<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1998
REGISTRATION NO. 333-64297
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TELE-COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4841 84-1260157
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111-3000
(303) 267-5500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
STEPHEN M. BRETT, ESQ.
TELE-COMMUNICATIONS, INC.
TERRACE TOWER II
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111-3000
(303) 267-5500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
CHARLES Y. TANABE, ESQ. LEE D. CHARLES, ESQ.
SHERMAN & HOWARD L.L.C. BAKER & BOTTS, L.L.P.
3000 FIRST INTERSTATE TOWER NORTH 599 LEXINGTON AVENUE
633 SEVENTEENTH STREET NEW YORK, NEW YORK 10022
DENVER, COLORADO 80202 (212) 705-5000
(303) 297-2900
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the Merger described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]________
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
TELE-COMMUNICATIONS, INC.
CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM S-4 AND PROXY STATEMENT/PROSPECTUS
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM FORM S-4 CAPTION HEADING IN PROXY STATEMENT/PROSPECTUS
---- ---------------- -------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1. Forepart of Registration Statement and
Outside Front Cover Page of Cross-Reference Sheet; Outside Front
Prospectus............................. Cover Page
Item 2. Inside Front and Outside Back Cover
Pages of Prospectus.................... Inside Front and Outside Back Cover
Pages; Available Information;
Incorporation of Certain Documents by
Reference; Table of Contents
Item 3. Risk Factors, Ratio of Earnings to
Fixed Charges, and Other Information... Summary; Risk Factors
Item 4. Terms of the Transaction............... Summary; The Merger; The Merger
Agreement; Certain Transactions Between
TCI and TINTA; Description of TCI
Capital Stock; Comparison of
Stockholders' Rights
Item 5. Pro Forma Financial Information........ *
Item 6. Material Contacts with the Company Certain Transactions Between TCI and
Being Acquired......................... TINTA
Item 7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters.............. *
Item 8. Interests of Named Experts and
Counsel................................ Legal Matters; Experts
Item 9. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities............................ *
B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information with Respect to S-3 Available Information; Incorporation of
Registrants............................ Certain Documents by Reference; Summary;
The AT&T Merger and the Liberty/Ventures
Combination
Item 11. Incorporation of Certain Information by
Reference.............................. Available Information; Incorporation of
Certain Documents by Reference
Item 12. Information with Respect to S-2 or S-3
Registrants............................ *
Item 13. Incorporation of Certain Information by
Reference.............................. *
Item 14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants...... *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
Item 15. Information with Respect to S-3 Available Information; Incorporation of
Companies.............................. Certain Documents by Reference; Summary
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM FORM S-4 CAPTION HEADING IN PROXY STATEMENT/PROSPECTUS
---- ---------------- -------------------------------------
<S> <C> <C>
Item 16. Information with Respect to S-2 or S-3
Companies.............................. *
Item 17. Information with Respect to Companies
Other than S-3 or S-2 Companies........ *
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or
Authorizations Are to be Solicited..... Available Information; Incorporation of
Certain Documents by Reference; Summary;
The Special Meeting; The Merger; Certain
Transactions Between TCI and TINTA;
Security Ownership of TINTA
Item 19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited,
or in an Exchange Offer................ *
</TABLE>
- --------
* Omitted because inapplicable or answer is in the negative.
<PAGE>
TELE-COMMUNICATIONS INTERNATIONAL, INC.
TERRACE TOWER II
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111
(303) 267-5500
October 14, 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Meeting") of Tele-Communications International, Inc. ("TINTA"), which will be
held at TINTA's corporate offices, located at 5619 DTC Parkway, Englewood,
Colorado, on Thursday, November 19, 1998, commencing at 9:30 a.m., local time.
A notice of the Meeting, a proxy card and a Proxy Statement/Prospectus
containing information about the matters to be acted upon at the Meeting are
enclosed.
At the Meeting, you will be asked to consider and vote upon a proposal to
adopt the Agreement and Plan of Merger, dated as of August 24, 1998 (together
with the exhibits and schedules thereto, the "Merger Agreement"), among Tele-
Communications, Inc. ("TCI"), Liberty Group Acquisition Co. ("Merger Sub") and
TINTA. Pursuant to the Merger Agreement, TCI will acquire the entire equity
interest in TINTA not already beneficially owned by TCI by means of a merger
(the "Merger") of Merger Sub, a newly formed wholly-owned subsidiary of TCI,
with and into TINTA. In the proposed Merger, each outstanding share of Series
A Common Stock, $1.00 par value per share, of TINTA ("TINTA Series A Stock")
and each outstanding share of Series B Common Stock, $1.00 par value per
share, of TINTA ("TINTA Series B Stock" and, together with the TINTA Series A
Stock, "TINTA Common Stock") (other than any such shares held by TINTA in its
treasury or owned of record by TCI or any subsidiary of TCI, all of which will
be canceled), will be converted into the right to receive 0.58 of a share of
Tele- Communications, Inc. Series A Liberty Media Group Common Stock, $1.00
par value per share (the "LMG Series A Stock"), subject to adjustment under
certain circumstances set forth in the Merger Agreement (as such ratio may be
adjusted, the "Exchange Ratio"). Other than the shares of TINTA Series B Stock
held by TCI, all of which will be canceled in the Merger, there are no
outstanding shares of TINTA Series B Stock. The accompanying Proxy
Statement/Prospectus contains detailed information concerning the terms of the
proposed Merger and certain additional information. Please give all of this
information your careful attention. A copy of the Merger Agreement is included
as Appendix I to the accompanying Proxy Statement/Prospectus and should be
read in its entirety.
The Board of Directors of TINTA (the "TINTA Board") has carefully reviewed
and considered the terms and conditions of the proposed Merger. In connection
with this review and consideration, the TINTA Board retained Salomon Brothers
Inc and Smith Barney Inc., collectively doing business as Salomon Smith Barney
("Salomon Smith Barney"), which delivered an oral opinion (which it
subsequently confirmed in writing) on August 21, 1998, to the TINTA Board, to
the effect that, as of the date thereof, the proposed Exchange Ratio was fair,
from a financial point of view, to the holders of TINTA Common Stock (other
than TCI and its subsidiaries). A copy of Salomon Smith Barney's opinion,
which sets forth the matters considered and the scope of review undertaken in
connection therewith, is included as Appendix II to the accompanying Proxy
Statement/Prospectus. The TINTA Board has determined that the terms of the
Merger are fair to, and in the best interests of, TINTA and its stockholders
other than TCI and its subsidiaries, has unanimously approved the Merger
Agreement and recommends that you vote FOR the proposal to adopt the Merger
Agreement.
Adoption of the Merger Agreement at the Meeting requires the affirmative
vote of the majority in voting power of outstanding shares of TINTA Series A
Stock and TINTA Series B Stock entitled to vote thereon at the Meeting, voting
together as a single class. As of October 2, 1998, the record date for the
Meeting, TCI beneficially owned shares of TINTA Common Stock with a combined
voting power equal to approximately 92% of the voting power of the shares of
TINTA Common Stock outstanding on such date, and TCI has agreed in the Merger
Agreement to cause all such shares to be voted in favor of the adoption of the
Merger Agreement. Such vote will assure that the Merger Agreement will be
adopted at the Meeting without regard to the votes cast by any other
stockholder of TINTA.
Whether or not you are personally able to attend the Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
prepaid envelope as soon as possible. This action will not limit your right to
vote in person if you wish to attend the Meeting and vote personally. Any
signed proxies received by TINTA that are not specifically marked with a
direction of how to vote in connection with the Merger will be counted as
affirmative votes in favor of adoption of the Merger Agreement.
Sincerely yours,
John C. Malone
Chairman of the Board
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES FOR YOUR
COMMON STOCK AT THIS TIME
<PAGE>
TELE-COMMUNICATIONS INTERNATIONAL, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1998
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (together with
any adjournment or postponement thereof, the "Meeting") of Tele-Communications
International, Inc., a Delaware corporation ("TINTA"), will be held at TINTA's
corporate offices, 5619 DTC Parkway, Englewood, Colorado, on Thursday,
November 19, 1998, at 9:30 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of August 24, 1998 (together with the exhibits and
schedules thereto, the "Merger Agreement"), among Tele-Communications,
Inc., a Delaware corporation ("TCI"), Liberty Group Acquisition Co., a
Delaware corporation and a newly formed wholly-owned subsidiary of TCI
("Merger Sub"), and TINTA. Pursuant to the Merger Agreement, (a) Merger Sub
will be merged with and into TINTA, with TINTA as the surviving corporation
(the "Merger") and, in connection therewith, (b) each share of Series A
Common Stock, $1.00 par value per share, of TINTA ("TINTA Series A Stock")
and each share of Series B Common Stock, $1.00 par value per share, of
TINTA ("TINTA Series B Stock" and, together with the TINTA Series A Stock,
"TINTA Common Stock") outstanding immediately prior to the Effective Time
(as defined in the Merger Agreement) (other than any such shares held by
TINTA in its treasury or owned of record by TCI or any subsidiary of TCI)
will be converted into the right to receive 0.58 (the "exchange ratio") of
a share of Tele-Communications, Inc. Series A Liberty Media Group Common
Stock, $1.00 par value per share (the "LMG Series A Stock").
Notwithstanding the foregoing, if the product of 0.58 and the LMG Market
Price (as defined in the Merger Agreement) on the closing date of the
Merger is less than $22.00, TCI must either (i) increase the exchange ratio
to equal the quotient (rounded upwards, if necessary, to the nearest one
one-thousandth) obtained by dividing $22.00 by such LMG Market Price or
(ii) terminate the Merger Agreement. Other than the shares of TINTA Series
B Stock held by TCI, all of which will be canceled in the Merger, there are
no outstanding shares of TINTA Series B Stock. The terms of the Merger
Agreement and the LMG Series A Stock are described in detail in the
accompanying Proxy Statement/Prospectus, and the full text of the Merger
Agreement (exclusive of exhibits and schedules) is included as Appendix I
thereto.
2. To transact such other business as may properly come before the
Meeting.
The Board of Directors of TINTA has fixed the close of business on October
2, 1998 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Meeting. Only holders of record of TINTA Common
Stock as of the close of business on such date are entitled to notice of, and
to vote at, the Meeting. A list of TINTA stockholders entitled to vote at the
Meeting will be available for examination by any TINTA stockholder at the
Meeting and, for a period of ten business days prior to the date of the
Meeting, during ordinary business hours, at TINTA's corporate offices at 5619
DTC Parkway, Englewood, Colorado 80111.
The affirmative vote of the majority in voting power of outstanding shares
of TINTA Common Stock entitled to vote thereon at the Meeting, voting together
as a single class, is required to adopt the Merger Agreement. As of the Record
Date, TCI beneficially owned approximately 83% of the shares of TINTA Series A
Stock and 100% of the TINTA Series B Stock, representing approximately 92% of
the combined voting power of the shares of TINTA Common Stock outstanding on
such date. In accordance with and subject to the terms of the Merger
Agreement, TCI has agreed to cause all such shares to be voted in favor of the
proposal to adopt the Merger Agreement. Accordingly, it is expected that the
Merger Agreement will be adopted at the Meeting. Holders of record of shares
of TINTA Common Stock as of the Record Date will not be entitled to any
dissenters' appraisal rights in connection with the Merger under Delaware law.
To assure that your interests will be represented at the Meeting, regardless
of whether you plan to attend in person, please complete, sign and date the
enclosed proxy card and return it in the enclosed prepaid envelope as soon as
possible. This action will not limit your right to vote in person if you wish
to attend the Meeting and vote personally.
By Order of the Board of Directors
Stephen M. Brett
Secretary
Englewood, Colorado
October 14, 1998
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY, WHETHER OR NOT YOU
INTEND TO BE PRESENT AT THE MEETING. DO NOT SEND ANY STOCK CERTIFICATES WITH
THE ENCLOSED PROXY CARD. THE PROCEDURE FOR THE EXCHANGE OF YOUR SHARES AFTER
THE MERGER IS CONSUMMATED IS SET FORTH IN THE ATTACHED PROXY STATEMENT/
PROSPECTUS.
<PAGE>
PROXY STATEMENT/PROSPECTUS
TELE-COMMUNICATIONS TELE-COMMUNICATIONS, INC.
INTERNATIONAL, INC.
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS SHARES OF TELE-COMMUNICATIONS, INC.
SERIES A LIBERTY MEDIA GROUP COMMON
TO BE HELD NOVEMBER 19, 1998 STOCK
----------------
This Proxy Statement/Prospectus is being furnished to holders of Series A
Common Stock, $1.00 par value per share ("TINTA Series A Stock"), and Series B
Common Stock, $1.00 par value per share ("TINTA Series B Stock" and, together
with the TINTA Series A Stock, "TINTA Common Stock"), of Tele-Communications
International, Inc., a Delaware corporation ("TINTA"), in connection with the
solicitation of proxies by the Board of Directors of TINTA (the "TINTA Board")
for use at a special meeting of stockholders of TINTA, or any adjournment or
postponement thereof (the "Meeting"). At the Meeting, holders of TINTA Common
Stock will consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of August 24, 1998 (together with the exhibits and schedules
thereto, the "Merger Agreement"), among Tele-Communications, Inc., a Delaware
corporation ("TCI"), Liberty Group Acquisition Co., a Delaware corporation and
a newly formed wholly-owned subsidiary of TCI ("Merger Sub"), and TINTA.
Pursuant to the Merger Agreement, Merger Sub will be merged with and into
TINTA, with TINTA as the surviving corporation (the "Merger"). As a result of
the Merger, stockholders of TINTA will become stockholders of TCI on the terms
described in this Proxy Statement/Prospectus. See "THE MERGER AGREEMENT."
On October 2, 1998, the record date for the Meeting (the "Record Date"), TCI
beneficially owned approximately 83% of the shares of TINTA Series A Stock and
100% of the shares of TINTA Series B Stock, which represent approximately 92%
of the combined voting power of the shares of both series of TINTA Common
Stock entitled to vote at the Meeting. The combined voting power of the shares
of TINTA Common Stock beneficially owned by TCI is sufficient to assure
approval at the Meeting of the proposal to adopt the Merger Agreement. In
accordance with and subject to the terms of the Merger Agreement, TCI has
agreed to cause all such shares to be voted in favor of such proposal.
SEE "RISK FACTORS" ON PAGE 15 FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS OF TINTA COMMON STOCK.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to the stockholders of TINTA on or about October 15, 1998.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is October 14, 1998.
<PAGE>
Upon consummation of the Merger, pursuant to the Merger Agreement, each
share of TINTA Common Stock outstanding immediately prior to the Effective
Time (other than any such shares held directly by TINTA in its treasury or
owned of record by TCI or any subsidiary of TCI, all of which will be
canceled) will be converted into the right to receive 0.58 of a share of Tele-
Communications, Inc. Series A Liberty Media Group Common Stock, $1.00 par
value per share (the "LMG Series A Stock"). Notwithstanding the foregoing, if
the product of 0.58 and the LMG Market Price (as hereinafter defined) on the
closing date of the Merger is less than $22.00, TCI must either (i) increase
the exchange ratio to equal the quotient (rounded upwards, if necessary, to
the nearest one one-thousandth) obtained by dividing $22.00 by such LMG Market
Price or (ii) terminate the Merger Agreement. See "THE MERGER AGREEMENT--
Consideration to be Received in the Merger."
Holders of shares of TINTA Common Stock will not be entitled to any
dissenters' appraisal rights in connection with the Merger under Delaware law.
See "THE MERGER--Absence of Appraisal Rights." Fractional shares of LMG Series
A Stock will not be issued in the Merger and holders of TINTA Common Stock
otherwise entitled to a fractional share of LMG Series A Stock will receive an
amount in cash equal to the same fraction of the current market value of a
whole share of LMG Series A Stock as determined in accordance with the Merger
Agreement. See "THE MERGER AGREEMENT--Consideration to be Received in the
Merger."
TCI has filed a registration statement on Form S-4 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the shares of LMG Series A Stock that are proposed to be issued pursuant to
or as contemplated by the Merger Agreement. This Proxy Statement/Prospectus
also constitutes the Prospectus of TCI filed as part of the Registration
Statement. All information contained in this Proxy Statement/Prospectus
relating to TINTA and its subsidiaries has been supplied by TINTA and all
information relating to TCI and its subsidiaries (other than TINTA and its
subsidiaries) has been supplied by TCI.
TCI's common stock, $1.00 par value per share ("TCI Common Stock"), is
comprised of six series: (a) the Tele-Communications, Inc. TCI Group Series A
Common Stock ("TCI Group Series A Stock"), (b) the Tele-Communications, Inc.
TCI Group Series B Common Stock ("TCI Group Series B Stock" and, together with
the TCI Group Series A Stock, the "TCI Group Stock"), (c) the LMG Series A
Stock, (d) the Tele-Communications, Inc. Liberty Media Group Series B Common
Stock ("LMG Series B Stock" and, together with the LMG Series A
Stock, "LMG Stock"), (e) the Tele-Communications, Inc. Series A TCI Ventures
Group Common Stock (the "TCIVG Series A Stock") and (f) the Tele-
Communications, Inc. Series B TCI Ventures Group Common Stock (the "TCIVG
Series B Stock" and, together with the TCIVG Series A Stock, the "TCIVG
Stock"). Both series of the LMG Stock are identical in all respects, except
(i) each share of LMG Series B Stock has ten votes and each share of LMG
Series A Stock has one vote and (ii) each share of LMG Series B Stock is
convertible, at the option of its holder, into one share of LMG Series A
Stock. Similarly, both series of the TCI Group Stock and both series of the
TCIVG Stock are identical in all respects, except (i) each share of TCI Group
Series B Stock and TCIVG Series B Stock has ten votes and each share of TCI
Group Series A Stock and TCIVG Series A Stock has one vote and (ii) each share
of TCI Group Series B Stock is convertible, at the option of its holder, into
one share of TCI Group Series A Stock and each share of TCIVG Series B Stock
is convertible, at the option of its holder, into one share of TCIVG Series A
Stock. The shares of LMG Series A Stock, TCI Group Series A Stock and TCIVG
Series A Stock are not convertible. See "DESCRIPTION OF TCI CAPITAL STOCK--
Common Stock."
The TCI Group Stock is intended to reflect the separate performance of the
"TCI Group," which consists primarily of TCI's domestic cable television and
information distribution business, including the ownership and operation of
various cable television systems, as well as the TCI Group's minority
interests in various partnerships owning and operating cable television
systems. The LMG Stock is intended to reflect the separate performance of the
"Liberty Media Group," which consists primarily of TCI's assets and businesses
relating to production, acquisition and distribution through all available
formats and media of branded entertainment, educational and informational
programming and software, including multimedia products, and electronic
retailing, direct marketing, advertising sales relating to programming
services, infomercials and transaction processing. The TCIVG Stock is intended
to reflect the separate performance of the "TCI Ventures Group," which
consists of TCI's entire 85% equity interest in TINTA Common Stock and
substantially all of TCI's non-
ii
<PAGE>
cable and non-programming domestic assets and businesses. The TCI Group, the
Liberty Media Group and the TCI Ventures Group are sometimes referred to
herein individually as a "Group" and collectively as the "Groups." See
"DESCRIPTION OF TCI CAPITAL STOCK."
On June 23, 1998, TCI entered into an Agreement and Plan of Restructuring
and Merger (together with the exhibits and schedules thereto, and as amended
from time to time, the "AT&T Agreement") among TCI, AT&T Corp. ("AT&T") and
Italy Merger Corp., which, subject to the terms and conditions thereof,
provides for the acquisition of TCI by AT&T. Such acquisition will be effected
through the merger of Italy Merger Corp., a wholly-owned subsidiary of AT&T,
with and into TCI, with TCI as the surviving corporation (the "AT&T Merger").
As a result of the AT&T Merger, TCI will become a wholly-owned subsidiary of
AT&T, and stockholders of TCI will become stockholders of AT&T. See "THE AT&T
MERGER AND THE LIBERTY/VENTURES COMBINATION--Consideration to be Received by
Holders of TCI Common Stock in the AT&T Merger."
In a separate proposed transaction, TCI has announced its intention to
reclassify each share of TCIVG Series A Stock as 0.52 of a share of LMG Series
A Stock and each share of TCIVG Series B Stock as 0.52 of a share of LMG
Series B Stock, and in connection therewith, to combine the assets and
businesses of the Liberty Media Group and the TCI Ventures Group (the
"Liberty/Ventures Combination"). The Liberty/Ventures Combination is expected
to occur prior to, but is not conditional upon, the consummation of the AT&T
Merger. The combined entity will be called the "Liberty Media Group"
("Liberty/Ventures Group") and the LMG Stock will thereafter reflect the
separate performance of the businesses and assets attributed to the
Liberty/Ventures Group. Consummation of the Liberty/Ventures Combination is
subject to certain conditions, including approval of the TCI stockholders.
Moreover, TCI has no contractual obligation to effect the Liberty/Ventures
Combination. Accordingly, there can be no assurance that the Liberty/Ventures
Combination will be consummated. See "THE AT&T MERGER AND THE LIBERTY/VENTURES
COMBINATION--The Liberty/Ventures Combination."
In the AT&T Merger, each share of LMG Series A Stock will be converted into
one share of a newly authorized class of common stock of AT&T which will be
intended to reflect the separate performance of the businesses and assets
attributed to the Liberty/Ventures Group. Following the AT&T Merger, the
Liberty/Ventures Group will comprise the corporations, partnerships and other
entities and interests which, at the time of the AT&T Merger, comprise the
Liberty/Ventures Group or, if the Liberty/Ventures Combination has not
occurred, the Liberty Media Group and the TCI Ventures Group (except for
certain assets that the TCI Ventures Group will transfer to the TCI Group for
cash prior to the AT&T Merger, as contemplated by the AT&T Agreement). AT&T
will own 100% of the businesses and assets attributed to the Liberty/Ventures
Group but the day-to-day management of the businesses of the Liberty/Ventures
Group will continue to be managed by certain members of TCI's management who
currently manage the businesses of the Liberty Media Group and the TCI
Ventures Group and will remain independent of AT&T management. See "THE AT&T
MERGER AND THE LIBERTY/VENTURES COMBINATION."
It is expected that the Merger will be consummated prior to the anticipated
closing date of the AT&T Merger. In such event and assuming the AT&T Merger is
consummated, shares of TINTA Common Stock that are converted into shares of
LMG Series A Stock in the Merger will ultimately be converted into the right
to receive shares of a newly authorized class of common stock of AT&T upon
consummation of the AT&T Merger in accordance with the AT&T Agreement.
Consummation of the Merger, however, is not contingent on the consummation of
the AT&T Merger or the other transactions contemplated by the AT&T Agreement,
and in the event such transactions are abandoned, former TINTA stockholders
would continue to own shares of LMG Series A Stock. Consummation of the AT&T
Merger is subject to the separate approvals of the stockholders of AT&T and
TCI, receipt of all necessary governmental consents and approvals and other
conditions to closing set forth in the AT&T Agreement. Accordingly, there can
be no assurance that the AT&T Merger will be consummated. See "THE AT&T MERGER
AND THE LIBERTY/VENTURES COMBINATION."
On October 13, 1998, the last trading day before the date of this Proxy
Statement/Prospectus, the last reported sales prices on the National Market
tier of the Nasdaq Stock Market ("NASDAQ/NM") for shares of TINTA Series A
Stock and LMG Series A Stock were $20 1/4 and $35, respectively.
iii
<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements in this Proxy Statement/Prospectus and in the documents
incorporated herein by reference constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Statements in this Proxy Statement/Prospectus that are not historical facts
are hereby identified as "forward-looking statements" for the purpose of the
safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Section 27A of the Securities Act. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of TINTA, TCI, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. With respect to both TINTA and TCI, such risks,
uncertainties and other factors include, among others: general economic and
business conditions and industry trends; the continued strength of the cable
television industry, the cable television programming industry and such other
industries in which TCI and/or TINTA are involved; rapid technological
changes; uncertainties inherent in proposed business strategies, new product
launches and development plans; future financial performance, including
availability, terms and deployment of capital; the ability of vendors to
deliver required equipment, software and services; availability of qualified
personnel; changes in, or the failure or inability to comply with, government
regulations and adverse outcomes from regulatory proceedings; changes in the
nature of key strategic relationships with partners and joint venturers; the
inability to obtain stockholder, regulatory or other necessary approvals of
any strategic transactions; competitor responses to such party's products and
services, and the overall market acceptance of such products and services,
including acceptance of the pricing of such products and services; and other
factors referenced herein. With respect to TINTA, such risks, uncertainties
and other factors also include, among others: changes in exchange rates;
changes in repatriation rights; governmental upheaval; and loss of control of
operations. In addition to statements that explicitly describe such risks,
uncertainties and other factors, readers are urged to consider statements that
include the terms "believes," "belief," "expects," "plans," "anticipates,"
"estimates," "intends" or the like to be uncertain and forward-looking. These
forward-looking statements (and such risks, uncertainties and other factors)
speak only as of the date of this Proxy Statement/Prospectus. TCI and TINTA
expressly disclaim any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein to reflect any
change in TCI's or TINTA's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
AVAILABLE INFORMATION
Each of TINTA and TCI is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy and
information statements and other information with the Securities and Exchange
Commission (the "SEC"). Such reports, proxy and information statements and
other information filed with the SEC can be read and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, NW, Washington, D.C. 20549, and at the regional offices of the
SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Further
information on the operation of the public reference facilities may be
obtained by calling the SEC at 1-800-SEC-0330. Copies of such material can
also be obtained by mail at prescribed rates by writing to the Public
Reference Section of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street,
NW, Washington, D.C. 20549. The SEC maintains a Web site on the Internet that
contains reports, proxy and information statements and other information
regarding registrants (including TINTA and TCI) that file electronically with
the SEC. The address of the SEC's Web site is http://www.sec.gov. In addition,
materials filed by TINTA or TCI should be available for inspection at the
offices of The Nasdaq Stock Market, Reports Section, 1735 K Street, NW,
Washington, D.C. 20006.
AT&T is also subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy and information statements
and other information with the SEC. Such reports, proxy and information
statements and other information filed with the SEC with respect to AT&T can
also be obtained at the above-referenced facilities maintained by the SEC.
iv
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TCI has filed the Registration Statement with the SEC under the Securities
Act, with respect to the shares of LMG Series A Stock to be issued pursuant to
or as contemplated by the Merger Agreement. This Proxy Statement/Prospectus
does not include all of the information set forth in the Registration
Statement filed by TCI with the SEC under the Securities Act, as permitted by
the rules and regulations of the SEC. The Registration Statement, including
any amendments, schedules and exhibits filed or incorporated by reference as a
part thereof, is available for inspection and copying as set forth above.
Statements contained in this Proxy Statement/Prospectus or in any document
incorporated herein by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, and
each such statement shall be deemed qualified in its entirety by such
reference.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES COVERED BY THIS PROXY STATEMENT/PROSPECTUS OR A
SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF TCI OR TINTA SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the SEC by TCI (Commission File
No. 0-20421) or TINTA (Commission File No. 000-26264) under the Exchange Act
and are hereby incorporated into this Proxy Statement/Prospectus by reference
and made a part hereof: (1) TCI's Annual Report on Form 10-K for the year
ended December 31, 1997; (2) TCI's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998; (3) TCI's Current Reports on
Form 8-K, dated (x) February 25, 1998, (y) March 6, 1998, as amended by Form
8-K/A (Amendment No. 1) dated June 23, 1998, and as further amended by Form 8-
K/A (Amendment No. 2) dated June 30, 1998, and (z) July 1, 1998 (which
includes, as an exhibit, the AT&T Agreement (exclusive of exhibits and
schedules)); (4) the description of the LMG Series A Stock included in Items 3
and 4 of TCI's registration statement on Form 8-B (as amended by Form 8-B/A
(Amendments No. 1, 2, 3 and 4)) and Item 1 of TCI's registration statement on
Form 8-A (as amended by Form 8-A/A (Amendments No. 1, 2 and 3)); (5) TINTA's
Annual Report on Form 10-K for the year ended December 31, 1997, as amended by
Form 10-K/A (Amendment No. 1); (6) TINTA's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1998 and June 30, 1998; and (7) TINTA's Current
Reports on Form 8-K, dated September 8, 1998 and October 9, 1998.
All documents subsequently filed by TCI or TINTA with the SEC 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 and any reoffering of the
securities offered hereby 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 Proxy Statement/Prospectus to the extent that
a statement contained herein (or in any other subsequently filed document that
is or is deemed to be incorporated by reference herein) modifies or supersedes
such previous statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Proxy Statement/Prospectus, except
as so modified or superseded.
v
<PAGE>
All information appearing in this Proxy Statement/Prospectus is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL
REQUEST BY ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN
DELIVERED, IN THE CASE OF DOCUMENTS RELATING TO TINTA, FROM TANA WEDUM,
MANAGER OF COMMUNICATIONS, TELE-COMMUNICATIONS INTERNATIONAL, INC., TERRACE
TOWER II, 5619 DTC PARKWAY, ENGLEWOOD, COLORADO 80111-3000 (TELEPHONE 303-267-
5648), AND IN THE CASE OF DOCUMENTS RELATING TO TCI, FROM STEPHEN M. BRETT,
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, TELE-COMMUNICATIONS, INC.,
TERRACE TOWER II, 5619 DTC PARKWAY, ENGLEWOOD, COLORADO 80111-3000 (TELEPHONE
303-267-5500). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH
REQUEST SHOULD BE RECEIVED BY NOVEMBER 12, 1998.
----------------
This Proxy Statement/Prospectus may also be used as a prospectus for the
resale by affiliates of TINTA and certain other TINTA stockholders of shares
of LMG Series A Stock acquired in the Merger. Any such resale would be
reflected in a supplement to this Proxy Statement/Prospectus or a post-
effective amendment of the Registration Statement, as appropriate.
vi
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
FORWARD LOOKING STATEMENTS................................................ iv
AVAILABLE INFORMATION..................................................... iv
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... v
INDEX OF DEFINED TERMS.................................................... ix
SUMMARY................................................................... 1
The Companies........................................................... 1
The Special Meeting..................................................... 1
The Merger.............................................................. 2
Interests of Certain Persons in the Merger.............................. 4
Fairness Opinion........................................................ 5
Regulatory Matters...................................................... 5
Absence of Appraisal Rights............................................. 5
Certain Federal Income Tax Consequences................................. 5
The AT&T Merger and the Liberty/Ventures Combination.................... 5
Comparative Market Price Data........................................... 6
Dividends............................................................... 7
Certain Comparative Per Share Data...................................... 8
Selected Historical Financial Data...................................... 9
RISK FACTORS.............................................................. 15
Stockholders of One Company; Financial Effects on One Group Could Affect
Other Groups........................................................... 15
Limited Separate Stockholder Rights; Effects on Voting Power............ 15
Potential Divergence of Interests; No Specific Procedures for Resolu-
tion................................................................... 16
Fiduciary Duties of the TCI Board Are to All TCI Stockholders Regardless
of Class or Series..................................................... 18
Transfer of Funds among Groups; Equity Contributions from the TCI
Group.................................................................. 19
Management and Allocation Policies Subject to Change.................... 20
Potential Conversion of LMG Stock....................................... 20
Potential Effects of Possible Disposition of Assets of the Liberty Media
Group.................................................................. 20
Limitations on Potential Acquisition of a Group......................... 20
Absence of Approval Rights with Respect to Future Issuances of Autho-
rized Shares........................................................... 21
Anti-Takeover Considerations............................................ 21
THE SPECIAL MEETING....................................................... 21
Date, Time, Place and Purpose........................................... 21
Voting Rights; Vote Required for Approval............................... 22
Proxies................................................................. 22
Expenses................................................................ 23
THE MERGER................................................................ 23
Background.............................................................. 23
TINTA's Reasons for the Merger; Recommendation of the TINTA Board....... 26
Fairness Opinion........................................................ 27
TCI's Reasons for the Merger............................................ 35
Interests of Certain Persons in the Merger.............................. 36
Certain Federal Income Tax Consequences................................. 38
Certain Consequences of the Merger; Operations Following the Merger..... 39
Accounting Treatment.................................................... 40
Certain Litigation...................................................... 40
Absence of Appraisal Rights............................................. 42
Certain Transactions Between TCI and TINTA.............................. 42
</TABLE>
vii
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<TABLE>
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THE MERGER AGREEMENT...................................................... 42
General; Effective Time................................................. 42
Consideration to be Received in the Merger.............................. 43
Conditions to the Merger................................................ 44
Covenants............................................................... 45
Listing on NASDAQ/NM.................................................... 47
Indemnification......................................................... 47
Termination, Amendment and Waiver....................................... 47
Assignment.............................................................. 48
Certain Restrictions on Resale of LMG Series A Stock.................... 48
Expenses................................................................ 48
CERTAIN TRANSACTIONS BETWEEN TCI AND TINTA................................ 49
Transactions with TCI and Others........................................ 49
Transactions with Management............................................ 50
THE AT&T MERGER AND THE LIBERTY/VENTURES COMBINATION...................... 51
General................................................................. 51
Consideration to be Received by Holders of TCI Common Stock in the AT&T
Merger................................................................. 52
Liberty/Ventures Combination............................................ 53
Assets and Business of the Liberty/Ventures Group Following the AT&T
Merger................................................................. 53
Operations and Management of the Liberty/Ventures Group Following the
AT&T Merger............................................................ 54
Conditions to the AT&T Merger........................................... 54
Termination of the AT&T Agreement....................................... 54
Registration and Listing of AT&T Stock.................................. 55
DESCRIPTION OF TCI CAPITAL STOCK.......................................... 56
General................................................................. 56
Common Stock............................................................ 56
Preferred Stock......................................................... 87
Anti-Takeover Considerations............................................ 88
COMPARISON OF STOCKHOLDERS' RIGHTS........................................ 90
Authorized Capital Stock................................................ 90
Voting Rights........................................................... 90
Conversion Rights....................................................... 90
Dividend, Redemption and Conversion Rights on Disposition of Assets..... 91
Redemption in Exchange for Stock of Subsidiary.......................... 91
Dividends and Share Distribution........................................ 92
Board of Directors...................................................... 93
Election of Directors................................................... 93
Removal of Directors.................................................... 93
Special Meetings of Stockholders........................................ 93
Merger, Consolidation and Sale of Assets................................ 94
Charter or Bylaw Amendments............................................. 94
Stockholder Approval of Certain Business Combinations................... 94
Liquidation or Dissolution.............................................. 95
SECURITY OWNERSHIP OF TINTA............................................... 95
Security Ownership of Certain Beneficial Owners......................... 95
Security Ownership of Management........................................ 95
LEGAL MATTERS............................................................. 100
EXPERTS................................................................... 100
MISCELLANEOUS............................................................. 102
</TABLE>
Appendix I: Agreement and Plan of Merger
Appendix II: Opinion of Salomon Smith Barney
viii
<PAGE>
INDEX OF DEFINED TERMS
Set forth below is a list of certain defined terms used in this Proxy
Statement/Prospectus and the page on which each such term is defined.
<TABLE>
<S> <C>
1997 LMG Stock Dividend..................................................... 7
1998 LMG Stock Dividend..................................................... 7
Adjusted Liberty Management Private Company Value........................... 32
Adjusted Liberty Management Value........................................... 33
Adjusted Liberty Public Investment Value.................................... 32
Adjusted Private Company DCF Range.......................................... 31
Adjusted TINTA DCF Range.................................................... 31
Adjusted TINTA Public Investment Value...................................... 30
Analysts Private Company Range.............................................. 31
AT&T........................................................................ iii
AT&T Agreement.............................................................. iii
AT&T Board.................................................................. 54
AT&T Common Stock........................................................... 6
AT&T Effective Time......................................................... 52
AT&T Liberty/Ventures Class A Stock......................................... 6
AT&T Liberty/Ventures Class B Stock......................................... 6
AT&T Liberty/Ventures Stock................................................. 6
AT&T Merger................................................................. iii
Baker & Botts............................................................... 4
Cablevision................................................................. 13
Certificate of Merger....................................................... 2
Class A Preferred Stock..................................................... 56
Class Action Lawsuits....................................................... 40
Class B Preferred Stock..................................................... 56
Closing Date................................................................ 2
Code........................................................................ 5
Credit Facility............................................................. 49
DCF......................................................................... 30
Debentures.................................................................. 3
Delaware Secretary of State................................................. 2
DGCL........................................................................ 1
Disposition................................................................. 57
EBITDA...................................................................... 30
Effective Time.............................................................. 2
Engagement Letter........................................................... 27
Exchange Act................................................................ iv
Exchange Agent.............................................................. 44
Exchange Offers............................................................. 57
Exchange Ratio.............................................................. 2
Executive Committee......................................................... 25
Flextech.................................................................... 13
Group....................................................................... iii
Groups...................................................................... iii
HSR Act..................................................................... 5
Implied Merger Consideration Values......................................... 33
Indemnified Parties......................................................... 47
</TABLE>
<TABLE>
<S> <C>
Indenture................................................................... 40
Inter-Group Interest........................................................ 58
IPO......................................................................... 23
IRS......................................................................... 38
Liberty..................................................................... 25
Liberty Analysts Private Company Range...................................... 32
Liberty Analysts Range...................................................... 33
Liberty Implied Equity Values............................................... 32
Liberty Management Estimates................................................ 32
Liberty Management Private Company Value.................................... 32
Liberty Management Value.................................................... 33
Liberty Media Group......................................................... ii
Liberty Media Group Available Dividend Amount............................... 67
Liberty Media Group Net Proceeds............................................ 59
Liberty Media Group Subsidiaries............................................ 80
Liberty Portfolio Companies................................................. 28
Liberty Price Target Range.................................................. 33
Liberty Private Companies................................................... 32
Liberty Public Companies.................................................... 31
Liberty Public Investment Value............................................. 31
Liberty/TINTA............................................................... 49
Liberty/Ventures Combination................................................ iii
Liberty/Ventures Group...................................................... iii
LMG Distribution............................................................ 10
LMG Market Price............................................................ 2
LMG Series A Per Share Values............................................... 33
LMG Series A Stock.......................................................... ii
LMG Series B Stock.......................................................... ii
LMG Stock................................................................... ii
LMG Stock Dividends......................................................... 7
Magness Group............................................................... 98
Malone Group................................................................ 98
Malone Right................................................................ 98
Market Value................................................................ 60
Meeting..................................................................... i
Merger...................................................................... i
Merger Agreement............................................................ i
Merger Consideration........................................................ 2
Merger Sub.................................................................. i
Minimum Value............................................................... 2
Minimum Value Adjustment.................................................... 2
Minority Purchase Premiums.................................................. 34
MOU......................................................................... 41
NASD........................................................................ 42
NASDAQ/NM................................................................... iii
NYSE........................................................................ 54
Plaintiff's Counsel......................................................... 26
</TABLE>
ix
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<TABLE>
<S> <C>
Private Company DCF Range................................................... 30
Qualifying Subsidiary....................................................... 62
Record Date................................................................. i
Registration Statement...................................................... ii
Regulations................................................................. 38
RL&F........................................................................ 26
Salomon Smith Barney........................................................ 27
SEC......................................................................... iv
Securities Act.............................................................. ii
Series C-LMG Preferred Stock................................................ 56
Series C-TCI Group Preferred Stock.......................................... 56
Series F Preferred Stock.................................................... 56
Series G Preferred Stock.................................................... 56
Series H Preferred Stock.................................................... 56
Series Preferred Stock...................................................... 56
share distribution.......................................................... 68
Sherman & Howard............................................................ 4
Surviving Corporation....................................................... 2
TCI......................................................................... i
TCI Board................................................................... 7
TCI Charter................................................................. 16
TCI Common Stock............................................................ ii
TCI Director Stock Option Plan.............................................. 97
TCI Group................................................................... ii
TCI Group Series A Stock.................................................... ii
TCI Group Series B Stock.................................................... ii
TCI Group Stock............................................................. ii
TCI Holders................................................................. 5
TCI Music................................................................... 30
TCI Preferred Stock......................................................... 56
TCI Series B Stock.......................................................... 99
TCI Ventures Group.......................................................... ii
</TABLE>
<TABLE>
<S> <C>
TCI Ventures Group Net Proceeds............................................. 65
TCI Voting Securities....................................................... 88
TCI-Estates Agreement....................................................... 98
TCIC........................................................................ 1
TCIVG Series A Stock........................................................ ii
TCIVG Series B Stock........................................................ ii
TCIVG Stock................................................................. ii
Telewest.................................................................... 14
Telewest UK Joint Venture................................................... 14
TINTA....................................................................... i
TINTA 1995 Plan............................................................. 36
TINTA 1996 Nonemployee Director Plan........................................ 36
TINTA Analysts Range........................................................ 31
TINTA Board................................................................. i
TINTA Charter............................................................... 1
TINTA Common Stock.......................................................... i
TINTA Implied Equity Values................................................. 31
TINTA Options............................................................... 36
TINTA Per Share Values...................................................... 33
TINTA Plans................................................................. 36
TINTA Portfolio Companies................................................... 28
TINTA Preferred Stock....................................................... 90
TINTA Price Target Range.................................................... 33
TINTA Private Companies..................................................... 30
TINTA Public Companies...................................................... 30
TINTA Public Investment Value............................................... 30
TINTA Restricted Stock Awards............................................... 37
TINTA SARs.................................................................. 36
TINTA Series A Stock........................................................ i
TINTA Series B Stock........................................................ i
TINTA Voting Securities..................................................... 93
Trading Day................................................................. 66
</TABLE>
x
<PAGE>
SUMMARY
The following summary is intended only to highlight certain information
contained elsewhere in this Proxy Statement/Prospectus or in the documents
incorporated by reference herein. This summary is not intended to be complete
and is qualified in its entirety by the more detailed information contained
elsewhere in this Proxy Statement/Prospectus, the Appendices hereto and the
documents incorporated by reference or otherwise referred to herein.
Stockholders are urged to review carefully the entire Proxy
Statement/Prospectus, including the Appendices hereto. As used in this Proxy
Statement/Prospectus, the term "TCI" refers to Tele-Communications, Inc. and,
unless the context otherwise requires, its consolidated subsidiaries (including
TINTA), and the term "TINTA" refers to Tele-Communications International, Inc.
and, unless the context otherwise requires, its subsidiaries and affiliates.
Capitalized terms used in this summary and not otherwise defined have the
meanings ascribed to them elsewhere in this Proxy Statement/Prospectus. See
"INDEX OF DEFINED TERMS."
THE COMPANIES
TINTA. TINTA, a majority-owned subsidiary of TCI, provides diversified
programming services to, and operates multichannel video and telecommunications
distribution networks in, selected markets outside the United States. The
activities of TINTA are concentrated in Europe, Latin America, Asia, Australia
and the Caribbean, with particular focus at present on the United Kingdom,
Argentina and Japan. At June 30, 1998, TINTA had ownership interests in or
managed 52 cable and satellite programming services, which are received by
subscribers in various countries outside the United States. TINTA also has
ownership interests in companies operating broadband networks that, at June 30,
1998, provided cable television service to an aggregate of approximately 4.4
million basic subscribers and, primarily in the United Kingdom, provided
telephone service over approximately 1.2 million telephone lines. TINTA 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.
TCI. TCI, through its subsidiaries and affiliates, engages principally 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. TCI also has investments in companies and
joint ventures involved in developing and providing programming for new
television and telecommunications technologies. TCI is a Delaware corporation
and was incorporated in 1994. TCI Communications, Inc., a subsidiary of TCI
("TCIC"), and its predecessors have been engaged in the cable television
business since the early 1950's. TCI's principal executive offices are located
at Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000;
telephone (303) 267-5500.
THE SPECIAL MEETING
A special meeting of the stockholders of TINTA will be held at TINTA's
corporate offices, 5619 DTC Parkway, Englewood, Colorado, on Thursday, November
19, 1998, at 9:30 a.m., local time. At the Meeting, TINTA's stockholders will
be asked to consider and vote upon the proposal to adopt the Merger Agreement
and such other matters as may properly be brought before the Meeting. See "THE
MERGER AGREEMENT."
Holders of record of TINTA Common Stock as of the close of business on the
Record Date are entitled to notice of, and to vote at, the Meeting. Each share
of TINTA Series A Stock is entitled to one vote and each share of TINTA Series
B Stock is entitled to ten votes on each matter that is properly presented to
stockholders at the Meeting. Pursuant to the Delaware General Corporation Law
(the "DGCL"), TINTA's Restated Certificate of Incorporation (the "TINTA
Charter") and TINTA's Bylaws, the presence at the Meeting, in person or by
properly executed proxy, of the holders of a majority in total voting power of
the outstanding shares of TINTA Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum at the Meeting, and
1
<PAGE>
the affirmative vote of the majority in voting power of outstanding shares of
TINTA Series A Stock and TINTA Series B Stock entitled to vote thereon at the
Meeting, voting together as a single class, is required to adopt the Merger
Agreement. As of the Record Date, TCI beneficially owned shares of TINTA Common
Stock with a combined voting power equal to approximately 92% of the total
voting power of the shares of TINTA Common Stock outstanding on such date and,
pursuant to and subject to the terms of the Merger Agreement, TCI has agreed to
cause all such shares to be voted in favor of the proposal to adopt the Merger
Agreement. Accordingly, both the quorum and the vote requirements will be met
without regard to the presence of, or votes cast by, the other stockholders of
TINTA, and it is expected that the Merger Agreement will be adopted at the
Meeting. No vote of the TCI stockholders is required for adoption of the Merger
Agreement. See "THE SPECIAL MEETING."
THE MERGER
Effect of the Merger. Pursuant to the Merger Agreement, upon consummation of
the Merger, Merger Sub will merge with and into TINTA, with TINTA being the
surviving corporation (the "Surviving Corporation"). As a result of the Merger,
TINTA will become a wholly-owned subsidiary of TCI. The Merger will become
effective (the "Effective Time") on the date and at the time that a certificate
of merger relating to the Merger (the "Certificate of Merger") is accepted for
filing by the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") in accordance with the applicable provisions of the DGCL
(or such later date and time as may be agreed to by TCI and TINTA and specified
in the Certificate of Merger). Such filing is expected to take place as soon as
practicable after the closing of the transactions contemplated by the Merger
Agreement. The date on which the closing of the transactions contemplated by
the Merger Agreement takes place, which, unless otherwise agreed among the
parties, shall be the date on which the last of the conditions precedent to the
Merger set forth in the Merger Agreement (other than the filing of the
Certificate of Merger and other than any such conditions which by their terms
are not capable of being satisfied prior to such date) is satisfied or, when
permissible, waived, is herein called the "Closing Date." See "THE MERGER
AGREEMENT--General; Effective Time."
Merger Consideration. Pursuant to the Merger Agreement, at the Effective
Time, each share of TINTA Common Stock outstanding immediately prior to the
Effective Time (other than any such shares held by TINTA in its treasury or
owned of record by TCI or any subsidiary of TCI, all of which will be canceled)
will be converted into the right to receive 0.58 (the "exchange ratio") of a
share of LMG Series A Stock. Notwithstanding the foregoing, if the product of
0.58 and the LMG Market Price (as defined below) on the Closing Date is less
than $22.00 (the "Minimum Value"), TCI must either (i) increase the exchange
ratio (the "Minimum Value Adjustment") to equal the quotient (rounded upwards,
if necessary, to the nearest one one-thousandth) obtained by dividing $22.00 by
such LMG Market Price or (ii) terminate the Merger Agreement. The 0.58 exchange
ratio, or such exchange ratio as adjusted pursuant to the Merger Agreement, is
herein referred to as the "Exchange Ratio." The LMG Series A Stock to be issued
in respect of a share of TINTA Common Stock pursuant to the Merger is herein
sometimes referred to as the "Merger Consideration." "LMG Market Price" means
the average of the closing sales prices (or, if on any day no sale price is
reported, the average of the quoted high and low bid prices on such day) of a
share of LMG Series A Stock on the NASDAQ/NM (or, if the LMG Series A Stock is
not traded on the NASDAQ/NM, on the principal stock exchange on which such
stock is traded) on each of the five consecutive trading days immediately
preceding the trading day prior to the Closing Date. Had the Merger been
scheduled to close on October 13, 1998, the LMG Market Price would have been
equal to $33.80 and the 0.58 exchange ratio would have resulted in the Merger
Consideration being less than the Minimum Value. Fractional shares of LMG
Series A Stock will not be issued in the Merger and holders of TINTA Common
Stock otherwise entitled to a fractional share of LMG Series A Stock will
receive an amount in cash equal to the same fraction of the current market
value of a whole share of LMG Series A Stock determined as described herein
under "THE MERGER AGREEMENT--Consideration to be Received in the Merger." For a
summary of the material differences between the rights of holders of LMG Series
A Stock and the rights of holders of TINTA Common Stock, see "COMPARISON OF
STOCKHOLDERS' RIGHTS." For a description of the LMG Series A Stock to be issued
in the Merger, see "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock."
2
<PAGE>
At the Effective Time, the 4 1/2% Convertible Subordinated Debentures due
2006 of TINTA (the "Debentures") outstanding immediately prior to the Effective
Time will remain outstanding and will remain obligations of TINTA as the
surviving corporation in the Merger. As a result of the Merger, however, the
Debentures, which are currently convertible into shares of TINTA Series A
Stock, will become convertible into shares of LMG Series A Stock at an adjusted
conversion price. In addition, as a result of and subsequent to the Merger,
holders of Debentures will have the right, in accordance with and subject to
the time periods prescribed by the terms of the Debentures, to require TINTA to
purchase any Debentures (or portion thereof) at a purchase price equal to 100%
of the principal amount tendered, plus accrued and unpaid interest thereon to
the purchase date. See "THE MERGER--Certain Consequences of the Merger;
Operations Following the Merger."
TINTA's Reasons for the Merger; Recommendation of the TINTA Board. The TINTA
Board has unanimously approved the Merger Agreement, has determined that it is
advisable and fair and in the best interests of TINTA and its stockholders
other than TCI and its subsidiaries, and unanimously recommends that holders of
shares of TINTA Common Stock vote FOR the proposal to adopt the Merger
Agreement. In reaching its decision to approve the Merger Agreement and to
recommend that TINTA's stockholders vote to adopt the Merger Agreement, the
TINTA Board considered the following factors: (i) the financial condition,
competitive position and prospects of each of TINTA and the Liberty Media
Group, and TINTA's future prospects as a stand-alone entity and on a combined
basis with the Liberty Media Group; (ii) the opinion of Salomon Smith Barney as
to the fairness, from a financial point of view, of the Exchange Ratio to the
holders of TINTA Common Stock (other than TCI and its subsidiaries); (iii) the
terms of the Merger Agreement, including that if the Merger is consummated,
each share of TINTA Common Stock would be exchanged in the Merger for a number
of shares of LMG Series A Stock having a value of at least $22.00 per share;
(iv) the expected difficulties TINTA would encounter in pursuing its growth
strategy as a stand-alone company given its leverage at the holding company
level, the capital needs of its subsidiaries and affiliates, its limited access
to capital and its limited ability to access the cash flow of its less than
majority-owned subsidiaries and affiliates; (v) the increased liquidity of the
LMG Series A Stock compared to the TINTA Series A Stock; and (vi) the ability
of holders of TINTA Common Stock to continue to participate in the growth of
TINTA's international assets through their ownership of LMG Series A Stock
while limiting their exposure to the uncertainties of a business whose
subsidiaries and affiliates operate almost exclusively outside the United
States. The TINTA Board also considered that the holders of TINTA Common Stock
would have an opportunity to participate in the future performance of the other
businesses and assets of the Liberty Media Group through their ownership of LMG
Series A Stock, which they would receive through a tax-free exchange in the
Merger. See "THE MERGER--TINTA's Reasons for the Merger; Recommendation of the
TINTA Board" and "--Fairness Opinion." For a discussion of the interests of
certain members of the TINTA Board in the Merger, see "THE MERGER--Interests of
Certain Persons in the Merger."
TCI's Reasons for the Merger. TCI believes that the acquisition of the
outstanding equity interests in TINTA not already owned by TCI will benefit TCI
and its stockholders. In reaching its decision to make the merger proposal and
to enter into the Merger Agreement, TCI considered its management's assessment
of TINTA's existing financial position, the market performance of the TINTA
Series A Stock since its initial public offering in July 1995, industry and
market conditions, and the following factors: (i) that the combination of
TINTA's programming and distribution assets and the Liberty Media Group's
programming interests would result in substantial synergies; (ii) that as a
wholly-owned subsidiary of TCI, TINTA would benefit from TCI's greater
liquidity and access to capital, thereby increasing TINTA's ability to satisfy
the capital requirements necessary for it to pursue its growth strategy; (iii)
that operating costs could be reduced through more efficient use of shared
personnel and the elimination of duplicate public company costs; and (iv) that
certain potential conflicts of interests between TINTA and the Liberty Media
Group relating to the growth of their respective programming businesses would
be eliminated. See "THE MERGER--TCI's Reasons for the Merger."
Conditions to the Merger. The respective obligations of TINTA and TCI to
consummate the transactions contemplated by the Merger Agreement are subject to
the satisfaction or, where permissible, waiver of a number
3
<PAGE>
of conditions, including (a) adoption of the Merger Agreement by the requisite
vote of stockholders of TINTA; (b) absence of any effective injunction or
similar order preventing consummation of the transactions contemplated by the
Merger Agreement as provided therein; (c) receipt of certain opinions of legal
counsel, including the opinions of Baker & Botts, L.L.P. ("Baker & Botts") and
Sherman & Howard L.L.C. ("Sherman & Howard") described elsewhere in this Proxy
Statement/Prospectus to the effect that the Merger will qualify as a tax-free
reorganization for federal income tax purposes; and (d) certain other
conditions that are usual and customary conditions for merger transactions. See
"THE MERGER AGREEMENT--Conditions to the Merger."
Covenants. Under the Merger Agreement, TINTA has agreed, prior to the
Effective Time, to conduct its business in the ordinary and usual course
consistent with past practice, to use its reasonable efforts to preserve intact
its business organization and assets and to refrain from issuing additional
capital stock, amending its charter, entering into or modifying material
agreements or taking certain other actions. See "THE MERGER AGREEMENT--
Covenants."
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time, by (a) the
mutual consent of TINTA and TCI; (b) either TINTA or TCI (i) if the Merger has
not been consummated before January 31, 1999, unless such failure is due to the
failure of the party seeking to terminate the Merger Agreement to perform any
of its obligations thereunder, (ii) for a material breach by the other party
under the Merger Agreement that is incapable of being cured, (iii) if a court
of competent jurisdiction has issued an order permanently enjoining or
otherwise prohibiting the Merger, or (iv) if the required adoption of the
Merger Agreement by the TINTA stockholders has not been duly obtained, provided
the terminating party has complied with its obligations contained in the Merger
Agreement regarding the Meeting and applicable SEC filings; or (c) TCI (i) if
the product of 0.58 and the LMG Market Price on the Closing Date is less than
$22.00, or (ii) if the TINTA Board has withdrawn or modified in any manner
adverse to TCI its recommendation to TINTA stockholders regarding the adoption
of the Merger Agreement. See "THE MERGER AGREEMENT--Termination, Amendment and
Waiver."
Indemnification. The Merger Agreement provides that the present and former
directors, officers, employees and agents of TINTA and any of its subsidiaries,
and any person who is or was serving at the request of TINTA as a director,
officer, employee or agent of another entity, will be indemnified by TCI from
and after the Effective Time against certain liabilities to the extent that (a)
a corporation is permitted under Delaware law to indemnify its own directors,
officers, employees or agents, as the case may be, (b) such person would be
entitled to be indemnified by TINTA with respect to the liability in question
under the TINTA Charter and TINTA's Bylaws and under any indemnification
agreement with TINTA and (c) such indemnification otherwise is permitted by
applicable law. See "THE MERGER AGREEMENT--Indemnification."
Accounting Treatment. The Merger will be accounted for by TCI as a "purchase"
of a minority interest, as such term is used under generally accepted
accounting principles, for accounting and financial reporting purposes.
Certain Litigation. For information regarding certain litigation relating to
the Merger, see "THE MERGER--Certain Litigation."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the TINTA Board with respect to the
Merger, stockholders should be aware that some of the members of TINTA's
management and the TINTA Board have certain interests in the Merger that are in
addition to or different from the interests of stockholders of TINTA generally.
See "THE MERGER--Interests of Certain Persons in the Merger." The TINTA Board
was aware of these interests and considered them, among other matters, in
approving the Merger Agreement.
4
<PAGE>
FAIRNESS OPINION
Salomon Smith Barney was retained on behalf of the TINTA Board to review the
fairness, from a financial point of view, of the Exchange Ratio to holders of
TINTA Common Stock. On August 21, 1998, Salomon Smith Barney delivered an oral
opinion (which it subsequently confirmed in writing) to the TINTA Board to the
effect that, as of the date thereof, and based upon the assumptions made,
matters considered and limits of the review, as set forth in such opinion, the
Exchange Ratio was fair, from a financial point of view, to the holders of
TINTA Common Stock (other than TCI and its subsidiaries (the "TCI Holders")). A
copy of Salomon Smith Barney's opinion, which sets forth the assumptions made,
the matters considered and the scope of review undertaken, is included as
Appendix II to this Proxy Statement/Prospectus. See "THE MERGER--Fairness
Opinion."
REGULATORY MATTERS
Consummation of the Merger requires the giving of notices to foreign
authorities that have jurisdiction over cable television systems operated by
certain of TINTA's subsidiaries and affiliates. Such notices will be given
before consummation of the Merger. Other than the foregoing and other than
compliance with certain requirements of federal and state securities laws,
TINTA and TCI are not aware of any foreign, federal or state regulatory
requirements that must be complied with or approvals that must be obtained by
them in connection with the Merger. Holders of TINTA Common Stock who, pursuant
to the Merger, will be acquiring shares of LMG Series A Stock having a value of
more than $15 million or a value which, when aggregated with the value of
shares of capital stock of TCI entitled to vote generally in the election of
directors owned by such persons prior to the Merger, exceeds $15 million, may
be subject to the notification and waiting period requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act").
All such waiting periods would have to expire or be terminated before any
issuance of LMG Series A Stock in the Merger to those particular stockholders
could be effected.
ABSENCE OF APPRAISAL RIGHTS
Holders of shares of TINTA Common Stock will not be entitled to appraisal
rights in connection with the Merger under Delaware law. See "THE MERGER--
Absence of Appraisal Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to be a tax-free reorganization so that no gain or
loss would be recognized by the holders of TINTA Common Stock, except in
respect of cash received in lieu of fractional shares. Each of TCI and TINTA
has received an opinion of counsel to the effect that the Merger will qualify
as a reorganization under Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and that no gain or loss will be recognized by the
stockholders of TINTA to the extent they receive shares of LMG Series A Stock
in exchange for their TINTA Common Stock in the Merger. Each party's obligation
to consummate the Merger is conditioned upon such opinion of its counsel not
being withdrawn prior to the Closing Date. See "THE MERGER--Certain Federal
Income Tax Consequences."
THE AT&T MERGER AND THE LIBERTY/VENTURES COMBINATION
On June 23, 1998, TCI and AT&T entered into the AT&T Agreement, pursuant to
which TCI will be acquired by AT&T through the AT&T Merger. As a result of the
AT&T Merger, TCI will become a wholly-owned subsidiary of AT&T, and
stockholders of TCI will become stockholders of AT&T. See "THE AT&T MERGER AND
THE LIBERTY/VENTURES COMBINATION--Consideration to be Received by Holders of
TCI Common Stock in the AT&T Merger."
In a separate proposed transaction, TCI has announced its intention to
consummate the Liberty/Ventures Combination, whereby each share of TCIVG Series
A Stock will be reclassified as 0.52 of a share of LMG
5
<PAGE>
Series A Stock and each share of TCIVG Series B Stock will be reclassified as
0.52 of a share of LMG Series B Stock, and in connection with such
reclassification, the assets and businesses of the Liberty Media Group and the
TCI Ventures Group will be combined. The Liberty/Ventures Combination is
expected to occur prior to, but is not conditional upon, the consummation of
the AT&T Merger. Following the Liberty/Ventures Combination, the LMG Stock will
reflect the separate performance of the businesses and assets attributed to the
combined Liberty/Ventures Group. Consummation of the Liberty/Ventures
Combination is subject to certain conditions, including approval of the TCI
stockholders. Moreover, TCI has no contractual obligation to effect the
Liberty/Ventures Combination. Accordingly, there can be no assurance that the
Liberty/Ventures Combination will be consummated. See "THE AT&T MERGER AND THE
LIBERTY/VENTURES COMBINATION--Liberty/Ventures Combination."
In connection with the consummation of the AT&T Merger, each share of LMG
Series A Stock will be converted into one share of Class A Liberty Group Common
Stock, $1.00 par value per share, of AT&T ("AT&T Liberty/Ventures Class A
Stock"), and each share of LMG Series B Stock will be converted into one share
of Class B Liberty Group Common Stock, $1.00 par value per share, of AT&T
("AT&T Liberty/Ventures Class B Stock" and, together with the AT&T
Liberty/Ventures Class A Stock, "AT&T Liberty/Ventures Stock"). In addition,
(i) if the Liberty/Ventures Combination has not occurred prior to the AT&T
Merger, each share of TCIVG Series A Stock will be converted into the right to
receive 0.52 of a share of AT&T Liberty/Ventures Class A Stock and each share
of TCIVG Series B Stock will be converted into the right to receive 0.52 of a
share of AT&T Liberty/Ventures Class B Stock and (ii) shares of TCI Group Stock
will be converted into shares of AT&T's common stock, $1.00 par value per share
("AT&T Common Stock"), upon consummation of the AT&T Merger, as provided in the
AT&T Merger Agreement.
The AT&T Liberty/Ventures Stock to be issued in the AT&T Merger will be a
newly authorized class of common stock of AT&T which will be intended to
reflect the separate performance of the businesses and assets attributed to the
Liberty/Ventures Group. Following the AT&T Merger, the Liberty/Ventures Group
will comprise the corporations, partnerships and other entities and interests
which, at the time of the AT&T Merger, comprise the Liberty/Ventures Group or,
if the Liberty/Ventures Combination has not occurred, the Liberty Media Group
and the TCI Ventures Group (except for certain assets that the TCI Ventures
Group will transfer to the TCI Group for cash prior to the AT&T Merger, as
contemplated by the AT&T Agreement). AT&T will own 100% of the businesses and
assets attributed to the Liberty/Ventures Group but the day-to-day management
of the businesses of the Liberty/Ventures Group will continue to be managed by
certain members of TCI's management who currently manage the businesses of the
Liberty Media Group and the TCI Ventures Group and will remain independent of
AT&T management. See "THE AT&T MERGER AND THE LIBERTY/VENTURES COMBINATION."
It is expected that the Merger will be consummated prior to the anticipated
closing date of the AT&T Merger. In such event and assuming the AT&T Merger is
consummated, shares of TINTA Common Stock that are converted into shares of LMG
Series A Stock in the Merger will ultimately be converted into the right to
receive shares of AT&T Liberty/Ventures Class A Stock upon consummation of the
AT&T Merger in accordance with the AT&T Agreement. Consummation of the Merger,
however, is not contingent on the consummation of the AT&T Merger or the other
transactions contemplated by the AT&T Agreement, and in the event such
transactions are abandoned, former TINTA stockholders would continue to own
shares of LMG Series A Stock. Consummation of the AT&T Merger is subject to the
separate approvals of the stockholders of AT&T and TCI, receipt of all
necessary governmental consents and approvals and other conditions to closing
set forth in the AT&T Agreement. Accordingly, there can be no assurance that
the AT&T Merger will be consummated. See "THE AT&T MERGER AND THE
LIBERTY/VENTURES COMBINATION."
COMPARATIVE MARKET PRICE DATA
The LMG Series A Stock and the TINTA Series A Stock trade on the NASDAQ/NM
under the symbols "LBTYA" and "TINTA," respectively. All of the TINTA Series B
Stock is owned by TCI and is not publicly
6
<PAGE>
traded. Effective January 13, 1997, TCI issued a stock dividend to holders of
LMG Stock, consisting of one share of LMG Series A Stock for every two shares
of LMG Series A Stock owned and one share of LMG
Series A Stock for every two shares of LMG Series B Stock owned (the "1997 LMG
Stock Dividend"). Effective February 6, 1998, TCI issued a stock dividend to
holders of LMG Stock consisting of one share of LMG Series A Stock for every
two shares of LMG Series A Stock owned and one share of LMG Series B Stock for
every two shares of LMG Series B Stock owned (the "1998 LMG Stock Dividend"
and, together with the 1997 LMG Stock Dividend, the "LMG Stock Dividends").
