly designate the Mutually Designated
Appraiser to determine such private market value. The Mutually Designated
Appraiser will not be provided with any of the work of the First Appraiser and
the Second Appraiser. The Mutually Designated Appraiser will, no later than
the 20th day after the date the Mutually Designated Appraiser is designated,
determine the Mutually Appraised Amount, and the Telephony Group Private Market
Value (subject to any adjustment described in the second succeeding paragraph)
will be (i) if the Mutually Appraised Amount is between the Lower Appraised
Amount and the Higher Appraised Amount, (a) the average of (1) the Mutually
Appraised Amount and (2) the Lower Appraised Amount or the Higher Appraised
Amount, whichever is closer to the Mutually Appraised Amount, or (b) the
Mutually Appraised Amount, if neither the Lower Appraised Amount nor the Higher
Appraised Amount is closer to the Mutually Appraised Amount, or (ii) if the
Mutually Appraised Amount is greater than the Higher Appraised Amount or less
than the Lower Appraised Amount, the average of the Higher Appraised Amount and
the Lower Appraised Amount. For these purposes, if any such investment banking
firm expresses its final view of the private market value of the Telephony Group
as a range of values, such investment banking firm's final view of such private
market value will be deemed to be the midpoint of such range of values.
Each of the investment banking firms referred to in the immediately
preceding paragraph will be instructed to determine the private market value of
the Telephony 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 Telephony Group, as if the Telephony Group were a publicly
traded non-controlled corporation and the purchaser was acquiring all of the
capital stock of such corporation and without consideration of any potential
regulatory constraints limiting the potential purchasers of the Telephony Group
other than that which would have existed if the Telephony Group were a publicly
traded non-controlled entity.
Following the determination of the Telephony Group Private Market Value,
the investment banking firms whose final views of the private market value of
the Telephony Group were used in the calculation of the Telephony Group Private
Market Value will determine the Adjusted Outstanding Shares of Telephony Group
Common Stock together with any further appropriate adjustments to the Telephony
Group Private Market Value resulting from such determination. The "Adjusted
Outstanding Shares of Telephony Group Common Stock" means a number, as
determined by such investment banking firms as of the Appraisal Date, equal to
the sum of the number of shares of Telephony Group Common Stock outstanding,
the Number of Shares Issuable with Respect to the Telephony Group Inter-Group
Interest, and the number of shares of Telephony Group Common Stock issuable
upon the conversion, exercise or exchange of those Convertible Securities 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
"Telephony Group Common Stock Per Share Value" means the quotient obtained by
dividing the Telephony Group Private Market Value by the Adjusted Outstanding
Shares of Telephony Group Common Stock, provided that if such investment
banking firms do not agree on the determinations
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<PAGE>
provided for in this paragraph, the Telephony Group Common Stock Per Share Value
will be the average of the quotients so obtained on the basis of the respective
determinations of such firms.
If TCI determines to convert shares of Telephony Group Series A Common
Stock into TCI Group Series A Common Stock and shares of Telephony Group Series
B Common Stock into TCI Group Series B Common Stock at the Telephony Group
Optional Conversion Ratio, such conversion will occur on a conversion date on
or prior to the 120th day following the Appraisal Date. If TCI determines not
to undertake such conversion, TCI may at any time thereafter undertake to
reestablish the Telephony Group Common Stock Per Share Value as of a subsequent
date.
Any such conversion would dilute the interests of holders of TCI Group
Common Stock and would preclude holders of Telephony Group Common Stock from
retaining their interest in a security reflecting separately the business of
the Telephony Group.
MANDATORY DIVIDEND, REDEMPTION OR CONVERSION OF LIBERTY MEDIA GROUP
COMMON STOCK. Upon the Disposition, in one transaction or a series of
related transactions by TCI and its subsidiaries of all or substantially all of
the properties and assets of the Liberty Media Group to one or more persons,
entities or groups TCI is required, on or prior to the 85th trading day
following the consummation of such Disposition, to take one of the actions
listed in the following paragraph. This requirement does not apply to a
Disposition (a) in connection with the Disposition by TCI of all of TCI's
properties and assets in one transaction or a series of related transactions in
connection with the liquidation, dissolution or winding up of TCI, (b) by
dividend, other distribution or redemption in accordance with any
provision described under "-Redemption of Liberty Media Group Common Stock in
Exchange for Stock of Subsidiary," "-Dividends," "-Share Distributions," or
"-Liquidation Rights," (c) to any person, entity or group which TCI, directly
or indirectly, after giving effect to the Disposition, controls or (d) in
connection with a Related Business Transaction. For these purposes,
"substantially all of the properties and assets of the Liberty Media Group"
means a portion of such properties and assets that represents at least 80% of
the then-current market value (as determined by the TCI Board) of the
properties and assets of the Liberty Media Group as of such date.
The action TCI is required to take is to either:
(i) subject to the limitations described under "-Dividends,"
declare and pay a dividend in cash and/or securities or other property (other
than a dividend or distribution of TCI Common Stock) to the holders of the
outstanding shares of Liberty Media Group Common Stock equally on a share for
share basis (subject to the provisions described in the last sentence of the
penultimate paragraph under this caption "-Mandatory Dividend, Redemption or
Conversion of Liberty Media Group Common Stock"), in an aggregate amount equal
to the product of the Liberty Media Group Outstanding Interest Fraction as of
the record date for determining the holders entitled to receive such dividend
and the Liberty Media Group Net Proceeds;
(ii) provided that there are assets of TCI legally available
therefor and the Liberty Media Group Available Dividend Amount would have
been sufficient to pay a dividend in lieu thereof as described in clause
(i) of this paragraph, 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 LMG Series A Common
Stock and LMG Series B Common Stock in exchange for cash and/or
securities or other property (other than TCI Common Stock) in an
aggregate amount equal to the product of the Adjusted Liberty Media
Group Outstanding Interest Fraction as of the date of such
redemption and the Liberty Media Group Net Proceeds, such aggregate
amount to be allocated (subject to the provisions described in the
last sentence of the penultimate paragraph under this caption) to
shares of LMG Series A Common Stock and LMG Series B Common Stock
in the ratio of the number of shares of each such series
outstanding (so that the amount of consideration paid for the
redemption of each share of LMG Series A Common Stock and each
share of LMG Series B Common Stock is the same); or
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(B) if such Disposition involves substantially all (but not
all) of the properties and assets of the Liberty Media Group, apply
an aggregate amount of cash and/or securities or other property
(other than TCI Common Stock) equal to the product of the Liberty
Media Group Outstanding Interest Fraction as of the date shares are
selected for redemption and the Liberty Media Group Net Proceeds of
such Disposition to the redemption of outstanding shares of LMG
Series A Common Stock and LMG Series B Common Stock, such aggregate
amount to be allocated (subject to the provisions described in the
last sentence of the penultimate paragraph under this caption) to
shares of LMG Series A Common Stock and LMG Series B Common Stock
in the ratio of the number of shares of each such series
outstanding, and the number of shares of each such series to be
redeemed to equal the lesser of (x) the whole number nearest the
number determined by dividing the aggregate amount so allocated to
the redemption of such series by the average Market Value of one
share of LMG Series A Common Stock during the ten-trading day
period beginning on the 16th trading day following the consummation
of such Disposition and (y) the number of shares of such series
outstanding (so that the amount of consideration paid for the
redemption of each share of LMG Series A Common Stock and each
share of LMG Series B Common Stock is the same); or
(iii) convert (A) each outstanding share of LMG Series A Common
Stock into a number (or fraction) of fully paid and nonassessable shares
of TCI Group Series A Common Stock and (B) each outstanding share of LMG
Series B Common Stock into a number (or fraction) of fully paid and
nonassessable shares of TCI Group Series B Common Stock, in each case
equal to 110% of the average daily ratio (calculated to the nearest five
decimal places) of the Market Value of one share of LMG Series A Common
Stock to the Market Value of one share of TCI Group Series A Common Stock
during the ten-trading day period referred to in clause (ii)(B) of this
paragraph.
