<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ____ to ____
Commission File Number 0-20421
TELE-COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Delaware 84-1260157
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class B 6% Cumulative Redeemable Exchangeable Junior Preferred
Stock, par value $.01 per share
Indicate by check mark whether the Registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
---
The aggregate market value of the Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock held by nonaffiliates of
Tele-Communications, Inc., computed by reference to the last sales price of such
stock, as of the close of trading on January 29, 1999, was approximately
$114,000,000.
<PAGE> 2
PART I.
Item 1. Business.
(a) General Development of Business
Tele-Communications, Inc. ("TCI" or the "Company"), through its
subsidiaries and affiliates, is principally engaged in the construction,
acquisition, ownership, and operation of cable television systems and the
provision of satellite-delivered video entertainment, information and home
shopping programming services to various video distribution media, principally
cable television systems. The Company also has investments in cable and
telecommunications operations and television programming in certain
international markets as well as investments in companies and joint ventures
involved in developing and providing programming for new television and
telecommunications technologies. The Company is a Delaware corporation and was
incorporated in 1994. TCI Communications, Inc. ("TCIC"), a subsidiary of TCI,
and its predecessors have been engaged in the cable television business since
the early 1950's.
The Company's assets and operations were previously included in three
separate groups, each of which was tracked separately by public equity
securities. These groups were known as the "Liberty Media Group", the "TCI
Ventures Group" and the "TCI Group".
The Liberty Media Group was intended to reflect the separate
performance of TCI's assets which produce and distribute programming services.
For additional information concerning the Liberty Media Group, see "Narrative
Description of Business - LIBERTY MEDIA GROUP."
The TCI Ventures Group was intended to reflect the separate performance
of TCI's principal international assets and businesses and substantially all of
TCI's non-cable and non-programming assets. For additional information
concerning the TCI Ventures Group, see "Narrative Description of Business - TCI
VENTURES GROUP."
The TCI Group was intended to reflect the separate performance of TCI
and its subsidiaries and assets not attributed to Liberty Media Group or TCI
Ventures Group. Such subsidiaries and assets are comprised primarily of TCI's
domestic cable and communications business. For additional information
concerning the TCI Group, see "Narrative Description of Business - TCI GROUP."
I-1
<PAGE> 3
The TCI Group was tracked separately through the Tele-Communications,
Inc. Series A TCI Group Common Stock (the "TCI Group Series A Stock") and Series
B TCI Group Common Stock (the "TCI Group Series B Stock," and together with the
TCI Group Series A Stock, the "TCI Group Stock"). The Liberty Media Group was
tracked separately through the Tele-Communications, Inc. Series A Liberty Media
Group Common Stock ("Liberty Group Series A Stock") and Series B Liberty Media
Group Common Stock ("Liberty Group Series B Stock" and together with the Liberty
Group Series A Stock, the "Liberty Group Stock"). The TCI Ventures Group was
tracked separately through the Tele-Communications Inc. Series A TCI Ventures
Group Common Stock ("TCI Ventures Group Series A Stock") and Series B TCI
Ventures Group Common Stock ("TCI Ventures Group Series B Stock" and together
with the TCI Ventures Group Series A Stock, the "TCI Ventures Group Stock").
The TCI Group Series A Stock, TCI Ventures Group Series A Stock and the
Liberty Group Series A Stock are sometimes collectively referred to herein as
the "Series A Stock," and the TCI Group Series B Stock, TCI Ventures Group
Series B Stock and Liberty Group Series B Stock are sometimes collectively
referred to herein as the "Series B Stock."
On March 9, 1999, AT&T Corporation ("AT&T") acquired TCI in a merger
(the "AT&T Merger") in which Italy Merger Corp., a wholly-owned subsidiary of
AT&T, merged with and into TCI, and TCI thereby became a wholly-owned subsidiary
of AT&T. As a result of the AT&T Merger, (i) each share of TCI Group Series A
Stock was converted into 0.7757 of a share of common stock, par value $1.00 per
share, of AT&T ("AT&T Common Stock"), (ii) each share of TCI Group Series B
Stock was converted into 0.8533 of a share of AT&T Common Stock, (iii) each
share of Liberty Group Series A Stock was converted into one share of a newly
created class of AT&T common stock designated as the Class A Liberty Media Group
Common Stock, par value $1.00 per share (the "AT&T Liberty Class A Tracking
Stock"), (iv) each share of Liberty Group Series B Stock was converted into one
share of a newly created class of AT&T common stock designated as the Class B
Liberty Media Group Common Stock, par value $1.00 per share (the "AT&T Liberty
Class B Tracking Stock" and together with the AT&T Liberty Class A Tracking
Stock, the "AT&T Liberty Tracking Stock"), (v) each share of TCI Ventures Group
Series A Stock was converted into 0.52 of a share of AT&T Liberty Class A
Tracking Stock, (vi) each share of TCI Ventures Group Series B Stock was
converted into 0.52 of a share of AT&T Liberty Class B Tracking Stock, (vii)
each share of TCI's Convertible Preferred Stock, Series C-TCI Group was
converted into 103.059502 shares of AT&T Common Stock, (viii) each share of
TCI's Convertible Preferred Stock Series C-Liberty Media Group was converted
into 56.25 shares of AT&T Liberty Class A Tracking Stock, (ix) each share of
TCI's Redeemable Convertible TCI Group Preferred Stock, Series G was converted
into 0.923083 shares of AT&T Common Stock and (x) each share of TCI's Redeemable
Convertible Liberty Media Group Preferred Stock, Series H was converted into
0.590625 of a share of AT&T Liberty Class A Tracking Stock. Following the AT&T
Merger, each share of TCI's Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock ("Class B Preferred Stock") continues to be outstanding as the
Class B Preferred Stock with the same rights and preferences such stock had
prior to the AT&T Merger. In general, the holders of shares of AT&T Liberty
Class A Tracking Stock and the holders of shares of AT&T Liberty Class B
Tracking 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, with the
holders being entitled to one-tenth (1/10th) of a vote for each share of AT&T
Liberty Class A Tracking Stock held, 1 vote per share of AT&T Liberty Class B
Tracking Stock held and 1 vote per share of AT&T Common Stock held.
I-2
<PAGE> 4
The shares of AT&T Liberty Tracking Stock issued in the AT&T Merger are
intended to reflect the separate performance of the businesses and assets
attributed to "Liberty/Ventures Group," which following the AT&T Merger, is
comprised of the businesses and assets attributed to Liberty Media Group and TCI
Ventures Group at the time of the AT&T Merger (the "Liberty/Ventures
Combination"). Pursuant to, and subject to the terms and conditions set forth
in, the Agreement and Plan of Restructuring and Merger, dated as of June 23,
1998 (the "Merger Agreement"), immediately prior to the AT&T Merger, certain
assets previously attributed to 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. ("TCG"), the stock of At Home Corporation ("@Home")
attributed to TCI Ventures Group, the assets and business of the National
Digital Television Center, Inc. ("NDTC") and TCI Ventures Group's equity
interest in Western Tele-Communications, Inc. ("WTCI")) were transferred to TCI
Group in exchange for approximately $5.5 billion in cash. Also, upon
consummation of the AT&T Merger, through a new tax sharing agreement between
Liberty/Ventures Group and AT&T, Liberty/Ventures Group became entitled to the
benefit of approximately $2.0 billion of net operating loss carryforwards
attributable to all entities included in TCI's consolidated federal income tax
return as of the date of the AT&T Merger. Such net operating loss carryforwards
are subject to adjustment by the Internal Revenue Service and are subject to
limitations on usage which may affect the ultimate amount utilized.
Additionally, certain warrants previously attributed to TCI Group were
transferred to Liberty/Ventures Group in exchange for approximately $176 million
in cash. Certain agreements entered into at the time of the AT&T Merger provide,
among other things, for preferred vendor status to Liberty/Ventures Group for
digital basic distribution on AT&T's systems of new programming services created
by Liberty/Ventures Group and for a renewal of existing affiliation agreements.
The transfer of certain other immaterial assets was also effected.
Pursuant to amended corporate governance documents for the entities
included in Liberty/Ventures Group and certain agreements among AT&T and TCI,
the business of Liberty/Ventures Group will continue to be managed by certain
persons who were members of TCI's management prior to the AT&T Merger. AT&T will
initially designate one third of the directors of such entities and its rights
as the sole shareholder of the common stock of such entities following the AT&T
Merger will, in accordance with Delaware law, be limited to actions which will
require shareholder approval. Therefore, management has concluded that TCI does
not have a controlling financial interest (as that term is used in Statement of
Financial Accounting Standards No. 94) in the entities comprising the
Liberty/Ventures Group following the AT&T Merger, and will account for its
investment in such entities under the equity method.
I-3
<PAGE> 5
Pursuant to a proposed final judgment (the "Final Judgment") agreed to
by TCI, AT&T and the United States Department of Justice (the "DOJ") on December
30, 1998, Liberty/Ventures Group prior to the AT&T Merger transferred all of the
equity securities of Sprint Corporation ("Sprint") beneficially owned by the
Liberty/Ventures Group (the "Sprint Securities") to a trust with an independent
trustee (the "Trustee"), pursuant to a trust agreement approved by the DOJ (the
"Trust Agreement"). The Final Judgment, if entered at the United States District
Court for the District of Columbia, would require the Trustee, on or before May
23, 2002, to dispose of a portion of the Sprint Securities held by the trust and
beneficially owned by Liberty/Ventures Group sufficient to cause
Liberty/Ventures Group to own beneficially no more than 10% of the outstanding
Series 1 PCS Stock of Sprint on a fully diluted basis (assuming the issuance of
all shares of Series 1 PCS Stock of Sprint ultimately issuable in respect of the
applicable securities of Sprint upon the exercise, conversion or other issuance
thereof in accordance with the terms of such securities) on such date. On or
before May 23, 2004, the Trustee must divest the remainder of the Sprint
Securities beneficially owned by Liberty/Ventures Group.
The Trust Agreement grants the Trustee the sole right to sell the
Sprint Securities and provides that all decisions regarding such divestiture
will be made by the Trustee without discussion or consultation with AT&T or the
entities in the Liberty/Ventures Group; however, the Final Judgment would
provide that the Trustee shall consult with the board of directors of the
Liberty/Ventures Group entity that owns the Sprint Securities regarding such
divestiture (other than certain directors appointed by AT&T following the AT&T
Merger and any director, officer or shareholder that owns more than 0.10% of the
outstanding AT&T Common Stock). The Trustee has the power and authority to
accomplish such divestiture only in a manner reasonably calculated to maximize
the value of the Sprint Securities beneficially owned by Liberty/Ventures Group.
The Final Judgment would provide that the Trustee vote the Sprint
Securities beneficially owned by Liberty/Ventures Group in the same proportion
as other holders of Sprint's PCS Stock so long as such securities are held by
the trust. The Final Judgment also would prohibit the acquisition by
Liberty/Ventures Group of additional Sprint Securities (other than in connection
with the exercise or conversion, as applicable, of certain Sprint Securities)
without the prior written consent of the DOJ.
Immediately prior to the AT&T Merger, TCI restructured its ownership of
certain of its subsidiaries. This restructuring included merging TCI's cable
subsidiary, TCIC, into TCI. As a result of TCIC's merger with TCI, all assets
and liabilities of TCIC have been assumed by TCI, including TCIC's public debt.
In connection with TCIC's merger with TCI, each share of TCIC's Cumulative
Exchangeable Preferred Stock, Series A was converted into 2.119 shares of TCI
Group Series A Stock, and such shares of TCI Group Series A Stock were
subsequently converted into AT&T Common Stock in connection with the AT&T
Merger. All other public securities issued by subsidiaries of TCIC (other than
TCI Pacific Communications, Inc. ("Pacific")) otherwise remained unaffected.
Furthermore, as part of the restructuring, (i) certain asset transfers were made
between TCI and its subsidiaries, (ii) 123,896 shares of the Company's
Convertible Redeemable Participating Preferred Stock, Series F ("Series F
Preferred Stock"), which were held by subsidiaries of TCI, were converted into
185,428,946 shares of TCI Group Series A Stock (which in turn were converted
into 143,837,233 shares of AT&T Common Stock in the AT&T Merger and continue to
be held by subsidiaries of TCI), (iii) the remaining 154,411 shares of Series F
Preferred Stock which were formerly held by subsidiaries of TCI were distributed
to TCI through a series of liquidations and canceled, and (iv) 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 Liberty Group Series A Stock, 3,417,187 shares of
Liberty Group Series B Stock, and 67,536 shares of Class B Preferred Stock, each
formerly held by subsidiaries of TCI, were distributed to TCI through a series
of liquidations and canceled.
I-4
<PAGE> 6
After the AT&T Merger, under the terms of the 5% Class A Senior
Cumulative Exchangeable Preferred Stock of Pacific (the "Exchangeable Preferred
Stock"), each share of that preferred stock is exchangeable, from and after
August 1, 2001, for approximately 4.225 shares of AT&T Common Stock, subject to
certain anti-dilution adjustments. Additionally, after the AT&T Merger, Pacific
may elect to make any dividend, redemption or liquidation payment on the
Exchangeable Preferred Stock in cash, by delivery of shares of AT&T Common Stock
or by a combination of the foregoing forms of consideration.
On June 16, 1997, (a) the Company issued 30,545,864 shares of TCI Group
Series A Stock (which shares are entitled to one vote per share) to the Estate
of Bob Magness (the "Magness Estate"), the late founder and former Chairman of
the Board of TCI in exchange (the "Exchange") for an equal number of shares of
TCI Group Series B Stock (which shares are entitled to ten votes per share)
owned by the Magness Estate, (b) the Magness Estate sold (the "Sale") the shares
of TCI Group Series A Stock received in the Exchange, together with
approximately 1.5 million shares of TCI Group Series A Stock that the Magness
Estate previously owned (collectively, the "Option Shares"), to two investment
banking firms (the "Investment Bankers") for approximately $530 million (the
"Sale Price") and (c) TCI entered into an agreement with the Investment Bankers
whereby TCI would have the option, but not the obligation, to purchase the
Option Shares at any time on or before June 16, 1999 (the "Option Period"). The
preceding transactions are referred to collectively as the "June 16 Stock
Transaction". During the Option Period, the Company and the Investment Bankers
would settle quarterly any increase or decrease in the market value of the
Option Shares. If the market value of the Option Shares should exceed the
Investment Bankers' cost, Option Shares with a fair value equal to the
difference between the market value and cost would be segregated from the other
Option Shares in an account at the Investment Bankers. If the market value of
the Option Shares should be less than the Investment Bankers' cost, the Company,
at its option, would settle such difference with shares of TCI Group Series A
Stock or TCI Ventures Group Series A Stock or, subject to certain conditions,
with cash or letters of credit. In addition, the Company would be required to
pay the Investment Bankers a quarterly fee equal to the London Interbank Offered
Rate plus 1% on the Sale Price, as adjusted for payments made by the Company
pursuant to any quarterly settlement with the Investment Bankers. Due to the
Company's ability to settle quarterly price fluctuations and fees with shares of
TCI Group Series A Stock or TCI Ventures Group Series A Stock, the Company
records all amounts received or paid under this arrangement as increases or
decreases, respectively, to equity. During the fourth quarter of 1997, the
Company repurchased 4 million shares of TCI Group Series A Stock from one of the
Investment Bankers for an aggregate cash purchase price of $66 million.
Additionally, as a result of the Exchange Offers and certain open market
transactions that were completed to obtain the desired weighting of TCI Group
Series A Stock and TCI Ventures Group Series A Stock, the Investment Bankers
disposed of 4,210,308 shares of TCI Group Series A Stock and acquired 23,407,118
shares of TCI Ventures Group Series A Stock during the last half of 1997. As a
result of the foregoing transactions and certain transactions related to the
January 5, 1998 settlement of litigation involving the Magness Estate, as
described below, the Option Shares were comprised of 6,201,042 shares of TCI
Group Series A Stock and 11,740,610 shares of TCI Ventures Group Series A Stock
at December 31, 1998. At December 31, 1998, the market value of the Option
Shares exceeded the Investment Bankers' cost by $421 million.
I-5
<PAGE> 7
Pursuant to a certain letter agreement, dated June 16, 1997, between
Dr. Malone, TCI's Chairman and Chief Executive Officer, and the Magness Estate,
Dr. Malone agreed to waive certain rights of first refusal with respect to
shares of TCI Group Series B Stock beneficially owned by the Magness Estate.
Such rights of first refusal arise from a letter agreement, dated June 17, 1988,
among Bob Magness, Kearns-Tribune Corporation and Dr. Malone, pursuant to which
Dr. Malone was granted a right of first refusal to acquire any shares of TCI
Group Series B Stock which the other parties proposed to sell. As a result of
Dr. Malone's rights under such June 17, 1988 letter agreement, such waiver was
necessary in order for the Magness Estate to consummate the Exchange and the
Sale.
In consideration for such waiver, TCI granted Dr. Malone the right (the
"Malone Right") to acquire from time to time until June 30, 1999, from TCI up to
30,545,864 shares of the TCI Group Series B Stock acquired by TCI from the
Magness Estate pursuant to the Exchange. Such acquisition may be made in
exchange for either, or any combination of, shares of TCI Group Series A Stock
owned by Dr. Malone (exchanged on a one for one basis), or cash in an amount
equal to the average closing sale price of the TCI Group Series B Stock for the
five trading days preceding the acquisition.
In connection with certain legal proceedings relative to the probate of
the Magness Estate, one or more of Gary Magness and Kim Magness, Bob Magness'
sons, Sharon Magness, Bob Magness' surviving second wife and the original
personal representatives of the Magness Estate advanced various claims, causes
of action, demands, complaints and requests against one or more of the others.
In addition, Kim Magness and Gary Magness, in a Complaint And Request To Void
Sale Of TCI Stock, And For Damages And Surcharge, filed on October 29, 1997 (the
"Voiding Action"), advanced various claims relating to the June 16 Stock
Transaction against TCI, Dr. Malone and the original personal representatives of
the Magness Estate. Among other matters, the Voiding Action challenged the June
16 Stock Transaction on various fiduciary bases and requested rescission of such
transaction and damages.
Pursuant to an agreement effective as of January 5, 1998, TCI, Gary
Magness, Kim Magness, Sharon Magness, the Magness Estate, the Estate of Betsy
Magness (the first wife of Bob Magness) and Dr. Malone agreed to settle their
respective claims against each other relating to the Magness Estate and the June
16 Stock Transaction, in each case without any of those parties admitting any of
the claims or allegations against that party (the "Magness Settlement").
In connection with the Magness Settlement, portions of the Exchange and
Sale were unwound such that (i) 10,201,041 shares of TCI Group Series A Stock
and 11,666,506 shares of TCI Ventures Group Series A Stock were returned to TCI
as authorized but unissued shares, (ii) the Magness Estate returned to the
Investment Bankers the portion of the Sale Price attributable to such returned
shares and (iii) the Magness Estate paid $11 million to TCI representing a
reimbursement of the Exchange fees incurred by TCI from June 16, 1997 through
February 9, 1998 with respect to such returned shares. TCI then issued to the
Magness Estate 10,017,145 shares of TCI Group Series B Stock and 12,034,298
shares of TCI Ventures Group Series B Stock. In addition, as part of the Magness
Settlement, TCI issued 1,339,415 shares of TCI Group Series B Stock to the
Estate of Betsy Magness in exchange for an equal number of shares of TCI Group
Series A Stock and issued 1,531,834 shares of TCI Ventures Group Series B Stock
for an equal number of shares of TCI Ventures Group Series A Stock.
I-6
<PAGE> 8
On February 9, 1998, in connection with the Magness Settlement, TCI
entered into a call agreement (the "Malone Call Agreement") with Dr. Malone and
Dr. Malone's wife (together with Dr. Malone, the "Malones"), under which the
Malones granted to TCI the right to acquire any shares of TCI stock which are
entitled to cast more than one vote per share (the "High-Voting Shares") owned
by the Malones, which at December 31, 1998 consisted of an aggregate of
approximately 69 million High-Voting Shares upon Dr. Malone's death or upon a
contemplated sale of the High-Voting Shares (other than a minimal amount) to
third persons. In either such event, TCI has the right to acquire the shares at
a maximum price equal to the then relevant market price of shares of
"low-voting" Series A Stock plus a ten percent premium. The Malones also agreed
that if TCI were ever to be sold to another entity, then the maximum premium
that the Malones would receive on their High-Voting Shares would be no greater
than a ten percent premium over the price paid for the relevant shares of Series
A Stock. TCI paid $150 million to the Malones in consideration of their entering
into the Malone Call Agreement.
Also on February 9, 1998, in connection with the Magness Settlement,
certain members of the Magness family, individually and in certain cases, on
behalf of the Estate of Betsy Magness and the Magness Estate (collectively, the
"Magness Family") also entered into a call agreement with TCI (with
substantially the same terms as the one entered into by the Malones, including a
call on the shares owned by the Magness Family upon Dr. Malone's death) (the
"Magness Call Agreement") on the Magness Family's, which at December 31, 1998
consisted of an aggregate of approximately 55 million High-Voting Shares. The
Magness Family was paid $124 million by TCI in consideration of their entering
into the Magness Call Agreement.
I-7
<PAGE> 9
Additionally, on February 9, 1998, the Magness Family entered into a
Shareholders' Agreement (the "Shareholders' Agreement") with the Malones and TCI
under which (i) the Magness Family and the Malones agree to consult with each
other in connection with matters to be brought to the vote of TCI's
stockholders, subject to the proviso that if they cannot mutually agree on how
to vote the shares, Dr. Malone has an irrevocable proxy to vote the High-Voting
Shares owned by the Magness Family, (ii) the Magness Family may designate a
nominee for the Board of Directors of TCI and Dr. Malone has agreed to vote his
High-Voting Shares for such nominee and (iii) certain "tag along rights" have
been created in favor of the Magness Family and certain "drag along rights" have
been created in favor of the Malones. In addition, the Malone Right granted by
TCI to Dr. Malone to acquire 30,545,864 shares of TCI Group Series B Stock was
reduced to an option to acquire 14,511,570 shares of TCI Group Series B Stock.
Pursuant to the terms of the Shareholders' Agreement, the Magness Family has the
right to participate in the reduced Malone Right on a proportionate basis with
respect to 12,406,238 shares of the 14,511,570 shares subject to the Malone
Right. On June 24, 1998, Dr. Malone delivered notice to TCI exercising his right
to purchase (subject to the Magness Family proportionate right) up to 14,511,570
shares of TCI Group Series B Stock at a per share price of $35.5875 pursuant to
the Malone Right. In addition, a representative of the Magness Family advised
Dr. Malone that the Magness Family would participate in such purchase up to the
Magness Family's proportionate right. On October 14, 1998, 8,718,770 shares of
TCI Group Series B Stock were issued to Dr. Malone upon payment of cash
consideration totaling $310 million. On October 16, 1998, 5,792,800 shares of
TCI Group Series B Stock were issued to the Magness Family upon payment of cash
consideration totaling $206 million. In connection with the acquisition of the
TCI Group Series B Stock by Dr. Malone, TCI executed certain waivers to the
Malone Call Agreement and TCI and the Magness Family executed a waiver to the
Shareholders' Agreement to, among other things, permit (subject to certain
limitations) the pledge of TCI Group Series B Stock owned by Dr. Malone as
collateral to the lenders who provided the funds for his purchase of shares of
TCI Group Series B Stock. In connection with the AT&T Merger, Liberty Media
Corporation ("Liberty") became entitled to exercise TCI's rights under each Call
Agreement and the Shareholders' Agreement with respect to the AT&T Liberty Class
B Tracking Stock acquired by the Malones and the Magness Family as a result of
the AT&T Merger and the Malones and the Magness Family agreed that the
Shareholders' Agreement would continue to apply to the AT&T Liberty Class B
Tracking Stock.
On February 1, 1999, the Company began to terminate the transactions
under the agreements with the Investment Bankers described above, and as of
March 5, 1999, such transactions were terminated. In connection with the
termination of such transactions the Company received an aggregate cash payment
of $509 million.
On March 4, 1998, the Company contributed to Cablevision Systems
Corporation ("CSC") certain of its cable television systems serving
approximately 830,000 customers in exchange for approximately 48.9 million newly
issued CSC Class A common shares (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 the Company. The Company has also entered into
letters of intent with CSC which provide for the Company to acquire a cable
system in Michigan and an additional 4% 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 the Company's debt. The ability of
the Company to sell or increase its investment in CSC is subject to certain
restrictions and limitations set forth in a stockholders agreement with CSC.