Sales prices of the LMG Series A Stock have been adjusted to give effect to the
LMG Stock Dividends. The following table sets forth the range of high and low
sale prices in United States dollars as furnished by the NASDAQ/NM for the
periods indicated for the LMG Series A Stock and the TINTA Series A Stock. The
prices have been rounded up to the nearest eighth and do not include retail
markups, markdowns or commissions.
<TABLE>
<CAPTION>
LMG TINTA
SERIES A STOCK SERIES A STOCK
--------------- ---------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
First Quarter................................. 13 11 1/2 24 3/4 19 1/2
Second Quarter................................ 13 7/8 11 1/2 22 1/4 16 1/2
Third Quarter................................. 13 1/8 9 1/4 18 1/8 15
Fourth Quarter................................ 13 1/4 9 7/8 16 3/4 12 1/2
Year ended December 31, 1997
First Quarter................................. 15 7/8 12 16 1/8 12 5/8
Second Quarter................................ 18 12 1/2 17 10 5/8
Third Quarter................................. 20 1/8 15 7/8 17 1/2 14
Fourth Quarter................................ 24 5/8 19 5/8 18 7/8 15 3/8
Year ended December 31, 1998
First Quarter................................. 35 22 1/8 21 1/4 16 1/4
Second Quarter................................ 40 1/8 30 3/8 20 3/4 15 7/8
Third Quarter................................. 44 31 3/4 25 3/4 19 1/8
Fourth Quarter (through October 13, 1998)..... 36 5/8 31 1/2 21 1/8 19
</TABLE>
On July 10, 1998, the last full trading day prior to the public announcement
that TCI had made a merger proposal to TINTA, the last reported sale prices on
the NASDAQ/NM for shares of LMG Series A Stock and TINTA Series A Stock were
$41 5/8 and $21 7/8 per share, respectively. On October 13, 1998, the last full
trading day before the date of this Proxy Statement/Prospectus, the last
reported sale prices on the NASDAQ/NM for shares of LMG Series A Stock and
TINTA Series A Stock were $35 and $20 1/4 per share, respectively. The
foregoing prices have been rounded up to the nearest eighth.
DIVIDENDS
TCI. TCI and its predecessors have never paid any cash dividends with respect
to its common stock. TCI anticipates that no cash dividends will be paid on the
LMG Series A Stock for the foreseeable future. Payment of cash dividends on the
LMG Series A Stock, if any, in the future will be determined by the Board of
Directors of TCI (the "TCI Board") in light of the financial condition, results
of operations and business requirements of TCI, taken as a whole, and subject
to the provisions described under "DESCRIPTION OF TCI CAPITAL STOCK--Common
Stock--Dividends." As a holding company, TCI's ability to pay cash dividends is
dependent on its ability to receive cash dividends and advances from its
subsidiaries. Certain loan agreements to which certain subsidiaries of TCI are
parties or are subject contain provisions that limit the amount of dividends,
other than stock dividends, that such companies may pay. Future loan agreements
may contain similar restrictions. Payment of dividends by TCI is also subject
to the terms of any series of TCI preferred stock. See "DESCRIPTION OF TCI
CAPITAL STOCK--Common Stock--Dividends."
7
<PAGE>
TINTA. TINTA has never paid any cash dividends with respect to the TINTA
Common Stock and, pursuant to the Merger Agreement, has agreed not to pay any
dividends on the TINTA Common Stock prior to the Effective Time of the Merger.
TINTA is a holding company and its ability to obtain funds for the payment of
cash dividends from its subsidiaries and affiliates is severely limited. In
addition, TINTA is prohibited by the terms of the Credit Facility from paying
cash dividends on its capital stock. See "CERTAIN TRANSACTIONS BETWEEN TCI AND
TINTA--Transactions with TCI and Others--Credit Facility."
CERTAIN COMPARATIVE PER SHARE DATA
The following table sets forth certain historical comparative data related to
book value and earnings (loss) per common share on a historical basis for the
Liberty Media Group and TINTA, on a pro forma basis for the Liberty Media Group
and on a pro forma equivalent basis for TINTA. The Liberty Media Group pro
forma book value per share information gives effect to the Merger as if it had
occurred on June 30, 1998. The Liberty Media Group pro forma earnings per share
information gives effect to the Merger as if it had occurred on January 1,
1997. The following information should be read in conjunction with the
consolidated historical financial statements and notes thereto of TCI and
TINTA, which are incorporated by reference into this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The following information also should be read in conjunction with the
description of TCI's common stock set forth under "DESCRIPTION OF TCI CAPITAL
STOCK--Common Stock." Capitalized terms used below that have not previously
been defined have the meanings specified under "DESCRIPTION OF TCI CAPITAL
STOCK--Common Stock." Neither TCI nor TINTA paid any cash dividends on its
common stock during the six months ended June 30, 1998 or the year ended
December 31, 1997. See "--Dividends."
<TABLE>
<CAPTION>
TINTA
Liberty Media Group TINTA Liberty Media Group Pro Forma
Historical Historical Pro Forma Equivalent(f)
------------------- ---------- ------------------- -------------
<S> <C> <C> <C> <C>
Book value per common
share
June 30, 1998......... $ 11.49 8.19 12.33 (a) 7.15
Basic earnings (loss)
attributable to common
stockholders
per common and common
equivalent share:
Six months ended June
30, 1998............. $ 0.67 (0.71) 0.61 (b) 0.35
Year ended December
31, 1997............. $ 0.34 (1.04) 0.26 (c) 0.15
Diluted earnings (loss)
attributable to common
stockholders per
common and common
equivalent share:
Six months ended June
30, 1998............. $ 0.61 (0.71) 0.55 (d) 0.32
Year ended December
31, 1997............. $ 0.31 (1.04) 0.24 (e) 0.14
</TABLE>
- --------
(a) The computations of the pro forma book value per share of the LMG Stock is
based upon 368 million shares of LMG Stock that would have been outstanding
on June 30, 1998 if the Merger had occurred on such date, and upon the
attribution of TCI's net assets as of June 30, 1998 to each of the Liberty
Media Group, the TCI Group and the TCI Ventures Group. Shares of LMG Stock,
TCI Group Stock and TCIVG Stock represent ownership interests in TCI and
the attributed net assets of the Liberty Media Group, the TCI Group and the
TCI Ventures Group are not necessarily indicative of the allocation of any
proceeds remaining upon any liquidation of TCI. In this regard, any such
liquidation proceeds remaining for distribution to holders of LMG Stock,
TCI Group Stock and TCIVG Stock would be allocated based upon the
respective aggregate market capitalization of the outstanding LMG Stock,
TCI Group Stock and TCIVG Stock.
(b) The pro forma basic earnings attributable to common stockholders per common
and common equivalent share for the six months ended June 30, 1998 is based
upon 366 million weighted average shares. Such amount was calculated
utilizing 356 million weighted average shares (as disclosed in TCI's
historical financial statements) increased by an estimated 10 million
shares to be issued upon consummation of the Merger.
(c) The pro forma basic earnings attributable to common stockholders per common
and common equivalent share for the year ended December 31, 1997 is based
upon 376 million weighted average shares. Such amount was calculated
utilizing 366 million weighted average shares (as disclosed in TCI's
historical financial statements) increased by an estimated 10 million
shares to be issued upon consummation of the Merger.
(d) The pro forma diluted earnings attributable to common stockholders per
common and common equivalent share for the six months ended June 30, 1998
is based upon 401 million diluted weighted average shares. Such amount was
calculated utilizing 391 million diluted weighted average shares (as
disclosed in TCI's historical financial statements) increased by an
estimated 10 million shares to be issued upon consummation of the Merger.
8
<PAGE>
(e) The pro forma diluted earnings attributable to common stockholders per
common and common equivalent share for the year ended December 31, 1997 is
based upon 413 million diluted weighted average shares. Such amount was
calculated utilizing 403 million diluted weighted average shares (as
disclosed in TCI's historical financial statements) increased by an
estimated 10 million shares to be issued upon consummation of the Merger.
(f) The indicated TINTA equivalents are determined by multiplying the pro forma
Liberty Media Group amounts by the Exchange Ratio of 0.58 of a share of LMG
Series A Stock for each share of TINTA Common Stock. As described under
"THE MERGER AGREEMENT--Consideration to be Received in the Merger," if the
product of 0.58 and the LMG Market Price on the Closing Date is less than
$22.00, TCI must either (i) increase the exchange ratio to equal the
quotient (rounded upwards, if necessary, to the nearest one one-thousandth)
obtained by dividing $22.00 by such LMG Market Price or (ii) terminate the
Merger Agreement. The TINTA pro forma equivalent information does not give
effect to any such potential adjustment to the Exchange Ratio.
SELECTED HISTORICAL FINANCIAL DATA
TCI. The following table sets forth selected historical financial data for
TCI and subsidiaries as of June 30, 1998 and as of December 31 of each of the
years in the five-year period ended December 31, 1997, and for the six-month
periods ended June 30, 1998 and 1997, and for each of the years in the five-
year period ended December 31, 1997. The data set forth in this table is
qualified in its entirety by, and should be read in conjunction with, the
consolidated financial statements and the notes thereto of TCI incorporated by
reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The
following information also should be read in conjunction with the description
of the TCI Common Stock set forth under "DESCRIPTION OF TCI CAPITAL STOCK--
Common Stock." Capitalized terms used below that have not been previously
defined have the meanings specified under "DESCRIPTION OF TCI CAPITAL STOCK--
Common Stock."
9
<PAGE>
TELE-COMMUNICATIONS, INC.
(In millions, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------ --------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OPERATING
DATA(D):
Revenue................. $ 3,685 3,703 7,570 8,022 6,506 4,682 3,977
Operating income........ $ 34 602 685 632 542 788 916
Earnings (loss) from
continuing operations.. $ 25 (212) (626) 292 (183) 91 (13)
Net earnings (loss)
attributable to common
stockholders:
TCI Class A and Class B
common stock.......... -- -- -- -- (78)(a) 83 (15)
TCI Group Stock........ $ 83 (255) (537) (799) (112)(b) -- --
LMG Stock.............. 238 22 125 1,056 (27)(b) -- --
TCIVG Stock............ (309) -- (256)(c) -- -- -- --
-------- ------- ----- ----- ----- ----- -----
$ 12 (233) (668) 257 (217) 83 (15)
======== ======= ===== ===== ===== ===== =====
Basic earnings (loss)
from continuing
operations attributable
to common stockholders
per common share:
TCI Class A and Class B
common stock.......... -- -- -- -- (.12)(a) .15 (.03)
TCI Group Stock........ $ .16 (.38) (.85) (1.20) (.17)(b) -- --
LMG Stock.............. $ .67 .06 .34 2.82 (.07)(b) -- --
TCIVG Stock............ $ (.73) -- (.62)(c) -- -- -- --
Diluted earnings (loss)
attributable to common
stockholders per common
and potential common
share:
TCI Class A and Class B
common stock.......... -- -- -- -- (.12)(a) .15 (.03)
TCI Group Stock........ $ .15 (.38) (.85) (1.20) (.17)(b) -- --
LMG Stock.............. $ .61 .05 .31 2.58 (.07)(b) -- --
TCIVG Stock............ $ (.73) -- (.62)(c) -- -- -- --
Weighted average common
shares outstanding:
TCI Class A and Class B
common stock.......... -- -- -- -- 648 (a) 541 433
TCI Group Stock........ 520 680 632 665 656 (b) -- --
LMG Stock.............. 356 374 366 374 369 (b) -- --
TCIVG Stock............ 421 -- 410 (c) -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
-------- -----------------------------------------
1998 1997 1996 1995 1994 1993
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET
DATA:
Property and equipment,
net...................... $ 6,876 7,679 7,528 7,409 5,876 4,935
Franchise costs, net...... $13,438 15,147 15,436 12,230 9,444 9,197
Total assets.............. $33,277 32,323 30,169 25,429 19,148 16,351
Debt...................... $14,422 15,250 14,926 13,211 11,162 9,900
Stockholders' equity...... $ 5,818 4,441 4,178 4,461 2,578 2,010
Shares of common stock
outstanding (net of
shares held by
subsidiaries):
TCI Class A and Class B
common stock............ -- -- -- -- 576 450
TCI Group Stock.......... 523 507 664 657 -- --
LMG Stock................ 358 345 374 369 -- --
TCIVG Stock.............. 422 409 -- -- -- --
Book value (deficit) per
common share:
TCI Class A and Class B
common stock............ -- -- -- -- 4.48 4.47
TCI Group Stock.......... $ (.89) (1.58) (1.15) .71 -- --
LMG Stock................ $ 11.49 8.46 6.41 4.37 -- --
TCIVG Stock.............. $ 5.12 5.54 -- -- -- --
</TABLE>
- --------
(a) From January 1, 1995 through August 10, 1995, the date on which TCI
distributed to its stockholders of record on August 4, 1995, 2.25 shares of
LMG Series A Stock for each share of TCI Group Series A Stock held of
record and 2.25 shares of LMG Series B Stock for each share of TCI Group
Series B Stock held of record (the "LMG Distribution").
10
<PAGE>
(b) From the date of the LMG Distribution through December 31, 1995.
(c) From the date of the Exchange Offers through December 31, 1997.
(d) On March 4, 1998, TCI contributed to Cablevision Systems Corporation, a
Delaware corporation ("CSC"), certain of its cable television systems
serving approximately 830,000 customers in exchange for approximately 24.5
million newly issued CSC Class A common shares (as adjusted for a stock
dividend) (the "CSC Transaction"). CSC also assumed and repaid
approximately $574 million of debt owed by TCI to external parties and $95
million of debt owed to TCI. TCI has also entered into letters of intent
with CSC which provide for TCI to acquire a cable system in Michigan and an
additional 3% of CSC's Class A common shares and for CSC to (i) acquire
cable systems serving approximately 250,000 customers in Connecticut and
(ii) assume $110 million of TCI's debt. The ability of TCI to sell or
increase its investment in CSC is subject to certain restrictions and
limitations set forth in a stockholders agreement with CSC. In addition,
during the first six months of 1998, TCI completed three transactions
whereby TCI contributed cable television systems serving in the aggregate
approximately 670,000 customers to three separate joint ventures
(collectively, the "1998 Joint Ventures") in exchange for non-controlling
ownership interests in each of the 1998 Joint Ventures, and the assumption
and repayment by the 1998 Joint Ventures of debt owed by TCI to external
parties aggregating $323 million and intercompany debt owed to TCI
aggregating $833 million. In connection with such transactions, TCI has
agreed to take certain steps to support compliance by each of the 1998
Joint Ventures with their payment obligations under certain debt
instruments, up to an aggregate contingent commitment of $784 million. The
CSC Transaction and the formation of the 1998 Joint Ventures are
collectively referred to herein as the "1998 Contribution Transactions."
Including the 1998 Contribution Transactions, TCI, as of July 31, 1998,
has, since January 1, 1997, contributed, or signed agreements or letters of
intent to contribute within the next twelve months, certain cable
television systems (the "Contributed Cable Systems") serving approximately
3.9 million basic customers to joint ventures in which TCI will retain non-
controlling ownership interests (the "Contribution Transactions").
Following the completion of the Contribution Transactions, TCI will no
longer consolidate the Contributed Cable Systems. Accordingly, it is
anticipated that the completion of the Contribution Transactions, as
currently contemplated, will result in an aggregate estimated reduction
(based on actual amounts with respect to the 1998 Contribution Transactions
and currently contemplated amounts with respect to the pending Contribution
Transactions) to TCI's debt of $4.8 billion and aggregate estimated
reductions (based on 1997 amounts) to TCI's annual revenue and annual
operating income before depreciation, amortization and other non-cash items
and stock compensation of $1.8 billion and $815 million, respectively. No
assurance can be given that any of the pending Contribution Transactions
will be consummated.
Liberty Media Group. The following table sets forth selected historical
financial data for the Liberty Media Group as of June 30, 1998 and as of
December 31 of each of the years in the three-year period ended December 31,
1997, and for the six-month periods ended June 30, 1998 and 1997, and for each
of the years in the three-year period ended December 31, 1997. The data set
forth in this table is qualified in its entirety by, and should be read in
conjunction with, the combined financial statements and the notes thereto of
the Liberty Media Group incorporated by reference herein. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
11
<PAGE>
LIBERTY MEDIA GROUP
(In millions, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------------------------------------
1998 1997 1997 1996 1995
--------- --------------- -------- --------
<S> <C> <C> <C> <C> <C>
SUMMARY STATEMENT OF OPERATIONS
DATA:
Revenue......................... $ 322 119 374 1,339 1,441
Cost of sales, operating,
selling, general and
administrative expenses
and stock compensation........ (416) (101) (473) (1,192) (1,437)
Depreciation and amortization... (16) (2) (12) (61) (98)
--------- ------ ------ -------- --------
Operating income (loss)......... (110) 16 (111) 86 (111)
Share of earnings (losses) of
affiliates, net................ (71) 13 (12) 8 (15)
Gain (loss) on dispositions..... 515 1 304 1,537 (2)
--------- ------ ------ -------- --------
Net earnings (loss)........... $ 239 22 125 1,056 (56)
========= ====== ====== ======== ========
Basic earnings (loss) attribut-
able to common stockholders
per common share.............. $ .67 .06 .34 2.82 (.07)
========= ====== ====== ======== ========
Diluted earnings (loss) attrib-
utable to common stockholders
per common and potential com-
mon share..................... $ .61 .05 .31 2.58 (.07)
========= ====== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
--------- -----------------
1998 1997 1996 1995
--------- ----- ----- -----
<S> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Investments in affiliates, accounted for under the
equity method, and related receivables........... $ 1,258 538 545 299
Investment in Time Warner, Inc. .................. $ 4,875 3,538 2,017 --
Investment in Turner Broadcasting Systems, Inc. .. $ -- -- -- 945
Other investments, at cost, and related
receivables...................................... $ 401 402 82 111
Excess cost over acquired net assets, net......... $ 194 194 7 331
Total assets...................................... $ 7,135 5,028 3,059 2,518
Debt.............................................. $ 981 349 2 251
Minority interest in equity of attributed
subsidiaries..................................... $ 104 101 1 88
Combined equity................................... $ 4,111 2,933 2,397 1,613
</TABLE>
TINTA. The following table sets forth selected historical financial data for
TINTA and subsidiaries as of June 30, 1998 and as of December 31 of each of the
years in the five-year period ended December 31, 1997, and for the six-month
periods ended June 30, 1998 and 1997, and for each of the years in the five-
year period ended December 31, 1997. The data set forth in this table is
qualified in its entirety by, and should be read in conjunction with, the
consolidated financial statements and the notes thereto of TINTA incorporated
by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
12
<PAGE>
TELE-COMMUNICATIONS INTERNATIONAL, INC.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Fiscal Year Ended December 31,
------------------- -----------------------------------------------
1998 1997 1997(a) 1996(b) 1995(c) 1994(d) 1993
--------- -------- -------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY STATEMENT OF
OPERATIONS DATA:
Revenue................. $ 25,672 134,156 219,834 314,560 190,533 43,982 20,616
Operating, selling,
general and
administrative
expenses............... (30,811) (86,199) (161,477) (279,170) (165,388) (62,196) (26,943)
Depreciation and
amortization........... (4,790) (32,136) (53,481) (58,747) (36,360) (8,590) (7,375)
--------- -------- -------- -------- --------- ------- -------
Operating income
(loss)................. (9,929) 15,821 4,876 (23,357) (11,215) (26,804) (13,702)
Share of losses of
Telewest(e)............ (63,717) (73,458) (145,264) (109,357) (70,274) (42,520) (29,750)
Share of losses of
Cablevision............ (7,591) -- (3,377) -- -- -- --
Share of losses of other
affiliates............. (45,406) (48,788) (99,729) (70,054) (53,674) (35,571) (42,010)
Interest expense........ (11,263) (19,074) (33,051) (35,153) (20,870) (651) --
Gain on issuance of
stock by Telewest(g)... -- -- -- 258 164,900 161,481 --
Gain on disposition of
assets................. 9,165 -- 109,463 12,284 51,139 -- --
Other, net.............. 3,705 5,224 1,779 49,348 1,737 10,285 2,186
--------- -------- -------- -------- --------- ------- -------
Earnings (loss) before
income taxes........... (125,036) (120,275) (165,303) (176,031) 61,743 66,220 (83,276)
Income tax benefit
(expense).............. 43,646 54,778 44,954 45,611 (31,702) (32,534) 20,101
--------- -------- -------- -------- --------- ------- -------
Net earnings (loss).... $ (81,390) (65,497) (120,349) (130,420) 30,041 33,686 (63,175)
========= ======== ======== ======== ========= ======= =======
Basic and diluted
earnings (loss)
attributable to
common stockholders:
Pro forma(h)........... $ 0.28 0.35
========= =======
Historical............. $( .71) (.56) (1.04) (1.10)
========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
June 30, Fiscal Year Ended December 31,
---------- ---------------------------------------------
1998 1997(a) 1996(b) 1995(c) 1994(d) 1993
---------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET
DATA:
Cash and receivables.... $ 2,356 5,065 82,377 152,175 25,465 7,697
Investment in Telewest.. 263,381 324,417 488,495 550,216 454,614 229,130
Investment in
Cablevision............ 231,957 239,379 -- -- -- --
Investment in other
affiliates accounted
for under the
equity method, and
related receivables.... 597,298 602,325 421,853 354,133 128,700 46,111
Deferred income tax
asset.................. 94,494 54,547 -- -- 193 --
Property and equipment,
net of accumulated
depreciation........... 58,781 57,521 202,527 112,989 47,737 39,515
Franchise costs and
other assets, net of
amortization........... 128,023 110,746 794,049 681,198 116,530 57,665
---------- --------- --------- --------- ------- -------
Total assets........... $1,376,290 1,394,000 1,989,301 1,850,711 773,239 380,118
========== ========= ========= ========= ======= =======
Payables, accruals and
other liabilities...... $ 41,882 39,647 128,338 72,284 16,503 10,338
Debt.................... 390,023 390,042 511,128 192,718 15,842 --
MultiThematiques
obligation(f).......... -- -- 47,902 65,876 -- --
Deferred income tax
liability.............. -- -- 193,748 186,126 -- 4,034
---------- --------- --------- --------- ------- -------
Total liabilities...... 431,905 429,689 881,116 517,004 32,345 14,372
Minority interests in
equity of
subsidiaries........... -- -- 142,187 122,358 24,451 51
Equity.................. 944,385 964,311 965,998 1,211,349 716,443 365,695
---------- --------- --------- --------- ------- -------
Total liabilities and
equity................ $1,376,290 1,394,000 1,989,301 1,850,711 773,239 380,118
========== ========= ========= ========= ======= =======
</TABLE>
- --------
(a) The summary statement of operations for the year ended December 31, 1997
and the summary balance sheet data as of December 31, 1997 reflect the
effects of the deconsolidation of (i) Flextech p.l.c. ("Flextech") in
January 1997 as a result of TINTA's decreased voting interest in Flextech
and (ii) Cablevision S.A. ("Cablevision") in October 1997 as a result of
the sale of a portion of TINTA's interest in Cablevision.
13
<PAGE>
(b) The summary statement of operations for the year ended December 31, 1996
and the summary balance sheet data as of December 31, 1996 reflect the
effects of (i) Flextech's acquisition in April 1996 of a controlling
interest in HSN Direct International Limited, a 100% interest in TVS
Television Limited and the 61% interest in Maidstone Broadcasting, which
Flextech did not already own and (ii) Cablevision's acquisition in October
1996 of 99.99% of Oeste Cable Color S.A.
(c) The summary statement of operations for the year ended December 31, 1995
and the summary balance sheet data as of December 31, 1995 reflect the
effects of TINTA's April 25, 1995 acquisition of a 51% ownership interest
in Cablevision.
(d) The summary statement of operations for the year ended December 31, 1994
and the summary balance sheet data as of December 31, 1994 reflect the
effects of the February 2, 1994 combination of certain of TINTA's United
Kingdom programming assets with Flextech.
(e) In connection with the November 1994 initial public offering (the "Old
Telewest IPO") of the predecessor of Telewest Communications plc ("Old
Telewest"), TINTA and certain affiliates of US WEST, Inc. contributed their
respective 50% interests in the TCI/US WEST Cable Communications Group (the
"Telewest UK Joint Venture") to Old Telewest. As a result of the Old
Telewest IPO, TINTA's 50% ownership in the Telewest UK Joint Venture was
converted into a 37.8% interest in Old Telewest. On October 3, 1995, Old
Telewest consummated a business combination (the "SBCC Transaction") with
SBC CableComms (UK) ("SBCC") pursuant to which a new entity, Telewest
Communications plc ("Telewest"), acquired all of the outstanding share
capital of Old Telewest and SBCC. The SBCC Transaction effectively resulted
in the conversion of TINTA's 37.8% indirect ownership interest in Old
Telewest into a 26.8% indirect ownership interest in Telewest. All
references herein to "Telewest" include Telewest and its predecessor
entities (Old Telewest and the Telewest Joint Venture), unless the context
indicates otherwise.
(f) Represents the estimated net present value of TINTA's obligation to
contribute an additional 264 million French francs to MultiThematiques S.A.
Such obligation was completely satisfied during 1997.
(g) In connection with the dilution of TINTA's ownership interest in Telewest
that occurred in 1996, 1995 and 1994, TINTA recognized non-cash gains of
$258,000, $164.9 million and $161.5 million (before deducting the related
tax expense of $90,000, $57.7 million and $56.5 million, respectively). The
1995 gain was recognized in connection with the SBCC Transaction, and the
1994 gain was recognized in connection with the Old Telewest IPO.
(h) On July 18, 1995, TINTA completed its initial public offering, in which
20,000,000 shares of TINTA Series A Stock were sold to the public for net
proceeds of approximately $301.3 million. In connection with its initial
public offering, TINTA amended and restated its certificate of
incorporation on July 12, 1995 to, among other things, (i) increase its
authorized capital stock and (ii) divide its common stock into two series.
At the same time, TINTA effected a reclassification pursuant to which the
1,000 shares of TINTA common stock held by TCI were reclassified and
changed into 85,800,000 shares of TINTA Series A Stock and 11,700,000
shares of TINTA Series B Stock. The pro forma earnings (loss) per common
share calculations give effect to such reclassification as if it had
occurred on January 1, 1994, and accordingly, assume 106.8 million and 97.5
million weighted average shares of TINTA Common Stock were outstanding
during the years ended December 31, 1995 and 1994, respectively.
14
<PAGE>
RISK FACTORS
The following factors, among others, should be considered carefully by TINTA
stockholders in considering whether to vote in favor of the Merger. Certain
capitalized terms used below that have not previously been defined have the
meanings specified under "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock."
STOCKHOLDERS OF ONE COMPANY; FINANCIAL EFFECTS ON ONE GROUP COULD AFFECT OTHER
GROUPS
TCI holds title to all of its assets and is responsible for all of its
liabilities, and the holders of TCI Common Stock have no specific claim
against the assets attributed for financial statement presentation purposes to
the Group whose performance is associated with the particular series of TCI
Common Stock they hold. Holders of LMG Stock are common stockholders of TCI
and are subject to risks associated with an investment in TCI and all of its
businesses, assets and liabilities.
The financial results of one Group that affect TCI's consolidated results of
operations or financial condition could affect the combined results of
operations and financial condition of the other Groups. Likewise, events
affecting one Group could affect the market price of the LMG Stock, the TCI
Group Stock and the TCIVG Stock. In addition, any net losses of any Group,
dividends or distributions on, or repurchases of, the LMG Stock, the TCI Group
Stock or the TCIVG Stock, and dividends on, or certain repurchases of, TCI
Preferred Stock, will reduce funds of TCI legally available for the payment of
dividends on the LMG Stock, the TCI Group Stock and the TCIVG Stock. The
combined financial statements of the LMG Stock, the TCI Group Stock and the
TCIVG Stock should be read in conjunction with the consolidated financial
statements of TCI. The combined financial statements of each Group principally
reflect the combined financial position, results of operations and cash flows
of the businesses and investments included therein. However, each Group's
financial information could also include allocated portions of the individual
assets and liabilities that are not separately identified with the operations
of a specific Group.
LIMITED SEPARATE STOCKHOLDER RIGHTS; EFFECTS ON VOTING POWER
Holders of LMG Stock do not have any legal rights specifically related to
the assets attributed to the Liberty Media Group or have any right to vote on
matters as a separate class, other than (i) as set forth in the provisions
relating to dividend and liquidation rights and requirements for mandatory
dividend, redemption or conversion of LMG Stock upon the disposition of all or
substantially all of the properties and assets of the Liberty Media Group as
described under "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--Conversion
and Redemption" and (ii) separate voting rights in limited circumstances as
required by the DGCL. Separate meetings for the holders of LMG Stock are not
held.
Holders of LMG Stock, TCI Group Stock and TCIVG Stock and any TCI Preferred
Stock having general voting rights, vote as one class on all matters coming
before any meeting of stockholders and do not have any separate class voting
rights except in limited circumstances as required by the DGCL. Under the
DGCL, the holders of the outstanding shares of a class are entitled to vote as
a class upon a proposed amendment to a corporation's certificate of
incorporation, whether or not entitled to vote on such amendment by the
certificate of incorporation, if the amendment would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of the shares of such class, or alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely. For this purpose, if a proposed amendment would alter or change the
powers, preferences or special rights of one or more series of any 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 as a separate class on the amendment. Accordingly, a proposed amendment
the adverse effect of which on the powers, preferences or special rights of
any series of TCI Common Stock does not differ from its adverse effect on the
powers, preferences or special rights of any other series of TCI Common Stock
would not entitle such series to vote as a class separately from the other
series of TCI Common Stock.
15
<PAGE>
Certain matters on which holders of LMG Stock, TCI Group Stock and TCIVG
Stock might vote together as a single class could involve a divergence or the
appearance of a divergence of interests among the holders of such series of
TCI Common Stock. For example, TCI's Restated Certificate of Incorporation, as
amended (the "TCI Charter"), does not require that a merger or consolidation
of TCI requiring the approval of TCI's stockholders be approved by a separate
vote of holders of any series of TCI Common Stock, and Delaware law requires
such approval only in certain circumstances. As a result, if holders of any
one or more series of TCI Common Stock that possess the requisite voting power
vote to approve the merger or consolidation, then the merger or consolidation
could be consummated even if the holders of a majority of some other series of
TCI Common Stock vote against the merger or consolidation. See "--Potential
Divergence of Interests; No Specific Procedures for Resolution." Immediately
following the issuance of shares of LMG Series A Stock in the Merger, the
combined voting power of the TCI Group Series A Stock and TCI Group Series B
Stock would represent a majority of the voting power of all classes and series
entitled to vote in the election of directors.
The LMG Series A Stock has one vote per share and the LMG Series B Stock has
ten votes per share. The TCI Group Series A Stock and TCIVG Series A Stock
have one vote per share and the TCI Group Series B Stock and TCIVG Series B
Stock have ten votes per share. See "DESCRIPTION OF TCI CAPITAL STOCK--Common
Stock--Voting Rights."
POTENTIAL DIVERGENCE OF INTERESTS; NO SPECIFIC PROCEDURES FOR RESOLUTION
The existence of separate series of TCI Common Stock may give rise to
occasions when the interests of the holders of LMG Stock and the holders of
either TCI Group Stock or TCIVG Stock, or both, may diverge or appear to
diverge. As further discussed below, examples include, among others,
determinations by the TCI Board to (i) convert each outstanding share of LMG
Stock into shares of TCI Group Stock, (ii) approve the disposition of all or
substantially all of the properties and assets of the Liberty Media Group,
(iii) allocate consideration to be received by holders of TCI Common Stock in
connection with a merger or consolidation involving TCI among holders of
different series of TCI Common Stock, (iv) allocate resources and financial
support to or pursue business opportunities or operational strategies through
one Group instead of one or more of the other Groups, (v) if and to the extent
the TCI Group has an Inter-Group Interest in the Liberty Media Group, allocate
the proceeds of issuances of LMG Stock either to the TCI Group in respect of a
reduction in its Inter-Group Interest in the Liberty Media Group or to the
equity of the Liberty Media Group, (vi) pay or omit dividends on the LMG
Stock, the TCI Group Common Stock or the TCIVG Stock or (vii) approve
transactions involving the transfer of funds or assets from one Group to one
or more of the other Groups or make other operational or financial decisions
with respect to one Group that could be considered to be detrimental to one or
more of the other Groups. Except for certain management and allocation
policies adopted by the TCI Board with respect to cash management, corporate
expenses, allocation of assets and liabilities and inter-Group transactions
(any and all of which could be modified or rescinded by the TCI Board in its
sole discretion and without approval of stockholders), no specific procedures
have been adopted for consideration of matters involving a divergence of
interests among the holders of LMG Stock, TCI Group Stock and TCIVG Stock.
Rather than develop additional specific procedures in advance, the TCI Board
has determined to exercise its judgment from time to time, depending on the
circumstances, as to how best to obtain information regarding the divergence
(or potential divergence) of interests, under what circumstances to seek the
assistance of outside advisers, whether a committee of the TCI Board should be
appointed to address the matter and how to assess which available alternative
is in the best interests of TCI and all of its stockholders. The TCI Board
believes the advantages of retaining flexibility in determining how best to
fulfill its responsibilities in such circumstances as they may arise outweigh
any perceived advantages from adopting additional specific procedures in
advance.
Optional Conversion of LMG Stock into TCI Group Stock. The TCI Board may
determine to convert each outstanding share of LMG Series A Stock into shares
of TCI Group Series A Stock and each outstanding share of LMG Series B Stock
into shares of TCI Group Series B Stock, in each case determined based upon
the ratio of the value (as determined on the basis of appraisals performed by
investment banking firms) of one share of LMG Stock to the average Market
Value over a 20-Trading Day period prior to the date such appraisal process is
initiated of one share of TCI Group Series A Stock. Such a conversion could be
effected at any time, including
16
<PAGE>
at a time when the value of one share of LMG Stock determined by appraisal
differs significantly from the market value of the LMG Stock reflected in the
trading markets, or at a time when the Market Value of the TCI Group Stock
used in the determination of the conversion ratio reflects what might be
considered an overvaluation or undervaluation. Basing the conversion ratio on
an appraised value determination for the LMG Stock and a trading market
valuation for the TCI Group Stock could result in the conversion ratio being
significantly different from that which would have resulted if the same
measure were used for the valuation of both the TCI Group Stock and the LMG
Stock. For example, a conversion could be considered dilutive of the interests
of the holders of the LMG Stock if the Market Value of the TCI Group Stock is
greater than the valuation of the TCI Group Stock that would have resulted if
a similar appraisal procedure to that used in the determination of the value
of the LMG Stock were used. Such a conversion would also have the effect of
precluding holders of LMG Stock from retaining their investment in a security
intended to reflect separately the businesses and assets attributed to the
Liberty Media Group.
Disposition of Group Assets. As long as the assets attributed to a Group
continue to represent less than substantially all of the properties and assets
of TCI, the TCI Board may approve sales and other dispositions of any amount
of the properties and assets attributed to such Group without stockholder
approval because, under the DGCL and the TCI Charter, stockholder approval is
required only for a sale or other disposition of all or substantially all of
the properties and assets of TCI as a whole. The TCI Charter, however,
contains provisions which, in the event of a Disposition of all or
substantially all of the properties and assets attributed to the Liberty Media
Group in one transaction or a series of related transactions, other than in
certain specified transactions, including a transaction in which TCI receives
primarily equity securities of an entity engaged or proposing to engage
primarily in a similar or complementary business, and other than in connection
with the disposition of all of the assets of TCI in its entirety, require TCI,
at its option, either to (i) distribute by dividend or redemption to the
holders of LMG Series A Stock and LMG Series B Stock an amount in cash and/or
securities or other property equal to their proportionate interest in the
Liberty Media Group Net Proceeds of such Disposition or (ii) convert
outstanding shares of LMG Series A Stock into a number (or fraction) of shares
of TCI Group Series A Stock and convert outstanding shares of LMG Series B
Stock into a number (or fraction) of shares of TCI Group Series B Stock, equal
in each case to 110% of the average daily ratio of the Market Value of a share
of LMG Series A Stock to the Market Value of a share of TCI Group Series A
Stock over a specified period following such Disposition. The provisions of
the TCI Charter do not require the TCI Board to select the option which would
result in the distribution with the highest value to the holders of the LMG
Stock or with the smallest effect on the TCI Group Stock. The TCI Charter does
not require TCI to take such actions upon sales or other dispositions of less
than substantially all of the properties and assets of the Liberty Media Group
or upon two or more unrelated sales or other dispositions which together
constitute the sale of substantially all of the properties and assets of the
Liberty Media Group. In addition, although the TCI Charter contains comparable
provisions relating to a disposition of all or substantially all of the
properties and assets of the TCI Ventures Group, the TCI Charter does not
contain comparable provisions relating to a disposition of all or
substantially all of the properties and assets of the TCI Group. See
"DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--Conversion and Redemption."
The appropriate disposition of proceeds in the latter case would be subject to
determination by the TCI Board in accordance with the TCI Charter, approved
allocation policies and the exercise of its fiduciary duties. See "--Fiduciary
Duties of the TCI Board Are to All TCI Stockholders Regardless of Class or
Series."
Allocation of Proceeds of Mergers or Consolidations. The TCI Charter does
not contain any provisions governing how consideration to be received by TCI's
stockholders in connection with a merger or consolidation involving TCI (in
which the TCI Common Stock is to be converted into other securities, cash or
other property) is to be allocated among holders of LMG Stock, TCI Group Stock
and TCIVG Stock. In any such merger or consolidation, the allocation of
consideration would be determined by the TCI Board. See "--Limited Separate
Stockholder Rights; Effects on Voting Power."
Allocation of Resources and Financial Support; Pursuit of Business
Opportunities or Operational Strategies. The TCI Board could from time to time
allocate resources and financial support to or pursue
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business opportunities or operational strategies through one Group instead of
the other Groups. The decision to allocate resources and financial support to
one Group may adversely affect the ability of the other Groups to obtain funds
sufficient to implement their business strategies.
Allocation of Proceeds Upon Issuance of LMG Stock. If and to the extent that
the TCI Group has an Inter-Group Interest in the Liberty Media Group at the
time of any sale by TCI of shares of LMG Stock, the TCI Board would determine
the allocation of the proceeds of such sale between the TCI Group and the
Liberty Media Group. In such case, the TCI Board could allocate up to 100% of
the net proceeds of such sale of LMG Stock to the TCI Group or to the Liberty
Media Group, and such net proceeds would be attributed entirely to and
reflected entirely on the combined financial statements of the Group to which
such proceeds were allocated. Any such allocation of net proceeds to the TCI
Group would reduce any then existing Inter-Group Interest in the Liberty Media
Group.
No Assurance of Payment of Dividends. TCI has never paid cash dividends on
the TCI Common Stock. The TCI Board does not currently intend to pay cash
dividends on the LMG Stock, the TCI Group Stock or the TCIVG Stock. Any
dividends on the LMG Stock which may be declared by the TCI Board will be
payable out of the lesser of (i) the funds of TCI legally available for such
purpose, which are determined on the basis of TCI in its entirety, and (ii)
the Liberty Media Group Available Dividend Amount. Such dividends are further
subject to the prior payment of dividends on outstanding shares of any class
or series of capital stock of TCI with preferential dividend provisions. Any
net losses of TCI (without regard to whether such losses arose from any
specific Group), any dividends or distributions on, or repurchases of, the TCI
Group Stock or the TCIVG Stock, and dividends on, and certain repurchases of,
TCI Preferred Stock, will reduce the funds of TCI legally available for
payment of dividends on the LMG Stock. Subject to limitations of the DGCL and
the TCI Charter, the TCI Board may declare and pay dividends on the LMG Stock,
the TCI Group Stock and the TCIVG Stock in equal or unequal amounts, or may
decide not to declare and pay such dividends, notwithstanding the relationship
among the Liberty Media Group Available Dividend Amount, the TCI Group
Available Dividend Amount and the TCI Ventures Group Available Dividend
Amount, the respective amounts of prior dividends paid on, or liquidation
rights of, the LMG Stock, the TCI Group Stock or the TCIVG Stock or any other
factor. See "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--Dividends."
Operational and Financial Decisions. The TCI Board could from time to time
make operational and financial decisions that affect the Groups
disproportionately, such as transfers of funds or assets among the Groups, the
allocation of funds for capital expenditures, the determination to expand into
new areas and the allocation of resources and personnel that may be suitable
for more than one Group. The decision to provide funds to one Group may
adversely affect the ability of the other Groups to obtain funds sufficient to
implement their business strategies. For further discussion of potential
divergence of interests arising from financial decisions, see "--Transfer of
Funds among Groups; Equity Contributions from the TCI Group."
FIDUCIARY DUTIES OF THE TCI BOARD ARE TO ALL TCI STOCKHOLDERS REGARDLESS OF
CLASS OR SERIES
Under Delaware law, the TCI Board has a duty to act with due care and in the
best interests of all TCI stockholders, including the holders of LMG Stock,
TCI Group Stock and TCIVG Stock. The existence of the LMG Stock, the TCI Group
Stock and the TCIVG Stock may give rise to occasions when the interests of the
holders of one or more series of TCI Common Stock and the holders of the other
series of TCI Common Stock may diverge or appear to diverge. See "--Potential
Divergence of Interests; No Specific Procedures for Resolution." The TCI Board
will address and resolve any issues involving a material divergence of
interests among the holders of the separate series of TCI Common Stock.
Although TCI is not aware of any precedent concerning the manner in which
principles of Delaware law would be applied in the context of a capital
structure involving multiple classes or series of capital stock the rights of
which include terms designed to reflect the separate performance of specified
businesses, principles of Delaware law provide that a board of directors must
act in accordance with its good faith business judgement of the corporation's
best interests, taking into consideration the interests of all stockholders
regardless of class or
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series. Under these principles of Delaware law and the "business judgment
rule," a good faith determination made by a disinterested and adequately
informed TCI Board with respect to any matter having a disparate impact upon
the holders of LMG Stock, the holders of TCI Group Stock and the holders of
TCIVG Stock would be a defense to any challenge to such determination made by
or on behalf of any of such Groups of holders. Nevertheless, a Delaware court
hearing a case involving such a challenge may decide to apply principles of
Delaware law other than those discussed above, or may fashion new principles
of Delaware law, in order to decide such a case, which would be a case of
first impression. There may arise circumstances involving a divergence of
interests in which the TCI Board is held to have properly discharged its
responsibilities to act with due care and in the best interests of TCI and all
of its stockholders, but in which holders of the LMG Stock, the TCI Group
Stock or the TCIVG Stock consider themselves to be disadvantaged relative to
the other series. In such a case, such holders would not have any other remedy
under Delaware law with respect to the circumstances giving rise to the
divergence of interests.
Disproportionate ownership interests of members of the TCI Board in the LMG
Stock, the TCI Group Stock and the TCIVG Stock or disparate values of the LMG
Stock, the TCI Group Stock and the TCIVG Stock could create or appear to
create potential conflicts of interest when directors are faced with decisions
that could have different implications for different series. See "--Potential
Divergence of Interests; No Specific Procedures for Resolution." Nevertheless,
TCI believes that a director would be able to discharge his or her fiduciary
responsibilities even if his or her interests in shares of LMG Stock, TCI
Group Stock and TCIVG Stock were disproportionate or had disparate values.
TRANSFER OF FUNDS AMONG GROUPS; EQUITY CONTRIBUTIONS FROM THE TCI GROUP
All debt incurred or preferred stock issued by TCI and its subsidiaries will
be (unless the TCI Board otherwise provides) specifically attributed to and
reflected on the combined financial statements of the Group that includes the
entity which incurred the debt or issued the preferred stock or, in case the
entity incurring the debt or issuing the preferred stock is Tele-
Communications, Inc., the TCI Group. The TCI Board could, however, determine
from time to time that debt incurred or preferred stock issued by entities
included in a Group should be specifically attributed to and reflected in the
combined financial statements of one of the other Groups to the extent that
the debt is incurred or the preferred stock is issued for the benefit of such
other Group.
To the extent cash needs of one Group exceed cash provided by such Group,
one of the other Groups may transfer funds to such Group. Such transfers of
funds among the Groups will be reflected as borrowings or, if determined by
the TCI Board, in the case of a transfer from the TCI Group to either the
Liberty Media Group or the TCI Ventures Group, reflected as the creation of
an, or an increase in any then existing, Inter-Group Interest of the TCI Group
in such Group or, in the case of a transfer from either the Liberty Media
Group or the TCI Ventures Group to the TCI Group, reflected as a reduction in
any then existing Inter-Group Interest of the TCI Group in such Group. There
are no specific criteria for determining when a transfer will be reflected as
a borrowing or as an increase or reduction in an Inter-Group Interest. The TCI
Board expects to make such determinations, either in specific instances or by
setting generally applicable policies from time to time, after consideration
of such factors as it deems relevant, including, without limitation, the needs
of TCI, the financing needs and objectives of the Groups, the investment
objectives of the Groups, the availability, cost and time associated with
alternative financing sources, prevailing interest rates and general economic
conditions.
Loans from one Group to another Group would bear interest at such rates and
have such repayment schedules and other terms as are established from time to
time by, or pursuant to procedures established by, the TCI Board. The TCI
Board expects to make such determinations, either in specific instances or by
setting generally applicable policies from time to time, after consideration
of such factors as it deems relevant, including, without limitation, the needs
of TCI, the use of proceeds by and creditworthiness of the recipient Group,
the capital expenditure plans and investment opportunities available to each
Group and the availability, cost and time associated with alternative
financing sources.
Although the creation of or any increase in an Inter-Group Interest of the
TCI Group in the Liberty Media Group resulting from an equity contribution by
the TCI Group to the Liberty Media Group or any decrease in
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such Inter-Group Interest resulting from a transfer of funds from the Liberty
Media Group to the TCI Group would be determined by reference to the Market
Value of the LMG Series A Stock as of the date of such transfer, such an
increase could occur at a time when such shares could be considered
undervalued and such a decrease could occur at a time when such shares could
be considered overvalued.
MANAGEMENT AND ALLOCATION POLICIES SUBJECT TO CHANGE
The TCI Board has adopted certain management and allocation policies with
respect to cash management, corporate expenses and inter-Group transactions,
any and all of which could be modified or rescinded by the TCI Board, in its
sole discretion, without the approval of stockholders. The TCI Board could
also adopt additional policies depending upon the circumstances. Any
determination to modify or rescind such policies, or to adopt additional
policies, including any such decision that could have disparate effects upon
holders of LMG Stock, TCI Group Stock or TCIVG Stock, would be made by the TCI
Board as set forth under "--Fiduciary Duties of the TCI Board Are to All TCI
Stockholders Regardless of Class or Series."
POTENTIAL CONVERSION OF LMG STOCK
Solely at TCI's option, all of the outstanding shares of LMG Stock may be
converted into TCI Group Stock upon the terms described under "DESCRIPTION OF
TCI CAPITAL STOCK--Common Stock--Conversion and Redemption." TCI cannot
predict the impact on the market prices of the LMG Stock or the TCI Group
Stock of its ability to effect any such conversion or the effect, if any, that
the exercise by TCI of this conversion right would have on the market price of
the LMG Stock or the TCI Group Stock prevailing at such time. See "--Potential
Divergence of Interests; No Specific Procedures for Resolution."
POTENTIAL EFFECTS OF POSSIBLE DISPOSITION OF ASSETS OF THE LIBERTY MEDIA GROUP
The terms of the LMG Stock provide that if TCI were to dispose of all or
substantially all of the properties and assets of the Liberty Media Group,
other than in a transaction in which TCI receives primarily equity securities
of an entity engaged or proposing to engage primarily in a similar or
complementary business and other than in connection with the disposition of
all of the assets of TCI, TCI would be required, at its option, either to (i)
distribute to holders of LMG Stock an amount equal to their proportionate
interest in the Liberty Media Group Net Proceeds of such Disposition, either
by special dividend or by redemption of all or part of the outstanding shares
of LMG Stock, or (ii) convert outstanding shares of LMG Stock into shares of
the corresponding series of TCI Group Stock at a conversion ratio based on
110% of the average daily ratio of the Market Value of a share of LMG Series A
Stock to the Market Value of a share of TCI Group Series A Stock over a
specified period following such Disposition. "Liberty Media Group Net
Proceeds" generally means the proceeds of such Disposition after payment of or
provision for certain specified costs, including taxes to be paid by TCI in
respect of the Disposition or such dividend or redemption, transaction costs
and liabilities and other obligations (contingent or otherwise, including
obligations in respect of TCI Preferred Stock) attributed to the Liberty Media
Group. If the Liberty Media Group were a separate independent company and its
shares were acquired by another person, certain of those costs, including
corporate and shareholder level taxes, might not be payable in connection with
such an acquisition. As a result, the consideration that would be received by
stockholders of such a separate independent company in connection with such a
stock acquisition might be greater than the Liberty Media Group Net Proceeds
that would be received by holders of LMG Stock if all or substantially all of
the properties and assets of the Liberty Media Group were sold. In addition,
no assurance can be given that the Liberty Media Group Net Proceeds per share
of LMG Stock to be received in connection with a Disposition of all or
substantially all of the properties and assets of the Liberty Media Group will
be equal to or more than the market value per share of LMG Stock prior to or
after announcement of such Disposition. See "--Potential Conversion of LMG
Stock" above and "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--Conversion
and Redemption."
LIMITATIONS ON POTENTIAL ACQUISITION OF A GROUP
If each Group were a separate publicly held corporation, any person
interested in acquiring such corporation without negotiation with management
could seek control of the outstanding stock of such corporation by means
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of a tender offer or proxy contest. Although LMG Stock is designed to reflect
the separate performance of the Liberty Media Group, a person interested in
acquiring only the Liberty Media Group without negotiation with TCI's
management would still be required to seek control of the voting power
represented by all of the outstanding capital stock of TCI, including the LMG
Stock, the TCI Group Stock and the TCIVG Stock. See "DESCRIPTION OF TCI
CAPITAL STOCK--Common Stock--Voting Rights."
ABSENCE OF APPROVAL RIGHTS WITH RESPECT TO FUTURE ISSUANCES OF AUTHORIZED
SHARES
The authorized but unissued shares of capital stock would be available for
issuance from time to time by TCI at the sole discretion of the TCI Board for
any proper corporate purpose. Such issuances could include shares of LMG
Stock, as well as the issuance of such shares upon the conversion or exercise
of securities of TCI that are convertible into or exercisable or exchangeable
for such shares. The approval of the stockholders of TCI will not be sought by
TCI for the issuance of authorized but unissued shares of LMG Stock (or the
reissuance of previously issued shares that have been reacquired by TCI) or
securities of TCI that are convertible into or exercisable or exchangeable for
such shares, unless deemed advisable by the TCI Board or required by
applicable law, regulation or the NASDAQ/NM requirements.
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. TCI
is subject to Section 203 of the DGCL, which, in general, prohibits a
"business combination" between a corporation and an "interested stockholder"
for a period of three years following the time that such stockholder became an
"interested stockholder" unless certain conditions are met. The TCI Charter
and Bylaw provisions which may discourage or make more difficult a change in
control of TCI include the requirement of a supermajority vote to approve
specified actions, the authorization of the TCI Board to issue additional
shares of Series Preferred Stock in one or more series and to fix and state
the designations, powers, preferences, qualifications, limitations,
restrictions and relative rights of the shares of each such series without
further action by TCI's stockholders, certain procedures required in
connection with the nomination of directors of TCI and the other provisions
described under "DESCRIPTION OF TCI CAPITAL STOCK--Anti-Takeover
Considerations." In addition, the existence of different series of TCI Common
Stock presents complexities and could in certain circumstances pose obstacles,
financial and otherwise, to an acquiring person. For example, a potential
acquiror would have to take into consideration that holders of different
series of TCI Common Stock might be more or less receptive to the acquiror's
proposal, that a tender offer would have to be structured so as to take into
account different prices at which shares of the different series might be
acquired, that a merger would require allocation of consideration among the
different series of TCI Common Stock and the effects of actions TCI might take
such as causing a conversion of the LMG Stock. The provisions of the DGCL, the
TCI Charter and TCI's Bylaws and the existence of different series of TCI
Common Stock could, under certain circumstances, prevent stockholders from
profiting from an increase in the market value of their shares as a result of
a change in control of TCI by delaying or preventing such change in control.
See "DESCRIPTION OF TCI CAPITAL STOCK--Anti-Takeover Considerations."
THE SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE
This Proxy Statement/Prospectus and the accompanying form of proxy are being
furnished to holders of TINTA Common Stock in connection with the solicitation
of proxies by the TINTA Board for use at the Meeting to be held on Thursday,
November 19, 1998, at TINTA's corporate offices, Terrace Tower II, 5619 DTC
Parkway, Englewood, Colorado, commencing at 9:30 a.m. local time. At the
Meeting, holders of TINTA Common Stock will be asked to consider and vote upon
(i) a proposal to adopt the Merger Agreement and (ii) such other matters as
may properly be brought before the Meeting. A copy of the Merger Agreement is
included as Appendix I to this Proxy Statement/Prospectus.
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VOTING RIGHTS; VOTE REQUIRED FOR APPROVAL
The TINTA Board has fixed the close of business on October 2, 1998, as the
Record Date for the determination of the TINTA stockholders entitled to notice
of and to vote at the Meeting. Accordingly, only holders of record of shares
of TINTA Common Stock at the close of business on the Record Date will be
entitled to notice of, and to vote at, the Meeting. At the close of business
on the Record Date, there were 103,663,874 shares of TINTA Series A Stock
outstanding and entitled to vote, held by 48 holders of record, and 11,700,000
shares of TINTA Series B Stock outstanding and entitled to vote, all of which
were held by TCI. Each holder of record of shares of TINTA Series A Stock on
the Record Date is entitled to cast one vote per share on each proposal
properly submitted for the vote of the TINTA stockholders at the Meeting. Each
holder of record of shares of TINTA Series B Stock on the Record Date is
entitled to cast ten votes per share on each such proposal. Votes may be cast
in person or by properly executed proxy at the Meeting. Pursuant to the DGCL
and TINTA's Bylaws, the presence, in person or by properly executed proxy, of
the holders of a majority in total voting power of the outstanding shares of
TINTA Common Stock entitled to vote at the Meeting is necessary to constitute
a quorum at the Meeting. Abstentions will be counted in determining whether a
quorum is present.
Under the TINTA Charter and the DGCL, adoption of the Merger Agreement
requires the affirmative vote of the majority in voting power of outstanding
shares of TINTA Series A Stock and TINTA Series B Stock entitled to vote
thereon at the Meeting, voting together as a single class. Abstentions and
broker non-votes in respect of the Merger Agreement will have the same effect
as negative votes. Under the DGCL, there are no dissenters' appraisal rights
for TINTA stockholders in connection with the transactions contemplated by the
Merger Agreement. See "THE MERGER--Absence of Appraisal Rights."
TCI has agreed pursuant to and subject to the terms of the Merger Agreement
to cause to be voted in favor of adoption of the Merger Agreement the
86,250,000 shares of TINTA Series A Stock and 11,700,000 shares of TINTA
Series B Stock beneficially owned by it as of the Record Date, representing
approximately 92% of the total voting power of the shares of TINTA Common
Stock entitled to vote at the Meeting. The vote of such shares of TINTA Common
Stock beneficially owned by TCI in favor of the proposal to adopt the Merger
Agreement is sufficient to assure the presence of a quorum at the Meeting and
the approval of such proposal by the holders of TINTA Common Stock without any
action on the part of any other holder of TINTA Common Stock. Accordingly, it
is expected that the Merger Agreement will be adopted at the Meeting.
As of the Record Date, directors and executive officers of TINTA, and their
affiliates (other than TCI and its subsidiaries), were beneficial owners of
outstanding shares of TINTA Common Stock representing less than 1% of the
total voting power of the shares of TINTA Common Stock outstanding on such
date. Each such director and executive officer has informed TINTA that he
intends to vote or direct the vote of all outstanding shares of TINTA Common
Stock over which he has voting control in favor of adoption of the Merger
Agreement, subject to and consistent with any fiduciary obligations in the
case of shares held as a fiduciary. See "SECURITY OWNERSHIP OF TINTA."
PROXIES
All shares of TINTA Common Stock represented by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted in
accordance with the instructions indicated on such proxies; however, properly
executed proxies marked "ABSTAIN," although counted for purposes of
determining whether there is a quorum at the Meeting, will not be voted. If no
instructions are indicated, such proxies will be voted FOR the proposal to
adopt the Merger Agreement.
At the date of this Proxy Statement/Prospectus, the TINTA Board does not
know of any business to be presented at the Meeting other than as set forth in
the notice accompanying this Proxy Statement/Prospectus. If any other matters
should properly be presented at the Meeting for consideration, including,
among other things, consideration of a motion to adjourn the Meeting to
another time and/or place, the persons named in the enclosed form of proxy and
acting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
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A stockholder may revoke his or her proxy at any time prior to its use by
(i) delivering to the Secretary of TINTA a signed notice of revocation bearing
a later date than the proxy, or a duly executed later-dated proxy relating to
the same shares or (ii) attending the Meeting and voting in person. Attendance
at the Meeting will not in itself constitute the revocation of a proxy. Any
written notice of revocation or subsequent proxy should be sent so as to be
delivered to TINTA at Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado
80111, Attention: Secretary, or hand-delivered to the Secretary of TINTA at
the aforementioned address at or before the taking of the vote at the Meeting.
EXPENSES
Pursuant to the Merger Agreement, costs and expenses incurred in connection
with the printing and mailing of this Proxy Statement/Prospectus will be paid
90% by TCI and 10% by TINTA. In addition to solicitation by mail, proxies may
be solicited by directors, officers and employees of TINTA in person or by
telephone, telegram or other means of communication. Such directors, officers
and employees will receive no additional compensation for such services, but
may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Brokerage firms, banks, nominees, fiduciaries and other
custodians will be requested to forward proxy solicitation materials to the
beneficial owners of shares held of record by them, and will be reimbursed for
the reasonable expenses incurred by them in connection therewith.
If your shares of TINTA Common Stock are held in the name of a brokerage
firm, bank nominee or other institution, only it can sign a proxy card with
respect to your shares of TINTA Common Stock. Accordingly, please contact the
person responsible for your account and give instructions for a proxy card to
be signed representing your shares of TINTA Common Stock.
If you have any questions about giving your proxy or require assistance,
please contact the Secretary of TINTA, at Terrace Tower II, 5619 DTC Parkway,
Englewood, Colorado 80111 (telephone: (303) 267-5500).
STOCKHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
THE MERGER
BACKGROUND
Formation of TINTA; IPO. TINTA was incorporated in 1994 as a wholly-owned
subsidiary of TCI. TINTA was formed by TCI as a holding company for the
purpose of consolidating TCI's ownership interests in substantially all of its
international cable and telephony assets and certain of its international
programming assets, pending a planned initial public offering of a portion of
TINTA's common stock. By effecting such an offering, TCI intended to obtain
credit for what it believed was the substantial "hidden" value of the
international cable, telephony and programming assets that it contributed to
TINTA.
TCI had been acquiring ownership interests since the mid-1980's in broadband
distribution and programming companies in foreign markets that TCI believed
exhibited attractive growth opportunities for providers of integrated multi-
channel television and programming services. TCI established an international
division in 1992, and TINTA's management initially consisted primarily of
those executives of TCI who had been responsible for the operations of TCI's
former international division. In anticipation of its initial public offering,
TINTA entered into a number of intercompany service agreements with TCI
covering a variety of matters, including lending arrangements, the provision
of TCI facilities and "back-office" services to TINTA, tax sharing
arrangements and a service agreement giving TINTA access to TCI's technology
and industry expertise, including support from TCI's cable engineering and
construction groups and programming personnel.
In July 1995, TINTA completed its initial public offering (the "IPO") of 20
million shares of TINTA Series A Stock, which at that time represented
approximately 17% of the outstanding shares of TINTA Common
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Stock. Immediately following the IPO, TCI beneficially owned 81% of the TINTA
Series A Stock, all of the TINTA Series B Stock and 91% of the combined voting
power of both series of TINTA Common Stock. Due to purchases of TINTA Series A
Stock by TINTA pursuant to a stock buy-back program announced by TINTA in
January, 1997, the shares of TINTA Series A Stock beneficially owned by TCI on
the Record Date represented 83% of the TINTA Series A Stock outstanding on
that date, and the shares of both series of TINTA Common Stock beneficially
owned by TCI on the Record Date represented 92% of the combined voting power
of both series of TINTA Common Stock outstanding on that date.
TINTA's Business Strategy. TINTA's business development strategy has
historically been based on the acquisition of ownership interests in, and
participation in the development and management of, distribution,
telecommunications and programming businesses in selected foreign markets.
Further to this strategy, TINTA has ownership interests in, and has
participated in the development of, distribution and programming businesses in
several markets, including the United Kingdom (through Telewest and Flextech),
Japan (through Jupiter TeleCommunications, Inc. and Jupiter Programming, Inc.)
and Argentina (through Cablevision, Torneos y Competencias S.A. and Pramer
S.R.L.).
Most recently, TINTA has placed greater emphasis on the acquisition and
development of multi-channel programming businesses. This emphasis is
highlighted by the appointment in September 1997 of Mr. David Evans as TINTA's
President and Chief Operating Officer. Mr. Evans' background in the television
business was largely programming oriented. He had previously been associated
with The News Corporation Limited where he played a key role in the
establishment of British Sky Broadcasting Group plc and in the launch of Sky
Latin America, direct-to-home satellite services for the United Kingdom and
Latin America, respectively. Mr. Evans was subsequently named TINTA's Chief
Executive Officer in January 1998.
The TCI Offer. Management of TCI routinely reviews TCI's investments in its
less than wholly-owned entities to determine whether it would be advisable for
TCI to continue to hold, increase or dispose of any such investment. Whether a
decision to increase or dispose of an investment is made, and the timing of
any such decision, depends on numerous factors, including the size and nature
of the investment, the perceived advantages, if any, of full or partial
ownership and management control, conditions in the relevant industry and
general market and economic conditions.
Since the IPO, management of TCI has from time to time evaluated the
performance of TINTA and analyzed the extent to which it had achieved its
business objectives as a separate publicly-held company. TCI's management
believed that TINTA's leverage at the holding company level, the capital needs
of its subsidiaries and affiliates, its limited access to capital and its
limited ability to access the cash flow of its less than majority-owned
subsidiaries and affiliates had restricted TINTA's ability to effectively
pursue its business development strategy and, consequently, had negatively
impacted the market price of the TINTA Series A Stock. Over the 29-month
period immediately following the IPO, stockholders had a cumulative total
stockholder return of only 12.50% on the TINTA Series A Stock compared to a
cumulative total stockholder return of 58.93% over the same period on the
common stock (assuming reinvestment of dividends) of a peer group of companies
based on the Nasdaq Telecommunications Stock Index.
TCI's management viewed TINTA's recent emphasis on international
programming, together with the increasingly global reach of many of the
programming assets which comprise the Liberty Media Group, as offering
substantial synergies. Management of TCI believed that combining TINTA's
assets with the assets of the Liberty Media Group would eliminate any
potential conflicts of interest between TINTA and the Liberty Media Group in
respect of business dealings between them, including potential conflicts with
respect to the carriage by TINTA's distribution companies of programming owned
or controlled by the Liberty Media Group. Moreover, TCI's management would
like to expand the Liberty Media Group's international programming assets
beyond the programming owned by the Liberty Media Group prior to the IPO and
sports programming. However, at the time of the IPO and subsequently, TCI has
stated its intention, subject to certain exceptions, to provide to TINTA any
non-sports programming opportunities that were presented to TCI or its
controlled affiliates. By
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acquiring the equity interests in TINTA not already beneficially owned by TCI,
Liberty Media Group would be free to pursue any non-sports programming
opportunities that were presented to it or to TCI or any of TCI's other
controlled affiliates. Finally, TCI's management believed that the primary
objective of the IPO, that being to unlock the hidden value of the
international cable, telephony and programming assets contributed to TINTA,
had been achieved and that the combination of those assets with the
programming assets of the Liberty Media Group would conceivably result in the
market giving a higher valuation to those assets.
On July 10, 1998, Mr. Robert R. Bennett, President and Chief Executive
Officer of Liberty Media Corporation ("Liberty"), approached TINTA's Chief
Executive Officer, Mr. Evans, at a media conference in Sun Valley, Idaho and
advised him of TCI's desire to acquire, through Liberty, all of the shares of
TINTA Common Stock not already beneficially owned by TCI. Later that day, and
after the close of trading on the NASDAQ/NM, TCI delivered a letter to TINTA
setting forth TCI's proposal for the acquisition of TINTA in a transaction to
be structured as a tax-free merger in which each share of TINTA Common Stock
would be converted into 0.58 of a share of LMG Series A Stock. Mr. Evans
notified each of the members of the TINTA Board of TINTA's receipt of the
merger proposal.