The "Adjusted Liberty Media Group Outstanding Interest Fraction" means a
fraction the numerator of which is the number of outstanding shares of Liberty
Media Group Common Stock and the denominator of which is the sum of (a) such
number of outstanding shares, (b) the Number of Shares Issuable with Respect to
the Liberty Media Group Inter-Group Interest, (c) the number of shares of
Liberty Media Group Common Stock issuable upon conversion, exercise or exchange
of Pre-Distribution Convertible Securities and (d) the number of Committed
Acquisition Shares issuable.
TCI may elect to pay the dividend or redemption price referred to in
clause (i) or (ii) of the second paragraph under this caption "-Mandatory
Dividend, Redemption or Conversion or Liberty Media Group Common Stock" either
in the same form as the proceeds of the Disposition were received or in any
other combination of cash or securities or other property (other than Common
Stock) that the TCI Board determines will have an aggregate market value on a
fully distributed basis, of not less than the amount of the Liberty Media Group
Net Proceeds. If the dividend or redemption price is paid in the form of
securities of an issuer other than TCI, the TCI Board may determine either to
(i) pay the dividend or redemption price in the form of separate classes or
series of securities, with one class or series of such securities to holders of
LMG Series A Common Stock and another class or series of securities to holders
of LMG Series B Common Stock, provided that such securities (and, if such
securities are convertible into or exercisable or exchangeable for shares of
another class or series of securities, the securities so issuable upon such
conversion, exercise or exchange) do not differ in any respect other than their
relative voting rights and related differences in designation, conversion,
redemption and share distribution provisions with holders of shares of LMG
Series B Common Stock receiving the class or series having the higher relative
voting rights (without regard to whether such rights differ to a greater or
lesser extent than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the LMG Series
A Common Stock and the LMG Series B Common Stock), provided that if such
securities constitute capital stock of a subsidiary of TCI, such rights will
not differ to a greater extent than the corresponding differences in voting
rights, designation, conversion, redemption and share distribution provisions
between the LMG Series A Common Stock and the LMG Series B Common Stock, and
otherwise such securities will be distributed on an equal per share basis, or
(ii) pay the dividend or redemption price in the form of a
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single class of securities without distinction between the shares received by
the holders of LMG Series A Common Stock and LMG Series B Common Stock.
At the time of any dividend made as a result of a Disposition referred to
above, the TCI Group will be credited, and the Liberty Media Group will be
charged (in addition to the charge for the dividend paid in respect of
outstanding shares of Liberty Media Group Common Stock), with an amount equal
to the product of (i) the aggregate amount paid in respect of such dividend
times (ii) a fraction the numerator of which is the Liberty Media Group
Inter-Group Interest Fraction and the denominator of which is the Liberty Media
Group Outstanding Interest Fraction.
MANDATORY DIVIDEND, REDEMPTION OR CONVERSION OF TELEPHONY GROUP COMMON
STOCK. If Telephony Group Common Stock is issued, upon the Disposition in
one transaction or a series of related transactions by TCI and its subsidiaries
of all or substantially all of the properties and assets of the Telephony Group
to any one or more persons, entities or groups, TCI is required, on or prior to
the 85th trading day following the consummation of such Disposition, to take
one of the actions listed in the following paragraph. This requirement does
not apply to a Disposition (a) in connection with the Disposition by TCI of all
of TCI's properties and assets in one transaction or a series of related
transactions in connection with the liquidation, dissolution or winding up of
TCI, (b) by dividend, other distribution or redemption in accordance with any
provision described under "-Redemption of Telephony Group Common Stock in
Exchange for Stock of Subsidiary" "-Dividends," "-Share Distributions," or
"-Liquidation Rights," (c) to any person, entity or group which TCI, directly
or indirectly, after giving effect to the Disposition, controls or (d) in
connection with a Related Business Transaction. For these purposes,
"substantially all of the properties and assets of the Telephony Group" means a
portion of such properties and assets that represents at least 80% of the
then-current market value (as determined by the TCI Board) of the properties
and assets of the Telephony Group as of such date.
The action TCI is required to take is to either:
(i) subject to the limitations described above under
"-Dividends," declare and pay a dividend in cash and/or securities or
other property (other than a dividend or distribution of TCI Common
Stock) to the holders of the outstanding shares of Telephony Group Common
Stock equally on a share for share basis (subject to the provisions
described in the last sentence of the third paragraph under this caption
"-Mandatory Dividends, Redemption or Conversion of Telephony Group Common
Stock," in an aggregate amount equal to the product of the Telephony
Group Outstanding Interest Fraction as of the record date for determining
the holders entitled to receive such dividend and the Telephony Group Net
Proceeds;
(ii) provided that there are assets of TCI legally available
therefor and the Telephony Group Available Dividend Amount would have
been sufficient to pay a dividend in lieu thereof as described in clause
(i) of this paragraph, then:
(A) if such Disposition involves all (not merely
substantially all) of the properties and assets of the Telephony
Group, redeem all outstanding shares of Telephony Group Series A
Common Stock and Telephony Group Series B Common Stock in exchange
for cash and/or securities or other property (other than TCI Common
Stock) in an aggregate amount equal to the product of the Telephony
Group Outstanding Interest Fraction as of the date of such
redemption and the Telephony Group Net Proceeds, such aggregate
amount to be allocated (subject to the provisions described in the
last sentence of the following paragraph) to shares of Telephony
Group Series A Common Stock and Telephony Group Series B Common
Stock in the ratio of the number of shares of each such series
outstanding (so that the amount of consideration paid for the
redemption of each share of Telephony Group Series A Common Stock
and each share of Telephony Group Series B Common Stock is the
same); or
(B) if such Disposition involves substantially all (but not
all) of the properties and assets of the Telephony Group, apply an
aggregate amount of cash and/or securities or other property (other
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than TCI Common Stock) equal to the product of the Telephony Group
Outstanding Interest Fraction as of the date shares are selected
for redemption and the Telephony Group Net Proceeds of such
Disposition to the redemption of outstanding shares of Telephony
Group Series A Common Stock and Telephony Group Series B Common
Stock, such aggregate amount to be allocated (subject to the
provisions described in the last sentence of the following
paragraph) to shares of Telephony Group Series A Common Stock and
Telephony Group Series B Common Stock in the ratio of the number of
shares of each such series outstanding, and the number of shares of
each such series to be redeemed to equal the lesser of (x) the
whole number nearest the number determined by dividing the
aggregate amount so allocated to the redemption of such series by
the average Market Value of one share of Telephony Group Series A
Common Stock during the ten-trading day period beginning on the
16th trading day following the consummation of such Disposition and
(y) the number of shares of such series outstanding (so that the
amount of consideration paid for the redemption of each share of
Telephony Group Series A Common Stock and each share of Telephony
Group Series B Common Stock is the same); or
(iii) convert (A) each outstanding share of Telephony Group Series
A Common Stock into a number (or fraction) of fully paid and nonassessable
shares of TCI Group Series A Common Stock and (B) each outstanding share of
Telephony Group Series B Common Stock into a number (or fraction) of fully paid
and nonassessable shares of TCI Group Series B Common Stock, in each case equal
to 110% of the average daily ratio (calculated to the nearest five decimal
places) of the Market Value of one share of Telephony Group Series A Common
Stock to the Market Value of one share of TCI Group Series A Common Stock
during the ten-trading day period referred to in clause (ii)(B) of this
paragraph.