I-8
<PAGE> 10
In addition to the CSC Transaction, the Company also completed, during
1998, eight transactions whereby TCI contributed cable television systems
serving in the aggregate approximately 1,924,000 customers to eight 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 the Company
to external parties aggregating $323 million and intercompany debt owed to the
Company aggregating $2,374 million. The Company has agreed to take certain steps
to support compliance by certain of the 1998 Joint Ventures with their payment
obligations under certain debt instruments, up to an aggregate contingent
commitment of $980 million. The CSC Transaction and the formation of the 1998
Joint Ventures are collectively referred to herein as the "1998 Contribution
Transactions." During the year ended December 31, 1998, the Company's revenue
and operating cash flow (defined by the Company as operating income before
depreciation, amortization, other non-cash items, year 2000 costs, AT&T merger
costs and stock compensation) included $622 million and $278 million,
respectively from the cable television systems included in the 1998 Contribution
Transactions.
In addition to the 1998 Contribution Transactions, the Company, as of
December 31, 1998, has signed agreements or letters of intent to contribute
within the next twelve months, certain cable television systems (the "Pending
Contribution Cable Systems") serving approximately 1.2 million basic customers
to joint ventures in which the Company will retain non-controlling ownership
interests (the "Pending Contribution Transactions"). Following the completion of
the Pending Contribution Transactions, the Company will no longer consolidate
the Pending Contribution Cable Systems. Accordingly it is anticipated that the
completion of the Pending Contribution Transactions, as currently contemplated,
will result in aggregate estimated reductions (based on 1998 amounts) to the
Company's debt, annual revenue and annual operating cash flow of $1.5 billion,
$500 million and $200 million, respectively. No assurance can be given that any
of the Pending Contribution Transactions will be consummated.
On March 1, 1999, TV Guide, Inc. (formerly United Video Satellite
Group, Inc. ("UVSG")) and The News Corporation Limited ("News Corp.") completed
a transaction whereby News Corp.'s TV Guide properties were combined with UVSG
to create a platform for offering television guide services and advertising to
consumers. As part of this combination, a unit of News Corp. received
consideration consisting of $800 million in cash and 60 million shares of UVSG's
stock, including 22.5 million shares of its Class A common stock and 37.5
million shares of its Class B common stock. In addition, News Corp. elected to
purchase approximately 6.5 million additional shares of UVSG Class A common
stock for $129 million in order to equalize its ownership with that of the
Company. Prior to such transactions, UVSG was a subsidiary of the Company. As a
result of these transactions, and another transaction completed on the same
date, News Corp., TCI and UVSG's public stockholders own, on an economic basis,
approximately 44%, 44% and 12%, respectively, of UVSG. Following such
transactions, News Corp. and TCI each have approximately 49% of the voting power
of UVSG's outstanding stock. Upon consummation, TCI began accounting for its
interest in UVSG under the equity method of accounting.
I-9
<PAGE> 11
On November 19, 1998, the Company exchanged, in a merger transaction,
0.58 of a share of Liberty Group Series A Stock for each share of the issued and
outstanding Series A common stock of its then majority-owned subsidiary,
Tele-Communications International, Inc. ("TINTA") not beneficially owned by TCI
(the "TINTA Merger"). Such transaction was accounted for as an acquisition of a
minority interest. The aggregate value assigned to the 10,086,594 shares of
Liberty Group Series A Stock issued by TCI was based upon the market value of
Liberty Group Series A Stock at the time the TINTA Merger was announced.
Prior to November 23, 1998, the "PCS Ventures" included Sprint Spectrum
Holding Company, L. P. and MinorCo, L.P. (collectively, "Sprint PCS") and
PhillieCo Partnership I, L.P. ("PhillieCo"). The partners of each of the Sprint
PCS partnerships were subsidiaries of Sprint, Comcast Corporation ("Comcast"),
Cox Communications, Inc. ("Cox") and the Company. The partners of PhillieCo were
subsidiaries of Sprint, Cox and the Company. The Company had a 30% partnership
interest in each of the Sprint PCS partnerships and a 35% partnership interest
in PhillieCo.
On November 23, 1998, the Company, Comcast, and Cox exchanged their
respective interests in Sprint PCS and PhillieCo (the "PCS Exchange") for shares
of "Sprint PCS Group Stock" which, tracks the performance of Sprint's newly
created "PCS Group" (consisting initially of the PCS Ventures and certain PCS
licenses which were separately owned by Sprint). The Sprint PCS Group Stock
collectively represents an approximate 17% voting interest in Sprint. As a
result of the PCS Exchange, the Company holds shares of Sprint PCS Group Stock,
as well as certain additional securities of Sprint exercisable for or
convertible into such securities, (the "Sprint Securities") representing
approximately 24% of the equity value of Sprint attributable to its PCS Group
and less than 1% of the voting interest in Sprint. In connection with the March
9, 1999 AT&T Merger, the Liberty/Ventures Group consented to divest its interest
in the Sprint Securities.
On July 23, 1998, a merger in which TCG agreed to be acquired by AT&T,
was consummated. As a result of such merger, the Company received in exchange
for all of its interest in TCG, approximately 47 million shares of AT&T Common
Stock. Such AT&T Common Stock was transferred from TCI Ventures Group to TCI
Group in connection with the AT&T Merger.
On January 19, 1999, @Home entered into a merger agreement with Excite,
Inc. ("Excite"), a global internet media company that offers consumers and
advertisers comprehensive internet navigation services with extensive
personalization capabilities. Under the terms of the merger agreement, @Home
will issue approximately 55 million shares of its common stock for all of the
outstanding common stock of Excite based on an exchange ratio of 1.041902 shares
of @Home's common stock for each share of Excite's common stock. @Home may issue
up to approximately 15 million additional shares of common stock in connection
with the assumption of obligations under Excite's stock option and employer
stock purchase plans and outstanding warrants. @Home will account for the
transaction as a purchase. @Home's preliminary estimate of the total purchase
consideration is approximately $7 billion, based on the fair value at the time
of announcement of the merger, of common stock to be issued and stock option,
stock purchase plan and warrant obligations assumed, plus estimated transaction
costs. As a result of the proposed merger, the Company's economic interest in
@Home would decrease from 39% to 27%, which would represent an approximate 58%
voting interest. The merger is subject to several conditions, including approval
by both companies' stockholders and the expiration of applicable waiting periods
under certain antitrust laws. TCI Ventures Group's investment in @Home was
transferred to TCI Group in connection with the AT&T Merger.
I-10
<PAGE> 12
Certain statements in this Annual Report on Form 10-K constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In particular, some of the statements contained
under the captions "Business" and "Management's Discussion And Analysis Of
Financial Condition And Results Of Operations," are forward-looking. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company (or entities in which the Company has interests), or
industry results, to differ materially from future results, performance or
achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors include, among others: general economic
and business conditions and industry trends; the regulatory and competitive
environment of the industries in which the Company, and the entities in which
the Company has interests, operate; uncertainties inherent in new business
strategies; uncertainties inherent in the changeover to the year 2000, including
the Company's projected state of readiness, the projected costs of remediation,
the expected date of completion of each program or phase, the projected worst
case scenarios, and the expected contingency plans associated with such worst
case scenarios; new product launches and development plans; rapid technological
changes; the acquisition, development and/or financing of telecommunications
networks and services; the development and provision of programming for new
television and telecommunications technologies; 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 failure or inability to comply with, government
regulations, including, without limitation, regulations of the Federal
Communications Commission ("FCC"), and adverse outcomes from regulatory
proceedings; changes in the nature of key strategic relationships with partners
and joint venturers; competitor responses to the Company's products and
services, and the products and services of the entities in which the Company has
interests, and the overall market acceptance of such products and services; and
other factors. These forward-looking statements (and such risks, uncertainties
and other factors) speak only as of the date of this Report, and the Company
expressly disclaims any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein, to reflect any
change in the Company's expectations with regard thereto, or any other change in
events, conditions or circumstances on which any such statement is based. Any
statement contained within Management's Discussion and Analysis of Financial
Condition and Results of Operations on this Form 10-K related to year 2000 are
hereby denominated as "Year 2000 Statements" within the meaning of the Year 2000
Information and Readiness Disclosure Act.
(b) Financial Information about Operating Segments
The Company had significant operations principally in two operating
segments: domestic cable and communications services and programming services.
The Company's domestic cable and communications businesses and assets were
included in TCI Group, and the Company's domestic programming businesses and
assets were included in Liberty Media Group. The Company's principal
international businesses and assets and the Company's remaining non-cable and
non-programming domestic businesses and assets were included in TCI Ventures
Group. No individual business or asset within TCI Ventures Group constitutes a
reportable segment of the Company as contemplated by Statement of Financial
Accounting Standard No. 131, Disclosures about Segments of an Enterprise and
Related Information. Financial information related to the Company's operating
segments can be found in note 22 to the Company's consolidated financial
statements found in Part II of this report.
I-11
<PAGE> 13
(c) Narrative Description of Business
TCI GROUP
Domestic Cable and Communications
General. Cable television systems receive video, audio and data signals
transmitted by nearby television and radio broadcast stations, terrestrial
microwave relay services and communications satellites. Such signals are then
amplified and distributed by coaxial cable and optical fiber to the premises of
customers who pay a fee for the service. In many cases, cable television systems
also originate and distribute local programming.
Cable operators use a combination of coaxial cable and optical fiber
for transmission of television signals to customers. Optical fiber is a
technologically advanced transmission medium capable of carrying cable
television signals via light waves generated by a laser. Optical fiber, when
used as an alternative to coaxial cable, can improve system reliability and
provide for additional capacity which should enable the provision of incremental
revenue-producing services.
At December 31, 1998, approximately 66% of TCI Group's cable television
systems had bandwidth capacities ranging from 450 megahertz to 750 megahertz.
The Company's cable television systems generally carry up to 78 analog channels.
Compressed digital video technology converts on average as many as twelve analog
signals (now used to transmit video and voice) into a digital format and
compresses such signals (which is accomplished primarily by eliminating the
redundancies in television imagery) into the space normally occupied by one
analog signal. The digitally compressed signal is uplinked to a satellite, which
retransmits the signal to a customer's satellite dish or to a cable system's
headend to be distributed, via optical fiber and coaxial cable, to the
customer's home. At the home, a set-top video terminal converts the digital
signal into analog channels that can be viewed on a normal television set.
TCI Group began offering digital cable television service to selected
markets in 1997. In February 1998, TCI Group initiated broader marketing efforts
intended to increase the number of digital cable television customers. Such
marketing efforts encompass multi-media, product enhancements, sales promotions
and sales incentives.
I-12
<PAGE> 14
Effective as of December 16, 1997, NDTC, on behalf of TCIC and other
cable operators that may be designated from time to time by NDTC, entered into
an agreement (the "Digital Terminal Purchase Agreement") with General Instrument
Corporation ("GI") to purchase advanced digital set-top devices. The hardware
and software incorporated into these devices are designed and manufactured to be
compatible and interoperable with the OpenCable(TM) architecture specifications
adopted by CableLabs, the cable television industry's research and development
consortium, in November 1997. NDTC has agreed that Approved Purchasers will
purchase, in the aggregate, a minimum of 6.5 million set-top devices during
calendar years 1998, 1999 and 2000 at an average price of $318 per set-top
device. Through December 31, 1998, approximately 1.6 million set-top devices had
been purchased pursuant to this commitment. GI agreed to provide NDTC and its
Approved Purchasers the most favorable prices, terms and conditions made
available by GI to any customer purchasing advanced digital set-top devices. In
connection with NDTC's purchase commitment, GI agreed to grant warrants to
purchase its common stock proportional to the number of devices ordered by each
organization, which as of the effective date of the Digital Terminal Purchase
Agreement, would have represented at least a 10% equity interest in GI (on a
fully diluted basis). Such warrants vest as annual purchase commitments are met.
On December 31, 1998, the Company vested in 4,928,000 warrants pursuant to such
arrangements. NDTC has the right to terminate the Digital Terminal Purchase
Agreement if, among other reasons, GI fails to meet a material milestone
designated in the Digital Terminal Purchase Agreement with respect to the
development, testing and delivery of advanced digital set-top devices.
Service Charges. TCI Group offers a limited "basic service"
("Basic-TV") (primarily comprised of local broadcast signals and public,
educational and governmental ("PEG") access channels) and an "expanded tier"
(primarily comprised of specialized programming services, in such areas as
health, family entertainment, religion, news, weather, public affairs,
education, shopping, sports and music). The monthly fee for basic service
generally ranges from $9.00 to $12.00, and the monthly service fee for the
expanded tier generally ranges from $13.00 to $19.00. TCI Group offers "premium
services" (referred to in the cable television industry as "Pay-TV" and
"pay-per-view") to its customers. Such services consist principally of feature
films, as well as live and taped sports events, concerts and other programming.
TCI Group offers Pay-TV services for a monthly fee generally ranging from $6.00
to $15.00 per service, except for certain movie services (such as certain Pay-TV
channels) offered at $1.00 to $2.00 per month, pay-per-view movies offered
separately at $1.00 to $4.00 per movie and certain pay-per-view events offered
separately at $6.00 to $50.00 per event. Charges are usually discounted when
multiple Pay-TV services are ordered. In most markets, customers may also elect
to subscribe to digital video services comprised of up to 36 additional video
and 10 additional audio channels featuring additional specialized programming
and premium services at an average incremental monthly charge of $10.
As further enhancements to their cable services, customers may
generally rent converters or converters with remote control devices for a
monthly charge ranging from $.71 to $3.50 each, as well as purchase a channel
guide for a monthly charge ranging from $1.35 to $3.00. Also a nonrecurring
installation charge (which is limited by rules of the FCC which regulate hourly
service charges for each individual cable system) ranging from $33.00 to $58.00
is usually charged.
Monthly fees for Basic-TV and Pay-TV services to commercial customers
vary widely depending on the nature and type of service. Except under the terms
of certain contracts to provide service to commercial accounts, customers are
free to discontinue service at any time without penalty.
I-13
<PAGE> 15
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") and the Telecommunications Act of 1996 (the "1996 Telecom
Act"), together with the 1992 Cable Act (the "Cable Acts"), established rules
under which TCI Group's basic service and expanded tier service rates and
equipment and installation charges are regulated if a complaint is filed or if
the appropriate franchise authority is certified. For additional information see
"Regulation and Legislation" below.
Customer Data. TCI Group operates its cable television systems either
through its operating divisions or through certain other subsidiaries of TCI
attributed to TCI Group. Domestic Basic-TV cable customers served by TCI Group
are summarized as follows (amounts in millions):
<TABLE>
<CAPTION>
Basic-TV customers at December 31,
---------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Managed through TCI Group's operating divisions 11.4 14.2 13.4 11.9 10.7
Other non-managed subsidiaries of TCI
attributed to TCI Group 0.5 0.2 0.5 0.6 0.5
------- ------- ------- ------- -------
11.9 14.4 13.9 12.5 11.2
======= ======= ======= ======= =======
</TABLE>
The decline in total Basic-TV customers between 1997 and 1998 is
attributable to the 1998 Contribution Transactions.
TCI Group had approximately 1 million digital customers at December 31,
1998.
TCI Group operates cable television systems throughout the United
States.
Local Franchises. Cable television systems generally are constructed
and operated under the authority of nonexclusive permits or "franchises" granted
by local and/or state governmental authorities. Federal law, including the Cable
Communications Policy Act of 1984 (the "1984 Cable Act") and the 1992 Cable Act,
limits the power of the franchising authorities to impose certain conditions
upon cable television operators as a condition of the granting or renewal of a
franchise.
Franchises contain varying provisions relating to construction and
operation of cable television systems, such as time limitations on commencement
and/or completion of construction; quality of service, including (in certain
circumstances) requirements as to the number of channels and broad categories of
programming offered to customers; rate regulation; provision of service to
certain institutions; provision of channels for public access and commercial
leased-use; and maintenance of insurance and/or indemnity bonds. TCI Group's
franchises also typically provide for periodic payments of fees, not to exceed
5% of revenue, to the governmental authority granting the franchise.
Additionally, many franchises require payments to the franchising authority for
the funding of PEG access channels. Franchises usually require the consent of
the franchising authority prior to a transfer of the franchise or a transfer or
change in ownership or operating control of the franchisee.
I-14
<PAGE> 16
Subject to applicable law, a franchise may be terminated prior to its
expiration date if the cable television operator fails to comply with the
material terms and conditions thereof. Under the 1984 Cable Act, if a franchise
is lawfully terminated, and if the franchising authority acquires ownership of
the cable television system or effects a transfer of ownership to a third party,
such acquisition or transfer must be at an equitable price or, in the case of a
franchise existing on the effective date of the 1984 Cable Act, at a price
determined in accordance with the terms of the franchise, if any.
In connection with a renewal of a franchise, the franchising authority
may require the cable operator to comply with different and more stringent
conditions than those originally imposed, subject to the provisions of the 1984
Cable Act and other applicable federal, state and local law. The 1984 Cable Act,
as supplemented by the renewal provisions of the 1992 Cable Act, establishes an
orderly process for franchise renewal which protects cable operators against
unfair denials of renewals when the operator's past performance and proposal for
future performance meet the standards established by the 1984 Cable Act. TCI
Group believes that its cable television systems generally have been operated in
a manner which satisfies such standards and allows for the renewal of such
franchises; however, there can be no assurance that the franchises for such
systems will be successfully renewed as they expire.
Most of TCI Group's present franchises had initial terms of
approximately 10 to 15 years. The duration of TCI Group's outstanding franchises
presently varies from a period of months to an indefinite period of time.
Approximately 1,090 of TCI Group's franchises expire within the next five years.
This represents approximately twenty-five percent of the franchises held by TCI
Group and involves approximately 4.6 million basic customers.
Competition. Cable television competes for customers in local markets
with other providers of entertainment, news and information. The competitors in
these markets include broadcast television and radio, newspapers, magazines and
other printed material, motion picture theatres, video cassettes and other
sources of information and entertainment including directly competitive cable
television operations and internet service providers. The Cable Acts are
designed to increase competition in the cable television industry. See
"Regulation and Legislation" below.
There are alternative methods of distributing the same or similar video
programming offered by cable television systems. Further, these technologies
have been encouraged by the United States Congress ("Congress") and the FCC to
offer services in direct competition with existing cable systems.
DBS. Direct broadcast satellite ("DBS") has emerged as the most
significant competition to cable television systems. Earlier direct-to-home
("DTH") satellite services required the subscriber to purchase a large and
expensive "dish" antenna, but newer medium and high powered alternatives
currently allow the subscriber to receive video services directly via satellite
using a relatively small dish. Moreover, digital compression technology allows
DBS providers to offer more than 100 digital channels, thereby surpassing the
typical cable system. DBS providers offer most of the same programming as cable
television, but also offer certain sports packages not currently available
through cable television systems. DBS currently faces technical and legal
obstacles to providing popular local broadcast signals, although at least one
DBS provider is now attempting to provide this programming in certain major
markets, and Congress and the FCC are considering proposals that would remove
existing legal obstacles. The DBS industry has grown rapidly over the last
several years and now serves approximately 9 million subscribers nationwide.
Recently announced mergers could strengthen the surviving DBS companies.
I-15
<PAGE> 17
Telephone Company Entry. The 1996 Telecom Act eliminated the statutory
and regulatory restrictions that prevented local telephone companies from
competing with cable operators for the provision of video services by any means.
See Regulation and Legislation below. The 1996 Telecom Act allows local
telephone companies, including the regional bell operating companies ("RBOCs"),
to compete with cable television operators both inside and outside their
telephone service areas. TCI Group expects that it could face competition from
telephone companies for the provision of video services, whether it is through
wireless cable, or through upgraded telephone networks. TCI Group assumes that
all major telephone companies have already entered or may enter the business of
providing video services. TCI Group is aware that telephone companies have
already built, or are in the process of building, competing cable system
facilities in a number of TCI Group's franchise areas. The 1992 Cable Act
ensures that telephone company providers of video services will have access to
acquiring all of the significant cable television programming services. The
specific manner in which telephone company provision of video services will be
regulated is described under "Regulation and Legislation" below.
Utility Company Entry. The 1996 Telecom Act eliminates certain federal
restrictions on utility holding companies and thus frees all utility companies
to provide cable television services. TCI Group expects this could result in
another source of competition in the delivery of video services. As an example,
in the Washington, D.C. metropolitan market, the local power utility has entered
into a partnership with an experienced cable television and open video system
company and is proposing to provide video and telecommunications services
throughout the Washington, D.C. metropolitan market.
MMDS/LMDS. Another alternative method of distribution is multi-channel
multi-point distribution systems ("MMDS"), which deliver programming services
over microwave channels received by customers with special antennas. MMDS
systems are less capital intensive, are not required to obtain local franchises
or pay franchise fees, and are subject to fewer regulatory requirements than
cable television systems. The 1992 Cable Act also ensures that MMDS operators
have the opportunity to acquire all significant cable television programming
services. Although there are relatively few MMDS systems in the United States
currently in operation, virtually all markets have been licensed or tentatively
licensed. Developments in digital compression technology will significantly
increase the number of channels that can be made available from MMDS. Finally,
an emerging technology, local multipoint distribution services ("LMDS"), could
also pose a significant threat to the cable television industry, if and when it
becomes established. LMDS, sometimes referred to as cellular television, could
have the capability of delivering more than 100 channels of video programming to
a customer's home. The potential impact of LMDS is difficult to assess due to
the recent development of the technology and the absence of any current
fully-operational LMDS systems.
Cable System Overbuilds. Cable operators may compete with other cable
operators or new entities seeking franchises for competing cable television
systems at any time during the terms of existing franchises. The 1992 Cable Act
promotes the granting of competitive franchises and TCI cable systems operate
under non-exclusive franchises. Recently, there has been a significant increase
in the number of cities that have constructed their own cable television systems
in a manner similar to city-provided utility services. These systems typically
will compete directly with the existing cable operator without the burdens of
franchise fees or other local regulation. Although the total number of municipal
overbuild cable systems remains relatively small, recent developments would
indicate an increasing trend in cities authorizing such direct municipal
competition with cable operators.
I-16
<PAGE> 18
Private Cable. TCI Group also competes with Satellite Master Antenna
Television ("SMATV") systems, which provide multichannel program services
directly to hotel, motel, apartment, condominium and similar multi-unit
complexes within a cable television system's franchise area, generally free of
any regulation by state and local governmental authorities. Further, the FCC in
1997, adopted new rules that restrict the ability of cable operators to maintain
ownership of cable wiring inside multi-unit buildings, thereby making it less
expensive for SMATV competitors to reach those customers. See "Regulation and
Legislation" below. Finally, the FCC in 1998 ruled that private cable operators
can lease video distribution capacity from local telephone companies and,
thereby, distribute cable programming services over the public rights-of-way
without obtaining a franchise. This could provide a significant regulatory
advantage for private cable operators in the future.
In addition to competition for customers, the cable television industry
competes with broadcast television, radio, the print media and other sources of
information and entertainment for advertising revenue. As the cable television
industry has developed additional programming, its advertising revenue has
increased. Cable operators sell advertising spots primarily to local and
regional advertisers.
TCI Group has no basis upon which to estimate the number of cable
television companies and other entities with which it competes or may
potentially compete. The full extent to which other media or home delivery
services will compete with cable television systems may not be known for some
time and there can be no assurance that existing, proposed or as yet undeveloped
technologies will not become dominant in the future.
Regulation and Legislation. The operation of cable television systems
is extensively regulated by the FCC, some state governments and most local
governments. On February 8, 1996, the President of the United States signed into
law the 1996 Telecom Act. This new law alters the regulatory structure governing
the nation's telecommunications providers. It removes barriers to competition in
both the cable television market and the local telephone market.
Among other things, it reduces the scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to implement numerous
rulemakings, the final outcome of which cannot yet be determined due to court
challenges. Moreover, Congress and the FCC have frequently revisited the subject
of cable television regulation and may do so again. Future legislative and
regulatory changes could adversely affect TCI Group's operations. This section
briefly summarizes key laws and regulations currently affecting the growth and
operation of TCI Group's cable systems.
Cable Rate Regulation. The 1992 Cable Act imposed extensive rate
regulation on the cable television industry. All cable systems are subject to
rate regulation of their basic and upper tier programming services, as well as
their provision of customer equipment used to receive basic tier services,
unless they face "effective competition" in their local franchise area. Under
the 1992 Cable Act, the incumbent cable operator can demonstrate effective
competition by showing either low penetration (less than 30% of the occupied
households in the franchise area subscribe to basic service), or the presence
(measured collectively as 50% availability, 15% customer penetration) of other
multichannel video programming distributors ("MVPDs"). The 1996 Telecom Act
expands the existing definition of effective competition to create a special
test for a competing MVPD (other than a DBS distributor) affiliated with a local
exchange carrier ("LEC"). There is no penetration minimum for a LEC affiliate to
qualify as an effective competitor, but it must offer comparable programming
services in the franchise area.