On July 13, 1998, TINTA publicly announced that it had received TCI's merger
proposal. On the same day and shortly thereafter, the Class Action Lawsuits
(as defined under "--Certain Litigation") were filed in Delaware in respect of
TCI's merger proposal. See "--Certain Litigation."
TINTA's Response. Shortly after Mr. Evans' receipt of TCI's proposal, he
discussed with attorneys at TINTA's outside law firm, Baker & Botts, how best
to respond to TCI's merger proposal. Baker & Botts is also one of TCI's
outside law firms. Mr. Evans discussed with Baker & Botts the possibility of
creating a special committee of the TINTA Board to negotiate the terms of any
merger agreement with TCI. In discussing the possible creation of such a
committee, it was recognized that each of the TINTA directors, with the
exception of Pierre Lescure, was either an executive officer of TCI or of one
of its business units, a director of TCI, or an executive officer of TINTA.
The formation of a special committee consisting of Mr. Evans and Mr. Lescure
was discussed. Mr. Evans was discussed as a possible candidate as he had the
least affiliation with TCI (having joined TINTA in September 1997) and his
compensation package, which includes TINTA stock options, most closely aligned
him with the interests of TINTA's public stockholders. The participation of
Mr. Lescure was discussed as he is the only "outside" director on the TINTA
Board. However, it was recognized that Mr. Evans, under Delaware law (the
corporation law that is applicable to both TCI and TINTA), might not be deemed
to be an "independent director" under applicable Delaware case precedents, and
hence any special committee on which he served might be unable to obtain the
benefits bestowed on properly constituted special committees under Delaware
law. It was also recognized that Mr. Lescure might not be deemed to be an
"independent director" under Delaware law, due to business dealings between
Canal + S.A. (of which Mr. Lescure is Chairman and Chief Executive Officer)
and TINTA.
On July 15, 1998, the Executive Committee of the TINTA Board (the "Executive
Committee"), which is comprised of Mr. Evans, John C. Malone (the Chairman of
the Board of TINTA and Chairman of the Board and Chief Executive Officer of
TCI), and Paul A. Gould (a director of TINTA and TCI), met by telephone
conference call. The Executive Committee discussed the feasibility and
desirability of forming a special committee, consisting of Mr. Evans and Mr.
Lescure, to negotiate the terms of any merger agreement with TCI. However, it
was determined that no such committee would be formed because, as explained
above, it might not be deemed to be independent under Delaware law. Rather, it
was concluded that TINTA's emphasis should be to ensure that the public
stockholders of TINTA received fair value for their TINTA Series A Stock in
any merger transaction with TCI. To this end, the Executive Committee
authorized TINTA's management to select and retain an independent financial
advisor to issue an opinion as to the fairness, from a financial point of
view, to TINTA's public stockholders of the exchange ratio proposed by TCI in
its merger proposal. The Executive Committee also approved the negotiation of
a merger agreement with TCI by TINTA's management and legal advisors.
On July 15, 1998, Salomon Smith Barney was retained on behalf of the TINTA
Board to review the fairness, from a financial point of view, to the holders
of TINTA Common Stock (other than the TCI Holders) of the exchange ratio
proposed by TCI in its merger proposal.
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From July 15 through August 17, 1998, management of TINTA and TCI and their
respective legal advisors negotiated the terms of a merger agreement. Officers
of TINTA met with Salomon Smith Barney during this period in connection with
Salomon Smith Barney's analysis of TCI's merger proposal, and provided
estimates and projections to Salomon Smith Barney. Salomon Smith Barney also
conducted interviews with senior executives of Liberty during this period and
was provided certain information by such executives. See "--Fairness Opinion."
On August 17, 1998, a special meeting of the TINTA Board was held at the New
York offices of Baker & Botts to consider TCI's merger proposal. At this
meeting, representatives of Salomon Smith Barney delivered a preliminary oral
presentation with respect to certain analyses performed by Salomon Smith
Barney in evaluating the fairness of the exchange ratio offered by TCI in its
merger proposal to the holders of TINTA Common Stock other than the TCI
Holders. Salomon Smith Barney's presentation included a discussion of a number
of analytical considerations, which are described in detail under "--Fairness
Opinion" below. Salomon Smith Barney responded to questions and comments from
the TINTA Board. Baker & Botts advised the TINTA Board as to the status of the
negotiations with TCI on a proposed merger agreement, made a presentation on
the material terms of the most recent draft of the merger agreement, and
discussed with the board the negotiations that had been held on the merger
agreement to date. TINTA's Delaware counsel, Richards, Layton & Finger, LLP
("RL&F") (which also represents TCI on a regular basis, including in
connection with the merger proposal pursuant to a conflict waiver from TCI and
TINTA), advised the TINTA Board as to its fiduciary duties under Delaware law
in its deliberations on TCI's merger proposal and on the proposed merger
agreement, and discussed with the directors the allegations in, and status of,
the Class Action Lawsuits. The special meeting was then recessed to August 21.
On August 20, 1998, RL&F and a representative of TCI conducted settlement
negotiations regarding the Class Action Lawsuits with counsel for the
plaintiffs (the "Plaintiff's Counsel"). After vigorous negotiation on possible
settlement alternatives, Plaintiff's Counsel agreed to enter into a memorandum
of understanding to settle the Class Action Lawsuits. The settlement was based
on TCI's agreement to change the merger agreement to provide that if the 0.58
exchange ratio did not yield a value of at least $22.00 per share of TINTA
Common Stock determined as of a date on or near the Effective Time, then TCI
must either (i) increase the exchange ratio to a level which would provide
that amount of LMG Series A Stock which yielded a value of $22.00 per share of
TINTA Common Stock or (ii) terminate the Merger Agreement. TCI also agreed not
to take any action that would improperly manipulate the price of the LMG
Series A Stock during the period the value of such stock was to be determined
under the merger agreement.
On August 21, 1998, the meeting of the TINTA Board was reconvened by
telephone conference call. Representatives of Baker & Botts and RL&F discussed
with the directors the revised terms of the proposed merger agreement and the
terms of the proposed settlement of the Class Action Lawsuits, including the
change to the merger agreement that would include the right of TCI, in the
event the exchange ratio yielded a value of less than $22.00 per share of
TINTA Common Stock, to implement the Minimum Value Adjustment or terminate the
merger agreement. Salomon Smith Barney updated its presentation of August 17,
1998 to reflect market and other data as of August 18, 1998, and rendered its
oral opinion that, as of such date, the Exchange Ratio was fair, from a
financial point of view, to the holders of TINTA Common Stock other than the
TCI Holders. See "--Fairness Opinion." After discussion, the TINTA Board, by
unanimous vote, approved acceptance of TCI's revised merger proposal. On
August 24, 1998, the Merger Agreement was executed and TINTA issued a press
release to that effect.
TINTA'S REASONS FOR THE MERGER; RECOMMENDATION OF THE TINTA BOARD
The TINTA Board has unanimously approved the Merger Agreement, has
determined that it is advisable and fair and in the best interests of TINTA
and its stockholders other than TCI and its subsidiaries, and unanimously
recommends that holders of shares of TINTA Common Stock vote FOR the proposal
to adopt the Merger Agreement.
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In reaching its decision to approve the Merger Agreement and to recommend
that TINTA's stockholders vote to adopt the Merger Agreement, the TINTA Board
considered the following factors:
(i) The financial condition, competitive position and prospects of each
of TINTA and the Liberty Media Group, and TINTA's future prospects as a
stand-alone entity and on a combined basis with the Liberty Media Group.
(ii) The opinion of Salomon Smith Barney, as of August 21, 1998, that the
Exchange Ratio was fair, from a financial point of view, to the holders of
TINTA Common Stock other than the TCI Holders. A copy of Salomon Smith
Barney's opinion is set forth in Appendix II to this Proxy
Statement/Prospectus.
(iii) The Exchange Ratio included in the Merger Agreement ensured that if
the Merger is consummated, each share of TINTA Common Stock would be
exchanged in the Merger for a number of shares of LMG Series A Stock having
a value of at least $22.00 per share, which amount represents a 37.4%
premium over the average trading price of the TINTA Series A Stock during
the 20 trading-day period ending immediately prior to the announcement of
the AT&T Merger.
(iv) The expected difficulties TINTA would encounter in pursuing its
growth strategy as a stand-alone company given its leverage at the holding
company level, the capital needs of its subsidiaries and affiliates, its
limited access to capital and its limited ability to access the cash flow
of its less than majority-owned subsidiaries and affiliates.
(v) The increased liquidity of the LMG Series A Stock compared to the
TINTA Series A Stock.
(vi) The ability of holders of TINTA Common Stock to continue to
participate in the growth of TINTA's international assets through their
ownership of LMG Series A Stock while limiting their exposure to the
uncertainties of a business whose subsidiaries and affiliates operate
almost exclusively outside the United States. The TINTA Board also
considered that the holders of TINTA Common Stock would have an opportunity
to participate in the future performance of the other businesses and assets
of the Liberty Media Group through their ownership of LMG Series A Stock,
which they would receive through a tax-free exchange in the Merger.
In view of the number of factors considered by the TINTA Board, the
disparate nature of these factors and each director's differing perspective,
the TINTA Board did not assign relative weights to the factors considered in
its conclusions.
The TINTA Board concluded that it would be impracticable for TINTA to be
sold to or merged with a party other than TCI, as the participation of TCI in
any such transaction would be essential. The TINTA Board also viewed TCI as
the best possible candidate to purchase all of TINTA, due to the Liberty Media
Group's international programming assets and TCI's familiarity with TINTA's
assets and business operations. Accordingly, the TINTA Board did not solicit,
and did not authorize Salomon Smith Barney to solicit, alternative acquisition
proposals from third parties. TCI refused to include in the Merger Agreement a
provision that would have required that the Merger Agreement be adopted by the
holders of a majority in voting power of the TINTA Common Stock not owned by
TCI or its subsidiaries. Therefore, adoption of the Merger Agreement does not
require the affirmative vote of the holders of a majority in voting power of
the TINTA Common Stock not owned by TCI or its subsidiaries. The TINTA Board
did not form an independent committee of the TINTA Board to act solely on
behalf of the public stockholders of TINTA for the reasons discussed under "--
Background" above.
For a discussion of the interests of certain members of the TINTA Board in
the Merger, see "--Interests of Certain Persons in the Merger."
FAIRNESS OPINION
The TINTA Board retained Salomon Brothers Inc and Smith Barney Inc.,
collectively doing business as Salomon Smith Barney ("Salomon Smith Barney"),
pursuant to a letter agreement dated July 15, 1998 (the "Engagement Letter"),
to review the fairness, from a financial point of view, of the Exchange Ratio
in connection with the Merger to the holders of TINTA Common Stock other than
the TCI Holders. Pursuant to the
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Engagement Letter, Salomon Smith Barney rendered an opinion to the TINTA Board
on August 21, 1998, to the effect that, based upon the assumptions made,
matters considered and limits of the review, as set forth in such opinion, as
of such date, the Exchange Ratio was fair, from a financial point of view, to
the holders of TINTA Common Stock other than the TCI Holders.
The full text of Salomon Smith Barney's opinion dated August 21, 1998, which
sets forth the assumptions made, general procedures followed, matters
considered and limits on the review undertaken, is included as Appendix II to
this Proxy Statement/Prospectus. The summary of Salomon Smith Barney's opinion
set forth below is qualified in its entirety by reference to the full text of
such opinion. No limitations were imposed by TINTA or the TINTA Board with
respect to the investigations made or procedures followed by Salomon Smith
Barney in rendering its opinion. HOLDERS OF TINTA COMMON STOCK ARE URGED TO
READ SALOMON SMITH BARNEY'S OPINION IN ITS ENTIRETY.
In connection with rendering its opinion, Salomon Smith Barney reviewed and
analyzed, among other things, the following: (i) a draft as of August 21, 1998
of the Merger Agreement; (ii) certain publicly available information
concerning TINTA, including the Annual Reports on Form 10-K of TINTA for each
of the years in the three-year period ended December 31, 1997 and the
Quarterly Reports on Form 10-Q of TINTA for the quarters ended March 31, 1998
and June 30, 1998; (iii) certain publicly available information concerning
certain entities in which TINTA holds a substantial equity interest (the
"TINTA Portfolio Companies"); (iv) certain other internal information,
primarily financial in nature, including projections, concerning the business,
assets and operations of TINTA and the TINTA Portfolio Companies furnished to
Salomon Smith Barney by TINTA for purposes of Salomon Smith Barney's analysis;
(v) certain publicly available information concerning the trading of, and the
trading market for, the TINTA Common Stock; (vi) certain publicly available
information concerning the Liberty Media Group, including separate information
concerning the Liberty Media Group contained in the Annual Reports on Form 10-
K of TCI for each of the years in the three-year period ended December 31,
1997 and the Quarterly Reports on Form 10-Q of TCI for the quarters ended
March 31, 1998 and June 30, 1998; (vii) certain publicly available information
concerning certain entities in which the Liberty Media Group holds a
substantial equity interest (the "Liberty Portfolio Companies"); (viii)
certain other internal information, primarily financial in nature, including
certain projected financial data, concerning the business, assets and
operations of the Liberty Media Group and the Liberty Portfolio Companies
furnished to Salomon Smith Barney by the Liberty Media Group for the purposes
of Salomon Smith Barney's analysis; (ix) the TCI Charter, including the terms
of the LMG Series A Stock set forth therein; and (x) certain publicly
available information concerning the trading of, and the trading market for,
LMG Series A Stock. Salomon Smith Barney also considered such other
information, financial studies, analyses, investigations and financial,
economic and market criteria that it deemed relevant. Salomon Smith Barney met
with certain officers and employees of TINTA, TCI and the Liberty Media Group
to discuss the foregoing, as well as other matters Salomon Smith Barney
believed relevant to its inquiry.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to it or publicly available and
neither attempted independently to verify nor assumed responsibility for
verifying any of such information. Salomon Smith Barney did not conduct a
physical inspection of any of the properties or facilities of TCI, TINTA, the
Liberty Media Group, any TINTA Portfolio Company or any Liberty Portfolio
Company, nor did Salomon Smith Barney make or obtain or assume any
responsibility for making or obtaining any independent evaluations or
appraisals of any of such properties or facilities. With respect to
projections, Salomon Smith Barney assumed that they were reasonably prepared
on bases reflecting the best currently available estimates and judgments of
the management of TINTA or the Liberty Media Group, as the case may be, as to
the future financial performance of TINTA and the TINTA Portfolio Companies or
the Liberty Media Group and the Liberty Portfolio Companies, as the case may
be. Salomon Smith Barney expressed no view with respect to such projections or
the assumptions on which they were based. The draft of the Merger Agreement
reviewed by Salomon Smith Barney did not include the Minimum Value Adjustment,
and Salomon Smith Barney assumed that the definitive Merger Agreement, when
executed, would contain a provision incorporating the Minimum
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Value Adjustment. In addition, except as described in the preceding sentence,
Salomon Smith Barney assumed that the definitive Merger Agreement, when
executed, would not contain any other terms or conditions that differed
materially from the draft of the Merger Agreement reviewed by Salomon Smith
Barney and that the Merger would be consummated in a timely manner and in
accordance with the terms of the Merger Agreement, without waiver of any of
the conditions precedent to the Merger contained in the Merger Agreement. For
the purposes of its analysis, Salomon Smith Barney understood and assumed that
the Merger will qualify as a tax-free reorganization for federal income tax
purposes. Salomon Smith Barney further understood and assumed that, following
consummation of the Merger, for purposes of the LMG Series A Stock, the
Liberty Media Group will be deemed to be the beneficial owner of approximately
15% of the outstanding capital stock of TINTA.
In conducting its analysis and arriving at its opinion, Salomon Smith Barney
considered such financial and other factors as it deemed appropriate under the
circumstances, including, among others, the following: (i) the historical and
current financial position and results of operations of TINTA, the Liberty
Media Group, the TINTA Portfolio Companies and the Liberty Portfolio
Companies; (ii) the business prospects of TINTA, the Liberty Media Group, the
TINTA Portfolio Companies and the Liberty Portfolio Companies; (iii) the terms
of the LMG Series A Stock; and (iv) the historical and current market for the
TINTA Common Stock and the LMG Series A Stock. Salomon Smith Barney also took
into account its assessment of general economic, market and financial
conditions as well as its experience in connection with similar transactions
and securities valuation generally. Salomon Smith Barney's opinion necessarily
was based upon conditions as they existed and could be evaluated on the date
thereof and Salomon Smith Barney assumed no responsibility to update or revise
its opinion based upon circumstances or events occurring after the date
thereof.
Salomon Smith Barney was not asked to consider, and its opinion does not
address, the relative merits of the Merger as compared to any alternative
business strategy that might exist for TINTA. Salomon Smith Barney understood
that TCI is a party to the AT&T Agreement, pursuant to which it is
contemplated that TCI will be acquired by AT&T through the AT&T Merger and
holders of LMG Series A Stock will receive shares of AT&T Liberty/Ventures
Class A Stock in exchange for LMG Series A Stock (the "AT&T Exchange").
Salomon Smith Barney was not asked to consider, and its opinion does not
address, the AT&T Merger or the AT&T Exchange or the effect thereof on LMG
Series A Stock or the effect, if any, of any decision not to proceed with or
consummate the AT&T Merger. Salomon Smith Barney further understood that it is
contemplated that TCI Ventures Group will merge with the Liberty Media Group
following consummation of the Merger. Salomon Smith Barney was not asked to
consider for the purposes of its opinion, and its opinion does not address,
the Liberty Ventures/Combination or the effect thereof on LMG Series A Stock
or the effect, if any, of any decision not to proceed with or consummate the
Liberty/Ventures Combination. In its analysis, Salomon Smith Barney understood
and took into account the fact that the TCI Holders currently own, directly or
indirectly, approximately 85% of the outstanding TINTA Common Stock. Salomon
Smith Barney's opinion does not constitute an opinion or imply any conclusion
as to the likely trading range for LMG Series A Stock following consummation
of the Merger or the Liberty/Ventures Combination or the likely trading range
for AT&T Liberty/Ventures Class A Stock following consummation of the AT&T
Merger. Salomon Smith Barney's opinion is, in any event, limited to the
fairness, from a financial point of view, of the Exchange Ratio to the holders
of TINTA Common Stock other than the TCI Holders, and does not constitute a
recommendation to any holder of TINTA Common Stock as to how such holder
should vote with respect to the Merger.
Salomon Smith Barney made a preliminary presentation to the TINTA Board on
August 17, 1998, which it updated on August 21, 1998 in connection with
rendering its opinion, with respect to certain analyses performed by Salomon
Smith Barney in evaluating the Exchange Ratio. The following is a summary of
such Salomon Smith Barney presentation. The following quantitative
information, to the extent it is based on market data, is based on market data
as it existed at August 18, 1998, and is not necessarily indicative of current
market conditions.
Sum of the Parts Analysis--Overview. TINTA is a holding company, and the
Liberty Media Group includes a holding company, that holds primarily minority
equity investments in other entities which are not consolidated for accounting
purposes. Accordingly, Salomon Smith Barney used a "sum of the parts" analysis
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to value each of TINTA and the Liberty Media Group, which analysis involved
the valuation of each of such entity's investments separately and then the
aggregation and adjustment of those valuations to obtain a composite valuation
of such entity.
Sum of the Parts Analysis--TINTA. Except as noted below with respect to TCI
Music, Inc. ("TCI Music"), Salomon Smith Barney calculated a value for each of
the investments held by TINTA in publicly-traded companies (Telewest, Flextech
and TCI Music) (the "TINTA Public Companies"), by multiplying the number of
shares of each such company held by TINTA by the average closing price per
share of each such company over the twenty trading-day period through August
18, 1998. With respect to TCI Music, of which TINTA owns approximately 2.7
million shares, such shares were valued at $8.00 per share, the price to be
paid upon TINTA's exercise of its put right associated with each such share,
as TINTA management indicated to Salomon Smith Barney its intent to exercise
such put prior to the Merger. Based on this analysis, Salomon Smith Barney
calculated an implied total market value for TINTA's investments in the TINTA
Public Companies of $1.536 billion (the "TINTA Public Investment Value"). With
respect to Telewest and Flextech, in which TINTA holds equity stakes of
approximately 20.9% and 36.8%, respectively, Salomon Smith Barney also
performed the analysis applying a 5.0% discount to the market value of such
investments to reflect, in Salomon Smith Barney's judgment, the extent of the
discount to market value that likely would be incurred by TINTA in attempting
to dispose of a large minority equity stake in such companies. Based on this
adjusted market value analysis, Salomon Smith Barney calculated an implied
total market value for TINTA's investments in the TINTA Public Companies of
$1.460 billion (the "Adjusted TINTA Public Investment Value").
With respect to investments held by TINTA in entities that are not publicly-
traded (Cablevision S.A., Sky Latin America, Metropolis-Intercom S.A., Torneos
y Competencias S.A., Jupiter Telecommunications Co., Ltd., Jupiter Programming
Co., Ltd., Fox Sports International, MultiThematiques, S.A., TCI Cablevision
of Puerto Rico, Inc., Bresnan International Partners (Poland), L.P., Princes
Holdings Ltd., Videopole S.A. and The Premium Movie Partnership) (the "TINTA
Private Companies"), Salomon Smith Barney used a discounted cash flow ("DCF")
analysis, in which an entity's value is estimated based on the sum of the
present value of projected free cash flows for a defined period plus the
present value of such entity's terminal value at the end of such period, to
determine a firm or enterprise value for each such entity. Salomon Smith
Barney then subtracted such entity's total debt from such firm or enterprise
value in order to arrive at an equity value for such entity. The resulting
equity value was then multiplied by TINTA's percentage ownership of such
entity in order to determine the value of TINTA's investment in such entity.
For TINTA Private Companies that are holding companies with minority
investments in other entities (that is, those entities with structures
comparable to that of TINTA), a similar DCF analysis was done with respect to
the investments held by such TINTA Private Companies in order to determine a
composite value for each of such TINTA Private Companies.
TINTA management provided Salomon Smith Barney with forecasts of free cash
flow for each of the TINTA Private Companies (and, if necessary for Salomon
Smith Barney's analysis and available, with forecasts for entities in which
such TINTA Private Company has made an equity investment). Generally, free
cash flow forecasts were provided through fiscal 2007. A terminal value for
each such entity was estimated by applying multiples to forecasted earnings
before interest, taxes, depreciation and amortization ("EBITDA") for the
terminal year (usually 2007). Multiples used to estimate terminal values
ranged from 3.5x to 11.0x EBITDA, as deemed appropriate by Salomon Smith
Barney after considering the nature and location of the entity and its
operations and businesses. Such free cash flow forecasts and terminal values
were discounted using a range of discount rates derived using the capital
asset pricing model and adjusted to reflect, as appropriate in Salomon Smith
Barney's judgment, factors such as political risk associated with the
countries in which such entities operate or hold investments and risks faced
by businesses in comparable stages of maturity. The discount rates used ranged
from 13% to 18%.
Based on its DCF analysis, Salomon Smith Barney calculated a range for the
implied total value of TINTA's investments in the TINTA Private Companies of
$1.595 billion to $1.986 billion (the "Private Company DCF Range"). Salomon
Smith Barney also performed the DCF analysis applying discounts ranging up to
30% to the
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value of TINTA's stake in each TINTA Private Company to reflect the relative
illiquidity of investments in privately-held entities and the fact that TINTA
does not have control or has only limited control over such entities. Based on
such adjusted DCF analysis, Salomon Smith Barney calculated a range for the
implied total value of TINTA's investments in the TINTA Private Companies of
$1.243 billion to $1.547 billion (the "Adjusted Private Company DCF Range").
Salomon Smith Barney also used research reports published by equity analysts
during 1998 to value TINTA's stake in each of the TINTA Private Companies.
Research reports published by Salomon Smith Barney, Merrill Lynch & Co. and CS
First Boston were used for this purpose. For certain TINTA Private Companies,
analysts' estimates of the equity value of TINTA's investment in such entity
were available. If such estimates were not available, Salomon Smith Barney
used analysts' estimates of the firm or enterprise value of the relevant TINTA
Private Company, deducted the amount of such entity's debt based on
information provided by TINTA, and multiplied the resulting implied equity
value by TINTA's percentage ownership of such entity in order to determine an
implied value for TINTA's investment in such entity. Based on such analysts'
estimates and its analysis, Salomon Smith Barney calculated a range for the
implied total value of TINTA's investments in the TINTA Private Companies of
$1.245 billion to $1.566 billion (the "Analysts Private Company Range").
Salomon Smith Barney derived implied equity values for TINTA (the "TINTA
Implied Equity Values") by (A) adding (i) the total value of TINTA's
investments in the TINTA Public Companies, (ii) the total value of TINTA's
investments in the TINTA Private Companies, (iii) the total value of certain
other investments held by TINTA (with an estimated total value of $75 million
based on information provided by TINTA), and (iv) TINTA's reported cash on
hand as of March 31, 1998, as adjusted to reflect certain subsequent events
and the assumed exercise of outstanding stock options (total value of $70
million), and (B) subtracting TINTA's reported total debt as of March 31,
1998, as adjusted to reflect certain subsequent events and the elimination of
the debt of TCI Cablevision of Puerto Rico, Inc. which was reflected in
Salomon Smith Barney's valuation of that company (total value of $345
million). Salomon Smith Barney computed implied equity values per share of
TINTA Common Stock by dividing the TINTA Implied Equity Values by 117.9
million, the approximate total number of shares of TINTA Common Stock
outstanding as of June 30, 1998 (including for this purpose restricted stock
and shares underlying outstanding stock options). Using the Private Company
DCF Range and the TINTA Public Investment Value, Salomon Smith Barney derived
a range for the implied equity value per share of TINTA Common Stock of $24.86
to $28.18. Using the Adjusted Private Company DCF Range and the Adjusted TINTA
Public Investment Value, Salomon Smith Barney derived a range for the implied
equity value per share of TINTA Common Stock of $21.24 to $23.81 (the
"Adjusted TINTA DCF Range"). Using the Analysts Private Company Range and the
TINTA Public Investment Value, Salomon Smith Barney derived a range for the
implied equity value per share of TINTA Common Stock of $21.89 to $24.62 (the
"TINTA Analysts Range").
Sum of the Parts Analysis--Liberty Media Group. Except as noted below with
respect to TCI Music, Salomon Smith Barney calculated a value for each of the
investments held by the Liberty Media Group in publicly-traded companies (Time
Warner Inc., USA Networks, Inc., TCI Music, United Video Satellite Group,
Inc., Cablevision Systems Corp. and Cendant Corp.) (the "Liberty Public
Companies") by multiplying the number of shares of each such company held by
the Liberty Media Group by the average closing price per share of such company
over the twenty trading-day period through August 18, 1998. For purposes of
this analysis, the shares of TCI Music were valued at $1.75 per share, the
price of such shares prior to the announcement of the merger of TCI Music and
DMX Inc. The value of the Liberty Media Group's holdings of TCI Music was
established by multiplying such per share value by 77.6 million, the
approximate number of shares the Liberty Media Group would hold after giving
effect to the exercise by holders other than the Liberty Media Group of
certain put rights associated with such shares, and deducting the aggregate
cost of the Liberty Media Group's obligation to purchase shares of TCI Music
not held by the Liberty Media Group at $8.00 per share upon exercise of the
put right associated with each such share of TCI Music. Based on this
analysis, Salomon Smith Barney calculated an implied total market value for
the Liberty Media Group's investments in the Liberty Public Companies of
$7.644 billion (the "Liberty Public Investment Value"). With respect to Time
Warner Inc., USA Networks, Inc. and United Video Satellite Group, Inc., in
which the Liberty Media Group holds equity stakes
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(adjusted for announced but not yet consummated transactions involving such
companies) of 10.0%, 21.2% and 16.0%, respectively, Salomon Smith Barney also
performed the analysis applying a 5.0% discount to the market value of such
investments to reflect, in Salomon Smith Barney's judgment, the extent of the
discount to market value that likely would be incurred by the Liberty Media
Group in attempting to dispose of a large minority equity stake in such
companies. Based on this adjusted market value analysis, Salomon Smith Barney
calculated an implied total value for the Liberty Media Group's investments in
the Liberty Public Companies of $7.267 billion (the "Adjusted Liberty Public
Investment Value").
With respect to investments held by the Liberty Media Group in entities that
are not publicly-traded (Discovery Communications, Inc., QVC Inc., Encore
Media Group, Fox/Liberty Networks, Fox Kids Worldwide, Inc., BET Holdings,
Inc., International Sports Programming, Odyssey, Court TV, E! Entertainment
Television) (the "Liberty Private Companies"), Salomon Smith Barney used
valuation estimates provided by the Liberty Media Group management (the
"Liberty Management Estimates"), rather than estimates based on DCF analysis,
for each Liberty Private Company, which estimates indicated that the total
value of the Liberty Media Group's investments in the Liberty Private
Companies was $11.537 billion (the "Liberty Management Private Company
Value"). Salomon Smith Barney was provided with certain financial forecasts by
Liberty Media Group management; however, it was not provided with the
forecasts that would be needed to perform individual DCF analyses with respect
to the Liberty Private Companies. Salomon Smith Barney applied discounts to
the Liberty Management Estimates of up to 30% to reflect the relative
illiquidity of investments in privately-held entities and the fact that the
Liberty Media Group does not have control or has limited control over such
entities. As so adjusted, the Liberty Management Estimates indicated that the
total value of the Liberty Media Group's investments in the Liberty Private
Companies was $9.989 billion (the "Adjusted Liberty Management Private Company
Value").
Salomon Smith Barney also used research reports published during 1998 by
equity analysts at Salomon Smith Barney, Merrill Lynch & Co., CS First Boston,
Donaldson, Lufkin & Jenrette and Lehman Brothers to value the Liberty Media
Group's stake in each of the Liberty Private Companies. For certain of the
Liberty Private Companies, analysts' estimates of the equity value of the
Liberty Media Group's investment in such company were available. If such
estimates were not available, Salomon Smith Barney used analysts' estimates of
the firm or enterprise value of such entity, deducted the amount of such
entity's debt based on information provided by the Liberty Media Group, and
multiplied the resulting implied equity value by the Liberty Media Group's
percentage ownership of such entity in order to determine an implied value for
the Liberty Media Group's investment in such entity. Based on such analysts'
estimates, Salomon Smith Barney calculated a range for the total implied value
of the Liberty Media Group's investments in the Liberty Private Companies of
$6.130 billion to $8.712 billion (the "Liberty Analysts Private Company
Range").
Salomon Smith Barney derived implied equity values for the Liberty Media
Group (the "Liberty Implied Equity Values") by (A) adding (i) the total value
of the Liberty Media Group's investments in the Liberty Public Companies, (ii)
the total value of the Liberty Media Group's investments in the Liberty
Private Companies, (iii) the total value of certain other investments held by
the Liberty Media Group (with an estimated total value of $135 million based
on certain valuation methods selected by Salomon Smith Barney), and (iv) the
Liberty Media Group's reported cash on hand as of March 31, 1998, as adjusted
to reflect certain subsequent events and the assumed exercise of outstanding
stock options (total value of $(456) million), and (B) subtracting the Liberty
Media Group's reported total debt as of March 31, 1998, as adjusted to reflect
certain subsequent events, the addition of certain inter-company obligations
and the elimination of the debt of Encore Media Group and TCI Music,
consolidated by the Liberty Media Group, which debt was reflected in the
valuation of Encore Media Group and TCI Music, as the case may be (total value
of $643 million). Salomon Smith Barney computed implied equity values per
share of the LMG Series A Stock by dividing the Liberty Implied Equity Values
by 396.6 million, the approximate total number of shares of LMG Stock
outstanding as of June 30, 1998 (including for this purpose shares underlying
certain outstanding stock options, convertible notes and convertible preferred
stock of TCI). Using the Liberty Management Private Company Value and the
Liberty Public Investment Value, Salomon Smith Barney derived an implied
equity value per share of LMG Series A Stock of $45.60 (the
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<PAGE>
"Liberty Management Value"). Using the Adjusted Liberty Management Private
Company Value and the Adjusted Liberty Public Investment Value, Salomon Smith
Barney derived an implied equity value per share of LMG Series A Stock of
$40.74 (the "Adjusted Liberty Management Value"). Using the Liberty Analysts
Private Company Range and the Liberty Public Investment Value, Salomon Smith
Barney derived a range for the implied equity value per share of LMG Series A
Stock of $31.96 to $38.47 (the "Liberty Analysts Range").
Sum of the Parts Analysis--Conclusions. Salomon Smith Barney calculated
certain implied values for the Merger Consideration (the "Implied Merger
Consideration Values") by multiplying the Exchange Ratio by the following
historical and implied per share prices for LMG Series A Stock (the "LMG
Series A Per Share Values"): (i) the closing price immediately prior to the
initial announcement of the Merger, which resulted in an implied value for the
Merger Consideration of $24.11; (ii) the closing price as of August 18, 1998,
which resulted in an implied value for the Merger Consideration of $21.06;
(iii) the average closing price over the twenty consecutive trading days
through August 18, 1998, which resulted in an implied value for the Merger
Consideration of $22.32; (iv) the Liberty Management Value, which resulted in
an implied value for the Merger Consideration of $26.45; (v) the Adjusted
Liberty Management Value, which resulted in an implied value for the Merger
Consideration of $23.63; (vi) the lower limit of the Liberty Analysts Range,
which resulted in an implied value for the Merger Consideration of $18.54;
(vii) the upper limit of the Liberty Analysts Range, which resulted in an
implied value for the Merger Consideration of $22.31; (viii) the lower limit
of the range of prices (the "Liberty Price Target Range") derived from twelve-
month per share price targets for LMG Series A Stock published in 1998 by
analysts at Salomon Smith Barney, Donaldson, Lufkin & Jenrette, Lehman
Brothers, Merrill Lynch & Co., and Morgan Stanley Dean Witter, which resulted
in an implied value for the Merger Consideration of $23.20; and (ix) the upper
limit of the Liberty Price Target Range, which resulted in an implied value
for the Merger Consideration of $30.45. Salomon Smith Barney noted that in
each case (other than cases which resulted in an Implied Merger Consideration
Value less than the Minimum Value), the Implied Merger Consideration Value was
within or above the $21.24 to $23.81 Adjusted TINTA DCF Range. Salomon Smith
Barney also noted that in each case (other than cases which resulted in an
Implied Merger Consideration Value less than the Minimum Value) the Implied
Merger Consideration Value was within or above the $21.89 to $24.62 TINTA
Analysts Range.
Analysts' Price Targets for TINTA Common Stock. Salomon Smith Barney
reviewed twelve-month per share price targets for TINTA Common Stock published
during 1998 by analysts at CS First Boston, Donaldson, Lufkin & Jenrette,
Goldman, Sachs & Co., and Merrill Lynch & Co., which ranged from $21.50 to
$26.50 (the "TINTA Price Target Range"). Salomon Smith Barney noted that each
Implied Merger Consideration Value (other than Implied Merger Consideration
Values less than the Minimum Value) was within or above such range. Salomon
Smith Barney further noted that the twelve-month per share price targets are
estimates of the future per share value of TINTA and that, in order to place
such targets on a more comparable basis to the Implied Merger Consideration
Values, the TINTA Board could consider the present value of such twelve-month
per share price targets.
Exchange Ratio Premium Analysis. Salomon Smith Barney compared the Implied
Merger Consideration Values to certain historical and implied per share values
of TINTA Common Stock to determine whether the Exchange Ratio would result in
a premium to each such per share value of TINTA Common Stock and, if so, the
amount of each such premium. In particular, Salomon Smith Barney compared the
Implied Merger Consideration Values to the following historical and implied
prices per share of TINTA Common Stock ("TINTA Per Share Values"): (i) the
closing price one day prior to the initial announcement of the Merger;
(ii) the closing price one month prior to the initial announcement of the
Merger; (iii) the closing price six months prior to the initial announcement
of the Merger; (iv) the average closing price over the twenty consecutive
trading days through August 18, 1998; (v) the average closing price over the
twenty consecutive trading days immediately prior to the initial announcement
of the pending AT&T Merger; (vi) the upper and lower limits of the TINTA
Analysts Range; (vii) the upper and lower limits of the Adjusted TINTA DCF
Range; and (viii) the upper and lower limits of TINTA Price Target Range.
Excluding Implied Merger Consideration Values less than the Minimum Value,
Salomon Smith Barney noted that the implied discount/premium represented by
the Exchange Ratio ranged from a discount of 15.8% to a premium of 90.2%.
Salomon Smith Barney also noted
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that relative to the closing price of TINTA Series A Stock one day prior, one
month prior and six months prior to the initial announcement of the Merger,
the implied premium represented by the Exchange Ratio based on the Implied
Merger Consideration Values (excluding those values less than the Minimum
Value) ranged from 2.0% to 83.8%.
Minority Purchase Premium Analysis. Salomon Smith Barney reviewed certain
publicly available information relating to 28 transactions, each announced in
1997 or 1998, in which an equity interest representing less than a majority of
a public entity's total equity was (or is to be) acquired by an existing
majority stockholder. Salomon Smith Barney determined that in such
transactions the premiums (the "Minority Purchase Premiums") paid for such
equity interests over the closing price per share as of the date one month
prior to the initial announcement of the relevant transaction ranged from 0.3%
to 76.0%, with a median of 25.6% and a mean of 25.8%. Salomon Smith Barney
noted that, based on the average closing price for LMG Series A Stock over the
twenty consecutive trading days through August 18, 1998, the Exchange Ratio
represents a premium of 34.8% over the closing price per share of TINTA Series
A Stock as of the date one month prior to the initial announcement of the
Merger, which percentage premium is greater than the median and mean Minority
Purchase Premiums.
Implied Exchange Ratio Analysis. Salomon Smith Barney calculated certain
implied exchange ratios by dividing each of the LMG Series A Per Share Values
by each of the TINTA Per Share Values. Based on these calculations (excluding
those involving the LMG Series A Per Share Values that would result in an
Implied Merger Consideration Value below the Minimum Value), the implied
exchange ratio ranged from 0.305 to 0.689. Salomon Smith Barney also noted
that when calculating the implied exchange ratio by dividing each of the LMG
Series A Per Share Values (excluding those LMG Series A Per Share Values that
would result in an Implied Merger Consideration Value below the Minimum Value)
by the closing price of TINTA Series A Stock one day prior, one month prior
and six months prior to the initial announcement of the Merger, the implied
exchange ratio ranged from 0.315 to 0.569. Salomon Smith Barney further noted
that the Exchange Ratio exceeds the upper limit of such range.
Historical Exchange Ratio Analysis. Salomon Smith Barney reviewed the daily
closing prices of TINTA Series A Stock and LMG Series A Stock during the
period from August 5, 1995 through August 18, 1998 and the historical implied
exchange ratios during such period, determined by dividing the closing price
per share of TINTA Series A Stock by the closing price per share of LMG Series
A Stock for each day during such period. Salomon Smith Barney noted that
during such period the implied exchange ratio ranged from 0.45 to 2.25.
Salomon Smith Barney further noted that for the period of May 14, 1998 through
July 10, 1998 (the last trading day prior to the initial announcement of the
Merger), the implied exchange ratio ranged from 0.45 to 0.57 and that the
Exchange Ratio exceeds the upper limit of such range.
Salomon Smith Barney informed the TINTA Board that, because of a lack of
sufficient precedent transaction data, a lack of publicly-traded entities
deemed comparable to TINTA or the Liberty Media Group by Salomon Smith Barney
and the fact that the operations of several of the TINTA Private Companies and
Liberty Private Companies are in the early stages of development and therefore
have not yet produced substantial earnings or cash flow, Salomon Smith Barney
did not deem it necessary or appropriate to perform two other valuation
analyses frequently performed in connection with the evaluation of the
fairness from a financial point of view of an acquisition of a publicly-held
company. In particular, Salomon Smith Barney did not deem it necessary or
appropriate to calculate implied values for the TINTA Common Stock or the LMG
Series A Stock based on valuation multiples derived from analysis of
financial, operating and stock market information for comparable companies or
analysis of other merger and acquisition transactions.
The foregoing summary does not purport to be a complete description of the
analyses performed by Salomon Smith Barney or of its presentations to the
TINTA Board. The preparation of financial analyses and fairness opinions is a
complex process involving subjective judgments and is not necessarily
susceptible to partial analysis or summary description. Salomon Smith Barney
made no attempt to assign specific weights to particular analyses or factors
considered, but rather made qualitative judgments as to the significance and
relevance of the
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<PAGE>
analyses and factors considered. Accordingly, Salomon Smith Barney believes
that its analyses (and the summary set forth above) must be considered as a
whole, and that selecting portions of such analyses and of the factors
considered by Salomon Smith Barney, without considering all of such analyses
and factors, could create a misleading or incomplete view of the processes
underlying the analyses conducted by Salomon Smith Barney and its opinion. In
its analyses, Salomon Smith Barney made numerous assumptions with respect to
TINTA, the Liberty Media Group, TCI, industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of TINTA, the Liberty Media Group and TCI. Any estimates
contained in Salomon Smith Barney's analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by such analyses.
Estimates of values of companies do not purport to be appraisals or
necessarily to reflect the prices at which companies may actually be sold.
Because such estimates are inherently subject to uncertainty, none of TINTA,
the Liberty Media Group, TCI, the TINTA Board, the Board of Directors of
Liberty, the Board of Directors of TCI, Salomon Smith Barney or any other
person assumes responsibility if future results or actual values differ
materially from the estimates. Salomon Smith Barney's analyses were prepared
solely as part of Salomon Smith Barney's analysis of the fairness of the
Exchange Ratio and were provided to the TINTA Board in that connection. The
opinion of Salomon Smith Barney was one of the factors taken into
consideration by the TINTA Board in making its determination to approve the
Merger Agreement and the Merger.
Salomon Smith Barney is an internationally recognized investment banking
firm engaged in, among other things, the valuation of businesses and their
securities in connection with mergers and acquisitions, restructurings,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. TINTA selected Salomon
Smith Barney to act as its financial advisor on the basis of Salomon Smith
Barney's international reputation and Salomon Smith Barney's familiarity with
TINTA, the Liberty Media Group and TCI. Salomon Smith Barney or its affiliates
previously have rendered certain investment banking and financial advisory
services to TINTA, the Liberty Media Group, TCI, TCI Ventures Group and AT&T,
for which Salomon Smith Barney or such affiliates received customary
compensation. Salomon Smith Barney and its affiliates (including Travelers
Group Inc.) may have other business relationships with TINTA and TCI. In
addition, in the ordinary course of business, Salomon Smith Barney may
actively trade the debt and equity securities of TINTA, TCI (including LMG
Series A Stock) and AT&T for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
Pursuant to the Engagement Letter, TINTA agreed, among other things, to pay
Salomon Smith Barney a fee in an amount of $500,000, payable upon delivery of
Salomon Smith Barney's opinion and whether or not the Merger is consummated.
In addition, whether or not the Merger is consummated, TINTA has agreed,
pursuant to the Engagement Letter, to reimburse Salomon Smith Barney for all
reasonable fees and disbursements of Salomon Smith Barney's counsel and all of
Salomon Smith Barney's reasonable travel and other out-of-pocket expenses and
to indemnify Salomon Smith Barney against certain liabilities and expenses
relating to or arising out of its engagement, including certain liabilities
under the federal securities laws.
As noted under the caption "THE MERGER--TINTA's Reasons for the Merger;
Recommendation of the TINTA Board," the fairness opinion of Salomon Smith
Barney was one of several factors considered by the TINTA Board in determining
to approve the Merger Agreement and the Merger. Salomon Smith Barney was not
involved in the negotiation of the Exchange Ratio between TINTA and TCI and
was retained by TINTA for the purpose of reviewing the fairness of the
Exchange Ratio from a financial point of view.
TCI'S REASONS FOR THE MERGER
TCI believes that the acquisition of the outstanding equity interests in
TINTA not already owned by TCI will benefit TCI and its stockholders. In
reaching its decision to make the merger proposal and to enter into the Merger
Agreement, TCI considered its management's assessment of TINTA's existing
financial position, the market performance of the TINTA Series A Stock since
the IPO, industry and market conditions, and the
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<PAGE>
following factors: (i) that the combination of TINTA's programming and
distribution assets and the Liberty Media Group's programming interests would
result in substantial synergies; (ii) that as a wholly-owned subsidiary of
TCI, TINTA would benefit from TCI's greater liquidity and access to capital,
thereby increasing TINTA's ability to satisfy the capital requirements
necessary for it to pursue its growth strategy; (iii) that operating costs
could be reduced through more efficient use of shared personnel and the
elimination of duplicate public company costs; and (iv) that certain potential
conflicts of interests between TINTA and the Liberty Media Group relating to
the growth of their respective programming businesses would be eliminated.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the TINTA Board with respect to the
Merger, TINTA stockholders should be aware that certain members of TINTA's
management and the TINTA Board have certain interests in the Merger that are
different from, or in addition to, the interests of stockholders of TINTA
generally. The TINTA Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement.
TINTA Options and Stock Appreciation Rights. As of August 1, 1998, executive
officers and directors of TINTA held options ("TINTA Options") to purchase an
aggregate of 1,715,000 shares of TINTA Series A Stock at various exercise
prices and subject to various vesting schedules. The outstanding TINTA Options
either were granted under the Tele-Communications International, Inc. 1995
Stock Incentive Plan (the "TINTA 1995 Plan") or the 1996 Nonemployee Director
Stock Option Plan (the "TINTA 1996 Nonemployee Director Plan" and, together
with the TINTA 1995 Plan, the "TINTA Plans"). All of the TINTA Options issued
under the TINTA 1995 Plan were issued in tandem with stock appreciation rights
("TINTA SARs") with respect to TINTA Series A Stock. In the case of a tandem
option or stock appreciation right, the related stock appreciation right or
option, as the case may be, is considered to have been exercised to the extent
of the number of shares of TINTA Common Stock with respect to which such
related tandem option or stock appreciation right is exercised.
At the Effective Time, pursuant to the Merger Agreement, each of the then
outstanding TINTA Options to purchase shares of TINTA Common Stock issued by
TINTA will, by virtue of the Merger, and without any further action on the
part of any holder thereof, be assumed by TCI and converted into an option (an
"Assumed Option") to purchase that number of whole shares of LMG Series A
Stock determined by multiplying the number of shares of TINTA Common Stock
subject to such TINTA Option at the Effective Time by the Exchange Ratio,
rounded up to the nearest whole number, at an exercise price per share of LMG
Series A Stock equal to the exercise price per share of such TINTA Option
immediately prior to the Effective Time divided by the Exchange Ratio, rounded
down to the nearest whole cent; provided, however, that in the case of any
options that are "incentive stock options" (as defined in Section 422 of the
Code), the adjustment provided for in this sentence will be and is intended to
be effected in a manner which is consistent with Section 424(a) of the Code.
The terms and conditions of each Assumed Option will otherwise remain as set
forth in the TINTA Option converted into such Assumed Option. TINTA SARs
issued in tandem with TINTA Options will be similarly modified.
The following table indicates for each person who is an executive officer or
director of TINTA and who held TINTA Options (including TINTA Options issued
in tandem with TINTA SARs) at August 1, 1998, (a) the number of shares of
TINTA Series A Stock subject to such options and/or stock appreciation rights
that were vested at August 1, 1998, (b) the number of shares of TINTA Series A
Stock subject to such options and/or stock appreciation rights that were not
vested at such date, (c) the exercise price per share of TINTA Series A Stock
of all such options and/or stock appreciation rights (whether vested or
unvested), (d) the total number of shares of LMG Series A Stock that would be
subject to such options and/or stock appreciation rights immediately following
the Effective Time assuming that all such options and/or stock appreciation
rights continue to be outstanding immediately prior to the Effective Time and
(e) the exercise or base price per share of LMG Series A Stock of such options
and/or stock appreciation rights immediately following the Effective Time. The
TINTA Options listed opposite the name of each person in the table below
(including TINTA Options issued in tandem
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with TINTA SARs) include all TINTA Options and TINTA SARs granted to such
person under incentive plans of TINTA or otherwise.
<TABLE>
<CAPTION>
LMG SERIES A LMG SERIES A
TINTA SERIES A TINTA SERIES A EXERCISE PRICE STOCK SUBJECT TO STOCK SUBJECT TO EXERCISE PRICE
STOCK SUBJECT TO STOCK SUBJECT TO OF TINTA ASSUMED OPTIONS ASSUMED OPTIONS OF ASSUMED
VESTED OPTIONS UNVESTED OPTIONS OPTIONS AND/OR AND/OR SARS AND/OR SARS OPTIONS AND/OR
OPTION AND SAR HOLDER AND/OR SARS AND/OR SARS SARS (VESTED) (A) (UNVESTED) (A) SARS (A)
- --------------------- ---------------- ---------------- -------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gregory Armstrong....... 20,000 30,000 $16.00 11,600 17,400 $27.58
10,000 40,000 $14.63 5,800 23,200 $25.22
Stephen M. Brett........ 20,000 30,000 $16.00 11,600 17,400 $27.58
10,000 40,000 $14.63 5,800 23,200 $25.22
Miranda Curtis.......... 80,000 120,000 $16.00 46,400 69,600 $27.58
20,000 80,000 $14.63 11,600 46,400 $25.22
David Evans............. -- 450,000 $14.63 -- 261,000 $25.22
Paul A. Gould........... 20,000 30,000 $16.00 11,600 17,400 $27.58
Leo J. Hindery, Jr...... 10,000 40,000 $16.00 5,800 23,200 $27.58
Graham E. Hollis........ 20,000 30,000 $16.00 11,600 17,400 $27.58
20,000 80,000 $14.63 11,600 46,400 $25.22
Jerome H. Kern.......... 10,000 15,000 $16.00 5,800 8,700 $27.58
Pierre Lescure.......... 20,000 30,000 $16.00 11,600 17,400 $27.58
John C. Malone.......... 20,000 30,000 $16.00 11,600 17,400 $27.58
Fred A. Vierra.......... 400,000 -- $16.00 232,000 -- $27.58
</TABLE>
- --------
(a)Assumes an Exchange Ratio of 0.58 of a share of LMG Series A Stock for each
share of TINTA Common Stock.
TINTA Restricted Stock Awards. As of August 1, 1998, executive officers and
directors of TINTA held restricted stock awards ("TINTA Restricted Stock
Awards") under the TINTA 1995 Plan representing the right to receive, upon
vesting, an aggregate of 175,000 shares of TINTA Series A Stock. At the
Effective Time, pursuant to the Merger Agreement, each restricted share of
TINTA Common Stock granted pursuant to any TINTA Plan and each restricted
share of TINTA Common Stock issued pursuant to individual awards not granted
pursuant to any TINTA Plan will, by virtue of the Merger, and without any
further action on the part of any holder thereof, be converted into a number
of restricted shares of LMG Series A Stock at the Exchange Ratio, and will
remain subject to the same restrictions applicable to such restricted share of
TINTA Common Stock immediately prior to the Effective Time. See "THE MERGER
AGREEMENT--Consideration to be Received in the Merger."
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The following table indicates for each person who is an executive officer or
director of TINTA and who held TINTA Restricted Stock Awards at August 1,
1998, (a) the number of shares of TINTA Series A Stock subject to TINTA
Restricted Stock Awards that were vested at August 1, 1998, (b) the number of
shares of TINTA Series A Stock subject to TINTA Restricted Stock Awards that
were not vested at such date and (c) the total number of shares of LMG Series
A Stock that would be subject to restricted stock awards immediately following
the Effective Time assuming that all such TINTA Restricted Stock Awards
continue to be outstanding immediately prior to the Effective Time.
<TABLE>
<CAPTION>
TINTA SERIES A STOCK SUBJECT TO LMG SERIES A STOCK SUBJECT TO
RESTRICTED STOCK AWARD HOLDER RESTRICTED STOCK AWARDS RESTRICTED STOCK AWARDS (A)
- ----------------------------- ------------------------------- -----------------------------
<S> <C> <C>
Miranda Curtis
Vested.................. -- --
Unvested................ 10,000 5,800
Fred A. Vierra
Vested.................. -- --
Unvested................ 165,000 95,700
</TABLE>
- --------
(a) Assumes an Exchange Ratio of 0.58 of a share of LMG Series A Stock for
each share of TINTA Common Stock.
Indemnification. The Merger Agreement provides that the present and former
directors, officers, employees and agents of TINTA and any of its
subsidiaries, and any person who is or was serving at the request of TINTA as
a director, officer, employee or agent of another entity, will be indemnified
by TCI from and after the Effective Time against certain liabilities to the
extent that (a) a corporation is permitted under Delaware law to indemnify its
own directors, officers, employees or agents, as the case may be, (b) such
person would be entitled to be indemnified by TINTA with respect to the
liability in question under the TINTA Charter and TINTA's Bylaws and under any
indemnification agreement with TINTA and (c) such indemnification otherwise is
permitted by applicable law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences that are expected to result to the stockholders of TINTA from the
Merger. This discussion is based upon current provisions of the Code, Treasury
Regulations promulgated thereunder ("Regulations"), current administrative
rulings, judicial decisions and other applicable authorities in effect as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. No ruling from the Internal Revenue Service ("IRS") has been sought
with respect to the Merger or the other transactions contemplated by this
Proxy Statement/Prospectus, and there can be no assurance that the IRS or a
court will not successfully challenge the conclusions reached below.
Furthermore, legislative, judicial or administrative changes may occur,
perhaps with retroactive effect, which could affect the accuracy of the
statements and conclusions set forth herein as well as the tax consequences to
the TINTA stockholders.
The discussion contained herein does not address all aspects of federal
income taxation that may be relevant to particular TINTA stockholders in light
of their personal investment or tax circumstances, or to certain types of
holders who may be subject to special treatment under the federal income tax
laws (including, without limitation, financial institutions, broker-dealers,
insurance companies, foreign persons, tax-exempt organizations, holders of
stock or options who received such property for compensatory purposes, and
holders who hold the TINTA Common Stock or will hold the LMG Series A Stock as
part of a straddle, hedge or conversion transaction). In addition, this
discussion is limited to persons who hold the TINTA Common Stock and who will
hold the LMG Series A Stock as "capital assets" (generally, property held for
investment) within the meaning of Code section 1221. This discussion does not
address state, local and foreign tax consequences.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH IN THIS SECTION ARE INCLUDED
HEREIN FOR GENERAL INFORMATION ONLY. EACH TINTA STOCKHOLDER SHOULD CONSULT A
TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE
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MERGER THAT MAY APPLY TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF STATE,
LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE CHANGES IN FEDERAL INCOME TAX LAW
THAT MAY OCCUR AFTER THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
Opinions of Counsel. In the opinions of Baker & Botts, counsel to TINTA, and
Sherman & Howard, counsel to TCI, (i) subject to the conditions and
limitations described in such opinions, the Merger will be treated for U.S.
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, no gain or loss will be recognized by TINTA as a result of
the Merger and no gain or loss will be recognized by TINTA stockholders who
exchange TINTA Common Stock for LMG Series A Stock in the Merger; and (ii) the
discussion set forth under the caption "Certain Federal Income Tax
Consequences" in this Proxy Statement/Prospectus describes the material
federal income tax consequences expected to result to the stockholders of
TINTA from the Merger and fairly represents such counsel's opinions as to the
federal income tax matters discussed herein. In addition, in the opinion of
Sherman & Howard, no gain or loss will be recognized by TCI or Merger Sub as a
result of the Merger. In rendering such opinions, counsel have relied upon
representations contained in certificates of TINTA and TCI. Consummation of
the Merger is conditioned upon the foregoing opinions of counsel not having
been withdrawn as of the Closing Date.
Tax Consequences to Holders of TINTA Common Stock. Under Section 354 of the
Code, a holder of TINTA Common Stock who receives only LMG Series A Stock in
exchange for his/her TINTA Common Stock in the Merger will not recognize gain
or loss for federal income tax purposes. The holder will have a tax basis in
the LMG Series A Stock equal to the holder's tax basis in the TINTA Common
Stock exchanged therefor. The holder's holding period for the LMG Series A
Stock for the purposes of determining long-term or short-term capital gain or
loss upon the subsequent disposition of the LMG Series A Stock will include
the period of time the holder held the TINTA Common Stock.
A holder of TINTA Common Stock who receives cash in lieu of a fractional
share of LMG Series A Stock will generally recognize taxable gain or loss.
Such gain or loss will be determined as if the holder had actually received
the fractional share of LMG Series A Stock to which the holder will be
required to allocate a portion of its tax basis in the TINTA Common Stock and
then had such fractional share redeemed for the cash received. The difference
between the basis allocated to a fractional share in this hypothetical
redemption and the cash received will constitute the gain or loss. This gain
or loss will generally be capital gain or loss (assuming the TINTA Common
Stock was held as a capital asset) and long-term capital gain or loss if the
TINTA Common Stock had been held for more than one year.
All holders of the TINTA Common Stock who receive LMG Series A Stock in the
Merger will be required to attach a statement to their federal income tax
returns for the year of the Merger which describes the facts of the Merger,
including the holder's tax basis in the TINTA Common Stock exchanged, and the
number of shares of LMG Series A Stock received in exchange for that TINTA
Common Stock. The holders should also keep as part of their permanent records
information necessary to establish their tax basis in the LMG Series A Stock
received in the Merger.
CERTAIN CONSEQUENCES OF THE MERGER; OPERATIONS FOLLOWING THE MERGER
General. Upon consummation of the Merger, the present holders of TINTA
Common Stock (other than TCI) will cease to have any direct interest in TINTA
or its future earnings or growth. TCI will own 100% of the equity interest of
the Surviving Corporation and will attribute 85% of such interest to the TCI
Ventures Group and 15% of such interest to the Liberty Media Group.
Accordingly, holders of TINTA Common Stock who receive LMG Series A Stock in
the Merger, by virtue of such receipt, may indirectly share in TINTA's future
earnings and growth through the interest in the Surviving Corporation
attributed to the Liberty Media Group, and may also share in the future
earnings and growth of the other assets and businesses of TCI attributed to
the Liberty Media Group. If the Liberty/Ventures Combination is consummated,
100% of the equity interest of the Surviving Corporation will be attributed to
the Liberty/Ventures Group.
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As a result of the Merger, TINTA will become a privately-held subsidiary of
TCI. The TINTA Series A Stock will be removed from listing on the NASDAQ/NM,
and its registration under the Exchange Act will be terminated.
It is expected that the business and operations of TINTA will be conducted
after the Merger substantially as they are currently being conducted. However,
a number of existing intercompany agreements between TCI and TINTA, covering
such matters as lending arrangements, indemnification, the provision of
services, the use of the Tele-Communications name and registration rights,
will be terminated. See "CERTAIN TRANSACTIONS BETWEEN TCI AND TINTA." In
addition, after the Merger, TCI will continue to evaluate the business and
operations of TINTA (as well as those of its other subsidiaries) and take such
other actions as it deems appropriate under then existing circumstances.
Except for the Merger and as otherwise described in this Proxy
Statement/Prospectus (including the documents incorporated by reference
herein), neither TCI nor TINTA has any specific plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation, or sale of a material amount of assets of TINTA.
Consequences to Holders of Debentures. The Debentures were issued under an
Indenture dated as of February 7, 1996 (the "Indenture"), between TINTA, as
issuer, and The Bank of New York, as trustee. The Debentures are currently
convertible, at the option of the holders thereof, into shares of TINTA Series
A Stock at a conversion price of $27.30 per share of TINTA Series A Stock
(equivalent to a conversion rate of 36.63 shares per $1,000 principal amount
of Debentures). Following the Effective Time, the Debentures outstanding
immediately prior to the Effective Time will remain outstanding and will
remain obligations of TINTA as the surviving corporation in the Merger. As a
result of the Merger, however, pursuant to the terms of the Indenture, the
Debentures will be exchangeable into the number of shares of LMG Series A
Stock (and the amount of cash in lieu of fractional shares thereof) that a
holder of such Debentures would have received if such holder had converted
such Debentures into shares of TINTA Series A Stock immediately prior to the
Effective Time. In addition, the Indenture provides that, in the event of any
"Change of Control" (as defined in the Indenture), each holder of Debentures
will have the right, at such holder's option and subject to the terms and
conditions of the Indenture (including the time periods prescribed thereby),
to require TINTA to purchase all or any portion (provided the principal amount
is $1,000 or an integral multiple thereof) of such holder's Debentures as of
the date that is 35 business days after the occurrence of such Change of
Control, at a cash price equal to 100% of the principal amount of such
Debentures or portion thereof tendered, plus accrued and unpaid interest
thereon to the purchase date. Consummation of the Merger will constitute a
"Change of Control" of TINTA within the meaning of the Indenture and,
accordingly, holders of Debentures will have the right to require TINTA to
repurchase such Debentures in accordance with the terms of the Indenture.
ACCOUNTING TREATMENT
The Merger will be accounted for by TCI as a "purchase" of a minority
interest, as such term is used under generally accepted accounting principles,
for accounting and financial reporting purposes. Accordingly, the
consideration paid for the acquired TINTA shares will be allocated on a pro
rata basis to the assets and liabilities of TINTA based on their respective
fair values.
CERTAIN LITIGATION
Shortly after TCI's announcement on July 13, 1998 of the making of its
initial merger proposal to TINTA, six putative class actions captioned
Berkowitz v. Hindery, et al. (Ca. No. 16533NC), Chetkof v. Hindery, et al.
(Ca. No. 16534NC), Mimona Capital v. Evans, et al. (Ca. No. 16535NC),
Phillips-Seitz v. Tele-Communications International, Inc. et al. (Ca. No.
16536NC), ETB Mircon Ltd. v. Hindery, et. al. (Ca. No. 16537NC), Firth v.
Hindery, et al. (Ca. No. 16547NC), respectively (collectively, the "Class
Action Lawsuits"), were filed by stockholders of TINTA in the Delaware Court
of Chancery against TCI, TINTA and the directors of TINTA. The Class Action
Lawsuits allege, among other things, that the consideration offered in the
initial merger proposal was inadequate, that those defendants who are
directors of TINTA have violated their fiduciary duties to TINTA and its
public stockholders and that TCI has violated its alleged fiduciary duties as
a majority
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stockholder of TINTA. Each of the Class Action Lawsuits seeks certification as
a class action on behalf of all stockholders of TINTA other than the
defendants, and seeks to enjoin the proposed acquisition of TINTA by TCI and/or
recover damages.
As a result of the pendency and prosecution of the Class Action Lawsuits,
plaintiffs' counsel and TCI's counsel conducted negotiations in an effort to
reach a settlement of the Class Action Lawsuits. Those negotiations resulted in
plaintiffs' agreement in principle to settle the Class Action Lawsuits based
upon, among other things, TCI's willingness to include in the Merger Agreement
a provision that if the Merger is consummated, the Exchange Ratio would yield a
value of at least $22.00 per share of TINTA Common Stock. See "--Background."
Prior to the signing of the Merger Agreement, Plaintiff's Counsel and counsel
for the defendants in the Class Action Lawsuits executed a memorandum of
understanding dated August 21, 1998 (the "MOU"), which set forth the parties'
agreement-in-principle regarding the terms of a settlement of the Class Action
Lawsuits. Subject to court approval and other conditions, the MOU provides for
the full settlement of any and all claims which have been or could have been
made in the Class Action Lawsuits, all of which will be released and
discharged, based upon and subject to, among other things: (i) a merger in
which the holders of shares of TINTA Common Stock (other than any such shares
held by TINTA in its treasury or owned of record by TCI or any subsidiary of
TCI) will receive 0.58 of share of LMG Series A Stock per share of TINTA Common
Stock; provided, however, that if the product of 0.58 and the LMG Market Price
on the Closing Date is less than $22.00, TCI must either (a) increase the
exchange ratio to equal the quotient (rounded upwards, if necessary, to the
nearest one one-thousandth) obtained by dividing $22.00 by such LMG Market
Price or (b) terminate the Merger Agreement (it being agreed that TCI may elect
to terminate the Merger Agreement if the product of 0.58 and the LMG Market
Price is less than $22.00), (ii) TCI not having taken any action with respect
to the LMG Series A Stock in violation of Regulation M of the Exchange Act, and
(iii) Plaintiff's Counsel having had the opportunity to review preliminary
shareholder disclosure materials relating to the Merger, and to negotiate with
defendants' counsel to resolve any issues raised by Plaintiff's Counsel
concerning the adequacy of such disclosure materials.