TCI may elect to pay the dividend or redemption price referred to in
clause (i) or (ii) of the second paragraph under this caption "-Mandatory
Dividend, Redemption or Conversion of Telephony Group Common Stock" either in
the same form as the proceeds of the Disposition were received or in any other
combination of cash or securities or other property (other than Common Stock)
that the TCI Board determines will have an aggregate market value on a fully
distributed basis, of not less than the amount of the Telephony Group Net
Proceeds. If the dividend or redemption price is paid in the form of
securities of an issuer other than TCI, the TCI Board may determine either to
(i) pay the dividend or redemption price in the form of separate classes or
series of securities, with one class or series of such securities to holders of
Telephony Group Series A Common Stock and another class or series of securities
to holders of Telephony Group Series B Common Stock, provided that such
securities (and, if such securities are convertible into or exercisable or
exchangeable for shares of another class or series of securities, the
securities so issuable upon such conversion, exercise or exchange) do not
differ in any respect other than their relative voting rights and related
differences in designation, conversion, redemption and share distribution
provisions with holders of shares of Telephony Group Series B Common Stock
receiving the class or series having the higher relative voting rights (without
regard to whether such rights differ to a greater or lesser extent than the
corresponding differences in voting rights, designation, conversion, redemption
and share distribution provisions between the Telephony Group Series A Common
Stock and the Telephony Group Series B Common Stock), provided that if such
securities constitute capital stock of a subsidiary of TCI, such rights will
not differ to a greater extent than the corresponding differences in voting
rights, designation, conversion, redemption and share distribution provisions
between the Telephony Group Series A Common Stock and the Telephony Group
Series B Common Stock, and otherwise such securities will be distributed on an
equal per share basis, or (ii) pay the dividend or redemption price in the form
of a single class of securities without distinction between the shares received
by the holders of Telephony Group Series A Common Stock and Telephony Group
Series B Common Stock. The Related Business Transaction exception would enable
TCI to enter into transactions in which the properties or assets of the
Telephony Group may be considered to be "disposed of" in exchange for equity
securities of an entity engaged or proposing to engage in similar or
complementary business areas to those of the Telephony Group while maintaining
the capital structure and delineation of business groups of the Telephony
Group.
At the time of any dividend made as a result of a Disposition referred to
above, the TCI Group will be credited, and the Telephony Group will be charged
(in addition to the charge for the dividend paid in respect of outstanding
shares
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of Telephony Group Common Stock), with an amount equal to the product of
(i) the aggregate amount paid in respect of such dividend times (ii) a fraction
the numerator of which is the Telephony Group Inter-Group Interest Fraction and
the denominator of which is the Telephony Group Outstanding Interest Fraction.
The option to convert the Telephony Group Common Stock into TCI Group
Common Stock in the event of a Disposition provides TCI with additional
flexibility by allowing TCI to deliver consideration in the form of shares of
TCI Group Common Stock rather than cash or securities or other properties.
This alternative could be used, for example, in circumstances when TCI did not
have sufficient legally available assets under the DGCL to pay the full amount
of an otherwise required dividend or redemption or when TCI desired to retain
such proceeds.
If less than substantially all of the properties and assets of the
Telephony Group were disposed of by TCI in one transaction, TCI would not be
required to pay a dividend on, redeem or convert the outstanding shares of
Telephony Group Common Stock, even if an additional transaction were
consummated at a later time in which additional properties and assets of the
Telephony Group were disposed of by TCI, which, together with the properties
and assets disposed of in the first transaction, would have constituted
substantially all of the properties and assets of the Telephony Group at the
time of the first transaction, unless such transactions constituted a series of
related transactions. The second transaction, however, could trigger such a
requirement if, at the time of the second transaction, the properties and
assets disposed of in such transaction constituted at least substantially all
of the properties and assets of the Telephony Group at such time. If less than
substantially all of the properties and assets of the Telephony Group were
disposed of by TCI, the holders of the Telephony Group Common Stock would not
be entitled to receive any dividend or have their shares redeemed or converted
for TCI Group Common Stock, although the TCI Board could determine, in its sole
discretion, to pay a dividend on the Telephony Group Common Stock in an amount
related to the proceeds of such Disposition.
REDEMPTION OF LIBERTY MEDIA GROUP COMMON STOCK IN EXCHANGE FOR STOCK OF
SUBSIDIARY. At any time at which all of the assets and liabilities
attributed to the Liberty Media Group are and continue to be held directly or
indirectly by any one or more corporations all of the capital stock of which is
owned by TCI (the "Liberty Media Group Subsidiaries"), the TCI Board may,
subject to the availability of assets of TCI legally available therefor,
redeem on a pro rata basis, all of the outstanding shares of Liberty Media
Group Common Stock in exchange for an aggregate number of outstanding fully
paid and nonassessable shares of common stock of each Liberty Media Group
Subsidiary equal to the product of the Adjusted Liberty Media Group Outstanding
Interest Fraction and the number of all of the outstanding shares of common
stock of such Liberty Media Group Subsidiary.
In effecting such a redemption, the TCI Board may determine either to (i)
redeem shares of LMG Series A Common Stock and LMG Series B Common Stock in
exchange for shares of separate classes or series of common stock of each
Liberty Media Group Subsidiary with relative voting rights and related
differences in designation, conversion, redemption and share distribution
provisions not greater than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions between
the LMG Series A Common Stock and LMG Series B Common Stock, with holders of
shares of LMG Series B Common Stock receiving the class or series having the
higher relative voting rights, or (ii) redeem shares of LMG Series A Common
Stock and LMG Series B Common Stock in exchange for shares of a single class of
common stock of each Liberty Media Group Subsidiary without distinction between
the shares distributed to the holders of the two series of Liberty Media Group
Common Stock. If TCI determines to undertake a redemption as described in
clause (i) of the preceding sentence, the outstanding shares of common stock of
each Liberty Media Group Subsidiary not distributed to holders of Liberty Media
Group Common Stock would consist solely of the class or series having the lower
relative voting rights.