I-17
<PAGE> 19
Although the FCC establishes all cable rate rules, local government
units (commonly referred to as local franchising authorities or "LFAs") are
primarily responsible for administering the regulation of the lowest level of
cable -- the basic service tier ("BST"), which typically contains local
broadcast stations and PEG access channels. Before an LFA begins BST rate
regulation, it must certify to the FCC that it will follow applicable federal
rules, and many LFAs have voluntarily declined to exercise this authority. LFAs
also have primary responsibility for regulating cable equipment rates. Under
federal law, charges for various types of cable equipment must be unbundled from
each other and from monthly charges for programming services, and priced no
higher than the operator's actual cost, plus an 11.25% rate of return.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only if
an LFA first receives at least two complaints from local customers within 90
days of a CPST rate increase and then files a formal complaint with the FCC.
When new CPST rate complaints are filed, the FCC now considers only whether the
incremental increase is justified and will not reduce the previously established
CPST rate.
Under the FCC's rate regulations, TCI Group was required to reduce its
BST and CPST rates in 1993 and 1994, and has since had its rate increases
governed by a complicated price structure that allows for the recovery of
inflation and certain increased costs, as well as providing some incentive for
expanding channel carriage. The FCC has modified its rate adjustment regulations
to allow for annual rate increases and to minimize previous problems associated
with delays in implementing rate increases. Operators also have the opportunity
of bypassing this "benchmark" structure in favor of traditional cost-of-service
regulation in cases where the latter methodology appears favorable. However, the
FCC significantly limited the inclusion in the rate base of acquisition costs in
excess of the historical cost of tangible assets. As a result, TCI Group pursued
cost of service justifications in only a few cases. Premium cable services
offered on a per channel or per program basis remain unregulated, as do
affirmatively marketed packages consisting entirely of new programming product.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all
systems (regardless of size) on March 31, 1999. However, certain members of
Congress and FCC officials have called for the delay of this regulatory sunset
and further have urged more rigorous rate regulation (including limits on
programming cost pass-throughs to cable customers) until a greater degree of
competition to incumbent cable operators has developed. The 1996 Telecom Act
also relaxes existing uniform rate requirements by specifying that uniform rate
requirements do not apply where the operator faces effective competition, and by
exempting bulk discounts to multiple dwelling units ("MDUs"), although
complaints about predatory pricing in MDUs still may be made to the FCC.
I-18
<PAGE> 20
Cable Entry Into Telecommunications. The 1996 Telecom Act provides that
no state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way.
Although the 1996 Telecom Act clarifies that traditional cable franchise fees
may be based only on revenues related to the provision of cable television
services, it also provides that LFAs may require reasonable, competitively
neutral compensation for management of the public rights-of-way when cable
operators provide telecommunications service. The 1996 Telecom Act prohibits
LFAs from requiring cable operators to provide telecommunications service or
facilities as a condition of a franchise grant, renewal or transfer, except that
LFAs argue they can seek "institutional networks" as part of such franchise
negotiations. The favorable pole attachment rates afforded cable operators under
federal law can be increased by utility companies owning the poles during a five
year phase-in period beginning in 2001, if the cable operator provides
telecommunications service, as well as cable service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act intended to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. This requires, for
example, that the incumbent local telephone company must allow new competing
telecommunications providers to connect to the local telephone distribution
system. In a January 1999 decision, the United States Supreme Court upheld the
FCC's fundamental interconnection requirements. However, the court ordered the
FCC to reconsider to what extent the local telephone company must make available
for resale separate components of its local telephone system.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act
allows telephone companies to compete directly with cable operators by repealing
the historic telephone company/cable company cross-ownership ban and the FCC's
video dialtone regulations. This will allow LECs, including the RBOCs, to
compete with cable operators both inside and outside their telephone service
areas. Because of their resources, LECs could be formidable competitors to
traditional cable operators, and certain LECs have begun offering cable service.
Under the 1996 Telecom Act, a LEC or other entity providing video
programming to customers will be regulated as a traditional cable operator
(subject to local franchising and federal regulatory requirements), unless it
elects to provide its programming via an "open video system" ("OVS"). It was
anticipated that the primary benefit of using an OVS regulatory model was to
avoid the need to obtain a local franchise prior to providing services. However,
a January 1999 federal court of appeals decision held that OVS providers can be
required to obtain such a franchise. To be eligible for OVS status, the provider
cannot occupy more than one-third of the system's activated channels when demand
for channels exceeds supply. Nor can it discriminate among programmers or
establish unreasonable rates, terms or conditions for service.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibitions remain on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures among cable
operators and LECs in the same market. The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition.
I-19
<PAGE> 21
Electric Utility Entry Into Telecommunications/Cable Television. The
1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services, information services, and
other services or products subject to the jurisdiction of the FCC,
notwithstanding the Public Utilities Holding Company Act. Electric utilities
must establish separate subsidiaries, known as "exempt telecommunications
companies" and must apply to the FCC for operating authority. Again, because of
their resources, electric utilities could be formidable competitors to
traditional cable systems.
Additional Ownership Restrictions. Pursuant to the 1992 Cable Act, the
FCC adopted regulations establishing a 30% limit on the number of homes
nationwide that a cable operator may reach through cable systems in which it
holds an attributable interest with an increase to 35% if the additional cable
systems are minority controlled. The FCC stayed the effectiveness of its
ownership limits pending the appeal of a September 16, 1993 decision by the
United States District Court for the District of Columbia which, among other
things, found unconstitutional the provision of the 1992 Cable Act requiring the
FCC to establish such ownership limits. If the ownership limits are determined
on appeal to be constitutional, they may affect TCI Group's ability to acquire
attributable interests in additional cable systems. The FCC is currently
conducting a reconsideration of its national customer limit rules, and it is
possible the FCC will revise both the national customer reach percentage
limitation and/or the manner in which it attributes ownership to a cable
operator. Either of these revisions, which are expected to be completed in 1999,
could adversely affect various joint ventures, partnerships and equity ownership
arrangements announced by TCI Group in 1997 and 1998 in TCI Group's effort to
reduce the number of cable systems over which it has control and management
responsibility.
The FCC also adopted regulations limiting carriage by a cable operator
of national programming services in which that operator holds an attributable
interest (using the same attribution standards as were adopted for its limits on
the number of homes nationwide that a cable operator may reach through its cable
systems) to 40% of the activated channels on each of the cable operator's
systems. The rules provide for the use of two additional channels or a 45%
limit, whichever is greater, provided that the additional channels carry
minority controlled programming services. The regulations also grandfather
existing carriage arrangements which exceed the channel limits, but require new
channel capacity to be devoted to unaffiliated programming services until the
system achieves compliance with the regulations. These channel occupancy limits
apply only up to 75 activated channels on the cable system, and the rules do not
apply to local or regional programming services.
The 1996 Telecom Act eliminates statutory restrictions on
broadcast/cable cross-ownership (including broadcast network/cable
restrictions), but leaves in place existing FCC regulations prohibiting local
cross-ownership between television stations and cable systems. The 1996 Telecom
Act leaves in place existing restrictions on cable cross-ownership with SMATV
and MMDS facilities, but lifts those restrictions where the cable operator is
subject to effective competition. In January 1995, however, the FCC adopted
regulations which permit cable operators to own and operate SMATV systems within
their franchise area, provided that such operation is consistent with local
cable franchise requirements.
I-20
<PAGE> 22
Must Carry/Retransmission Consent. The 1992 Cable Act contains
broadcast signal carriage requirements that allow local commercial television
broadcast stations to elect once every three years between requiring a cable
system to carry the station ("must carry") or negotiating for payments for
granting permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect must carry, and more popular
stations typically elect retransmission consent. Must carry requests can dilute
the appeal of a cable system's programming offerings, and retransmission consent
demands may require substantial payments or other concessions (e.g. a
requirement that the cable system also carry the local broadcaster's affiliated
cable programming service). Either option has a potentially adverse effect on
TCI Group's business. The burden associated with must-carry obligations could
dramatically increase if television broadcast stations proceed with planned
conversions to digital transmissions and if the FCC determines in a pending
rulemaking that cable systems must carry all analog and digital signals
transmitted by the television stations. For more information see "LIBERTY MEDIA
GROUP - Regulation - Programming Companies" and " - Regulation of Carriage of
Broadcast Stations," below.
Access Channels. LFAs can include franchise provisions requiring cable
operators to set aside certain channels for PEG access programming. Federal law
also requires a cable system with 36 or more channels to designate a portion of
its activated channel capacity (either 10% or 15%) for commercial leased access
by unaffiliated third parties. The FCC has adopted rules regulating the terms,
conditions and maximum rates a cable operator may charge for use of this
designated channel capacity, but use of commercial leased access channels has
been relatively limited. In February of 1997, the FCC released revised rules
which mandated a modest rate reduction that has made commercial leased access a
more attractive option for third party programmers, particularly for part-time
leased access carriage.
"Anti-Buy Through" Provisions. Federal law requires each cable system
to permit customers to purchase premium or pay-per-view video programming
offered by the operator on a per-channel or a per-program basis without the
necessity of subscribing to any tier of service (other than the basic service
tier) unless the system's lack of addressable converter boxes or other
technological limitations does not permit it to do so. The statutory exemption
for cable systems that do not have the technological capability to comply
expires in October 2002, but the FCC may extend that period if deemed necessary.
Access to Programming. To spur the development of independent cable
programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes satellite video programmers affiliated with cable
operators from favoring cable operators over competing multichannel video
programming distributors (such as DBS and MMDS distributors). This provision
limits the ability of vertically integrated satellite cable programmers to offer
exclusive programming arrangements to TCI Group. Recently, both Congress and the
FCC have considered proposals that would expand the program access rights of
cable's competitors, including the possibility of subjecting both terrestrially
delivered video programming and video programmers who are not affiliated with
cable operators to all program access requirements. For more information see
"LIBERTY MEDIA GROUP - Regulation of Program Licensing," below.
I-21
<PAGE> 23
Inside Wiring. In a 1997 Order, the FCC established rules that require
an incumbent cable operator upon expiration or termination of an MDU service
contract to sell, abandon, or remove "home run" wiring that was installed by the
cable operator in a MDU building. These inside wiring rules will assist building
owners in their attempts to replace existing cable operators with new video
programming providers who are willing to pay the building owner a higher fee.
Additionally, the FCC has proposed abrogating all exclusive MDU contracts held
by cable operators, but at the same time allowing competitors to cable to enter
into exclusive MDU service contracts.
Internet Service Regulation. Although there is no significant federal
regulation of cable system delivery of internet services at the current time,
and the FCC recently issued a report to Congress finding no immediate need to
impose such regulation, this situation may change as cable systems expand their
broadband delivery of internet services. In particular, proposals have been
advanced at the FCC that would require cable operators to provide access to
unaffiliated internet service providers and online service providers. Certain
internet service providers also are attempting to use existing commercial leased
access provisions of the 1996 Telecom Act to gain access to cable system
delivery. Finally, some local franchising authorities are considering the
imposition of mandatory internet access requirements as part of cable franchise
renewals or transfer approvals.
Other FCC Regulations. In addition to the FCC regulations noted above,
there are other FCC regulations covering such areas as equal employment
opportunity, customer privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, and consumer electronics equipment compatibility. FCC requirements
imposed in 1997 for Emergency Alert Systems and for hearing-impaired Closed
Captioning on programming will result in new and potentially significant costs
for TCI Group. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.
The FCC recently completed a rulemaking designed to encourage and
facilitate third-party sale of cable converters to cable customers.
Specifically, the FCC requires cable operators to segregate security functions
of set top boxes from all other functions by July 1, 2000. Additionally, as of
January 1, 2005, cable operators can no longer lease or sell converter set top
boxes that have integrated security and navigation functions. The result of this
rulemaking is that cable subscribers will not necessarily obtain their set top
boxes from the cable operator, but, instead, may purchase such set top boxes
from third-party vendors. Such third-party sales of previously unmodified cable
set top boxes could make it more difficult for cable operators to combat theft
of service.
I-22
<PAGE> 24
Copyright. Cable television systems are subject to federal copyright
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenue to a federal copyright royalty pool (such percentage varies depending on
the size of the system and the number of distant broadcast television signals
carried), cable operators can obtain blanket permission to retransmit
copyrighted material on broadcast signals. The possible modification or
elimination of this compulsory copyright license is subject to continuing review
and could adversely affect TCI Group's ability to obtain desired broadcast
programming. In addition, the cable industry pays music licensing fees to
Broadcast Music, Inc. and is negotiating a similar arrangement with the American
Society of Composers, Authors and Publishers. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations. For
more information, see discussion under "LIBERTY MEDIA GROUP - Copyright
Regulations," below.
State and Local Regulation. Cable television systems generally are
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity. The 1996 Telecom Act clarified that the need
for an entity providing cable services to obtain a local franchise depends
solely on whether the entity crosses public rights of way. Federal law now
prohibits franchise authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises covering an existing cable
system's service area. Cable franchises generally are granted for fixed terms
and in many cases are terminable if the franchisee fails to comply with material
provisions. Non-compliance by the cable operator with franchise provisions may
also result in monetary penalties.
The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing cable operations, service rates, franchise fees, system construction
and maintenance obligations, system channel capacity, design and technical
performance, customer service standards, and indemnification protections. A
number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. Although LFAs have considerable
discretion in establishing franchise terms, there are certain federal
limitations. For example, LFAs cannot insist on franchise fees exceeding 5% of
the system's gross revenue, cannot dictate the particular technology used by the
system, and cannot specify video programming other than identifying broad
categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees and funding for PEG channels as a condition of renewal.
Similarly, if a franchise authority's consent is required for the purchase or
sale of a cable system or franchise, such authority may attempt to impose more
burdensome or onerous franchise requirements in connection with a request for
consent. Historically, franchises have been renewed for cable operators that
have provided satisfactory services and have complied with the terms of their
franchises.
Proposed Changes in Regulation. The regulation of cable television
systems at the federal, state and local levels is subject to the political
process and has been in constant flux over the past decade. Material changes in
the law and regulatory requirements must be anticipated and there can be no
assurance that TCI Group's business will not be affected adversely by future
legislation, new regulation or deregulation.
I-23
<PAGE> 25
LIBERTY MEDIA GROUP
On March 9, 1999, TCI combined the businesses and assets of Liberty
Media Group and of TCI Ventures Group in conjunction with the AT&T Merger.
Subsequent to the AT&T Merger, TCI does not have a controlling financial
interest in Liberty/Ventures Group and accordingly TCI will de-consolidate
Liberty/Ventures Group and will account for its investment in Liberty/Media
Group under the equity method. For more information, see "Business - General
Development of Business." The following information about Liberty Media Group is
dated as of March 1, 1999 and does not reflect the effects of the
Liberty/Ventures Combination.
Liberty Media Group, through Liberty Media Corporation, and its
attributed subsidiaries and affiliates, produces, acquires and distributes
entertainment, sports and informational programming services, as well as
electronic retailing services. Such programming is delivered via cable
television and other distribution technologies to viewers in the United States
and overseas. Liberty Media Group's assets also include video and telephony
distribution businesses which operate in countries outside the United States.
Liberty Media Group's principal assets include interests in Encore Media Group
LLC ("EMG"), Discovery Communications, Inc., ("Discovery") Fox/Liberty regional
and national sports networks, Time Warner Inc. ("Time Warner"), QVC, Inc.
("QVC"), and USA Networks, Inc. Liberty Media Group also has interests in
certain other domestic and international programming networks and businesses as
indicated on the table below. This table sets forth Liberty Media Group's
attributed programming interests which are held directly and indirectly through
partnerships, joint ventures, common stock investments and instruments
convertible or exchangeable into common stock. Ownership percentages in the
table are approximate, calculated as of March 1, 1999 and, where applicable and
except as otherwise noted, assume conversion to common equity by Liberty Media
Group and, to the extent known by Liberty Media Group, other holders. In some
cases, Liberty Media Group's interest may be subject to buy/sell procedures,
repurchase rights or, under certain circumstances, dilution.
I-24
<PAGE> 26
<TABLE>
<CAPTION>
ATTRIBUTED
SUBSCRIBERS AT OWNERSHIP
12/31/98 YEAR INTEREST AT
ENTITY (000's) LAUNCHED 3/1/99
------ ------- -------- ------
<S> <C> <C> <C> <C>
ENTERTAINMENT AND INFORMATION
Encore Media Group LLC 100%
Encore 12,671 1991
MOVIEplex 7,473 1995
Thematic Multiplex (aggregate units) 17,854 1994
Love Stories
Westerns
Mystery
Action
True Stories
WAM! Americas Kidz Network
STARZ! 8,779 1994
STARZ!2 4,386 1996
BET Movies/STARZ!3 359 1997 88%
ACTV, Inc. (Nasdaq: IATV) N/A 8%
Bay TV 1994 49%
BET Holdings II, Inc. 35%
BET Cable Network 56,002 1980
BET Action Pay-Per-View 10,800(1) 1990
BET on Jazz 4,000 1996
Canales n (2) 1998 100%
Court TV 31,432 1991 50%
Discovery Communications, Inc. 49%
Discovery Channel 75,481 1985
The Learning Channel 67,749 1980
Discovery Travel Channel 21,355 1987 35%
Animal Planet 44,839 1996 40%
Animal Planet Asia 353 1998 25%
Animal Planet Europe 6,748 1998
Animal Planet Latin America 3,342 1998 25%
Discovery People 8,900
Discovery Science (2) 1996
Discovery Civilization (2) 1996
Discovery Travel & Living (2) 1996
Discovery Kids (2) 1996
Discovery Health (2) 1998
Discovery Wings (2) 1998
Discovery Asia 23,207 1994
Discovery India 9,500 1996
Discovery Japan 840 1996 29%(3)
Discovery Europe 16,882 1989
Discovery Germany 284 1996 25%
Discovery Italy/Africa 736 1996
Discovery Latin America 10,146 1996
Discovery Latin America Kids Network 6,163 1996
People & Arts (Latin America) 7,622 1995 25%
Discovery Channel Online Online 1995
</TABLE>
I-25
<PAGE> 27
<TABLE>
<CAPTION>
ATTRIBUTED
SUBSCRIBERS AT OWNERSHIP
12/31/98 YEAR INTEREST AT
ENTITY (000's) LAUNCHED 3/1/99
------ ------- -------- ------
<S> <C> <C> <C> <C>
ENTERTAINMENT AND INFORMATION (Continued)
E! Entertainment Television 53,707 1990 10%
Fox Kids Worldwide, Inc. (4)
Health TV 20 1997 100%
Kaleidoscope 8,141 1995 12%
Recovery Net Online 1997 50%
International Channel 7,778 1990 90%
MacNeil/Lehrer Productions N/A N/A 67%
Odyssey 28,700 1988 33%
TCI Music, Inc. (Nasdaq: TUNE/TUNEP)
Digital Music Express 4,234(5) 1991 86%
THE BOX 31,689 1985
THE BOX SET 771 1997
THE BOX--International Services 25,707
SonicNet Online 1997
Addicted to Noise Online 1997
Streamland Online 1997
Telemundo Network (6) 50%
Telemundo Station Group (7) 25%
Time Warner Inc. (NYSE: TWX) 9%
Time Warner/Turner Programming Services(8)
USA Networks, Inc. (Nasdaq: USAI) 21% (9)
HSN 69,325 (10) 1985
America's Store 9,500 (10) 1986
ISN Online 1995
HSN en Espanol 2,500 1998 11%
HOT (Germany) 16,100 1995 9%
Shop Channel (Japan) 4,375 1996 11% (11)
SciFi Channel 52,551 1992
USA Network 75,115 1980
Ticketmaster N/A
Studios USA N/A
USA Broadcasting 37,025 (12) 1986
TV Guide, Inc. (f/k/a United Video Satellite
Group, Inc.)
(Nasdaq: TVGIA) N/A 17% (13)
TV Guide Channel 49,211 1988
Sneak Prevue 34,983 1991
TV Guide Magazine
TV Guide Online Online
Superstar/Netlink Group LLC 1,155 N/A 35%
UVTV 54,869 (14)
</TABLE>
I-26
<PAGE> 28
<TABLE>
<CAPTION>
ATTRIBUTED
SUBSCRIBERS AT OWNERSHIP
12/31/98 YEAR INTEREST AT
ENTITY (000's) LAUNCHED 3/1/99
------ ------- -------- ------
<S> <C> <C> <C> <C>
QVC, Inc. 43%
QVC Network 64,201 1986
QVC-The Shopping Channel (UK) 7,050 1993
QVC-Germany 12,797 1996
iQVC Online 1995
SPORTS SERVICES
Regional Sports Networks
Fox Sports Arizona 1,112 1996 50%
Fox Sports Bay Area 2,824 1990 35%
Fox Sports Chicago 3,125 1984 35%
Fox Sports Cincinnati 2,447 1989 20%
Fox Sports Detroit 2,315 1984 50%
Fox Sports Intermountain West 624 1990 50%
Fox Sports Midwest 1,528 1989 50%
Fox Sports New England 3,060 1984 20%
Fox Sports New York 4,315 1982 19%
Fox Sports Northwest 2,146 1988 50%
Fox Sports Ohio 2,082 1989 20%
Fox Sports Pittsburgh 2,009 1985 50%
Fox Sports Rocky Mountain 2,060 1988 50%
Fox Sports South 6,274 1990 44%
Fox Sports Southwest 5,081 1983 50%
Fox Sports West 4,034 1985 50%
Fox Sports West 2 2,467 1997 50%
Home Team Sports 4,000 1984 17%
MSG Network 6,789 1969 19%
SportsChannel Florida 2,964 1993 6%
Sunshine Network 3,848 1988 27%
Metro Learning 2,082 1998 20%
Metro Guide 2,082 1998 20%
Metro Traffic 2,082 1998 20%
National Sports Networks
FiT TV 8,300 1993 45%
Fox Sports World Espanol (US) 2,270 1993 29% (15)
Fox Sports Direct 4,366 1989 50%
Fox Sports Net 62,034 1996 25%
FX 38,101 1994 50%
Outdoor Life 16,976 1995 17%
Speedvision 17,122 1995 17%
International Sports Programming
Fox Sports Americas (Latin America) 8,865 1995 29% (15)
Fox Sports World 1,712 1997 29% (15)
Fox Sports Middle East 96 1998 29% (15)
</TABLE>
I-27
<PAGE> 29
<TABLE>
<CAPTION>
ATTRIBUTED
SUBSCRIBERS AT OWNERSHIP
12/31/98 YEAR INTEREST AT
ENTITY (000's) LAUNCHED 3/1/99
------ ------- -------- ------
<S> <C> <C> <C> <C>
SPORTS SERVICES (Continued)
STAR TV(16) 220,000 (16) 4% (17)
Torneos y Competencias, SA. (Argentina) N/A 23% (17)
J-Sports (Japan) N/A 1998 39% (18)
Other
New York Knicks 19%
New York Rangers 19%
Madison Square Garden Arena 19%
Radio City Music Hall 19%
Pepsi Center 7%
Colorado Avalanche 7% (19)
Denver Nuggets 7% (19)
Staples Center 20%
INTERNATIONAL PROGRAMMING, CABLE & TELEPHONY
Tele-Communications International, Inc.
N/A N/A 15% (20)
</TABLE>
- ----------
(1) Number of subscribers to whom service is available.
(2) Digital services. Subscriber information not currently available.
(3) Jupiter Programming Co., Ltd. ("Jupiter Programming"), of which TINTA
owns 50%, has a 50% interest in Discovery Japan.
(4) Liberty's interest consists of shares of 30-year 9% preferred stock
which have a stated aggregate value of $345 million and are not
convertible into common stock.
(5) Includes residential and commercial addressable digital cable and
direct broadcast satellite subscribers.
(6) Telemundo Network is a 24-hour broadcast network serving 61 markets in
the United States, including the 37 largest Hispanic markets.
I-28
<PAGE> 30
(7) Telemundo Station Group, Inc. owns and operates seven full power
broadcast stations serving the seven largest Hispanic markets in the
United States.
(8) Includes CNN, Cartoon Network, Headline News, TNT, Turner Classic
Movies, TBS Superstation, CNNfn, CNN/SI, CNN International, TNT Latin
America, Cartoon Network Latin America, TNT & Cartoon Network Europe,
TNT and Cartoon Network Asia, HBO, Cinemax, Comedy Central, HBO Ole,
HBO Asia, TVKO and WB Television Network. Following consummation of the
Time Warner/Turner Broadcasting System, Inc. ("TBS") merger (the
"TBS/Time Warner Merger") on October 10, 1996, Liberty Media Group is
no longer reporting subscriber numbers for these programming services.
(9) Liberty Media Group owns direct and indirect interests in various USA
Networks, Inc. ("USAi") and Home Shopping Network, Inc. ("HSN")
securities which may be exchanged for USAi common stock. Assuming the
exchange of such securities and the exchange of certain securities
owned by Universal Studios, Inc. and certain of its affiliates for USAi
common stock, Liberty Media Group would own approximately 21% of USAi.