The MOU also provides that the parties to the Class Action Lawsuits, through
their counsel, will use their best efforts to pursue the settlement of the
Class Action Lawsuits and will cooperate in preparing the papers necessary to
define, pursue, and effectuate the settlement of the Class Action Lawsuits.
Further, the parties to the Class Action Lawsuits agreed in the MOU to use
their best efforts to agree upon a formal stipulation of settlement to include,
among other things, the express provision that all defendants have denied and
continue to deny that they have committed or have threatened to commit any
violations of law or breaches of duty to anyone. The MOU also provides that,
subject to the terms and conditions of the MOU and the terms and conditions of
the formal stipulation of settlement, TINTA will pay, on behalf of and for the
benefit of the TINTA director defendants in the Class Action Lawsuits, such
fees and expenses as may be awarded by the Delaware Court. Further, TINTA has
agreed in the MOU to pay all reasonable costs and expenses incurred in
providing notice of the settlement to the members of the class.
The MOU further provides that consummation of the settlement contemplated
thereby will be subject to (i) the completion of discovery by the plaintiffs;
(ii) the execution by the parties' counsel of a formal stipulation of
settlement (and such other documentation as may be required to obtain final
court approval of the settlement); (iii) the consummation of the Merger; (iv)
final court approval of the settlement (and the exhaustion of possible appeals,
if any); (v) the dismissal of the Class Action Lawsuits with prejudice and
without awarding costs to any party (except as provided in the MOU) and court
entry of a final order and judgment containing such release language as is
negotiated by the parties and contained in the stipulation of settlement; and
(vi) the determination by defendants in the Class Action Lawsuits that the
dismissal of the Class Action Lawsuits in accordance with the stipulation of
settlement will result in the release with prejudice of all claims asserted in
the Class Action Lawsuits. The MOU also provides that it will be null and void
and of no force and effect if any of the conditions contained therein are not
met or if Plaintiff's Counsel determines in good faith that, based on the
discovery contemplated by the MOU, the proposed settlement is not fair,
reasonable and adequate.
Plaintiff's Counsel are conducting their confirmatory discovery and the
parties to the Class Action Lawsuits are preparing the formal stipulation of
settlement for court approval. It is a condition to the respective obligations
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of TCI and TINTA to consummate the Merger that there be no effective
injunction or similar order preventing consummation of the transactions
contemplated by the Merger Agreement as provided therein or permitting such
consummation only subject to any condition or restriction that has or would
have a material adverse effect on TINTA. See "THE MERGER AGREEMENT--Conditions
to the Merger."
ABSENCE OF APPRAISAL RIGHTS
Under the DGCL, dissenters' appraisal rights are not available for the
shares of any class or series of stock, (A) which, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at a
meeting of stockholders to act upon a merger agreement, were designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. ("NASD") and (B) the holders
of which shares are not required to accept in exchange therefor anything other
than shares of stock of another corporation, which shares will be designated
as a national market system security on an interdealer quotation system by the
NASD, and cash in lieu of fractional shares. Accordingly, holders of TINTA
Series A Stock are not entitled to dissenters' appraisal rights in connection
with the Merger since (a) at the Record Date, the TINTA Series A Stock was
listed on the NASDAQ/NM and (b) in the Merger, holders of TINTA Common Stock
will receive only LMG Series A Stock, which will be listed on the NASDAQ/NM,
and cash in lieu of fractional shares thereof.
As of the Record Date, there were no outstanding shares of TINTA Series B
Stock, other than the shares of TINTA Series B Stock held by TCI, all of which
will be canceled in the Merger.
CERTAIN TRANSACTIONS BETWEEN TCI AND TINTA
Other than the Merger Agreement and the related transactions described in
this Proxy Statement/Prospectus or in a document incorporated herein by
reference, there has not been during the last two full fiscal years of TINTA
any material contract, arrangement, understanding, relationship, negotiation
or transaction between TINTA or its affiliates and TCI or its affiliates
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors, or a sale or transfer of a
material amount of assets. See "CERTAIN TRANSACTIONS BETWEEN TCI AND TINTA."
John C. Malone, a director and Chairman of the Board of TINTA, is Chairman
of the Board and Chief Executive Officer of TCI. Leo J. Hindery, Jr., a
director of TINTA, is President, Chief Operating Officer and a director of
TCI. Gary S. Howard, a director of TINTA, is an Executive Vice President of
TCI. Jerome H. Kern, a director of TINTA, is Vice Chairman and a director of
TCI. Fred A. Vierra, a director and Vice Chairman of the Board of TINTA, is a
consultant to TCI and, until January 1998, served as an Executive Vice
President of TCI. Paul A. Gould, a director of TINTA, is a director of TCI.
For a description of certain transactions between TCI and TINTA, see "CERTAIN
TRANSACTIONS BETWEEN TCI AND TINTA."
THE MERGER AGREEMENT
The following description of the Merger Agreement is qualified in its
entirety by reference to the complete text of the Merger Agreement, which is
incorporated by reference herein and a copy of which (exclusive of exhibits
and schedules) is annexed to this Proxy Statement/Prospectus as Appendix I.
GENERAL; EFFECTIVE TIME
The Merger Agreement provides that, upon the terms and subject to the
conditions of the Merger Agreement, Merger Sub will merge with and into TINTA,
with TINTA being the Surviving Corporation. In the Merger, which will become
effective on the date and at the time that the Certificate of Merger is
accepted for filing by the Delaware Secretary of State in accordance with the
applicable provisions of the DGCL (or such later date and time as may be
agreed to by TCI and TINTA and specified in the Certificate of Merger),
stockholders of TINTA will receive the consideration described below under "--
Consideration to be Received
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in the Merger." Such filing is expected to take place as soon as practicable
after the closing of the transactions contemplated by the Merger Agreement.
The Merger will have the effects set forth in the DGCL (including, without
limitation, Sections 259, 260 and 261 thereof).
As a result of the Merger, TINTA will become a wholly-owned subsidiary of
TCI. The Merger Agreement provides that (i) the TINTA Charter will be amended
pursuant to the Certificate of Merger to be identical to the certificate of
incorporation of Merger Sub in effect immediately prior to the Effective Time,
except to indicate that the name of the Surviving Corporation will be "Tele-
Communications International, Inc.," and such TINTA Charter as so amended will
be the certificate of incorporation of the Surviving Corporation until
thereafter amended in accordance with the terms thereof and the DGCL, (ii)
TINTA's Bylaws will be amended as of the Effective Time to be identical to the
bylaws of Merger Sub in effect immediately prior to the Effective Time (except
to the extent required to reflect that the name of the Surviving Corporation
will be "Tele-Communications International, Inc.") and, in such amended form,
will be the bylaws of the Surviving Corporation until thereafter amended in
accordance with the terms thereof, the certificate of incorporation of the
Surviving Corporation and the DGCL, and (iii) the directors of Merger Sub and
the officers of TINTA at the Effective Time will, from and after the Effective
Time, be the directors and officers of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation, or as otherwise provided by applicable law.
CONSIDERATION TO BE RECEIVED IN THE MERGER
TINTA Common Stock. Pursuant to the Merger Agreement, at the Effective Time,
each share of TINTA Common Stock outstanding immediately prior to the
Effective Time (other than any such shares held by TINTA in its treasury or
owned of record by TCI or any subsidiary of TCI, all of which will be
canceled) will be converted in the Merger into the right to receive 0.58 of a
share of LMG Series A Stock. Notwithstanding the foregoing, if the product of
0.58 and the LMG Market Price on the Closing Date is less than $22.00, TCI
must either (i) increase the exchange ratio to equal the quotient (rounded
upwards, if necessary, to the nearest one one-thousandth) obtained by dividing
$22.00 by such LMG Market Price or (ii) terminate the Merger Agreement. Had
the Merger been scheduled to close on October 13, 1998, the LMG Market Price
would have been equal to $33.80 and the 0.58 exchange ratio would have
resulted in the Merger Consideration being less than the Minimum Value. If any
holder of TINTA Common Stock would be entitled to receive a number of shares
of LMG Series A Stock that includes a fraction, then in lieu of a fractional
share, such holder will be entitled to receive cash in an amount determined by
multiplying such fraction by the current market value of a whole share of LMG
Series A Stock and rounding the product to the nearest whole cent. The
"current market value" of a share of LMG Series A Stock means, for this
purpose, the average of the last reported sale prices (or, if on any day no
sale price is reported, the average of the quoted high and low bid prices on
such day) of a share of LMG Series A Stock on the NASDAQ/NM (or, if the LMG
Series A Stock is not traded on the NASDAQ/NM, on the principal stock exchange
on which such stock is traded) for the period of five consecutive trading days
ending on and including the last full trading day preceding the Closing Date.
TINTA Options, Stock Appreciation Rights and Restricted Stock Awards. For a
description of the treatment of TINTA Options, TINTA SARs and TINTA Restricted
Stock Awards under the Merger Agreement, see "THE MERGER--Interests of Certain
Persons in the Merger."
Merger Sub Capital Stock. At the Effective Time, each share of capital stock
of Merger Sub outstanding immediately prior to the Effective Time will be
converted into one share of the common stock of the Surviving Corporation. As
a result, the Surviving Corporation will be a wholly-owned subsidiary of TCI
immediately after the Effective Time.
Certain Adjustments. If, prior to the Effective Time, the LMG Series A Stock
is recapitalized or reclassified or TCI effects any stock dividend, stock
split, or reverse stock split of LMG Series A Stock or otherwise effects any
transaction that changes the LMG Series A Stock into any other securities
(including securities of another corporation, including securities of AT&T) or
any dividend or distribution is made on the LMG Series A Stock (or such other
securities), then the shares of LMG Series A Stock to be delivered in the
Merger to the holders of TINTA Common Stock will be appropriately and
equitably adjusted to the kind and
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amount of shares of stock and other securities and property which the holders
of such shares of LMG Series A Stock would have been entitled to receive had
such shares been issued and outstanding as of the record date for determining
stockholders entitled to participate in such corporate event.
Exchange of Shares. Promptly after the Effective Time, transmittal letters
will be mailed to each holder of record of shares of TINTA Common Stock to be
used in forwarding his or her certificates evidencing such shares for
surrender and exchange for certificates evidencing the shares of LMG Series A
Stock to which he or she has become entitled and, if applicable, cash in lieu
of a fractional share of LMG Series A Stock. After receipt of such transmittal
letter, each holder of certificates formerly representing TINTA Common Stock
should surrender such certificates to The Bank of New York, as exchange agent
(the "Exchange Agent"), and each such holder will receive in exchange therefor
certificates evidencing the number of whole shares of LMG Series A Stock to
which he or she is entitled and a check for any cash that may be payable in
lieu of a fractional share of LMG Series A Stock. Such transmittal letters
will be accompanied by instructions specifying other details of the exchange.
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL LETTER.
After the Effective Time, each certificate evidencing TINTA Common Stock
(other than certificates evidencing shares held directly by TINTA in its
treasury or shares owned of record by TCI or any subsidiary of TCI, all of
which will be canceled), until so surrendered and exchanged, will be deemed,
for all purposes, to evidence only the right to receive the number of shares
of LMG Series A Stock that the holder of such certificate is entitled to
receive and the right to receive any cash payment in lieu of a fractional
share of LMG Series A Stock. The holder of such unexchanged certificate will
not be entitled to receive any dividends or other distributions payable by TCI
until the certificate is surrendered. Subject to applicable laws, such
dividends and distributions, if any, will be accumulated and, at the time of
such surrender, all such unpaid dividends and distributions, together with any
cash payment in lieu of a fractional share of LMG Series A Stock, will be
paid, without interest.
CONDITIONS TO THE MERGER
The respective obligations of TINTA, TCI and Merger Sub to consummate the
transactions contemplated by the Merger Agreement are subject to the
satisfaction or, where permissible, waiver of the following conditions: (a)
adoption of the Merger Agreement by the requisite vote of the stockholders of
TINTA at the Meeting; (b) effective registration under the Securities Act of
the shares of LMG Series A Stock to be issued in connection with the Merger
and receipt of all state securities law permits and authorizations necessary
to carry out the transactions contemplated by the Merger Agreement; (c) the
absence of any effective permanent or preliminary injunction or similar order
issued by a court or other governmental entity of competent jurisdiction
preventing consummation of the transactions contemplated by the Merger
Agreement as provided therein or permitting such consummation only subject to
any condition or restriction that has or would have a material adverse effect
on TINTA; and (d) the absence of any withdrawal by Salomon Smith Barney of its
consent to the inclusion of its opinion in this Proxy Statement/Prospectus and
the Registration Statement.
The obligations of TCI and Merger Sub to consummate the transactions
contemplated by the Merger Agreement are also subject to the satisfaction or
waiver of the following conditions: (a) the material accuracy of the
representations and warranties and the performance, in all material respects,
of the obligations, agreements and covenants made by TINTA in the Merger
Agreement; (b) receipt of certain closing certificates from TINTA; (c) receipt
of the opinion of Sherman & Howard, to the effect that no gain or loss should
be recognized by the stockholders of TINTA upon the receipt of the LMG Series
A Stock in exchange for their TINTA Common Stock in the Merger; (d) no action
having been taken, nor any statute, rule, regulation, order, judgment or
decree proposed, enacted, issued, enforced or deemed applicable by any foreign
or United States federal, state or local governmental entity, and the absence
of any pending or threatened action, suit or proceeding, which (i) makes or
may make the transactions contemplated by the Merger Agreement illegal or
imposes or may impose material
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damages or penalties in connection therewith, (ii) requires or may require the
divestiture of a material portion of the business of (A) TCI and its
subsidiaries, taken as a whole, (B) the Liberty Media Group, or (C) TINTA and
its subsidiaries taken as a whole, if the Merger is consummated, (iii) imposes
or may impose material limitations on the ability of TCI effectively to
exercise full rights of ownership of shares of capital stock of the Surviving
Corporation, (iv) requires or may require TCI, TINTA or any of their
respective material subsidiaries or affiliates to refrain from engaging in any
material business if the Merger is consummated, or (v) otherwise prohibits,
restricts, or unreasonably delays consummation of the Merger or any of the
other transactions contemplated by the Merger Agreement, or materially
increases TCI's obligations in connection therewith; and (e) receipt of all
material governmental consents, approvals and authorizations.
The obligation of TINTA to consummate the transactions contemplated by the
Merger Agreement is also subject to the satisfaction or waiver of the
following conditions: (a) the material accuracy of the representations and
warranties and the performance, in all material respects, of the obligations,
agreements and covenants made by TCI and Merger Sub in the Merger Agreement;
(b) receipt of certain closing certificates from TCI; (c) receipt of the
opinion of Baker & Botts, to the effect that no gain or loss should be
recognized by the stockholders of TINTA upon the receipt of the LMG Series A
Stock in exchange for their TINTA Common Stock in the Merger; (d) no action
having been taken, nor any statute, rule, regulation, order, judgment or
decree proposed, enacted, issued, enforced or deemed applicable by any foreign
or United States federal, state or local governmental entity, and the absence
of any pending or threatened action, suit or proceeding, which (i) makes or
may make the Merger Agreement, the Merger or any of the other transactions
contemplated by the Merger Agreement illegal or may impose material damages or
penalties in connection therewith, or (ii) has or, in the reasonable judgment
of TINTA, assuming consummation of the Merger, is reasonably likely to have a
material adverse effect on the business, properties, operations or financial
condition of TCI and its subsidiaries (including TINTA and its subsidiaries),
taken as a whole, or the Liberty Media Group; (e) receipt of authorization for
listing on the NASDAQ/NM of the shares of LMG Series A Stock to be issued
pursuant to the Merger Agreement and upon exercise of the Assumed Options,
subject only to official notice of issuance; and (f) receipt of all material
governmental consents, approvals and authorizations.
COVENANTS
Certain Covenants by TINTA. TINTA has agreed, except as permitted, required
or specifically contemplated by the Merger Agreement or consented to in
writing by TCI, to conduct, and to cause each of its subsidiaries to conduct,
its business, in the ordinary and usual course consistent with past practice,
and to use its reasonable efforts to preserve intact its business
organization, to preserve its licenses and other permits in full force and
effect, to keep available the services of its present officers and key
employees and to preserve the good will of those with which it has business
relationships. TINTA has also agreed that except as permitted, required or
specifically contemplated by the Merger Agreement or consented to in writing
by TCI, it will not and will not permit any of its subsidiaries to, prior to
the Effective Time, (a) amend its charter or bylaws or other governing
instrument or document; (b) authorize for issuance, issue, grant, sell,
deliver, dispose of, pledge or otherwise encumber any shares of its capital
stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of its capital stock or other
equity or voting interests, or any rights, options, warrants, calls,
commitments or other agreements of any character to purchase or acquire any
shares of its capital stock or other equity or voting interests, or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of its capital stock or other equity or
voting interests, subject to certain specified exceptions; (c) except for
conversions of shares of TINTA Series B Stock outstanding on the date of the
Merger Agreement into shares of TINTA Series A Stock, in accordance with the
terms of the TINTA Charter as in effect on the date of the Merger Agreement,
split, combine, subdivide or reclassify the outstanding shares of its capital
stock or other equity or voting interests, or declare, set aside for payment
or pay any dividend, or make any other actual constructive or deemed
distribution in respect of any shares of its capital stock or other equity or
voting interests, or otherwise make any payments to stockholders or owners of
equity or voting interests in their capacity as such (other than dividends or
distributions paid by any wholly-owned subsidiary of TINTA to TINTA or another
wholly-owned subsidiary); (d) redeem, purchase or
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otherwise acquire, directly or indirectly, any outstanding shares of capital
stock or other securities or equity or voting interests of TINTA or any
subsidiary of TINTA; (e) make any other changes in its capital or ownership
structure; (f) sell or grant a lien with respect to any stock, equity or
partnership interest owned by it in any subsidiary of TINTA; or (g) enter into
or assume any contract, agreement, obligation, commitment or arrangement with
respect to any of the foregoing.
Except as permitted, required or specifically contemplated by the Merger
Agreement or consented to in writing by TCI, TINTA has also agreed that it
will not, and will cause its subsidiaries not to, (i) modify in any material
respect any material license or contract, other than in the ordinary course of
business; (ii) enter into any new employment, consulting, agency or commission
agreement, make any amendment or modification to any existing such agreement
or grant any increases in compensation, other than (x) in the ordinary course
of business and consistent with past practice and with or granted to persons
who are not officers or directors and which do not, in the aggregate,
materially increase compensation or benefit expense, and (y) regular annual
salary increases granted in the ordinary course of business consistent with
past practice to officers who are not directors or executive officers; (iii)
establish, amend or modify any employee benefit plan, except in the ordinary
course of business, consistent with past practice and to the extent not
material and except to the extent required by applicable law or the existing
terms of such employee benefit plan or by the provisions of the Merger
Agreement; (iv) make capital expenditures which in the aggregate exceed the
amount provided for capital expenditures in TINTA's most recent capital
budget; (v) pay, discharge or satisfy claims, liabilities or obligations,
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of TINTA included in TINTA's SEC filings, or incurred
in the ordinary course of business and consistent with past practice; (vi)
cancel any debts or waive any claims or rights except in the ordinary course
of business and consistent with past practice; (vii) accelerate the payment
of, or otherwise prepay, any existing outstanding indebtedness for borrowed
money; (viii) other than in connection with normal cash management practices
conducted in the ordinary and usual course of business and consistent with
past practice, make any advance or loan to or engage in any transaction with
any director, officer, partner or affiliate not required by the terms of an
existing contract; (ix) enter into or assume any contract, agreement,
obligation, commitment or arrangement with respect to any of the foregoing; or
(x) incur any material amount of indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of TINTA or any of its subsidiaries or
guarantee any debt securities of others, other than in the ordinary course of
business consistent with past practice and excluding (a) any guarantees in
effect on the date of the Merger Agreement or that are required to be given
under existing agreements, (b) the incurrence or guarantee of certain
specified indebtedness, (c) any renewal, extension, amendment or refinancing
of existing indebtedness (provided there is no increase in the interest rate
or the principal amount of such indebtedness) and (d) the incurrence of any
new indebtedness, or the amendment or refinancing of any existing indebtedness
(whether or not permitted by clause (c)), if such indebtedness would be
prepayable in full at the Effective Time without material restrictions (other
than customary prepayment penalties and premiums that, in the case of any
refinancing, are no greater than those contained in the indebtedness being
refinanced).
Certain Covenants by TCI. Pursuant to the Merger Agreement, TCI has agreed,
in its capacity as a beneficial owner of TINTA Common Stock, to cause the
TINTA Common Stock beneficially owned by TCI to be voted at the Meeting in
favor of the proposal to adopt the Merger Agreement.
In addition, TCI has agreed, if the AT&T Merger becomes effective prior to
the Effective Time, to cause AT&T to take such action, including executing
such documents and instruments, as may be necessary or desirable in order for
(i) the holders of TINTA Series A Stock to receive, at the Effective Time and
in accordance with the Merger Agreement, shares of AT&T Liberty/Ventures Class
A Stock, (ii) the holders of Assumed Options to receive, upon exercise of such
options and in accordance with the Merger Agreement, shares of AT&T
Liberty/Ventures Class A Stock, (iii) the holders of Debentures to receive,
upon conversion of and in accordance with the terms of such debentures, shares
of AT&T Liberty/Ventures Class A Stock and (iv) all other provisions contained
in the Merger Agreement that are intended to be performed by, and binding
upon, the issuer of the LMG Series A Stock to be performed by, and binding
upon, AT&T as the issuer of the AT&T Liberty/Ventures Class A Stock.
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LISTING ON NASDAQ/NM
The LMG Series A Stock is listed on the NASDAQ/NM. TCI has agreed to use its
reasonable best efforts to cause the shares of LMG Series A Stock to be issued
pursuant to the Merger Agreement and upon exercise of the Assumed Options to
be authorized for listing on the NASDAQ/NM (or on the stock exchange which, at
the Effective Time, is the principal market for the LMG Series A Stock),
subject to official notice of issuance. The obligation of TINTA to consummate
the transactions contemplated by the Merger Agreement is subject to the
authorization for listing on the NASDAQ/NM of such shares, subject only to
official notice of issuance. See "--Conditions to the Merger."
INDEMNIFICATION
The Merger Agreement provides that, from and after the Effective Time, TCI
will indemnify, defend and hold harmless the present and former directors,
officers, employees or agents of TINTA and any of its subsidiaries, and any
person who is or was serving at the request of TINTA as a director, officer,
employee or agent of another entity (collectively, the "Indemnified Parties")
against (i) all losses, claims, damages, costs, expenses (including fees and
expenses of counsel properly retained by an Indemnified Party under the Merger
Agreement), liabilities or judgments or amounts that are paid in settlement
with the approval of TCI (which approval shall not be unreasonably withheld)
of or in connection with any claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact
that such person was at any time prior to the Effective Time a director,
officer, employee or agent of TINTA, whether pertaining to any matter existing
or occurring at or prior to the Effective Time and whether asserted or claimed
prior to, at or after the Effective Time ("Indemnified Liabilities") and (ii)
all Indemnified Liabilities based in whole or in part on, or arising in whole
or in part out of, or pertaining to the Merger Agreement or the transactions
contemplated thereby (and TCI shall pay expenses in advance of the final
disposition of any such action, suit, proceeding or investigation to each
Indemnified Party (including fees and expenses of counsel properly retained by
an Indemnified Party under the Merger Agreement), to the full extent permitted
by law upon receipt of the undertaking contemplated by Section 145(e) of the
DGCL), in each case to the full extent that (x) a corporation is permitted
under Delaware law to indemnify or advance expenses to its own directors,
officers, employees or agents, as the case may be, (y) such Indemnified Party
would have been entitled to be indemnified by TINTA, if such Indemnified Party
was a director, officer, employee or agent of TINTA, with respect to the
Indemnified Liabilities in question under the TINTA Charter and TINTA's Bylaws
as in effect on January 1, 1998 and under any indemnification agreement with
TINTA in a form disclosed to TCI prior to the date of the Merger Agreement and
(z) such indemnification otherwise is permitted by applicable law.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after adoption of the Merger
Agreement by the stockholders of TINTA, by (a) mutual consent of TINTA and
TCI; (b) either TINTA, on the one hand, or TCI and Merger Sub, on the other
hand, if (i) the Merger has not been consummated before January 31, 1999,
unless such failure is due to the failure of the party seeking to terminate
the Merger Agreement to perform any of its obligations thereunder, (ii) there
has been a material breach of any representation, warranty, covenant or
agreement on the part of the other party (or by Merger Sub, if the party
seeking to terminate the Merger Agreement is TINTA) contained in the Merger
Agreement and such breach is incapable of being cured, (iii) any court of
competent jurisdiction or other competent governmental authority has issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such action has become final
and nonappealable, or (iv) the required adoption of the Merger Agreement by
the stockholders of TINTA has not been duly obtained, provided the terminating
party has complied with its obligations contained in the Merger Agreement
regarding the Meeting and applicable SEC filings; or (c) TCI, if (i) the
product of 0.58 and the LMG Market Price on the Closing Date is less than
$22.00, or (ii) the TINTA Board has withdrawn or modified in any manner
adverse to TCI its recommendation to TINTA stockholders regarding the adoption
of the Merger Agreement.
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In the event of termination of the Merger Agreement by either TINTA or TCI
as provided above, the Merger Agreement will become void and there will be no
liability or obligation on the part of TCI, Merger Sub, TINTA or their
respective affiliates, stockholders, officers, directors, agents or
representatives (other than under certain specified provisions of the Merger
Agreement which will survive the termination thereof and other than to the
extent such termination results from the wilful breach by TCI, Merger Sub or
TINTA of any of its respective representations, warranties, covenants or
agreements contained in the Merger Agreement).
TINTA and TCI may amend the Merger Agreement, by action taken or authorized
by their respective boards of directors, at any time prior to the Effective
Time, either before or after adoption by the stockholders of TINTA of the
Merger Agreement, except that after such adoption by the stockholders of
TINTA, no amendment may be made which by law requires further approval by such
stockholders without such further approval. At any time prior to the Effective
Time, either TINTA or TCI, by action taken or authorized by such party's board
of directors, may, to the extent legally allowed, extend the time specified in
the Merger Agreement for the performance of any of the obligations of the
other party, waive any inaccuracies in the representations and warranties of
the other party contained in the Merger Agreement or in any document delivered
pursuant thereto, waive compliance by the other party with any of the
agreements or covenants of such other party contained in the Merger Agreement
or waive any condition to such waiving party's obligation to consummate the
transactions contemplated by, or other obligations under, the Merger
Agreement.
ASSIGNMENT
The Merger Agreement and all the rights, benefits and obligations under the
Merger Agreement will be assignable to and binding upon, and inure to the
benefit of and be enforceable by, any successor of TCI pursuant to the AT&T
Merger. Except as otherwise provided in the preceding sentence, neither the
Merger Agreement nor any of the rights, benefits or obligations thereunder may
be assigned by any party without the prior written consent of the other party.
Subject to the preceding sentence, the Merger Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
CERTAIN RESTRICTIONS ON RESALE OF LMG SERIES A STOCK
All shares of LMG Series A Stock received by TINTA stockholders in the
Merger will be registered under the Securities Act and freely transferable
under the federal securities laws, except that any such shares received by
persons who are deemed "affiliates" (as such term is defined under the
Securities Act) of TINTA prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 under the
Securities Act (or Rule 144 in the case of such persons who become affiliates
of TCI) or as otherwise permitted under the Securities Act. Persons who may be
deemed to be affiliates of TINTA or TCI generally include individuals or
entities that control, are controlled by, or are under common control with
such party and may include certain officers and directors of such party as
well as principal stockholders of such party. The Merger Agreement requires
TINTA to use reasonable efforts to cause each of its affiliates to execute a
written agreement to the effect that such person will not offer or sell or
otherwise dispose of any of the shares of LMG Series A Stock issued to such
person in or pursuant to the Merger in violation of the Securities Act or the
rules and regulations promulgated by the SEC thereunder.
EXPENSES
If the Merger Agreement is terminated prior to the Effective Time, TCI is
required to reimburse TINTA for all out-of-pocket costs and expenses incurred
in connection with the transactions contemplated by the Merger Agreement and
all costs and expenses incurred or otherwise owed by TINTA pursuant to the
Merger Agreement, provided that such termination is not the result of a
material wilful breach by TINTA of its covenants or agreements contained in
the Merger Agreement or the representations and warranties made by TINTA in
the Merger Agreement. Except as otherwise provided in the preceding sentence,
whether or not the Merger is consummated, each party will pay its own costs
and expenses incurred in connection with the Merger Agreement
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and the transactions contemplated thereby, except that the aggregate expenses
incurred in connection with the printing and mailing of this Proxy
Statement/Prospectus and the Registration Statement will be borne 90% by TCI
and 10% by TINTA.
CERTAIN TRANSACTIONS BETWEEN TCI AND TINTA
TRANSACTIONS WITH TCI AND OTHERS
Relationship with TCI. As of the Record Date, TCI beneficially owned
86,250,000 shares of TINTA Series A Stock and 11,700,000 shares of TINTA
Series B Stock which, at such date, collectively represented approximately 92%
of the total voting power of the outstanding shares of TINTA Common Stock.
Consequently, TCI has significant influence over the policies and affairs of
TINTA and is in a position to determine the outcome of corporate actions
requiring stockholder approval, including the election of directors, the
adoption of amendments to the TINTA Charter and the approval of mergers
(including the Merger) and the sale of all or substantially all of TINTA's
assets.
TCI formed TINTA during the fourth quarter of 1994 and the first quarter of
1995 through the contribution to TINTA of substantially all of TCI's
international cable television and telephony assets and certain of TCI's
international programming assets. The international programming assets that
TCI did not contribute to TINTA remained in two of TCI's other subsidiaries,
Liberty and TCIC. The international programming assets that remained with
Liberty were those that were either (i) devoted to foreign sports programming
or (ii) owned directly or indirectly (in whole or in part) by U.S.-based
programming companies in which Liberty had an interest. During 1996, Liberty
contributed its interests in foreign sports programming to Liberty/TINTA LLC
("Liberty/TINTA"), a limited liability company owned in equal parts by
subsidiaries of TINTA and Liberty. Liberty/TINTA then contributed such assets
to a newly formed sports programming venture with The News Corporation
Limited.
In connection with the formation of the TCI Ventures Group, TCI concluded an
exchange offer with its stockholders on September 10, 1997, whereby TCI
exchanged (i) shares of TCIVG Series A Stock for shares of TCI Group Series A
Stock, and (ii) shares of TCIVG Series B Stock for shares of TCI Group Series
B Stock. The businesses and assets attributed to the TCI Ventures Group
include TCI's current equity interest in TINTA and substantially all of TCI's
non-cable and non-programming domestic assets. With the formation of the TCI
Ventures Group, TCI assigned to TCI Ventures Group, L.L.C., various
agreements, rights and obligations related to TCI's assets attributed to the
TCI Ventures Group, including all of TCI's current equity interest in TINTA
and certain financial obligations. See "--Credit Facility." Upon consummation
of the Merger, TCI will attribute to the Liberty Media Group and the TCI
Ventures Group 15% and 85%, respectively, of TCI's 100% equity interest in
TINTA.
In August 1998, Liberty purchased from TINTA 2,710,406 shares of Series A
Common Stock of TCI Music, a subsidiary of TCI, for a cash payment of
$21,683,248 ($8.00 per share). Such purchase was made pursuant to TINTA's
exercise of a right granted to TINTA and all other stockholders of DMX Inc.
("DMX") in July 1997 when DMX was acquired by TCI Music through a merger in
which stockholders of DMX received 0.25 of a share of Series A Common Stock of
TCI Music for each share of DMX common stock. Each share of Series A Common
Stock of TCI Music issued in that transaction was paired with a nondetachable
right (a "Right") to require TCI to purchase such share for $8.00 in cash or
TCI Group Series A Stock. The Rights were exercisable for a 30 day period,
beginning July 13, 1998. Liberty, which assumed TCI's obligations with respect
to the Rights in July 1997, elected to pay cash in satisfaction of all
exercised Rights.
Credit Facility. TINTA and TCI entered into a subordinated revolving credit
facility (the "Credit Facility"), effective April 25, 1995, which provides for
loans from TCI to TINTA in an aggregate principal amount at any time
outstanding of up to $200 million. As of September 10, 1997, TCI assigned all
of its rights,
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interests and obligations in and to the Credit Facility to TCI Ventures Group,
L.L.C. At the time of such assignment no borrowings were outstanding under the
Credit Facility. In connection with the assignment, the parties agreed to
extend the maturity date of the Credit Facility to September 10, 2002, at
which time all borrowings under the Credit Facility, together with all accrued
interest thereon, will be payable. In addition, the parties reduced the
interest rate on the Credit Facility from 13% to 10% per annum. Prior to such
maturity date, borrowings repaid by TINTA under the Credit Facility will be
available for re-borrowing, subject to certain conditions to borrowing. TINTA
is required to pay an annual facility fee in an amount equal to .375% of the
unused borrowing availability under the Credit Facility. At September 30,
1998, approximately $150.2 million (including accrued interest) was
outstanding under the Credit Facility.
Other Agreements. TCI and TINTA are parties to a number of intercompany
agreements covering matters such as lending arrangements, indemnification, the
provision of services, tax sharing, the use of the Tele-Communications name
and registration rights. TCI also provides certain administrative, financial,
legal, treasury, accounting, tax and other services to TINTA and makes
available certain of its employee benefit plans to TINTA's employees. It is
expected that following consummation of the Merger, all such existing
arrangements, other than tax sharing arrangements, will be terminated.
TRANSACTIONS WITH MANAGEMENT
Consulting Agreement with Mr. Vierra. Effective January 1, 1998, TCI entered
into a five year consulting agreement with Fred A. Vierra, a director and Vice
Chairman of the Board of TINTA and, until January 1998, Chief Executive
Officer of TINTA. The consulting agreement provides for Mr. Vierra to provide
consulting services to TCI on the allocation of TCI's resources and other
matters generally and with respect to the international operations of TCI in
particular. Mr. Vierra is not required to provide more than 700 hours per year
in such consulting services. For such consulting services, the consulting
agreement provides for a fee of $700,000 per annum. Pursuant to the agreement,
a portion of such consulting fee will be deferred at an annual rate of
approximately $250,000 per annum. The deferred amounts will be paid in monthly
installments over a 240-month period commencing on the later of the first
business day of the first full calendar month following December 31, 2002, and
the termination of Mr. Vierra's position as a consultant to TCI, together with
interest thereon at the rate of 8% per annum, compounded annually, from the
date of deferral to the payment date. In the event of Mr. Vierra's death, all
outstanding deferred amounts will be paid in a lump sum to his beneficiaries.
While Mr. Vierra is a consultant to TCI pursuant to the agreement, he is
entitled to participate in all insurance plans or policies adopted for the
benefit of TCI's employees. The consulting agreement provides that all options
for TCI Common Stock and TINTA Common Stock held by Mr. Vierra are now vested
in full. In addition, restricted stock awards for TINTA Common Stock shall
vest upon the expiration of the terms provided by the agreements evidencing
their respective grants. See "THE MERGER--Interests of Certain Persons in the
Merger."
Upon termination of the consulting agreement by TCI, TCI will pay all
remaining compensation due under the agreement for the balance of the term of
the agreement. Upon Mr. Vierra's death during the term of the consulting
agreement, TCI will pay to Mr. Vierra's beneficiaries a lump sum in an amount
equal to one year's compensation. The consulting agreement provides further
that, during the term of the agreement, Mr. Vierra will not be connected in
any manner with any entity which directly competes in a material respect with
the business of TCI or any of its majority-owned subsidiaries, which includes
TINTA. Mr. Vierra may, however, own securities of any corporation listed on a
national securities exchange or quoted on The Nasdaq Stock Market to the
extent of an aggregate of 5% of the amount of such securities outstanding. In
addition, Mr. Vierra may provide consulting services to others if approved by
TCI's chief executive officer.
Employment Agreement with Mr. Evans. Mr. Evans commenced employment as
TINTA's President and Chief Operating Officer effective September 1, 1997, and
as TINTA's Chief Executive Officer in January 1998, pursuant to the terms of a
five-year employment agreement with TINTA. The employment agreement provides
for a base salary of $600,000 per annum. Such salary is subject to annual
review by the TINTA Board, which
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may, in its sole discretion, increase Mr. Evans' salary. In addition, Mr.
Evans will receive an annual bonus of $200,000, payable in two equal
installments on February 1 and September 1 of each year, commencing February
1, 1998. The employment agreement allows for discretionary bonuses as well.
Pursuant to the terms of the employment agreement, TINTA issued to Mr. Evans
on each of September 1, 1997 and 1998, $500,000 of TINTA Series A Stock
(30,075 shares and 23,194 shares in 1997 and 1998, respectively) and is
required to issue to Mr. Evans on each of the next three successive
anniversaries of such latter issuance an additional $500,000 of TINTA Series A
Stock. On September 1, 1997, TINTA also granted Mr. Evans options to purchase
450,000 shares of TINTA Series A Stock with an exercise price of $14.625 per
share. Such options have been granted pursuant to the terms of the TINTA 1995
Plan and vest evenly over the succeeding five years. See "THE MERGER--
Interests of Certain Persons in the Merger--TINTA Options and Stock
Appreciation Rights." At such time as Mr. Evans relocates to Denver, Colorado,
TINTA will reimburse Mr. Evans for his reasonable relocation expenses. The
agreement allows Mr. Evans to be based in Los Angeles, California until August
31, 1999, after which time he will be based at TINTA's principal offices.
While he is employed by TINTA pursuant to his employment agreement, Mr. Evans
is entitled to participate in all formal incentive compensation plans, stock
incentive plans, employee stock purchase plans, retirement plans and insurance
plans or policies adopted for the benefit of TINTA's or TCI's executive
officers or employees generally.
Mr. Evans' employment agreement provides further that during the term of his
employment with TINTA, Mr. Evans will not be connected with any entity in any
manner, which directly competes in a material respect with the business of
TINTA or any of its majority-owned subsidiaries. Mr. Evans may, however, own
securities of any corporation listed on a national securities exchange or
quoted on The Nasdaq Stock Market to the extent of an aggregate of 5% of the
amount of such securities outstanding.
Mr. Evans' employment agreement terminates on August 31, 2002. The
employment agreement provides that upon an earlier termination of Mr. Evans'
employment by TINTA without cause, all remaining compensation due under such
agreement for the balance of the employment term would become immediately due
and payable to Mr. Evans. Upon his death during the employment term, TINTA
would pay to Mr. Evans' beneficiaries all compensation accrued to the date of
death. In the event of his disability, TINTA would continue to pay Mr. Evans
his annual salary as and when it would have otherwise become due until the
first to occur of the end of the employment term or the date of his death.
Following the consummation of the Merger, TINTA's employment agreement with
Mr. Evans shall continue on the same terms as were in effect immediately prior
to the Merger, except that all TINTA Options granted to Mr. Evans shall become
Assumed Options and the $500,000 of TINTA Series A Stock issuable to Mr. Evans
on September 1 of each of the next three years shall instead be issuable in
shares of LMG Series A Stock.
THE AT&T MERGER AND THE LIBERTY/VENTURES COMBINATION
The following description of the AT&T Merger and the Liberty/Ventures
Combination is qualified in its entirety by reference to the complete text of
the AT&T Agreement (excluding the exhibits and schedules thereto), which is
incorporated by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." Consummation of the Merger is not subject to the consummation of
either the AT&T Merger or the Liberty/Ventures Combination.
GENERAL
On June 23, 1998, TCI and AT&T entered into the AT&T Agreement, which,
subject to the terms and conditions thereof, provides for the acquisition of
TCI by AT&T. Such acquisition will be effected through the AT&T Merger, in
which Italy Merger Corp., a wholly-owned subsidiary of AT&T, will be merged
with and into
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TCI, with TCI as the surviving corporation. As a result of the AT&T Merger,
TCI will become a wholly-owned subsidiary of AT&T, and stockholders of TCI
will become stockholders of AT&T. See "--Consideration to be Received by
Holders of TCI Common Stock in the AT&T Merger."
In a separate proposed transaction, TCI has announced its intention to
consummate the Liberty/Ventures Combination, whereby the shares of TCIVG Stock
will be reclassified as shares of LMG Stock and, in connection with such
reclassification, the businesses and assets of the Liberty Media Group and the
TCI Ventures Group will be combined. Following the Liberty/Ventures Combination,
the LMG Stock will reflect the separate performance of the businesses and assets
attributed to the combined entity. See "--Liberty/Ventures Combination." The
Liberty/Ventures Combination is expected to occur prior to, but is not
conditional upon, the consummation of the AT&T Merger.
CONSIDERATION TO BE RECEIVED BY HOLDERS OF TCI COMMON STOCK IN THE AT&T MERGER
In connection with the AT&T Merger, (i) each share of LMG Series A Stock
outstanding immediately prior to the effective time of the AT&T Merger (the
"AT&T Effective Time") will be converted into the right to receive one share
of AT&T Liberty/Ventures Class A Stock and each share of LMG Series B Stock
outstanding immediately prior to the AT&T Effective Time will be converted
into the right to receive one share of AT&T Liberty/Ventures Class B Stock,
(ii) each share of TCI Group Series A Stock outstanding immediately prior to
the AT&T Effective Time will be converted into the right to receive .7757 of a
share of AT&T Common Stock and each share of TCI Group Series B Stock
outstanding immediately prior to the AT&T Effective Time will be converted
into the right to receive .8533 of a share of AT&T Common Stock, and (iii) if
the Liberty/Ventures Combination has not occurred prior to the AT&T Effective
Time, each share of TCIVG Series A Stock will be converted into the right to
receive 0.52 of a share of AT&T Liberty/Ventures Class A Stock and each share
of TCIVG Series B Stock will be converted into the right to receive 0.52 of a
share of AT&T Liberty/Ventures Class B Stock, subject to TCI's right to adjust
the foregoing exchange ratios for the TCIVG Common Stock as it deems
appropriate to reflect the relative values of the TCI Ventures Group and the
Liberty Media Group. The AT&T Liberty/Ventures Stock to be issued in the AT&T
Merger will be a newly authorized class of common stock of AT&T which will be
intended to reflect the separate performance of the businesses and assets
attributed to the Liberty/Ventures Group. See "--Assets and Business of
Liberty/Ventures Group Following the AT&T Merger."
In general, the AT&T Agreement provides that the holders of shares of AT&T
Liberty/Ventures Class A Stock and holders of shares of AT&T Liberty/Ventures
Class B Stock will vote together as a single class with the holders of shares
of AT&T Common Stock on all matters presented to such stockholders. Holders of
AT&T Liberty/Ventures Class A Stock will be entitled to 1/10 of a vote for
each share of such stock held, holders of AT&T Liberty/Ventures Class B Stock
will be entitled to one vote for each share of such stock held and holders of
AT&T Common Stock will be entitled to one vote for each share of such stock
held.
It is expected that the Merger will be consummated prior to the anticipated
closing date of the AT&T Merger. In such event and assuming the AT&T Merger is
consummated, shares of TINTA Common Stock that are converted into shares of
LMG Series A Stock in the Merger will ultimately be converted into the right
to receive shares of AT&T Liberty/Ventures Class A Stock upon consummation of
the AT&T Merger in accordance with the AT&T Agreement. Consummation of the
Merger, however, is not contingent on the consummation of the AT&T Merger or
the other transactions contemplated by the AT&T Agreement, and in the event
such transactions are abandoned, former TINTA stockholders would continue to
own shares of LMG Series A Stock. Consummation of the AT&T Merger is subject
to certain conditions, including the separate approvals of the stockholders of
TCI and AT&T and, accordingly, there can be no assurance that the AT&T Merger
will be consummated. See "--Conditions to the AT&T Merger."
LIBERTY/VENTURES COMBINATION
TCI has announced its intention, subject to TCI stockholder approval, to
consummate the Liberty/Ventures Combination, whereby (i) each share of TCIVG
Series A Stock will be reclassified as 0.52 of a share of LMG Series A Stock
and each share of TCIVG Series B Stock will be reclassified as 0.52 of a share
of LMG Series B
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Stock, and (ii) the assets and businesses of the Liberty Media Group and the
TCI Ventures Group will be combined. The Liberty/Ventures Combination is
expected to occur prior to, but is not conditional upon, the consummation of
the AT&T Merger. In connection with the Liberty/Ventures Combination,
following receipt of the requisite TCI stockholder approval, the TCI Charter
will be amended to (i) reflect the reclassification of each series of TCIVG
Stock as the corresponding series of LMG Stock, (ii) delete all references to
the TCI Ventures Group currently contained in the TCI Charter, and redefine
the term "Liberty Media Group" in the TCI Charter to include the assets and
businesses held by the Liberty Media Group and the TCI Ventures Group
immediately prior to the combination of the Liberty Media Group and the TCI
Ventures Group, and (iii) reflect certain other conforming changes to the TCI
Charter necessary to effect the Liberty/Ventures Combination.
In addition, upon the effectiveness of the amendments to the TCI Charter
which are required to effect the Liberty/Ventures Combination, TCI will cause
all of the capital stock of Liberty, the entity which holds all the assets and
businesses attributed to the Liberty Media Group, to be contributed to TCI
Ventures Group, L.L.C., the entity which holds all the assets and businesses
attributed to the TCI Ventures Group. Thereafter, the name of TCI Ventures
Group, L.L.C. will be changed to Liberty/Ventures Group, L.L.C.
Following the Liberty/Ventures Combination, the combined Liberty Media Group
and TCI Ventures Group will be called the "Liberty Media Group" (herein
referred to as the Liberty/Ventures Group), and the LMG Stock will reflect the
separate performance of the businesses and assets attributed to the
Liberty/Ventures Group. John C. Malone, Chairman and Chief Executive Officer
of TCI, will serve as Chairman of the Liberty/Ventures Group, Robert R.
Bennett, President and Chief Executive Officer of Liberty, will be President
and Chief Executive Officer of the Liberty/Ventures Group and Gary S. Howard,
currently President and Chief Executive Officer of TCI Ventures Group, L.L.C.
and Executive Vice President and Chief Operating Officer of Liberty, will be
Executive Vice President and Chief Operating Officer of the Liberty/Ventures
Group.
Consummation of the Liberty/Ventures Combination is subject to certain
conditions, including approval of the TCI stockholders. Moreover, TCI has no
contractual obligation to effect the Liberty/Ventures Combination.
Accordingly, there can be no assurance that the Liberty/Ventures Combination
will be consummated.
ASSETS AND BUSINESS OF THE LIBERTY/VENTURES GROUP FOLLOWING THE AT&T MERGER
Following the AT&T Merger, the Liberty/Ventures Group will comprise the
corporations, partnerships and other entities and interests which, at the time
of the AT&T Merger, comprise the Liberty/Ventures Group or, if the
Liberty/Ventures Combination has not occurred, the Liberty Media Group and the
TCI Ventures Group. Pursuant to the AT&T Agreement, prior to, and conditional
upon, the closing of the AT&T Merger, certain assets currently attributed to
the TCI Ventures Group (including, among others, the shares of AT&T Common
Stock received in the merger of AT&T and Teleport Communications Group, Inc.,
the stock of At Home Corporation, the assets of, or outstanding equity
interests in, the National Digital Television Center, Inc. and the equity
interests in Western Tele-Communications, Inc.) will be transferred to the TCI
Group or attributed to the TCI Group in exchange for approximately $5.5
billion in cash. Certain other transfers of assets among the Groups will also
occur. In addition, upon consummation of the AT&T Merger, the Liberty/Ventures
Group will become entitled to the benefit of all the net operating loss
carryforwards available to the entities included in TCI's consolidated income
tax return as of the date of the AT&T Merger (which TCI anticipates to be
approximately $1.7 billion).
After giving effect to such transfers, the Liberty/Ventures Group will be
engaged in four principal lines of business: (i) production, acquisition and
distribution through all available formats and media of branded entertainment,
educational and informational programming and software, including multimedia
products; (ii) electronic retailing, direct marketing, advertising sales
relating to programming services, infomercials and transaction processing;
(iii) international cable distribution and satellite distributed programming
services; and (iv) various investments in telecommunications products,
services and technologies.
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OPERATIONS AND MANAGEMENT OF THE LIBERTY/VENTURES GROUP FOLLOWING THE AT&T
MERGER
Following the AT&T Merger, AT&T will own 100% of the businesses and assets
that comprise the Liberty/Ventures Group. However, the day-to-day management
of the businesses of the Liberty/Ventures Group will remain independent of
AT&T management. The AT&T Agreement provides that the Liberty/Ventures Group
will continue to be managed by certain members of TCI's management who
currently manage the businesses of the Liberty Media Group and the TCI
Ventures Group and who, if the Liberty/Ventures Combination shall have been
consummated, will have been managing the business of the Liberty/Ventures
Group. See "--Liberty/Ventures Combination."
In addition, the AT&T Agreement contemplates the execution of certain
agreements at the AT&T Effective Time which will, among other things,
(i) provide preferred vendor status to the Liberty/Ventures Group for digital
basic distribution on AT&T's systems of new programming services created by
the Liberty/Ventures Group and its affiliates, (ii) provide for a renewal of
existing affiliation agreements of the Liberty/Ventures Group and its
affiliates, and (iii) provide interactive video services to the
Liberty/Ventures Group.
CONDITIONS TO THE AT&T MERGER
Consummation of the AT&T Merger is subject to the satisfaction or, where
permissible, waiver of a number of customary conditions to closing, including
but not limited to (a) the separate approvals of the stockholders of AT&T and
TCI (including the former holders of TINTA Common Stock if the Merger shall
have been consummated), (b) effective registration under the Securities Act of
the shares of AT&T Common Stock and AT&T Liberty/Ventures Stock to be issued
to TCI stockholders in the AT&T Merger, (c) receipt of all necessary
governmental consents and approvals, including consent of the Federal
Communications Commission and expiration or termination of any waiting period
applicable under the HSR Act, (d) absence of any effective injunction or
similar order preventing consummation of the transactions contemplated by the
AT&T Agreement, (e) receipt by TCI and AT&T of certain opinions from their
respective legal counsel to the effect that, among other things, the AT&T
Merger should qualify as a tax-free reorganization for federal income tax
purposes, and (f) receipt of authorization for listing of the shares of AT&T
Common Stock and AT&T Liberty/Ventures Stock on The New York Stock Exchange,
Inc. ("NYSE") or, in the case of AT&T Liberty/Ventures Stock, the NASDAQ/NM,
subject only to official notice of issuance.
TERMINATION OF THE AT&T AGREEMENT
The AT&T Agreement may be terminated and the AT&T Merger abandoned at any
time prior to the AT&T Effective Time, by (a) the mutual consent of TCI and
AT&T; (b) either TCI or AT&T (i) if the AT&T Merger has not been consummated
by March 31, 1999; provided, however, that the party seeking to terminate did
not fail to fulfill any obligation causing the AT&T Merger not to be
consummated by that date, and provided, further that such date may be extended
(1) first to June 30, 1999 by either party in the event that the delay is
attributable to a transaction permitted in connection with obtaining
regulatory approval, due to the failure to have obtained the requisite
regulatory approvals or due to an injunction or other governmental action
preventing the consummation of the AT&T Merger, and (2) then to September 30,
1999 as long as the party extending such date believes in good faith that such
conditions are capable of being satisfied on such date, (ii) if a court of
competent jurisdiction or governmental entity has issued a final and
nonappealable order enjoining or prohibiting the AT&T Merger, or (iii) if the
requisite approvals of the stockholders of TCI and AT&T of the transactions
contemplated by the AT&T Agreement have not been duly obtained on or prior to
March 31, 1999; (c) by AT&T or Italy Merger Corp. (i) if the TCI Board has
withdrawn or modified its approval or recommendation of the transactions
contemplated by the AT&T Agreement, or (ii) if TCI breaches or fails in any
material respect to perform or comply with its covenants and agreements or
breaches its representations and warranties contained in the AT&T Agreement,
in each case in a manner that is not curable, (d) by AT&T if certain
stockholders of TCI who entered into a voting agreement with respect to the
AT&T Merger have breached any of their respective representations, covenants
or obligations thereunder in any material respect and such breach is not
curable; or (e) by TCI (i) if the Board of Directors of AT&T (the "AT&T
Board") has withdrawn or modified its approval
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or recommendation of the transactions contemplated by the AT&T Agreement, or
(ii) if AT&T or Italy Merger Corp. breaches or fails in any material respect
to perform or comply with its covenants and agreements or breaches its
representations and warranties contained in the AT&T Agreement, in each case
in a manner that is not curable.
AT&T will be required to pay TCI a termination fee equal to $1.75 billion in
cash if TCI terminates the AT&T Agreement due to (i) the failure of AT&T's
stockholders to approve the transactions contemplated by the AT&T Agreement by
the requisite vote prior to March 31, 1999, (ii) the withdrawal or
modification by the AT&T Board of its approval or recommendation of such
transactions, or (iii) the failure to obtain necessary governmental and
regulatory approvals by September 30, 1999, which failure occurs as a result
of the announcement by AT&T of a significant transaction that delays receipt
of such governmental approvals. TCI will be required to pay AT&T a termination
fee equal to $1.75 billion in cash if AT&T terminates the AT&T Agreement due
to the failure of TCI stockholders to approve the transactions contemplated by
the AT&T Agreement by the requisite vote prior to March 31, 1999 or the
withdrawal or modification by the TCI Board of its approval or recommendation
of such transactions.
REGISTRATION AND LISTING OF AT&T STOCK
The AT&T Agreement provides that the shares of AT&T Common Stock and AT&T
Liberty/Ventures Stock issued pursuant to the AT&T Agreement will be
registered under the applicable provisions of the Securities Act and, if
required, under any applicable state securities laws. Such shares also will be
listed for trading on the NYSE or, in the case of the AT&T Liberty/Ventures
Stock, at AT&T's option, on the NASDAQ/NM.
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DESCRIPTION OF TCI CAPITAL STOCK
The following description of certain terms of the TCI Common Stock and the
TCI Preferred Stock (as defined below) does not purport to be complete and is
qualified in its entirety by reference to the TCI Charter (including the
Certificate of Designations with respect to each outstanding series of Series
Preferred Stock (as defined below)), which is incorporated herein by
reference.
GENERAL
The TCI Charter currently provides that TCI is authorized to issue
3,602,375,096 shares of capital stock, including (i) 3,550,000,000 shares of
TCI Common Stock, of which 1,750,000,000 shares are designated TCI Group
Series A Stock, 150,000,000 shares are designated TCI Group Series B Stock,
750,000,000 shares are designated LMG Series A Stock, 75,000,000 shares are
designated LMG Series B Stock, 750,000,000 shares are designated TCIVG Series
A Stock and 75,000,000 shares are designated TCIVG Series B 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, 70,575
shares are designated as Convertible Preferred Stock, Series C-TCI Group (the
"Series C-TCI Group Preferred Stock"), 70,575 shares are designated as
Convertible Preferred Stock, Series C-Liberty Media Group (the "Series C-LMG
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"). All of the shares of Class A
Preferred Stock have previously been redeemed and retired and may not be
reissued, thereby reducing the number of authorized shares of TCI Preferred
Stock.
COMMON STOCK
As of June 30, 1998, (i) 473,398,380 shares of TCI Group Series A Stock (net
of treasury stock and shares held by subsidiaries of TCI), 49,945,822 shares
of TCI Group Series B Stock (net of treasury stock and shares held by
subsidiaries of TCI), 325,959,183 shares of LMG Series A Stock (net of
treasury stock and shares held by subsidiaries of TCI), 31,745,757 shares of
LMG Series B Stock (net of treasury stock and shares held by subsidiaries of
TCI), 377,030,654 shares of TCIVG Series A Stock (net of treasury stock) and
45,367,134 shares of TCIVG Series B Stock (net of treasury stock) had been
issued and were outstanding; (ii) 11,362,365 shares of TCI Group Series A
Stock, 14,842,472 shares of TCI Group Series B Stock, 25,126,455 shares of LMG
Series A Stock, 82,074 shares of LMG Series B Stock, 61,450 shares of TCIVG
Series A Stock and 432,196 shares of TCIVG Series B Stock were held by TCI as
treasury stock, and (iii) 125,728,816 shares of TCI Group Series A Stock,
9,154,134 shares of TCI Group Series B Stock, 6,654,367 shares of LMG Series A
Stock and 3,417,187 shares of LMG Series B Stock were held by subsidiaries of
TCI (all as adjusted for stock dividends issued with respect to the LMG Stock
and the TCIVG Stock on February 6, 1998). As of June 30, 1998, 98,598,176
shares of TCI Group Series A Stock, 14,511,570 shares of TCI Group Series B
Stock, 38,863,193 shares of LMG Series A Stock, 33,704,949 shares of TCIVG
Series A Stock and 2,800,000 shares of TCIVG Series B Stock (all as adjusted
for stock dividends issued with respect to the LMG Stock and the TCIVG Stock
on February 6, 1998) were reserved for issuance upon conversion, exchange or
exercise of outstanding convertible or exchangeable securities (other than the
TCI Group Series B Stock, the LMG Series B Stock and the TCIVG Series B Stock,
and other than the Series F Preferred Stock held by subsidiaries of TCI) and
options. In addition, TCI has reserved a number of shares of TCI Group Series
A Stock equal to the number of shares of TCI Group Series B Stock outstanding,
a number of shares of LMG Series A Stock equal to the number of shares of LMG
Series B Stock outstanding and a number of shares of TCIVG Series A Stock
equal to the number of shares of TCIVG Series B Stock outstanding, in either
case for issuance upon conversion, at the option of the holder, of the TCI
Group Series B Stock, the LMG Series B Stock and the TCIVG Series B 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 Stock.
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CERTAIN DEFINITIONS
As used herein, the following terms have the meanings specified below:
"Adjusted Liberty Media Group Outstanding Interest Fraction" means a
fraction the numerator of which is the number of outstanding shares of LMG
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 LMG
Stock issuable upon conversion, exercise or exchange of Pre-Distribution
Convertible Securities and (d) the number of Committed Acquisition Shares
issuable.
"Adjusted TCI Ventures Group Outstanding Interest Fraction" means a fraction
the numerator of which is the number of outstanding shares of TCIVG 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 TCI Ventures Group
Inter-Group Interest and (c) the number of shares of TCIVG Stock issuable upon
conversion, exercise or exchange of Pre-Exchange Offer Securities.
"Appraisal Date," with respect to any determination of the Liberty Media
Group Private Market Value or the TCI Ventures Group Private Market Value,
shall mean 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 Stock
that TCI had, prior to the record date for the LMG Distribution on August 10,
1995, agreed to issue, but as of such record date had not issued, and (ii) the
shares of LMG Series A 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 Stock), which as a result of the LMG Distribution,
constitute obligations to issue, among other securities, LMG Series A Stock or
Convertible Securities which are convertible into or exercisable or
exchangeable for LMG Series A Stock; provided, however, that Committed
Acquisition Shares will not include any shares of LMG 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 Stock and dividends or distributions of shares of LMG Series A Stock
or LMG Series B Stock to holders of LMG Series A Stock and other
reclassifications of the LMG Series A Stock, in each case occurring (or the
record date for which occurs) after the LMG Distribution. The shares of LMG
Series A Stock issuable upon conversion of the Series H Preferred Stock
constitute Committed Acquisition Shares.
"Convertible Securities" means any securities of TCI (other than any series
of TCI Common Stock) or any Subsidiary thereof 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.
"Disposition" means the sale, transfer, assignment or other disposition
(whether by merger, consolidation, sale or contribution of assets or stock or
otherwise) of properties or assets.
"Exchange Offers" means those certain offers made by TCI to exchange (i) one
share of TCIVG Series A Stock for each share of TCI Group Series A Stock
properly tendered and not validly withdrawn, up to 188,661,300 shares of TCI
Group Series A Stock (the "Series A Maximum"), and (ii) one share of TCIVG
Series B Stock for each share of TCI Group Series B Stock properly tendered
and not validly withdrawn, up to 16,266,400 shares of TCI Group Series B Stock
(the "Series B Maximum"), upon the terms and subject to the conditions set
forth in the Offering Circular of TCI, dated August 7, 1997, and the related
letters of transmittal.
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"First Appraiser" means, with respect to any determination of the Liberty
Media Group Private Market Value or the TCI Ventures 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 TCI Ventures 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 all of whose
members are independent directors as determined under the NASDAQ/NM rules.
"Initial Ventures Options" means those certain options to purchase shares of
TCIVG Series A Stock that were issued effective upon the consummation of the
Exchange Offers, in connection with the adjustment of the Adjustable Options.
For purposes of this definition, the term "Adjustable Options" means those
options to purchase shares of TCI Group Series A Stock that were outstanding
immediately prior to the consummation of the Exchange Offers under any
Existing Stock Plan (as defined below), which options the TCI Board and, if
applicable, the committee of the TCI Board charged with the administration of
such Existing Stock Plan, determined to adjust for the effects of the Exchange
Offers by the issuance, in substitution for and in cancellation of each such
Adjustable Option effective upon the consummation of the Exchange Offers, of
an Initial Ventures Option to purchase a number of shares of TCIVG Series A
Stock initially equal to 30% (rounded up to the next whole number) of the
number of shares of TCI Group Series A Stock that would have been issuable
upon exercise of such Adjustable Option immediately prior to the consummation
of the Exchange Offers, and an option to purchase a number of shares of TCI
Group Series A Stock equal to 70% (rounded down to the next whole number) of
the number of shares of TCI Group Series A Stock that would have been issuable
upon exercise of such Adjustable Option immediately prior to the consummation
of the Exchange Offers, together with such other securities as were then
issuable upon exercise of such Adjustable Option (and, in each case, having
such other terms consistent with the terms of the Adjustable Option for which
they are exchanged as the TCI Board or the committee, as applicable,
determines). The term "Existing Stock Plans" means each of the following: the
Tele-Communications, Inc. 1994 Stock Incentive Plan, the Tele-Communications,
Inc. 1995 Employee Stock Incentive Plan and the Tele-Communications, Inc. 1996
Incentive Plan.
"Inter-Group Interest" of the TCI Group in the Liberty Media Group or the
TCI Ventures Group means any common stockholders' equity value of TCI
attributable to the Liberty Media Group or the TCI Ventures Group, as the case
may be, that is not represented by outstanding shares of LMG Stock or TCIVG
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 TCI Ventures Group is represented by the Number of Shares
Issuable with Respect to the TCI Ventures Group Inter-Group Interest.
"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 TCI Board;
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provided that (a) from and after any dividend or other distribution with
respect to any shares of LMG Stock (other than a dividend or other
distribution payable in shares of LMG 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 assets or
properties so paid in respect of shares of LMG 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 LMG Stock payable in securities of TCI
attributed to the Liberty Media Group other than LMG 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 LMG 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.
"Liberty Media Group Inter-Group Interest Fraction," as of any date, shall
mean a fraction the numerator of which is the Number of Shares Issuable with
Respect to the Liberty Media 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 Liberty Media Group Inter-Group Interest as of such date and
(b) the aggregate number of shares of LMG Stock outstanding as of such date.
"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 LMG Stock" (or which would have been payable but for the
utilization of tax benefits attributable to the TCI Group or the TCI Ventures
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
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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
LMG Stock."
"Liberty Media Group Outstanding Interest Fraction," as of any date, shall
mean a fraction the numerator of which is the aggregate number of shares of
LMG Stock outstanding on such date and the denominator of which is the sum of
(a) such aggregate number of shares of LMG Stock outstanding on such date and
(b) the Number of Shares Issuable with Respect to the Liberty Media Group
Inter-Group Interest as of such date.
"Lower Appraised Amount," with respect to any determination of the Liberty
Media Group Private Market Value or the TCI Ventures Group Private Market
Value, shall mean 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/NM, or
if the shares of such class or series are not quoted on the NASDAQ/NM 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 NYSE member firm selected from time to time by TCI, or if
such closing bid and asked prices are not made available by any such NYSE
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 LMG Stock at the Option of TCI," "--Conversion and Redemption--
Conversion of TCIVG Stock at the Option of TCI," "--Mandatory Dividend,
Redemption or Conversion of LMG Stock," and "--Mandatory Dividend, Redemption
or Conversion of TCIVG 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.