REDEMPTION OF TELEPHONY GROUP COMMON STOCK IN EXCHANGE FOR STOCK OF
SUBSIDIARY. If Telephony Group Common Stock is issued, at any time at which
all of the assets and liabilities attributed to the Telephony Group have become
and continue to be held directly or indirectly by any one or more corporations
that are Qualifying Subsidiaries (the "Telephony Group Subsidiaries"), the TCI
Board may, subject to the availability of assets of TCI legally available
therefor, redeem on a pro rata basis, all of the outstanding shares of
Telephony Group Common Stock in exchange for an aggregate number of
outstanding, fully paid and nonassessable shares of common stock of each
Telephony Group
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Subsidiary equal to the product of the Telephony Group Outstanding Interest
Fraction and the number of outstanding shares of common stock of each Telephony
Group Subsidiary that is owned by TCI.
In effecting such a redemption, the TCI Board may determine either to (i)
redeem shares of Telephony Group Series A Common Stock and Telephony Group
Series B Common Stock in exchange for shares of separate classes or series of
common stock of each Telephony 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 Telephony Group Series A Common Stock and Telephony
Group Series B Common Stock, with holders of shares of Telephony Group Series B
Common Stock receiving the class or series having the higher relative voting
rights, or (ii) redeem shares of Telephony Group Series A Common Stock and
Telephony Group Series B Common Stock in exchange for shares of a single class
of common stock of each Telephony Group Subsidiary without distinction between
the shares distributed to the holders of the two series of Telephony Group
Common Stock.
CERTAIN PROVISIONS RESPECTING CONVERTIBLE SECURITIES. Unless the
provisions of any class or series of Convertible Securities which are
convertible into or exercisable or exchangeable for shares of Telephony Group
Common Stock provide specifically to the contrary, after any conversion date or
redemption date on which all outstanding shares of Telephony Group Common Stock
were converted or redeemed, any share of Telephony Group Common Stock that is
issued on conversion, exercise or exchange of any such Convertible Securities
will, immediately upon issuance pursuant to such conversion, exercise or
exchange and without any notice or any other action on the part of TCI or the
TCI Board or the holder of such share of Telephony Group Common Stock, be
redeemed in exchange for, to the extent assets of TCI are legally available
therefor, the amount of $.01 per share in cash.
Unless the provisions of any class or series of Pre-Distribution
Convertible Securities or Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares provide
specifically to the contrary, after any conversion date or redemption date on
which all outstanding shares of Liberty Media Group Common Stock were converted
or redeemed, any share of Liberty Media Group Common Stock that is issued on
conversion, exercise or exchange of any Pre-Distribution Convertible Securities
or any Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares will, immediately upon issuance
pursuant to such conversion, exercise or exchange and without any notice or any
other action on the part of TCI or the TCI Board or the holder of such share of
Liberty Media Group Common Stock, be converted into or redeemed in exchange for,
as applicable, the kind and amount of shares of capital stock, cash and/or other
securities or property that a holder of such Pre-Distribution Convertible
Securities or any Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares would have been
entitled to receive pursuant to the terms of such securities had such terms
provided that the conversion, exercise or exchange privilege in effect
immediately prior to any such conversion or redemption of all outstanding shares
of Liberty Media Group Common Stock would be adjusted so that the holder of any
such Pre-Distribution Convertible Securities or any Convertible Securities which
are convertible into or exercisable or exchangeable for Committed Acquisition
Shares thereafter surrendered for conversion, exercise or exchange would be
entitled to receive the kind and amount of shares of capital stock, cash and/or
other securities or property such holder would have received as a result of such
action had such securities been converted, exercised or exchanged immediately
prior thereto. With respect to any Convertible Securities that are convertible
into or exercisable or exchangeable for shares of Liberty Media Group Common
Stock and which are created, established or otherwise first authorized for
issuance subsequent to the record date for the LMG Distribution (other than Pre-
Distribution Convertible Securities and Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition
Shares), the terms and provisions of which do not provide for adjustments
specifying the kind and amount of capital stock, cash and/or securities or other
property that such holder would be entitled to receive upon the conversion,
exercise or exchange of such Convertible Securities following any conversion
date or redemption date on which all outstanding shares of Liberty Media Group
Common Stock were converted or redeemed, then upon such conversion, exercise or
exchange of such Convertible Securities, any share of Liberty Media Group Common
Stock that is issued on conversion, exercise or exchange of any such Convertible
Securities will, immediately upon issuance and without any notice or any other
action on the part of TCI or the TCI Board or the holder of such share of
Liberty Media
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Group Common Stock, be redeemed in exchange for, to the extent assets of TCI are
legally available therefor, the amount of $.01 per share in cash.
GENERAL CONVERSION AND REDEMPTION PROVISIONS. Not later than the
10th trading day following the consummation of a Disposition referred to above
under "-Mandatory Dividend, Redemption or Conversion of Liberty Media Group
Common Stock," TCI will announce publicly by press release (i) the Liberty
Media Group Net Proceeds, (ii) the number of outstanding shares of LMG Series A
Common Stock and LMG Series B Common Stock, (iii) the number of shares of LMG
Series A Common Stock and LMG Series B Common Stock into or for which
Convertible Securities are then convertible, exercisable or exchangeable and
the conversion, exercise or exchange prices thereof (and stating which, if any,
of such Convertible Securities constitute Pre-Distribution Convertible
Securities or Convertible Securities which are convertible into or exercisable
or exchangeable for Committed Acquisition Shares) and the number of Committed
Acquisition Shares issuable, (iv) the Liberty Media Group Outstanding Interest
Fraction as of a recent date preceding the date of such notice and (v) the
Adjusted Liberty Media Group Outstanding Interest Fraction as of a recent date
preceding the date of such notice. Not earlier than the 26th trading day and
not later than the 30th trading day following the consummation of such
Disposition, TCI will announce publicly by press release which of the actions
described in clause (i), (ii) or (iii) of the second paragraph under
"-Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock" it has irrevocably determined to take.
If TCI determines to pay a dividend described in clause (i) of the second
paragraph under the caption "-Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock," TCI will, not later than the 30th trading
day following the consummation of such Disposition, cause to be given to each
holder of outstanding shares of LMG Series A Common Stock and LMG Series B
Common Stock, a notice setting forth (i) the record date for determining
holders entitled to receive such dividend, which will be not earlier than the
40th trading day and not later than the 50th trading day following the
consummation of such Disposition, (ii) the anticipated payment date of such
dividend (which will not be more than 85 trading days following the
consummation of such Disposition), (iii) the kind of shares of capital stock,
cash and/or other securities or property to be distributed in respect of shares
of Liberty Media Group Common Stock, (iv) the Liberty Media Group Net Proceeds,
(v) the Liberty Media Group Outstanding Interest Fraction as of a recent date
preceding the date of such notice, and (vi) the number of outstanding shares of
LMG Series A Common Stock and LMG Series B Common Stock and the number of shares
of LMG Series A Common Stock and LMG Series B Common Stock into or for which
outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof.