(10) Includes broadcast households and cable subscribers.
(11) Jupiter Programming holds a 70% interest in Shop Channel.
(12) Number of television households in areas of USA Broadcasting's owned
and operated broadcast stations.
(13) The TCI Ventures Group owns an approximate 27% equity interest and a
32% voting interest in TV Guide, Inc.
(14) Aggregate number of subscribers to WGN, KTLA and WPIX, three
"Superstations" and 6 Denver broadcast stations marketed and
distributed by UVTV.
(15) Held by a 50/50 joint venture between News Corp. and a 50/50 joint
venture between Liberty Media Group and TINTA ("Liberty/TINTA").
(16) "STAR TV" is a satellite-delivered television platform. Programming
services on STAR TV'S platform include STAR Sports, STAR Plus, Phoenix
Chinese Channel, STAR Movies and ZEE TV, among others. STAR TV reaches
approximately 220 million people in Asia, India and the Middle East.
(17) Held by Liberty/TINTA. The ownership interest in the table reflects
only the attributed interest of Liberty Media Group.
(18) The remaining interest is held by Jupiter Programming.
(19) Interests represent rights to receive payments equal to approximately
6.5% of distributions by, and approximately 6.5% of proceeds from the
sale of, the entities owning the Colorado Avalanche and the Denver
Nuggets, rather than ownership interests in those entities.
(20) The remaining interest in TINTA is attributed to the TCI Ventures
Group.
I-29
<PAGE> 31
Cable television networks distribute their programming via cable and
other distribution technologies, including DTH companies, broadcast television
stations, SMATV systems, MMDS, and the internet. Both basic cable networks and
pay television programming services generally enter into separate multi-year
agreements, known as "affiliation agreements," with operators of cable
television systems, SMATV systems, MMDS and DTH distribution companies that have
agreed to carry such networks. With the proliferation of new cable networks and
services, competition for cable carriage on the limited available channel
capacity has intensified. Basic cable networks generate their revenue
principally from the sale of advertising time on the networks and from receipt
of monthly per subscriber fees paid by cable operators, DTH distribution
companies and other customers, who have contracted to receive and distribute
such networks. Pay-TV networks do not sell advertising and generate their
revenue principally from monthly subscriber fees.
Relationship with TCI Group. Most of the networks affiliated with
Liberty Media Group have entered into affiliation agreements with Satellite
Services, Inc. ("SSI") a company within TCI Group. SSI purchases programming
services from programming suppliers and then makes such services available to
cable television systems owned by or affiliated with TCI Group ("SSI
Affiliates"). Customers served by SSI Affiliates ("SSI Subscribers") represented
approximately 24% of U.S. households which received cable or satellite delivered
programming at December 31, 1998. The following details each national network
which had a number of SSI Subscribers, as a percentage of total subscribers, in
excess of 24% as of December 31, 1998: FX (28%), Fox Sports World (64%), Fox
Sports World Espanol (35%), and International Channel (26%). Regional networks,
such as Bay TV and the regional sports networks may be disproportionately
dependent on the predominant cable provider in their region, whether an SSI
Affiliate or an unaffiliated cable operator. Therefore, where an SSI Affiliate
is the predominant cable provider in the region, the ratio of SSI Subscribers to
overall subscribers to such networks significantly exceeds 24%. For example, at
December 31, 1998, approximately 87% of the subscribers of Bay TV, a regional
network for the San Francisco region, were SSI Affiliates. Each of EMG and TCI
Music, Inc. ("TCI Music") has entered into long term, fixed rate affiliation
agreements with TCI Group pursuant to which TCI Group pays monthly fixed amounts
in exchange for unlimited access to certain programming services of such
companies. For the year ended December 31, 1998, such fixed rate affiliation
fees represented approximately 41% and 24% of the total revenues of EMG and TCI
Music, respectively.
Description of Liberty Media Group
The principal assets attributed to Liberty Media Group are described in
greater detail below.
Programming Services
Encore Media Group LLC. EMG provides 25 channels of cable and
satellite-delivered premium movie services, including Encore, which
predominantly airs hit movies from the `60's, `70's and `80's as well as first
run movies; six thematic multiplexed channels--Love Stories, Westerns, Mystery,
Action, True Stories and WAM!, a 24-hour youth oriented education and
entertainment service; STARZ! a first-run movie service; STARZ!2, offering
"prime time movies all the time," and BET Movies/STARZ!3 featuring African
American actors and directors. EMG also offers MOVIEplex, a "theme by day"
channel featuring a different Encore or thematic multiplex channel each day, on
a weekly rotation.
I-30
<PAGE> 32
Discovery Communications, Inc. Discovery is the largest originator of
documentary, non-fiction programming in the world. Discovery operates several
business units. The first of these, Discovery Networks, US, consists of four
basic cable networks: Discovery Channel, The Learning Channel, Animal Planet,
and the recently acquired Travel Channel, and six networks created for the
digital platform: Discovery Science, Discovery Civilization, Discovery Home &
Leisure, Discovery Kids, Discovery Health and Discovery Wings. Discovery Channel
and The Learning Channel provide nature, science, technology and other
non-fiction programming, and are distributed in virtually all U.S.
pay-television homes. Animal Planet offers a range of animal programming,
including children's programs, game shows, feature films, wildlife documentaries
and how-to pet shows.
Discovery Networks International distributes various Discovery networks
in Latin America, Europe, Asia and Africa. Discovery's international networks
serve more than 66 million customers in more than 50 countries outside the
United States. Discovery Retail operates over 115 retail stores in the United
States and the United Kingdom. These include The Nature Company stores,
Discovery Channel Stores and one Discovery Channel Destination flagship store.
Discovery also markets and distributes BBC America, which launched in March
1998. Discovery recently purchased Eye on People, a 24-hour cable channel
focused on people and personalities, from CBS Corporation.
Time Warner Inc. Time Warner has interests in four fundamental areas of
business: Entertainment, consisting primarily of interests in filmed
entertainment, television production, television broadcasting, recorded music
and music publishing; Cable Networks, consisting principally of interests in
cable television programming; Publishing, consisting principally of interests in
magazine publishing, book publishing and direct marketing; and Cable, consisting
principally of interests in cable television systems. Time Warner is a holding
company which derives its operating income and cash flow from its investments in
its direct subsidiaries, Time Warner Companies, Inc. and TBS.
In connection with the TBS/Time Warner Merger in which Liberty Media
Group received Time Warner common shares, Time Warner, TBS, TCI and Liberty
Media Group entered into an Agreement Containing Consent Order with the Federal
Trade Commission ("FTC"), dated August 14, 1996, as amended on September 4, 1996
(the "FTC Consent Decree"). Pursuant to the FTC Consent Decree, among other
things, Liberty Media Group agreed to exchange its shares of Time Warner common
stock for shares of a separate series of Time Warner common stock with limited
voting rights designated as Series LMCN-V common stock (the "TW Exchange
Stock"). The TW Exchange Stock entitles the holder to one one-hundredth
(1/100th) of a vote for each share with respect to the election of directors.
Liberty Media Group holds approximately 114 million shares of the TW Exchange
Stock, which represent less than 1% of the voting power of Time Warner's
outstanding common stock. Each share of TW Exchange Stock is exchangeable, under
certain circumstances, for one share of Time Warner common stock.
ACTV, Inc. On September 21, 1998 Liberty Media Group purchased a 7.5%
interest in ACTV, Inc., a company which produces tools for the creation of
programming that allows viewer participation for both television and internet
platforms.
I-31
<PAGE> 33
BET Holdings II, Inc. ("BET") BET's primary operations are conducted by
BET Cable Network, an advertiser-supported basic cable network which provides a
broad mix of music videos, off-network situation comedies and original
programming targeted to the interests and concerns of African-American viewers.
BET also operates BET on Jazz featuring jazz concerts and music videos, as well
as BET Action Pay-Per-View, which distributes films produced by major studios
and independent film companies. In addition, BET has interests in magazine and
book publishing, as well as motion picture production.
Court TV. Court TV is a basic cable network which provides live and/or
tape delayed coverage and analysis of selected criminal and civil legal
proceedings.
TCI Music, Inc. TCI Music is a diversified music entertainment company
delivering audio and video music services to commercial and residential
customers via television, the internet and other distribution technologies. TCI
Music's principal services include THE BOX, an interactive all music video
channel; Digital Music Express, a premium digital audio music service; and
SonicNet, a leading music site on the internet.
E! Entertainment Television. E! Entertainment Television is a 24-hour
basic cable network devoted to the world of celebrities and entertainment. The
network's programming mix includes entertainment news reports, original
programs, and exclusive live coverage of major awards shows and celebrity
events.
International Cable Channels Partnership, Ltd. ("ICCP") ICCP
distributes and markets ethnic programming in the United States. Its basic
network, International Channel, provides news, sports, music, movies and general
entertainment programming from around the world in more than 20 different
languages. ICCP also operates Premium Networks, a digital tier of
single-language channels, such as Chinese and French. In addition, ICCP markets
and distributes Canales n, a newly launched digital tier of Spanish-language
cable television channels designed to serve the growing Latino market in the
United States.
Odyssey. Odyssey, a national basic cable network, provides viewers with
non-denominational religious and values-based entertainment and informational
programming. Hallmark Entertainment and The Jim Henson Company, both leaders in
the production of family entertainment, recently invested in Odyssey, reducing
Liberty Media Group's ownership interest from 49% to approximately 33%. Both
Hallmark Entertainment and The Jim Henson Company will make their programming
available to Odyssey.
MacNeil/Lehrer Productions. MacNeil/Lehrer Productions is the primary
producer of the News Hour on the Public Broadcasting System and a producer of
other high-quality documentary and public affairs programming.
TV Guide, Inc. (formerly United Video Satellite Group, Inc.) is a media
and communications company engaged predominantly in providing print, passive and
interactive program listings guides to households, distributing superstation
programming to cable television systems and DTH satellite providers, and
marketing satellite delivered programming to C-band satellite dish owners.
I-32
<PAGE> 34
On March 1, 1999, UVSG acquired Liberty Media Group's 40% interest in
Superstar/Netlink Group LLC ("SNG"), and Liberty Media Group's 100% interest in
Netlink USA in exchange for 12,750,000 shares of UVSG Class B Common Stock (the
"Netlink Transaction"). As a result of the Netlink Transaction, UVSG owns
approximately 80% of SNG which markets packages of satellite entertainment
programming to C-band satellite dish owners in North America. Netlink USA
uplinks the signals of six broadcast television stations to C-band packagers
such as SNG.
On the same date, UVSG acquired from TVG Holdings, Inc., an indirect
subsidiary of News Corp., the stock of News America Publications, Inc. and TVSM,
Inc. (the "TV Guide Transaction"). These entities publish TV Guide Magazine and
other printed television program listings guides and distribute, through the
internet, an entertainment service known as TV Guide Online. News Corp. received
consideration consisting of approximately 22.5 million shares of UVSG Class A
common stock, approximately 37.5 million shares of UVSG Class B common stock and
$800 million in cash. News Corp. then elected to purchase approximately 6.5
million additional shares of UVSG Class A Common Stock for approximately $129
million in cash to equalize its ownership with that of TCI.
Upon closing of the foregoing transactions, UVSG's name was changed to
TV Guide, Inc. TCI and News Corp. each owned approximately 44% of the issued and
outstanding common stock of UVSG and each owned approximately 49% of the total
voting power of UVSG. TCI's entire interest in UVSG is attributed to Liberty
Media Group and TCI Ventures Group.
USA Networks, Inc. USAi, formerly known as HSN, Inc., is a diversified
media and electronic commerce company that is engaged in five principal areas of
business: HSN, which primarily engages in the electronic retailing business;
Networks and television production, which operates the USA Network, a general
entertainment basic cable television network, and The Sci-Fi Channel, which
features classic science fiction movies, science fact, fiction, movies and
original production; Studios USA, which produces and distributes television
programming; USA Broadcasting, which owns and operates a group of UHF and low
power television stations; Ticketmaster Group, Inc., which is the leading
provider of automated ticketing services in the United States; and internet
services.
Liberty Media Group's interest in USAi consists of shares of USAi
common stock held by Liberty Media Group and its subsidiaries, shares of USAi
common stock held by certain entities in which Liberty Media Group has an equity
interest but only limited voting rights, and securities of certain subsidiaries
of USAi which are exchangeable for shares of USAi common stock. In general,
until the occurrence of certain events and with the exception of certain
negative controls, Mr. Barry Diller has voting power over Liberty Media Group's
interest in USAi.
Fox Sports Networks. In April 1996, Liberty Media Group and News Corp.,
formed Fox/Liberty Networks ("Fox Sports"), a joint venture to hold Liberty
Media Group's national and regional sports networks and the FX network. In
December 1997, Fox Sports completed a series of transactions (the "Rainbow
Transactions") with Rainbow Media Sports Holdings, Inc. ("Rainbow") in which Fox
Sports acquired a 40% interest in Rainbow's eight regional sports networks, the
Madison Square Garden entertainment complex, Radio City Productions LLC, the New
York Rangers, a professional hockey team, and the New York Knicks, a
professional basketball team. As of December 31, 1998, Fox Sports owned
interests in, or was affiliated with, 24 regional sports networks, 17 of which
operate under the Fox Sports name. These regional sports networks have rights to
telecast live games of professional sports teams in the National Basketball
Association, the National Hockey League and/or Major League Baseball, and
numerous collegiate sports teams.
I-33
<PAGE> 35
As part of the Rainbow Transaction, Fox Sports and Rainbow established
a 50-50 partnership to operate Fox Sports Net, which provides affiliated
regional sports networks, 24 hours per day, with national sports programming to
supplement their regional sports offerings. Fox Sports Net features live and
replayed sporting events, as well as other original sports programming,
including a national sports news program, Fox Sports News. Fox Sports and
Rainbow also established a national advertising representative firm to sell
advertising time during both the regional affiliates' local programming and
national network programming provided by Fox Sports Net.
Fox Sports also operates several national networks in addition to Fox
Sports Net, including FX, a general entertainment network which also carries
various sporting events; FiT TV, which features health and fitness programming;
Speedvision, which provides coverage of the automotive, motorcycle, aviation and
marine industries; and Outdoor Life Network, which is devoted to adventure,
wildlife and environmental issues and the outdoor lifestyle.
At the international level, Liberty Media Group and TINTA formed a
joint venture with News Corp. to hold their international sports interests.
These include Fox Sports World Espanol, a Spanish language sports network,
distributed in the United States and in Latin America, and STAR TV, a
satellite-delivered programming platform available to 220 million viewers in
Asia, India and the Middle East. Outside of the venture with News Corp., Liberty
Media Group and TINTA own an interest in J-Sports, a sports network in Japan
featuring coverage of SUMO wrestling, soccer, baseball and other international
sporting events; and Torneos y Competencias S.A. ("TyC"), Argentina's dominant
sports programming service. TyC also owns an interest in Canal 9, a general
entertainment broadcast channel in Buenos Aires, Argentina which has become an
international superchannel, providing programming to the United States and, via
cable, to outlying areas of Argentina.
The sports programming networks typically enter into rights agreements
with one or more professional sports teams in their regions and acquire rights
to collegiate and other sporting events through arrangements with regional
conferences, individual schools, programming syndicators and event organizers.
Fox Sports also acquires national rights agreements with professional leagues,
such as Major League Baseball, and with regional collegiate conferences.
Programming acquired under national rights agreements may be exhibited on Fox
Sports Net and FX in addition to the regional sports networks. The duration of
the rights agreements with the professional teams ranges from one to 20 years.
The rights agreements for collegiate sporting events typically range from two to
10 years. Certain factors such as player strikes, bankruptcy of leagues or
individual teams or team relocations may have an adverse effect on the revenue
of the regional sports networks.
Telemundo. On August 12, 1998, Liberty Media Group, in a 50-50
partnership with Sony Pictures Entertainment, acquired 100% of the Telemundo
network and approximately 50% of the Telemundo station group. The Telemundo
network is a broadcast network which provides 24-hour Hispanic language
programming to 61 markets in the United States, including the 37 largest
Hispanic markets, and reaches approximately 85% of all Hispanic households in
the United States. The Telemundo station group owns and operates eight full
power UHF stations and 15 low power television stations serving some of the
largest Hispanic markets in the United States and Puerto Rico. While Liberty
Media Group has approximately a 25% interest in the Telemundo station group, its
voting power is less than 5% to meet certain regulatory requirements.
I-34
<PAGE> 36
Electronic Retailing. Liberty Media Group has significant investments
in the two largest home shopping companies in the United States--QVC and HSN.
These companies market and sell a wide variety of consumer products and services
primarily by means of televised shopping programs on the QVC and HSN networks
and via the Internet through iQVC and Internet Shopping Network. QVC also
operates shopping networks in the United Kingdom and Germany, while HSN operates
home shopping networks in Japan and Germany.
TINTA. On November 19, 1998 TINTA completed its merger with a wholly
owned subsidiary of TCI and, as a result, TCI now owns 100% of TINTA. Prior to
the TINTA Merger TCI Ventures Group owned approximately 83% of TINTA's Series A
common stock and all of TINTA's Series B common stock. Following the TINTA
Merger, approximately 85% of TINTA was attributed to TCI Ventures Group and 15%
was attributed to Liberty Media Group. See "TCI VENTURES GROUP Description of
TCI Ventures Group" for more details on the business of TINTA.
Regulation-Programming Companies
The FCC regulates the providers of satellite communications services
and facilities for the transmission of programming services, the cable
television systems that carry such services, and, to some extent, the
availability of the programming services themselves through its regulation of
program licensing. Cable television systems are also regulated by municipalities
or other state and local government authorities. Continued rate regulation or
other franchise conditions could place downward pressure on subscriber fees
earned by the programming companies described above in which Liberty Media Group
has interests (the "Programming Companies") and regulatory carriage requirements
could adversely affect the number of channels available to carry the Programming
Companies. For more information on rate regulation, see "TCI GROUP - Regulation
and Legislation" and " - Cable Rate Regulations," above.
Regulation of Program Licensing. The 1992 Cable Act directed the FCC to
promulgate regulations regarding the sale and acquisition of cable programming
between multi-channel video programming distributors (including cable operators)
and satellite-delivered programming services in which a cable operator has an
attributable interest. The legislation and the implementing regulations adopted
by the FCC preclude virtually all exclusive programming contracts between cable
operators and satellite programmers affiliated with any cable operator (unless
the FCC first determines the contract serves the public interest) and generally
prohibit a cable operator that has an attributable interest in a satellite
programmer from improperly influencing the terms and conditions of sale to
unaffiliated multi-channel video programming distributors. Further, the 1992
Cable Act requires that such affiliated programmers make their programming
services available to cable operators and competing multi-channel video
programming distributors such as MMDS and direct broadcast satellite
distributors on terms and conditions that do not unfairly discriminate among
such distributors. The 1996 Telecom Act has extended these rules to programming
services in which telephone companies and other common carriers have
attributable ownership interests. The FCC recently revised its program licensing
rules, by implementing a damages remedy in situations where the defendant
knowingly violates the regulations and by establishing a timeline for the
resolution of such complaints, among other things.
Regulation of Carriage of Programming. Under the 1996 Telecom Act, the
FCC has adopted regulations prohibiting cable operators from requiring a
financial interest in a programming service as a condition to carriage of such
service, coercing exclusive rights in a programming service or favoring
affiliated programmers so as to restrain unreasonably the ability of
unaffiliated programmers to compete.
I-35
<PAGE> 37
Regulation of Ownership. The 1992 Cable Act required the FCC, among
other things, (a) to prescribe rules and regulations establishing reasonable
limits on the number of channels on a cable system that will be allowed to carry
programming in which the owner of such cable system has an attributable interest
and (b) to consider the necessity and appropriateness of imposing limitations on
the degree to which multi-channel video programming distributors (including
cable operators) may engage in the creation or production of video programming.
In 1993, the FCC adopted regulations limiting carriage by a cable operator of
national programming services in which that operator holds an attributable
interest to 40% of the first 75 activated channels on each of the cable
operator's systems. The rules provide for the use of two additional channels or
a 45% limit, whichever is greater, provided that the additional channels carry
minority-controlled programming services. The regulations also grandfather
existing carriage arrangements that exceed the channel limits, but require new
channel capacity to be devoted to unaffiliated programming services until the
system achieves compliance with the regulations. These channel occupancy limits
apply only up to 75 activated channels on the cable system, and the rules do not
apply to local or regional programming services. These rules may limit carriage
of the Programming Companies on certain systems of affiliated cable operators.
In the same rulemaking, the FCC concluded that additional restrictions on the
ability of multi-channel distributors to engage in the creation or production of
video programming were then unwarranted.
Regulation of Carriage of Broadcast Stations. The 1992 Cable Act
granted broadcasters a choice of must carry rights or retransmission consent
rights. The rules adopted by the FCC generally provided for mandatory carriage
by cable systems of all local full-power commercial television broadcast signals
selecting must carry rights and, depending on a cable system's channel capacity,
non-commercial television broadcast signals. Such statutorily mandated carriage
of broadcast stations coupled with the provisions of the 1984 Cable Act, which
require cable television systems with 36 or more "activated" channels to reserve
a percentage of such channels for commercial use by unaffiliated third parties
and permit franchise authorities to require the cable operator to provide
channel capacity, equipment and facilities for PEG access channels, could
adversely affect some or substantially all of the Programming Companies by
limiting the carriage of such services in cable systems with limited channel
capacity. The FCC recently initiated a proceeding asking to what extent cable
operators must carry all digital signals transmitted by broadcasters. The
imposition of such additional must carry regulation, in conjunction with the
current limited cable system channel capacity, would make it likely that cable
operators will be forced to drop cable programming services, which may have an
adverse impact on the Programming Companies' programming interests.
Closed Captioning Regulation. The 1992 Cable Act also required the FCC
to establish rules and an implementation schedule to ensure that video
programming is fully accessible to the hearing impaired through closed
captioning. The rules adopted by the FCC will require substantial closed
captioning over an eight to 10 year phase-in period with only limited
exemptions. As a result, the Programming Companies are expected to incur
significant additional costs for closed captioning.
I-36
<PAGE> 38
Copyright Regulation. Under regulations adopted by the Copyright
Office, satellite carriers such as Netlink USA are not "cable systems" within
the meaning of the Copyright Revision Act of 1976 as amended. Accordingly,
satellite carriers are not permitted to provide superstation or network station
broadcast signals to home satellite dish owners under the separate compulsory
license extended to cable systems. Instead, Congress granted a statutory
copyright license to satellite carriers retransmitting the broadcast signals of
"superstations," such as KWGN and WGN, and of network stations to the public for
private home viewing under the Satellite Home Viewer Act of 1994 (the "SHV
Act"), which license is scheduled to expire on December 31, 1999. Although
bills, which, among other things, would extend the license granted under the SHV
Act, have been introduced in Congress, if the license is not further extended,
satellite carriers will be required to negotiate private licenses for the
retransmission of copyright material to home satellite dish owners after 1999.
Satellite carriers may only distribute the signals of network broadcast
stations, as distinguished from superstations, to "unserved households" that are
outside the Grade B contours of a primary station affiliated with such network.
The FCC released new rules on February 2, 1999 for determining whether
households are unserved. Netlink USA entered into an agreement with the National
Association of Broadcasters, the ABC, CBS, FOX and NBC networks, their affiliate
associations, and several hundred broadcast stations, effective May 1, 1998, to
identify by zip code those geographic areas which are "unserved" by network
affiliated stations. Depending upon the implementation of the agreement and such
identification, Netlink USA may be required, after expiration of a transition
period on August 31, 1999, to disconnect a substantial number of existing
subscribers. Under the SHV Act, satellite carriers must pay a monthly fee for
each subscriber. To the extent that satellite carriers transmit superstation or
network station signals to cable operators, such cable operators pay the
copyright fee under the separate compulsory license.
Satellites and Uplink. In general, authorization from the FCC must be
obtained for the construction and operation of a communications satellite. The
FCC authorizes utilization of satellite orbital slots assigned to the United
States by the World Administrative Radio Conference. Such slots are finite in
number, thus limiting the number of carriers that can provide satellite
transponders and the number of transponders available for transmission of
programming services. At present, however, there are numerous competing
satellite service providers that make transponders available for video services
to the cable industry.
Proposed Changes in Regulation. The regulation of programming services,
cable television systems, satellite carriers and television stations is subject
to the political process and has been in constant flux over the past decade.
Further material changes in the law and regulatory requirements must be
anticipated and there can be no assurance that Liberty Media Group's business
will not be affected adversely by future legislation, new regulation or
deregulation.