"Mutually Appraised Amount," with respect to any determination of the
Liberty Media Group Private Market Value or the TCI Ventures Group Private
Market Value, shall mean 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 TCI
Ventures 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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"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 Stock and dividends or distributions of shares of LMG Series A
Stock or LMG Series B Stock to holders of LMG Series A Stock and other
reclassifications of LMG Series A Stock,
(ii) decreased (but not to less than zero) by (a) the aggregate number of
shares of LMG Series A Stock issued or sold by TCI after the LMG
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 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 LMG
Series A Stock issued or delivered by TCI as a dividend or distribution to
holders of TCI Group Series A Stock and TCI Group Series B Stock, (d) the
aggregate number of shares of LMG Series A 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 LMG Distribution
as a dividend or distribution or by reclassification or exchange to holders
of TCI Group Series A Stock and TCI Group Series B Stock and (e) the
aggregate number of shares of LMG Series A 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 Stock as of the date of such transfer,
and
(iii) increased by (a) the aggregate number of any shares of LMG Series A
Stock and LMG Series B 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 Stock as
of the date of such contribution and (c) the aggregate number of shares of
LMG Series A Stock and LMG Series B 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 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 TCI Ventures Group Inter-
Group Interest" is currently zero and will from time to time, as applicable,
be
(i) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
TCIVG Series A Stock and TCIVG Series B Stock and dividends or
distributions of shares of TCIVG Series A Stock or TCIVG Series B Stock to
holders of TCIVG Series A Stock and TCIVG Series B Stock and other
reclassifications of the TCIVG Series A Stock and TCIVG Series B Stock,
(ii) decreased (but not to less than zero) by (a) the aggregate number of
shares of TCIVG Series A Stock or TCIVG Series B Stock issued or sold by
TCI after the consummation of the Exchange Offers the proceeds of which are
attributed to the TCI Group, (b) the aggregate number of shares of TCIVG
Series A Stock or TCIVG Series B Stock issued or delivered upon conversion,
exercise or exchange of Convertible Securities (other than Pre-Exchange
Offer Securities), the proceeds of which are attributed to the TCI
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Group, (c) the aggregate number of shares of TCIVG Series A Stock or TCIVG
Series B Stock issued or delivered by TCI as a dividend or distribution to
holders of TCI Group Series A Stock and TCI Group Series B Stock, (d) the
aggregate number of shares of TCIVG Series A Stock or TCIVG Series B Stock
issued or delivered upon the conversion, exercise or exchange of any
Convertible Securities (other than Pre-Exchange Offer Securities) issued or
delivered by TCI after the consummation of the Exchange Offers as a
dividend or distribution or by reclassification or exchange to holders of
TCI Group Series A Stock and TCI Group Series B Stock and (e) the aggregate
number of shares of TCIVG Series A Stock and TCIVG Series B 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 TCI Ventures Group that are transferred from the TCI Ventures Group
to the TCI Group in consideration of a reduction in the Number of Shares
Issuable with Respect to the TCI Ventures Group Inter-Group Interest,
divided by the Market Value of one share of TCIVG Series A Stock as of the
date of such transfer, and
(iii) increased by (a) the aggregate number of any shares of TCIVG Series
A Stock and TCIVG Series B 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 TCI Ventures Group in consideration of an increase in the Number of
Shares Issuable with Respect to the TCI Ventures Group Inter-Group
Interest, divided by the Market Value of one share of TCIVG Series A Stock
as of the date of such contribution and (c) the aggregate number of shares
of TCIVG Series A Stock and TCIVG Series B 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 TCI
Ventures 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 Stock).
"Pre-Exchange Offer Securities" means the TCI-UA Notes and the Initial
Ventures Options.
"Qualifying Subsidiary" shall mean a Subsidiary of TCI in which (i) TCI's
ownership and voting interest is sufficient to satisfy the requirements of the
IRS for (x), in the case of a Subsidiary that holds assets attributed to the
Liberty Media Group, a distribution of TCI's interest in such Subsidiary to
the holders of LMG Series A Stock and LMG Series B Stock that is tax free to
such holders or (y), in the case of a Subsidiary that holds assets attributed
to the TCI Ventures Group, a distribution of TCI's interest in such Subsidiary
to the holders of TCIVG Series A Stock and TCIVG Series B Stock that is tax
free to such holders or (ii) TCI owns, directly or indirectly, all of the
issued and outstanding capital stock.
"Related Business Transaction" shall mean any Disposition of all or
substantially all of the properties and assets of the Liberty Media Group or
the TCI Ventures 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 TCI Ventures 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 TCI Ventures 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 TCI Ventures Group, as
the case may be, prior to such Disposition, as determined in good faith by the
Board of Directors.
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"Second Appraiser" means, with respect to any determination of the Liberty
Media Group Private Market Value or the TCI Ventures Group Private Market
Value, an investment banking firm of recognized national standing selected by
the Independent Committee to make such determination.
"Selection Date," with respect to any determination of the Liberty Media
Group Private Market Value or the TCI Ventures Group Private Market Value,
shall mean the date upon which the Second Appraiser for such determination is
selected by the Independent Committee.
"Subsidiary" shall mean, with respect to any person or entity, any
corporation or partnership 50% or more of whose outstanding voting securities
or partnership interests, as the case may be, are directly or indirectly owned
by such person or entity.
"TCI Group" 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 TCI Ventures 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 TCI Ventures Group equal to the
TCI Ventures Group Inter-Group Interest Fraction as of such date;
(iii) from and after any dividend or other distribution with respect to
shares of LMG Stock (other than a dividend or other distribution payable in
shares of LMG 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 LMG 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 TCIVG Stock (other than a dividend or other distribution payable
in shares of TCIVG 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 TCI Ventures Group Inter-Group Interest," or in other
securities of TCI attributed to the TCI Ventures 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 TCI Ventures
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 TCIVG Stock multiplied by a fraction the numerator of which is
equal to the TCI Ventures 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 TCI Ventures
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 TCI Ventures 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 TCI Ventures
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 TCI
Ventures Group, as applicable, described in clause (ii) above). If TCI pays a
dividend or makes any other distribution with respect to shares of LMG Stock
payable in other securities of TCI
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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
LMG 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 TCI pays
a dividend or makes any other distribution with respect to shares of TCIVG
Stock payable in other securities of TCI attributed to the TCI Ventures 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 TCIVG 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
the TCI Ventures Group, as applicable.
"TCI-UA Notes" shall mean those certain convertible notes due December 12,
2021 issued by TCI UA, Inc., a Subsidiary of TCI, which notes were, prior to
the consummation of the Exchange Offers, exchangeable for shares of TCI Group
Series A Stock and LMG Series A Stock.
"TCI Ventures Group" shall mean, as of any date that any shares of TCIVG
Series A Stock or TCIVG Series B Stock have been issued and continue to be
outstanding:
(i) the interest of TCI or of any of its subsidiaries in any of the
following persons or any of their respective 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: TCI Ventures
Group, L.L.C., Tele-Communications International, Inc., TCI Telephony
Holdings, Inc., New Jersey Fiber Technologies, L.P., Louisville Lightwave,
Western Tele-Communications, Inc., TCI GCI, Inc., TCI UVSG, Inc., Acclaim
Entertainment, Inc., TCI TSX, Inc., Intessera, Inc., TCI-TVGOS, Inc., TCI
MCNS Holdings, Inc., TCI ETC Holdings, Inc., TCI Internet Holdings, Inc.,
TCI Online Sports Holdings, Inc., TCI Online Village Holdings, Inc., TCI
INZ Sports Holdings, Inc., TCI Netscape Holdings, Inc., TCI Java, Inc.,
National Digital Television Center, Inc., TCI SUMMITrak of Texas, Inc., TCI
SUMMITrak, LLC, DigiVentures, LLC, Kitty Hawk Capital Limited Partners, II,
New Enterprise Associates, IV, Limited Partnership, Venture First II, L.P.,
TVSM, Inc.,
(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 any of the Persons named in clause (i) or any of their
respective subsidiaries (or any successor as described in clause (i) of
this sentence),
(iii) the proceeds of exercise of the Initial Ventures Options and the
expense of exercise of any related stock appreciation rights,
(iv) all assets and properties contributed or otherwise transferred to
the TCI Ventures Group from the TCI Group, and
(v) 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
TCI Ventures Group, as determined by the TCI Board;
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provided that (a) from and after any dividend or other distribution with
respect to any shares of TCIVG Stock (other than a dividend or other
distribution payable in shares of TCIVG 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 TCI Ventures Group Inter-Group
Interest," or in other securities of TCI attributed to the TCI Ventures Group
for which provision shall be made as set forth in the penultimate sentence of
this definition), the TCI Ventures Group will no longer include an amount of
assets or properties equal to the aggregate amount of such kind of assets or
properties so paid in respect of shares of TCIVG Stock multiplied by a
fraction the numerator of which is equal to the TCI Ventures 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
TCI Ventures 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 TCI Ventures Group to the
TCI Group, the TCI Ventures Group shall no longer include the assets or
properties so transferred. If TCI pays a dividend or makes any other
distribution with respect to shares of TCIVG Stock payable in securities of
TCI attributed to the TCI Ventures Group other than TCIVG 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 (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 TCIVG Stock, the TCI Ventures 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 TCI Ventures 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 TCI
Ventures Group.
"TCI Ventures Group Inter-Group Interest Fraction," as of any date, shall
mean a fraction the numerator of which is the Number of Shares Issuable with
Respect to the TCI Ventures 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 TCI Ventures Group Inter-Group Interest as of such date and (b)
the aggregate number of shares of TCIVG Stock outstanding as of such date.
"TCI Ventures Group Net Proceeds" shall mean, as of any date, with respect
to any Disposition of any of the properties and assets of the TCI Ventures
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 TCIVG 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 TCI
Ventures 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-Exchange Offer Securities which are included in the determination of the
Adjusted TCI Ventures Group Outstanding Interest Fraction) in respect of TCI
Preferred Stock attributed to the TCI Ventures Group. For purposes of this
definition, any properties and assets of the TCI Ventures 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
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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 TCIVG Stock."
"TCI Ventures Group Outstanding Interest Fraction," as of any date, shall
mean a fraction the numerator of which is the aggregate number of shares of
TCIVG Stock outstanding on such date and the denominator of which is the sum
of (a) such aggregate number of shares of TCIVG Stock outstanding on such date
and (b) the Number of Shares Issuable with Respect to the TCI Ventures Group
Inter-Group Interest as of such date.
"Trading Day" shall mean each weekday other than any day on which any
relevant class or series of capital stock of TCI is not traded on the
NASDAQ/NM or in the over-the-counter market.
VOTING RIGHTS
Holders of TCI Group Series A Stock, LMG Series A Stock and TCIVG Series A
Stock, in each case, are entitled to one vote for each share of such stock
held, and holders of TCI Group Series B Stock, LMG Series B Stock and TCIVG
Series B Stock, in each case, are entitled to ten votes for each share of such
stock held, on all matters presented to such stockholders. Except as may
otherwise be required by the laws of the State of Delaware or, with respect to
any class of TCI Preferred Stock or any series of such a class, in the TCI
Charter (including any resolution or resolutions providing for the
establishment of such class or series pursuant to authority vested in the TCI
Board by the TCI Charter), the holders of TCI Group Stock, the holders of LMG
Stock, the holders of TCIVG Stock and the holders of each class or series of
TCI Preferred Stock, if any, entitled to vote thereon will vote as one class
with respect to all matters to be voted on by stockholders of TCI.
None of the holders of TCI Group Series A Stock, TCI Group Series B Stock,
LMG Series A Stock, LMG Series B Stock, TCIVG Series A Stock or TCIVG Series B
Stock have any rights to vote as a separate class or series on any matter
coming before the stockholders of TCI, except with respect to certain limited
class and series voting rights provided under the DGCL. Under the DGCL, the
approval of the holders of a majority of the outstanding shares of any class
of capital stock of a corporation, voting separately as a class, is required
to approve any amendment to the charter of such corporation 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. Because the
TCI Group Series A Stock, the TCI Group Series B Stock, the LMG Series A
Stock, the LMG Series B Stock, the TCIVG Series A Stock and the TCIVG Series B
Stock are each a separate series of a single class of stock, each series will
be entitled to vote separately as a class upon an amendment to the Charter
that would alter or change the powers, preferences or special rights of such
series so as to affect them adversely only if the other series were not so
affected. The DGCL does not provide for any other separate voting rights of a
class or series of capital stock (other than with respect to a change in par
value or, in certain circumstances not applicable in the case of TCI's
outstanding stock, an increase or decrease in the authorized shares of such
class or series). Consequently, because most matters brought to a stockholder
vote will require the approval of only a specified percentage of all of TCI's
outstanding capital stock entitled to vote on such matters (including the TCI
Group Stock, the LMG Stock and the TCIVG Stock) voting together as a single
class, if the holders of one or more series of TCI Common Stock have more than
the number of votes required to approve any such matter, such holders would be
in a position to control the outcome of the vote on such matter.
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 Stock out of the lesser of
(x) the TCI Group Available Dividend Amount and (y) funds of TCI legally
available therefor under
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the DGCL, (ii) on the LMG 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 TCIVG Stock out of the lesser of (x)
the TCI Ventures 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 TCI Ventures 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 TCI Ventures Group and
any dividends or distributions on, or repurchases of, the TCI Group Stock, the
LMG Stock or the TCIVG 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," as of any date, means either (i)
the excess of (a) an amount equal to the total assets of the TCI Group less
the total liabilities (not including preferred stock) of the TCI Group as of
such date over (b) the aggregate par value of, or any greater amount
determined to be capital in respect of, all outstanding shares of TCI Group
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,
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, 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 Stock under the DGCL if the TCI Group were a
separate Delaware corporation. There can be no assurance that there will be a
TCI Group Available Dividend Amount.
The "Liberty Media Group Available Dividend Amount," as of any date, means
the product of the 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 LMG 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 LMG Stock under the DGCL if the
Liberty Media Group were a separate Delaware corporation. There can be no
assurance that there will be a Liberty Media Group Available Dividend Amount.
The "TCI Ventures Group Available Dividend Amount," as of any date, means
the product of the TCI Ventures Group Outstanding Interest Fraction and either
(i) the excess of (a) an amount equal to the total assets of the TCI Ventures
Group less the total liabilities (not including preferred stock) of the TCI
Ventures 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 TCIVG Stock and each class or series of TCI Preferred Stock attributed to
the TCI Ventures Group or (ii) in case there is no such excess, an amount
equal to the Corporation Earnings (Loss) Attributable to the TCI Ventures
Group (if positive) for the fiscal year in which such date occurs and/or the
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preceding fiscal year. The "Corporation Earnings (Loss) Attributable to the
TCI Ventures Group," for any period, means the net earnings or loss of the TCI
Ventures Group for such period determined on a basis consistent with the
determination of the net earnings or loss of the TCI Ventures Group for such
period as presented in the combined financial statements of the TCI Ventures
Group, including income and expenses of TCI attributed to the operations of
the TCI Ventures Group on a substantially consistent basis, including, without
limitation, corporate administrative costs, net interest and income taxes. The
TCI Ventures Group Available Dividend Amount is intended to be similar to the
amount that would be legally available for the payment of dividends on the
TCIVG Stock under the DGCL if the TCI Ventures Group were a separate Delaware
corporation. There can be no assurance that there will be a TCI Ventures Group
Available Dividend Amount.
Except for dividends declared or paid as described below under "--Share
Distributions," "--Conversion and Redemption--Mandatory Dividend, Redemption
or Conversion of LMG Stock," and "--Conversion and Redemption--Mandatory
Dividend, Redemption or Conversion of TCIVG Stock," any dividends paid on the
TCI Group Series A Stock or the TCI Group Series B Stock will be paid only on
both series, in equal amounts per share; any dividends paid on the LMG Series
A Stock or the LMG Series B Stock will be paid only on both series, in equal
amounts per share; and any dividends paid on the TCIVG Series A Stock or the
TCIVG Series B 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 Stock, the LMG Stock or the TCIVG Stock in equal or
unequal amounts, notwithstanding the relationship among the TCI Group
Available Dividend Amount, the Liberty Media Group Available Dividend Amount
and the TCI Ventures Group Available Dividend Amount, the respective amounts
of prior dividends declared on, or liquidation rights of, the TCI Group Stock,
the LMG Stock or the TCIVG Stock or any other factor.
At the time of any dividend or other distribution on the outstanding shares
of LMG 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 LMG 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 LMG 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 LMG 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.
At the time of any dividend or other distribution on the outstanding shares
of TCIVG Stock (including any dividend of TCI Ventures Group Net Proceeds from
the Disposition of all or substantially all of the properties and assets of
the TCI Ventures Group as described under "--Conversion and Redemption--
Mandatory Dividend, Redemption or Conversion of TCIVG Stock"), the TCI Group
will (if at such time there is an Inter-Group Interest in the TCI Ventures
Group) be credited, and the TCI Ventures Group will be charged (in addition to
the charge for the dividend or other distribution paid or distributed in
respect of outstanding shares of TCIVG 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 TCIVG Stock times (ii) a
fraction the numerator of which is the TCI Ventures Group Inter-Group Interest
Fraction and the denominator of which is the TCI Ventures Group Outstanding
Interest Fraction.
SHARE DISTRIBUTIONS
Distributions on TCI Group Stock. If at any time after the initial issuance
of shares of TCIVG Stock, a distribution paid in TCI Group Stock, LMG Stock,
TCIVG Stock, or any other securities of TCI or any other person (a "share
distribution"), is made with respect to the TCI Group Stock, such share
distribution will be declared and paid only as follows:
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(i) a share distribution consisting of shares of TCI Group Series A Stock
(or Convertible Securities convertible into or exercisable or exchangeable
for shares of TCI Group Series A Stock) to holders of TCI Group Series A
Stock and TCI Group Series B Stock, on an equal per share basis; or
consisting of shares of TCI Group Series B Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of TCI Group
Series B Stock) to holders of TCI Group Series A Stock and TCI Group Series
B Stock, on an equal per share basis; or consisting of shares of TCI Group
Series A Stock (or Convertible Securities convertible into or exercisable
or exchangeable for shares of TCI Group Series A Stock) to holders of TCI
Group Series A Stock and, on an equal per share basis, shares of TCI Group
Series B Stock (or like Convertible Securities convertible into or
exercisable or exchangeable for shares of TCI Group Series B Stock) to
holders of TCI Group Series B Stock;
(ii) a share distribution consisting of shares of LMG Series A Stock (or
Convertible Securities convertible into or exercisable or exchangeable for
shares of LMG Series A Stock) to holders of TCI Group Series A Stock and
TCI Group Series B Stock, on an equal per share basis; provided that the
sum of (A) the aggregate number of shares of LMG Series A 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 TCIVG Series A Stock
(or Convertible Securities convertible into or exercisable or exchangeable
for shares of TCIVG Series A Stock) to holders of TCI Group Series A Stock
and TCI Group Series B Stock, on an equal per share basis; or consisting of
shares of TCIVG Series B Stock (or Convertible Securities convertible into
or exercisable or exchangeable for shares of TCIVG Series B Stock) to
holders of TCI Group Series A Stock and TCI Group Series B Stock, on an
equal per share basis; or consisting of shares of TCIVG Series A Stock (or
Convertible Securities convertible into or exercisable or exchangeable for
shares of TCIVG Series A Stock) to holders of TCI Group Series A Stock and,
on an equal per share basis, shares of TCIVG Series B Stock (or like
Convertible Securities convertible into or exercisable or exchangeable for
shares of TCIVG Series B Stock) to holders of TCI Group Series B Stock;
provided that the sum of (A) the aggregate number of shares of TCIVG
Series A Stock and TCIVG Series B Stock to be so distributed (or the number
of such shares which would be issuable upon conversion, exercise or
exchange of any Convertible Securities to be so distributed) and (B) the
number of shares of TCIVG Series A Stock and TCIVG Series B Stock 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-Exchange Offer Securities) is less than or equal to
the Number of Shares Issuable with Respect to the TCI Ventures 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 Stock, LMG Stock or TCIVG
Stock (or Convertible Securities convertible into or exercisable or
exchangeable for shares of TCI Group Stock, LMG Stock or TCIVG Stock),
either on the basis of a distribution of identical securities, on an equal
per share basis, to holders of TCI Group Series A Stock and TCI Group
Series B Stock or on the basis of a distribution of one class or series of
securities to holders of TCI Group Series A Stock and another class or
series of securities to holders of TCI Group Series B Stock, provided that
the securities so distributed (and, if the distribution consists of
Convertible Securities, the securities into which such Convertible
Securities are convertible or for which they are exercisable or
exchangeable) do not differ in any respect other than their relative voting
rights and related differences in designation, conversion, redemption and
share distribution provisions, with holders of shares of TCI Group Series B
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 Stock and the TCI Group Series B 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
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differences in voting rights, designation, conversion, redemption and share
distribution provisions between the TCI Group Series A Stock and the TCI
Group Series B 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 Stock
without reclassifying, subdividing or combining the TCI Group Series B Stock,
on an equal per share basis, and TCI will not reclassify, subdivide or combine
the TCI Group Series B Stock without reclassifying, subdividing or combining
the TCI Group Series A Stock, on an equal per share basis.
Distributions on LMG Stock. If at any time a share distribution is to be
made with respect to the LMG Stock, such share distribution will be declared
and paid only as follows (or as described under "--Conversion and Redemption"
with respect to the redemptions and other distributions referred to therein):
(i) a share distribution consisting of shares of LMG Series A Stock (or
Convertible Securities convertible into or exercisable or exchangeable for
shares of LMG Series A Stock) to holders of LMG Series A Stock and LMG
Series B Stock, on an equal per share basis; or consisting of shares of LMG
Series B Stock (or Convertible Securities convertible into or exercisable
or exchangeable for shares of LMG Series B Stock) to holders of LMG Series
A Stock and LMG Series B Stock, on an equal per share basis; or consisting
of shares of LMG Series A Stock (or Convertible Securities convertible into
or exercisable or exchangeable for shares of LMG Series A Stock) to holders
of LMG Series A Stock and, on an equal per share basis, shares of LMG
Series B Stock (or like Convertible Securities convertible into or
exercisable or exchangeable for shares of LMG Series B Stock) to holders of
LMG Series B 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 Stock or TCIVG Stock (or
Convertible Securities convertible into or exercisable or exchangeable for
shares of TCI Group Stock or TCIVG Stock), either on the basis of a
distribution of identical securities, on an equal per share basis, to
holders of LMG Series A Stock and LMG Series B Stock or on the basis of a
distribution of one class or series of securities to holders of LMG Series
A Stock and another class or series of securities to holders of LMG Series
B 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 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 Stock and the LMG Series B 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 Stock
and the LMG Series B Stock, and provided in each case that such
distribution is otherwise made on an equal per share basis.
Because under the TCI Charter the Liberty Media Group is not permitted to
have an Inter-Group Interest in either the TCI Group or the TCI Ventures
Group, no distributions on the LMG Stock of shares of TCI Group Stock (or
related Convertible Securities) or TCIVG Stock (or related Convertible
Securities) are permitted.
TCI will not reclassify, subdivide or combine the LMG Series A Stock without
reclassifying, subdividing or combining the LMG Series B Stock, on an equal
per share basis, and TCI will not reclassify, subdivide or combine the LMG
Series B Stock without reclassifying, subdividing or combining the LMG Series
A Stock, on an equal per share basis.
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Distributions on TCIVG Stock. If at any time a share distribution is to be
made with respect to the TCIVG Stock, such share distribution will be declared
and paid only as follows (or as described under "--Conversion and Redemption"
with respect to the redemptions and other distributions referred to therein):
(i) a share distribution consisting of shares of TCIVG Series A Stock (or
Convertible Securities convertible into or exercisable or exchangeable for
shares of TCIVG Series A Stock) to holders of TCIVG Series A Stock and
TCIVG Series B Stock, on an equal per share basis; or consisting of shares
of TCIVG Series B Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of TCIVG Series B Stock) to holders
of TCIVG Series A Stock and TCIVG Series B Stock, on an equal per share
basis; or consisting of shares of TCIVG Series A Stock (or Convertible
Securities convertible into or exercisable or exchangeable for shares of
TCIVG Series A Stock) to holders of TCIVG Series A Stock and, on an equal
per share basis, shares of TCIVG Series B Stock (or like Convertible
Securities convertible into or exercisable or exchangeable for shares of
TCIVG Series B Stock) to holders of TCIVG Series B 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 Stock or LMG Stock (or
Convertible Securities convertible into or exercisable or exchangeable for
shares of TCI Group Stock or LMG Stock), either on the basis of a
distribution of identical securities, on an equal per share basis, to
holders of TCIVG Series A Stock and TCIVG Series B Stock or on the basis of
a distribution of one class or series of securities to holders of TCIVG
Series A Stock and another class or series of securities to holders of
TCIVG Series B 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
TCIVG Series B 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 TCIVG Series A Stock and the TCIVG Series B 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 TCIVG Series A
Stock and the TCIVG Series B Stock, and provided in each case that such
distribution is otherwise made on an equal per share basis.
Because under the TCI Charter the TCI Ventures Group is not permitted to
have an Inter-Group Interest in either the TCI Group or the Liberty Media
Group, no distributions on the TCIVG Stock of shares of TCI Group Stock (or
related Convertible Securities) or LMG Stock (or related Convertible
Securities) are permitted.
TCI will not reclassify, subdivide or combine the TCIVG Series A Stock
without reclassifying, subdividing or combining the TCIVG Series B Stock, on
an equal per share basis, and TCI will not reclassify, subdivide or combine
the TCIVG Series B Stock without reclassifying, subdividing or combining the
TCIVG Series A Stock, on an equal per share basis.
CONVERSION AND REDEMPTION
Conversion at the Option of the Holder. Each share of TCI Group Series B
Stock is convertible, at the option of the holder thereof, into one share of
TCI Group Series A Stock. Each share of LMG Series B Stock is convertible, at
the option of the holder thereof, into one share of LMG Series A Stock. Each
share of TCIVG Series B Stock is convertible, at the option of the holder
thereof, into one share of TCIVG Series A Stock. Shares of TCI Group Series A
Stock are not convertible into shares of TCI Group Series B Stock; shares of
LMG Series A Stock are not convertible into shares of LMG Series B Stock; and
shares of TCIVG Series A Stock are not convertible into shares of TCIVG Series
B Stock.
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Conversion of LMG 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 Stock will be
converted into a number (or fraction) of fully paid and nonassessable shares
of TCI Group Series A Stock equal to the Liberty Media Group Optional
Conversion Ratio, and (ii) all of the outstanding shares of LMG Series B Stock
will be converted into a number (or fraction) of fully paid and nonassessable
shares of TCI Group Series B 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 LMG Stock determined by appraisal to the public trading price of a share of
TCI Group 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 LMG Stock Per Share Value by (y) the average Market Value of
one share of TCI Group Series A Stock over the 20-Trading Day period ending on
the Trading Day preceding the Appraisal Date. The LMG Stock Per Share Value
will equal the quotient obtained by dividing the Liberty Media Group Private
Market Value by the Adjusted Outstanding Shares of LMG 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 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
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the Liberty Media Group Private Market Value will determine the Adjusted
Outstanding Shares of LMG Stock together with any further appropriate
adjustments to the Liberty Media Group Private Market Value resulting from
such determination. The "Adjusted Outstanding Shares of LMG 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 LMG 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 LMG Stock issuable upon the conversion, exercise or exchange of all
Pre-Distribution Convertible Securities and the number of shares of LMG 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 "LMG Stock Per Share
Value" means the quotient obtained by dividing the Liberty Media Group Private
Market Value by the Adjusted Outstanding Shares of LMG Stock, provided that if
such investment banking firms do not agree on the determinations provided for
in this paragraph, the LMG 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 Stock into TCI Group
Series A Stock and shares of LMG Series B Stock into TCI Group Series B 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 LMG Stock Per Share Value as
of a subsequent date.
Any such conversion would dilute the interests of holders of TCI Group Stock
and would preclude holders of LMG Stock from retaining their interest in a
security reflecting separately the business of the Liberty Media Group. In
addition, the adjustments in respect of Pre-Distribution Convertible
Securities and Committed Acquisition Shares would dilute the interests of
holders of LMG Stock upon any conversion of shares of LMG Stock into TCI Group
Stock at the Liberty Media Group Optional Conversion Ratio.
Conversion of TCIVG Stock at the Option of TCI. The TCI Board may at any
time declare that (i) all of the outstanding shares of TCIVG Series A Stock
will be converted into a number (or fraction) of fully paid and nonassessable
shares of TCI Group Series A Stock equal to the TCI Ventures Group Optional
Conversion Ratio, and (ii) all of the outstanding shares of TCIVG Series B
Stock will be converted into a number (or fraction) of fully paid and
nonassessable shares of TCI Group Series B Stock equal to the TCI Ventures
Group Optional Conversion Ratio. As more fully described below, the TCI
Ventures Group Optional Conversion Ratio is the ratio of the private market
value of a share of TCIVG Stock determined by appraisal to the public trading
price of a share of TCI Group Stock.
Under the TCI Charter, the "TCI Ventures Group Optional Conversion Ratio"
means the quotient (calculated to the nearest five decimal places) obtained by
dividing (x) the TCIVG Stock Per Share Value by (y) the average Market Value
of one share of TCI Group Series A Stock over the 20-Trading Day period ending
on the Trading Day preceding the Appraisal Date. The TCIVG Stock Per Share
Value will equal the quotient obtained by dividing the TCI Ventures Group
Private Market Value by the Adjusted Outstanding Shares of TCIVG Stock, which
will be determined in the manner described below.
The "TCI Ventures Group Private Market Value" means an amount equal to the
private market value of the TCI Ventures Group as of the Appraisal Date. In
the event that TCI determines to establish the TCI Ventures 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 TCI Ventures
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
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such private market value. If the Higher Appraised Amount is not more than
120% of the Lower Appraised Amount, the TCI Ventures 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 TCI Ventures 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 TCI Ventures 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 TCI Ventures 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 TCI Ventures Group, as if the TCI
Ventures 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 TCI Ventures Group other than that which would
have existed if the TCI Ventures Group were a publicly traded non-controlled
entity.
Following the determination of the TCI Ventures Group Private Market Value,
the investment banking firms whose final views of the private market value of
the TCI Ventures Group were used in the calculation of the TCI Ventures Group
Private Market Value will determine the Adjusted Outstanding Shares of TCIVG
Stock together with any further appropriate adjustments to the TCI Ventures
Group Private Market Value resulting from such determination. The "Adjusted
Outstanding Shares of TCIVG 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 TCIVG Stock outstanding, the Number of Shares Issuable
with Respect to the TCI Ventures Group Inter-Group Interest, the number of
shares of TCIVG Stock issuable upon the conversion, exercise or exchange of
all Pre-Exchange Offer Securities, and the number of shares of TCIVG Stock
issuable upon the conversion, exercise or exchange of those Convertible
Securities (other than Pre-Exchange Offer 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 "TCIVG Stock Per
Share Value" means the quotient obtained by dividing the TCI Ventures Group
Private Market Value by the Adjusted Outstanding Shares of TCIVG Stock,
provided that if such investment banking firms do not agree on the
determinations provided for in this paragraph, the TCIVG 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 TCIVG Series A Stock into TCI Group
Series A Stock and shares of TCIVG Series B Stock into TCI Group Series B
Stock at the TCI Ventures 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 TCIVG Stock Per Share Value
as of a subsequent date.
Any such conversion would dilute the interests of holders of TCI Group Stock
and would preclude holders of TCIVG Stock from retaining their interest in a
security reflecting separately the business of the TCI Ventures
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Group. In addition, the adjustments in respect of Pre-Exchange Offer
Securities would dilute the interests of holders of TCIVG Stock upon any
conversion of shares of TCIVG Stock into TCI Group Stock at the TCI Ventures
Group Optional Conversion Ratio.
Mandatory Dividend, Redemption or Conversion of LMG 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
"--Conversion and Redemption--Redemption of LMG 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 LMG 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 LMG 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 Stock and LMG Series B 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 Stock and LMG Series B 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 Stock and each share of LMG Series B Stock is the same); or
(B) if such Disposition involves substantially all (but not all) of
the properties and assets of the Liberty Media Group, apply an
aggregate amount of cash and/or securities or other property (other
than TCI Common Stock) equal to the product of the 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 Stock and LMG
Series B 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 Stock and LMG Series B
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 Stock during the ten-Trading Day period beginning on the
16th
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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
Stock and each share of LMG Series B Stock is the same); or
(iii) convert (A) each outstanding share of LMG Series A Stock into a
number (or fraction) of fully paid and nonassessable shares of TCI Group
Series A Stock and (B) each outstanding share of LMG Series B Stock into a
number (or fraction) of fully paid and nonassessable shares of TCI Group
Series B 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 Stock to the Market Value of one share of TCI Group
Series A 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 LMG 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 TCI 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 Stock and
another class or series of securities to holders of LMG Series B 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 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 Stock
and the LMG Series B 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 Stock and the LMG Series B Stock, and otherwise such securities will
be distributed on an equal per share basis, or (ii) pay the dividend or
redemption price in the form of a single class of securities without
distinction between the shares received by the holders of LMG Series A Stock
and LMG Series B Stock. The Related Business Transaction exception to the
foregoing requirements would enable TCI to enter into transactions in which
the properties or assets of the Liberty Media Group may be considered to be
"disposed of" in exchange for equity securities of an entity engaged or
proposing to engage in similar or complementary business areas to those of the
Liberty Media Group while maintaining the capital structure and delineation of
business groups of the Liberty Media Group.
The effect of using the Adjusted Liberty Media Group Outstanding Interest
Fraction, instead of the Liberty Media Group Outstanding Interest Fraction, in
the determination of amounts to be paid in redemption of shares of LMG Stock
following a Disposition of all of the properties and assets of the Liberty
Media Group is to allocate to the TCI Group a portion of the Liberty Media
Group Net Proceeds of the Disposition, in addition to the amount so allocated
in respect of any Inter-Group Interest, sufficient to provide for the delivery
of the portion of the consideration deliverable by TCI upon any post-
Disposition conversion, exercise or exchange of Pre-Distribution Convertible
Securities that is in substitution for shares of LMG Stock that would have
been issuable upon such conversion, exercise or exchange if it had occurred
prior to such Distribution and to make similar provision for TCI's obligation
in respect of any Committed Acquisition Shares that remain issuable. To the
extent such Pre-Distribution Convertible Securities and Committed Acquisition
Shares are included in the determination of the Adjusted Liberty Media Group
Outstanding Interest Fraction, TCI's obligations in respect of such securities
would not be a reduction in the calculation of the Liberty Media Group Net
Proceeds. In the event any redemption of the LMG Stock or conversion of the
LMG Stock into TCI Group Stock is made in circumstances in which securities or
property are allocated to the TCI Group in respect of Pre-Distribution
Convertible Securities, Committed Acquisition Shares or other Convertible
Securities entitled to receive such securities or
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property upon conversion, exercise or exchange, the TCI Group will segregate
and hold such securities or other property separate (in the case of any
securities or property other than TCI Group Stock), or duly reserve shares of
TCI Group Stock issuable upon such conversion, exercise or exchange, for the
benefit of the holders of Pre-Distribution Convertible Securities, Committed
Acquisition Shares or other Convertible Securities. In the event the holders
of any such Pre-Distribution Convertible Securities or other Convertible
Securities do not convert, exercise or exchange such securities prior to the
expiration of any conversion or exercise right or the retirement of such
security, or the acquisition relating to such Committed Acquisition Shares is
not consummated (or any Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares are not
converted, exercised or exchanged), then the securities or other property so
reserved shall revert to the TCI Group and the former holders of LMG Stock
shall have no interest in such securities or property.
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 LMG 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.
The option to convert the LMG Stock into TCI Group 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 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 Liberty
Media 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 LMG
Stock, even if an additional transaction were consummated at a later time in
which additional properties and assets of the Liberty Media Group were
disposed of by 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 Liberty Media 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 Liberty Media Group at such time. If less
than substantially all of the properties and assets of the Liberty Media Group
were disposed of by TCI, the holders of the LMG Stock would not be entitled to
receive any dividend or have their shares redeemed or converted for TCI Group
Stock, although the TCI Board could determine, in its sole discretion, to pay
a dividend on the LMG Stock in an amount related to the proceeds of such
Disposition.
Mandatory Dividend, Redemption or Conversion of TCIVG 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 TCI Ventures 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
"--Conversion and Redemption--Redemption of TCIVG 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 TCI Ventures 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 TCI
Ventures Group as of such date.
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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 TCIVG Stock equally on a share for share basis
(subject to the provisions described in the second sentence of the third
paragraph under this caption "--Mandatory Dividend, Redemption or
Conversion of TCIVG Stock"), in an aggregate amount equal to the product of
the TCI Ventures Group Outstanding Interest Fraction as of the record date
for determining the holders entitled to receive such dividend and the TCI
Ventures Group Net Proceeds of such Disposition;
(ii) provided that there are assets of TCI legally available therefor and
the TCI Ventures 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 TCI Ventures Group, redeem all
outstanding shares of TCIVG Series A Stock and TCIVG Series B 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 TCI Ventures Group Outstanding Interest Fraction as of the
date of such redemption and the TCI Ventures Group Net Proceeds of such
Disposition, such aggregate amount to be allocated (subject to the
provisions described in the second sentence of the following paragraph)
to shares of TCIVG Series A Stock and TCIVG Series B 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 TCIVG
Series A Stock and each share of TCIVG Series B Stock is the same); or
(B) if such Disposition involves substantially all (but not all) of
the properties and assets of the TCI Ventures Group, apply an aggregate
amount of cash and/or securities or other property (other than TCI
Common Stock) equal to the product of the TCI Ventures Group
Outstanding Interest Fraction as of the date shares are selected for
redemption and the TCI Ventures Group Net Proceeds of such Disposition
to the redemption of outstanding shares of TCIVG Series A Stock and
TCIVG Series B Stock, such aggregate amount to be allocated (subject to
the provisions described in the second sentence of the following
paragraph) to shares of TCIVG Series A Stock and TCIVG Series B Stock
in the ratio of the number of shares of each such series outstanding,
with 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 TCIVG Series A 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 TCIVG Series A Stock and each
share of TCIVG Series B Stock is the same); or
(iii) convert (A) each outstanding share of TCIVG Series A Stock into a
number (or fraction) of fully paid and nonassessable shares of TCI Group
Series A Stock and (B) each outstanding share of TCIVG Series B Stock into
a number (or fraction) of fully paid and nonassessable shares of TCI Group
Series B 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 TCIVG Series A Stock to the Market Value of one share of TCI Group
Series A 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 TCIVG 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 TCI 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 TCI Ventures 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 TCIVG
Series A Stock and another class or series of
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securities to holders of TCIVG Series B 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 TCIVG Series B 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 TCIVG Series A Stock and the TCIVG Series B 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 TCIVG Series A Stock and the TCIVG Series
B 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 TCIVG Series A Stock and TCIVG Series B Stock. The Related
Business Transaction exception to the foregoing requirements would enable TCI
to enter into transactions in which the properties or assets of the TCI
Ventures 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 TCI Ventures Group while
maintaining the capital structure and delineation of business groups of the
TCI Ventures Group.
The effect of using the Adjusted TCI Ventures Group Outstanding Interest
Fraction, instead of the TCI Ventures Group Outstanding Interest Fraction, in
the determination of amounts to be paid in redemption of shares of TCIVG Stock
following a Disposition of all of the properties and assets of the TCI
Ventures Group is to allocate to the TCI Group a portion of the TCI Ventures
Group Net Proceeds of the Disposition, in addition to the amount so allocated
in respect of any Inter-Group Interest, sufficient to provide for the delivery
of the portion of the consideration deliverable by TCI upon any post-
Disposition conversion, exercise or exchange of Pre-Exchange Offer Securities
that is in substitution for shares of TCIVG Stock that would have been
issuable upon such conversion, exercise or exchange if it had occurred prior
to such Disposition. To the extent such Pre-Exchange Offer Securities are
included in the determination of the Adjusted TCI Ventures Group Outstanding
Interest Fraction, TCI's obligations in respect of such securities would not
be a reduction in the calculation of the TCI Ventures Group Net Proceeds. In
the event any redemption of the TCIVG Stock or conversion of the TCIVG Stock
into TCI Group Stock is made in circumstances in which securities or property
are allocated to the TCI Group in respect of Pre-Exchange Offer Securities or
other Convertible Securities entitled to receive such securities or property
upon conversion, exercise or exchange, the TCI Group will segregate and hold
such securities or other property separate (in the case of any securities or
property other than TCI Group Stock), or duly reserve shares of TCI Group
Stock issuable upon such conversion, exercise or exchange, for the benefit of
the holders of Pre-Exchange Offer Securities or other Convertible Securities.
In the event the holders of any such Pre-Exchange Offer Securities or other
Convertible Securities do not convert, exercise or exchange such securities
prior to the expiration of any conversion, exercise or exchange right or the
retirement of such security, then the securities or other property so reserved
shall revert to the TCI Group and the former holders of TCIVG Stock shall have
no interest in such securities or property.
At the time of any dividend made as a result of a Disposition referred to
above, the TCI Group will be credited, and the TCI Ventures Group will be
charged (in addition to the charge for the dividend paid in respect of
outstanding shares of TCIVG 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 TCI Ventures Group Inter-Group Interest Fraction
and the denominator of which is the TCI Ventures Group Outstanding Interest
Fraction.
The option to convert the TCIVG Stock into TCI Group 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 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.
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If less than substantially all of the properties and assets of the TCI
Ventures 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
TCIVG Stock, even if an additional transaction were consummated at a later
time in which additional properties and assets of the TCI Ventures 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 TCI Ventures 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 TCI Ventures Group at such time. If less
than substantially all of the properties and assets of the TCI Ventures Group
were disposed of by TCI, the holders of the TCIVG Stock would not be entitled
to receive any dividend or have their shares redeemed or converted for TCI
Group Stock, although the TCI Board could determine, in its sole discretion,
to pay a dividend on the TCIVG Stock in an amount related to the proceeds of
such Disposition.
Redemption of LMG Stock in Exchange for Stock of Subsidiary. At any time at
which all of the assets and liabilities attributed to the Liberty Media Group
have become and continue to be held directly or indirectly by any one or more
corporations that are Qualifying Subsidiaries (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 LMG 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 outstanding shares
of common stock of such Liberty Media Group Subsidiary that are owned by TCI.
The effect of using the Adjusted Liberty Media Group Outstanding Interest
Fraction, instead of the Liberty Media Group Outstanding Interest Fraction, in
the determination of the number of shares of the Liberty Media Group
Subsidiaries deliverable in such a redemption is to allocate to the TCI Group
a portion of the shares of the Liberty Media Group Subsidiaries, in addition
to the number of such shares so allocated in respect of any Inter-Group
Interest, sufficient to provide for the delivery of the consideration
deliverable by TCI upon any post-redemption conversion, exercise or exchange
of Pre-Distribution Convertible Securities that become so payable in
substitution for shares of LMG Stock that would have been issuable upon such
conversion, exercise or exchange if it had occurred prior to such redemption
and to make similar provision for TCI's obligations in respect of any
Committed Acquisition Shares that remain issuable.
In effecting such a redemption, the TCI Board may determine either to (i)
redeem shares of LMG Series A Stock and LMG Series B 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 Stock and LMG Series B Stock, with holders of shares of LMG Series B
Stock receiving the class or series having the higher relative voting rights,
or (ii) redeem shares of LMG Series A Stock and LMG Series B 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 LMG 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 LMG Stock shall consist solely of the class or series having the lower
relative voting rights.
Redemption of TCIVG Stock in Exchange for Stock of Subsidiary. At any time
at which all of the assets and liabilities attributed to the TCI Ventures
Group have become and continue to be held directly or indirectly by any one or
more corporations that are Qualifying Subsidiaries (the "TCI Ventures 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 TCIVG Stock in exchange for an aggregate number of
outstanding, fully paid and nonassessable shares of common stock of each TCI
Ventures Group Subsidiary equal to the product of the Adjusted TCI Ventures
Group Outstanding Interest Fraction and the number of outstanding shares of
common
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stock of such TCI Ventures Group Subsidiary that are owned by TCI. The effect
of using the Adjusted TCI Ventures Group Outstanding Interest Fraction,
instead of the TCI Ventures Group Outstanding Interest Fraction, in the
determination of the number of shares of the TCI Ventures Group Subsidiaries
deliverable in such a redemption is to allocate to the TCI Group a portion of
the shares of the TCI Ventures Group Subsidiaries, in addition to the number
of such shares so allocated in respect of any Inter-Group Interest, sufficient
to provide for the delivery of the consideration deliverable by TCI upon any
post-redemption conversion, exercise or exchange of Pre-Exchange Offer
Securities that become so payable in substitution for shares of TCIVG Stock
that would have been issuable upon such conversion, exercise or exchange if it
had occurred prior to such redemption.
In effecting such a redemption, the TCI Board may determine either to (i)
redeem shares of TCIVG Series A Stock and TCIVG Series B Stock in exchange for
shares of separate classes or series of common stock of each TCI Ventures
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 TCIVG
Series A Stock and TCIVG Series B Stock, with holders of shares of TCIVG
Series B Stock receiving the class or series having the higher relative voting
rights, or (ii) redeem shares of TCIVG Series A Stock and TCIVG Series B Stock
in exchange for shares of a single class of common stock of each TCI Ventures
Group Subsidiary without distinction between the shares distributed to the
holders of the two series of TCIVG Stock.
Certain Provisions Respecting Convertible Securities. Unless the provisions
of any class or series of Pre-Distribution Convertible Securities or
Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares provide specifically to the
contrary, after any conversion date or redemption date on which all
outstanding shares of LMG Stock were converted or redeemed, any share of LMG
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 LMG 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 as a result of such conversion and
redemption had such securities been converted, exercised or exchanged
immediately prior to such action. With respect to any Convertible Securities
that are convertible into or exercisable or exchangeable for shares of LMG
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 LMG
Stock were converted or redeemed, then upon such conversion, exercise or
exchange of such Convertible Securities, any share of LMG 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 LMG 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 the Pre-Exchange Offer Securities provide
specifically to the contrary, after any conversion date or redemption date on
which all outstanding shares of TCIVG Stock were converted or redeemed, any
share of TCIVG Stock that is issued on conversion, exercise or exchange of any
Pre-Exchange Offer 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 TCIVG Stock,
be converted into or redeemed in exchange for, as applicable, the kind and
amount of shares of capital stock, cash and/or securities or other property
that a holder of such Pre-Exchange Offer Securities would have been
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entitled to receive as a result of such conversion and redemption had such
Pre-Exchange Offer Securities been converted, exercised or exchanged
immediately prior to such action. Unless the provisions of any class or series
of Convertible Securities (other than Pre-Exchange Offer Securities) which are
convertible into or exercisable or exchangeable for shares of TCIVG Stock
provide specifically to the contrary, after any conversion date or redemption
date on which all outstanding shares of TCIVG Stock were converted or
redeemed, any share of TCIVG 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 TCIVG 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 "--Conversion and Redemption--Mandatory Dividend, Redemption or
Conversion of LMG Stock," TCI will announce publicly by press release (i) the
Liberty Media Group Net Proceeds of such Disposition, (ii) the number of
outstanding shares of LMG Series A Stock and LMG Series B Stock, (iii) the
number of shares of LMG Series A Stock and LMG Series B 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 "--
Conversion and Redemption--Mandatory Dividend, Redemption or Conversion of LMG
Stock" it has irrevocably determined to take.
If TCI determines to pay a dividend described in clause (i) of the second
paragraph under "--Conversion and Redemption--Mandatory Dividend, Redemption
or Conversion of LMG 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 Stock and LMG Series B 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 LMG Series A
Stock and LMG Series B Stock, (iv) the Liberty Media Group Net Proceeds of
such Disposition, (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 Stock and LMG Series B Stock and the number
of shares of LMG Series A Stock and LMG Series B 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 LMG 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 "--Conversion and Redemption--Mandatory Dividend, Redemption
or Conversion of LMG Stock," TCI will cause to be given to each holder of
outstanding shares of LMG Series A Stock and LMG Series B Stock, a notice
setting forth (i) a statement that all shares of LMG 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 LMG Stock
outstanding on the redemption date, (iv) the Liberty Media Group Net Proceeds
of such Disposition, (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 LMG 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
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securities or property, and (vii) the number of outstanding shares of LMG
Series A Stock and LMG Series B Stock and the number of shares of LMG Series A
Stock and LMG Series B 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.
If TCI determines to undertake a redemption of shares of LMG 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 "--Conversion and Redemption--Mandatory Dividend, Redemption
or Conversion of LMG 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 Stock and LMG Series B
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 LMG 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 LMG Stock selected for redemption, (iv) the Liberty Media Group Net
Proceeds of such Disposition, (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 Stock and LMG Series B Stock and
the number of shares of LMG Series A Stock and LMG Series B 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 LMG 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 Stock and LMG Series B Stock to be redeemed, a notice setting forth (i) the
number of shares of LMG Series A Stock and LMG Series B Stock held by such
holder to be redeemed, (ii) a statement that such shares of LMG Series A Stock
and LMG Series B 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 LMG Stock to be redeemed, including details as
to the calculation thereof, and (v) the place or places where certificates for
shares of such LMG 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 LMG Stock to be redeemed will be redeemed
by TCI pro rata among the holders of LMG 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 "--Conversion and
Redemption--Conversion of LMG Stock at the Option of TCI" or "--Conversion and
Redemption--Mandatory Dividend, Redemption or Conversion of LMG Stock," TCI
will cause to be given to each holder of outstanding shares of LMG Series A
Stock and LMG Series B Stock a notice setting forth (i) a statement that all
outstanding shares of LMG 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 "--Conversion and Redemption--Mandatory Dividend, Redemption
or Conversion of LMG 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 and Redemption--Conversion of LMG Stock at the
Option of TCI"), (iii) the per share number (or fraction) of shares of TCI
Group Series A Stock or TCI Group Series B Stock, as applicable, to be
received with respect to each share of LMG Series A Stock or LMG Series B
Stock, including details as to the calculation thereof, (iv) the place or
places where certificates for shares of LMG Stock, properly endorsed or
assigned for transfer (unless TCI waives such requirement), are to be
surrendered, and (v) the
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number of outstanding shares of LMG Series A Stock and LMG Series B Stock, the
number of Committed Acquisition Shares issuable and the number of shares of
LMG Series A Stock and LMG Series B 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.
If TCI determines to redeem shares of LMG Series A Stock and LMG Series B
Stock as described above under "--Conversion and Redemption--Redemption of LMG
Stock in Exchange for Stock of Subsidiary," TCI will promptly cause to be
given to each holder of LMG Series A Stock and LMG Series B Stock a notice
setting forth (i) a statement that all outstanding shares of LMG 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 LMG 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 Stock and LMG Series B Stock and the number
of shares of LMG Series A Stock and LMG Series B 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.
In each case in which a notice is required to be given to holders of
outstanding shares of LMG Series A Stock and LMG Series B 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 LMG 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
LMG 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 LMG Stock or of Convertible
Securities nor any defect therein will affect the sufficiency thereof with
respect to any other holder of outstanding shares of LMG 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 LMG 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 LMG Stock held at the relevant time by such
holder of record. If the number of shares of any class of
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capital stock or the amount of securities remaining to be issued or delivered
to any holder of LMG 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.
No adjustments in respect of dividends will be made upon the conversion or
redemption of any shares of LMG Stock; provided, however, that if the
conversion date or the redemption date with respect to the LMG 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 LMG
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 LMG 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 LMG 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 LMG 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 LMG Stock represented by any one
certificate are to be redeemed, TCI will issue and deliver a new certificate
for the shares of LMG Stock not redeemed. TCI will not be required to register
a transfer of (i) any shares of LMG Stock for a period of 15 Trading Days next
preceding any selection of shares of LMG Stock to be redeemed or (ii) any
shares of LMG Stock selected or called for redemption. Shares selected for
redemption may not thereafter be converted pursuant to the provisions
described under "--Conversion at the Option of the Holder."
From and after any applicable conversion date or redemption date, all rights
of a holder of shares of LMG Stock that were converted or redeemed will cease
except for the right, upon surrender of the certificates representing shares
of LMG 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 LMG 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 LMG Stock, represented shares of LMG 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 LMG 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
LMG Stock, TCI will, however, be entitled to treat the certificates for shares
of LMG 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 LMG Stock represented by such
certificates have been converted or redeemed, notwithstanding the failure to
surrender such certificates.
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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
LMG Stock. TCI will not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issue and delivery of any
shares of capital stock in a name other than that in which the shares of LMG
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
TCI Ventures Group and a determination of TCI to pay a dividend on or
undertake a partial or complete redemption of the TCIVG Stock following such
Disposition, in the event of any conversion of the TCIVG Stock as described
under "--Conversion and Redemption--Conversion of TCIVG Stock at the Option of
TCI" or "--Conversion and Redemption--Mandatory Dividend, Redemption or
Conversion of TCIVG Stock," and in the event of a redemption of the TCIVG
Stock in exchange for stock of one or more subsidiaries as described under "--
Conversion and Redemption--Redemption of TCIVG 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 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 LMG 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) the holders of the shares of
TCIVG 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 Stock and the TCI Group Series B Stock, X is the
aggregate Market Capitalization of the LMG Series A Stock and the LMG Series B
Stock, Y is the aggregate Market Capitalization of the TCIVG Series A Stock
and the TCIVG Series B Stock, and Z is the aggregate Market Capitalization of
the TCI Group Series A Stock, the TCI Group Series B Stock, the LMG Series A
Stock, the LMG Series B Stock, the TCIVG Series A Stock and the TCIVG Series B
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 LMG Stock, TCI Group Stock or TCIVG Stock will have any special
right to receive specific assets of the Liberty Media Group, the TCI Group or
the TCI Ventures 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 CAPITAL STOCK--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 Stock, the LMG Stock and the TCIVG Stock do not
have any preemptive rights to subscribe for any additional shares of capital
stock or other obligations convertible into or exercisable for shares of
capital stock that may hereafter be issued by TCI.
PREFERRED STOCK
As of June 30, 1998, 1,552,490 shares of Class B Preferred Stock (net of
shares held by subsidiaries of TCI), 44,575 shares of Series C-TCI Group
Preferred Stock, 70,575 shares of Series C-LMG Preferred Stock, 278,307 shares
of Series F Preferred Stock, 6,446,794 shares of Series G Preferred Stock and
6,567,794 shares of Series H Preferred Stock were outstanding. All of the
outstanding shares of Series F Preferred Stock and 67,536 shares of Class B
Preferred Stock are held by subsidiaries of TCI. As of June 30, 1998,
35,061,783 shares of Series Preferred Stock remain available for designation
pursuant to the TCI Charter. The rights evidenced by the TCI Common Stock are
subject to the prior preferences and rights of the TCI Preferred Stock.
As of the date of this Proxy Statement/Prospectus, the liquidation
preference of each class and series of TCI Preferred Stock is as follows: (i)
$100 per share for the Class B Preferred Stock, (ii) $2,208.35 per share for
the Series C-TCI Group Preferred Stock, (iii) $579.31 per share for the Series
C-LMG Preferred Stock, (iv) $.01 per share for the Series F Preferred Stock,
(v) $21.60 per share for the Series G Preferred Stock, and (vi) $5.40 per
share for the Series H Preferred Stock. After receipt of their liquidation
preference, holders of Series F Preferred Stock are entitled to receive from
the assets of TCI available for distribution to common stockholders an amount
equal to the amount per share to be distributed to holders of TCI Group Series
A Stock in such liquidation, multiplied by the number of shares of TCI Group
Series A Stock into which their shares of Series F Preferred Stock are then
convertible.
As of the date of this Proxy Statement/Prospectus, (i) each share of Series
C-TCI Group Preferred Stock is convertible at the option of the holder into
132.86 shares of TCI Group Series A Stock, (ii) each share of Series C-LMG
Preferred Stock is convertible at the option of the holder into 37.5 shares of
LMG Series A Stock (and, as a result of the LMG Stock Dividend, an additional
share of LMG Series A Stock for every two such shares received upon
conversion), (iii) each share of Series F Preferred Stock is convertible into
1,496.65 shares of TCI Group Series A Stock, (iv) each share of Series G
Preferred Stock is convertible at the option of the holder into 1.190 shares
of TCI Group Series A Stock, and (v) each share of Series H Preferred Stock is
convertible at the option of the holder into .2625 shares of LMG Series A
Stock (and, as a result of the LMG Stock Dividend, an additional share of LMG
Series A Stock for every two such shares received upon conversion), in each
case subject to antidilution adjustments. The Series C-TCI Group Preferred
Stock and the Series C-LMG Preferred Stock are required to be redeemed by TCI
at any time on or after August 8, 2001, in each case at the option of the
holder, in whole or in part (provided that the aggregate liquidation value of
the shares to be redeemed is in excess of $1 million). The Series G Preferred
Stock and the Series H Preferred Stock are required to be redeemed by TCI out
of legally available funds on February 1, 2016.
The Class B Preferred Stock, the Series F Preferred Stock, the Series G
Preferred Stock and the Series H Preferred Stock are each entitled to vote, on
the basis of one vote per share, together with the TCI Common Stock and any
class or series of TCI Preferred Stock entitled to vote thereon, in the
general election of directors of TCI. The holders of shares of Series C-TCI
Group Preferred Stock and Series C-LMG Preferred Stock are entitled to vote
such shares on an as converted basis on all matters submitted to a vote of
holders of the capital stock of TCI entitled to vote generally on the election
of directors. Except as described above and as otherwise required by the DGCL
or the TCI Charter, the currently outstanding TCI Preferred Stock has no
voting rights. The terms of the various classes and series of the TCI
Preferred Stock include provisions that restrict the redemption or repurchase
of and the payment of dividends or the making of distributions on the TCI
Common Stock if any dividends are in arrears on the TCI Preferred Stock or if
TCI has failed to redeem any shares of TCI Preferred Stock that it was
required to redeem.
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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, the TCI Charter and TCI's Bylaws with
respect to the foregoing are outlined below.
DGCL Section 203, in general, prohibits a "business combination" between a
corporation and an "interested stockholder" within three years of the time
such stockholder became an "interested stockholder," unless (i) prior to such
time 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) at or subsequent to such time, 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 or entity that individually
or with or through such person's or entity's 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 The Nasdaq Stock Market 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 TCI Voting Securities (as defined below), voting together as a
single class, to approve (i) a merger or consolidation of TCI with, or into,
another corporation, other than a merger or consolidation which does not
require the consent of stockholders under the DGCL or a merger or
consolidation which has been approved by 75% of the members of the TCI Board
(in which case, in accordance with the DGCL, the affirmative vote of a
majority of the total voting power of the outstanding TCI 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. The term "TCI Voting Securities" is
defined in the TCI Charter as the TCI Group Stock, the LMG
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Stock, the TCIVG Stock and any class or series of TCI Preferred Stock entitled
to vote generally with the holders of TCI Common Stock on matters submitted to
stockholders for a vote, which currently would include the Series C-TCI Group
Preferred Stock and the Series C-LMG Preferred Stock. 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 the annual meeting of stockholders at which such class of
directors' term expires. The exact number of directors, currently nine, is
fixed by the TCI Board. The holders of TCI Voting Securities and of Class B
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 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 35,061,783 remain available for issuance as of June
30, 1998. 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 Stock, 825,000,000 shares of LMG Stock and 825,000,000
shares of TCIVG Stock are currently authorized by the TCI Charter, of which
1,215,568,011 shares of TCI Group Stock, 432,014,977 shares of LMG Stock and
402,108,566 shares of TCIVG Stock remain available for issuance as of June 30,
1998 (in each case, without taking into consideration shares 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 Stock, LMG Stock, TCIVG 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 TCI 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 TCI 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 SEC 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 action to remove directors is required to
be for "cause" (as defined in the TCI Charter) and be approved by the holders
of 66 2/3% of the total voting power of the outstanding shares entitled to
vote in the election of directors (which would include the Class B Preferred
Stock, the Series G Preferred Stock and the Series H Preferred Stock, in
addition to the TCI Voting Securities).
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COMPARISON OF STOCKHOLDERS' RIGHTS
Upon consummation of the Merger, holders of outstanding shares of TINTA
Common Stock (except TCI) will become holders of shares of LMG Series A Stock.
The following is a summary of certain significant provisions affecting, and
differences between, the rights of holders of TINTA Common Stock and the
rights of holders of LMG Series A Stock. Since both TINTA and TCI are
organized under the laws of the State of Delaware, any differences in the
rights of holders of TINTA Common Stock and LMG Series A Stock arise from
various provisions of the TINTA Charter and TINTA's Bylaws and the TCI Charter
and TCI's Bylaws. The following summary does not purport to be complete and is
qualified in its entirety by reference to the DGCL and the complete text of
the TINTA Charter, TINTA's Bylaws, the TCI Charter and TCI's Bylaws. The TCI
Charter and TCI's Bylaws have been filed as exhibits to, or are incorporated
by reference in, the Registration Statement of which this Proxy
Statement/Prospectus is a part. See "AVAILABLE INFORMATION."
AUTHORIZED CAPITAL STOCK
TINTA. TINTA's authorized capitalization consists of a total of 322,000,000
shares of capital stock, including (i) 312,000,000 shares of TINTA Common
Stock of which 300,000,000 shares are designated TINTA Series A Stock and
12,000,000 shares are designated TINTA Series B Stock, and (ii) 10,000,000
shares of preferred stock, $.01 par value per share ("TINTA Preferred Stock").
No shares of the authorized TINTA Preferred Stock are currently issued and
outstanding or are issued and held by TINTA in its treasury or by subsidiaries
of TINTA.
TCI. TCI's authorized capitalization consists of 3,602,375,096 shares of
capital stock, including (i) 3,550,000,000 shares of TCI Common Stock of which
1,750,000,000 shares are designated TCI Group Series A Stock, 150,000,000
shares are designated TCI Group Series B Stock, 750,000,000 shares are
designated LMG Series A Stock, 75,000,000 shares are designated LMG Series B
Stock, 750,000,000 shares are designated TCIVG Series A Stock and 75,000,000
shares are designated TCIVG Series B Stock, and (ii) 52,375,096 shares of TCI
Preferred Stock. See "DESCRIPTION OF TCI CAPITAL STOCK--General."
VOTING RIGHTS
TINTA. Holders of TINTA Series A Stock are entitled to one vote for each
share of such stock held and holders of TINTA Series B Stock are entitled to
ten votes for each share of such stock held, on all matters presented to
stockholders. Except as may otherwise be required by the laws of the State of
Delaware or, with respect to any series of TINTA Preferred Stock, in any
resolution or resolutions providing for the establishment of such series
pursuant to authority vested in the TINTA Board by the TINTA Charter, the
holders of shares of TINTA Series A Stock, the holders of shares of TINTA
Series B Stock and the holders of shares of each series of TINTA Preferred
Stock, if any, entitled to vote thereon vote as one class for all purposes.
TCI. Holders of LMG Series A Stock, TCI Group Series A Stock and TCIVG
Series A Stock are entitled to one vote for each share of such stock held and
holders of LMG Series B Stock, TCI Group Series B Stock and TCIVG Series B
Stock are entitled to ten votes for each share of such stock held, on all
matters presented to stockholders. Except as may otherwise be required by the
laws of the State of Delaware or, with respect to any class of TCI Preferred
Stock or any series of such a class, in the TCI Charter (including any
resolution or resolutions providing for the establishment of such class or
series pursuant to authority vested in the TCI Board by the TCI Charter), the
holders of shares of LMG Stock, the holders of shares of TCI Group Stock, the
holders of shares of TCIVG Stock and the holders of shares of each class or
series of TCI Preferred Stock, if any, entitled to vote thereon vote as one
class for all purposes. See "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--
Voting Rights."
CONVERSION RIGHTS
TINTA. Shares of TINTA Series A Stock are not convertible into shares of
TINTA Series B Stock. Each share of TINTA Series B Stock is convertible, at
the option of its holder, into one share of TINTA Series A Stock.
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TCI. Shares of LMG Series A Stock are not convertible into shares of LMG
Series B Stock, shares of TCI Group Series A Stock are not convertible into
shares of TCI Group Series B Stock, and shares of TCIVG Series A Stock are not
convertible into shares of TCIVG Series B Stock. Each share of LMG Series B
Stock is convertible, at the option of its holder, into one share of LMG
Series A Stock, each share of TCI Group Series B Stock is convertible, at the
option of its holder, into one share of TCI Group Series A Stock, and each
share of TCIVG Series B Stock is convertible at the option of its holder, into
one share of TCIVG Series A Stock. In addition, the TCI Board may at any time
declare that (x) all of the outstanding shares of LMG Series A Stock be
converted into TCI Group Series A Stock and all of the outstanding shares of
LMG Series B Stock be converted into TCI Group Series B Stock, and (y) all of
the outstanding shares of TCIVG Series A Stock be converted into TCI Group
Series A Stock and all of the outstanding shares of TCIVG Series B Stock be
converted into TCI Group Series B Stock. See "DESCRIPTION OF TCI CAPITAL
STOCK--Common Stock--Conversion and Redemption."