If TCI determines to undertake a redemption of shares of Liberty Media
Group Common Stock following a Disposition of all (not merely substantially
all) of the properties and assets of the Liberty Media Group as described in
clause (ii)(A) of the second paragraph under the caption "-Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock," TCI will cause
to be given to each holder of outstanding shares of LMG Series A Common Stock
and LMG Series B Common Stock, a notice setting forth (i) a statement that all
shares of Liberty Media Group Common Stock outstanding on the redemption date
will be redeemed, (ii) the redemption date (which will not be more than 85
trading days following the consummation of such Disposition), (iii) the kind of
shares of capital stock, cash and/or other securities or property to be paid as
a redemption price in respect of shares of Liberty Media Group Common Stock
outstanding on the redemption date, (iv) the Liberty Media Group Net Proceeds,
(v) the Adjusted Liberty Media Group Outstanding Interest Fraction as of a
recent date preceding the date of such notice, (vi) the place or places where
certificates for shares of Liberty Media Group Common Stock, properly endorsed
or assigned for transfer (unless TCI waives such requirement), are to be
surrendered for delivery of certificates for shares of such capital stock, cash
and/or other securities or property, and (vii) the number of outstanding shares
of LMG Series A Common Stock and LMG Series B Common Stock and the number of
shares of LMG Series A Common Stock and LMG Series B Common Stock into or for
which outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and,
stating which, if any, of such Convertible Securities constitute
Pre-Distribution Convertible Securities or Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition
Shares and the number of Committed Acquisition Shares issuable). Such notice
will be sent not less than 35 trading days nor more than 45 trading days prior
to the redemption date.
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If TCI determines to undertake a redemption of shares of Liberty Media
Group Common Stock following a Disposition of substantially all (but not all)
of the properties and assets of the Liberty Media Group as described in clause
(ii)(B) of the second paragraph under the caption "-Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock," TCI will, not
later than the 30th trading day following the consummation of such Disposition,
cause to be given to each holder of record of outstanding shares of LMG Series
A Common Stock and LMG Series B Common Stock a notice setting forth (i) a date
not earlier than the 40th trading day and not later than the 50th trading day
following the consummation of such Disposition which will be the date on which
shares of the Liberty Media Group Common Stock then outstanding will be
selected for redemption, (ii) the anticipated redemption date (which will not
be more than 85 trading days following the consummation of such Disposition),
(iii) the kind of shares of capital stock, cash and/or other securities or
property to be paid as a redemption price in respect of shares of Liberty Media
Group Common Stock selected for redemption, (iv) the Liberty Media Group Net
Proceeds, (v) the Liberty Media Group Outstanding Interest Fraction as of a
recent date preceding the date of such notice, (vi) the number of outstanding
shares of LMG Series A Common Stock and LMG Series B Common Stock and the
number of shares of LMG Series A Common Stock and LMG Series B Common Stock
into or for which outstanding Convertible Securities are then convertible,
exercisable or exchangeable and the conversion, exercise or exchange prices
thereof and (vii) a statement that TCI will not be required to register a
transfer of any shares of Liberty Media Group Common Stock for a period of 15
trading days next preceding the date referred to in clause (i) of this
sentence. Promptly following the date referred to in clause (i) of the
preceding sentence, but not earlier than the 40th trading day and not later
than the 50th trading day following the consummation of such Disposition, TCI
will cause to be given to each holder of shares of LMG Series A Common Stock
and LMG Series B Common Stock to be redeemed, a notice setting forth (i) the
number of shares of LMG Series A Common Stock and LMG Series B Common Stock
held by such holder to be redeemed, (ii) a statement that such shares of LMG
Series A Common Stock and LMG Series B Common Stock will be redeemed, (iii) the
redemption date (which will not be more than 85 trading days following the
consummation of such Disposition), (iv) the kind and per share amount of shares
of capital stock, cash and/or other securities or property to be received by
such holder with respect to each share of such Liberty Media Group Common Stock
to be redeemed, including details as to the calculation thereof, and (v) the
place or places where certificates for shares of such Liberty Media Group
Common Stock, properly endorsed or assigned for transfer (unless TCI waives
such requirement), are to be surrendered for delivery of certificates for
shares of such capital stock, cash and/or other securities or property. The
outstanding shares of Liberty Media Group Common Stock to be redeemed will be
redeemed by TCI pro rata among the holders of Liberty Media Group Common Stock
or by such other method as may be determined by the TCI Board to be equitable.
In the event of any conversion as described above under the caption
"-Conversion of Liberty Media Group Common Stock at the Option of TCI" or as
described in clause (iii) of the second paragraph under "-Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock," TCI will cause
to be given to each holder of outstanding shares of LMG Series A Common Stock
and LMG Series B Common Stock a notice setting forth (i) a statement that all
outstanding shares of Liberty Media Group Common Stock will be converted, (ii)
the conversion date (which will not be more than 85 trading days following the
consummation of such Disposition in the event of a conversion pursuant to the
provisions described under "-Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock" and which will not be more than 120 days
after the Appraisal Date in the event of a conversion pursuant to the
provisions described under "-Conversion of Liberty Media Group Common Stock at
the Option of TCI"), (iii) the per share number (or fraction) of shares of TCI
Group Series A Common Stock or TCI Group Series B Common Stock, as applicable,
to be received with respect to each share of LMG Series A Common Stock or LMG
Series B Common Stock, including details as to the calculation thereof, (iv)
the place or places where certificates for shares of Liberty Media Group Common
Stock, properly endorsed or assigned for transfer (unless TCI waives such
requirement), are to be surrendered, and (v) the number of outstanding shares
of LMG Series A Common Stock and LMG Series B Common Stock, the number of
Committed Acquisition Shares issuable and the number of shares of LMG Series A
Common Stock and LMG Series B Common Stock into or for which outstanding
Convertible Securities are then convertible, exercisable or exchangeable and
the conversion, exercise or exchange prices thereof. Such notice will be sent
not less than 35 trading days nor more than 45 trading days prior to the
conversion date.
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If TCI determines to redeem shares of LMG Series A Common Stock and LMG
Series B Common Stock as described above under the caption "-Redemption of
Liberty Media Group Common Stock in Exchange for Stock of Subsidiary," TCI will
promptly cause to be given to each holder of LMG Series A Common Stock and LMG
Series B Common Stock a notice setting forth (i) a statement that all
outstanding shares of Liberty Media Group Common Stock will be redeemed in
exchange for shares of common stock of the Liberty Media Group Subsidiaries,
(ii) the redemption date, (iii) the Adjusted Liberty Media Group Outstanding
Interest Fraction as of a recent date preceding the date of such notice, (iv)
the place or places where certificates for shares of Liberty Media Group Common
Stock, properly endorsed or assigned for transfer (unless TCI waives such
requirement), are to be surrendered for delivery of certificates for shares of
common stock of the Liberty Media Group Subsidiaries, and (v) the number of
outstanding shares of LMG Series A Common Stock and LMG Series B Common Stock
and the number of shares of LMG Series A Common Stock and LMG Series B Common
Stock into or for which outstanding Convertible Securities are then
convertible, exercisable or exchangeable and the conversion, exercise or
exchange prices thereof. Such notice will be sent not less than 35 trading
days nor more than 45 trading days prior to the redemption date.