Competition-Programming Companies
The business of distributing programming for cable television is highly
competitive. The Programming Companies directly compete with other programming
services for distribution on a limited number of cable television channels and
on other distribution media. In addition to competition for cable distribution,
viewers and advertisers, the Programming Companies also compete, to varying
degrees, for programming content.
HSN and QVC operate in direct competition with businesses which are
engaged in retail merchandising.
I-37
<PAGE> 39
TCI VENTURES GROUP
On March 9, 1999, TCI combined the businesses and assets of Liberty
Media Group and of TCI Ventures Group in conjunction with the AT&T Merger.
Subsequent to the AT&T Merger, TCI does not have a controlling financial
interest in Liberty/Ventures Group and accordingly TCI will deconsolidate
Liberty/Ventures Group and will account for its investment in Liberty Media
Group under the equity method. For more information, see "Business - General
Development of Business". The following information about TCI Ventures Group is
dated as of March 1, 1999 and does not reflect the effects of the
Liberty/Ventures Combination.
In connection with the AT&T Merger and immediately prior thereto,
certain of the assets attributed to TCI Ventures Group were transferred to TCI
Group in exchange for approximately $5.5 billion cash. The transferred assets
are identified in the table below with an asterisk.
The assets attributed to TCI Ventures Group, the business unit created
in 1997, include interests in internet services; satellite communications; wired
and wireless domestic telephony; international cable, telephony and programming;
digital services; and other technology investments, listed in the table below.
Such assets are held directly and indirectly through partnerships, joint
ventures, common stock investments and instruments convertible or exchangeable
into common stock. In some cases, TCI Ventures Group's interest may be subject
to buy-sell procedures, repurchase rights, performance guarantees and other
restrictions. Ownership percentages in the table are approximate, calculated as
of March 1, 1999.
<TABLE>
<CAPTION>
Attributed
Company Ownership(1) Business
- --------------------------------------------------- ------------ ----------------------------------
INTERNET SERVICES
<S> <C> <C>
At Home Corporation* 39% equity High-speed multimedia Internet
(Nasdaq: ATHM) 71% voting services
Sportsline USA, Inc. 3% Internet provider of branded
(Nasdaq: SPLN) inter-active sports information,
programming and merchandise
iVillage, Inc. 4% Developer and Internet and on-line
provider of branded communications
and information services for adult
women
KPCB Java Fund, L.P. 5% Investor in Java application
development
DIVERSIFIED SATELLITE COMMUNICATIONS
TV Guide, Inc. (f/k/a United Video Satellite Group, 27% equity Satellite distribution of video,
Inc.)(Nasdaq: TVGIA) 32% voting audio, data and program promotion
services
</TABLE>
I-38
<PAGE> 40
<TABLE>
<CAPTION>
Attributed
Company Ownership (1) Business
- --------------------------------------------------- ------------- ----------------------------------
DOMESTIC TELEPHONY
<S> <C> <C>
Sprint PCS Group 22% equity (2) Digital PCS under the "Sprint"
(NYSE: PCS) less than 1% voting brand name
Western Tele-Communications, Inc.* 100% Provider of microwave and
wireline transport of
telecommunications services
AT&T (NYSE: T)* 3% Telecommunications
INTERNATIONAL CABLE, TELEPHONY AND PROGRAMMING
Tele-Communications International, Inc. 85% equity International cable, telephony and
programming
DIGITAL SERVICES
National Digital Television Center, 100% Provider of television production,
Inc.* digital compression, and
transmission and authorization
services to programmers, cable
systems and other video
distributors
OTHER ASSETS
Academic Systems Corporation 5% Provider of higher education
multimedia instruction manuals
Antec Corporation 19% Manufacturer of products for
(NASDAQ/NM: ANTC) hybrid fiber/coaxial broadband
networks
CSG Systems International, Inc. 5.5% (3) Provider of processing software
(NYSE: CSG) and other customer management
services to video and data
distributors
General Instrument Corporation 13% (4) World-wide supplier of systems and
(NYSE: GIC) equipment for high performance
networks delivering video, voice
and data/Internet services
</TABLE>
I-39
<PAGE> 41
<TABLE>
<CAPTION>
Attributed
Company Ownership (1) Business
- --------------------------------------------------- ------------- ----------------------------------
<S> <C> <C>
Intessera, Inc. 100% Provider of database management
software
The Lightspan Partnership, Inc. 8% Developer of educational
programming
MCNS Holdings, L.P. 25% Developer of multimedia
communications network and
associated technologies
</TABLE>
- ----------
(1) Unless otherwise noted, ownership percentages represent both equity and
voting interests.
(2) TCI Ventures Group holds securities of Sprint which are exercisable for
or convertible into Sprint PCS stock. The percentage in the table
assumes exercise and conversion of such securities and is calculated on
a fully diluted basis.
(3) The percentage in the table assumes the exercise of warrants which are
exercisable for 1.5 million shares of common stock and which are
subject to certain vesting requirements.
(4) Excludes warrants to purchase approximately 21.4 million additional
shares of GI common stock at $14.25 per share, subject to certain
vesting requirements.
Description of the TCI Ventures Group
The principal assets attributed to TCI Ventures Group are described in
greater detail below.
Internet Service
The primary internet service asset attributed to TCI Ventures Group
prior to the AT&T Merger was its investment in @Home.
At Home Corporation. @Home, which became a public company in July 1997,
is a leading provider of broadband internet services that delivers data to homes
and businesses through the cable television infrastructure and a cable modem at
speeds up to 100 times faster than traditional telephone dial-up alternatives.
I-40
<PAGE> 42
@Home currently offers two internet services: @Home for residential
consumers and @Work for businesses and tele-commuters. @Home's primary offering
"the @Home service" allows residential subscribers to connect their personal
computers via cable modem to a high-speed internet "backbone" network developed
and managed by @Home. @Home has entered into distribution arrangements with
cable companies whose cable systems pass approximately 57.3 million homes.
@Home's residential offering had approximately 331,000 cable modem subscribers
across North America at December 31, 1998 representing an increase of
approximately 158% from the 210,000 subscribers reported at September 30, 1998.
As of December 31, 1998, approximately 13.2 million of the homes served by the
cable companies with which @Home has distribution agreements are passed by
upgraded two-way hybrid fiber co-axial cable. For businesses, @Home's @Work
service provides a platform for internet, intranet and extranet connectivity
solutions and networked business applications over both cable infrastructure and
digital telecommunications lines. As of December 31, 1998, @Work had over 1,700
corporate customers, and the @Work service was available in 22 metropolitan
markets.
TCI was a founding partner of @Home and currently holds a 39% equity
interest and a 71% voting interest in @Home. Four officers or directors of TCI
currently serve on @Home's 11 member board; however, TCI has the right, at any
time, to increase the size of @Home's Board of Directors (the "@Home Board") and
elect a majority of the directors of the @Home Board. TCI's controlling position
in @Home is, however, subject to certain protective rights held by @Home. TCI
has agreed that @Home will be the exclusive high-speed internet service provider
distributed over TCI's cable systems, subject to certain exceptions, until at
least June 4, 2002, subject to early termination in certain circumstances. In
February 1998, NDTC, on behalf of TCI, entered into a Memorandum of
Understanding with @Home pursuant to which @Home agreed to develop software and
provide integration services for TCI's advanced set top devices that will
deliver both digital television and data services.
Diversified Satellite Communications
TV Guide, Inc. (formerly UVSG) Following completion of the Netlink and
TV Guide Transactions which are described in "LIBERTY MEDIA GROUP - Description
of Liberty Media Group - Programming Services," TCI had approximately a 44%
equity interest and a 49% voting interest in UVSG of which a 27% equity interest
and a 32% voting interest was attributed to TCI Ventures Group and the balance
of which was attributed to Liberty Media Group. UVSG is a media and
communications company engaged predominantly in providing print, passive and
interactive program listings guides to households, distributing superstation
programming to cable television systems and DTH satellite providers, and
marketing satellite delivered programming to C-band satellite dish owners. UVSG
has been organized into three operating groups: Magazine Group; Entertainment
Group; and United Video Group. The Magazine Group publishes and distributes TV
Guide Magazine and customized monthly programming guides for cable and satellite
operators in the US and internationally. The Entertainment Group supplies
satellite-delivered on-screen program promotion and guide services, including TV
Guide Channel and Sneak Prevue. The United Video Group provides DTH satellite
services, satellite distribution of video entertainment services, software
development and systems integration services and satellite transmission services
for private networks. This group includes SNG and Netlink USA in addition to
UVSG's UVTV division which markets and distributes to cable television systems
and other multi-channel video distributors WGN (Chicago), KTLA (Los Angeles) and
WPIX (New York), three independent "superstations".
I-41
<PAGE> 43
Domestic Telephony
Prior to the AT&T Merger, TCI Ventures Group's telephony assets
consisted primarily of its ownership of (a) an approximately 22% equity interest
(on a fully diluted basis) in the "Sprint PCS Group," consisting of shares of
Series 2 Sprint PCS stock (which have limited voting rights) and certain
warrants and shares of convertible preferred stock exercisable for or
convertible into such shares; (b) 100% of WTCI; and (c) approximately 47 million
shares of AT&T Common Stock.
The Sprint PCS Group, which markets its wireless telephony products and
services under the "Sprint"(R) and "Sprint PCS"(R) brand names, operates the
only 100% digital personal communications system ("PCS") wireless network in the
United States, with licenses to provide service nationwide utilizing a single
frequency band and a single technology. The Sprint PCS Group owns licenses to
provide service to the entire United States population, including Puerto Rico
and the U.S. Virgin Islands.
Pursuant to the Final Judgment agreed to by TCI, AT&T and the DOJ on
December 31, 1998, Liberty/Ventures Group prior to the AT&T Merger transferred
all of the Sprint Securities to a trust with the Trustee, pursuant to a trust
agreement approved by the DOJ. The Final Judgment, if entered by the United
States District Court for the District of Columbia, would require the Trustee,
on or before May 23, 2002, to dispose of a portion of the Sprint Securities held
by the trust and beneficially owned by Liberty/Ventures Group sufficient to
cause Liberty/Ventures Group to own beneficially no more than 10% of the
outstanding Series 1 PCS stock of Sprint on a fully diluted basis (assuming the
issuance of all shares of Series 1 PCS stock of Sprint ultimately issuable in
respect of the applicable securities of Sprint upon the exercise, conversion or
other issuance thereof in accordance with the terms of such securities) on such
date. On or before May 23, 2004, the Trustee must divest the remainder of the
Sprint Securities beneficially owned by Liberty/Ventures Group. For additional
information, see note 2 to the Company's consolidated financial statements
included in Part II of this report.
WTCI provides long-distance transport of video, voice and data traffic
and other telecommunications services to telecommunications carriers on a
wholesale basis. WTCI provides these services primarily through a digital
broadband microwave network located in a 12-state region.
International Cable and Programming and Telephony
TINTA. TCI owns 100% of the equity in TINTA, of which 85% is attributed
to TCI Ventures Group and 15% is attributed to Liberty Media Group. TINTA
provides diversified programming services and operates broadband cable
television and telephony distribution networks in selected markets outside the
United States. At December 31, 1998, TINTA had ownership interests in or managed
61 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 December 31, 1998,
provided cable television service to an aggregate of approximately 4.5 million
basic subscribers and, primarily in the United Kingdom, provided telephone
service over approximately 1.5 million telephone lines.
TINTA has recently placed greater emphasis on the acquisition and
development of multi-channel programming businesses, while maintaining
meaningful and complementary interests in cable distribution assets. TINTA's
distribution and programming ventures are concentrated in the United Kingdom,
Europe, Latin America, Asia and the Caribbean, with particular focus, at
present, on the United Kingdom, Argentina and Japan.
I-42
<PAGE> 44
Included among TINTA's cable and telephony distribution assets are an
indirect 22% interest in Telewest Communications plc ("Telewest") and a 40%
interest in Jupiter Telecommunications Co. Ltd ("Jupiter"). Telewest is a
leading provider of cable television and cable telephony services in the United
Kingdom providing cable television services over a broadband (i.e., high
capacity) network and uses such network, together with twisted-pair copper wire
connections for final delivery to the customer premises, to provide telephony
services to its customers. Jupiter provides residential and business cable
television and cable telephony in Japan.
TINTA also currently has an approximate 28% ownership interest and
certain conditional management rights in Cablevision S.A. ("Cablevision"), which
is one of the two largest cable television companies in Argentina. At December
31, 1998, Cablevision provided cable television service to an aggregate of
approximately 1.5 million subscribers.
TINTA's programming interests include a 37% equity interest
(representing a 50% voting interest) in Flextech p.l.c. ("Flextech"), a 30%
interest in MultiThematiques, S.A. ("MultiThematiques") and a 50% interest in
Jupiter Programming. Through its subsidiaries and affiliates, Flextech creates,
packages and markets entertainment and information programming for distribution
on cable television and DTH satellite providers throughout the United Kingdom
and parts of continental Europe. Flextech's ordinary shares trade on the London
Stock Exchange. MultiThematiques and Jupiter Programming provide multi-channel
programming to cable television and DTH satellite providers in continental
Europe and Japan, respectively. In addition, in August 1998, TINTA purchased
Pramer S.C.A., an Argentine company which programs, markets and distributes 16
cable channels in Argentina, of which 10 are distributed throughout Latin
America, and which markets one terrestrial station to operators in Argentina and
neighboring countries.
Liberty/TINTA, through a 50/50 joint venture with News Corp., holds
international sports interests. These include Fox Sports World Espanol, a
Spanish language sports network, distributed in the United States and in Latin
America, and STAR TV, a satellite-delivered programming platform available to
220 million viewers in Asia, India and the Middle East. Outside of the venture
with News Corp., Liberty Media Group and TINTA own an interest in J-Sports, a
sports network in Japan featuring coverage of SUMO wrestling, soccer, baseball
and other international sporting events; and TyC, Argentina's dominant sports
programming service. TyC also owns an interest in Canal 9, a general
entertainment broadcast channel in Buenos Aires, Argentina which has become an
international superchannel, providing programming to the United States and, via
cable, to outlying areas of Argentina.
Competition. The various cable operators in which TINTA has interests
directly compete for customers and advertisers in local markets with other
providers of entertainment, news and information. Such cable operators also
compete with companies who use alternative methods of distributing the same or
similar video programming offered by cable television systems.
The business of distributing programming for cable and satellite
television is also highly competitive. TINTA's programming subsidiaries and
affiliates directly compete with other programming services for distribution on
a limited number of television channels and, when distribution is obtained, they
compete for viewers and advertisers with other programming services.
I-43
<PAGE> 45
Government Regulation. Substantially every country in which TINTA has,
or proposes to make, an investment regulates, in varying degrees, (a) the
granting of cable and telephony franchises, the construction of cable and
telephony systems and the operations of cable, other multi-channel television
operators and telephony operators and service providers, as well as the
acquisition of, and foreign investments in, such operators and service
providers, and (b) the broadcast and content of programming and internet
services and foreign investment in programming companies. Regulations or laws
may cover wireline and wireless telephony, satellite and cable communications
and internet services, among others. Regulations or laws that exist at the time
TINTA makes an investment in a subsidiary or affiliate may thereafter change,
and there can be no assurance that material and adverse changes in the
regulation of the services provided by TINTA's subsidiaries and affiliates will
not occur in the future. Regulation can take the form of price controls, service
requirements and programming and other content restrictions, among others.
Moreover, some countries do not issue exclusive licenses to provide
multi-channel television services within a geographic area, and in those
instances TINTA may be adversely affected by an overbuild by a competing cable
operator. In certain countries where multi-channel television is less developed,
there is minimal regulation of cable television, and, hence, the protections of
the cable operator's investment available in the United States and other
countries (such as rights to renewal of franchises and utility pole attachment)
may not be available in these countries.
National Digital Television Center, Inc., NDTC, which operates through
a number of wholly owned subsidiaries of TCI, provides a wide range of analog
and digital television services to programmers, cable operators and satellite
distributors.
NDTC's Video Services unit, through its state-of-the-art facilities
outside of Denver and additional facilities in New York, Los Angeles and Hong
Kong, provides services such as studio production, post-production, on-air
origination, digital compression, encryption and authorization, and satellite
uplink services. NDTC's Headend in the Sky ("HITS") unit manages a package of
compressed digital signals and sells this service along with GI's authorization
services to United States cable operators. The HITS programming lineup consists
of over 130 program channels and 40 digital music channels. HITS currently has
approximately 1.3 million digital subscribers. NDTC's Technology unit manages a
team developing an advanced digital settop terminal. This team consists
primarily of GI, Microsoft Corporation, Sun Mircrosystems, Inc., TV Guide
Networks, Inc. and @Home. Scheduled for delivery in late 1999, the advanced
digital settop terminal is expected to combine traditional television services
with high-speed internet-like services.
On July 17, 1998, NDTC acquired approximately 21.4 million shares of
restricted common stock of GI in exchange for (a) certain assets of NDTC's
settop authorization business, (b) the license of certain related technology to
GI, (c) a $50 million promissory note from TCI Ventures Group, and (iv) a
nine-year revenue guarantee in favor of GI. NDTC has also entered into a service
agreement pursuant to which it provides certain services to GI's settop
authorization business.
Pursuant to an agreement between NDTC and GI, TCI Group held warrants
to purchase approximately 21.4 million additional shares of GI common stock at
$14.25 per share which vest upon the purchase of certain quantities of advanced
digital settop terminals. In connection with the AT&T Merger, Liberty/Ventures
Group paid TCI Group an aggregate of approximately $176 million in cash and TCI
Ventures Group retained these warrants. If any warrants are forfeited solely
because TCI Group fails to purchase the required number of advanced digital
settop terminals, TCI Group will pay to the Liberty/Ventures Group an amount
equal to $8.25 for each warrant forfeited, adjusted as appropriate for any
changes in the capitalization of GI.
Item 2. Properties.
The Company currently leases its executive offices in a suburb of
Denver, Colorado, and leases most of its regional and local operating offices.
During 1999, the Company will relocate its executive offices to a suburb in
Denver, Colorado to properties owned by the Company. The Company owns many of
its head-end and antenna sites. Its physical cable television properties, which
are located throughout the United States, consist of system components, motor
vehicles, miscellaneous hardware, spare parts and other components.
The Company's cable television facilities are, in the opinion of
management, suitable and adequate by industry standards. Physical properties of
the Company are not held subject to any major encumbrance.
I-44
<PAGE> 46
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the Company is
a party or to which any of its property is subject, except as follows:
Intellectual Property Development Corporation v. UA-Columbia
Cablevision of Westchester, Inc. and Tele-Communications, Inc. On September 1,
1994, plaintiff filed suit in federal court in New York for the alleged
infringement of a patent for an invention used in broadcasting systems with
fiber optic transmission lines. Plaintiff seeks injunctive relief and
unspecified treble damages. The patent at issue expired on January 16, 1996,
thereby eliminating any claim for injunctive relief by plaintiff. The issues now
center around whether defendants owe past damages up to the time the patent
expired. Discovery is currently ongoing. Based upon the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition of this action should not have a
material adverse effect upon the financial condition of Tele-Communications,
Inc. ("TCI" or the "Company").
Time Warner Stockholder Litigation. In November 1995, two lawsuits on
behalf of and for the benefit of Time Warner, Inc. ("Time Warner") were filed in
the Court of Chancery of the State of Delaware ("the Delaware Chancery Court")
by purported stockholders of Time Warner. These actions, which have identical
claims and allegations, are styled as Bernard v. Time Warner, Inc., Civil Action
("C.A.") No. 14651, and Parnes v. Time Warner, Inc., C.A. No. 14660,
respectively. The defendants named in both complaints are Time Warner, Inc.,
Tele-Communications, Inc., and the following individuals who are directors of
Time Warner: Gerald M. Levin, Merv Adelson, Beverly Sills Greenough, Michael A.
Miles, Donald S. Perkins, Raymond S. Trough, Edward S. Finkelstein, Carla A.
Hills, Henry Luce, III, Reuben Mark, Francis T. Vincent, Jr., Lawrence B.
Buttenweiser, David T. Kearns, J. Richard Munro, and Richard D. Parsons. In both
cases, plaintiffs allege among other things that the Time Warner directors
breached their fiduciary duties in establishing the terms of Time Warner's
proposed merger with Turner Broadcasting System, Inc. ("TBS") Specifically,
plaintiffs contend in both cases that the Time Warner directors impermissibly
sought to entrench themselves and that TCI aided and abetted the Time Warner
directors' alleged breaches of fiduciary duty. Plaintiffs complain in both cases
that, in connection with the proposed merger between TBS and Time Warner (the
"TBS-Time Warner Merger"), TCI will receive (i) a premium for its TBS stock with
a value of nearly 7% over the value of the merger consideration to be received
by other TBS stockholders, (ii) exclusive programming benefits at discounted
prices from TBS, (iii) an agreement to purchase TBS's and Time Warner's
interests in two regional sports networks, and (iv) five million additional
shares of Time Warner stock in exchange for giving Time Warner an option to
purchase a subsidiary of TCI. In exchange for these alleged benefits, TCI
allegedly facilitated efforts by the Time Warner directors and Time Warner's
management to entrench themselves by allowing the Time Warner voting stock to be
received by TCI upon consummation of the TBS-Time Warner Merger to be placed in
a voting trust controlled by defendant Levin, who is the chairman and chief
executive officer of Time Warner. Plaintiffs seek in both actions to enjoin the
consummation of the proposed TBS-Time Warner Merger, to rescind the TBS-Time
Warner Merger if it is consummated, and to enjoin the transfer of Time Warner's
assets or stock to TCI in connection with the TBS-Time Warner Merger. TCI moved
to dismiss these actions on November 22, 1995. Discovery has not commenced in
these actions. On December 5, 1995, plaintiffs in both actions agreed to stay
any proceedings pending regulatory developments regarding the proposed TBS-Time
Warner Merger. The TBS-Time Warner Merger was consummated on October 10, 1996.
This case has been voluntarily dismissed and will not be reported in future
filings.
I-45
<PAGE> 47
DMX Shareholders Litigation. In September 1996, a putative class action
complaint was filed with the Delaware Chancery Court in C.A. No 15206 by a
stockholder of DMX Inc. ("DMX"). The complaint was filed following the
announcement of a proposed business combination in which TCI Music, Inc. ("TCI
Music"), a newly formed entity, would acquire DMX (the "TCI Music-DMX Merger").
The proposed business combination contemplates that the shareholders of DMX,
including subsidiaries of TCI that currently own approximately 45% of DMX's
outstanding stock, would receive shares of TCI Music Class A common stock having
one vote per share and representing approximately 19% of TCI Music's outstanding
shares. TCI would hold TCI Music Class B common stock having ten votes per share
and representing approximately 81% of the TCI Music common equity outstanding
immediately after the transaction. TCI would acquire those shares in exchange
for consideration that includes DMX subscriber accounts held by TCI subsidiaries
and equipment used by those subsidiaries to distribute the DMX music service to
TCI customers. The defendants in the action include DMX, TCI and the directors
of DMX (Jerold H. Rubinstein, Donne F. Fisher, Leo J. Hindery, Jr., James R.
Shaw, Sr., Kent Burkhart, J.C. Sparkman and Menon Bhaskar). Mr. Fisher is a
director of and a consultant to TCI. Mr. Hindery is a director and an executive
officer of TCI. Mr. Sparkman is a director of TCI.
The gravamen of the complaint is that the DMX directors would breach
their fiduciary duties by approving the proposed business combination.
Specifically, plaintiff alleges that, due to TCI's alleged control over the DMX
board, the DMX directors are unwilling to negotiate with TCI to maximize the
value for the public stockholders of DMX. Plaintiff claims that the proposed
consideration to be paid the public stockholders of DMX is grossly unfair,
inadequate and substantially below the fair value of DMX. Plaintiff seeks to
enjoin the consummation of proposed business combination or, should the proposed
transaction proceed, to rescind the transaction. Plaintiff also seeks
unspecified rescissory and compensatory damages, fees and costs. The action
remains pending and discovery has not commenced. The TCI Music-DMX Merger was
consummated on July 11, 1997. Based upon the facts available, management
believes that, although no assurance can be given as to the outcome of this
action, the ultimate disposition should not have a material adverse effect upon
the financial condition of the Company.
Clarence L. Elder, both individually and as the group Representative
vs. Tele-Communications, Inc. et al. On December 11, 1995, plaintiff filed suit
in the Circuit Court for Baltimore City, Case No. 95345001/CL205580 against UCTC
L.P. Company, UCTC of Baltimore, Inc., UTI Purchase Company, Inc. and
Tele-Communications, Inc. The allegations made in the complaint pertain to
plaintiff's interest in United Cable Television of Baltimore Limited
Partnership. Plaintiff claims he was wrongfully denied certain preference
distributions, rights to purchase stock, rights to escrow funds, and tax
distributions. The Court granted defendants' Motion for Summary Judgment and
plaintiff has filed an appeal. On September 24, 1997, the Maryland Court of
Special Appeals affirmed in all but one respect the Circuit Court's summary
judgment in favor of the defendants. The court found that the settlement
agreement at issue is ambiguous concerning the number of Limited Partnership
units the plaintiffs were entitled to purchase (186.6 or 311), but ruled in
favor of defendants concerning the price at which the units must be sold and all
other issues.