DIVIDEND, REDEMPTION AND CONVERSION RIGHTS ON DISPOSITION OF ASSETS
TINTA. The TINTA Charter does not contain any provisions comparable to the
dividend, redemption and conversion rights applicable to the LMG Stock and the
TCIVG Stock described below that would apply in the case of the disposition of
all or substantially all of the properties and assets of TINTA.
TCI. If TCI disposes of all or substantially all of the assets attributed to
the Liberty Media Group (defined as 80% or more on a current market value
basis), other than in certain types of transactions, TCI is required, at its
option either to (i) distribute to holders of LMG Stock an amount in cash
and/or securities or other property equal to their proportionate interest in
the Liberty Media Group Net Proceeds of such disposition, either by special
dividend or by redemption of all or part of the outstanding shares of LMG
Stock, or (ii) convert each outstanding share of LMG Series A Stock and LMG
Series B Stock into a number (or fraction) of fully paid and nonassessable
shares of TCI Group Series A Stock or TCI Group Series B Stock, respectively,
equal in each case to 110% of the average daily ratio over the ten-Trading Day
period beginning on the 16th Trading Day after consummation of the transaction
of the Market Value of one share of LMG Series A Stock to the Market Value of
one share of TCI Group Series A Stock. See "DESCRIPTION OF TCI CAPITAL STOCK--
Common Stock--Conversion and Redemption--Mandatory Dividend, Redemption or
Conversion of LMG Stock."
Similarly, if TCI disposes of all or substantially all of the assets
attributed to the TCI Ventures Group (defined as 80% or more on a current
market value basis), other than in certain types of transactions, TCI is
required, at its option either to (i) distribute to holders of TCIVG Stock an
amount in cash and/or securities or other property equal to their
proportionate interest in the TCI Ventures Group Net Proceeds of such
disposition, either by special dividend or by redemption of all or part of the
outstanding shares of TCIVG Stock, or (ii) convert each outstanding share of
TCIVG Series A Stock and TCIVG Series B Stock into a number (or fraction) of
fully paid and nonassessable shares of TCI Group Series A Stock or TCI Group
Series B Stock, respectively, equal in each case to 110% of the average daily
ratio over the ten-Trading Day period beginning on the 16th Trading Day after
consummation of the transaction of the Market Value of one share of TCIVG
Series A Stock to the Market Value of one share of TCI Group Series A Stock.
See "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--Conversion and
Redemption--Mandatory Dividend, Redemption or Conversion of TCIVG Stock."
No provisions comparable to the foregoing dividend, redemption and
conversion rights applicable to the LMG Stock and the TCIVG Stock will apply
in the case of the disposition of all or substantially all of the properties
and assets attributed to the TCI Group.
REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY
TINTA. The TINTA Charter does not contain any provisions comparable to the
redemption rights of TCI applicable to the LMG Stock and the TCIVG Stock
described below.
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TCI. Subject to certain restrictions, TCI could at any time, in the sole
discretion of the TCI Board, redeem (without premium) all outstanding shares
of LMG Stock or TCIVG Stock, as the case may be, in exchange for a
proportionate interest in the outstanding shares of any one or more Qualifying
Subsidiaries that hold all of the assets and liabilities attributed to the
Liberty Media Group or the TCI Ventures Group, as the case may be. See
"DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--Conversion and Redemption--
Redemption of LMG Stock in Exchange for Stock of Subsidiary" and "--Redemption
of TCIVG Stock in Exchange for Stock of Subsidiary."
DIVIDENDS AND SHARE DISTRIBUTION
TINTA. Subject to the following sentence, any dividends paid on the TINTA
Series A Stock or the TINTA Series B Stock will be paid only on both series,
in equal amounts per share. If a distribution paid in TINTA Series A Stock,
TINTA Series B Stock, other securities of TINTA or securities of any other
entity is to be made with respect to the TINTA Series A Stock or TINTA Series
B Stock, such share distribution may be paid only as follows: (a) a share
distribution consisting of shares of TINTA Series A Stock (or any securities
of TINTA convertible into, exercisable or exchangeable for, or evidencing the
right to purchase any shares of TINTA Series A Stock) to holders of TINTA
Series A Stock and TINTA Series B Stock, on an equal per share basis; or
consisting of shares of TINTA Series B Stock (or securities of TINTA
convertible into, exercisable or exchangeable for, or evidencing the right to
purchase any shares of TINTA Series B Stock) to holders of TINTA Series A
Stock and TINTA Series B Stock, on an equal per share basis; or consisting of
shares of TINTA Series A Stock (or securities of TINTA convertible into,
exercisable or exchangeable for, or evidencing the right to purchase any
shares of TINTA Series A Stock) to holders of TINTA Series A Stock and, on an
equal per share basis, shares of TINTA Series B Stock (or securities of TINTA
convertible into, exercisable or exchangeable for, or evidencing the right to
purchase any shares of TINTA Series B Stock) to holders of TINTA Series B
Stock; and (b) a share distribution consisting of any class or series of
securities of TINTA or any other entity other than TINTA Series A Stock or
TINTA Series B Stock (or other than securities of TINTA convertible into,
exercisable or exchangeable for, or evidencing the right to purchase any
shares of TINTA Series A Stock or TINTA Series B Stock) either on the basis of
a distribution of identical securities, on an equal per share basis, to
holders of TINTA Series A Stock and TINTA Series B Stock or on the basis of a
distribution of one class or series of securities to holders of TINTA Series A
Stock and another class or series of securities to holders of TINTA Series B
Stock, provided that the securities so distributed (and, if applicable, the
securities into which the distributed securities are convertible, or for which
they are exercisable or exchangeable, or which the distributed securities
evidence the right to purchase) do not differ in any respect other than their
relative voting rights and related differences in designation, conversion and
share distribution provisions with holders of shares of TINTA Series B Stock
receiving the class or series having the higher relative voting rights
(without regard to whether such rights differ to a greater or lesser extent
than the corresponding differences in voting rights and related differences in
designation, conversion and share distribution provisions between the TINTA
Series A Stock and the TINTA Series B Stock) provided that if the securities
so distributed constitute capital stock of a subsidiary of TINTA, such rights
shall not differ to a greater extent than the corresponding differences in
voting rights, designation, conversion and share distribution provisions
between the TINTA Series A Stock and the TINTA Series B Stock, and provided in
each case that such distribution is otherwise made on an equal per share
basis.
TCI. Except in the case of dividends paid as share distributions and in
certain other circumstances, (x) any dividends paid on the LMG Series A Stock
or the LMG Series B Stock will be paid only on both series, in equal amounts
per share, (y) any dividends paid on the TCI Group Series A Stock or the TCI
Group Series B Stock will be paid only on both series, in equal amounts per
share and (z) any dividends paid on the TCIVG Series A Stock or the TCIVG
Series B Stock will be paid only on both series, in equal amounts per share.
See "DESCRIPTION OF TCI CAPITAL STOCK--Common Stock--Dividends," "--Share
Distributions," "--Conversion and Redemption--Mandatory Dividend, Redemption
or Conversion of LMG Stock" and "--Conversion and Redemption--Mandatory
Dividend, Redemption or Conversion of TCIVG Stock."
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BOARD OF DIRECTORS
TINTA. The TINTA Charter provides for a Board of Directors of not less than
three members, divided into three classes of approximately equal size, with
each class to be elected for a three-year term at each annual meeting of
stockholders. The exact number of directors, currently eight, is fixed by the
TINTA Board.
TCI. The TCI Charter provides for a Board of Directors of not less than
three members, divided into three classes of approximately equal size, with
each class to be elected for a three-year term at each annual meeting of
stockholders. The exact number of directors, currently nine, is fixed by the
TCI Board. See "DESCRIPTION OF TCI CAPITAL STOCK--Anti-Takeover
Considerations."
ELECTION OF DIRECTORS
TINTA. The holders of shares of TINTA Series A Stock and the holders of
shares of TINTA Series B Stock, voting together as a single class, vote in
elections for directors. Stockholders of TINTA do not have cumulative voting
rights. Directors may be elected under TINTA's Bylaws by a plurality of the
votes of the shares present in person or represented by proxy at a meeting of
stockholders at which a quorum is present and entitled to vote on the election
of directors.
TCI. The holders of shares of TCI Group Stock, LMG Stock, TCIVG Stock, Class
B Preferred Stock, Series C-TCI Group Preferred Stock, Series C-LMG Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock, voting together
as a single class, vote in elections for directors. (Series F Preferred Stock
has voting rights, but outstanding shares are not entitled to vote because
they are held by subsidiaries of TCI.) Stockholders of TCI do not have
cumulative voting rights. Directors may be elected under TCI's Bylaws by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors.
REMOVAL OF DIRECTORS
TINTA. The TINTA Charter provides that directors may be removed only for
"cause" (as defined in the TINTA Charter) upon the affirmative vote of 66 2/3%
of the total voting power of the outstanding shares entitled to vote in an
election of directors.
TCI. The TCI Charter provides that, subject to the rights of the holders of
any class or series of TCI Preferred Stock, directors may be removed from
office only for "cause" (as defined in the TCI Charter) upon the affirmative
vote of 66 2/3% of the total voting power of the outstanding shares of TCI
Group Stock, LMG Stock, TCIVG Stock and any class or series of TCI Preferred
Stock entitled to vote in an election of directors, voting together as a
single class. See "DESCRIPTION OF TCI CAPITAL STOCK--Anti-Takeover
Considerations."
SPECIAL MEETINGS OF STOCKHOLDERS
TINTA. The TINTA Charter and TINTA's Bylaws provide that a special meeting
of stockholders will be held at any time, subject to the rights of the holders
of any series of TINTA Preferred Stock, upon the call of the Secretary of
TINTA (i) upon the written request of the holders of not less than 66 2/3% of
the total voting power of the outstanding shares of TINTA Voting Securities
(as defined below) or (ii) at the request of at least 75% of the members of
the TINTA Board. The term "TINTA Voting Securities" includes the TINTA Common
Stock and any series of TINTA Preferred Stock entitled to vote with the
holders of TINTA Common Stock generally upon all matters which may be
submitted to a vote of stockholders at any annual meeting or special meeting
thereof.
TCI. The TCI Charter and TCI's Bylaws provide that a special meeting of
stockholders will be held at any time, subject to the rights of the holders of
any class or series of TCI Preferred Stock, upon the call of the Secretary of
TCI (i) upon the written request of the holders of not less than 66 2/3% of
the total voting power of the outstanding TCI Voting Securities or (ii) at the
request of at least 75% of the members of the TCI Board. See "DESCRIPTION OF
TCI CAPITAL STOCK--Anti-Takeover Considerations."
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MERGER, CONSOLIDATION AND SALE OF ASSETS
TINTA. The TINTA Charter requires, subject to the rights, if any, of any
series of TINTA Preferred Stock, the affirmative vote of 66 2/3% of the total
voting power of the outstanding shares of TINTA Voting Securities, voting
together as a single class, to approve (i) a merger or consolidation of TINTA
with or into any other corporation, other than a merger or consolidation which
does not require the consent of stockholders under the DGCL or a merger or
consolidation which has been approved by at least 75% of the members of the
TINTA Board (in which case, in accordance with the DGCL, the affirmative vote
of a majority of the total voting power of the outstanding TINTA Voting
Securities would, with certain exceptions, be required for approval), or (ii)
the sale, lease or exchange of all or substantially all of the property and
assets of TINTA.
TCI. The TCI Charter requires, subject to the rights, if any, of any class
or series of TCI Preferred Stock, the affirmative vote of 66 2/3% of the total
voting power of the outstanding shares of TCI Voting Securities, voting
together as a single class, to approve (i) a merger or consolidation of TCI
with, or into, another corporation, other than a merger or consolidation which
does not require the consent of stockholders under the DGCL or a merger or
consolidation which has been approved by at least 75% of the members of the
TCI Board (in which case, in accordance with the DGCL, the affirmative vote of
a majority of the total voting power of the outstanding TCI Voting Securities
would, with certain exceptions, be required for approval), or (ii) the sale,
lease or exchange of all or substantially all of the property and assets of
TCI.
CHARTER OR BYLAW AMENDMENTS
TINTA. Subject to the rights of the holders of any series of TINTA Preferred
Stock, the affirmative vote of the holders of at least 66 2/3% of the total
voting power of the outstanding shares of TINTA Voting Securities, voting
together as a single class, is required to approve (a) any amendment,
alteration or repeal of any provision of the TINTA Charter or the addition or
insertion of other provisions therein and (b) the adoption, amendment or
repeal of any provision of TINTA's Bylaws; provided, however, that this voting
requirement shall not apply to, and no vote of the stockholders of TINTA is
required to authorize the adoption, amendment or repeal of any provision of
TINTA's Bylaws by the TINTA Board by action taken by the affirmative vote of
not less than 75% of the members of the TINTA Board then in office.
TCI. Subject to the rights of the holders of any class or series of TCI
Preferred Stock, the affirmative vote of the holders of at least 66 2/3% of
the total voting power of the outstanding shares of TCI Voting Securities,
voting together as a single class, is required to approve (a) any amendment,
alteration or repeal of any provision of the TCI Charter or the addition or
insertion of other provisions therein and (b) the adoption, amendment or
repeal of any provision of TCI's Bylaws; provided, however, that this voting
requirement shall not apply to, and no vote of the stockholders of TCI is
required to authorize the adoption, amendment or repeal of TCI's Bylaws by the
TCI Board by action taken by the affirmative vote of not less than 75% of the
members of the TCI Board then in office. See "DESCRIPTION OF TCI CAPITAL
STOCK--Anti-Takeover Considerations."
STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
TINTA. DGCL Section 203 generally prohibits a Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for
three years following the time that such person becomes an interested
stockholder, subject to certain exceptions contained in DGCL Section 203. See
"DESCRIPTION OF TCI CAPITAL STOCK--Anti-Takeover Considerations." The TINTA
Charter does not contain any provision "opting out" of the application of DGCL
Section 203; however, the TINTA Board approved the transaction which resulted
in TCI becoming an interested stockholder of TINTA, thereby making the
restrictions of DGCL Section 203 inapplicable to the Merger.
TCI. 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." See "DESCRIPTION OF TCI CAPITAL STOCK--Anti-
Takeover Considerations."
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LIQUIDATION OR DISSOLUTION
TINTA. Under the TINTA Charter, in the event of a liquidation, dissolution
or winding up of TINTA, whether voluntary or involuntary, after payment or
provision for payment of the debts and liabilities of TINTA and subject to the
prior payment in full of the preferential amounts to which any series of TINTA
Preferred Stock is entitled, the holders of TINTA Series A Stock and the
holders of TINTA Series B Stock will share equally, on a share for share
basis, in the assets of TINTA remaining for distribution to its common
stockholders.
TCI. Under the TCI Charter, 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
LMG Stock will share equally, on a share for share basis, in a portion of the
funds of TCI remaining for distribution to its common stockholders, (ii) the
holders of the shares of TCI Group Stock will share equally, on a share for
share basis, in a portion of the funds of TCI remaining for distribution to
its common stockholders and (iii) the holders of the shares of TCIVG Stock
will share equally, on a share for share basis, in a portion of the funds of
TCI remaining for distribution to its common stockholders. For a description
of the basis on which such portions are determined, see "DESCRIPTION OF TCI
CAPITAL STOCK--Common Stock--Liquidation Rights." No holder of LMG Stock, TCI
Group Stock or TCIVG Stock will have any special right to receive specific
assets of the Liberty Media Group, the TCI Group or the TCI Ventures Group, as
the case may be, in the case of any dissolution, liquidation or winding up of
TCI.
SECURITY OWNERSHIP OF TINTA
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
On August 1, 1998, TCI beneficially owned, through TCI Ventures Group,
L.L.C., and had sole voting and investment power over, 86,250,000 shares of
TINTA Series A Stock and all of the 11,700,000 outstanding shares of TINTA
Series B Stock, which represented 85% of the outstanding shares of TINTA
Common Stock, 83% of the outstanding shares of TINTA Series A Stock and 92% of
the combined voting power of the TINTA Common Stock outstanding at that date.
TCI's executive offices are located at Terrace Tower II, 5619 DTC Parkway,
Englewood, Colorado 80111. TCI is the only person known to TINTA that
beneficially owns 5% or more of either series of TINTA Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of shares of TINTA Series A Stock. In addition, the table sets forth
information with respect to the beneficial ownership of shares of the
following securities of TCI: (i) TCI Group Series A Stock, (ii) TCI Group
Series B Stock, (iii) LMG Series A Stock, (iv) LMG Series B Stock, (v) TCIVG
Series A Stock; (vi) TCIVG Series B Stock, (vii) Class B Preferred Stock;
(viii) Series C-TCI Group Preferred Stock; (ix) Series C-LMG Preferred Stock;
(x) Series G Preferred Stock; and (xi) Series H Preferred Stock. The table
indicates securities beneficially owned by (i) each director of TINTA, (ii)
the Chief Executive Officer and each of the four other most highly compensated
executive officers of TINTA for the fiscal year 1997, and (iii) all directors
and executive officers of TINTA as a group. The table also indicates the pro
forma number and ownership percentage of shares of LMG Series A Stock that
will be owned by such persons immediately after the Effective Time, assuming
an Exchange Ratio of 0.58 of a share of LMG Series A Stock for each share of
TINTA Common Stock and assuming such persons do not acquire or dispose of, any
shares of TINTA Common Stock during the period commencing on August 1, 1998
and ending at the Effective Time.
Shares issuable upon exercise of options or conversion of convertible
securities and upon vesting of restricted stock awards are deemed to be
outstanding for the purpose of computing the percentage ownership and overall
voting power of persons beneficially owning such securities, but have not been
deemed to be outstanding for the purpose of computing the percentage ownership
or overall voting power of any other person.
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Voting power in the table is computed with respect to a general election of
directors of TCI with the TCI Group Stock, LMG Stock, TCIVG Stock, Class B
Preferred Stock, Series C-TCI Group Preferred Stock, Series C-LMG Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock, voting together
as a single class. So far as is known to TINTA, the persons indicated below
have sole voting and investment power with respect to the shares indicated as
owned by them, except as otherwise stated in the notes to the table. The
information in the table (including the footnotes) is as of August 1, 1998.
<TABLE>
<CAPTION>
POST-MERGER LMG
PRE-MERGER TINTA COMMON STOCK AND CERTAIN TCI SECURITIES SERIES A STOCK
- ---------------------------------------------------------------------------------------------------- ---------------------
AMOUNT AND
NATURE OF
TITLE OF AMOUNT AND NATURE OF PERCENT OF VOTING BENEFICIAL PERCENT OF
BENEFICIAL OWNER CLASS OR SERIES BENEFICIAL OWNERSHIP CLASS(1) POWER(1) OWNERSHIP CLASS(1)
- ---------------- --------------- -------------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David Evans TINTA Series A Stock 467,875 (2) * * 271,368 *
President, Chief
Executive Officer and
Director
Paul A. Gould TINTA Series A Stock 95,000 (3) * * 208,907 *
Director TCI Group Series A Stock 99,450 (4) *
TCI Group Series B Stock 246,271 *
LMG Series A Stock 153,807 (4) *
LMG Series B Stock 58,621 * *
TCIVG Series A Stock 56,266 *
TCIVG Series B Stock 57,964 *
Class B Preferred Stock 12,248 *
Leo J. Hindery, Jr. TINTA Series A Stock 50,000 (5) * * 1,154,000 *
Director TCI Group Series A Stock 2,924,534 (6) *
TCI Group Series B Stock 1,684,775 (7) 3.37%
LMG Series A Stock 1,125,000 (6) * 1.60%
TCIVG Series A Stock 1,550,932 (6) *
TCIVG Series B Stock 1,721,360 (7) 3.79%
Gary S. Howard TINTA Series A Stock 900 * * 102,283 *
Director TCI Group Series A Stock 223,499 (8) *
LMG Series A Stock 101,761 (8) * *
TCIVG Series A Stock 216,742 (8) *
Jerome H. Kern TINTA Series A Stock 25,000 (9) * * 1,406,105 *
Director TCI Group Series A Stock 1,880,746 (10) *
LMG Series A Stock 1,391,605 (10) * *
TCIVG Series A Stock 1,474,876 (10) *
Pierre Lescure TINTA Series A Stock 50,000 (3) * * 29,000 *
Director
John C. Malone TINTA Series A Stock 50,000 (3) * * 1,166,807 *
Director and Chairman
of TCI Group Series A Stock 1,400,146 (11) *
the Board TCI Group Series B Stock 54,449,228 (7)(12)(13)(14) 84.49%
LMG Series A Stock 1,137,807 (11)(12) *
LMG Series B Stock 27,233,811 (12)(13)(14) 85.91% 48.0%
TCIVG Series A Stock 1,200,000 (11) *
TCIVG Series B Stock 45,039,888 (7)(11)(12)(13)(14) 93.38%
Class B Preferred Stock 273,600 (12) 17.62%
Fred A. Vierra TINTA Series A Stock 569,000 (15) * * 378,864 *
Director and Vice TCI Group Series A Stock 15,463 *
Chairman of the Board; LMG Series A Stock 48,844 * *
Chief Executive Officer TCIVG Series A Stock 61,980 *
until 1/1/98 Class B Preferred Stock 200 *
Stephen M. Brett TINTA Series A Stock 100,000 (16) * * 506,294 *
Vice President and TCI Group Series A Stock 666,282 (17) *
Secretary LMG Series A Stock 448,294 (17) * *
TCIVG Series A Stock 508,314 (17) *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
POST-MERGER LMG
PRE-MERGER TINTA COMMON STOCK AND CERTAIN TCI SECURITIES SERIES A STOCK
- ----------------------------------------------------------------------------------------------------- ---------------------
AMOUNT AND
NATURE OF
TITLE OF AMOUNT AND NATURE OF PERCENT OF VOTING BENEFICIAL PERCENT OF
BENEFICIAL OWNER CLASS OR SERIES BENEFICIAL OWNERSHIP CLASS(1) POWER(1) OWNERSHIP CLASS(1)
- ---------------- --------------- -------------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Miranda Curtis TINTA Series A Stock 310,500 (18) * * 194,152 *
Executive Vice
President TCI Group Series A Stock 7,000 (19) *
LMG Series A Stock 14,062 (19) * *
TCIVG Series A Stock 15,000 (19) *
Graham E. Hollis TINTA Series A Stock 150,600 (20) * * 89,436 *
Executive Vice
President and TCI Group Series A Stock 2,607 (21) *
Chief Financial Officer LMG Series A Stock 2,088 (21) * *
TCIVG Series A Stock 2,260 (21) *
All Directors and
Executive Officers as a
Group (12 persons) TINTA Series A Stock 1,968,875 (2)(5)(22)(23) 1.87% * 5,574,581 1.42%
TCI Group Series A Stock 7,226,125 (24) 1.51%
TCI Group Series B Stock 54,695,499 (7)(12)(13)(14) 84.87%
LMG Series A Stock 4,432,633 (12)(24) 1.34% 48.42%
LMG Series B Stock 27,292,432 (12)(13)(14) 86.10%
TCIVG Series A Stock 5,091,770 (24) 1.33%
TCIVG Series B Stock 45,097,852 (7)(12)(13)(14)(25) 93.50%
Class B Preferred Stock 286,048 (12) 18.43%
</TABLE>
- -------
* Less than 1%
(1) The figures for the percent of class and voting power calculations for
TINTA are based on 103,640,680 shares of TINTA Series A Stock (after
elimination of shares of TINTA held in treasury and by subsidiaries of
TINTA) and 11,700,000 shares of TINTA Series B Stock outstanding on
August 1, 1998. In addition, the figures for the percent of class and
voting power calculations for TCI are based on 473,411,579 shares of TCI
Group Series A Stock, 49,932,623 shares of TCI Group Series B Stock,
326,005,365 shares of LMG Series A Stock, 31,699,575 shares of LMG Series
B Stock, 376,964,436 shares of TCIVG Series A Stock, 45,433,352 shares of
TCIVG Series B Stock, 1,552,490 shares of Class B Preferred Stock, 44,575
shares of Series C-TCI Group Preferred Stock, 70,575 shares of Series C-
LMG Preferred Stock, 6,446,794 shares of Series G Preferred Stock, and
6,567,794 shares of Series H Preferred Stock outstanding on August 1,
1998 (in each case after elimination of shares of TCI held in treasury
and by subsidiaries of TCI).
(2) Assumes the exercise in full of options granted in tandem with stock
appreciation rights in September 1997, pursuant to the TINTA 1995 Plan,
to acquire 450,000 shares of TINTA Series A Stock. None of these options
were exercisable at August 1, 1998. The table does not include an
additional 23,194 shares of TINTA Series A Stock issued to Mr. Evans in
September 1998, pursuant to the terms of his employment contract. See
"CERTAIN TRANSACTIONS BETWEEN TCI AND TINTA--Transactions with
Management--Employment Agreement with Mr. Evans."
(3) Assumes the exercise in full of options granted in April 1996, pursuant
to the TINTA 1996 Nonemployee Director Plan, to acquire 50,000 shares of
TINTA Series A Stock. Options to acquire 20,000 shares are currently
exercisable.
(4) Assumes the exercise in full of options granted in December 1996,
pursuant to TCI's 1994 Nonemployee Director Stock Option Plan (the "TCI
Director Stock Option Plan"), to acquire 50,000 shares of TCI Group
Series A Stock and 28,125 shares of LMG Series A Stock. Options to
acquire 10,000 and 5,625, respectively, of such shares are currently
exercisable.
(5) Assumes the exercise in full of options granted in tandem with stock
appreciation rights in February 1997, by TCI, to acquire 50,000 shares of
TINTA Series A Stock owned by TCI. Options to acquire 10,000 shares are
currently exercisable.
(6) Assumes the exercise in full of the following: (a) stock options granted
in tandem with stock appreciation rights in February 1997 to acquire
700,000 shares of TCI Group Series A Stock, 375,000 shares of LMG Series
A Stock and 600,000 shares of TCIVG Series A Stock, of which options to
acquire 140,000, 75,000 and 120,000, respectively, of such shares are
currently exercisable; and (b) stock options granted in tandem with stock
appreciation rights in July 1997 to acquire 1,050,000 shares of TCI Group
Series A Stock, 750,000 shares of LMG Series A Stock and 900,000 shares
of TCIVG Series A Stock, of which options to acquire 210,000, 150,000 and
180,000, respectively, of such shares are currently exercisable. Also
includes 174,534 restricted shares of TCI Group Series A Stock and 50,932
restricted shares of TCIVG Series A Stock. Such shares vest as to 50% in
July 2001 and as to the remaining 50% in July 2002. Also includes
1,000,000 restricted shares of TCI Group Series A Stock. Such shares vest
as to 50% in June 2002 and as to the remaining 50% in June 2003.
(7) Includes 1,684,775 shares of TCI Group Series B Stock and 1,721,360
shares of TCIVG Series B Stock held by trusts of which Mr. Hindery is the
trustee. Dr. Malone has the power to vote such shares and also has a
right of first refusal with respect to any proposed transfer of such
shares. Such right of first refusal may be exercised by Dr. Malone either
by the payment of cash or, subject to certain exceptions, by the
exchanging of shares of TCI Group Series A Stock for such TCI Group
Series B Stock or TCIVG Series A Stock for such TCIVG Series B Stock. If
not exercised by Dr. Malone, the right of first refusal may be exercised
by TCI.
(8) Assumes the exercise in full of the following: (a) stock options granted
in tandem with stock appreciation rights in November 1992 to acquire
35,000 shares of TCI Group Series A Stock, 28,125 shares of LMG Series A
Stock and 30,000 shares of TCIVG Series A Stock, all of which options are
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<PAGE>
currently exercisable; (b) stock options granted in tandem with stock
appreciation rights in October 1993 to acquire 35,000 shares of TCI Group
Series A Stock, 28,125 shares of LMG Series A Stock and 30,000 shares of
TCIVG Series A Stock, all of which options are currently exercisable; (c)
stock options granted in tandem with stock appreciation rights in November
1994 to acquire 35,000 shares of TCI Group Series A Stock, 28,125 shares of
LMG Series A Stock and 30,000 shares of TCIVG Series A Stock, of which
options to acquire 21,000, 16,875 and 18,000, respectively, of such shares
are currently exercisable; and (d) stock options granted in tandem with
stock appreciation rights in December 1995 to acquire 105,000 shares of TCI
Group Series A Stock and 90,000 shares of TCIVG Series A Stock, of which
options to acquire 42,000 and 36,000, respectively, of such shares are
currently exercisable. Also includes 9,543 restricted shares of TCI Group
Series A Stock and 10,914 restricted shares of TCIVG Series A Stock. Such
shares vest as to 50% in December 1999 and as to the remaining 50% in
December 2000.
(9) Assumes the exercise in full of options granted in April 1996, pursuant to
the TINTA 1996 Nonemployee Director Plan, to acquire 25,000 shares of
TINTA Series A Stock. Options to acquire 10,000 shares are currently
exercisable.
(10) Assumes the exercise in full of the following: (a) stock options granted
in November 1994, pursuant to the TCI Director Stock Option Plan, to
acquire 25,000 shares of TCI Group Series A Stock and 14,063 shares of LMG
Series A Stock, of which options to acquire 15,000 and 8,438,
respectively, of such shares are currently exercisable; (b) stock options
granted in tandem with stock appreciation rights in December 1995 to
acquire 175,000 shares of TCI Group Series A Stock, 140,625 shares of LMG
Series A Stock and 150,000 shares of TCIVG Series A Stock, of which
options to acquire 70,000, 56,250 and 60,000, respectively, of such shares
are currently exercisable; (c) stock options granted in tandem with stock
appreciation rights in July 1997 to acquire 1,050,000 shares of TCI Group
Series A Stock, 843,750 shares of LMG Series A Stock and 900,000 shares of
TCIVG Series A Stock, of which options to acquire 210,000, 168,750 and
180,000, respectively, of such shares are currently exercisable; and (d)
stock options granted in tandem with stock appreciation rights in December
1997 to acquire 350,000 shares of TCI Group Series A Stock, 250,000 shares
of LMG Series A Stock and 300,000 shares of TCIVG Series A Stock, none of
which options were exercisable at August 1, 1998. Also includes 163,620
restricted shares of TCI Group Series A Stock and 72,760 restricted shares
of TCIVG Series A Stock. Such shares vest as to 50% in July 2001 and as to
the remaining 50% in July 2002.
(11) Assumes the exercise in full of the following: (a) stock options granted
in tandem with stock appreciation rights in November 1992 to acquire
700,000 shares of TCI Group Series A Stock, 562,500 shares of LMG Series A
Stock, and 600,000 shares of TCIVG Series A Stock, all of which options
are currently exercisable; (b) stock options granted in tandem with stock
appreciation rights in December 1995 to acquire 700,000 shares of TCI
Group Series A Stock, 562,500 shares of LMG Series A Stock and 600,000
shares of TCIVG Series A Stock, of which options to acquire 280,000,
225,000 and 240,000, respectively, of such shares are currently
exercisable; and (c) stock options granted in tandem with stock
appreciation rights in December 1997 to acquire 2,800,000 shares of TCIVG
Series B Stock, none of which options were exercisable at August 1, 1998.
(12) Includes 784,892 shares of TCI Group Series B Stock, 12,726 shares of LMG
Series A Stock, 439,875 shares of LMG Series B Stock, 793,240 shares of
TCIVG Series B Stock and 6,900 shares of Class B Preferred Stock held by
Dr. Malone's wife, Mrs. Leslie Malone, as to which Dr. Malone has
disclaimed beneficial ownership.
(13) Pursuant to a letter agreement dated June 17, 1988, the late Mr. Bob
Magness (the founder and former Chairman of TCI) and Kearns- Tribune
Corporation, a newspaper publishing concern, each granted Dr. Malone
certain rights with respect to the then Class B Common Stock of TCI owned
by them. Dr. Malone agreed with TCI to forego the exercise of such rights
in connection with a June 16, 1997 transaction whereby the Estate of Bob
Magness sold 30,545,864 shares of TCI Group Series B Stock to TCI in
exchange for an equal number of shares of TCI Group Series A Stock. In
consideration thereof, TCI granted Dr. Malone the right (the "Malone
Right") to acquire, at any time and from time to time prior to June 30,
1999, up to 30,545,864 shares of TCI Group Series B Stock for either (or
any combination of): (i) shares of TCI Group Series A Stock on a one-for-
one basis; or (ii) cash based on the closing market price of the TCI Group
Series B Stock on the NASDAQ/NM for a specified period prior to the
acquisition of such shares by Dr. Malone (the "TCI-Estates Agreement").
Effective February 9, 1998, however, the number of shares of TCI Group
Series B Stock subject to the Malone Right was reduced from 30,545,864 to
14,511,570 shares. Dr. Malone and certain members of the Magness family,
individually, and in certain cases, on behalf of the Estate of Betsy
Magness and the Estate of Bob Magness (collectively, the "Magness Group")
have the right to participate with Dr. Malone in any acquisition of up to
12,406,238 of the 14,511,570 shares of TCI Group Series B Stock subject to
the Malone Right on a basis proportionate to the relative ownership by the
Magness Group and Dr. Malone and his spouse of capital stock of TCI having
more than one vote per share in the election of directors. The Malone
Right may be exercised at any time prior to June 30, 1999. If the Magness
Group or any member thereof declines to participate in the Malone Right,
Dr. Malone may acquire all such shares. As of June 24, 1998, Dr. Malone
delivered to TCI a notice of his intent to exercise the Malone Right in
full. The representative of the Magness Group delivered a notice to Dr.
Malone and TCI of the Magness Group's intent to exercise its proportionate
share of such right in full. As of August 1, 1998, the closing of these
exercises and the attendant issuance of the stock had not occurred. In
connection with the foregoing changes to the TCI-Estates Agreement, on
February 9, 1998, Dr. Malone and Leslie Malone, his spouse (collectively,
the "Malone Group"), and the Magness Group entered into a Stockholders'
Agreement, pursuant to which the parties agreed to consult with each other
on any matter coming to a vote of TCI stockholders; provided, however,
that in the event of a disagreement, the shares of TCI Group Series B
Stock, LMG Series B Stock and TCIVG Series B Stock held by the Malone
Group and the Magness Group would be voted in the manner directed by Dr.
Malone pursuant to an irrevocable proxy given by the Magness Group. As a
result of the February 1998 transactions, Dr. Malone's beneficial
ownership of TCI Common Stock includes the following shares held by the
Magness Group: 16,365,681 shares of TCI Group Series B Stock, 14,292,719
shares of LMG Series B Stock, and 18,684,034 shares of TCIVG Series B
Stock. In addition, all of the shares subject to the Malone Right have
been included in Dr. Malone's beneficial stock ownership information.
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<PAGE>
(14) The Malone Group's shares of TCI Group Series B Stock, LMG Series B Stock
and TCIVG Series B Stock (collectively, the "TCI Series B Stock") are
subject to the terms of a Call Agreement dated as of February 9, 1998,
among the Malone Group and TCI. Such Call Agreement provides TCI the
right to acquire all of the shares of TCI Series B Stock owned by the
Malone Group upon Dr. Malone's death or a contemplated sale of such TCI
Series B Stock to third parties at prices determined in accordance with
the Call Agreement. Such Call Agreement also prohibits the Malone Group
from disposing of their TCI Series B Stock, except for certain exempt
transfers (such as transfers to related parties or the Magness Group or
public sales of up to an aggregate of 5% of their TCI Series B Stock). In
addition, the Malone Group entered into a voting agreement, dated as of
June 23, 1998 (the "AT&T Voting Agreement"), with AT&T in connection with
the AT&T Merger. Pursuant to the AT&T Voting Agreement, each of the
members of the Malone Group has agreed to vote all TCI Voting Securities
that such member owns or has the right to vote, in favor of the AT&T
Merger and against any other Takeover Proposal (as defined in the AT&T
Merger Agreement). The AT&T Voting Agreement also contains restrictions
on the ability of the members of the Malone Group to dispose of their TCI
Voting Securities. Such restrictions are subject to certain exceptions
and, under certain circumstances, extend beyond the date of termination
of the AT&T Agreement.
(15) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in December 1995 to acquire 400,000 shares of
TINTA Series A Stock. Options to acquire 160,000 of such shares of TINTA
Series A Stock are currently exercisable. Also assumes the vesting in
full of 15,000 restricted shares of TINTA Series A Stock granted in
December 1995. Such shares vest as to 50% in December 1999 and as to the
remaining 50% in December 2000. In addition, assumes the vesting in full
of 150,000 restricted shares of TINTA Series A Stock granted in July
1997. Such shares vest as to 50% in July 2001 and as to the remaining 50%
in July 2002.
(16) Assumes the exercise in full of the following: (a) stock options granted
in tandem with stock appreciation rights in December 1995 to acquire
50,000 shares of TINTA Series A Stock, of which options to acquire 20,000
of such shares are currently exercisable; and (b) stock options granted
in tandem with stock appreciation rights in July 1997 to acquire 50,000
shares of TINTA Series A Stock, of which options to acquire 10,000 of
such shares are currently exercisable.
(17) Assumes the exercise in full of the following: (a) stock options granted
in tandem with stock appreciation rights in November 1994 to acquire
124,000 shares of TCI Group Series A Stock, 104,500 shares of LMG Series
A Stock and 112,000 shares of TCIVG Series A Stock, of which options to
acquire 68,000, 59,500 and 64,000, respectively, of such shares are
currently exercisable; (b) stock options granted in tandem with stock
appreciation rights in December 1995 to acquire 210,000 shares of TCI
Group Series A Stock, 168,750 shares of LMG Series A Stock and 180,000
shares of TCIVG Series A Stock, of which options to acquire 84,000,
67,500 and 72,000, respectively, of such shares are currently
exercisable; and (c) stock options granted in tandem with stock
appreciation rights in July 1997 to acquire 241,500 shares of TCI Group
Series A Stock, 150,000 shares of LMG Series A Stock and 207,000 shares
of TCIVG Series A Stock, of which options to acquire 48,300, 30,000 and
41,400, respectively, of such shares are currently exercisable. In
addition, assumes the vesting in full of 35,634 restricted shares of TCI
Group Series A Stock, 22,500 restricted shares of LMG Series A Stock and
8,732 restricted shares of TCIVG Series A Stock granted in December 1995.
Such shares vest as to 50% in December 1999 and as to the remaining 50%
in December 2000. Also includes 50,000 restricted shares of TCI Group
Series A Stock. Such shares vest as to 50% in June 2002 and as to the
remaining 50% in June 2003.
(18) Assumes the exercise in full of the following: (a) stock options granted
in tandem with stock appreciation rights in December 1995 to acquire
200,000 shares of TINTA Series A Stock, of which options to acquire
80,000 of such shares are currently exercisable; and (b) stock options
granted in tandem with stock appreciation rights in July 1997 to acquire
100,000 shares of TINTA Series A Stock, of which options to acquire
20,000 of such shares are currently exercisable. Also includes 10,000
restricted shares of TINTA Series A Stock granted in December 1995. Such
shares vest as to 50% in December 1999 and as to the remaining 50% in
December 2000.
(19) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November 1994 to acquire 7,000 shares of TCI
Group Series A Stock, 14,062 shares of LMG Series A Stock and 15,000
shares of TCIVG Series A Stock. None of the shares of TCI Group Series A
Stock are currently exercisable and 8,437 shares of the LMG Series A
Stock and 9,000 shares of TCIVG Series A Stock are currently exercisable.
(20) Assumes the exercise in full of the following: (a) stock options granted
in tandem with stock appreciation rights in December 1995 to acquire
50,000 shares of TINTA Series A Stock, of which options to acquire 20,000
of such shares are currently exercisable; and (b) stock options granted
in tandem with stock appreciation rights in July 1997 to acquire 100,000
shares of TINTA Series A Stock, of which options to acquire 20,000 of
such shares are currently exercisable.
(21) Assumes the exercise in full of stock options granted in tandem with
stock appreciation rights in November 1994 to acquire 2,520 shares of TCI
Group Series A Stock, 2,025 shares of LMG Series A Stock and 2,160 shares
of TCIVG Series A Stock. None of such options were exercisable at August
1, 1998.
(22) Certain executive officers and directors hold options, which were granted
in tandem with stock appreciation rights in December 1995, to acquire
750,000 shares of TINTA Series A Stock. Options to acquire 300,000 of
such shares are currently exercisable. Certain executive officers and
directors hold options, which were granted in tandem with stock
appreciation rights in July 1997, to acquire 300,000 shares of TINTA
Series A Stock, of which options to acquire 60,000 of such shares are
currently exercisable. Additionally, Mr. Vierra and Ms. Curtis hold in
the aggregate 175,000 restricted shares of TINTA Series A Stock. Of such
shares, 25,000 vest as to 50% in December 1999 and as to the remaining
50% in December of 2000, and the other 150,000 vest as to 50% in July
2001 and as to the remaining 50% in July 2002.
(23) Assumes the exercise in full of stock options granted in April 1996
pursuant to the TINTA 1996 Nonemployee Director Plan to acquire 175,000
shares of TINTA Series A Stock. Options to acquire 70,000 of such shares
are currently exercisable.
(24) Certain executive officers and directors hold options, which were granted
in tandem with stock appreciation rights in November 1992, to acquire
735,000 shares of TCI Group Series A Stock, 590,625 shares of LMG Series
A Stock and 630,000 shares of TCIVG Series A Stock. All such options are
currently exercisable. Certain executive officers and directors hold
options, which were granted in tandem with stock appreciation rights in
October 1993, to acquire an aggregate of 35,000 shares of TCI Group
Series A Stock, 28,125 share of LMG Series A Stock and 30,000 shares of
TCIVG Series A Stock. All such options are currently exercisable. Certain
executive officers and directors hold options, which were granted in
tandem with
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stock appreciation rights in November 1994, to acquire 174,820 shares of
TCI Group Series A Stock, 153,774 shares of LMG Series A Stock and 164,560
shares of TCIVG Series A Stock. Options to acquire 92,780, 87,849 and
94,240, respectively, of such shares are currently exercisable. Mr. Kern
holds a stock option, which was granted in November 1994, pursuant to the
TCI Director Stock Option Plan, to purchase 25,000 shares of TCI Group
Series A Stock and 14,063 shares of LMG Series A Stock. Options to acquire
15,000 and 8,438, respectively, of such shares are currently exercisable.
Certain executive officers and directors hold options, which were granted
in tandem with stock appreciation rights in December 1995, to acquire
1,190,000 shares of TCI Group Series A Stock, 871,875 shares of LMG Series
A Stock and 1,020,000 shares of TCIVG Series A Stock. Options to acquire
476,000, 348,750 and 408,000, respectively, of such shares are currently
exercisable. Additionally, certain executive officer and directors hold
45,177 restricted shares of TCI Group Series A Stock, 22,500 restricted
shares of LMG Series A Stock and 19,646 restricted shares of TCIVG Series A
Stock. Such shares vest as to 50% in December 1999 and as to the remaining
50% in December 2000. Mr. Hindery holds stock options granted in tandem
with stock appreciation rights in February 1997 to acquire 700,000 shares
of TCI Group Series A Stock, 375,000 shares of LMG Series A Stock and
600,000 shares of TCIVG Series A Stock. None of such options were
exercisable at August 1, 1998. In addition, Mr. Gould holds a stock option,
which was granted in December 1996, pursuant to the TCI Director Stock
Option Plan, to purchase 50,000 shares of TCI Group Series A Stock and
28,125 shares of LMG Series A Stock. Options to acquire 10,000 and 5,625,
respectively, of such shares are currently exercisable. In addition,
certain executive officers and directors hold stock options, which were
granted in tandem with stock appreciation rights in July 1997, to acquire
2,341,500 shares of TCI Group Series A Stock, 1,743,750 shares of LMG
Series A Stock and 2,007,000 shares of TCIVG Series A Stock. Options to
acquire 468,300, 348,750 and 401,400, respectively, of such shares are
currently exercisable. Also, Messrs. Hindery and Kern were granted an
aggregate of 338,154 restricted shares of TCI Group Series A Stock and
123,692 restricted shares of TCIVG Series A Stock. Such shares vest as to
50% in July 2001 and as to the remaining 50% in July 2002. Additionally,
Mr. Kern holds a stock option, which was granted in tandem with stock
appreciation rights in December 1997, to acquire 350,000 shares of TCI
Group Series A Stock, 250,000 shares of LMG Series A Stock and 300,000
shares of TCIVG Series A Stock. None of such options were exercisable at
August 1, 1998. All of the aforementioned options, options granted in
tandem with stock appreciation rights and shares of restricted stock are
reflected in this table assuming the exercise or vesting in full of such
securities as to each individual.
(25) Dr. Malone holds a stock option which was granted in tandem with stock
appreciation rights in December 1997, to acquire 2,800,000 shares of
TCIVG Series B Stock. None of these options were exercisable at August 1,
1998.
No equity securities in any subsidiary of TINTA, other than directors'
qualifying shares, are owned by any of TINTA's executive officers or
directors. TINTA knows of no arrangements, including any pledge by any person
of securities of TINTA, the operation of which may at a subsequent date result
in a change in control of TINTA.
LEGAL MATTERS
The validity of the LMG Series A Stock to be issued in connection with the
Merger will be passed upon by Sherman & Howard L.L.C., 3000 First Interstate
Tower North, 633 Seventeenth Street, Denver, Colorado 80202. Certain of the
tax consequences of the Merger will be passed upon by Sherman & Howard L.L.C.,
Denver, Colorado, on behalf of TCI, and by Baker & Botts, L.L.P., New York,
New York, on behalf of TINTA. Certain partners of Baker & Botts, L.L.P. may
hold shares of TCI Common Stock.
EXPERTS
The consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1997 and 1996, 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, 1997, and the related
financial statement schedules, which appear in the December 31, 1997 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein in reliance upon the reports, dated March 20, 1998, 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, 1997 and 1996,
and the related combined statements of operations, equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1997,
which appear in the December 31, 1997 Annual Report on Form 10-K of Tele-
Communications, Inc., have been incorporated by reference herein in reliance
upon the report, dated March 20, 1998, of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein,
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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 and TCI Ventures Group for all periods that TCI Group has
an interest in Liberty Media Group and TCI Ventures Group.
The combined balance sheets of Liberty Media Group as of December 31, 1997
and 1996, and the related combined statements of operations, equity, and cash
flows for each of the years in the three-year period ended December 31, 1997,
which appear in the December 31, 1997 Annual Report on Form 10-K of Tele-
Communications, Inc., have been incorporated by reference herein in reliance
upon the report, dated March 20, 1998, 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 Ventures Group as of December 31, 1997
and 1996, and the related combined statements of operations, equity, and cash
flows for each of the years in the three-year period ended December 31, 1997,
which appear in the December 31, 1997 Annual Report on Form 10-K of Tele-
Communications, Inc., have been incorporated by reference herein in reliance
upon the report, dated March 20, 1998, 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 sheets of Tele-Communications International, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related statements
of operations, stockholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 1997, which appear in the December
31, 1997 Annual Report on Form 10-K of Tele-Communications International,
Inc., as amended by Form 10-K/A (Amendment No. 1), have been incorporated by
reference herein in reliance upon the report, dated March 20, 1998, 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, 1997 and 1996, and the related consolidated
statements of operations and cash flows for each of the years in the three-
year period ended December 31, 1997, which appear in the December 31, 1997
Annual Report on Form 10-K of Tele-Communications, Inc., have been
incorporated by reference herein in reliance upon the report, dated March 19,
1998, 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 as of December 31, 1997 and 1996 and the related consolidated
statements of operations, changes in partners' capital and cash flows for each
of the three years in the period ended December 31, 1997 incorporated in this
Proxy Statement/Prospectus and in the Registration Statement by reference,
which appear in the Annual Report on Form 10-K of Tele-Communications, Inc.
for the year ended December 31, 1997, 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
emergence from the development stage), which is incorporated herein by
reference, and has been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated balance sheets of Cablevision Systems Corporation and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' deficiency and cash flows for each of
the years in the three-year period ended December 31, 1996, and the related
financial statement schedule, which report appears in the Current Report on
Form 8-K, as amended on Form 8-K/A (Amendment No. 2) of Tele-Communications,
Inc., dated March 6, 1998, have been incorporated by reference herein in
reliance upon the report, dated April 1, 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.
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MISCELLANEOUS
It is expected that a representative of KPMG Peat Marwick LLP, TINTA's
independent certified public accountants, will be present at the Meeting to
respond to appropriate questions of TINTA stockholders and to make a statement
if he so desires.
Due to the contemplated consummation of the Merger, TINTA does not currently
intend to hold a 1999 Annual Meeting of Stockholders. If the Merger is not
consummated, the Annual Meeting of Stockholders of TINTA is expected to be
held on July 1, 1999. Proposals by stockholders to be considered for inclusion
in the proxy materials for such meeting must be received by the Secretary of
TINTA by January 31, 1999 in a form that complies with applicable regulations.
SEC rules set forth standards as to what stockholder proposals are required to
be included in a proxy statement for an Annual Meeting of Stockholders.
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APPENDIX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
TELE-COMMUNICATIONS, INC.,
LIBERTY GROUP ACQUISITION CO.,
AND
TELE-COMMUNICATIONS INTERNATIONAL, INC.
DATED AS OF AUGUST 24, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I
Definitions and Construction............................................... 1
1.1 Certain Definitions................................................... 1
1.2 Terms Generally....................................................... 6
ARTICLE II
The Merger and Related Matters............................................. 6
2.1 The Merger............................................................ 6
2.2 Closing............................................................... 7
2.3 Conversion of Securities.............................................. 7
2.4 Exchange of Shares.................................................... 8
2.5 Changes in LMG Series A Stock......................................... 10
2.6 Stock Options, SARs and Benefit Plans................................. 10
ARTICLE III
Certain Actions............................................................ 11
3.1 Stockholder Meeting................................................... 11
3.2 Registration Statement and Other SEC Filings.......................... 11
3.3 Identification of Affiliates.......................................... 11
3.4 Reasonable Efforts.................................................... 12
3.5 Company SIP........................................................... 12
3.6 Employee Matters...................................................... 12
ARTICLE IV
Representations and Warranties of the Company.............................. 13
4.1 Organization and Qualification........................................ 13
4.2 Authorization and Validity of Agreement............................... 13
4.3 Capitalization........................................................ 14
4.4 Reports and Financial Statements...................................... 14
4.5 No Approvals or Notices Required; No Conflict with Instruments........ 15
4.6 Absence of Certain Changes or Events.................................. 16
4.7 Registration Statement; Proxy Statement............................... 16
4.8 Brokers or Finders.................................................... 17
4.9 Fairness Opinion...................................................... 17
4.10 Recommendation of the Company Board.................................. 17
4.11 Vote Required........................................................ 17
4.12 Full Disclosure...................................................... 17
ARTICLE V
Representations and Warranties of TCI...................................... 17
5.1 Organization.......................................................... 17
5.2 Authorization and Validity of Agreement............................... 18
5.3 Capitalization of TCI................................................. 18
5.4 TCI Reports and Financial Statements.................................. 19
5.5 No Approvals or Notices Required; No Conflict with Instruments........ 19
5.6 Absence of Certain Changes or Events.................................. 20
5.7 Registration Statement................................................ 20
</TABLE>
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<TABLE>
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5.8 Brokers or Finders................................................... 20
5.9 Vote Required........................................................ 21
5.10 Full Disclosure..................................................... 21
5.11 Interim Operations of Merger Sub.................................... 21
5.12 Separation of Assets and Liabilities................................ 21
5.13 LMG Series A Stock.................................................. 21
ARTICLE VI
Transactions Prior To Closing............................................. 21
6.1 Access to Information................................................ 21
6.2 Confidentiality...................................................... 21
6.3 Public Announcements................................................. 22
6.4 Conduct of the Company's Business Pending the Effective Time......... 23
6.5 Expenses............................................................. 24
6.6 Indemnification...................................................... 24
6.7 Notification of Certain Matters...................................... 26
6.8 Defense of Litigation................................................ 26
6.9 Actions by TCI and Merger Sub........................................ 26
6.10 AT&T Merger......................................................... 26
6.11 Listing............................................................. 27
ARTICLE VII
Conditions Precedent...................................................... 27
7.1 Conditions Precedent to the Obligations of TCI, Merger Sub and the
Company................................................................. 27
7.2 Conditions Precedent to the Obligations of Merger Sub and TCI........ 27
7.3 Conditions Precedent to the Obligations of the Company............... 29
ARTICLE VIII
Termination............................................................... 30
8.1 Termination and Abandonment.......................................... 30
8.2 Effect of Termination................................................ 30
ARTICLE IX
Miscellaneous............................................................. 31
9.1 Effectiveness of Representations, Warranties and Agreements.......... 31
9.2 Notices.............................................................. 31
9.3 Entire Agreement..................................................... 31
9.4 Assignment; Binding Effect; Benefit.................................. 32
9.5 Amendment............................................................ 32
9.6 Extension; Waiver.................................................... 32
9.7 Headings............................................................. 32
9.8 Counterparts......................................................... 32
9.9 Applicable Law....................................................... 32
9.10 Enforcement of this Agreement....................................... 33
9.11 Limited Liability................................................... 33
9.12 Severability........................................................ 33
</TABLE>
[Schedules and Exhibits Omitted]
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of this 24th
day of August, 1998, by and among Tele-Communications, Inc., a Delaware
corporation ("TCI"), Liberty Group Acquisition Co., a Delaware corporation and
a direct wholly-owned subsidiary of TCI ("Merger Sub"), and Tele-
Communications International, Inc., a Delaware corporation (the "Company").
WHEREAS, TCI is the parent of the Company and beneficially owns 85% of the
outstanding shares of common stock of the Company which shares represent, in
the aggregate, 92% of the voting power of all outstanding shares of common
stock of the Company;
WHEREAS, TCI desires to acquire all of the shares of common stock of the
Company not owned by it;
WHEREAS, the Boards of Directors of TCI, Merger Sub and the Company each
have determined that it is advisable and in the best interests of their
respective stockholders for TCI to so acquire such shares and, to that end,
for Merger Sub to merge with and into the Company (the "Merger") upon the
terms and subject to the conditions of this Agreement;
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986 (the "Code");
WHEREAS, TCI has entered into an Agreement and Plan of Restructuring and
Merger, dated as of June 23, 1998, with AT&T Corp. ("AT&T") and Italy Merger
Corp. (the "AT&T Agreement"), pursuant to which, among other things, TCI will
be acquired by AT&T by means of a merger (the "AT&T Merger"); and
WHEREAS, neither this Agreement nor the consummation of the transactions
contemplated hereby is contingent on consummation of the transactions
contemplated by the AT&T Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
Definitions and Construction
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
"affiliate" of any Person shall have the meaning ascribed to such term in
Rule 12b-2 under the Exchange Act. For purposes of this Agreement (other than
Section 3.3), unless otherwise specified, (A) neither the Company nor any of
its subsidiaries shall be deemed to be affiliates of TCI or any of TCI's
subsidiaries; (B) neither TCI nor any of its subsidiaries shall be deemed to
be affiliates of the Company or any of the Company's subsidiaries; (C) none of
the affiliates (the "Company Affiliates") of the Company or any of its
subsidiaries shall be deemed to be an affiliate of TCI or any of TCI's
subsidiaries, unless such Company Affiliate would be such an affiliate if
neither TCI nor any of its subsidiaries (1) owned any capital stock of the
Company, (2) designated or nominated, or possessed any contractual right to
designate or nominate, any directors of the Company or any of its subsidiaries
or (3) otherwise possessed, directly or indirectly, the power to direct or
cause the direction of the management or policies of the Company or any of its
subsidiaries; and (D) none of the affiliates ("TCI Affiliates") of TCI or any
of TCI's subsidiaries shall be deemed to be an affiliate of the Company or any
of the Company's subsidiaries, unless such TCI Affiliate would be such an
affiliate if neither TCI nor any of its subsidiaries (1) owned any capital
stock of the Company, (2) designated or nominated, or possessed any
contractual right to designate or nominate, any directors of the Company or
any of its subsidiaries
I-1
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or (3) otherwise possessed, directly or indirectly, the power to direct or
cause the direction of the management or policies of the Company or any of its
subsidiaries.
"Agreement" shall mean this Agreement and Plan of Merger, including all
Exhibits and Schedules hereto.
"Assumed Option" shall have the meaning specified in Section 2.6(a) hereof.
"Assumed SAR" shall have the meaning specified in Section 2.6(b) hereof.
"AT&T" shall have the meaning specified in the preamble hereto.
"AT&T Agreement" shall have the meaning specified in the preamble hereto.
"AT&T Liberty Class A Stock" shall mean the Class A Liberty Group Common
Stock, par value $1.00 per share, of AT&T, having the terms set forth in the
proposed amendment to the Certificate of Incorporation of AT&T, set forth as
Exhibit A to the AT&T Agreement, as the same may be amended or modified in
accordance with the terms of the AT&T Agreement.
"AT&T Merger" shall have the meaning specified in the preamble hereto.
"Certificates" shall have the meaning specified in Section 2.4(b) hereof.
"Certificate of Merger" shall mean the certificate of merger with respect to
the Merger, containing the provisions required by, and executed in accordance
with, Section 251 of the DGCL.
"Closing" shall mean the consummation of the transactions contemplated by
this Agreement.
"Closing Date" shall mean the date on which the Closing occurs pursuant to
Section 2.2 hereof.
"Code" shall have the meaning specified in the preamble hereto.
"Company" shall have the meaning specified in the preamble hereto.
"Company Board" shall mean the Board of Directors of the Company.
"Company Charter" shall mean the Restated Certificate of Incorporation of
the Company, as amended to the date hereof and as it may be further amended
prior to the Effective Time with the consent of TCI pursuant to Section 6.4
hereof.
"Company Common Stock" shall mean the Company Series A Stock and the Company
Series B Stock.
"Company Debentures" shall mean the 4 1/2% Convertible Subordinated
Debentures due 2006 of the Company.
"Company Equity Affiliates" shall have the meaning specified in Section 4.1
hereof.
"Company Option" shall have the meaning specified in Section 2.6(a) hereof.
"Company Plan" shall mean each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization, medical, life or other insurance, supplemental unemployment
benefits, profit-sharing, pension or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to at any time since January 1, 1997 by the Company or by any
trade or business, whether or not incorporated ("ERISA Affiliate"), that
together with the Company would be deemed a "controlled group" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
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employee of the Company or any ERISA Affiliate including any such type of plan
established, maintained or contributed to under the laws of any foreign
country.
"Company Preferred Stock" shall mean the Preferred Stock, par value $.01 per
share, of the Company.
"Company SAR" shall have the meaning specified in Section 2.6(b) hereof.
"Company SEC Filings" shall have the meaning specified in Section 4.4
hereof.
"Company Series A Stock" shall mean the Series A Common Stock, $1.00 par
value per share, of the Company.
"Company Series B Stock" shall mean the Series B Common Stock, $1.00 par
value per share, of the Company.
"Company SIP" shall have the meaning specified in Section 3.5 hereof.
"Company Stock" shall mean the Company Common Stock and the Company
Preferred Stock.
"Contract Consent" shall have the meaning specified in Section 4.5(iii)
hereof.
"Contract Notice" shall have the meaning specified in Section 4.5(iii)
hereof.
"Contract" shall have the meaning specified in Section 4.5(iv) hereof.
"control" shall mean, with respect to any Person, the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
partnership interests, by contract or otherwise.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Effective Time" shall mean the time when the Merger of Merger Sub with and
into the Company becomes effective under applicable law as provided in Section
2.1(a) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder, as in effect from time to
time.
"Exchange Agent" shall have the meaning specified in Section 2.4(a) hereof.
"Exchange Agent Agreement" shall have the meaning specified in Section
2.4(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the rules
and regulations thereunder.
"Exchange Ratio" shall have the meaning specified in Section 2.3(i).
"Fairness Opinion" shall have the meaning specified in Section 4.9 hereof.
"GAAP" shall mean generally accepted accounting principles as accepted by
the accounting profession in the United States as in effect from time to time.
"Government Consent" shall have the meaning specified in Section 4.5(ii)
hereof.
"Governmental Entity" shall mean any court, arbitrator, administrative or
other governmental department, agency, commission, authority or
instrumentality, domestic or foreign.
"Governmental Filing" shall have the meaning specified in Section 4.5(ii)
hereof.
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"Group" shall mean the TCI Group, the Liberty Media Group or the TCI
Ventures Group.
"Indemnified Liabilities" shall have the meaning specified in Section 6.6(a)
hereof.
"Indemnified Parties" shall have the meaning specified in Section 6.6(a)
hereof.
"Indemnified Party" shall have the meaning specified in Section 6.6(a)
hereof.
"Injunction" shall have the meaning specified in Section 3.4 hereof.
"Liberty Media Group" shall have the meaning specified in the TCI Charter.
"Liberty Media Members" shall mean those subsidiaries of TCI whose assets,
businesses and results of operations are attributed to the Liberty Media
Group.
"License" shall mean any license, franchise, ordinance, authorization,
permit, certificate, variance, exemption, concession, lease, right of way,
easement, instrument, order and approval, domestic or foreign.
"Lien" shall mean any security interest, mortgage, pledge, hypothecation,
charge, claim, option, right to acquire, adverse interest, assignment, deposit
arrangement, encumbrance, restriction, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any conditional sale or other
title retention agreement, any financing lease involving substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
"LMG Market Price," on any date of determination, shall mean the average of
the closing sales prices (or, if on any day no sale price is reported, the
average of the quoted high and low bid prices on such day) of a share of LMG
Series A Stock on the NNM (or, if the LMG Series A Stock is not traded on the
NNM, on the principal stock exchange on which such stock is traded) on each of
the five consecutive trading days immediately preceding the trading day prior
to the date of such determination.
"LMG Preferred Stock" shall mean the Series C-LMG Preferred Stock and the
Series H Preferred Stock.
"LMG Series A Stock" shall mean the Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, $1.00 par value per share, of TCI, or such
other securities as may be issuable to holders of Company Common Stock in the
Merger in accordance with Section 2.5 hereof.
"LMG Series B Stock" shall mean the Tele-Communications, Inc. Series B
Liberty Media Group Common Stock, $1.00 par value per share, of TCI.
"Local Approvals" shall have the meaning specified in Section 4.5(ii)
hereof.
"Material Adverse Effect" shall mean (A) with respect to TCI, a material
adverse effect on the business, properties, operations or financial condition
of (i) TCI and its subsidiaries (including the Company and its subsidiaries)
taken as a whole, other than any such effect arising out of or resulting from
general business or economic conditions in the United States or from changes
in or affecting the cable television industry generally in the United States,
or (ii) the Liberty Media Group, other than any such effect arising out of or
resulting from general business or economic conditions in the United States or
from changes in or affecting the cable television programming industry
generally in the United States, and (B) with respect to the Company, a
material adverse effect on the business, properties, operations or financial
condition of the Company and its subsidiaries taken as a whole, other than any
such effect arising out of or resulting from general business or economic
conditions in areas where the Company does business or from changes in or
affecting the cable television industry or the cable television programming
industry generally in areas where the Company does business.
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"Merger" shall have the meaning specified in the preamble hereto.
"Merger Sub" shall have the meaning specified in the preamble hereto.
"NNM" shall mean The Nasdaq Stock Market, Inc.'s Nasdaq National Market.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or joint
venture or a government, agency, political subdivision, or instrumentality
thereof.
"Proxy Statement" shall have the meaning specified in Section 3.2(a) hereof.
"Registration Statement" shall have the meaning specified in Section 3.2(a)
hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, and the rules and
regulations thereunder.
"Series C-LMG Preferred Stock" shall have the meaning specified in Section
5.3(a) hereof.
"Series H Preferred Stock" shall have the meaning specified in Section
5.3(a) hereof.
"Significant Subsidiary" shall have the meaning ascribed to such term in
Rule 1-02 of Regulation S-X of the Rules and Regulations of the SEC.
"Special Meeting" shall have the meaning specified in Section 3.1 hereof.