In each case in which a notice is required to be given to holders of
outstanding shares of LMG Series A Common Stock and LMG Series B Common Stock
in accordance with the preceding five paragraphs (other than a notice to
holders of shares selected for redemption), notice shall also be given, within
the required time period, to each holder of Convertible Securities that are
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), which notice shall include, in addition
to all of the information set forth in the corresponding notice to holders of
Liberty Media Group Common Stock, a statement to the effect that the holders of
such Convertible Securities will be entitled to receive the dividend,
participate in the redemption of shares following a Disposition or in the
selection of shares for redemption, participate in the conversion of shares or
participate in the redemption of shares in exchange for stock of the Liberty
Media Group Subsidiaries only if such holder appropriately converts, exercises
or exchanges such Convertible Securities on or prior to the record date for the
dividend, redemption date, date fixed for selection of shares to be redeemed or
conversion date, as applicable, set forth in such notice. In the case of a
redemption or conversion of shares of Liberty Media Group Common Stock, the
notice to holders of Convertible Securities shall also state what, if anything,
such holders will be entitled to receive pursuant to the terms of such
Convertible Securities or, if applicable, the provision described under
"-Conversion and Redemption-Certain Provisions Respecting Convertible
Securities" if such holders convert, exercise or exchange such Convertible
Securities following the redemption date or conversion date, as applicable.
All notices required to be given in accordance with the preceding
paragraphs will be sent to a holder by first-class mail, postage prepaid, at
the holder's address as the same appears on the transfer books of TCI. Neither
the failure to mail any notice to any particular holder of Liberty Media Group
Common Stock or of Convertible Securities nor any defect therein will affect
the sufficiency thereof with respect to any other holder of outstanding shares
of Liberty Media Group Common Stock or of Convertible Securities, or the
validity of any conversion or redemption.
TCI will not be required to issue or deliver fractional shares of any
class of capital stock or any fractional securities to any holder of Liberty
Media Group Common Stock upon any conversion, redemption, dividend or other
distribution described above. In connection with the determination of the
number of shares of any class of capital stock that is issuable or the amount
of securities that is deliverable to any holder of record upon any such
conversion, redemption, dividend or other distribution (including any fractions
of shares or securities), TCI may aggregate the number of shares of Liberty
Media Group Common Stock held at the relevant time by such holder of record.
If the number of shares of any class of capital stock or the amount of
securities remaining to be issued or delivered to any holder of Liberty Media
Group Common Stock is a fraction, TCI will, if such fraction is not issued or
delivered to such holder, pay a cash adjustment in respect of such fraction in
an amount equal to the fair market value of such fraction on the fifth trading
day prior to the date such payment is to be made (without interest). For
purposes of the preceding sentence, "fair market value" of any fraction will be
(i) in the case of any fraction of a share of capital stock of TCI, the product
of such fraction and the Market Value of one share of such capital stock and
(ii) in the case of any other fractional security, such value as is determined
by the TCI Board.
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No adjustments in respect of dividends will be made upon the conversion
or redemption of any shares of Liberty Media Group Common Stock; provided,
however, that if the conversion date or the redemption date with respect to the
Liberty Media Group Common Stock is subsequent to the record date for the
payment of a dividend or other distribution thereon or with respect thereto,
the holders of shares of Liberty Media Group Common Stock at the close of
business on such record date will be entitled to receive the dividend or other
distribution payable on or with respect to such shares on the date set for
payment of such dividend or other distribution, notwithstanding the conversion
or redemption of such shares or TCI's default in payment of the dividend or
distribution due on such date.
Before any holder of shares of Liberty Media Group Common Stock will be
entitled to receive certificates representing shares of any kind of capital
stock or cash and/or securities or other property to be received by such holder
with respect to any conversion or redemption of shares of Liberty Media Group
Common Stock, such holder is required to surrender at such place as TCI will
specify certificates for such shares, properly endorsed or assigned for
transfer (unless TCI waives such requirement). TCI will as soon as practicable
after surrender of certificates representing shares of Liberty Media Group
Common Stock deliver to the person for whose account such shares were so
surrendered, or to the nominee or nominees of such person, certificates
representing the number of whole shares of the kind of capital stock or cash
and/or securities or other property to which such person is entitled, together
with any payment for fractional securities referred to above. If less than all
of the shares of Liberty Media Group Common Stock represented by any one
certificate are to be redeemed, TCI will issue and deliver a new certificate
for the shares of Liberty Media Group Common Stock not redeemed. TCI will not
be required to register a transfer of (i) any shares of Liberty Media Group
Common Stock for a period of 15 trading days next preceding any selection of
shares of Liberty Media Group Common Stock to be redeemed or (ii) any shares of
Liberty Media Group Common Stock selected or called for redemption. Shares
selected for redemption may not thereafter be converted pursuant to the
provisions described under the caption "-Conversion at the Option of the
Holder."
From and after any applicable conversion date or redemption date, all
rights of a holder of shares of Liberty Media Group Common Stock that were
converted or redeemed will cease except for the right, upon surrender of the
certificates representing shares of Liberty Media Group Common Stock, to
receive certificates representing shares of the kind and amount of capital
stock or cash and/or securities or other property for which such shares were
converted or redeemed, together with any payment for fractional securities, and
such holder will have no other or further rights in respect of the shares of
Liberty Media Group Common Stock so converted or redeemed, including, but not
limited to, any rights with respect to any cash, securities or other property
which are reserved or otherwise designated by TCI as being held for the
satisfaction of TCI's obligations to pay or deliver any cash, securities or
other property upon the conversion, exercise or exchange of any Convertible
Securities outstanding as of the date of such conversion or redemption or any
Committed Acquisition Shares which may then be issuable. No holder of a
certificate that, immediately prior to the applicable conversion date or
redemption date for the Liberty Media Group Common Stock, represented shares of
Liberty Media Group Common Stock will be entitled to receive any dividend or
other distribution with respect to shares of any kind of capital stock into or
in exchange for which the Liberty Media Group Common Stock was converted or
redeemed until surrender of such holder's certificate for a certificate or
certificates representing shares of such kind of capital stock. Upon such
surrender, there will be paid to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable with respect
to a record date after the conversion date or redemption date, as the case may
be, but that were not paid by reason of the foregoing, with respect to the
number of whole shares of the kind of capital stock represented by the
certificate or certificates issued upon such surrender. From and after a
conversion date or redemption date, as the case may be, of Liberty Media Group
Common Stock, TCI will, however, be entitled to treat the certificates for
shares of Liberty Media Group Common Stock that have not yet been surrendered
for conversion or redemption as evidencing the ownership of the number of whole
shares of the kind or kinds of capital stock for which the shares of Liberty
Media Group Common Stock represented by such certificates have been converted or
redeemed, notwithstanding the failure to surrender such certificates.
TCI will pay any and all documentary, stamp or similar issue or transfer
taxes that may be payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on conversion or redemption of shares of
Liberty Media Group Common Stock. TCI will not, however, be required to pay
any tax that may be payable in respect
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of any transfer involved in the issue and delivery of any shares of capital
stock in a name other than that in which the shares of Liberty Media Group
Common Stock so converted or redeemed were registered and no such issue or
delivery will be made unless and until the person requesting such issue has paid
to TCI the amount of any such tax, or has established to the satisfaction of TCI
that such tax has been paid.