Plaintiffs have filed a motion for reconsideration, and have filed a
petition for certiorari in the Court of Appeals on December 24, 1997 if their
motion for reconsideration is denied. If the Court of Special Appeals decision
is not disturbed, the only issue for trial will be the number of units
Plaintiffs are entitled to purchase at fair market value, as determined in
accordance with the appraisal previously obtained by defendants. Based upon the
facts available, management believes that, although no assurance can be given as
to the outcome of this action, the ultimate disposition should not have a
material adverse effect upon the financial condition of the Company.
I-46
<PAGE> 48
Donald E. Watson v. Tele-Communications, Inc., et al. On March 10,
1995, Donald Watson, doing business under the name of Tri-County Cable, filed
suit in Superior Court for the District of Columbia against TCI, TCI East, Inc.,
District Cablevision Limited Partnership, District Cablevision, Inc., TCI of
D.C., Inc., TCI of Maryland, Inc., TCI Development Corporation, United Cable
Television of Baltimore Limited Partnership, TCI of Pennsylvania, Inc. and two
individuals, Richard Bushey and Roy Harbert. The action alleges breach of
settlement agreement, intentional misrepresentations, tortious interference with
prospective advantage, tortious interference with contract, tortious
interference with economic relations, and discrimination on the basis of race.
Three counts in the Complaint each seek compensatory damages of $2.5 million and
punitive damages of $25 million; one count seeks compensatory damages of $2.5
million and punitive damages of $40 million; and two counts each seek
compensatory damages of $20 million and punitive damages of $40 million. In an
order dated September 25, 1997, the Court granted summary judgment in favor of
defendants on the claims of intentional misrepresentations, tortious
interference with prospective advantage, tortious interference with contract,
and discrimination on the basis of race. The remaining claims of breach of
contract and tortious interference with economic relations will be tried on
March 2, 1999. Based upon the facts available, management believes that,
although no assurance can be given as to the outcome of this action, the
ultimate disposition should not have a material adverse effect upon the
financial condition of the Company.
C. Lamont Smith, et al. v. Mile Hi Cable Partners, et al. On December
9, 1996, C. Lamont Smith and The Black Movie Channel, LLC filed suit in the
District Court for the City and County of Denver against subsidiaries of
Tele-Communications, Inc. (TCI Communications, Inc.; Mile Hi Cable Partners, LP;
Liberty Media Corporation and Encore Media Corporation); Black Entertainment
Television; Steve Santamaria; Media Management Group, Inc. and Virginia Butler.
Plaintiffs assert, in part, that the defendants misappropriated plaintiffs'
concept for the development of a 24 hours a day, seven days a week, cable or
satellite premium channel which would broadcast movies made by or featuring
African Americans, as well as educational programming and community oriented
programming of interest to both the Hispanic and Black communities. Plaintiffs
claim anticipated annual net profits from such a network would exceed $600
million. Plaintiffs also assert that the franchise agreement with the City and
County of Denver has been breached for alleged implied covenants of good faith
and fair dealing under the Denver franchise; promissory estoppel and breach of
implied contract; misappropriation of confidential information and trade
secrets; breach of confidence; breach of fiduciary duty; as well as unjust
enrichment; fraud; negligent misrepresentation; non-disclosure and concealment;
civil conspiracy; and violation of the Colorado Antitrust Act of 1992.
Plaintiffs seek an award of consequential, special and restitutionary damages in
an unspecified amount as well as exemplary damages, prejudgment interest, expert
witness fees, attorneys fees and costs. On August 5, 1997, the trial court
entered an Order dismissing all of plaintiffs' claims against defendants Liberty
Media Corporation and Encore Media Corporation as well as plaintiffs' first,
second, fifth, and a portion of the twelfth claim for relief against the
remaining Company defendants. The partnership's motion for judgment on the
pleadings was denied with respect to plaintiffs' remaining claims. The trial
court certified its rulings for an immediate appeal, which was filed by
plaintiffs and will take from 12 to 18 months for a decision from the appellate
court. Based upon the facts available, management believes that, although no
assurance can be given as to the outcome of this action, the ultimate
disposition should not have a material adverse effect upon the financial
condition of the Company.
I-47
<PAGE> 49
James Dalton, et al. v. Tele-Communications, Inc., et al. On February
24, 1997, James Dalton, et al. filed suit in District Court for Arapahoe County,
Colorado, Case No. 97-CV421, against TCI and certain current and former officers
of TCI and its subsidiary, TCIC (John C. Malone, Brendan R. Clouston, Barry P.
Marshall, Camille K. Jayne, Sadie N. Decker, Bruce W. Ravenel, Gerald W. Gaines,
Bernard W. Schotters, II) and Daniel L. Ritchie and Donne F. Fisher, in their
capacity as co-personal representatives of the estate of Bob Magness. Plaintiffs
filed this action under the Colorado Securities Act and Colorado common law on
behalf of all persons who purchased TCI securities from January 10, 1996 through
October 24, 1996 ("the class period"). Plaintiffs claim, in part, that the
defendants made false and misleading statements during the class period
concerning TCI's revenue and cash flow growth, customer growth, and expansion
and diversification into a multi-business platform; and that TCI failed to
disclose the performance of its various operations. Plaintiffs claim further, in
part, that TCI's cash flow growth was weak and below levels necessary to fund a
multi-business diversification program and that TCI was competitively
disadvantaged and would likely be threatened by adverse conditions impacting its
business. Plaintiffs are seeking nationwide class certification and claim that
the amount in controversy is less than $75,000 per named plaintiff, exclusive of
interest and costs. On September 3, 1997, defendants motion to dismiss was
denied. Defendants answered the Complaint on October 3, 1997. Settlement has
been reached in principle, which settlement requires further documentation,
notice and court approval. Based upon the facts available, management believes
that, although no assurances can be given as to the outcome of this action, the
ultimate disposition should not have a material adverse effect upon the
financial condition of the Company.
IMedia Corporation v. Western Tele-Communications, Inc. On August 12,
1997, in the United States District Court for the Northern District of
California, Case No. C 97-2960 CAL, Plaintiff Imedia Corporation ("Imedia")
filed suit against Western Tele-Communications, Inc. ("WTCI"). The Plaintiff
alleged that Defendant WTCI breached its contract to pay IMedia $5,000,000 for
the use of IMedia's StatMux software, developed for multiplexing digitally
compressed video signals. Plaintiff also claimed for loss of per-subscriber fees
through September 30, 2004, pursuant to the contract. Additionally, Plaintiff
requested an injunction against WTCI or any affiliated company prohibiting use
by WTCI of any multiplexing software other than IMedia's. This case was settled
and dismissed in December of 1998 with prejudice. The settlement did not have a
material adverse effect upon the financial condition of the Company. This case
will not be reported on in the future.
Teleport Communications Group Shareholder Litigation. In December of
1997 and January of 1998, in the Delaware Chancery Court, the following three
actions were filed: Sternberg v. TCI Communications, Inc., et al., Case No.
16092, Cirillo v. Tele-Communications, Inc., et al., Case No. 16139, and Blain
v. Tele-Communications, Inc., et al., Case No. 16161. The complaints were filed
in response to public reports of a proposed merger between Teleport
Communications Group ("TCG") and AT&T Corporation ("AT&T") whereby each share of
TCG common stock would be exchanged for 0.943 shares of AT&T Common Stock.
Common to the three complaints are the following defendants: TCG, TCG
shareholders, TCI, Comcast Corporation, ("Comcast") and Cox Communications, Inc.
("Cox"); and the following TCG directors: Brian L. Roberts, Brendan R. Clouston,
Larry E. Romrell, Lawrence S. Smith, Robert Annunziata, James O. Robbins, Jimmy
W. Hayes, David M. Woodrow, John R. Dillon, Bernard W. Schotters, Gerald W.
Gaines, James Bruce Llewellyn and C.B. Rogers, Jr. Additionally, the Cirillo
complaint names AT&T as a defendant. Messrs. Clouston, Romrell and Schotters
were affiliated with TCI during the period relevant to the allegations in the
complaints.
I-48
<PAGE> 50
The gravamen of the complaints is that the price at which AT&T proposed
to acquire TCG shares was inadequate and that, in causing TCG to pursue the
merger with AT&T, the defendant directors, TCI, Cox and Comcast were acting in
their own self-interest rather than in the interests of TCG and its
stockholders. Specifically, the complaints allege that the defendants controlled
TCG, had access to internal financial information concerning TCG's true value,
and used such information to the detriment of TCG's public stockholders. The
Cirillo complaint additionally alleges that AT&T has aided and abetted the
alleged wrongdoing. The complaints seek to enjoin the proposed merger, to
rescind the merger should it be consummated, and to recover unspecified
compensatory damages for the public holders of TCG common stock, or their
successors in interest, who are being or will be harmed by the defendants'
actions. In addition, the Sternberg complaint seeks an order requiring the
defendants to undertake actions to maximize the value of TCG's stock in
furtherance of their fiduciary duties. The merger between TCG & AT&T was
consummated in July 1998. Discovery has not commenced in these actions. Based
upon the facts available, management believes that, although no assurances can
be given as to the outcome of this action, the ultimate disposition of this
matter should not have a material adverse effect upon the financial condition of
the Company.
Magness Shareholder Litigation. On January 8, 1998, seven putative
derivative actions on behalf of and for the benefit of TCI were filed in the
Delaware Chancery Court by purported shareholders of TCI: Morgan, et al. v.
Tele-Communications, Inc., et al., C.A. No. 16128-NC; Steiner v.
Tele-Communications, Inc., et al., C.A. No. 16130-NC; Weisberg v.
Tele-Communications, Inc., et al., C.A. No. 16131-NC; Pan v.
Tele-Communications, Inc., et al., C.A. No. 16133; Klein v. Tele-Communications,
Inc., et al., C.A. No. 16135; Crandon Capital Partners v. Tele-Communications,
Inc., et al., C.A. No. 16136; and Deutsch v. Tele-Communications, Inc., et al.,
C.A. No. 16148. Also named as defendants in these cases are John C. Malone, John
W. Gallivan, Donne F. Fisher, Leo J. Hindery, Jr., J.C. Sparkman, Paul A. Gould,
Jerome H. Kern, Kim Magness, and Robert A. Naify. These are derivative
shareholder actions challenging the Magness estate settlement and the related
payment to John C. Malone. Plaintiffs allege, among other things, the following
claims for relief: breach of fiduciary duties, self-dealing and unjust
enrichment, and waste of Company assets. The complaints seek repayment of
amounts paid for call agreements, injunctive relief, attorney fees, costs and
unspecified compensatory damages. These actions have been consolidated for all
purposes under the current caption styled as In Re: TCI - Magness Estate
Derivative Litigation, Consolidated C.A. No. 16128. The plaintiffs have not
demanded a jury trial. On June 26, 1998, plaintiffs filed an amended complaint
to add claims arising from the proposed merger between TCI and AT&T (the
"TCI-AT&T Merger") substantially similar to those alleged in the TCI-AT&T Merger
litigation described below.
I-49
<PAGE> 51
The gravamen of the amended complaint is that the TCI directors
breached their fiduciary duties by approving the Magness estate settlement,
pursuant to which (i) the 1997 sale by the Magness estate of approximately 32
million shares of TCI Group Series A Stock to affiliates of Merrill Lynch & Co.
and Lehman Brothers was partially voided; (ii) the Magness estate and Dr. Malone
agreed to vote their TCI stock as a single group; and (iii) TCI acquired the
rights to purchase separately the shares of TCI Group Series B Stock currently
held by Dr. Malone and the Magness estate in exchange for the respective payment
by TCI to Dr. Malone and the Magness estate of $150 million and $124 million,
respectively. Specifically, the plaintiffs allege that the TCI directors sought
to entrench themselves through the Magness estate settlement, and the TCI
directors' approval of the settlement constituted waste of TCI assets.
Plaintiffs also allege that Dr. Malone would be unjustly enriched by the
proposed TCI-AT&T Merger, announced on June 24, 1998, because the merger
exchange ratio provides a premium for the shares of TCI Group Series B Stock
over the shares of TCI Group Series A Stock, and the Magness estate settlement
unjustly increased Dr. Malone's holdings of TCI Group Series B Stock. In the
amended complaint, plaintiffs seek a declaratory judgment that the defendants
breached their fiduciary duties to the Company, an accounting by the TCI
director defendants to TCI for the damages allegedly sustained by the Company,
an accounting by Dr. Malone to TCI for the damages allegedly sustained by the
Company, an accounting by Dr. Malone of his profits from the Magness estate
settlement, the rescission of the Magness estate settlement, the repayment by
Dr. Malone of any payments he has received under the Magness estate settlement
and an award of unspecified compensatory damages. Discovery has not commenced in
this action. The TCI-AT&T Merger was consummated on March 9, 1999. Based upon
the facts available, management believes that, although no assurances can be
given as to the outcome of this action, the ultimate disposition of this matter
should not have a material adverse effect upon the financial condition of the
Company.
I-50
<PAGE> 52
Tele-Communications International, Inc. Stockholder Litigation. On July
13, 1998, two putative class action complaints were filed by certain
stockholders of Tele-Communications International, Inc. ("TINTA") in the
Delaware Chancery Court. The actions, which have identical claims and
allegations, are styled as Berkowitz v. Tele-Communications, Inc., et al., C.A.
No. 16533, and Chetkov v. Tele-Communications, Inc., et al., C.A. No. 16534,
respectively. The complaints were filed following the announcement of a proposed
business combination in which Liberty Media Group would acquire all outstanding
public shares of TINTA not already owned by TCI Ventures Group. The defendants
named in both complaints are TCI, TINTA, and the Board of Directors of TINTA:
Leo J. Hindery, Jr., John C. Malone, Gary S. Howard, David J. Evans, Pierre
Lescure, Paul A. Gould, Fred A. Vierra, and Jerome H. Kern. The gravamen of both
complaints is that the TINTA directors will breach their fiduciary duties by
approving the merger and undervaluing the proposed merger consideration to the
detriment of the TINTA public stockholders. Plaintiffs in both actions seek to
enjoin the consummation or closing of the proposed merger, or the rescission of
the merger in the event it is consummated, and unspecified compensatory damages,
fees and costs. The Company and the plaintiffs have reached an agreement in
principle to settle the class action litigation in exchange for TCI's
willingness to include a pricing provision in the merger agreement providing TCI
with the option of either increasing the merger exchange ratio to yield at least
$22.00 per share of TINTA common stock or to terminate the merger agreement. The
merger was consummated on November 19, 1998. The tentative settlement is subject
to numerous conditions, including the execution of definitive settlement
documents, court approval of the settlement and consummation of the merger.
Based upon the facts available, management believes that, although no assurances
can be given as to the outcome of this action, the ultimate disposition of this
matter should not have a material adverse effect upon the financial condition of
the Company.
AT&T-TCI Group Series A Stockholder Litigation. Between June 24 and
July 1, 1998, thirteen purported class action complaints were filed by holders
of TCI Group Series A Stock in the Delaware Chancery Court under the captions
Nieto v. Tele-Communications, Inc., et al., C.A. No. 16470; Martin, et al., v.
Tele-Communications, Inc., et al., C.A. No. 16471; Bove v. Tele-Communications,
Inc., et al., C.A. No. 16473; Freiman v. Tele-Communications, Inc., et al., C.A.
No. 16474; Great Neck Capital Appreciation Investment Partnership, L.P. v.
Tele-Communications, Inc., et al., C.A. No. 16477; Cohen v. Tele-Communications,
Inc., et al., C.A. No. 16478; Silvert v. Tele-Communications, Inc., et al., C.A.
No. 16479; Alex Cooper Profit Sharing Trust v. Tele-Communications, Inc., et
al., C.A. No. 16482; Satz v. Tele-Communications, Inc., et al., C.A. No. 16489;
Stefansky, et al., v. Tele-Communications, Inc., et al., C.A. No. 16490; Hushing
v. Tele-Communications, Inc., et al., C.A. No. 16491; Krim v.
Tele-Communications, Inc., et al., C.A. No. 16495; and Hirsch v.
Tele-Communications, Inc., et al., C.A. No. 16501. The complaints were filed in
response to the announcement of the proposed TCI-AT&T Merger and allege
substantially similar claims. On December 4, 1998, the Delaware Chancery Court
consolidated these actions under the caption In re Tele-Communications, Inc.,
Shareholders Litigation, Consolidated C.A. No. 16470. On February 10, 1999,
plaintiffs filed a consolidated amended complaint (the "TCI Group Consolidated
Complaint"). The defendants named in the consolidated action are TCI and the
following TCI directors: Donne F. Fisher, John W. Gallivan, Paul A. Gould, Leo
J. Hindery, Jr., Jerome H. Kern, Kim Magness, John C. Malone, Robert A. Naify
and J.C. Sparkman. AT&T was also named as a defendant in the consolidated
action.
I-51
<PAGE> 53
The gravamen of the TCI Group Consolidated Complaint is that the TCI
directors breached their fiduciary duties to the holders of TCI Group Series A
Stock because Dr. Malone, the largest holder of TCI Group Series B Stock, with
the acquiescence of the other TCI directors, has obtained under the TCI-AT&T
Merger agreement a premium in the merger consideration for the stockholders of
TCI Group Series B Stock over the amount of merger consideration that would be
received by the stockholders of TCI Group Series A Stock. Plaintiffs also allege
that the TCI proxy statement relating to the proposed TCI-AT&T Merger, dated
January 11, 1999, contains inadequate disclosures regarding the value under the
TCI-AT&T Merger of the stock options, stock appreciation rights and restricted
stock awards held by the officers and directors of TCI, the correct premium that
will be paid for shares of TCI Group Series B Stock pursuant to the merger
agreement, the factors relied upon by the TCI directors determining that the 10%
premium to be received by the stockholders of TCI Group Series B Stock was
acceptable, and the existence of various lawsuits attacking the TCI-AT&T Merger
and related transactions. Plaintiffs in the consolidated action seek to enjoin
the proposed TCI-AT&T Merger, or rescind the TCI-AT&T Merger in the event it is
consummated, and request unspecified compensatory damages, fees and costs.
Plaintiffs have filed discovery requests in this action. The TCI-AT&T Merger was
consummated on March 9, 1999. Based on the facts available, management believes
that, although no assurance can be given as to the outcome of this action, the
ultimate disposition of this matter should not have a material adverse effect
upon the financial condition of the Company.
TCI Ventures Group Shareholder Litigation re: TCI Ventures Group
consolidation into Liberty Media Group: Donald I. Gettinger v.
Tele-Communications, Inc., et al., C.A. No. 16502 NC; Bart Landau, as Trustee
for LFS/RGP Profit Sharing Plan v. Tele-Communications, Inc., et al., C.A. No.
16492 NC. On July 1, 1998, two putative class action complaints were filed by
stockholders of TCI Ventures Group Series A Stock in the Delaware Chancery
Court. These complaints were filed in response to the public announcement by TCI
that, in conjunction with the TCI-AT&T Merger, TCI intends to combine the assets
and businesses of Liberty Media Group and TCI Ventures Group and reclassify each
share of TCI Ventures Group Series A Stock as 0.52 of a share of Liberty Group
Series A Stock. Thereafter, upon completion of the TCI-AT&T Merger, all holders
of Liberty Group Series A Stock would receive AT&T Liberty Class A Tracking
Stock. On December 4, 1998, the Delaware Chancery Court consolidated these
actions and directed that all future filings be made in C.A. No. 16492. On
February 2, 1999, the plaintiffs filed a consolidated amended complaint (the
"TCI Ventures Group Consolidated Complaint"). The defendants named in the
consolidated action are AT&T, TCI, and the following TCI directors: John C.
Malone, John W. Gallivan, Paul A. Gould, Leo J. Hindery, Jr., Robert A. Naify,
Donne F. Fisher, Kim Magness, J.C. Sparkman and Jerome H. Kern.
The gravamen of the TCI Ventures Group Consolidated Complaint is that
the TCI directors breached their fiduciary duties by failing to ensure that the
stockholders' interests of TCI Ventures Group Series A Stock would be properly
represented in the series of transactions leading up to and including the
TCI-AT&T Merger. Specifically, the plaintiffs allege that AT&T will acquire
certain assets of TCI Ventures Group, including TCI Ventures Group's ownership
interest in At Home Corporation ("@Home"), National Digital Television Center,
Inc. ("NDTC") and Western Tele-Communications, Inc. ("WTCI") and approximately
46.95 million shares of AT&T Common Stock, for inadequate cash consideration
totaling approximately $5.5 billion. Plaintiffs in the consolidated action seek
to enjoin the proposed transfer of assets to AT&T, or rescind the transfer or
award rescissory damages to the plaintiff class in the event that the asset
transfer is consummated, and request unspecified compensatory damages, fees and
costs. Plaintiffs have filed discovery requests in this actions. The TCI-AT&T
Merger was consummated on March 9, 1999. Based on the facts available,
management believes that, although no assurance can be given as to the outcome
of this action, the ultimate disposition of this matter should not have a
material adverse effect upon the financial condition of the Company.
I-52
<PAGE> 54
Liberty Media Group Shareholder Litigation re: TCI Ventures Group
consolidation into Liberty Media Group: Michael Chetkof v. John C. Malone; John
W. Gallivan; Paul A. Gould; Leo J. Hindery, Jr.; Robert A. Naify; Donne F.
Fisher; Kim Magness; J.C. Sparkman; Jerome H. Kern; Tele-Communications, Inc.;
and AT&T Corporation, C.A. No. 16868 NC. In January 1999, an identical suit was
filed encaptioned: Gwen Werbowksy v. same defendants, C.A. No. 16886 NC. In
December 1998 and January 1999, these putative class action complaints were
filed by stockholders of Liberty Group Series A Stock in the Delaware Chancery
Court. These complaints were filed in response to the public announcement by TCI
that, in conjunction with the TCI-AT&T Merger, TCI intends to combine the assets
and businesses of Liberty Media Group and TCI Ventures Group and reclassify each
share of TCI Ventures Group Series A Stock as 0.52 of a share of Liberty Group
Series A Stock. Thereafter, upon completion of the TCI-AT&T Merger, all holders
of Liberty Group Series A Stock would receive AT&T Liberty Class A Tracking
Stock. On February 3, 1999, the Delaware Chancery Court consolidated these
actions under the caption Chetkoff v. Tele-Communications, Inc., et al.,
Consolidated C.A. No. 16868. The defendants named in the consolidated action are
AT&T, TCI, and the following TCI directors: John C. Malone, John W. Gallivan,
Paul A. Gould, Leo J. Hindery, Jr., Robert A. Naify, Donne F. Fisher, Kim
Magness, J. C. Sparkman and Jerome H. Kern.
The gravamen of the complaints is that the TCI directors breached
their fiduciary duties by failing to ensure that the stockholders' interests of
Liberty Group Series A Stock would be properly represented in the series of
transactions leading up to and including the TCI-AT&T Merger. Specifically,
plaintiffs allege that the approximately $5.5 billion in cash that new
"Liberty/Ventures Group" will receive from TCI for the sale to TCI of certain
TCI Ventures Group assets (including TCI Ventures Group's ownership interests in
@Home, NDTC and WTCI, and approximately 46.95 million shares of AT&T Common
Stock held by TCI Ventures Group) is inadequate. Additionally, plaintiffs
contend that, unlike the holders of TCI Group Stock, stockholders of Liberty
Group Series A Stock will not receive a premium over the pre-announcement market
price in the exchange of their Liberty Group Series A Stock for AT&T Liberty
Class A Tracking Stock. Plaintiffs seek to enjoin the proposed transfer of
assets to TCI and the proposed TCI-AT&T Merger, or the proposed transfer of
assets to TCI and rescind the TCI-AT&T Merger in the event that it is
consummated, and request unspecified compensatory damages fees and costs.
Discovery has not commenced in this action. The TCI-AT&T Merger was consummated
on March 9, 1999. Based upon the facts available, management believes that,
although no assurance can be given as to the outcome of this action, the
ultimate disposition should not have a material adverse effect upon the
financial condition of the Company.
Late Fee Litigation. The Company has been named in a number of
purported and certified class actions in various jurisdictions concerning late
fee charges and practices. Certain cable systems directly or indirectly owned or
managed by the Company charge late fees to customers who do not pay their cable
bills on time. These late fee cases challenge the amount of the late fees and
the practices under which they are imposed. The Plaintiffs raise claims under
state consumer protection statutes, other state statutes, and the common law.