"subsidiary" when used with respect to any Person, means any other Person,
of which (x) in the case of a corporation, at least (A) a majority of the
equity and (B) a majority of the voting interests are owned or controlled,
directly or indirectly, by such first Person, by any one or more of its
subsidiaries, or by such first Person and one or more of its subsidiaries or
(y) in the case of any Person other than a corporation, such first Person, one
or more of its subsidiaries, or such first Person and one or more of its
subsidiaries (A) owns a majority of the equity interests thereof and (B) has
the power to elect or direct the election of a majority of the members of the
governing body thereof or otherwise has control over such organization or
entity; provided that, for purposes of the agreements set forth in Article III
and Article VI, references to subsidiaries shall not include any Person as to
which such first Person's voting interests are subject to a voting agreement,
proxy, management contract or other arrangement as a result of which such
first Person does not control such other Person. For purposes of this
Agreement (other than Section 3.3), unless otherwise specified, neither the
Company nor any of its subsidiaries shall be deemed to be subsidiaries of TCI
or any of TCI's subsidiaries, whether or not they otherwise would be
subsidiaries of TCI or any of TCI's subsidiaries under the foregoing
definition.
"Surviving Corporation" shall mean the Company as the Surviving Corporation
after the Merger as provided in Section 2.1(a).
"TCI" shall have the meaning specified in the preamble hereto.
"TCI Benefit Arrangement" shall mean each material plan, program, policy,
contract or arrangement of TCI and its subsidiaries, other than TCI Employee
Plans, providing for bonuses, pensions, deferred pay, stock or stock related
awards, severance pay, salary continuation or similar benefits,
hospitalization, medical, dental or disability benefits, life insurance or
other employee benefits, or compensation to or for any TCI Employees or any
beneficiaries or dependents of any TCI Employees (other than directors' and
officers' liability policies), whether or not insured or funded.
"TCI Charter" shall mean the Restated Certificate of Incorporation of TCI,
as amended.
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"TCI Employee" shall mean any current or former employee, agent, director or
independent contractor of TCI or its subsidiaries.
"TCI Employee Plan" shall mean each material "employee benefit plan" (as
defined in Section 3(3) of ERISA) of TCI and its subsidiaries in which TCI
Employees participate or pursuant to which TCI or any of its subsidiaries may
have a liability with respect to employees.
"TCI Equity Affiliates" shall have the meaning specified in Section 5.1
hereof.
"TCI Group" shall have the meaning specified in the TCI Charter.
"TCI Group Members" shall mean those subsidiaries of TCI whose assets,
businesses and results of operations are attributed to the TCI Group.
"TCI SEC Filings" shall have the meaning specified in Section 5.4 hereof.
"TCI Ventures Group" shall have the meaning specified in the TCI Charter.
"TCI Ventures Members" shall mean those subsidiaries of TCI (including the
Company and its subsidiaries) whose assets, businesses and results of
operations are attributed to the TCI Ventures Group.
"Violation" shall have the meaning specified in Section 4.5(iv) hereof.
"Wholly-Owned Subsidiary" shall mean, as to any Person, a subsidiary of such
Person 100% of the equity and voting interest in which is owned, directly or
indirectly, by such Person.
1.2 Terms Generally. The definitions in Section 1.1 shall apply equally to
both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". The words "herein",
"hereof" and "hereunder" and words of similar import refer to this Agreement
(including the Exhibits and Schedules) in its entirety and not to any part
hereof unless the context shall otherwise require. As used herein, the term
"to the knowledge of the Company" or any similar term relating to the
Company's knowledge means the actual knowledge, without investigation, of any
of the officers or directors of the Company, and the term "to the knowledge of
TCI" or any similar term relating to TCI's knowledge means the actual
knowledge, without investigation, of any of the officers or directors of TCI.
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Unless the context
shall otherwise require, any references to any agreement or other instrument
or statute or regulation are to it as amended and supplemented from time to
time (and, in the case of a statute or regulation, to any successor
provisions). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a business day, then such action or notice shall be
deferred until, or may be taken or given on, the next business day. As used
herein, the phrase "made available" means that the information referred to has
been made available if requested by the party to whom such information is to
be made available.
ARTICLE II
The Merger and Related Matters
2.1 The Merger.
(a) Merger; Effective Time. At the Effective Time and subject to and upon
the terms and conditions of this Agreement, Merger Sub shall merge with and
into the Company in accordance with the provisions of the
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DGCL, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the Surviving Corporation. The Effective Time shall
occur on the date and at the time that the Certificate of Merger shall have
been accepted for filing by the Delaware Secretary of State (or such later
date and time as may be agreed to by TCI and the Company and specified in the
Certificate of Merger). Provided that this Agreement has not been terminated
pursuant to Article VIII, the parties will cause the Certificate of Merger to
be filed with the Delaware Secretary of State as soon as practicable after the
Closing.
(b) Effects of the Merger. From and after the Effective Time, the Merger
shall have the effects set forth in the DGCL (including, without limitation,
Sections 259, 260 and 261 thereof). Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
(c) Certificate of Incorporation of Surviving Corporation. At the Effective
Time, the Company Charter shall be amended pursuant to the Certificate of
Merger to be identical to the Certificate of Incorporation of Merger Sub in
effect immediately prior to the Effective Time, except that Article I thereof
shall read in its entirety as follows: "The name of the Corporation is: Tele-
Communications International, Inc." Such Company Charter as so amended shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the terms thereof and the DGCL.
(d) Bylaws of the Surviving Corporation. The Bylaws of the Company shall be
amended as of the Effective Time to be identical to the Bylaws of Merger Sub
in effect immediately prior to the Effective Time (except to the extent
required to reflect that the name of the Surviving Corporation shall be "Tele-
Communications International, Inc.") and, in such amended form, shall be the
Bylaws of the Surviving Corporation until thereafter amended in accordance
with the terms thereof, the Certificate of Incorporation of the Surviving
Corporation and the DGCL.
(e) Directors and Officers of Surviving Corporation. The directors of Merger
Sub at the Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise
provided by applicable law. The officers of the Company at the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their respective successors are duly appointed and qualified
in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by applicable law.
2.2 Closing. Unless this Agreement shall have been terminated pursuant to
Section 8.1 and subject to the satisfaction or, when permissible, waiver of
the conditions set forth in Article VII, the Closing shall take place (i) at
10:00 a.m. (Denver time) at the executive offices of TCI in Denver, Colorado,
on the date on which the last of the conditions set forth in Article VII
(other than the filing of the Certificate of Merger and other than any such
conditions which by their terms are not capable of being satisfied until the
Closing Date or thereafter) is satisfied or, when permissible, waived, or (ii)
on such other date and/or at such other time and/or place as the parties may
mutually agree.
2.3 Conversion of Securities.
(a) Conversion of Company Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of TCI, Merger Sub, the Company
or the holders of shares of Company Common Stock:
(i) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Common Stock
to be canceled pursuant to Section 2.3(a)(ii)) shall be converted into and
represent the right to receive, and shall be exchangeable for, .58 (the
"Exchange Ratio") of a validly issued, fully paid and nonassessable share
of LMG Series A Stock; provided, however, that if the product of .58 and
the LMG Market Price on the Closing Date shall be less than $22.00 and TCI
shall not theretofore have terminated this Agreement in accordance with
Section 8.1(iii)(A), then the Exchange Ratio shall be increased to equal
the quotient (rounded upwards, if necessary, to the nearest one one-
thousandth) obtained by dividing $22.00 by such LMG Market Price. At the
Effective Time, all such
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shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
LMG Series A Stock to be issued pursuant to this Section 2.3(a)(i) (and any
dividends or other distributions and any cash in lieu of a fractional share
payable pursuant to Sections 2.4(f) and 2.4(g)) with respect thereto upon
the surrender of such certificate in accordance with Section 2.4, without
interest.
(ii) Each share of Company Stock that immediately prior to the Effective
Time is (i) owned of record by TCI or any subsidiary of TCI or (ii) held in
the treasury of the Company or held by any Wholly-Owned Subsidiary of the
Company shall automatically be canceled, retired and cease to exist without
payment of any consideration thereof and without any conversion thereof
into LMG Series A Stock.
(b) Conversion of Merger Sub Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of TCI, Merger Sub or the Company,
each share of capital stock of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
2.4 Exchange of Shares.
(a) Appointment of Exchange Agent. On or before the Closing Date, TCI shall
enter into an agreement (the "Exchange Agent Agreement") with an exchange
agent selected by TCI and reasonably acceptable to the Company (the "Exchange
Agent"), authorizing such Exchange Agent to act as Exchange Agent hereunder.
(b) Letter of Transmittal. As soon as reasonably practicable after the
Effective Time, TCI will instruct the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time evidenced issued and outstanding shares of Company Common Stock
(other than shares to be canceled pursuant to Section 2.3(a)(ii)) (the
"Certificates"): (i) a notice of the effectiveness of the Merger and (ii) a
letter of transmittal (which shall state that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) with instructions for use
in effecting the surrender and exchange of the Certificates. Such notice,
letter of transmittal and instructions shall contain such provisions and be in
such form as TCI and the Company may jointly specify.
(c) Exchange Procedure. Promptly following the surrender, in accordance with
such instructions, of a Certificate to the Exchange Agent (or such other agent
or agents as may be appointed by the Exchange Agent or TCI pursuant to the
Exchange Agent Agreement), together with such letter of transmittal (duly
executed) and any other documents required by such instructions or letter of
transmittal, TCI shall, subject to Section 2.4(d), cause to be distributed to
the Person in whose name such Certificate shall have been issued (i) a
certificate registered in the name of such Person representing the number of
whole shares of LMG Series A Stock into which the shares previously
represented by the surrendered Certificate shall have been converted at the
Effective Time pursuant to this Article II and (ii) payment (which shall be
made by check) of any cash payable in lieu of a fractional share of LMG Series
A Stock pursuant to Section 2.4(f). Each Certificate so surrendered shall
forthwith be canceled.
(d) Unregistered Transfers of Company Common Stock. In the event of a
transfer of ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of whole shares of LMG Series A Stock may be issued (and
cash in lieu of a fractional share of LMG Series A Stock may be paid) to the
transferee of such shares if the Certificate evidencing such shares of Company
Common Stock surrendered to the Exchange Agent in accordance with Section
2.4(c) is properly endorsed for transfer or is accompanied by appropriate and
properly endorsed stock powers and is otherwise in proper form to effect such
transfer, if the Person requesting such transfer pays to the Exchange Agent
any transfer or other taxes payable by reason of such transfer or establishes
to the satisfaction of the Exchange Agent that such taxes have been paid or
are not required to be paid and if such Person establishes to the satisfaction
of TCI that such transfer would not violate applicable federal or state
securities laws.
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(e) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed satisfactory to TCI and complying with any other reasonable
requirements imposed by TCI, TCI will cause to be delivered to such Person in
respect of such lost, stolen or destroyed Certificate the shares of LMG Series
A Stock or other property deliverable in respect thereof as determined in
accordance with this Article II. TCI may, in its discretion, require the owner
of such lost, stolen or destroyed Certificate to give TCI a bond in such sum
as it may direct as indemnity against any claim that may be made against TCI
or the Surviving Corporation with respect to the Certificate alleged to have
been lost, stolen or destroyed.
(f) No Fractional Shares. No certificates or scrip representing fractional
shares of LMG Series A Stock shall be issued upon the surrender for exchange
of Certificates for Company Common Stock; no stock split or dividend with
respect to shares of LMG Series A Stock shall relate to any fractional share
interest, and no such fractional share interest will entitle the owner thereof
to vote as, or to any other rights of, a stockholder of TCI. In lieu of such
fractional shares, any holder of Company Common Stock who would otherwise be
entitled to a fractional share of LMG Series A Stock will, upon surrender of
his Certificate to the Exchange Agent in accordance with Section 2.4(c), be
entitled to receive cash in an amount determined by multiplying such fraction
by the current market value of a whole share of LMG Series A Stock and
rounding the product to the nearest whole cent. The "current market value" of
a share of LMG Series A Stock means, for this purpose, the average of the last
reported sale prices (or, if on any day no sale price is reported, the average
of the quoted high and low bid prices on such day) of a share of LMG Series A
Stock on the NNM (or, if the LMG Series A Stock is not traded on the NNM, on
the principal stock exchange on which such stock is traded) for the period of
five consecutive trading days ending on and including the last full trading
day preceding the Closing Date. No interest shall accrue or be paid with
respect to fractional share interests or with respect to cash payable in lieu
of fractional share interests.
(g) No Dividends Before Surrender of Certificates. No dividends or other
distributions declared or made after the Effective Time with respect to LMG
Series A Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of LMG
Series A Stock represented thereby, until the holder of record of such
Certificate shall surrender such Certificate as provided herein. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing
whole shares of LMG Series A Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions, if any, with a record date after the Effective Time theretofore
paid by TCI with respect to such whole shares of LMG Series A Stock, and (ii)
at the appropriate payment date, the amount of dividends or other
distributions, if any, with a record date after the Effective Time but prior
to surrender and with a payment date subsequent to surrender payable with
respect to such whole shares of LMG Series A Stock.
(h) No Further Ownership Rights in Company Common Stock. All shares of LMG
Series A Stock issued and all cash in lieu of fractional shares paid upon the
surrender for exchange of shares of Company Common Stock in accordance with
the terms hereof shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. Subject to Section
2.4(i), if, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(i) Abandoned Property Laws. Payment or delivery of the shares of LMG Series
A Stock, any cash in lieu of fractional shares thereof and any dividends or
distributions with respect thereto in accordance with the terms hereof shall
be subject to applicable abandoned property, escheat and similar laws and none
of TCI, Merger Sub, the Surviving Corporation or the Company shall be liable
to any holder of shares of Company Common Stock or LMG Series A Stock for any
such shares, for any dividends or distributions with respect thereto or for
any cash in lieu of fractional shares which may be delivered to any public
official pursuant to any abandoned property, escheat or similar law.
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2.5 Changes in LMG Series A Stock. If, after the date hereof and prior to
the Effective Time, the LMG Series A Stock shall be recapitalized or
reclassified or TCI shall effect any stock dividend, stock split, or reverse
stock split of LMG Series A Stock or otherwise effect any transaction that
changes the LMG Series A Stock into any other securities (including securities
of another corporation, including, without limitation, securities of AT&T) or
any other dividend or distribution shall be made on the LMG Series A Stock (or
such other securities), then the shares of LMG Series A Stock to be delivered
under this Agreement to the holders of Company Common Stock shall be
appropriately and equitably adjusted to the kind and amount of shares of stock
and other securities and property which the holders of such shares of LMG
Series A Stock would have been entitled to receive had such shares been issued
and outstanding as of the record date for determining stockholders entitled to
participate in such corporate event.
2.6 Stock Options, SARs and Benefit Plans.
(a) Stock Options. Each of the then outstanding stock options, if any, to
purchase shares of Company Common Stock (each, a "Company Option") issued by
the Company pursuant to any Company Plan, and any non-plan options to acquire
shares of Company Common Stock set forth in Schedule 2.6 issued by the Company
pursuant to an option agreement or otherwise issued by the Company, shall, by
virtue of the Merger, and without any further action on the part of any holder
thereof, be assumed by TCI and converted into an option (an "Assumed Option")
to purchase that number of shares of LMG Series A Stock determined by
multiplying the number of shares of Company Common Stock subject to such
Company Option at the Effective Time by the Exchange Ratio, at an exercise
price per share of LMG Series A Stock equal to the exercise price per share of
such Company Option immediately prior to the Effective Time divided by the
Exchange Ratio, rounded down to the nearest whole cent. If the foregoing
calculation results in an Assumed Option being exercisable for a fraction of a
share of LMG Series A Stock, then the number of shares of LMG Series A Stock
subject to such option shall be rounded up to the nearest whole number of
shares, with no cash being payable for such fractional share. The terms and
conditions of each Assumed Option shall otherwise remain as set forth in the
Company Option converted into such Assumed Option. The adjustment provided for
in this Section 2.6(a) with respect to any options that are "incentive stock
options" (as defined in Section 422 of the Code) shall be and is intended to
be effected in a manner which is consistent with Section 424(a) of the Code.
(b) Stock Appreciation Rights. Each of the then outstanding stock
appreciation rights, if any, with respect to shares of Company Common Stock
(each, a "Company SAR") issued by the Company pursuant to any Company Plan,
and any non-plan stock appreciation rights with respect to shares of Company
Common Stock set forth in Schedule 2.6 issued by the Company pursuant to an
option agreement or otherwise issued by the Company, shall, by virtue of the
Merger, and without any further action on the part of any holder thereof, be
assumed by TCI and converted into a stock appreciation right (an "Assumed
SAR") with respect to that number of shares of LMG Series A Stock equal to the
number of shares of Company Common Stock that were subject to such Company SAR
at the Effective Time multiplied by the Exchange Ratio, at an exercise price
per stock appreciation right equal to (i) in the case of a Company SAR issued
in tandem with Company Options, the exercise price per share of the related
Company Option assumed by TCI as determined above and (ii) in the case of a
free standing Company SAR, the amount determined by dividing the base price
per share of such Company SAR immediately prior to the Effective Time by the
Exchange Ratio, rounded down to the nearest whole cent. If the foregoing
calculation results in an Assumed SAR being exercisable with respect to a
fraction of a share of LMG Series A Stock, then the number of shares of LMG
Series A Stock in respect of such stock appreciation right shall be rounded up
to the nearest whole number of shares, with no cash being payable for such
fractional share. The terms and conditions of each Assumed SAR shall otherwise
remain as set forth in the Company SAR converted into such Assumed SAR.
(c) Restricted Stock. Each restricted share of Company Common Stock granted
pursuant to any Company Plan and each restricted share of Company Common Stock
issued pursuant to individual awards not granted pursuant to any Company Plan
shall, by virtue of the Merger, and without any further action on the part of
any holder thereof, be converted into a number of restricted shares of LMG
Series A Stock at the Exchange Ratio determined pursuant to Section 2.3(a)(i)
hereof, and will remain subject to the same restrictions applicable to such
restricted share of Company Common Stock immediately prior to the Effective
Time.
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ARTICLE III
Certain Actions
3.1 Stockholder Meeting. Except as otherwise required by the fiduciary
duties of the Company Board, as determined in good faith by the Company Board
following the receipt of advice of the Company's outside legal counsel
thereon, (A) the Company, acting through the Company Board, shall, in
accordance with applicable law, the Company Charter and the Company's Bylaws,
duly call, give notice of, convene and hold, as soon as reasonably practicable
after the date hereof, a meeting of the Company's stockholders (the "Special
Meeting") for the purpose of considering and voting upon this Agreement and
(B) the Company will, through the Company Board, recommend to its stockholders
the adoption of this Agreement.
3.2 Registration Statement and Other SEC Filings.
(a) Registration Statement and Proxy Statement. As soon as reasonably
practicable after the execution of this Agreement, the Company shall prepare
and file with the SEC a preliminary proxy statement in form and substance
reasonably satisfactory to TCI, and TCI shall prepare and file with the SEC a
Registration Statement on Form S-4 (the "Registration Statement") in
connection with the registration under the Securities Act of the LMG Series A
Stock issuable in the Merger and upon exercise of the Assumed Options. The
proxy statement furnished to the Company's stockholders in connection with the
Special Meeting (the "Proxy Statement") shall be included as part of the
prospectus forming part of the Registration Statement. Each party hereto
agrees to use its reasonable best efforts to cooperate with each other party
in connection with the preparation and filing of the preliminary proxy
statement, the Proxy Statement and the Registration Statement, including
providing information to the other party with respect to itself as may be
reasonably required in connection therewith. Each of TCI and the Company shall
use its reasonable best efforts to respond to any comments of the SEC, to
cause the Registration Statement to be declared effective under the Securities
Act as soon as reasonably practicable after such filing and to continue to be
effective as of the Effective Time and to cause the Proxy Statement approved
by the SEC to be mailed to the Company's stockholders at the earliest
practicable time. TCI also shall use its reasonable best efforts to take any
reasonable action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified, subjecting itself to taxation in any
jurisdiction in which it is not now so subject, giving any consent to general
service of process in any jurisdiction in which it is not now subject to such
service or changing in any respect its authorized or outstanding capital stock
or the composition of its assets) required to be taken under any applicable
state securities or blue sky laws in connection with the issuance of the LMG
Series A Stock to be covered by the Registration Statement.
(b) SEC Comments; Amendments and Supplements. Each of TCI and the Company
shall notify the other party promptly of the receipt of any comments of the
SEC or its staff and of any request by the SEC or its staff or any other
governmental officials for amendments or supplements to the preliminary proxy
statement, the Proxy Statement, the Registration Statement or any other filing
or for additional information, and will supply the other with copies of all
correspondence between it and any of its representatives, on the one hand, and
the SEC or its staff or any other governmental officials, on the other hand,
with respect to the preliminary proxy statement, the Proxy Statement, the
Registration Statement, the Merger or any other filing relating thereto. The
Proxy Statement, the Registration Statement and such other filings shall
comply in all material respects with all applicable requirements of law. If at
any time prior to the Effective Time, any event shall occur relating to TCI or
the Company, as the case may be, or its subsidiaries or any of their
respective officers, directors, partners or affiliates which should be
described in an amendment or supplement to the Proxy Statement, the
Registration Statement or any other filing, TCI or the Company, as the case
may be, shall inform the other party promptly after becoming aware of such
event and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of the Company, such
amendment or supplement.
3.3 Identification of Affiliates. Promptly after the Special Meeting and
before the Closing Date, the Company shall deliver to TCI a letter identifying
all Persons who, to the Company's knowledge, at the time of the Special
Meeting or at the Effective Time, may be deemed to be "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall
use its reasonable best efforts to cause each Person who is identified as an
"affiliate" in the letter referred to above to deliver to TCI, on or prior to
the Closing Date, a
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written agreement, in substantially the form annexed hereto as Exhibit 3.3,
that such Person will not offer to sell or otherwise dispose of any shares of
LMG Series A Stock issued to such Person pursuant to the Merger in violation
of the Securities Act and the rules and regulations thereunder.
3.4 Reasonable Efforts. Subject to the terms and conditions of this
Agreement and applicable law and, in the case of the Company, except as
otherwise required by the fiduciary duties of the Company Board (as determined
in good faith by the Company Board following the receipt of advice of the
Company's outside legal counsel thereon), each of the parties hereto shall use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations or otherwise to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
as soon as reasonably practicable, including such actions or things as any
other party hereto may reasonably request in order to cause any of the
conditions to such other party's obligation to consummate such transactions
specified in Article VII to be fully satisfied. Without limiting the
generality of the foregoing, the parties shall (and shall cause their
respective directors, officers and subsidiaries, and use their reasonable best
efforts to cause their respective affiliates, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide reasonable assistance to each other in (i) obtaining all necessary
consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications, or other permission or action by, and giving
all necessary notices to and making all necessary filings with and
applications and submissions to, any Governmental Entity or other Person; (ii)
lifting any permanent or preliminary injunction or restraining order or other
similar order issued or entered by any court or Governmental Entity (an
"Injunction") of any type referred to in Section 7.1(c); (iii) subject to the
last sentence of Section 3.2(a), taking such actions as may reasonably be
required under applicable state securities or blue sky laws in connection with
the issuance of the LMG Series A Stock to be covered by the Registration
Statement; (iv) obtaining the tax opinions referred to in Sections 7.2(d) and
7.3(d); and (v) in general, consummating and making effective the transactions
contemplated hereby; provided, however, that in order to obtain any consent,
approval, waiver, license, permit, authorization, registration, qualification,
or other permission or action or the lifting of any Injunction referred to in
clause (i) or (ii) of this sentence, no party shall be required to pay any
consideration, to divest itself of any of, or otherwise rearrange the
composition of, its assets or to agree to any conditions or requirements
which, individually or in the aggregate, would have a Material Adverse Effect
on the Company or TCI. Prior to making any application to or filing with any
Governmental Entity or other Person in connection with this Agreement, each
party shall provide the other party with drafts thereof and afford the other
party a reasonable opportunity to comment on such drafts.
3.5 Company SIP. The Company may amend and/or take action with respect to
the Tele-Communications International, Inc. 1995 Stock Incentive Plan (the
"Company SIP") prior to the Effective Time to provide that, upon a termination
of employment by participants of the Company SIP who are employed by the
Company or any of its subsidiaries at the Effective Time with good reason or
by the Company without cause following the Effective Time, options, stock
appreciation rights or other awards granted under the Company SIP in 1997 and
outstanding as of the Effective Time shall be fully vested, and in the case of
stock options or stock appreciation rights be immediately exercisable, and
will remain outstanding for their full original term as if the individual had
remained employed by the Company.
3.6 Employee Matters. From and after the Effective Time, TCI will cause the
Surviving Corporation to honor, in accordance with their terms, the executive,
employment and other agreements and arrangements relating to officers and
employees of the Company set forth in Schedule 3.6 (the "Executive
Agreements") and all the Company Plans; provided, however, that nothing herein
shall preclude any change in any Executive Agreement or Company Plan effective
on a prospective basis that is permitted pursuant to the terms of the
applicable Executive Agreement or Company Plan. Company performance in respect
of any performance or other programs shall be calculated without taking into
account any expenses or costs directly associated with or arising as a result
of the transactions contemplated by this Agreement or any non-recurring
charges that would not reasonably be expected to have been incurred had the
transactions contemplated by this Agreement not occurred. With respect to
employees of the Company, TCI shall assume the obligations of the Company
under the
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Company Plans as in effect immediately prior to the Effective Time and will
provide employee benefit plans with aggregate employee benefits to Company
employees that are no less favorable than the aggregate benefits provided to
them immediately prior to the Effective Time; provided that TCI at its sole
option may provide employee benefits to Company employees which, in the
aggregate, are no less favorable than those applicable to similarly situated
employees of TCI. With respect to any plans established by TCI, to the extent
a Company employee becomes eligible to participate in any such plans by virtue
of the Merger, TCI shall grant to such Company employee from after the
Effective Time, credit for all service with the Company and its affiliates and
predecessors (and any other service credited by the Company under similar
Company Plans) prior to the Effective Time for eligibility to participate,
benefit accrual and vesting purposes, including for purposes of eligibility
and participation under TCI's severance policies and plans, including the
calculation of such employee's "Years of Continuous Service," to the extent
such service was credited under the Company Plans on the Closing Date, and
Company employees shall not be subject to any waiting periods or limitations
on benefits for pre-existing conditions under such TCI plans, including any
group health and disability plans, except to the extent such employees were
subject to such limitations under the Company Plans or were eligible to
participate in such TCI plans prior to the Effective Time. TCI further agrees
to maintain the Company's severance plans as in effect on the date hereof for
a period of two years from the Effective Time, without adverse amendment, for
the benefit of Company employees.
ARTICLE IV
Representations and Warranties of the Company
The Company hereby represents and warrants to TCI and Merger Sub as follows:
4.1 Organization and Qualification. Each of the Company and its subsidiaries
(i) is a corporation, partnership, limited liability company or other business
association duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, (ii) has all
requisite corporate, partnership, limited liability company or other business
association power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted and (iii) is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or license necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed or
in good standing has not had and is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Each entity in which the Company, directly or through one or more of its
subsidiaries, has an investment accounted for by the equity method (the
"Company Equity Affiliates") is a corporation, partnership, limited liability
company or other business association (A) duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, (B) has all requisite corporate, partnership, limited liability
company or other business association power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted and (C) is duly qualified to do business and is in good standing in
each jurisdiction in which the property owned, leased or operated by it, or
the nature of its activities, makes such qualification necessary, except in
each case where such failure to be so existing and in good standing or to have
such power and authority or to be so qualified to do business and be in good
standing has not had and is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The Company has
heretofore furnished or made available to TCI a true and complete copy of the
Company Charter and the Company's Bylaws, each as amended through and in
effect on the date hereof.
4.2 Authorization and Validity of Agreement. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject to
obtaining the approval of its stockholders specified in Section 4.11, to
perform its obligations hereunder and consummate the transactions contemplated
hereby. The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Company Board and by all other necessary corporate
action on the part of the Company, subject, in the case of the consummation by
it of the Merger, to
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such approval of the Company's stockholders. This Agreement has been duly
executed and delivered by the Company and (assuming the due execution and
delivery of this Agreement by the other parties hereto) constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies). The Company and the Company Board have
taken all actions necessary to render the provisions of Section 203 of the
DGCL inapplicable to TCI and, with respect to Merger Sub, to the transactions
contemplated by this Agreement.
4.3 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 312,000,000
shares of Company Common Stock, of which 300,000,000 shares are designated
Company Series A Stock and 12,000,000 shares are designated Company Series B
Stock and (ii) 10,000,000 shares of Company Preferred Stock, issuable in
series.
(b) As of the close of business on June 30, 1998, (i) 103,640,680 shares of
Company Series A Stock and 11,700,000 shares of Company Series B Stock were
issued and outstanding, (ii) 15,394,363 shares of Company Series A Stock and
no shares of Company Series B Stock were reserved for issuance upon
conversion, exchange or exercise of outstanding convertible or exchangeable
securities and options and other stock performance awards, (iii) no shares of
Company Preferred Stock were issued and outstanding and no action had been
taken by the Company Board with respect to the designation of the rights and
preferences of any series of Company Preferred Stock, and (iv) 3,382,200
shares of Company Series A Stock and no shares of Company Series B Stock or
Company Preferred Stock were held in the treasury of the Company or held by
subsidiaries of the Company.
(c) All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock of
the Company is entitled to preemptive rights.
(d) Except for the Company Debentures, there are no issued or outstanding
bonds, debentures, notes or other indebtedness of the Company or any of its
subsidiaries which have the right to vote (or which are convertible into other
securities having the right to vote) on any matters on which stockholders of
the Company may vote.
(e) As of the close of business on June 30, 1998, there were no options,
warrants or other rights to acquire capital stock (or securities convertible
into or exercisable or exchangeable for capital stock) from the Company, other
than (i) Company Options or other rights outstanding as of the close of
business on June 30, 1998 representing in the aggregate the right to purchase
or acquire up to 2,757,000 shares of Company Series A Stock, pursuant to
Company Plans or otherwise, (ii) the right of the holders of Company
Debentures to convert such debentures into shares of Company Series A Stock,
pursuant to the terms thereof, and (iii) the right of the holders of shares of
Company Series B Stock to convert such shares into shares of Company Series A
Stock, pursuant to the Company Charter. Upon consummation of the Merger, none
of such options or convertible securities will be exercisable for or
convertible into any shares of capital stock of the Company, but instead will
either be converted in the Merger or be adjusted to be exercisable for or
convertible into shares of LMG Series A Stock in accordance with the terms of
this Agreement and such securities.
(f) Since June 30, 1998 until the execution of this Agreement, the Company
has not issued any capital stock or any options, warrants or other rights to
acquire capital stock (or securities convertible into or exercisable or
exchangeable for capital stock).
4.4 Reports and Financial Statements. The Company has filed all Reports on
Form 10-K, Form 10-Q and Form 8-K and proxy statements required under the
Exchange Act to be filed with the SEC since January 1, 1996 (collectively, the
"Company SEC Filings"). The Company has heretofore furnished or made available
to TCI true and complete copies of all the Company SEC Filings filed prior to
the date hereof. As of their respective dates, each of the Company SEC Filings
complied in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder, and none of the Company
SEC Filings contained as
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of such date any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (except that no representation or warranty is made with respect
to any information regarding TCI included in the Company SEC Filings which was
furnished by TCI expressly for use therein). When filed with the SEC, the
financial statements (including the related notes) included in the Company SEC
Filings complied as to form in all material respects with the applicable
requirements of the Exchange Act and the applicable rules and regulations
thereunder and were prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated therein or in the schedules thereto), and
such financial statements fairly present, in all material respects, the
consolidated financial position of the Company and its consolidated
subsidiaries as of the respective dates thereof and the consolidated results
of their operations and their consolidated cash flows for the respective
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments. Except (i) as and
to the extent disclosed or reserved against on the balance sheet of the
Company as of June 30, 1998 included in the Company SEC Filings, or (ii) as
incurred after the date thereof in the ordinary course of business consistent
with prior practice and not prohibited by this Agreement, none of the Company,
any of the Company's subsidiaries or, to the knowledge of the Company, any
Company Equity Affiliate has incurred any liability or obligation of any kind
that, individually or in the aggregate, has or would have a Material Adverse
Effect on the Company.
4.5 No Approvals or Notices Required; No Conflict with Instruments. Except
as set forth on Schedule 4.5, the execution and delivery by the Company of
this Agreement do not, and the performance by the Company of its obligations
hereunder and the consummation of the transactions contemplated hereby will
not:
(i) assuming adoption of this Agreement at the Special Meeting by the
requisite vote of the Company's stockholders, conflict with or violate the
Company Charter or Bylaws or the charter or bylaws of any corporate
subsidiary of the Company, or the partnership agreement of any partnership
subsidiary of the Company, or any other instrument or document governing
any subsidiary of the Company that is not a corporation or partnership;
(ii) require any consent, approval, order or authorization of or other
action by any Governmental Entity (a "Government Consent") or any
registration, qualification, declaration or filing with or notice to any
Governmental Entity (a "Governmental Filing"), in each case on the part of
or with respect to the Company, any subsidiary of the Company or, to the
knowledge of the Company, any Company Equity Affiliate, except for (A) the
filing with the SEC of the Registration Statement and such reports under
Sections 13(a) and 16(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby,
(B) the filing of the Certificate of Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business, (C) such
Government Consents and Governmental Filings with foreign, state and local
governmental authorities (the "Local Approvals") as may be required with
respect to the Licenses held by the Company, any of its subsidiaries or, to
the knowledge of the Company, any of the Company Equity Affiliates or as
may otherwise be required under laws applicable to the conduct of the
businesses of the Company and its subsidiaries in the ordinary course, (D)
the Governmental Filings to be made on the part of or with respect to TCI
and Merger Sub referred to in clause (ii) of Section 5.5, (E) such
Government Consents and Governmental Filings as may be required in
connection with the issuance of the LMG Series A Stock to be covered by the
Registration Statement pursuant to state securities and blue sky laws, and
(F) such Government Consents and Government Filings the absence or omission
of which will not, either individually or in the aggregate, have a Material
Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger;
(iii) assuming adoption of this Agreement at the Special Meeting by the
requisite vote of the Company's stockholders, require, on the part of the
Company, any subsidiary of the Company or, to the knowledge of the Company,
any Company Equity Affiliate, any consent by or approval or authorization
of (a "Contract Consent") or notice to (a "Contract Notice") any other
Person (other than a Governmental Entity), whether under any License or
other Contract or otherwise, except (A) as set forth on Schedule 4.5 and
(B) such Contract Consents and Contract Notices the absence or omission of
which will not, either
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<PAGE>
individually or in the aggregate, have a Material Adverse Effect on the
Company or prevent or materially delay the consummation of the Merger;
(iv) assuming that the Contract Consents and Contract Notices described
on Schedule 4.5 are obtained and given and that any Government Consents and
Governmental Filings required under any Licenses are obtained or made,
conflict with or result in any violation or breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation, suspension, modification or, subject to Section
4.5(v), acceleration of any obligation or any increase in any payment
required by or the impairment, loss or forfeiture of any material benefit,
rights or privileges under or the creation of a Lien or other encumbrance
on any assets pursuant to (any such conflict, violation, breach, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation") any contract (including any note, bond, indenture, mortgage,
deed of trust, lease, franchise, permit, authorization, license, contract,
instrument, employee benefit plan or practice, or other agreement,
obligation, commitment or concession of any nature (each, a "Contract")) to
which the Company, any subsidiary of the Company or, to the knowledge of
the Company, any Company Equity Affiliate is a party, by which the Company,
any subsidiary of the Company or, to the knowledge of the Company, any
Company Equity Affiliate or any of their respective assets or properties is
bound or affected or pursuant to which the Company, any subsidiary of the
Company or, to the knowledge of the Company, any Company Equity Affiliate
is entitled to any rights or benefits (including the Licenses), except (A)
as set forth on Schedule 4.5 and (B) such Violations which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company or prevent or materially delay the consummation of the Merger;
(v) require any approval, consent or authorization from the holders of
the Company Debentures. The Merger will result in a "Change of Control"
under the terms of the Company Debentures, and holders of such debentures
will have the right to tender the same, in whole or in part, to the Company
for a purchase price of 100% of principal amount, plus accrued but unpaid
interest, within the time periods and subject to the requirements of the
Indenture for the Company Debentures; or
(vi) assuming adoption of this Agreement at the Special Meeting by the
requisite vote of the Company's stockholders and assuming that the
Government Consents and Governmental Filings specified in clause (ii) of
this Section 4.5 are obtained, made and given, result in a Violation of,
under or pursuant to any law, rule, regulation, order, judgment or decree
applicable to the Company, any subsidiary of the Company or, to the
knowledge of the Company, any Company Equity Affiliate, or by which any of
their respective properties or assets are bound or affected, except for
such Violations which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger.
4.6 Absence of Certain Changes or Events. Except as otherwise disclosed in
the Company SEC Filings filed with the SEC prior to the date hereof or as set
forth on Schedule 4.6, since December 31, 1997, there has not been any
material adverse change in the business, properties, operations or financial
condition of the Company and its subsidiaries taken as a whole, and no event
has occurred and no condition exists which, individually or together with
other events or conditions, has had or, insofar as the Company can reasonably
foresee, is reasonably likely to have, a Material Adverse Effect on the
Company.
4.7 Registration Statement; Proxy Statement. None of the information
supplied or to be supplied by the Company in writing specifically for
inclusion or incorporation by reference in, and which is included or
incorporated by reference in, (i) the Registration Statement (including the
Proxy Statement forming part of the prospectus included therein) or any
amendment or supplement thereto or (ii) any other documents filed or to be
filed with the SEC or any other Governmental Entity in connection with the
transactions contemplated hereby, will, at the respective times such documents
are filed, and, in the case of the Registration Statement (including the Proxy
Statement forming part of the prospectus included therein) or any amendment or
supplement thereto, when the same becomes effective, at the time of the
Special Meeting and at the Effective Time, be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading or necessary to
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<PAGE>
correct any statement in any earlier communication. For this purpose, any such
information included or incorporated by reference in any such document
relating to the Company will be deemed to have been so supplied in writing
specifically for inclusion or incorporation therein if such document was
available for review by the Company a reasonable time before such document was
filed (but the foregoing shall not be the exclusive manner in which it may be
established that such information was so supplied).
4.8 Brokers or Finders. No investment banker, broker, finder consultant or
intermediary (other than Salomon Smith Barney, Inc.) is entitled to any
brokerage, finder's or other fee or commission in connection with this
Agreement, the Merger and the other transactions contemplated hereby based
upon arrangements made by or on behalf of the Company.
4.9 Fairness Opinion. The Company Board has received the opinion, dated
August 21, 1998, of Salomon Smith Barney, Inc. to the effect that the exchange
ratio contemplated by Section 2.3(a) for the conversion of Company Common
Stock into LMG Series A Stock pursuant to the Merger is fair, from a financial
point of view, to the holders of Company Common Stock (other than TCI or its
affiliates) (the "Fairness Opinion"). A true and complete copy of the Fairness
Opinion (which includes the consent of Salomon Smith Barney, Inc. to the
inclusion of the Fairness Opinion in the Proxy Statement and the Registration
Statement) has been delivered to TCI.
4.10 Recommendation of the Company Board. The Company Board, at a meeting
duly called and held, unanimously (a) determined that this Agreement and the
Merger are fair to and in the best interests of the Company's stockholders
(other than TCI and its subsidiaries), (b) approved this Agreement, the Merger
and the other transactions contemplated hereby and (c) resolved to recommend
adoption of this Agreement by the stockholders of the Company.
4.11 Vote Required. The only vote of stockholders of the Company required
under the DGCL, the Company Charter, the Company's Bylaws and the rules and
regulations of The Nasdaq Stock Market in order to adopt this Agreement is the
affirmative vote of a majority of the aggregate voting power of the issued and
outstanding shares of Company Series A Stock and the Company Series B Stock
voting together as a single class, and no other vote or approval of or other
action by the holders of any capital stock or other securities of the Company
is required.
4.12 Full Disclosure. No statement in this Agreement or in any certificate
delivered pursuant to the requirements of this Agreement by or on behalf of
the Company to TCI contains or will contain an untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE V
Representations and Warranties of TCI
TCI hereby represents and warrants to the Company as follows:
5.1 Organization. Each of Merger Sub, TCI and TCI's subsidiaries (i) is a
corporation, partnership, limited liability company or other business
association duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, (ii) has all
requisite corporate, partnership, limited liability company or other business
association power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted and (iii) is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or license necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed or
in good standing has not had and is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TCI. Each
entity in which TCI, directly
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or through one or more of its subsidiaries, has an investment accounted for by
the equity method (the "TCI Equity Affiliates") is a corporation, partnership,
limited liability company or other business association (A) duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, (B) has all requisite corporate,
partnership, limited liability company or other business association power and
authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and (C) is duly qualified to do business
and is in good standing in each jurisdiction in which the property owned,
leased or operated by it, or the nature of its activities, makes such
qualification necessary, except in each case where such failure to be so
existing and in good standing or to have such power and authority or to be so
qualified to do business and be in good standing has not had and is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TCI.
5.2 Authorization and Validity of Agreement. Each of TCI and Merger Sub has
all requisite corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by TCI of this
Agreement and the consummation by each of TCI and Merger Sub of the
transactions contemplated hereby have been approved by the respective Boards
of Directors of TCI and Merger Sub and by TCI as the sole stockholder of
Merger Sub, and have been duly authorized by all other necessary corporate
action on the part of TCI or Merger Sub. This Agreement has been duly executed
and delivered by TCI and Merger Sub and (assuming the due execution and
delivery of this Agreement by the Company) constitutes a valid and binding
agreement of TCI and Merger Sub, enforceable against TCI and Merger Sub in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
5.3 Capitalization of TCI.
(a) TCI's authorized capital stock includes 750,000,000 shares of LMG Series
A Stock and 75,000,000 shares of LMG Series B Stock. No shares of TCI's
preferred stock are convertible into LMG Series A Stock or LMG Series B Stock
other than its Convertible Preferred Stock, Series C-Liberty Media (the
"Series C-LMG Preferred Stock") and its Redeemable Convertible Liberty Media
Group Preferred Stock, Series H (the "Series H Preferred Stock"). There are
70,575 authorized shares of Series C-LMG Preferred Stock and 7,259,380
authorized shares of Series H Preferred Stock.
(b) As of the close of business on June 30, 1998, (A) 326,005,365 shares of
LMG Series A Stock and 31,699,575 shares of LMG Series B Stock (in each case
net of shares held in treasury and shares held by subsidiaries all of the
common stock of which is beneficially owned by TCI) were issued and were
outstanding, (B) 31,780,822 shares of LMG Series A Stock and 3,499,261 shares
of LMG Series B Stock were held in TCI's treasury (including shares held by
subsidiaries of TCI), and (C) 70,575 shares of Series C-LMG Preferred Stock,
no shares of Series D Preferred Stock and 6,567,794 shares of Series H
Preferred Stock were issued and were outstanding.
(c) All outstanding shares of LMG Series A Stock, LMG Series B Stock and LMG
Preferred Stock are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock of TCI is entitled to preemptive
rights.
(d) As of the close of business on June 30, 1998, there were no options,
warrants or other rights to acquire LMG Series A Stock (or securities
convertible into or exercisable or exchangeable for LMG Series A Stock) from
TCI, other than (i) the right of the holders of LMG Series B Stock to convert
shares of LMG Series B Stock into LMG Series A Stock, pursuant to the TCI
Charter, (ii) options or other rights representing in the aggregate the right
to purchase or otherwise acquire up to 11,597,336 shares of LMG Series A
Stock, pursuant to TCI Employee Plans or TCI Benefit Arrangements or
otherwise, (iii) 19,416,910 shares of LMG Series A Stock issuable upon
exchange of the TCI UA, Inc. Convertible Notes due December 12, 2021, and (iv)
(A) 3,969,844 shares of LMG Series A Stock issuable upon conversion of the
Series C-LMG Preferred Stock, at a conversion rate equal to 56.25 per share
and (B) 3,879,103 shares of LMG Series A Stock issuable upon conversion of the
Series H Preferred Stock, at a conversion rate equal to 0.590625 per share.
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(e) Since June 30, 1998 until the execution of this Agreement, TCI has not
issued any LMG Series A Stock or any options, warrants or other rights to
acquire LMG Series A Stock (or securities convertible into or exercisable or
exchangeable for LMG Series A Stock) other than the issuance of shares of LMG
Series A Stock pursuant to options referred to in clause (ii) of the foregoing
paragraph (d) that were outstanding as of June 30, 1998.
(f) As of June 30, 1998 and the date hereof, the following were all zero:
Number of Shares Issuable with Respect to the Liberty Media Group Inter-Group
Interest, the Number of Shares Issuable with Respect to the TCI Ventures Group
Inter-Group Interest, the Committed Acquisition Shares and the TCI Ventures
Group Preferred Interest (each, as defined in the TCI Charter).
5.4 TCI Reports and Financial Statements. TCI has filed all Reports on Form
10-K, Form 10-Q and Form 8-K and proxy statements required under the Exchange
Act to be filed with the SEC since January 1, 1996 (collectively, the "TCI SEC
Filings"). TCI has heretofore furnished or made available to the Company true
and complete copies of all the TCI SEC Filings filed prior to the date hereof.
The TCI SEC Filings constitute all of the documents (other than preliminary
material) that TCI was required to file with the SEC under the Exchange Act
since such date. As of their respective dates, each of the TCI SEC Filings
complied in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder, and none of the TCI SEC
Filings contained as of such date any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading (except that no representation or warranty is made
with respect to any information regarding the Company included in the TCI SEC
Filings which was furnished by the Company expressly for use therein). When
filed with the SEC, the financial statements (including the related notes)
included in the TCI SEC Filings complied as to form in all material respects
with the applicable requirements of the Exchange Act and the applicable rules
and regulations thereunder and were prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in the schedules
thereto), and such financial statements fairly present, in all material
respects, the consolidated financial position of TCI and its consolidated
subsidiaries as of the respective dates thereof and the consolidated results
of their operations and their consolidated cash flows for the respective
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments. Except (i) as
and to the extent disclosed or reserved against on TCI's balance sheet as of
June 30, 1998 included in the TCI SEC Filings, or (ii) as incurred after the
date thereof in the ordinary course of business consistent with prior practice
and not prohibited by this Agreement, none of TCI, any of TCI's subsidiaries
or, to the knowledge of TCI, any TCI Equity Affiliate has incurred any
liability or obligation of any kind that, individually or in the aggregate,
has or would have a Material Adverse Effect on TCI.
5.5 No Approvals or Notices Required; No Conflict with Instruments. The
execution and delivery by TCI and Merger Sub of this Agreement do not, and the
performance by TCI and Merger Sub of their obligations hereunder and the
consummation of the transactions contemplated hereby will not:
(i) conflict with or violate the TCI Charter or TCI's Bylaws or the
Certificate of Incorporation or Bylaws of Merger Sub;
(ii) require any Government Consent or Governmental Filing on the part of
or with respect to TCI, any subsidiary of TCI or, to the knowledge of TCI,
any TCI Equity Affiliate, except for (A) the filing with the SEC of the
Registration Statement and such reports under Sections 12(g), 13(a), 13(d)
and 16(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (B) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which the
Company or Merger Sub is qualified to do business, (C) the Local Approvals,
(D) such Government Consents and Governmental Filings as may be required in
connection with the issuance of the LMG Series A Stock covered by the
Registration Statement pursuant to state securities and blue sky laws, (E)
the Governmental Filings to be made on the part of or with respect to the
Company referred to in clause (ii) of Section 4.5, and (F) such Government
Consents
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and Governmental Filings the absence or omission of which will not, either
individually or in the aggregate, have a Material Adverse Effect on TCI or
prevent or materially delay the consummation of the Merger;
(iii) require on the part of TCI, any subsidiary of TCI or, to the
knowledge of TCI, any TCI Equity Affiliate, any Contract Consent or
Contract Notice, except such Contract Consents and Contract Notices the
absence or omission of which will not, either individually or in the
aggregate, have a Material Adverse Effect on TCI or prevent or materially
delay the consummation of the Merger;
(iv) assuming that any Government Consents and Governmental Filings
required under any Licenses are obtained or made, result in a Violation by
TCI, Merger Sub or any other subsidiary of TCI of any Contract to which
TCI, Merger Sub, any other subsidiary of TCI or, to the knowledge of TCI,
any TCI Equity Affiliate is a party, by which TCI, Merger Sub, any other
subsidiary of TCI or, to the knowledge of TCI, any TCI Equity Affiliate or
any of their respective assets or properties is bound or affected or
pursuant to which TCI, Merger Sub, any other subsidiary of TCI or, to the
knowledge of TCI, any TCI Equity Affiliate is entitled to any rights or
benefits, except for such Violations which would not, individually or in
the aggregate, have a Material Adverse Effect on TCI or prevent or
materially delay the consummation of the Merger; or
(v) assuming that this Agreement is adopted by the Company's stockholders
as required by the DGCL and the Company Charter and Bylaws, and that the
Government Consents and Governmental Filings specified in clause (ii) of
this Section 5.5 are obtained, made and given, result in a Violation of,
under or pursuant to any law, rule, regulation, order, judgment or decree
applicable to TCI, Merger Sub, any other subsidiary of TCI or, to the
knowledge of TCI, any TCI Equity Affiliate or by which any of their
respective properties or assets are bound or affected, except for such
Violations which would not, individually or in the aggregate, have a
Material Adverse Effect on TCI or prevent or materially delay the
consummation of the Merger.
5.6 Absence of Certain Changes or Events. Except as otherwise disclosed in
the TCI SEC Filings filed with the SEC prior to the date hereof, since
December 31, 1997, there has not been any material adverse change in the
business, properties, operations or financial condition of TCI and its
subsidiaries taken as a whole, and no event has occurred and no condition
exists which, individually or together with other events or conditions, has
had or, insofar as TCI can reasonably foresee, is reasonably likely to have, a
Material Adverse Effect on TCI.
5.7 Registration Statement. None of the information supplied or to be
supplied by TCI or Merger Sub in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in, (i) the Registration Statement (including the Proxy Statement
forming part of the prospectus included therein) or any amendment or
supplement thereto, or (ii) any other documents filed or to be filed with the
SEC or any other Governmental Entity in connection with the transactions
contemplated hereby, will, at the respective times such documents are filed,
and, in the case of the Registration Statement (including the Proxy Statement
forming part of the prospectus included therein) or any amendment or
supplement thereto, when the same becomes effective, at the time of the
Special Meeting and at the Effective Time, be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading or necessary to correct any statement in any earlier
communication. For this purpose, any such information included or incorporated
by reference in any such document relating to TCI or Merger Sub will be deemed
to have been so supplied in writing specifically for inclusion or
incorporation therein if such document was available for review by TCI a
reasonable time before such document was filed (but the foregoing shall not be
the exclusive manner in which it may be established that such information was
so supplied). The Registration Statement will comply (with respect to TCI and
Merger Sub and information provided in writing therefor by TCI or Merger Sub)
as to form in all material respects with the applicable provisions of the
Securities Act and the rules and regulations under such Act.
5.8 Brokers or Finders. No investment banker, broker, finder consultant or
intermediary is entitled to any brokerage, finder's or other fee or commission
in connection with this Agreement, the Merger and the other transactions
contemplated hereby based upon arrangements made by or on behalf of TCI or
Merger Sub.
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5.9 Vote Required. No vote of stockholders of TCI is required under the
DGCL, the TCI Charter, TCI's Bylaws or the rules and regulations of The Nasdaq
Stock Market in order for TCI to validly perform its obligations under this
Agreement (including, without limitation, its obligation to issue the LMG
Series A Stock pursuant to Section 2.3(a)(i) hereof).
5.10 Full Disclosure. No statement in this Agreement or in any certificate
delivered pursuant to the requirements of this Agreement by or on behalf of
TCI or Merger Sub to the Company contains or will contain an untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
5.11 Interim Operations of Merger Sub. Merger Sub has been formed solely for
the purpose of engaging in the transactions contemplated hereby, and
immediately prior to the Effective Time will have engaged in no other business
activities, will have no subsidiaries, and will have conducted its operations
only as contemplated hereby.
5.12 Separation of Assets and Liabilities. Each of the combined balance
sheets (including the related notes) of each of the TCI Group, the Liberty
Media Group and the TCI Ventures Group included in the TCI SEC Filings
presents fairly, respectively, in all material respects, the combined
financial position of each of the TCI Group, the Liberty Media Group and the
TCI Ventures Group as of the respective dates thereof, and the other related
statements (including the related notes) included in the TCI SEC Filing
present fairly, respectively, in all material respects, the results of
operations and the changes in financial position of each of the TCI Group, the
Liberty Media Group and the TCI Ventures Group for the respective periods or
as of the respective dates set forth therein, all in conformity with GAAP
consistently applied during the periods involved, except as otherwise noted
therein and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments. Except (i) as and to the extent
disclosed or reserved against on the balance sheet of the TCI Group, the
Liberty Media Group or the TCI Ventures Group as of December 31, 1997 included
in the TCI SEC Filings, or (ii) as incurred after the date thereof in the
ordinary course of business consistent with prior practice and not prohibited
by the AT&T Agreement, none of the TCI Group, the Liberty Media Group or the
TCI Ventures Group has any liabilities or obligations of any nature, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, have or would have a Material Adverse Effect
on TCI.
5.13 LMG Series A Stock. The shares of LMG Series A Stock to be issued and
delivered pursuant to Section 2.4 will be, when the Merger has become
effective and such shares are issued and delivered as provided in Section 2.4
and as described in the Registration Statement, duly authorized, validly
issued, fully paid and nonassessable and no stockholder of TCI will have any
preemptive right of subscription or purchase in respect thereof. The shares of
LMG Series A Stock to be issued in the Merger, will, when issued, be
registered under the Securities Act and the Exchange Act and registered or
exempt from registration under any applicable state securities laws.
ARTICLE VI
Transactions Prior to Closing
6.1 Access to Information. From the date hereof to the Effective Time, upon
reasonable notice, each of TCI and the Company shall (and shall cause each of
its subsidiaries, and use its reasonable best efforts to cause its other
affiliates, to) afford to the officers, employees, counsel, accountants and
other authorized representatives of the other reasonable access during normal
business hours to all its properties, personnel, books and records and furnish
promptly to such Persons such information concerning its business, properties,
personnel and affairs as such Persons shall from time to time reasonably
request.
6.2 Confidentiality. Unless otherwise agreed to in writing by the party
disclosing (or whose Representatives disclosed) the same (a "disclosing
party"), each party (a "receiving party") shall, and shall
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cause its affiliates, directors, officers, employees, agents and controlling
Persons (such affiliates and other Persons with respect to any party being
collectively referred to as such party's "Representatives") to, (i) keep all
Proprietary Information (as defined below) of the disclosing party
confidential and not disclose or reveal any such Proprietary Information to
any Person other than those Representatives of the receiving party who are
participating in effecting the transactions contemplated hereby or who
otherwise need to know such Proprietary Information, (ii) use such Proprietary
Information only in connection with consummating the transactions contemplated
hereby and enforcing the receiving party's rights hereunder, and (iii) not use
Proprietary Information in any manner detrimental to the disclosing party. In
the event that a receiving party is requested pursuant to, or required by,
applicable law or regulation or by legal process to disclose any Proprietary
Information of the disclosing party, the receiving party shall provide the
disclosing party with prompt notice of such request(s) to enable the
disclosing party to seek an appropriate protective order. A party's
obligations hereunder with respect to Proprietary Information that (i) is
disclosed to a third party with the disclosing party's written approval, (ii)
is required to be produced under order of a court of competent jurisdiction or
other similar requirements of a governmental agency, or (iii) is required to
be disclosed by applicable law or regulation, will, subject in the case of
clauses (ii) and (iii) above to the receiving party's compliance with the
preceding sentence, cease to the extent of the disclosure so consented to or
required, except to the extent otherwise provided by the terms of such consent
or covered by a protective order. If a receiving party uses a degree of care
to prevent disclosure of the Proprietary Information that is at least as great
as the care it normally takes to preserve its own information of a similar
nature, it shall not be liable for any disclosure that occurs despite the
exercise of that degree of care, and in no event shall a receiving party be
liable for any indirect, punitive, special or consequential damages unless
such disclosure resulted from its willful misconduct or gross negligence in
which event it shall be liable in damages for the disclosing party's lost
profits resulting directly and solely from such disclosure. In the event this
Agreement is terminated, each party shall, if so requested by the other party,
promptly return or destroy all of the Proprietary Information of such other
party, including all copies, reproductions, summaries, analyses or extracts
thereof or based thereon in the possession of the receiving party or its
Representatives; provided, however, that the receiving party shall not be
required to return or cause to be returned summaries, analyses or extracts
prepared by it or its Representatives, but shall destroy (or cause to be
destroyed) the same upon request of the disclosing party.
For purposes of this Section 6.2, "Proprietary Information" of a party means
all proprietary or confidential information about such party that is furnished
by it or its Representatives to the other party or the other party's
Representatives, regardless of the manner in which it is furnished.
"Proprietary Information" does not include, however, information which (a) has
been or in the future is published or is now or in the future is otherwise in
the public domain through no fault of the receiving party or its
Representatives, (b) was available to the receiving party or its
Representatives on a non-confidential basis prior to its disclosure by the
disclosing party, (c) becomes available to the receiving party or its
Representatives on a non-confidential basis from a Person other than the
disclosing party or its Representatives who is not otherwise bound by a
confidentiality agreement with the disclosing party or its Representatives, or
is not otherwise prohibited from transmitting the information to the receiving
party or its Representatives, or (d) is independently developed by the
receiving party or its Representatives through Persons who have not had,
either directly or indirectly, access to or knowledge of such information.
6.3 Public Announcements. No party shall or shall permit any of its
subsidiaries to (and each party shall use its reasonable best efforts to cause
its affiliates, directors, officers, employees, agents and representatives not
to) issue any press release, make any public announcement or furnish any
written statement to its employees or stockholders generally concerning the
transactions contemplated by this Agreement without the consent of the other
party (which consent shall not be unreasonably withheld), except to the extent
required by applicable law or the applicable requirements of the National
Association of Securities Dealers, Inc. with respect to issuers whose
securities are quoted on The Nasdaq Stock Market (and in either such case such
party shall, to the extent consistent with timely compliance with such
requirement, consult with the other party prior to making the required
release, announcement or statement).
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6.4 Conduct of the Company's Business Pending the Effective Time. The
Company shall, and shall cause each of its subsidiaries to, except as
permitted, required or specifically contemplated by this Agreement, required
by any change in applicable law or consented to or approved in writing by TCI
(which consent or approval shall not be unreasonably withheld) during the
period commencing on the date hereof and ending at the Effective Time:
(a) conduct its business only in, and not take any action except in, the
ordinary and usual course of its business and consistent with past
practices;
(b) use reasonable efforts, in the ordinary and usual course of business
and consistent with past practices, to preserve intact its current business
organizations, to preserve its Licenses in full force and effect, to keep
available the services of its present officers and key employees, and to
preserve the good will of those having business relationships with it;
(c) not (i) make any change or amendments in its charter, bylaws or
partnership agreement or other governing instrument or document (as the
case may be); (ii) authorize for issuance, issue, grant, sell, deliver,
dispose of, pledge or otherwise encumber any shares of its capital stock or
any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for any shares of its capital stock or other equity
or voting interests, or any rights, options, warrants, calls, commitments
or other agreements of any character to purchase or acquire any shares of
its capital stock or other equity or voting interests, or any securities or
rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of its capital stock or other equity or voting
interests, other than (A) shares of Company Common Stock issued upon
exercise of Company Options or other rights outstanding as of the date
hereof under Company Plans or otherwise disclosed pursuant to this
Agreement, in accordance with the terms thereof, (B) shares of Company
Series A Stock issued upon conversion of shares of Company Series B Stock
outstanding on the date hereof, in accordance with the terms of the Company
Charter as in effect on the date hereof, and (C) shares of Company Common
Stock issued in connection with the conversion of convertible or
exchangeable securities of the Company or its subsidiaries, including the
Company Debentures, outstanding as of the date hereof, in accordance with
the terms of such securities; (iii) except for conversions of shares of
Company Series B Stock outstanding on the date hereof into shares of
Company Series A Stock, in accordance with the terms of the Company Charter
as in effect on the date hereof, split, combine, subdivide or reclassify
the outstanding shares of its capital stock or other equity or voting
interests, or declare, set aside for payment or pay any dividend, or make
any other actual, constructive or deemed distribution in respect of any
shares of its capital stock or other equity or voting interests, or
otherwise make any payments to stockholders or owners of equity or voting
interests in their capacity as such (other than dividends or distributions
paid by any Wholly-Owned Subsidiary of the Company to the Company or
another Wholly-Owned Subsidiary; (iv) redeem, purchase or otherwise
acquire, directly or indirectly, any outstanding shares of capital stock or
other securities or equity or voting interests of the Company or any
subsidiary of the Company; (v) make any other changes in its capital or
ownership structure; (vi) sell or grant a Lien with respect to any stock,
equity or partnership interest owned by it in any subsidiary of the
Company; or (vii) enter into or assume any contract, agreement, obligation,
commitment or arrangement with respect to any of the foregoing;
(d) not (i) modify or change in any material respect any material License
or other material Contract, other than in the ordinary course of business;
(ii) enter into any new employment, consulting, agency or commission
agreement, make any amendment or modification to any existing such
agreement or grant any increases in compensation, (A) in each case other
than in the ordinary course of business and consistent with past practice
and with or granted to Persons who are not officers or directors of the
Company or any subsidiary of the Company and which do not, in the
aggregate, materially increase the compensation or benefit expense of the
Company or any subsidiary of the Company or any Company Equity Affiliate
and (B) other than the regular annual salary increase granted in the
ordinary course of business and consistent with past practice to officers
of the Company or its subsidiaries who are not directors or executive
officers of the Company; (iii) establish, amend or modify any Company Plan
or any other employee benefit plan, except in the ordinary course of
business, consistent with past practice and to the extent not material and
except to the extent required by any applicable law or the existing terms
of such Company Plan or by the
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provisions of this Agreement; (iv) pay, discharge or satisfy claims,
liabilities or obligations (absolute, accrued, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company included in the Company
SEC Filings, or incurred in the ordinary course of business and consistent
with past practice; (v) cancel any debts or waive any claims or rights,
except in the ordinary course of business and consistent with past
practice; (vi) make any capital expenditures which individually or in the
aggregate are in excess of the amount provided for capital expenditures in
the most recent capital budget for the Company and its subsidiaries
approved by the Company Board prior to December 31, 1997 (the "1998 capital
budget"); (vii) accelerate the payment of, or otherwise prepay, any
existing outstanding indebtedness for borrowed money; (viii) other than the
normal cash management practices of the Company and its subsidiaries
conducted in the ordinary and usual course of their business and consistent
with past practice, make any advance or loan to or engage in any
transaction with any director, officer, partner or affiliate not required
by the terms of an existing Contract; or (ix) enter into or assume any
contract, agreement, obligation, commitment or arrangement with respect to
any of the foregoing; and
(e) not incur (which shall not be deemed to include entering into credit
agreements, lines of credit or similar arrangements until borrowings are
made under such arrangements) any material amount of indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the
Company or any of its subsidiaries or guarantee any debt securities of
others other than in the ordinary course of business consistent with past
practice; provided, however, that the foregoing shall not prohibit (i) any
guarantees in effect on the date of this Agreement that are referred to in
the Company SEC Filings or in Schedule 6.4(e) or that are required to be
given under existing agreements referred to in the Company SEC Filings,
(ii) the incurrence or guarantee of the indebtedness set forth on Schedule
6.4(e), (iii) any renewal, extension, amendment or refinancing of existing
indebtedness (provided there is no increase in the interest rate or the
principal amount of such indebtedness) and (iv) the incurrence of any new
indebtedness, or the amendment or refinancing of any existing indebtedness
(whether or not permitted by the preceding clause (iii), if such
indebtedness would be prepayable in full at the Effective Time without
material restrictions (other than customary prepayment penalties and
premiums that, in the case of any refinancing, are no greater than those
contained in the indebtedness being refinanced).
6.5 Expenses. Except as otherwise provided in this Section 6.5, whether or
not the Merger is consummated, all costs and expenses incurred or to be
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such cost or expense, except that
the costs and expenses incurred in connection with printing and mailing the
Proxy Statement, the Registration Statement (and any amendment or supplement
thereto) and the prospectus included in the Registration Statement (and any
amendment or supplement thereto) shall be borne 90% by TCI and 10% by the
Company. Notwithstanding the foregoing, if this Agreement or the transactions
contemplated hereby are terminated or abandoned prior to the Effective Time,
TCI shall reimburse the Company for all out-of-pocket costs and expenses
incurred in connection with the transactions contemplated by this Agreement
and all costs and expenses incurred or otherwise owed by the Company pursuant
to the foregoing sentence, provided that such termination or abandonment is
not the result of a material wilful breach by the Company of its covenants or
agreements contained herein or the representations and warranties made by it
herein. Such payment shall be made against receipt of documentation in
reasonable detail supporting the amount of such costs and expenses. Any such
payment required to be made by TCI hereunder shall be made as promptly as
practicable but not later than five business days after termination of this
Agreement and, in any such case, shall be made by wire transfer of immediately
available funds to an account designated by the Company.