Provisions substantially the same as those described under this caption
"-General Conversion and Redemption Provisions," apply in the event of a
Disposition of all or substantially all of the properties and assets of the
Telephony Group and a determination of TCI to pay a dividend on or undertake a
partial or complete redemption of the Telephony Group Common Stock following
such Disposition, in the event of any conversion of the Telephony Group Common
Stock as described under the caption "-Conversion of Telephony Group Common
Stock at the Option of TCI" or "-Mandatory Dividend, Redemption or Conversion
of Telephony Group Common Stock," and in the event of a redemption of the
Telephony Group Common Stock in exchange for stock of one or more subsidiaries
as described under the caption "-Redemption of Telephony Group Common Stock in
Exchange for Stock of Subsidiary."
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution or winding up of TCI, whether
voluntary or involuntary, after payment or provision for payment of the debts
and other liabilities of TCI and subject to the prior payment in full of the
preferential amounts to which any class or series of TCI Preferred Stock is
entitled, (i) the holders of the shares of TCI Group Common Stock will share
equally, on a share for share basis, in a percentage of the funds of TCI
remaining for distribution to its common stockholders equal to 100% multiplied
by the average daily ratio (expressed as a decimal) of W/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, (ii) the holders
of the shares of Liberty Media Group Common Stock will share equally, on a
share for share basis, in a percentage of the funds of TCI remaining for
distribution to its common stockholders equal to 100% multiplied by the average
daily ratio (expressed as a decimal) of X/Z for such 20-trading day period and
(iii) if Telephony Group Common Stock is issued, the holders of the shares of
Telephony Group Common Stock will share equally, on a share for share basis, in
a percentage of the funds of TCI remaining for distribution to its common
stockholders equal to 100% multiplied by the average daily ratio (expressed as
a decimal) of Y/Z for such 20-trading day period, where W is the aggregate
Market Capitalization of the TCI Group Series A Common Stock and the TCI Group
Series B Common Stock, X is the aggregate Market Capitalization of the LMG
Series A Common Stock and the LMG Series B Common Stock, Y is the aggregate
Market Capitalization of the Telephony Group Series A Common Stock and the
Telephony Group Series B Common Stock, and Z is the aggregate Market
Capitalization of the TCI Group Series A Common Stock, the TCI Group Series B
Common Stock, the LMG Series A Common Stock, the LMG Series B Common Stock, the
Telephony Group Series A Common Stock and the Telephony Group Series B Common
Stock. Neither a consolidation, merger nor sale of assets will be construed to
be a "liquidation," "dissolution" or "winding up" of TCI.
No holder of Liberty Media Group Common Stock or, if issued, Telephony
Group Common Stock will have any special right to receive specific assets of
the Liberty Media Group or the Telephony Group, as the case may be, in the case
of any dissolution, liquidation or winding up of TCI.
DETERMINATIONS BY THE TCI BOARD
The TCI Charter provides that any determinations made by the TCI Board
under any provision described under "Description of TCI Common Stock" will be
final and binding on all stockholders of TCI, except as may otherwise be
required by law. Such a determination would not be binding if it were
established that the determination was made in breach of a fiduciary duty of
the TCI Board. TCI will prepare a statement of any such determination by the
TCI Board respecting the fair market value of any properties, assets or
securities and will file such statement with the Secretary of TCI.
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PREEMPTIVE RIGHTS
Holders of the TCI Group Common Stock and the Liberty Media Group Common
Stock do not have, and if the Telephony Group Common Stock is issued, holders
of the Telephony Group Common Stock would not have, any preemptive rights to
subscribe for any additional shares of capital stock or other obligations
convertible into or exercisable for shares of capital stock that may hereafter
be issued by TCI.
ANTI-TAKEOVER CONSIDERATIONS
The DGCL, the TCI Charter and TCI's Bylaws contain provisions which may
serve to discourage or make more difficult a change in control of TCI without
the support of the TCI Board or without meeting various other conditions. The
principal provisions of the DGCL and the aforementioned corporate governance
documents are outlined below.
DGCL Section 203, in general, prohibits a "business combination" between
a corporation and an "interested stockholder" within three years of the date
such stockholder became an "interested stockholder," unless (i) prior to such
date the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, exclusive of shares owned by
directors who are also officers and by certain employee stock plans or (iii) on
or after such date, the business combination is approved by the board of
directors and authorized by the affirmative vote at a stockholders' meeting of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. The term "business combination" is defined to include,
among other transactions between the interested stockholder and the corporation
or any direct or indirect majority-owned subsidiary thereof, a merger or
consolidation; a sale, pledge, transfer or other disposition (including as part
of a dissolution) of assets having an aggregate market value equal to 10% or
more of either the aggregate market value of all assets of the corporation on a
consolidated basis or the aggregate market value of all the outstanding stock
of the corporation; certain transactions that would increase the interested
stockholder's proportionate share ownership of the stock of any class or series
of the corporation or such subsidiary; and any receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or other
financial benefits provided by or through the corporation or any such
subsidiary. In general, and subject to certain exceptions, an "interested
stockholder" is any person who is the owner of 15% or more of the outstanding
voting stock (or, in the case of a corporation with classes of voting stock
with disparate voting power, 15% or more of the voting power of the outstanding
voting stock) of the corporation, and the affiliates and associates of such
person. The term "owner" is broadly defined to include any person that
individually or with or through his or its affiliates or associates, among other
things, beneficially owns such stock, or has the right to acquire such stock
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement or understanding or upon the exercise of
warrants or options or otherwise or has the right to vote such stock pursuant to
any agreement or understanding, or has an agreement or understanding with the
beneficial owner of such stock for the purpose of acquiring, holding, voting or
disposing of such stock. The restrictions of DGCL Section 203 do not apply to
corporations that have elected, in the manner provided therein, not to be
subject to such section or, with certain exceptions, which do not have a class
of voting stock that is listed on a national securities exchange or authorized
for quotation on an interdealer quotation system of a registered national
securities association or held of record by more than 2,000 stockholders. The
TCI Charter does not contain any provision "opting out" of the application of
DGCL Section 203 and TCI has not taken any of the actions necessary for it to
"opt out" of such provision. As a result, the provisions of Section 203 will
remain applicable to transactions between TCI and any of its "interested
stockholders."
The TCI Charter also contains certain provisions which could make a
change in control of TCI more difficult. For example, the TCI Charter
requires, subject to the rights, if any, of any class or series of TCI
Preferred Stock, the affirmative vote of 66 2/3% of the total voting power of
the outstanding shares of Voting Securities, voting together as a single class,
to approve (i) a merger or consolidation of TCI with, or into, another
corporation, other than a merger or consolidation which does not require the
consent of stockholders under the DGCL or a merger or consolidation which
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has been approved by 75% of the members of the TCI Board (in which case, in
accordance with the DGCL, the affirmative vote of a majority of the total voting
power of the outstanding Voting Securities would, with certain exceptions, be
required for approval), (ii) the sale, lease or exchange of all or substantially
all of the property and assets of TCI or (iii) the dissolution of TCI. "Voting
Securities" is currently defined as the TCI Group Common Stock, the Liberty
Media Group Common Stock, the Telephony Group Common Stock, if issued, and any
class or series of TCI Preferred Stock entitled to vote generally with the
holders of TCI Common Stock on matters submitted to stockholders for a vote. The
TCI Charter also provides for a TCI Board of not less than three members,
divided into three classes of approximately equal size, with each class to be
elected for a three-year term at each annual meeting of stockholders. The exact
number of directors, currently nine, is fixed by the TCI Board. The holders of
TCI Group Common Stock, Liberty Media Group Common Stock, Telephony Group Common
Stock, if issued, Class B Preferred Stock, Series C Preferred Stock, Series G
Preferred Stock and Series H Preferred Stock, voting together as a single class,
vote in elections for directors. (The holders of TCI's Series F Preferred Stock
are by the terms thereof entitled to vote in the election of directors; however,
the DGCL prohibits the voting of such shares because such shares are held by
subsidiaries of TCI.) Stockholders of TCI do not have cumulative voting rights.