Plaintiffs generally allege that the late fees charged by various cable systems
are not reasonably related to the costs incurred by the cable systems as a
result of the late payment. Plaintiffs seek to require cable systems to reduce
their late fees on a prospective basis and to provide compensation for alleged
excessive late fee charges for past periods. These cases are at various stages
of the litigation process. Based upon the facts available management believes
that, although no assurances can be given as to the outcome of these actions,
the ultimate disposition of these matters should not have a material adverse
effect upon the financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
I-53
<PAGE> 55
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Tele-Communications, Inc. ("TCI" or the "Company") had six series of
common stock. Tele-Communications, Inc. Series A TCI Group Common Stock, par
value $1.00 per share ("TCI Group Series A Stock") and Tele-Communications, Inc.
Series B TCI Group Common Stock, par value $1.00 per share ("TCI Group Series B
Stock", and together with the TCI Group Series A Stock, the "TCI Group Stock").
The TCI Group Stock was intended to reflect the separate performance of the "TCI
Group," which was substantially comprised of TCI's domestic cable and
communications assets. Tele-Communications, Inc. Series A Liberty Media Group
Common Stock, par value $1.00 per share ("Liberty Group Series A Stock") and
Tele-Communications, Inc. Series B Liberty Media Group Common Stock, par value
$1.00 per share ("Liberty Group Series B Stock", and together with the Liberty
Group Series A Stock, the "Liberty Group Stock"). The Liberty Group Stock was
intended to reflect the separate performance of TCI's assets which produce and
distribute programming services ("Liberty Media Group"). Tele-Communications,
Inc. Series A TCI Ventures Group Common Stock, par value $1.00 per share (the
"TCI Ventures Group Series A Stock") and Tele-Communications, Inc. Series B TCI
Ventures Group Common Stock, par value $1.00 per share (the "TCI Ventures Group
Series B Stock," and together with TCI Ventures Group Series A Stock, the "TCI
Ventures Group Stock"). The TCI Ventures Group Stock was intended to reflect the
separate performance of the "TCI Ventures Group," which was comprised of TCI's
principal international assets and businesses and substantially all of TCI's
non-cable and non-programming assets.
On March 9, 1999, AT&T Corporation ("AT&T") acquired TCI in a merger
(the "AT&T Merger") in which Italy Merger Corp., a wholly-owned subsidiary of
AT&T, merged with and into TCI, and TCI thereby became a wholly-owned subsidiary
of AT&T. As a result of the AT&T Merger, (i) each share of TCI Group Series A
Stock was converted into 0.7757 of a share of common stock, par value $1.00 per
share, of AT&T ("AT&T Common Stock"), (ii) each share of TCI Group Series B
Stock was converted into 0.8533 of a share of AT&T Common Stock, (iii) each
share of Liberty Group Series A Stock was converted into one share of a newly
created class of AT&T common stock designated as the Class A Liberty Media Group
Common Stock, par value $1.00 per share (the "AT&T Liberty Class A Tracking
Stock"), (iv) each share of Liberty Group Series B Stock was converted into one
share of a newly created class of AT&T common stock designated as the Class B
Liberty Media Group Common Stock, par value $1.00 per share (the "AT&T Liberty
Class B Tracking Stock" and together with the AT&T Liberty Class A Tracking
Stock, the "AT&T Liberty Tracking Stock"), (v) each share of TCI Ventures Group
Series A Stock was converted into 0.52 of a share of AT&T Liberty Class A
Tracking Stock, (vi) each share of TCI Ventures Group Series B Stock was
converted into 0.52 of a share of AT&T Liberty Class B Tracking Stock. For
additional information, see note 2 to the accompanying consolidated financial
statements of the Company.
II-1
<PAGE> 56
As of December 31, 1998, TCI Group Series A Stock, TCI Group Series B
Stock, Liberty Group Series A Stock, Liberty Group Series B Stock, TCI Ventures
Group Series A Stock and TCI Ventures Group Series B Stock were traded on the
Nasdaq National Market Tier of the Nasdaq Stock Market ("Nasdaq") under the
symbols TCOMA, TCOMB, LBTYA, LBTYB, TCIVA and TCIVB, respectively. The table
below sets forth the range of high and low sales prices in United States dollars
of shares of common stock of TCI for the periods indicated as furnished by
Nasdaq. The prices have been rounded up to the nearest eighth, and do not
include retail markups, markdowns, or commissions.
<TABLE>
<CAPTION>
TCI Group Stock
Series A Series B
------------------- -------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1997:
First quarter 14-7/8 11-7/8 14-3/4 12
Second quarter 17-1/8 10-3/4 18 10-1/4
Third quarter 21-1/8 14-1/8 22 15-1/2
Fourth quarter 29-1/8 19-1/2 29-1/2 21
1998:
First quarter 33-1/8 26-1/4 33-1/2 26-1/4
Second quarter 44 30-1/2 47-7/8 30-3/4
Third quarter 42-5/8 30-3/8 46-3/4 33-1/2
Fourth quarter 56-3/4 35-7/8 62 38-3/8
</TABLE>
<TABLE>
<CAPTION>
Liberty Group Stock
Series A Series B
------------------- -------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1997:
First quarter 15-7/8 12 15-1/2 12-3/8
Second quarter 18 12-1/2 17-7/8 12-3/8
Third quarter 20-1/8 15-7/8 19-3/4 16-1/4
Fourth quarter 24-5/8 19-5/8 25 20-1/4
1998:
First quarter 35 22-1/8 35-1/8 22-1/8
Second quarter 40-1/8 30-3/8 41 31-3/8
Third quarter 44 31-3/4 47-3/4 33-1/2
Fourth quarter 46-3/4 31-1/2 48-1/4 34-1/4
</TABLE>
<TABLE>
<CAPTION>
TCI Ventures Group Stock
Series A Series B
------------------- -------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1997:
Third quarter (from September 10, 1997 (on
September 10, 1997 TCI issued shares of
TCI Ventures Group Stock in exchange
for certain shares of TCI Group Stock,
"the TCI Ventures Exchange") through
September 30, 1997) 10-3/4 9-5/8 10-7/8 10-1/8
Fourth quarter 14-7/8 9-7/8 14-3/8 10-1/8
1998:
First quarter 18 13-1/2 18 13-1/2
Second quarter 20-1/4 15-3/4 20-1/8 15-1/2
Third quarter 22-1/8 15-7/8 22-3/4 16-3/8
Fourth quarter 24 15-3/8 24-1/8 16
</TABLE>
II-2
<PAGE> 57
As of December 31, 1998, there were 5,579 holders of record of TCI
Group Series A Stock, 349 of TCI Group Series B Stock, 4,364 of Liberty Group
Series A Stock, 292 of Liberty Group Series B Stock, 1,244 of TCI Ventures Group
Series A Stock and 123 of TCI Ventures Group Series B Stock (which amounts do
not include the number of stockholders whose shares are held of record by
brokerage houses but include each brokerage house as one stockholder).
Subsequent to the AT&T Merger, all of the Company's common stock is
owned by AT&T. The Company has not paid cash dividends on its common stock and
has no present intention of so doing. Payment of cash dividends, if any, in the
future will be determined by the Board of Directors of TCI (the "Board") in
light of the Company's earnings, financial condition and other relevant
considerations. The Company is a holding company and its assets consist almost
entirely of investments in its subsidiaries. As a holding company, the Company's
ability to pay dividends on any classes or series of its stock is dependent on
the earnings of, or other funds available to, the Company's subsidiaries and the
distribution or other payment of such earnings or other funds to the Company in
the form of dividends, loans or other advances, payment or reimbursement of
management fees and expenses and repayment of loans and advances from the
Company. Certain of the Company's subsidiaries are subject to loan agreements
that prohibit or limit the transfer of funds by such subsidiaries to the Company
in the form of dividends, loans, or advances, and require that such
subsidiaries' indebtedness to the Company be subordinate to the indebtedness
under such loan agreements. At December 31, 1998, the amount of net assets of
subsidiaries subject to such restrictions exceeded the Company's consolidated
net assets.
II-3
<PAGE> 58
Item 6. Selected Financial Data.
The following tables present selected historical information relating
to the financial condition and results of operations of Tele-Communications,
Inc. for the past five years. The following data should be read in conjunction
with the Company's consolidated financial statements. This information has not
been adjusted for the March 9, 1999 AT&T Merger, the related combination of
Liberty Media Group and TCI Ventures Group, or the merger of TCI Communications,
Inc. ("TCIC") into TCI and related restructuring transactions. See note 2 to
accompanying consolidated financial statements of the Company.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ----------- ----------
amounts in millions
<S> <C> <C> <C> <C> <C>
Summary Balance Sheet Data:
Property and equipment, net $ 7,153 7,679 7,528 7,409 5,876
Franchise costs, net $ 12,068 15,147 15,436 12,230 9,444
Total assets $ 41,851 32,477 30,169 25,429 19,148
Debt $ 14,052 15,250 14,926 13,211 11,162
Minority interests in equity of
consolidated subsidiaries $ 1,460 1,664 1,493 651 429
Redeemable securities $ 322 660 658 478 170
Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trusts ("Trust
Preferred Securities")
holding solely subordinated
debt securities of TCI
Communications, Inc. $ 1,500 1,500 1,000 -- --
Stockholders' equity $ 10,868 4,506 4,178 4,461 2,578
Common shares outstanding
(net of treasury shares and
shares held by subsidiaries):
Class A common stock -- -- -- -- 491
Class B common stock -- -- -- -- 85
TCI Group Series A Stock 474 469 579 572 --
TCI Group Series B Stock 64 38 85 85 --
Liberty Group Series A Stock 336 313 342 337 --
Liberty Group Series B Stock 32 32 32 32 --
TCI Ventures Group Series A Stock 377 377 -- -- --
TCI Ventures Group Series B Stock 45 32 -- -- --
</TABLE>
II-4
<PAGE> 59
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- --------- -------- ---------
amounts in millions, except per share data
<S> <C> <C> <C> <C> <C>
Summary Statement of
Operations Data:
Revenue $ 7,351 7,570 8,022 6,506 4,682
Operating income (loss) $ (59) 849 632 542 788
Interest expense $ (1,061) (1,160) (1,096) (1,010) (785)
Share of losses of affiliates, other than
Liberty Media Corporation, net $ (1,384) (930) (450) (213) (64)
Gains (losses) on disposition of
assets, net $ 5,760 401 1,593 49 (10)
Net earnings (loss) $ 1,943 (561) 292 (183) 91
Net earnings (loss) attributable
to common stockholders:
TCI Class A and Class B
common stock $ -- -- -- (78)(a) 83
TCI Group Stock (240) (537) (799) (112)(b) --
Liberty Group Stock 156 125 1,056 (27)(b) --
TCI Ventures Group Stock 2,003 (191)(c) -- -- --
---------- ---------- --------- -------- ---------
$ 1,919 (603) 257 (217) 83
========== ========== ========= ======== =========
Basic earnings (loss)
attributable to common
stockholders per common
share:
TCI Class A and Class B
common stock $ -- -- -- (.12)(a) .15
TCI Group Stock $ (.46) (.85) (1.20) (.17)(b) --
Liberty Group Stock $ .43 .34 2.82 (.07)(b) --
TCI Ventures Group Stock $ 4.75 (.47) (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
TCI Group Stock $ (.49) (.85) (1.20) (.17)(b) --
Liberty Group Stock $ .39 .31 2.58 (.07)(b) --
TCI Ventures Group Stock $ 4.44 (.47) (c) -- -- --
</TABLE>
- --------------
(a) From January 1, 1995 through August 10, 1995 (on August 10, 1995, TCI
distributed in the form of a dividend, 2.25 shares (as adjusted) of Liberty
Group Stock for each four shares of TCI Group Stock owned, the "Liberty
Distribution").
(b) From the date of the Liberty Distribution through December 31, 1995.
(c) From the date of the TCI Ventures Exchange through December 31, 1997.
II-5
<PAGE> 60
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis provides information concerning
the results of operations and financial condition of the Company. Such
discussion should be read in conjunction with the accompanying consolidated
financial statements and notes thereto.
Targeted Stock
The Company, through its subsidiaries and affiliates, is principally
engaged in the construction, acquisition, ownership, and operation of cable
television systems and the provision of satellite-delivered video entertainment,
information and home shopping programming services to various video distribution
media, principally cable television systems. The Company also has investments in
cable and telecommunications operations and television programming in certain
international markets as well as investments in companies and joint ventures
involved in developing and providing programming for new television and
telecommunications technologies.
The Company's assets and operations were previously included in three
separate groups, each of which was tracked separately by public equity
securities. These groups were known as the Liberty Media Group, the TCI Ventures
Group and the TCI Group.
The Liberty Media Group was intended to reflect the separate
performance of TCI's assets which produce and distribute programming services.
For additional information, see note 1 to the accompanying consolidated
financial statements of the Company.
The TCI Ventures Group was intended to reflect the separate performance
of TCI's principal international assets and businesses and substantially all of
TCI's non-cable and non-programming assets. For additional information, see note
1 to the accompanying consolidated financial statements of the Company.
The TCI Group was intended to reflect the separate performance of TCI
and its subsidiaries and assets not attributed to Liberty Media Group or TCI
Ventures Group. Such subsidiaries and assets are comprised primarily of TCI's
domestic cable and communications business. For additional information, see note
1 to the accompanying consolidated financial statements of the Company.
The TCI Group was tracked separately through the TCI Group Series A
Stock and the TCI Group Series B Stock. The Liberty Media Group was tracked
separately through the Liberty Group Series A Stock and Liberty Group Series B
Stock. The TCI Ventures Group was tracked separately through the TCI Ventures
Group Series A Stock and TCI Ventures Group Series B Stock.
The TCI Group Series A Stock, TCI Ventures Group Series A Stock and the
Liberty Group Series A Stock are sometimes collectively referred to herein as
the "Series A Stock," and the TCI Group Series B Stock, TCI Ventures Group
Series B Stock and Liberty Group Series B Stock are sometimes collectively
referred to herein as the "Series B Stock."
II-6
<PAGE> 61
Merger and Restructuring
On March 9, 1999, AT&T acquired TCI in the AT&T Merger in which Italy
Merger Corp., a wholly-owned subsidiary of AT&T, merged with and into TCI, and
TCI thereby became a wholly-owned subsidiary of AT&T. As a result of the AT&T
Merger, (i) each share of TCI Group Series A Stock was converted into 0.7757 of
a share of AT&T Common Stock, (ii) each share of TCI Group Series B Stock was
converted into 0.8533 of a share of AT&T Common Stock, (iii) each share of
Liberty Group Series A Stock was converted into one share of a newly created
class of AT&T common stock designated as the AT&T Liberty Class A Tracking
Stock, (iv) each share of Liberty Group Series B Stock was converted into one
share of a newly created class of AT&T common stock designated as the AT&T
Liberty Class B Tracking Stock, (v) each share of TCI Ventures Group Series A
Stock was converted into 0.52 of a share of AT&T Liberty Class A Tracking Stock,
(vi) each share of TCI Ventures Group Series B Stock was converted into 0.52 of
a share of AT&T Liberty Class B Tracking Stock, (vii) each share of TCI's
Convertible Preferred Stock, Series C-TCI Group was converted into 103.059502
shares of AT&T Common Stock, (viii) each share of TCI's Convertible Preferred
Stock Series C-Liberty Media Group was converted into 56.25 shares of AT&T
Liberty Class A Tracking Stock, (ix) each share of TCI's Redeemable Convertible
TCI Group Preferred Stock, Series G was converted into 0.923083 shares of AT&T
Common Stock and (x) each share of TCI's Redeemable Convertible Liberty Media
Group Preferred Stock, Series H was converted into 0.590625 of a share of AT&T
Liberty Class A Tracking Stock. Following the AT&T Merger, each share of TCI's
Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock ("Class B
Preferred Stock") continues to be outstanding as the Class B 6% Preferred Stock
with the same rights and preferences such stock had prior to the AT&T Merger. In
general, the holders of shares of AT&T Liberty Class A Tracking Stock and the
holders of shares of AT&T Liberty Class B Tracking 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, with the holders being entitled to one-tenth
(1/10th) of a vote for each share of AT&T Liberty Class A Tracking Stock held, 1
vote per share of AT&T Liberty Class B Tracking Stock held and 1 vote per share
of AT&T Common Stock held.
II-7
<PAGE> 62
The shares of AT&T Liberty Tracking Stock issued in the AT&T Merger are
intended to reflect the separate performance of the businesses and assets
attributed to "Liberty/Ventures Group," which following the AT&T Merger, is
comprised of the businesses and assets attributed to Liberty Media Group and TCI
Ventures Group at the time of the AT&T Merger. Pursuant to, and subject to the
terms and conditions set forth in, the Agreement and Plan of Restructuring and
Merger, dated as of June 23, 1998 (the "Merger Agreement"), immediately prior to
the AT&T Merger, certain assets previously attributed to 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. ("TCG"), the stock of At Home
Corporation ("@Home") attributed to TCI Ventures Group, the assets and business
of the National Digital Television Center, Inc. ("NDTC") and TCI Ventures
Group's equity interest in Western Tele-Communications, Inc.("WTCI")) were
transferred to TCI Group in exchange for approximately $5.5 billion in cash.
Also, upon consummation of the AT&T Merger, through a new tax sharing agreement
between Liberty/Ventures Group and AT&T, Liberty/Ventures Group became entitled
to the benefit of approximately $2.0 billion of net operating loss carryforwards
attributable to all entities included in TCI's consolidated federal income tax
return as of the date of the AT&T Merger. Such net operating loss carryforwards
are subject to adjustment by the Internal Revenue Service and are subject to
limitations on usage which may affect the ultimate amount utilized. See note 19
to the accompanying consolidated financial statements of the Company.
Additionally, certain warrants previously attributed to TCI Group were
transferred to Liberty/Ventures Group in exchange for approximately $176 million
in cash. Certain agreements entered into at the time of the AT&T Merger provide,
among other things, for preferred vendor status to Liberty/Ventures Group for
digital basic distribution on AT&T's systems of new programming services created
by Liberty/Ventures Group and for a renewal of existing affiliation agreements.
The transfer of certain other immaterial assets was also effected.
Pursuant to amended corporate governance documents for the entities
included in Liberty/Ventures Group and certain agreements among AT&T and TCI,
the business of Liberty/Ventures Group will continue to be managed by certain
persons who were members of TCI's management prior to the AT&T Merger. AT&T will
initially designate one third of the directors of such entities and its rights
as the sole shareholder of the common stock of such entities following the AT&T
Merger will, in accordance with Delaware law, be limited to actions which will
require shareholder approval. Therefore, management has concluded that TCI does
not have a controlling financial interest (as that term is used in Statement of
Financial Accounting Standards No. 94) in the entities comprising the
Liberty/Ventures Group following the AT&T Merger, and will account for its
investment in such entities under the equity method.
II-8
<PAGE> 63
Accordingly, effective with the AT&T Merger, the results of operations
of the entities attributed to Liberty/Ventures Group (exclusive of @Home, NDTC
and WTCI which were transferred to TCI Group immediately prior to the AT&T
Merger) will no longer be consolidated in the TCI consolidated financial
statements. The following table presents certain combined operating information
of Liberty/Ventures Group (inclusive of the operating information of @Home, NDTC
and WTCI) for the indicated periods:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------
1998 1997 1996
----------- ------------ -----------
amounts in millions
<S> <C> <C> <C>
Revenue:
Unaffiliated parties $ 1,301 1,104 1,136
TCI Group 258 195 117
Net sales from electronic retailing services -- -- 984
----------- ------------ -----------
1,559 1,299 2,237
----------- ------------ -----------
Cost of sales, operating costs and expenses:
Cost of sales -- -- 605
Operating 882 682 750
Selling, general and administrative 427 348 563
Charges from related parties 28 75 63
Cost of distribution agreements 50 -- --
Stock compensation 518 296 10
Depreciation and amortization 243 196 210
----------- ------------ -----------
2,148 1,597 2,201
----------- ------------ -----------
Operating income (loss) (589) (298) 36
Other income (expense):
Interest expense (116) (57) (68)
Interest expense to related parties (10) (18) --
Dividend and interest income 100 57 39
Interest income from related parties -- 6 14
Share of losses of affiliates, net (1,034) (850) (372)
Minority interests in losses of attributed
subsidiaries 102 25 26
Gains on dispositions, net 4,738 420 1,558
Gains on issuance of equity by affiliates and
subsidiaries 357 172 13
Other, net 6 2 9
----------- ------------ -----------
4,143 (243) 1,219
----------- ------------ -----------
Earnings (loss) before income
taxes 3,554 (541) 1,255
Income tax benefit (expense) (1,397) 130 (457)
----------- ------------ -----------
Net earnings (loss) $ 2,157 (411) 798
=========== ============ ===========
</TABLE>
If the transfer of @Home, NDTC and WTCI from Liberty/Ventures Group to TCI Group
had occurred on January 1, 1998, TCI Group's revenue, operating cash flow (as
defined by the Company) and operating loss would have increased (decreased) by
$182 million, $7 million and ($159 million), respectively.
II-9
<PAGE> 64
Pursuant to a proposed final judgment (the "Final Judgment") agreed to
by TCI, AT&T and the United States Department of Justice (the "DOJ") on December
30, 1998, Liberty/Ventures Group prior to the AT&T Merger transferred all of the
equity securities of Sprint Corporation ("Sprint") beneficially owned by the
Liberty/Ventures Group (the "Sprint Securities") to a trust with an independent
trustee (the "Trustee"), pursuant to a trust agreement approved by the DOJ (the
"Trust Agreement"). The Final Judgment, if entered by the United States District
Court for the District of Columbia, would require the Trustee, on or before May
23, 2002, to dispose of a portion of the Sprint Securities held by the trust and
beneficially owned by Liberty/Ventures Group sufficient to cause
Liberty/Ventures Group to own beneficially no more than 10% of the outstanding
Series 1 PCS Stock of Sprint on a fully diluted basis (assuming the issuance of
all shares of Series 1 PCS Stock of Sprint ultimately issuable in respect of the
applicable securities of Sprint upon the exercise, conversion or other issuance
thereof in accordance with the terms of such securities) on such date. On or
before May 23, 2004, the Trustee must divest the remainder of the Sprint
Securities beneficially owned by Liberty/Ventures Group.
The Trust Agreement grants the Trustee the sole right to sell the
Sprint Securities and provides that all decisions regarding such divestiture
will be made by the Trustee without discussion or consultation with AT&T or the
entities in the Liberty/Ventures Group; however, the Final Judgment would
provide that the Trustee shall consult with the board of directors of the
Liberty/Ventures Group entity that owns Sprint Securities regarding such
divestiture (other than certain directors appointed by AT&T following the AT&T
Merger and any director, officer or shareholder that owns more than 0.10% of the
outstanding AT&T Common Stock). The Trustee has the power and authority to
accomplish such divestiture only in a manner reasonably calculated to maximize
the value of the Sprint Securities beneficially owned by Liberty/Ventures Group.
The Final Judgment would provide that the Trustee vote the Sprint
Securities beneficially owned by Liberty/Ventures Group in the same proportion
as other holders of Sprint's PCS stock so long as such securities are held by
the trust. The Final Judgment also would prohibit the acquisition by
Liberty/Ventures Group of additional Sprint Securities (other than in connection
with the exercise or conversion, as applicable, of certain Sprint Securities)
without the prior written consent of the DOJ.
Immediately prior to the AT&T Merger, TCI restructured its ownership of
certain of its subsidiaries. This restructuring included merging TCI's cable
subsidiary, TCIC, into TCI. As a result of TCIC's merger with TCI, all assets
and liabilities of TCIC have been assumed by TCI, including TCIC's public debt.
In connection with TCIC's merger with TCI, each share of TCIC's Cumulative
Exchangeable Preferred Stock, Series A was converted into 2.119 shares of TCI
Group Series A Stock, and such shares of TCI Group Series A Stock were
subsequently converted into AT&T Common Stock in connection with the AT&T
Merger. All other public securities issued by subsidiaries of TCIC (other than
TCI Pacific Communications, Inc. ("Pacific")) otherwise remained unaffected.
Furthermore, as part of the restructuring, (i) certain asset transfers were made
between TCI and its subsidiaries, (ii) 123,896 shares of the Company's
Convertible Redeemable Participating Preferred Stock, Series F ("Series F
Preferred Stock"), which were held by subsidiaries of TCI, were converted into
185,428,946 shares of TCI Group Series A Stock (which in turn were converted
into 143,837,233 shares of AT&T Common Stock in the AT&T Merger and continue to
be held by subsidiaries of TCI), (iii) the remaining 154,411 shares of Series F
Preferred Stock which were formerly held by subsidiaries of TCI were distributed
to TCI through a series of liquidations and canceled, and (iv) 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 Liberty Group Series A Stock, 3,417,187 shares of
Liberty Group Series B Stock, and 67,536 shares of Class B Preferred Stock, each
formerly held by subsidiaries of TCI, were distributed to TCI through a series
of liquidations and canceled.