6.6 Indemnification.
(a) Indemnification of Company Directors and Officers. From and after the
Effective Time, TCI shall indemnify, defend and hold harmless the present and
former directors, officers, employees or agents of the
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Company and any of its subsidiaries, and any Person who is or was serving at
the request of the Company as a director, officer, employee or agent of
another Person (individually an "Indemnified Party" and, collectively, the
"Indemnified Parties") against (i) all losses, claims, damages, costs,
expenses (including fees and expenses of counsel properly retained by an
Indemnified Party under this Section 6.6) (promptly as statements therefor are
received), liabilities or judgments or amounts that are paid in settlement
with the approval of TCI (which approval shall not be unreasonably withheld)
of or in connection with any claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact
that such Person was at any time prior to the Effective Time a director,
officer, employee or agent of the Company, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted
or claimed prior to, at or after the Effective Time ("Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby (and TCI shall pay expenses in advance of
the final disposition of any such action, suit, proceeding or investigation to
each Indemnified Party (including fees and expenses of counsel properly
retained by an Indemnified Party under this Section 6.6), promptly as
statements therefor are received, to the full extent permitted by law upon
receipt of the undertaking contemplated by Section 145(e) of the DGCL), in
each case to the full extent that (x) a corporation is permitted under
Delaware law to indemnify or advance expenses to its own directors, officers,
employees or agents, as the case may be, (y) such Indemnified Party would have
been entitled to be indemnified by the Company, if such Indemnified Party was
a director, officer, employee or agent of the Company, with respect to the
Indemnified Liabilities in question under the Company Charter and the
Company's Bylaws as in effect on January 1, 1998 and under any indemnification
agreement with the Company in a form disclosed to TCI prior to the date hereof
and (z) such indemnification otherwise is permitted by applicable law. In the
event any such claim, action, suit, proceeding or investigation is asserted or
commenced against any Indemnified Party (whether before or after the Effective
Time), TCI will be entitled to participate and, to the extent that it may
wish, to assume the defense thereof, except that if TCI also is a subject of
such claim, action, suit, proceeding or investigation and there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the position of TCI and the position of such Indemnified Party,
or if TCI shall fail to assume responsibility for such defense, such
Indemnified Party may, subject to Section 6.6(b), retain counsel who will
represent such Indemnified Party, and TCI shall pay all fees and expenses of
such counsel promptly as statements therefor are received; provided that such
Indemnified Party shall vigorously defend (or, if the defense is assumed by
TCI, use his reasonable best efforts to assist in the vigorous defense of) any
such matter; provided, further, that TCI shall not be liable for any
settlement effected without its written consent, which consent, however, shall
not be unreasonably withheld; and provided, further, that TCI shall not have
any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, after exhaustion of all
avenues of appeal, that such Indemnified Party is not entitled to
indemnification hereunder.
(b) Indemnification Procedures. Any Indemnified Party wishing to claim
indemnification or advancement of expenses under Section 6.6(a), upon learning
of any such claim, action, suit, proceeding or investigation, shall promptly
notify TCI thereof (provided that the failure so to notify TCI shall not
relieve TCI from any liability which it may have under this Section 6.6,
except to the extent such failure materially prejudices TCI) and shall deliver
to TCI an undertaking to repay any amounts advanced pursuant thereto when and
if a court of competent jurisdiction shall ultimately determine, after
exhaustion of all avenues of appeal, that such Indemnified Party is not
entitled to indemnification hereunder. In no event may the Indemnified Parties
retain more than one lead law firm and one local counsel to represent them
with respect to any such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the position
of any two or more Indemnified Parties in which case the Indemnified Parties
may (unless the defense of such matter has been assumed by TCI as provided
herein) retain, at the expense of TCI, such number of additional counsel as
are necessary to eliminate all conflicts of the type referred to above.
(c) Survival of Existing Indemnification Rights. TCI and Merger Sub agree
that all rights to indemnification, including provisions relating to advances
of expenses incurred in defense of any action, suit or proceeding, whether
civil, criminal, administrative or investigative (each, a "Claim"), existing
in favor of the
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Indemnified Parties as provided in the Company Charter or the Company's Bylaws
or pursuant to other agreements, or certificates of incorporation or bylaws or
similar documents of any of the Company's subsidiaries, as in effect as of the
date hereof, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time;
provided, however, that all rights to indemnification in respect of any Claim
asserted, made or commenced within such period shall continue until the final
disposition of such Claim.
(d) Survival. This Section 6.6 shall survive the consummation of the Merger.
The provisions of this Section 6.6 are intended to be for the benefit of and
shall be enforceable by each of the Indemnified Parties and his heirs and
legal representatives, and shall be binding on TCI, Merger Sub and the
Surviving Corporation and their respective successors and assigns.
6.7 Notification of Certain Matters. Between the date hereof and the
Effective Time, each party will give prompt notice in writing to the other
party of: (i) any information that indicates that any of its representations
or warranties contained herein was not true and correct as of the date hereof
or will not be true and correct at and as of the Effective Time with the same
force and effect as if made at and as of the Effective Time (except for
changes permitted or contemplated by this Agreement), (ii) the occurrence or
non- occurrence of any event which will result, or has a reasonable prospect
of resulting, in the failure of any condition, covenant or agreement contained
in this Agreement to be complied with or satisfied, (iii) any failure of the
Company or TCI (or Merger Sub), as the case may be, to comply with or satisfy
any condition, covenant or agreement to be complied with or satisfied by it
hereunder, (iv) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or that such
transactions otherwise may violate the rights of or confer remedies upon such
third party and (v) any notice of, or other communication relating to, any
litigation referred to in Section 6.8 or any order or judgment entered or
rendered therein; provided, however, that the delivery of any notice pursuant
to this Section 6.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.8 Defense of Litigation. Each of the parties agrees, except, in the case
of the Company, as otherwise required by the fiduciary duties of the Company
Board (as determined in good faith by the Company Board following the receipt
of advice of the Company's outside legal counsel thereon), to vigorously
defend against all actions, suits or proceedings in which such party is named
as a defendant which seek to enjoin, restrain or prohibit the transactions
contemplated hereby or seek damages with respect to such transactions. No
party shall settle any such action, suit or proceeding or fail to perfect on a
timely basis any right to appeal any judgment rendered or order entered
against such party therein without the consent of the other party (which
consent shall not be withheld unreasonably). Each of the parties further
agrees to use its reasonable best efforts to cause each of its affiliates,
directors and officers to vigorously defend any action, suit or proceeding in
which such affiliate, director or officer is named as a defendant and which
seeks any such relief to comply with this Section to the same extent as if
such Person were a party hereto.
6.9 Actions by TCI and Merger Sub. In its capacity as a beneficial owner of
Company Stock, TCI hereby consents to the adoption of this Agreement and
agrees to cause the Company Stock beneficially owned by TCI to be voted in
favor of the adoption of this Agreement at the Special Meeting. In its
capacity as the sole stockholder of Merger Sub, (i) TCI hereby consents to the
adoption of this Agreement by Merger Sub and agrees that such consent shall be
treated for all purposes as a vote in favor of this Agreement duly adopted at
a meeting of the stockholders of Merger Sub held for such purpose, and (ii)
TCI shall cause Merger Sub to take all corporate action necessary on its part
to consummate the Merger and the transactions contemplated hereby. Merger Sub
shall not conduct any other business.
6.10 AT&T Merger. If the AT&T Merger becomes effective prior to the
Effective Time, TCI shall cause AT&T to take such action, including executing
such documents and instruments, as may be necessary or desirable in order for
(i) the holders of Company Series A Stock to receive, at the Effective Time
and in accordance with Section 2.3(a)(i) hereof, shares of AT&T Liberty Class
A Stock, (ii) the holders of Assumed
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Options to receive, upon exercise of such options and in accordance with
Section 2.6 hereof, shares of AT&T Liberty Class A Stock, (iii) the holders of
Company Debentures to receive, upon conversion of and in accordance with the
terms of such debentures, shares of AT&T Liberty Class A Stock and (iv) all
other provisions contained in this Agreement that are intended to be performed
by, and binding upon, the issuer of the LMG Series A Stock to be performed by,
and binding upon, AT&T as the issuer of the AT&T Liberty Class A Stock.
6.11 Listing. TCI agrees to use its reasonable best efforts to cause the
shares of LMG Series A Stock to be issued pursuant to this Agreement and upon
exercise of the Assumed Options to be authorized for listing on the NNM (or on
the stock exchange which, at the Effective Time, is the principal market for
the LMG Series A Stock), subject to official notice of issuance.
ARTICLE VII
Conditions Precedent
7.1 Conditions Precedent to the Obligations of TCI, Merger Sub and the
Company. The respective obligations of TCI, Merger Sub and the Company to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any or all of which, to the extent permitted by applicable law,
may be waived by TCI, for itself and Merger Sub (but not for the Company), or
by the Company for itself (but not for TCI or Merger Sub):
(a) Stockholder Approval. This Agreement shall have been duly adopted by the
requisite vote of the stockholders of the Company at the Special Meeting, in
accordance with the DGCL, the Company Charter and the Company's Bylaws.
(b) Registration. The Registration Statement (as amended or supplemented)
shall have been declared effective and shall be effective under the Securities
Act at the Effective Time, and no stop order suspending effectiveness shall
have been issued, and no action, suit, proceeding or investigation seeking a
stop order or to suspend the effectiveness of the Registration Statement shall
have been initiated and be continuing or shall have been threatened and be
unresolved. TCI shall have received all state securities law or blue sky
permits and authorizations necessary to carry out the transactions
contemplated hereby, such permits and authorizations shall be in full force
and effect and no action, suit, proceeding or investigation seeking to revoke
or suspend the effectiveness of any such permit or authorization shall have
been initiated and be continuing or shall have been threatened and be
unresolved.
(c) Absence of Injunctions. No permanent or preliminary Injunction or
restraining order or other order by any court or other Governmental Entity of
competent jurisdiction, or other legal restraint or prohibition, preventing
consummation of the transactions contemplated hereby as provided herein shall
be in effect, or permitting such consummation only subject to any condition or
restriction that has or would have a Material Adverse Effect on the Company.
(d) Fairness Opinion. The consent of Salomon Smith Barney, Inc. to the
inclusion of the Fairness Opinion in the Proxy Statement and the Registration
Statement shall not have been withdrawn.
7.2 Conditions Precedent to the Obligations of Merger Sub and TCI. The
obligations of Merger Sub and TCI to consummate the transactions contemplated
by this Agreement are also subject to the satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by TCI:
(a) Accuracy of Representations and Warranties. All representations and
warranties of the Company contained in this Agreement shall, if specifically
qualified by materiality, be true and correct and, if not so qualified, be
true and correct in all material respects in each case as of the date of this
Agreement and (except to the extent such representations and warranties speak
as of a specified earlier date) on and as of the Closing Date as though made
on and as of the Closing Date, except for changes permitted or contemplated by
this Agreement.
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(b) Performance of Agreements. The Company shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Officers' Certificates. TCI and Merger Sub shall have received such
certificates of the Company, dated the Closing Date, in each case signed by an
executive officer of the Company (but without personal liability thereto), to
evidence satisfaction of the conditions set forth in Sections 7.1(a), 7.1(c),
7.2(a) and 7.2(b) (insofar as each relates to the Company), as may be
reasonably requested by TCI.
(d) Tax Opinion. TCI shall have received, prior to the earlier of the date
the Proxy Statement is first mailed to the Company's stockholders and the
effective date of the Registration Statement, the opinion of Sherman & Howard
L.L.C., in form and substance reasonably satisfactory to TCI, to the effect
that (i) the Merger should be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) each of
TCI and the Company should be a party to that reorganization, (iii) no gain or
loss should be recognized by the Company, TCI or Merger Sub as a result of the
Merger, (iv) no gain or loss should be recognized by a stockholder of the
Company to the extent that such stockholder receives only stock of TCI in
exchange for his stock of the Company in the Merger, and (v) the Federal
Income Tax Consequences section of the Proxy Statement (which constitutes the
prospectus included in the Registration Statement) describes the material
anticipated federal income tax consequences to the Company's stockholders from
the Merger (subject to customary conditions and limitations described therein)
and fairly represents such counsel's opinion as to the material anticipated
federal income tax matters discussed therein. Such firm shall have consented
to the filing of such opinion as an exhibit to the Registration Statement and
to the reference to such firm in the Registration Statement, and such firm
shall not have withdrawn such opinion prior to the Closing Date. In rendering
the opinions referenced in this Section 7.2(d), Sherman & Howard L.L.C. may
rely on representations contained in certificates of the Company, TCI, Merger
Sub and others, in each case in form and substance reasonably acceptable to
Sherman & Howard L.L.C., and upon such other documents and data as such
counsel deems appropriate as a basis for such opinions.
(e) No Adverse Enactments. There shall not have been any action taken, or
any statute, rule, regulation, order, judgment or decree proposed, enacted,
promulgated, entered, issued, enforced or deemed applicable by any foreign or
United States federal, state or local Governmental Entity, and there shall be
no action, suit or proceeding pending or threatened, which (i) makes or may
make this Agreement, the Merger, or any of the other transactions contemplated
by this Agreement illegal or imposes or may impose material damages or
penalties in connection therewith; (ii) requires or may require the
divestiture of a material portion of the business of (A) TCI and its
subsidiaries taken as a whole, (B) the Liberty Media Group, or (C) the Company
and its subsidiaries taken as a whole, if the Merger is consummated, (iii)
imposes or may result in imposition of material limitations on the ability of
TCI effectively to exercise full rights of ownership of shares of capital
stock of the Surviving Corporation (including the right to vote such shares on
all matters properly presented to the stockholders of the Surviving
Corporation) or makes the holding by TCI of any such shares illegal or subject
to any materially burdensome requirement or condition, (iv) requires or may
require TCI or the Company or any of their respective material subsidiaries or
affiliates to cease or refrain from engaging in any material business,
including any material business conducted by the Company or any of its
subsidiaries, if the Merger is consummated, or (v) otherwise prohibits,
restricts, or unreasonably delays consummation of the Merger or any of the
other transactions contemplated by this Agreement or increases or may increase
in any material respect the liabilities or obligations of TCI arising out of
this Agreement, the Merger, or any of the other transactions contemplated by
this Agreement.
(f) Receipt of Licenses, Permits and Consents. Other than the filing of the
Certificate of Merger with the Delaware Secretary of State and filings due
after the Effective Time, all Local Approvals and all other Government
Consents as are required in connection with the consummation of the
transactions contemplated hereby shall have been obtained and shall be in full
force and effect and all Governmental Filings as are required in connection
with the consummation of such transactions shall have been made, and all
waiting periods, if any,
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applicable to the consummation of such transactions imposed by any
Governmental Entity shall have expired, other than those which, if not
obtained, in force or effect, made or expired (as the case may be) would not,
either individually or in the aggregate, (i) have a material adverse effect on
the transactions contemplated hereby or (ii) assuming consummation of the
Merger, have a Material Adverse Effect, as of or after the Effective Time, on
the Company or TCI.
7.3 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to consummate the transactions contemplated by this Agreement
is also subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, unless waived by the Company:
(a) Accuracy of Representations and Warranties. All representations and
warranties of TCI contained in this Agreement shall, if specifically qualified
by materiality, be true and correct and, if not so qualified, be true and
correct in all material respects in each case as of the date of this Agreement
and (except to the extent such representations and warranties speak of a
specified earlier date) on and as of the Closing Date as though made on and as
of the Closing Date, except for changes permitted or contemplated by this
Agreement.
(b) Performance of Agreements. Each of Merger Sub and TCI shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants and conditions, contained
in this Agreement to be performed or complied with by it prior to or on the
Closing Date.
(c) Officers' Certificates. The Company shall have received such
certificates of TCI, dated the Closing Date, in each case signed by an
executive officer of TCI (but without personal liability thereto) to evidence
satisfaction of the conditions set forth in Sections 7.1(b), 7.1(c), 7.3(a),
7.3(b), 7.3(e) and 7.3(g) (insofar as each relates to TCI or Merger Sub), as
may be reasonably requested by the Company.
(d) Tax Opinion. The Company shall have received, prior to the earlier of
the date the Proxy Statement is first mailed to the Company's stockholders and
the effective date of the Registration Statement, the opinion of Baker &
Botts, L.L.P., in form and substance reasonably satisfactory to the Company,
to the effect that (i) the Merger should be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
(ii) each of TCI and the Company should be a party to that reorganization,
(iii) no gain or loss should be recognized by the Company as a result of the
Merger, (iv) no gain or loss should be recognized by a stockholder of the
Company to the extent that such stockholder receives only stock of TCI in
exchange for his stock of the Company in the Merger, and (v) the Federal
Income Tax Consequences section of the Proxy Statement (which constitutes the
prospectus included in the Registration Statement) describes the material
anticipated federal income tax consequences to the Company's stockholders from
the Merger (subject to customary conditions and limitations described therein)
and fairly represents such counsel's opinion as to the material anticipated
federal income tax matters discussed therein. Such firm shall have consented
to the filing of such opinion as an exhibit to the Registration Statement and
to the reference to such firm in the Registration Statement, and such firm
shall not have withdrawn such opinion prior to the Closing Date. In rendering
the opinions referenced in this Section 7.3(d), Baker & Botts, L.L.P. may rely
on representations contained in certificates of the Company, TCI, Merger Sub
and others, in each case in form and substance reasonably acceptable to Baker
& Botts, L.L.P., and upon such other documents and data as such counsel deems
appropriate as a basis for such opinions.
(e) No Adverse Enactments. There shall not have been any action taken, or
any statute, rule, regulation, order, judgment or decree proposed, enacted,
promulgated, entered, issued, enforced or deemed applicable by any foreign or
United States federal, state or local Governmental Entity, and there shall be
no action, suit or proceeding pending or threatened, which (i) makes or may
make this Agreement, the Merger, or any of the other transactions contemplated
by this Agreement illegal or imposes or may impose material damages or
penalties in connection therewith or (ii) has or, in the reasonable judgment
of the Company, assuming consummation of the Merger, is reasonably likely to
have a Material Adverse Effect, as of or after the Effective Time, on TCI
(including any potential change or event disclosed on any Schedule which,
subsequent to the date hereof, actually occurs).
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(f) Receipt of Licenses, Permits and Consents. Other than the filing of the
Certificate of Merger with the Delaware Secretary of State and filings due
after the Effective Time, all Local Approvals and all other Government
Consents as are required in connection with the consummation of the
transactions contemplated hereby shall have been obtained and shall be in full
force and effect, all Governmental Filings as are required in connection with
the consummation of such transactions shall have been made, and all waiting
periods, if any, applicable to the consummation of such transactions imposed
by any Governmental Entity shall have expired, other than those which, if not
obtained, in force or effect, made or expired (as the case may be), would not,
either individually or in the aggregate, assuming consummation of the Merger,
have a Material Adverse Effect, as of or after the Effective Time, on TCI.
(g) NNM Listing. The shares of LMG Series A Stock to be issued pursuant to
this Agreement and upon exercise of the Assumed Options shall have been
authorized for listing on the NNM (or on the stock exchange which, at the
Effective Time, is the principal market for the LMG Series A Stock), subject
only to official notice of issuance.
ARTICLE VIII
Termination
8.1 Termination and Abandonment. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after adoption of this Agreement by the
stockholders of the Company:
(i) by mutual consent of TCI and the Company;
(ii) by either the Company, on the one hand, or TCI and Merger Sub, on
the other hand: (A) if the Merger shall not have been consummated before
January 31, 1999, provided that the right to terminate this Agreement
pursuant to this clause (ii)(A) shall not be available to any party whose
failure to perform any of its obligations under this Agreement required to
be performed by it at or prior to the Effective Time has been the cause of
or resulted in the failure of the Merger to be consummated before such
date, (B) if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the other party (or by
Merger Sub, if the party seeking to terminate this Agreement is the
Company) contained in this Agreement and such breach is incapable of being
cured, (C) if any court of competent jurisdiction or other competent
governmental authority shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable, or (D) if the required adoption of
this Agreement by the stockholders of the Company shall not have been duly
obtained, provided that the terminating party has complied with its
obligations under Section 3.1 or 3.2 (as the case may be); or
(iii) by TCI (A) if the product of .58 and the LMG Market Price on the
Closing Date shall be less than $22.00, or (B) if the Company Board shall
have withdrawn or modified in any manner adverse to TCI its recommendation
to the Company stockholders referred to in Section 4.10.
8.2 Effect of Termination. In the event of any termination of this Agreement
by the Company or TCI pursuant to Section 8.1, this Agreement forthwith shall
become void and there shall be no liability or obligation on the part of TCI,
Merger Sub, the Company or their respective affiliates, stockholders,
directors, officers, agents or representatives except (i) as provided in
Sections 6.2, 6.5, 6.6, 6.8, 8.1 and 9.11, which shall survive such
termination; and (ii) to the extent such termination results from the willful
breach by TCI, Merger Sub or the Company of any of its representations,
warranties, covenants or agreements contained in this Agreement.
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ARTICLE IX
Miscellaneous
9.1 Effectiveness of Representations, Warranties and Agreements. Except as
set forth in the next sentence, the respective representations, warranties and
agreements of the parties contained herein or in any certificate or other
instrument delivered pursuant hereto prior to or at the Closing shall remain
operative and in full force and effect, regardless of any investigation made
by or on behalf of the other parties hereto, whether prior to or after the
execution of this Agreement. The representations, warranties, covenants or
agreements contained in this Agreement or in any certificate or other
instrument delivered pursuant to this Agreement shall terminate at the
Effective Time, except for (i) the agreements contained in Article II,
Sections 6.5 and 6.6, and in this Article IX, and (ii) the agreements of the
"affiliates" of the Company delivered pursuant to Section 3.3.
9.2 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by
telegram or confirmed telex or telecopier, as follows:
(a)if to TCI or Merger Sub, to:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attn: Stephen M. Brett, Executive Vice President
Telecopier: (303) 488-3245
and with a copy to:
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
3000 First Interstate Tower North
Denver, Colorado 80202
Attn: Charles Tanabe, Esq.
Telecopier: (303) 298-0940
(b)if to the Company, to:
Tele-Communications International, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attn: Graham Hollis, Chief Financial Officer
Telecopier: (303) 267-5651
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue, 28th Floor
New York, New York 10022-6030
Attn: Robert W. Murray Jr., Esq.
Telecopier: (212) 705-5125
or to such other Person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery
or on the third business day after the mailing thereof, except that any notice
of a change of address shall be effective only upon actual receipt thereof.
9.3 Entire Agreement. This Agreement (including the Schedules, Exhibits and
other documents delivered in connection herewith) constitutes the entire
agreement of the parties and supersedes all prior agreements and
understandings, oral and written, between the parties with respect to the
subject matter hereof.
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9.4 Assignment; Binding Effect; Benefit.
(a) Neither this Agreement nor any of the rights, benefits or obligations
hereunder may be assigned by any party (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns. Nothing in this Agreement, expressed or implied, is intended to
confer on, or to make enforceable by, any Person other than the parties or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, other than rights conferred
upon Indemnified Parties under Section 6.6 and upon stockholders, directors,
officers, affiliates, agents and representatives of the parties under Section
9.11. Notwithstanding anything to the contrary contained in this Agreement,
the provisions of Section 6.6 of this Agreement may not be amended or altered
in any manner with respect to any Indemnified Party without the written
consent of such Indemnified Party. No assignment of this Agreement shall
relieve TCI from its obligations to any Indemnified Party contained in Section
6.6 of this Agreement.
(b) Notwithstanding Section 9.4(a), this Agreement and all the rights,
benefits and obligations hereunder shall be assignable to and binding upon,
and inure to the benefit of and be enforceable by, any successor of TCI
pursuant to the AT&T Merger.
9.5 Amendment. Before or after adoption of this Agreement by the
stockholders of the Company, this Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time prior to the Effective Time; provided, however, that after
adoption of this Agreement by the stockholders of the Company, no amendment
may be made without the further requisite approval of such stockholders if
such amendment by law requires the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
9.6 Extension; Waiver. At any time prior to the Effective Time, either of
the parties, by action taken or authorized by such party's Board of Directors,
may, to the extent legally allowed, (i) extend the time specified herein for
the performance of any of the obligations of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto, (iii) waive
compliance by the other party with any of the agreements or covenants of such
other party contained herein or (iv) waive any condition to such waiving
party's obligation to consummate the transactions contemplated hereby or to
any of such waiving party's other obligations hereunder. Any such extension or
waiver shall be valid only if set forth in a written instrument signed by the
party or parties to be bound thereby. Any such extension or waiver by any
party shall be binding on such party but not on the other party entitled to
the benefits of the provision of this Agreement affected unless such other
party also has agreed to such extension or waiver. No such waiver shall
constitute a waiver of, or estoppel with respect to, any subsequent or other
breach or failure to strictly comply with the provisions of this Agreement.
The failure of any party to exercise any of its rights, powers or remedies
hereunder or with respect hereto or to insist on strict compliance with this
Agreement shall not constitute a waiver by such party of its right to exercise
any such or other rights, powers or remedies or to demand such compliance.
Whenever this Agreement requires or permits consent or approval by any party,
such consent or approval shall be effective if given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 9.6.
9.7 Headings. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which together shall be deemed to be one and the same instrument.
9.9 Applicable Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to the conflict of laws rules thereof.
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9.10 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.11 Limited Liability. Notwithstanding any other provision of this
Agreement, no stockholder, director, officer, affiliate, agent or
representative of any party (other than TCI as the sole stockholder of Merger
Sub) shall have any liability in respect of or relating to the covenants,
obligations, representations or warranties of such party hereunder or in
respect of any certificate delivered with respect thereto and, to the fullest
extent legally permissible, each party, for itself and its stockholders,
directors, officers and affiliates, waives and agrees not to seek to assert or
enforce any such liability which any such Person otherwise might have pursuant
to applicable law.
9.12 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent
possible.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan
of Merger as of the date first above written.
Tele-Communications, Inc.
/s/ Leo J. Hindery, Jr.
By: _________________________________
Name:Leo J. Hindery Jr.
Title:President & COO
ATTEST:
/s/ Stephen M. Brett
_____________________________________
Secretary
Tele-Communications International,
Inc.
/s/ David J. Evans
By: _________________________________
Name:David J. Evans
Title:President & CEO
ATTEST:
/s/ Stephen M. Brett
_____________________________________
Secretary
Liberty Group Acquisition Co.
/s/ Robert R. Bennett
By: _________________________________
Name:Robert R. Bennett
Title:President
ATTEST:
/s/ Vivian J. Carr
_____________________________________
Secretary
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APPENDIX II
OPINION OF SALOMON SMITH BARNEY
August 21, 1998
Board of Directors
Tele-Communications International, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
Ladies and Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of Series A Common Stock, $1.00
par value per share (the "Company Common Stock"), of Tele- Communications
International, Inc. (the "Company"), other than Tele-Communications, Inc.
("TCI") or any subsidiary of TCI (collectively, with TCI, "TCI Holders"), of
the Exchange Ratio (as defined below) in connection with the proposed merger
(the "Proposed Merger") of Liberty Group Acquisition Co. ("Merger Sub"), a
wholly owned subsidiary of TCI, with and into the Company, pursuant to the
Agreement and Plan of Merger (the "Agreement") by and among the Company,
Merger Sub and TCI.
As more specifically set forth in the Agreement, and subject to the terms
and conditions thereof, Merger Sub will merge with and into the Company, and
each issued and outstanding share of Company Common Stock (other than shares
owned by the Company, any wholly owned subsidiary of the Company or any TCI
Holder) will be converted in the Proposed Merger into the right to receive
0.58 of a share (the "Exchange Ratio") of TCI Series A Liberty Media Group
Common Stock, $1.00 par value per share ("TCI/Liberty Stock"); provided,
however, that if the product of 0.58 times the Average Market Price (as
defined below) of TCI/Liberty Stock on the date established for the closing of
the Proposed Merger shall be less than $22.00, the Exchange Ratio shall,
unless TCI shall have terminated the Agreement, be increased to equal the
quotient (rounded upwards, if necessary, to the nearest one one-thousandth)
obtained by dividing $22.00 by such Average Market Price (such adjustment
being referred to as the "Minimum Value Adjustment"). In accordance with the
Agreement, "Average Market Price" means the average of the closing sales
prices (or, if on any day no sale price is reported, the average of the quoted
high and low bid prices on such day) of a share of TCI/Liberty Stock on the
Nasdaq National Market on each of the five consecutive trading days
immediately preceding the trading day prior to the date of such determination.
In connection with rendering our opinion we have reviewed and analyzed,
among other things, the following: (i) a draft as of August 21, 1998 of the
Agreement; certain publicly available information concerning the Company,
including the Annual Reports on Form 10-K of the Company for each of the years
in the three-year period ended December 31, 1997 and the Quarterly Reports on
Form 10-Q of the Company for the quarters ended March 31, 1998 and June 30,
1998, respectively; (ii) certain publicly available information concerning
certain entities in which the Company holds a substantial equity interest (the
"Company Portfolio Companies"); (iii) certain other internal information,
primarily financial in nature, including projections, concerning the business,
assets and operations of the Company and the Company Portfolio Companies
furnished to us by the Company for purposes of our analysis; (iv) certain
publicly available information concerning the trading of, and the trading
market for, the Company Common Stock; (v) certain publicly available
information concerning the Liberty Media Group (as such term is defined in the
Restated Certificate of Incorporation of TCI (the "Certificate")) ("Liberty"),
including separate information concerning Liberty contained in the Annual
Reports on Form 10-K of TCI for each of the years in the three-year period
ended December 31, 1997 and the Quarterly Reports on Form 10-Q of TCI for the
quarters ended March 31, 1998 and June 30, 1998, respectively; (vi) certain
publicly available information concerning certain entities in which Liberty
holds a substantial equity interest (the "Liberty Portfolio Companies"); (vii)
certain other internal information, primarily financial in nature, including
projections, concerning the business, assets and operations of Liberty and the
Liberty Portfolio Companies furnished to us by Liberty for the purposes of our
analysis; (viii) the Certificate, including the terms of the
II-1
<PAGE>
TCI/Liberty Stock set forth therein; and (ix) certain publicly available
information concerning the trading of, and the trading market for, TCI/Liberty
Stock. We also have considered such other information, financial studies,
analyses, investigations and financial, economic and market criteria that we
deemed relevant. We have also met with certain officers and employees of the
Company, TCI and Liberty to discuss the foregoing, as well as other matters we
believe relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and
other information provided us or publicly available and have neither attempted
independently to verify nor assumed responsibility for verifying any of such
information. We have not conducted a physical inspection of any of the
properties or facilities of TCI, the Company, Liberty, any Company Portfolio
Company or any Liberty Portfolio Company, nor have we made or obtained or
assumed any responsibility for making or obtaining any independent evaluations
or appraisals of any of such properties or facilities. With respect to
projections, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company or Liberty, as the case may be, as to the future
financial performance of the Company and the Company Portfolio Companies or
Liberty and the Liberty Portfolio Companies, as the case may be, and we
express no view with respect to such projections or the assumptions on which
they were based. We also have assumed that the definitive Agreement, when
executed, will contain a provision incorporating the Minimum Value Adjustment
and will not contain any other terms or conditions that differ materially from
the draft we have reviewed and that the Proposed Merger will be consummated in
a timely manner and in accordance with the terms of the Agreement, without
waiver of any of the conditions precedent to the Proposed Merger contained in
the Agreement. We understand, and have assumed, that the Proposed Merger will
qualify as a tax-free reorganization for federal income tax purposes. We
further understand, and have assumed, that, following the Merger, for purposes
of the TCI/Liberty Stock, Liberty will be deemed to be the beneficial owner of
15% of the outstanding capital stock of the Company.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following:
(x) the historical and current financial position and results of operations of
the Company, Liberty, the Company Portfolio Companies and the Liberty
Portfolio Companies; (xi) the business prospects of the Company, Liberty, the
Company Portfolio Companies and the Liberty Portfolio Companies; (xii) the
terms of the TCI/Liberty Stock; and (xiii) the historical and current market
for the Company Common Stock and the TCI/Liberty Stock. We also have taken
into account our assessment of general economic, market and financial
conditions as well as our experience in connection with similar transactions
and securities valuation generally. Our opinion necessarily is based upon
conditions as they exist and can be evaluated on the date hereof and we assume
no responsibility to update or revise our opinion based upon circumstances or
events occurring after the date hereof.
We have not been asked to consider, and our opinion does not address, the
relative merits of the Proposed Merger as compared to any alternative business
strategy that might exist for the Company. We understand that TCI is a party
to an Agreement and Plan of Restructuring and Merger with AT&T Corp., dated as
of June 23, 1998, pursuant to which it is contemplated that a wholly owned
subsidiary of AT&T Corp. will merge with and into TCI (the "AT&T Merger") and
holders of TCI/Liberty Stock will receive shares of the Class A Liberty Group
Common Stock of AT&T ("AT&T/Liberty Stock") in exchange for TCI/Liberty Stock
(the "AT&T Exchange"). We have not been asked to consider, and this opinion
does not address, the AT&T Merger or the AT&T Exchange or the effect thereof
on TCI/Liberty Stock or the effect, if any, of any decision not to proceed
with or consummate the AT&T Merger. We further understand that it is
contemplated that TCI Ventures Group (as such term is defined in the
Certificate) will merge with and into Liberty (the "Ventures/Liberty Merger")
following consummation of the Proposed Merger. We have not been asked to
consider for the purposes of this opinion, and this opinion does not address,
the Ventures/Liberty Merger or the effect thereof on TCI/Liberty Stock or the
effect, if any, of any decision not to proceed with or consummate the
Ventures/Liberty Merger. We have taken into account the fact that the TCI
Holders currently own, directly or indirectly, approximately 85% of the
outstanding Company Common Stock. Our opinion as expressed below does not
constitute an opinion or
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<PAGE>
imply any conclusion as to the likely trading range for TCI/Liberty Stock
following consummation of the Proposed Merger or the Ventures/Liberty Merger
or the likely trading range for AT&T/Liberty Stock following consummation of
the AT&T Merger. Our opinion is, in any event, limited to the fairness, from a
financial point of view, of the Exchange Ratio to the holders of Company
Common Stock, other than the TCI Holders, and does not constitute a
recommendation to any holder of Company Common Stock as to how such holder
should vote with respect to the Proposed Merger.
As you are aware, Salomon Brothers Inc and Smith Barney Inc., doing business
as Salomon Smith Barney (collectively with all other entities doing business
as Salomon Smith Barney, "Salomon Smith Barney"), are acting as financial
advisor to the Company in connection with the Proposed Merger and will receive
a fee for our services. In addition, in the ordinary course of business,
Salomon Smith Barney may actively trade the debt and equity securities of the
Company, TCI (including TCI/Liberty Stock) and AT&T for its own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities. Additionally, Salomon Smith Barney or its
affiliates previously have rendered certain investment banking and financial
advisory services to the Company, TCI, Liberty, TCI Ventures Group and AT&T,
for which Salomon Smith Barney received customary compensation. Salomon Smith
Barney and its affiliates (including Travelers Group Inc.) may have other
business relationships with the Company and TCI.
This opinion is intended for the benefit and use of the Company (including
its management and directors) in considering the transaction to which it
relates and may not be used by the Company for any other purpose or
reproduced, disseminated, quoted or referred to by the Company at any time, in
any manner or for any purpose, without the prior written consent of Salomon
Smith Barney, except that it may be introduced into evidence and other
references to it may be made in connection with any litigation relating to the
Proposed Merger and it may be reproduced in full in any proxy or information
statement relating to the Proposed Merger that the Company files with the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
Based upon and subject to the foregoing, we are of the opinion as investment
bankers that the Exchange Ratio is fair, from a financial point of view, to
the holders of Company Common Stock other than the TCI Holders.
Very truly yours,
Salomon Smith Barney
II-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides, generally,
that a corporation shall have the power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (except actions by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation against all expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A corporation may similarly indemnify such person for
expenses actually and reasonably incurred by such person in connection with
the defense or settlement of any action or suit by or in the right of the
corporation, provided such person acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of claims, issues and matters as to which such
person shall have been adjudged liable to the corporation, provided that a
court shall have determined, upon application, that, despite the adjudication
of liability but in view of all of the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which such
court shall deem proper.
Section 102(b)(7) of the Delaware General Corporation Law provides,
generally, that the certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision may not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under section 174 of Title 8 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. No such provision may eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such
provision became effective.
Article V, Section E of the Restated Certificate of Incorporation, as
amended ("TCI Charter"), of Tele-Communications, Inc., a Delaware corporation
("TCI"), provides as follows:
"1. Limitation on Liability.
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or modification
of this paragraph 1 shall be prospective only and shall not adversely affect
any limitation, right or protection of a director of the Corporation existing
at the time of such repeal or modification.
2. Indemnification.
(a) RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. Such right of
indemnification shall inure whether or not the claim asserted is based on
matters which antedate the adoption of this Section E. The Corporation shall
be required to indemnify a person in connection with a proceeding (or part
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<PAGE>
thereof) initiated by such person only if the proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
(b) PREPAYMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of expenses
incurred by a director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the director
or officer to repay all amounts advanced if it should be ultimately determined
that the director or officer is not entitled to be indemnified under this
paragraph or otherwise.
(c) CLAIMS. If a claim for indemnification or payment of expenses under this
paragraph is not paid in full within 60 days after a written claim therefor
has been received by the Corporation, the claimant may file suit to recover
the unpaid amount of such claim and, if successful in whole or in part, shall
be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
(d) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
paragraph shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of this Certificate,
the Bylaws, agreement, vote of stockholders or disinterested directors or
otherwise.
(e) OTHER INDEMNIFICATION. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation,
partnership, joint venture, trust, enterprise or nonprofit entity.
3. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of this Section E
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification."
Article II, Section 2.9 of TCI's Bylaws also contains an indemnity
provision, requiring TCI to indemnify members of the Board of Directors and
officers of TCI and their respective heirs, personal representatives and
successors in interest for or on account of any action performed on behalf of
TCI, to the fullest extent provided by the laws of the State of Delaware and
the TCI Charter, as then or thereafter in effect.
TCI has also entered into indemnification agreements with each of its
directors (each director, an "indemnitee"). The indemnification agreements
provide (i) for the prompt indemnification to the fullest extent permitted by
law against any and all expenses, including attorneys' fees and all other
costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness or participating in (including on
appeal), or in preparing for ("Expenses"), any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation
("Claim"), related to the fact that such indemnitee is or was a director,
officer, employee, agent or fiduciary of TCI or is or was serving at TCI's
request as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust
or other enterprise, or by reason of anything done or not done by a director
or officer in any such capacity, and against any and all judgments, fines,
penalties and amounts paid in settlement (including all interest, assessments
and other charges paid or payable in connection therewith) of any Claim,
unless the Reviewing Party (one or more members of the Board of Directors or
other person appointed by the Board of Directors, who is not a party to the
particular claim, or independent legal counsel) determines that such
indemnification is not permitted under applicable law and (ii) for the prompt
advancement of Expenses, and for reimbursement to TCI if the Reviewing Party
determines that such indemnitee is not entitled to such indemnification under
applicable law. In addition, the indemnification agreements provide (i) a
mechanism through which an indemnitee may seek court relief in the event the
Reviewing Party determines that the indemnitee would not be permitted to be
indemnified under applicable law (and therefore is not entitled to
indemnification or expense advancement under the indemnification agreement)
and (ii) indemnification against all expenses (including attorneys' fees), and
advancement thereof if requested, incurred by the indemnitee in seeking to
collect an indemnity claim or
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<PAGE>
advancement of expenses from TCI or incurred in seeking to recover under a
directors' and officers' liability insurance policy, regardless of whether
successful or not. Furthermore, the indemnification agreements provide that
after there has been a "change in control" in TCI (as defined in the
indemnification agreements), other than a change in control approved by a
majority of directors who were directors prior to such change, then, with
respect to all determinations regarding a right to indemnity and the right to
advancement of Expenses, TCI will seek legal advice only from independent
legal counsel selected by the indemnitee and approved by TCI.
The indemnification agreements impose upon TCI the burden of proving that an
indemnitee is not entitled to indemnification in any particular case and
negate certain presumptions that may otherwise be drawn against an indemnitee
seeking indemnification in connection with the termination of actions in
certain circumstances. Indemnitees' rights under the indemnification
agreements are not exclusive of any other rights they may have under Delaware
law, TCI's Bylaws or otherwise. Although not requiring the maintenance of
directors' and officers' liability insurance, the indemnification agreements
require that an indemnitee be provided with the maximum coverage available for
any director or officer of TCI if there is such a policy.
TCI may purchase liability insurance policies covering its directors and
officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of August 24, 1998, among TCI,
Liberty Group Acquisition Co. and Tele-Communications International,
Inc. (included as Appendix I to the Proxy Statement/Prospectus which
is a part of this Registration Statement).
2.2 Agreement and Plan of Restructuring and Merger dated as of June 23,
1998, among AT&T Corp., Italy Merger Corp. and Tele-Communications,
Inc. (Incorporated herein by reference to Exhibit 2.1 of TCI's
Current Report on Form 8-K, dated July 1, 1998 (Commission File No.
0-20421)).
3.1 Restated Certificate of Incorporation of TCI, dated August 4, 1994,
as amended on August 4, 1994, August 16, 1994, October 11, 1994,
October 21, 1994, January 26, 1995, August 3, 1995, August 3, 1995,
January 25, 1996, January 25, 1996, April 7, 1997, August 28, 1997,
December 30, 1997 and December 30, 1997 (Incorporated herein by
reference to Exhibit 3.1 of TCI's Annual Report on Form 10-K for the
year ended December 31, 1997 (Commission File No. 0-20421)).
3.2 Bylaws of TCI as adopted June 16, 1994 (Incorporated herein by
reference to Exhibit 3.2 of TCI's Annual Report on Form 10-K for the
year ended December 31, 1994, as amended by Form 10-K/A (Commission
File No. 0-20421)).
4 Specimen Stock Certificate for the Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, par value $1.00 per share
(Incorporated herein by reference to Exhibit 4.3 of TCI's
registration statement on Form 8-A, as amended by Form 8-A/A
(Amendments No. 1, 2 and 3) Commission File No. 0-20421).
5 Opinion of Sherman & Howard L.L.C. regarding legality of securities
being registered.
8.1 Opinion of Sherman & Howard L.L.C. regarding certain federal income
tax matters.
8.2 Opinion of Baker & Botts, L.L.P. regarding certain federal income tax
matters.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
23.5 Consent of KPMG Peat Marwick LLP.
23.6 Consent of KPMG Audit Plc.
23.7 Consent of Deloitte & Touche LLP.
23.8 Consent of KPMG Peat Marwick LLP.
23.9 Consent of Sherman & Howard L.L.C. (included in Exhibit 5).
23.10 Consent of Sherman & Howard L.L.C. (included in Exhibit 8.1).
23.11 Consent of Baker & Botts, L.L.P. (included in Exhibit 8.2).
24 Powers of Attorney (included on Page II-6).
99.1 Opinion of Salomon Smith Barney (included as Appendix II to the Proxy
Statement/Prospectus which is part of this Registration Statement).
99.2 Form of Proxy for Special Meeting of Tele-Communications
International, Inc.+
</TABLE>
(b) Financial Statement Schedules.
Schedule I--Condensed Information as to the Financial Position of the
Registrant, December 31, 1997 and 1996; Condensed Information as to the
Operations and Cash Flows of the Registrant, Years ended December 31, 1997,
1996 and 1995 ++
Schedule II--Valuation and Qualifying Accounts, Years ended December 31,
1997, 1996 and 1995 ++
(c) Reports, Opinions or Appraisals. Opinion of Salomon Smith Barney
(included as Appendix II to the Proxy Statement/Prospectus which is part of
this Registration Statement).
- --------
+ Previously filed.
++ Incorporated herein by reference to the same schedule included as part of
TCI's Annual Report on Form 10-K for the year ended December 31, 1997
(Commission File No. 20421).
ITEM 22. UNDERTAKINGS
(a) TCI hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
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<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), TCI undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(6) That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
Form within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective, provided, in the case of a transaction that (but for
the possibility of integration with other transactions) would itself
qualify for an exemption from registration, that (i) such transaction by
itself or when aggregated with other such transactions made since the
filing of the most recent audited financial statements of TCI would have a
material financial effect upon TCI and (ii) the information required to be
supplied in a post-effective amendment by this paragraph 8 is not contained
in periodic reports filed by TCI pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of TCI
pursuant to the foregoing provisions or otherwise, TCI has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by TCI of expenses incurred
or paid by a director, officer or controlling person of TCI in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, TCI will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greenwood Village,
State of Colorado, on October 12, 1998.
Tele-Communications, Inc.
/s/ Stephen M. Brett
By: _________________________________
Name: Stephen M. Brett
Title: Executive Vice President
and General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons (which persons
constitute a majority of the Board of Directors) in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, October 12, 1998
______________________________________ Chief Executive Officer
(John C. Malone) and Director (Principal
Executive Officer)
* President, Chief Operating October 12, 1998
______________________________________ Officer and Director
(Leo J. Hindery, Jr.)
* Director October 12, 1998
______________________________________
(Donne F. Fisher)
Director
______________________________________
(John W. Gallivan)
Director
______________________________________
(Kim Magness)
Director
______________________________________
(Robert A. Naify)
* Director October 12, 1998
______________________________________
(Jerome H. Kern)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director October 12, 1998
______________________________________
(Paul A. Gould)
Director
______________________________________
(J.C. Sparkman)
* Senior Vice President October 12, 1998
______________________________________ (Principal Financial
(Bernard W. Schotters) Officer)
* Executive Vice President October 12, 1998
_____________________________________ of Finance and Accounting
(Ann M. Koets) of TCI Communications,
Inc. (Principal
Accounting Officer)
</TABLE>
*By: /s/ Stephen M. Brett
_______________________
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of August 24, 1998, among Tele-
Communications, Inc. ("TCI"), Liberty Group Acquisition Co. and Tele-
Communications International, Inc. (included as Appendix I to the Proxy
Statement/Prospectus which is a part of this Registration Statement).
2.2 Agreement and Plan of Restructuring and Merger dated as of June 23,
1998, among AT&T Corp., Italy Merger Corp. and Tele-Communications, Inc.
(Incorporated herein by reference to Exhibit 2.1 of TCI's Current Report
on Form 8-K, dated July 1, 1998 (Commission File No. 0-20421)).
3.1 Restated Certificate of Incorporation of TCI, dated August 4, 1994, as
amended on August 4, 1994, August 16, 1994, October 11, 1994, October
21, 1994, January 26, 1995, August 3, 1995, August 3, 1995, January 25,
1996, January 25, 1996, April 7, 1997, August 28, 1997, December 30,
1997 and December 30, 1997 (Incorporated herein by reference to Exhibit
3.1 of TCI's Annual Report on Form 10-K for the year ended December 31,
1997 (Commission File No. 0-20421)).
3.2 Bylaws of TCI as adopted June 16, 1994 (Incorporated herein by reference
to Exhibit 3.2 of TCI's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended by Form 10-K/A (Commission File No. 0-
20421)).
4 Specimen Stock Certificate for the Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, par value $1.00 per share
(Incorporated herein by reference to Exhibit 4.3 of TCI's registration
statement on Form 8-A, as amended by Form 8-A/A (Amendments No. 1, 2 and
3) Commission File No. 0-20421).
5 Opinion of Sherman & Howard L.L.C. regarding legality of securities
being registered.
8.1 Opinion of Sherman & Howard L.L.C. regarding certain federal income tax
matters.
8.2 Opinion of Baker & Botts, L.L.P. regarding certain federal income tax
matters.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of KPMG Peat Marwick LLP.
23.6 Consent of KPMG Audit Plc.
23.7 Consent of Deloitte & Touche LLP.
23.8 Consent of KPMG Peat Marwick LLP.
23.9 Consent of Sherman & Howard L.L.C. (included in Exhibit 5).
23.10 Consent of Sherman & Howard L.L.C. (included in Exhibit 8.1).
23.11 Consent of Baker & Botts, L.L.P. (included in Exhibit 8.2).
24 Powers of Attorney (included on Page II-6).
99.1 Opinion of Salomon Smith Barney Inc. (included as Appendix II to the
Proxy Statement/Prospectus which is part of this Registration
Statement).
99.2 Form of Proxy for Special Meeting of Tele-Communications International,
Inc.+
</TABLE>
- --------
+ Previously filed.
<PAGE>
EXHIBIT 5
SHERMAN & HOWARD L.L.C.
633 SEVENTEENTH STREET, SUITE 3000
DENVER, COLORADO 80202
(303) 297-2900
October 13, 1998
Tele-Communications, Inc.
5619 DTC Parkway
Terrace Tower II
Englewood, Colorado 80111
Re: Validity of Common Stock
Ladies and Gentlemen:
We have acted as special counsel to Tele-Communications, Inc., a
Delaware corporation ("TCI"), in connection with Amendment No. 1 to Registration
Statement on Form S-4, File No. 333-64297 (the "Registration Statement"), filed
by TCI with the Securities and Exchange Commission on October 13, 1998, relating
to the merger of Liberty Group Acquisition Co., a Delaware corporation ("Merger
Sub"), with and into Tele-Communications International, Inc., a Delaware
corporation ("TINTA"), pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") dated as of August 24, 1998, by and among TCI, TINTA and Merger
Sub, pursuant to which TCI will issue shares of its Series A Liberty Media Group
Common Stock, $1.00 par value per share ("Liberty Stock").
We have examined the Certificate of Incorporation and Bylaws of TCI,
each as amended, and minutes of the proceedings of TCI's Board of Directors
authorizing the issuance of the shares of Liberty Stock to be issued pursuant to
the Merger Agreement. We have also examined such other documents and records,
and we have made such inquiries of officers and representatives of TCI, as we
have deemed necessary to render the opinion set forth herein.
Based upon the foregoing, we advise you that, in our opinion, the
shares of Liberty Stock being offered pursuant to the Registration Statement
have been duly authorized and, when issued in accordance with the Merger
Agreement, will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the Rules of the Securities and Exchange
Commission thereunder.
Yours truly,
/s/ Sherman & Howard L.L.C.
<PAGE>
EXHIBIT 8.1
SHERMAN & HOWARD L.L.C.
633 SEVENTEENTH STREET, SUITE 3000
DENVER, COLORADO 80202
October 12, 1998
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
Ladies and Gentlemen:
We have acted as counsel to Tele-Communications, Inc., a Delaware
corporation ("TCI"), in connection with the planned merger (the "Merger") into
Tele-Communications International, Inc., a Delaware corporation (the "Company"),
of Liberty Group Acquisition Co., a Delaware corporation ("Merger Sub"), which
is a newly formed and wholly-owned subsidiary of TCI, pursuant to an Agreement
and Plan of Merger dated as of August 24, 1998 (the "Agreement") by and among
the Company, Merger Sub and TCI. Unless otherwise specified, capitalized terms
shall have the meaning assigned to such terms in the Agreement.
In rendering this opinion, we have examined and are relying upon
(without any independent investigation or review thereof) the truth and accuracy
at all relevant times of the statements, covenants and representations contained
in (i) the Agreement, (ii) the draft Proxy Statement filed by the Company with
the Securities and Exchange Commission ("SEC") on September 25, 1998 (the "Proxy
Statement"), and (iii) representation letters dated October 12, 1998, which were
provided to us by the Company and TCI. In addition, we assume that the Merger
will be consummated in accordance with the Agreement and as described in the
Proxy Statement. Any inaccuracy in any of the aforementioned statements,
representations, and assumptions or breach of any of the aforementioned
covenants could adversely affect our opinion.
On the basis of and subject to the foregoing and subject to the
limitations set forth below, it is our opinion that, under presently applicable
federal income tax law, the Merger should be a tax-free reorganization within
the meaning of Section 368(a)(1)(B) of the Code and that each of the Company and
TCI should be treated as a party to that reorganization. As a result, the
following U.S. federal income tax consequences should occur:
(a) No gain or loss should be recognized by TCI, Merger Sub or the
Company as a result of the Merger;
(b) No gain or loss should be recognized by holders of the Company
Common Stock upon their receipt in the Merger of LMG Series A Stock in exchange
therefor;
<PAGE>
Tele-Communications, Inc. October 12, 1998
(c) The tax basis of the shares of LMG Series A Stock received by a
Company stockholder in the Merger should be the same as the tax basis of the
Company Common Stock surrendered in exchange therefor;
(d) The holding period of the shares of LMG Series A Stock received by
a Company stockholder in the Merger should include the holding period of the
Company Common Stock surrendered in exchange therefor, provided that such shares
of the Company Common Stock are held as capital assets at the Effective Time;
(e) Gain or loss will be recognized by a Company stockholder with
respect to cash received in lieu of a fractional share of LMG Series A Stock in
an amount equal to the difference between the cash received and the tax basis
that such stockholder would have had in such fractional share if such fractional
share had actually been received; and
(f) The section of the Proxy Statement entitled "The Merger -- Certain
Federal Income Tax Consequences" describes the material federal income tax
consequences expected to result to the Company stockholders from the Merger.
Our opinion is based on our interpretation of the Code, applicable
Treasury regulations, judicial authority, and administrative rulings and
practice, all as of the date hereof. There can be no assurance that future
legislative, judicial or administrative changes or interpretations will not
adversely affect the accuracy of the conclusions set forth herein. We do not
undertake to advise you as to any such future changes or interpretations unless
we are specifically retained to do so. Our opinion will not be binding upon the
Internal Revenue Service (the "Service"), and the Service will not be precluded
from adopting a contrary position.
No opinion is expressed as to any matter not specifically addressed
above, including, without limitation, the tax consequences of the Merger under
any foreign, state, or local tax law. Moreover, tax consequences which are
different from or in addition to those described herein may apply to Company
stockholders who are subject to special treatment under the U.S. federal income
tax laws, such as foreign persons and persons who acquired their shares in
compensatory transactions.
This opinion is delivered to you solely in connection with and for
purposes of the transactions contemplated by the Agreement and is not to be
relied upon by any other person, quoted in whole or in part, or otherwise
referred to (except in a list of closing documents), nor is it to be provided to
any other person without our prior written consent. Notwithstanding the
foregoing sentence, we consent to the filing with the SEC of this letter as an
exhibit to the Registration Statement of which the Proxy Statement is a part and
to the reference to our firm under the heading
2
<PAGE>
Tele-Communications, Inc. October 12, 1998
"The Merger - Certain Federal Income Tax Consequences" contained therein. In
giving such consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
rules of the SEC thereunder.
Sincerely,
/s/ SHERMAN & HOWARD L.L.C.
3
<PAGE>
EXHIBIT 8.2
October 14, 1998
Tele-Communications International, Inc.
5619 DTC Parkway
Englewood, CO 80111-3000
Ladies and Gentlemen:
We have acted as counsel to Tele-Communications International, Inc., a
Delaware corporation (the "Company"), in connection with the planned merger (the
"Merger") into the Company of Liberty Group Acquisition Co., a Delaware
corporation ("Merger Sub"), which is a newly formed and wholly-owned subsidiary
of Tele-Communications, Inc., a Delaware corporation ("TCI"), pursuant to an
Agreement and Plan of Merger dated as of August 24, 1998 (the "Agreement") by
and among the Company, Merger Sub and TCI. Unless otherwise specified,
capitalized terms shall have the meaning assigned to such terms in the
Agreement.
In rendering this opinion, we have examined and are relying upon
(without any independent investigation or review thereof) the truth and accuracy
at all relevant times of the statements, covenants, and representations
contained in (i) the Agreement, (ii) the Proxy Statement/Prospectus included in
the Registration Statement on Form S-4 filed by TCI with the Securities and
Exchange Commission ("SEC") on October 14, 1998 (the "Proxy Statement"), (iii)
certain of the reports filed by Company with the SEC pursuant to the Securities
and Exchange Act of 1934, as amended, and (iv) the representation letters dated
October 14, 1998 which were provided to us by the Company and TCI and which are
attached hereto as exhibits. In addition, we assume that the Merger will be
consummated in accordance with the Agreement and as described in the Proxy
Statement. Any inaccuracy in any of the aforementioned statements,
representations, and assumptions or breach of any of the aforementioned
covenants could adversely affect our opinion.
On the basis of and subject to the foregoing and subject to the
limitations set forth below, it is our opinion that, under presently applicable
federal income tax law, the Merger should be a tax-free reorganization within
the meaning of Section 368(a)(1)(B) of the Code, and each of the Company and TCI
should be treated as a party to that reorganization. As a result, the following
U.S. federal income tax consequences should occur:
(a) No gain or loss should be recognized by the Company as a result of
the Merger;
(b) No gain or loss should be recognized by holders of Company Common
Stock upon their receipt in the Merger of LMG Series A Stock in exchange
therefor;
<PAGE>
Tele-Communications International, Inc.
October 14, 1998
Page 2
(c) The tax basis of the shares of LMG Series A Stock received by a
Company stockholder in the Merger should be the same as the tax basis of
the Company Common Stock surrendered in exchange therefor;
(d) The holding period of the shares of LMG Series A Stock received by
a Company stockholder in the Merger should include the holding period of
the Company Common Stock surrendered in exchange therefor, provided that
such shares of Company Common Stock are held as capital assets at the
Effective Time;
(e) Gain or loss will be recognized by a Company stockholder with
respect to cash received in lieu of a fractional share of LMG Series A
Stock in an amount equal to the difference between the cash received and
the tax basis that such stockholder would have had in such fractional share
if such fractional share had actually been received; and
(f) The section of the Proxy Statement entitled "The Merger--Certain
Federal Income Tax Consequences" describes the material federal income tax
consequences expected to result to the Company stockholders from the
Merger.
Our opinion is based on our interpretation of the Code, applicable
Treasury regulations, judicial authority, and administrative rulings and
practice, all as of the date hereof. There can be no assurance that future
legislative, judicial or administrative changes or interpretations will not
adversely affect the accuracy of the conclusions set forth herein. We do not
undertake to advise you as to any such future changes or interpretations unless
we are specifically retained to do so. Our opinion will not be binding upon the
Internal Revenue Service (the "Service"), and the Service will not be precluded
from adopting a contrary position.
No opinion is expressed as to any matter not specifically addressed
above including, without limitation, the tax consequences of the Merger under
any foreign, state, or local tax law. Moreover, tax consequences which are
different from or in addition to those described herein may apply to Company
stockholders who are subject to special treatment under the U.S. federal income
tax laws, such as foreign persons and persons who acquired their shares in
compensatory transactions.
This opinion is delivered to you solely in connection with and for
purposes of the transactions contemplated by the Agreement and is not to be
relied upon by any other person, quoted in whole or in part, or otherwise
referred to (except in a list of closing documents), nor is it to be provided to
any other person without our prior written consent. Notwithstanding the
foregoing sentence, we consent to the filing with the SEC of this letter as an
exhibit to the Registration Statement of which the Proxy Statement is a part and
to the reference to our firm under the heading
<PAGE>
Tele-Communications International, Inc.
October 14, 1998
Page 3
"The Merger--Certain Federal Income Tax Consequences" and "Legal Matters"
contained therein. In giving such consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules of the SEC thereunder.
Sincerely,
BAKER & BOTTS, L.L.P.
Attachments
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statement (No.
333-64297) of Tele-Communications, Inc. on Form S-4, as amended (Amendment No.
1), of our reports, dated March 20, 1998, relating to the consolidated balance
sheets of Tele-Communications, Inc. and subsidiaries as of December 31, 1997 and
1996, 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, 1997, and all related financial statement schedules, which reports
appear in the December 31, 1997 Annual Report on Form 10-K of Tele-
Communications, Inc., and to the reference to our firm under the heading
"Experts" in the Registration Statement.
KPMG Peat Marwick LLP
Denver, Colorado
October 12, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statement (No.
333-64297) of Tele-Communications, Inc. on Form S-4, as amended (Amendment No.
1), of our report, dated March 20, 1998, relating to the combined balance sheets
of TCI Group as of December 31, 1997 and 1996, and the related combined
statements of operations, equity (deficit), and cash flows for each of the years
in the three-year period ended December 31, 1997, which report appears in the
December 31, 1997 Annual Report on Form 10-K of Tele-Communications, Inc., and
to the reference to our firm under the heading "Experts" in the Registration
Statement. Our report covering the combined financial statements refers to the
effects of not consolidating TCI Group's interest in Liberty Media Group and TCI
Ventures Group for all periods that TCI Group has an interest in Liberty Media
Group and TCI Ventures Group, respectively.
KPMG Peat Marwick LLP
Denver, Colorado
October 12, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statement (No.
333-64297) of Tele-Communications, Inc. on Form S-4, as amended (Amendment
No. 1), of our report, dated March 20, 1998, relating to the combined balance
sheets of Liberty Media Group as of December 31, 1997 and 1996, and the related
combined statements of operations, equity, and cash flows for each of the years
in the three-year period ended December 31, 1997, which report appears in the
December 31, 1997 Annual Report on Form 10-K of Tele-Communications, Inc., and
to the reference to our firm under the heading "Experts" in the Registration
Statement.
KPMG Peat Marwick LLP
Denver, Colorado
October 12, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statement (No.
333-64297) of Tele-Communications, Inc. on Form S-4, as amended (Amendment
No. 1), of our report, dated March 20, 1998, relating to the combined balance
sheets of TCI Ventures Group as of December 31, 1997 and 1996, and the related
combined statements of operations, equity, and cash flows for each of the years
in the three-year period ended December 31, 1997, which report appears in the
December 31, 1997 Annual Report on Form 10-K of Tele-Communications, Inc., and
to the reference to our firm under the heading "Experts" in the Registration
Statement.
KPMG Peat Marwick LLP
Denver, Colorado
October 12, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Tele-Communications International, Inc.
We consent to the incorporation by reference in the Registration Statement (No.
333-64297) of Tele-Communications, Inc. on Form S-4, as amended (Amendment
No. 1) of our report, dated March 20, 1998, relating to the consolidated balance
sheets of Tele-Communications International, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997, which report appears in the December 31, 1997
Annual Report on Form 10-K of Tele-Communications International, Inc., as
amended by Form 10-K/A (Amendment No. 1), and to the reference to our firm under
the report heading "Experts" in the Registration Statement.
KPMG Peat Marwick LLP
Denver, Colorado
October 12, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Shareholders of
Telewest Communications plc:
We consent to the incorporation by reference in the Registration Statement (No.
333-64297) of Tele-Communications, Inc. on Form S-4, as amended (Amendment No.
1), of our report, dated March 19, 1998, relating to the consolidated balance
sheet of Telewest Communications plc and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations and cash flows
for each of the years in the three year period ended December 31, 1997, which
report appears in the December 31, 1997 Annual Report on Form 10-K of Tele-
Communications, Inc., and to the reference to our firm under the heading
"Experts" in the Registration Statement.
KPMG Audit Plc
Chartered Accountants
Registered Auditors
London, England
October 12, 1998
<PAGE>
EXHIBIT 23.7
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-64297 of Tele-Communications, Inc. on Form S-4 of
our report dated February 3, 1998, on the consolidated financial statements of
Sprint Spectrum Holding Company, L.P. and subsidiaries (which expresses an
unqualified opinion and includes an explanatory paragraph referring to the
emergence from the development stage of Sprint Spectrum Holding Company, L.P.
and subsidiaries) appearing in the Annual Report on Form 10-K of Tele-
Communications, Inc., for the year ended December 31, 1997, and to the reference
to us under the heading "Experts" in this Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
October 12, 1998
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Cablevision Systems Corporation:
We consent to the incorporation by reference in the Registration Statement (No.
333-64297) of Tele-Communications, Inc. on Form S-4, as amended (Amendment No.
1) of our report, dated April 1, 1997, relating to the consolidated balance
sheets of Cablevision Systems Corporation and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of operations,
stockholders' deficiency, and cash flows for each of the years in the three-year
period ended December 31, 1996, and the related financial statement schedule,
which report appears in the Current Report on Form 8-K, as amended on Form 8-K/A
(Amendment No. 2), of Tele-Communications, Inc., dated March 6, 1998, and to the
reference to our firm under the heading "Experts" in the Registration Statement.
KPMG Peat Marwick LLP
Jericho, New York
October 12, 1998