The TCI Charter authorizes the issuance of 50,000,000 shares of Series
Preferred Stock, of which 33,901,240 remain available for issuance as of March
31, 1997. Under the TCI Charter, the TCI Board is authorized, without further
action by the stockholders of TCI, to establish the preferences, limitations
and relative rights of the Series Preferred Stock. In addition, 1,900,000,000
shares of TCI Group Common Stock, 825,000,000 shares of Liberty Media Group
Common Stock and 825,000,000 shares of Telephony Group Common Stock are
currently authorized by the TCI Charter, of which 1,100,294,776 shares of the
TCI Group Common Stock (as of March 31, 1997), 575,062,234 shares of the
Liberty Media Group Common Stock (as of March 31, 1997) and all 825,000,000
shares of Telephony Group Common Stock remain available for issuance (without
taking into consideration shares to be reserved for issuance upon conversion,
exchange or exercise of outstanding convertible or exchangeable securities and
options). The issue and sale of shares of TCI Group Common Stock, Liberty
Media Group Common Stock, Telephony Group Common Stock and/or Series Preferred
Stock could occur in connection with an attempt to acquire control of TCI, and
the terms of such shares of Series Preferred Stock could be designed in part to
impede the acquisition of such control.
The TCI Charter requires the affirmative vote of 66 2/3% of the total
voting power of the outstanding shares of Voting Securities, voting together as
a single class, to approve any amendment, alteration or repeal of any provision
of the TCI Charter or the addition or insertion of other provisions therein.
The TCI Charter and TCI's Bylaws provide that a special meeting of
stockholders will be held at any time, subject to the rights of the holders of
any class or series of TCI Preferred Stock, upon the call of the Secretary of
TCI upon (i) the written request of the holders of not less than 66 2/3% of the
total voting power of the outstanding shares of Voting Securities or (ii) at the
request of not less than 75% of the members of the TCI Board. Subject to the
rights of any class or series of TCI Preferred Stock, TCI's Bylaws require that
written notice of the intent to make a nomination at a meeting of stockholders
must be received by the Secretary of TCI, at TCI's principal executive offices,
not later than (a) with respect to an election of directors to be held at an
annual meeting of stockholders, 90 days in advance of such meeting, and (b) with
respect to an election of directors to be held at a special meeting of
stockholders, the close of business on the seventh day following the day on
which notice of such meeting is first given to stockholders. The notice must
contain: (1) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (2) a representation
that the stockholder is a holder of record of TCI's Voting Securities entitled
to vote at the meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (3) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (4) such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Commission had each proposed nominee
been nominated, or intended to be nominated, by the TCI Board; and (5) the
consent of each nominee to serve as a director of TCI if so elected. Any actions
to remove directors is required to be
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for "cause" (as defined in the TCI Charter) and be approved by the holders of 66
2/3% of the total voting power of the outstanding shares entitled to vote in the
election of directors.
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Stephen
M. Brett, Esq., Executive Vice President and General Counsel of the Company.
EXPERTS
The consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1996 and 1995, 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, 1996, and all related
financial statement schedules, which appear in the December 31, 1996 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein and in the Registration Statement in reliance upon the
reports, dated March 24, 1997, of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
The combined balance sheets of TCI Group as of December 31, 1996 and
1995, and the related combined statements of operations, equity, and cash flows
for each of the years in the three-year period ended December 31, 1996, which
appear in the December 31, 1996 Annual Report on Form 10-K of
Tele-Communications, Inc., have been incorporated by reference herein and in
the Registration Statement in reliance upon the report, dated March 24, 1997,
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP
covering the combined financial statements above refers to the effects of not
consolidating TCI Group's interest in Liberty Media Group for all periods that
TCI Group has an interest in Liberty Media Group.
The combined balance sheets of Liberty Media Group as of December 31,
1996 and 1995, and the related combined statements of operations, equity, and
cash flows for each of the years in the three-year period ended December 31,
1996, which appear in the December 31, 1996 Annual Report on Form 10-K of
Tele-Communications, Inc., have been incorporated by reference herein and in
the Registration Statement in reliance upon the report, dated March 24, 1997,
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated balance sheet of Telewest Communications plc and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1996, which appear in the December 31, 1996 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein and in the Registration Statement in reliance upon the report,
dated March 11, 1997, of KPMG Audit Plc, chartered accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated balance sheets of Sprint Spectrum Holding Company, L.P.
and subsidiaries, development stage enterprises, as of December 31, 1996 and
1995 and the related consolidated statements of operations, changes in
partners' capital and cash flows for each of the two years in the period ended
December 31, 1996, for the period from October 24, 1994 (date of inception) to
December 31, 1994 and for the cumulative period from October 24, 1994 (date of
inception) to December 31, 1996, incorporated in this prospectus by reference
from Tele-Communications, Inc. Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report (which expresses an unqualified opinion and
includes an explanatory paragraph referring to the developmental stage of
Sprint Spectrum Holding Company, L.P. and subsidiaries), which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
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The financial statements of American PCS, L.P., not separately presented
in this Prospectus, have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon has been incorporated by reference herein.
Such financial statements, to the extent they have been included in the
financial statements of Sprint Spectrum Holding Company, L.P., have been so
included in the Annual Report on Form 10-K of Tele-Communications, Inc. in
reliance on their report given on the authority of said firm as experts in
auditing and accounting.
The combined financial statements of VII Cable which appear in TCI's
Current Report on Form 8-K dated June 19, 1996, have been incorporated by
reference herein in reliance on the report dated February 14, 1996 of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------------------
TABLE OF CONTENTS
Page
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Available Information........................................................2
Incorporation of Documents by
Reference................................................................ 2
Risk Factor..................................................................3
The Company................................................................. 3
Shares Being Offered........................................................ 3
Selling Stockholders.........................................................5
Plan of Distribution........................................................ 7
Description of TCI Common Stock............................................. 8
Legal Matters.............................................................. 40
Experts.................................................................... 40
TELE-COMMUNICATIONS, INC.
Tele-Communications, Inc. Series A TCI Group
Common Stock ($1.00 par value)
Tele-Communications, Inc. Series A
Liberty Media Group Common Stock
($1.00 par value)
-----------------------------------------
PROSPECTUS
-----------------------------------------
May 13, 1997
================================================================================