II-10
<PAGE> 65
After the AT&T Merger, under the terms of the 5% Class A Senior
Cumulative Exchangeable Preferred Stock of Pacific (the "Exchangeable Preferred
Stock"), each share of that preferred stock is exchangeable, from and after
August 1, 2001, for approximately 4.225 shares of AT&T Common Stock, subject to
certain anti-dilution adjustments. Additionally, after the AT&T Merger, Pacific
may elect to make any dividend, redemption or liquidation payment on the
Exchangeable Preferred Stock in cash, by delivery of shares of AT&T Common Stock
or by a combination of the foregoing forms of consideration.
Magness Settlement
On June 16, 1997, (a) the Company issued 30,545,864 shares of TCI Group
Series A Stock (which shares are entitled to one vote per share) to the Estate
of Bob Magness (the "Magness Estate"), the late founder and former Chairman of
the Board of TCI in exchange (the "Exchange") for an equal number of shares of
TCI Group Series B Stock (which shares are entitled to ten votes per share)
owned by the Magness Estate, (b) the Magness Estate sold (the "Sale") the shares
of TCI Group Series A Stock received in the Exchange, together with
approximately 1.5 million shares of TCI Group Series A Stock that the Magness
Estate previously owned (collectively, the "Option Shares"), to two investment
banking firms (the "Investment Bankers") for approximately $530 million (the
"Sale Price") and (c) TCI entered into an agreement with the Investment Bankers
whereby TCI would have the option, but not the obligation, to purchase the
Option Shares at any time on or before June 16, 1999 (the "Option Period"). The
preceding transactions are referred to collectively as the "June 16 Stock
Transaction". During the Option Period, the Company and the Investment Bankers
would settle quarterly any increase or decrease in the market value of the
Option Shares. If the market value of the Option Shares should exceed the
Investment Bankers' cost, Option Shares with a fair value equal to the
difference between the market value and cost would be segregated from the other
Option Shares in an account at the Investment Bankers. If the market value of
the Option Shares should be less than the Investment Bankers' cost, the Company,
at its option, would settle such difference with shares of TCI Group Series A
Stock or TCI Ventures Group Series A Stock or, subject to certain conditions,
with cash or letters of credit. In addition, the Company would be required to
pay the Investment Bankers a quarterly fee equal to the London Interbank Offered
Rate ("LIBOR") plus 1% on the Sale Price, as adjusted for payments made by the
Company pursuant to any quarterly settlement with the Investment Bankers. Due to
the Company's ability to settle quarterly price fluctuations and fees with
shares of TCI Group Series A Stock or TCI Ventures Group Series A Stock, the
Company records all amounts received or paid under this arrangement as increases
or decreases, respectively, to equity. During the fourth quarter of 1997, the
Company repurchased 4 million shares of TCI Group Series A Stock from one of the
Investment Bankers for an aggregate cash purchase price of $66 million.
Additionally, as a result of the Exchange Offers and certain open market
transactions that were completed to obtain the desired weighting of TCI Group
Series A Stock and TCI Ventures Group Series A Stock, the Investment Bankers
disposed of 4,210,308 shares of TCI Group Series A Stock and acquired 23,407,118
shares of TCI Ventures Group Series A Stock during the last half of 1997. As a
result of the foregoing transactions and certain transactions related to the
January 5, 1998 settlement of litigation involving the Magness Estate, as
described below, the Option Shares were comprised of 6,201,042 shares of TCI
Group Series A Stock and 11,740,610 shares of TCI Ventures Group Series A Stock
at December 31, 1998. At December 31, 1998, the market value of the Option
Shares exceeded the Investment Bankers' cost by $421 million.
II-11
<PAGE> 66
Pursuant to a certain letter agreement, dated June 16, 1997, between
Dr. Malone, TCI's Chairman and Chief Executive Officer, and the Magness Estate,
Dr. Malone agreed to waive certain rights of first refusal with respect to
shares of TCI Group Series B Stock beneficially owned by the Magness Estate.
Such rights of first refusal arise from a letter agreement, dated June 17, 1988,
among Bob Magness, Kearns-Tribune Corporation and Dr. Malone, pursuant to which
Dr. Malone was granted a right of first refusal to acquire any shares of TCI
Group Series B Stock which the other parties proposed to sell. As a result of
Dr. Malone's rights under such June 17, 1988 letter agreement, such waiver was
necessary in order for the Magness Estate to consummate the Exchange and the
Sale.
In consideration for such waiver, TCI granted Dr. Malone the right (the
"Malone Right") to acquire from time to time until June 30, 1999, from TCI up to
30,545,864 shares of the TCI Group Series B Stock acquired by TCI from the
Magness Estate pursuant to the Exchange. Such acquisition may be made in
exchange for either, or any combination of, shares of TCI Group Series A Stock
owned by Dr. Malone (exchanged on a one for one basis), or cash in an amount
equal to the average closing sale price of the TCI Group Series B Stock for the
five trading days preceding the acquisition.
In connection with certain legal proceedings relative to the probate of
the Magness Estate, one or more of Gary Magness and Kim Magness, Bob Magness'
sons, Sharon Magness, Bob Magness' surviving second wife and the original
personal representatives of the Magness Estate advanced various claims, causes
of action, demands, complaints and requests against one or more of the others.
In addition, Kim Magness and Gary Magness, in a Complaint And Request To Void
Sale Of TCI Stock, And For Damages And Surcharge, filed on October 29, 1997 (the
"Voiding Action"), advanced various claims relating to the June 16 Stock
Transaction against TCI, Dr. Malone and the original personal representatives of
the Magness Estate. Among other matters, the Voiding Action challenged the June
16 Stock Transaction on various fiduciary bases and requested rescission of such
transaction and damages.
Pursuant to an agreement effective as of January 5, 1998, TCI, Gary
Magness, Kim Magness, Sharon Magness, the Magness Estate, the Estate of Betsy
Magness (the first wife of Bob Magness) and Dr. Malone agreed to settle their
respective claims against each other relating to the Magness Estate and the June
16 Stock Transaction, in each case without any of those parties admitting any of
the claims or allegations against that party (the "Magness Settlement").
In connection with the Magness Settlement, portions of the Exchange and
Sale were unwound such that (i) 10,201,041 shares of TCI Group Series A Stock
and 11,666,506 shares of TCI Ventures Group Series A Stock were returned to TCI
as authorized but unissued shares, (ii) the Magness Estate returned to the
Investment Bankers the portion of the Sale Price attributable to such returned
shares and (iii) the Magness Estate paid $11 million to TCI representing a
reimbursement of the Exchange fees incurred by TCI from June 16, 1997 through
February 9, 1998 with respect to such returned shares. TCI then issued to the
Magness Estate 10,017,145 shares of TCI Group Series B Stock and 12,034,298
shares of TCI Ventures Group Series B Stock. In addition, as part of the Magness
Settlement, TCI issued 1,339,415 shares of TCI Group Series B Stock to the
Estate of Betsy Magness in exchange for an equal number of shares of TCI Group
Series A Stock and issued 1,531,834 shares of TCI Ventures Group Series B Stock
for an equal number of shares of TCI Ventures Group Series A Stock.
II-12
<PAGE> 67
On February 9, 1998, in connection with the Magness Settlement, TCI
entered into a call agreement (the "Malone Call Agreement") with Dr. Malone and
Dr. Malone's wife (together with Dr. Malone, the "Malones"), under which the
Malones granted to TCI the right to acquire any shares of TCI stock which are
entitled to cast more than one vote per share (the "High-Voting Shares") owned
by the Malones, which at December 31, 1998 consisted of an aggregate of
approximately 69 million High-Voting Shares upon Dr. Malone's death or upon a
contemplated sale of the High-Voting Shares (other than a minimal amount) to
third persons. In either such event, TCI has the right to acquire the shares at
a maximum price equal to the then relevant market price of shares of
"low-voting" Series A Stock plus a ten percent premium. The Malones also agreed
that if TCI were ever to be sold to another entity, then the maximum premium
that the Malones would receive on their High-Voting Shares would be no greater
than a ten percent premium over the price paid for the relevant shares of Series
A Stock. TCI paid $150 million to the Malones in consideration of their entering
into the Malone Call Agreement.
Also on February 9, 1998, in connection with the Magness Settlement,
certain members of the Magness family, individually and in certain cases, on
behalf of the Estate of Betsy Magness and the Magness Estate (collectively, the
"Magness Family") also entered into a call agreement with TCI (with
substantially the same terms as the one entered into by the Malones, including a
call on the shares owned by the Magness Family upon Dr. Malone's death) (the
"Magness Call Agreement") on the Magness Family's, which at December 31, 1998
consisted of an aggregate of approximately 55 million High-Voting Shares. The
Magness Family was paid $124 million by TCI in consideration of their entering
into the Magness Call Agreement.
II-13
<PAGE> 68
Additionally, on February 9, 1998, the Magness Family entered into a
Shareholders' Agreement (the "Shareholders' Agreement") with the Malones and TCI
under which (i) the Magness Family and the Malones agree to consult with each
other in connection with matters to be brought to the vote of TCI's
stockholders, subject to the proviso that if they cannot mutually agree on how
to vote the shares, Dr. Malone has an irrevocable proxy to vote the High-Voting
Shares owned by the Magness Family, (ii) the Magness Family may designate a
nominee for the Board and Dr. Malone has agreed to vote his High-Voting Shares
for such nominee and (iii) certain "tag along rights" have been created in favor
of the Magness Family and certain "drag along rights" have been created in favor
of the Malones. In addition, the Malone Right granted by TCI to Dr. Malone to
acquire 30,545,864 shares of TCI Group Series B Stock was reduced to an option
to acquire 14,511,570 shares of TCI Group Series B Stock. Pursuant to the terms
of the Shareholders' Agreement, the Magness Family has the right to participate
in the reduced Malone Right on a proportionate basis with respect to 12,406,238
shares of the 14,511,570 shares subject to the Malone Right. On June 24, 1998,
Dr. Malone delivered notice to TCI exercising his right to purchase (subject to
the Magness Family proportionate right) up to 14,511,570 shares of TCI Group
Series B Stock at a per share price of $35.5875 pursuant to the Malone Right. In
addition, a representative of the Magness Family advised Dr. Malone that the
Magness Family would participate in such purchase up to the Magness Family's
proportionate right. On October 14, 1998, 8,718,770 shares of TCI Group Series B
Stock were issued to Dr. Malone upon payment of cash consideration totaling $310
million. On October 16, 1998, 5,792,800 shares of TCI Group Series B Stock were
issued to the Magness Family upon payment of cash consideration totaling $206
million. In connection with the acquisition of the TCI Group Series B Stock by
Dr. Malone, TCI executed certain waivers to the Malone Call Agreement and TCI
and the Magness Family executed a waiver to the Shareholders' Agreement to,
among other things, permit (subject to certain limitations) the pledge of TCI
Group Series B Stock owned by Dr. Malone as collateral to the lenders who
provided the funds for his purchase of shares of TCI Group Series B Stock. In
connection with the AT&T Merger, Liberty Media Corporation ("Liberty") became
entitled to exercise TCI's rights under each Call Agreement and the
Shareholders' Agreement with respect to the AT&T Liberty Class B Tracking Stock
acquired by the Malones and the Magness Family as a result of the AT&T Merger
and the Malones and the Magness Family agreed that the Shareholders' Agreement
would continue to apply to the AT&T Liberty Class B Tracking Stock.
On February 1, 1999, the Company began to terminate the transactions
under the agreements with the Investment Bankers described above, and as of
March 5, 1999, such transactions were terminated. In connection with the
termination of such transactions the Company received an aggregate cash payment
of $509 million.
Inflation
Inflation has not had a significant impact on TCI's results of
operations during the three-year period ended December 31, 1998.
II-14
<PAGE> 69
Accounting Standards
Effective January 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"). The Company has reclassified its prior period consolidated
balance sheet and consolidated statements of operations to conform to the
requirements of SFAS 130. SFAS 130 requires that all items which are components
of comprehensive earnings or losses be reported in a financial statement in the
period in which they are recognized. The Company has included cumulative foreign
currency translation adjustments and unrealized holding gains and losses on
available-for-sale securities in other comprehensive earnings that are recorded
directly in stockholders' equity. Pursuant to SFAS 130, these items are
reflected, net of related tax effects, as components of comprehensive earnings
in the Company's consolidated statements of operations and comprehensive
earnings, and are included in accumulated other comprehensive earnings in the
Company's consolidated balance sheets and statements of stockholders' equity.
During 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, ("SFAS 133"), which is effective for all fiscal years
beginning after June 15, 1999. SFAS 133 establishes accounting and reporting
standards for derivative instruments and hedging activities by requiring that
all derivative instruments be reported as assets or liabilities and measured at
their fair values. Under SFAS 133, changes in the fair values of derivative
instruments are recognized immediately in earnings unless those instruments
qualify as hedges of the (1) fair values of existing assets, liabilities, or
firm commitments, (2) variability of cash flows of forecasted transactions, or
(3) foreign currency exposures of net investments in foreign operations.
Although management of the Company has not completed its assessment of the
impact of SFAS 133 on its consolidated results of operations and financial
position, management currently estimates that the impact of SFAS 133 will not be
material.
Year 2000
During 1998, the Company continued its enterprise-wide, comprehensive
efforts to assess and remediate its computer systems and related software and
equipment to ensure such systems, software and equipment recognize, process and
store information in the year 2000 and thereafter. The Company's year 2000
remediation efforts include an assessment of its most critical systems, such as
customer service and billing systems, headends and other cable plant systems
that support the Company's programming services, business support operations,
and other equipment and facilities. The Company also continued its efforts to
verify the year 2000 readiness of its significant suppliers and vendors and
continued to communicate with significant business partners and affiliates to
assess such partners and affiliates' year 2000 status.
The Company has a year 2000 Program Management Office (the "PMO") to
organize and manage its year 2000 remediation efforts. The PMO is responsible
for overseeing, coordinating and reporting on the Company's year 2000
remediation efforts. At December 31, 1998, it was comprised of a 119-member,
full-time staff, accountable to executive management of the Company.
II-15
<PAGE> 70
The PMO has defined a four-phase approach to determining the year 2000
readiness of the Company's systems, software and equipment. Such approach is
intended to provide a detailed method for tracking the evaluation, repair and
testing of the Company's critical systems, software and equipment. Phase 1,
Assessment, involves the inventory of all critical systems, software and
equipment and the identification of any year 2000 issues. Phase 1 also includes
the preparation of the workplans needed for remediation. Phase 2, Remediation,
involves repairing, upgrading and/or replacing any non-compliant critical
equipment and systems. Phase 3, Testing, involves testing the Company's critical
systems, software, and equipment for year 2000 readiness, or in certain cases,
relying on test results provided to the Company. Phase 4, Implementation,
involves placing compliant systems, software and equipment into production or
service.
At December 31, 1998, TCI's overall progress by phase was as follows:
<TABLE>
<CAPTION>
Percentage of year 2000 Expected Completion
Projects Date - All year 2000
Phase Completed by Phase* Projects
----- ------------------- --------------------
<S> <C> <C>
Phase 1-Assessment 69% April 1999
Phase 2-Remediation 28% June 1999
Phase 3-Testing 16% July 1999
Phase 4-Implementation 11% September 1999
</TABLE>
- -------------
*The percentages set forth above were calculated by dividing the number of year
2000 projects that have completed a given phase by the total number of year 2000
projects.
The completion dates set forth above are based on the Company's current
expectations. However, due to the uncertainties inherent in year 2000
remediation, no assurances can be given as to whether such projects will be
completed on such dates.
The Company is completing an inventory of critical systems with
embedded technologies that impact its operations and is currently determining
the correct remediation approach. The embedded technologies assessments are
expected to be complete by April of 1999.
During 1998, the Company continued its survey of significant
third-party vendors and suppliers whose systems, services or products are
important to the Company's operations (e.g., suppliers of addressable
controllers and set-top devices, and the provider of the Company's billing
services). The year 2000 readiness of such providers is critical to continued
provision of the Company's cable service. The Company has received information
that critical systems, services or products supplied to the Company by third
parties are either year 2000 ready or are expected to be year 2000 ready by
mid-1999.
In addition to the survey process described above, management of the
Company has identified its most critical supplier/vendor relationships and has
instituted a verification process to determine the vendor's year 2000 readiness.
Such verification includes, as deemed necessary, reviewing vendors' test and
other data and engaging in regular conferences with vendors' year 2000 teams.
The Company is also requiring testing to validate the year 2000 compliance of
certain critical products and services.
II-16
<PAGE> 71
Significant market value is associated with the Company's investments
in certain public and private corporations, partnerships and other businesses.
Accordingly, the Company is monitoring the public disclosure of such
publicly-held business entities to determine their year 2000 readiness,
including Cablevision Systems Corporation ("CSC"), Time Warner, Inc. ("Time
Warner"), and AT&T. In addition, the Company has surveyed and monitored the year
2000 status of certain privately-held business entities in which the Company has
significant investments. For updated information related to such companies' year
2000 programs, please refer to the most recent periodic filings with the
Securities and Exchange Commission of CSC, Time Warner and AT&T.
Year 2000 expenses and capital expenditures incurred during the year
ended December 31, 1998 were $11 million and $2 million, respectively.
Management of the Company currently estimates the remaining costs to be not less
than $113 million, bringing the total estimated cost associated with the
Company's year 2000 remediation efforts to be not less than $126 million
(including $33 million for replacement of noncompliant information technology
("IT") Systems). Also included in this estimate is $14 million in future
payments to be made pursuant to unfulfilled executory contracts or commitments
with vendors for year 2000 remediation services. Although no assurances can be
given, management currently expects that (i) cash flow from operations will fund
the costs associated with year 2000 compliance and (ii) the total projected cost
associated with the Company's year 2000 program will not be material to the
Company's financial position, results of operations or cash flows.
The Company is a widely distributed enterprise in which allocation of
certain resources, including IT support is decentralized. Accordingly, the
Company does not consolidate an IT budget. Therefore, total estimated year 2000
costs as a percentage of an IT budget are not available. There are currently no
planned IT projects being deferred due to year 2000 costs.
The failure to correct a material year 2000 problem could result in an
interruption or failure of certain important business operations. Management
believes that its year 2000 program will significantly reduce the Company's
risks associated with the changeover to the year 2000 and has implemented
certain contingency plans to minimize the effect of any potential year 2000
related disruptions. The risks and the uncertainties discussed below and the
associated contingency plans relate to systems, software, equipment, and
services that the Company has deemed critical in regard to customer service,
business operations, financial impact or safety.
The failure of addressable controllers contained in the cable system
headends could disrupt the delivery of premium services to customers and could
necessitate crediting customers for failure to receive such premium services. In
this unlikely event, management expects that it will identify and transmit the
lowest cost programming tier. Unless other contingency plans are developed with
the programmers, premium and adult content channels would not likely be
transmitted until the addressable controller had been repaired.
Customer service networks and/or automated voice response systems
failure could prevent access to customer account information, hamper
installation scheduling and disable the processing of pay-per-view requests. The
Company plans to have its customer service representatives answer telephone
calls from customers in the event of outages and expects to retrieve needed
customer information manually from the billing service provider.
II-17
<PAGE> 72
A failure of the services provided by billing systems service providers
could result in a loss of customer records which could disrupt the ability to
bill customers for a protracted period. The Company plans to prepare electronic
backup records of its customer billing information prior to the year 2000 to
allow for data recovery. In addition, the Company continues to monitor the year
2000 readiness of its key customer-billing suppliers.
Advertising revenue could be adversely affected by the failure of
certain equipment which could impede or prevent the insertion of advertising
spots in the Company's programming. The Company anticipates that it can minimize
such effect by manually resetting the dates each day until the equipment is
repaired.
The Company owns investments in numerous cable programming operators
and other businesses. The market value of the Company's investment in these
entities could be adversely impacted by material failures of such entities to
address year 2000 remediation issues (including supplier and vendor issues)
related to their programming services and businesses. Further, due to tax and
strategic considerations, the Company has a limited ability to dispose of these
investments if year 2000 issues develop. Therefore, as a contingency plan, the
Company has undertaken an extensive effort to verify and in certain cases assist
in the year 2000 remediation efforts of companies in which it has significant
investments.
Security and fire protection systems failure could leave facilities
vulnerable to intrusion and fire. The Company expects to return such systems to
normal functioning by turning the power off and then on again ("power off/on").
The Company also plans to have additional security staff on site and plans to
implement a backup plan for communicating with local fire and police
departments. Also, certain personal computers interface with and control
elevators, escalators, wireless systems, public access systems and certain
telephony systems. In the event such computers cease operating, conducting a
power off/on is expected to resume normal functioning. If a power off/on does
not resume normal functioning, management expects to resolve the problem by
resetting the computer to a pre-designated date which precedes the year 2000.
In the event that the local public utility cannot supply power, the
Company expects to supply power for a limited time to the Company's cable
headends, the NDTC and office sites through backup generators.
The financial impact of any or all of the above worst-case scenarios
has not been and cannot be estimated by the Company due to the numerous
uncertainties and variables associated with such scenarios.
If critical systems related to the Company's cable TV and programming
services are not successfully remediated, the Company could face claims of
breach of contract from customers of the NDTC, from parties to cable system sale
or exchange agreements, from certain programming providers and from other cable
TV businesses that rely on the Company's programming services. The Company has
not determined the possible losses from any such claims of breach of contract.
II-18
<PAGE> 73
SUMMARY OF OPERATIONS
Summarized operating data with respect to TCI is presented below for
the indicated periods:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1998 1997 1996
----------- ---------- ----------
amounts in millions
<S> <C> <C> <C>
Revenue $ 7,351 7,570 8,022
Operating expenses (2,997) (2,995) (3,677)
Selling, general and administrative expenses (1,642) (1,600) (2,069)
Year 2000 costs (11) -- --
AT&T merger costs (14) -- --
Stock compensation (866) (488) 13
Reserve for loss arising from contingent obligation (90) -- --
Cost of distribution agreements (50) -- --
Impairment of assets (5) (15) --
Restructuring charges -- -- (41)
Depreciation (1,121) (1,077) (1,093)
Amortization (614) (546) (523)
----------- ---------- ----------
Operating income (loss) (59) 849 632
Interest expense (1,061) (1,160) (1,096)
Interest and dividend income 122 88 64
Share of losses of affiliates, net (1,384) (930) (450)
Loss on early extinguishment of debt (60) (39) (71)
Minority interests in earnings of consolidated
subsidiaries, net (88) (154) (56)
Gains on issuance of equity interests by subsidiaries 89 60 --
Gains on issuance of stock by equity investees 268 112 12
Gains on disposition of assets, net 5,760 401 1,593
Other, net (49) (22) (65)
----------- ---------- ----------
Earnings (loss) before income taxes 3,538 (795) 563
Income tax benefit (expense) (1,595) 234 (271)
----------- --------- ----------
Net earnings (loss) $ 1,943 (561) 292
=========== ========= ==========
</TABLE>
The Company's domestic cable and communications businesses and assets
were attributed to TCI Group, and the Company's programming businesses and
assets were attributed to Liberty Media Group. The Company's principal
international businesses and assets and the Company's remaining non-cable and
non-programming domestic businesses and assets were included in TCI Ventures
Group.
II-19
<PAGE> 74
Acquisitions and Dispositions
The Company has completed a number of acquisitions and dispositions
during the three years ended December 31, 1998 which have affected the
comparability of operating results between periods. The acquisitions and
dispositions which had a significant impact on the Company's operating results
are discussed below.
On March 4, 1998, the Company contributed to CSC certain of its cable
television systems serving approximately 830,000 customers in exchange for
approximately 48.9 million newly issued CSC Class A common shares (the "CSC
Transaction"). For additional information concerning the CSC Transaction, see
note 6 to the accompanying consolidated financial statements. In addition to the
CSC Transaction, the Company also completed, during 1998, eight transactions
whereby TCI contributed cable television systems serving in the aggregate
approximately 1,924,000 customers to eight 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 the Company to external
parties aggregating $323 million and intercompany debt owed to the Company
aggregating $2,374 million. The CSC Transaction and the formation of the 1998
Joint Ventures are collectively referred to herein as the "1998 Contribution
Transactions." During the year ended December 31, 1998, the Company's revenue
and operating cash flow (defined by the Company as operating income before
depreciation, amortization, other non-cash items, year 2000 costs, AT&T merger
costs and stock compensation) included $622 million and $278 million,
respectively, from the cable television systems included in the 1998
Contribution Transactions.
In addition to the 1998 Contribution Transactions, the Company, as of
December 31, 1998, has signed agreements or letters of intent to contribute
within the next twelve months, certain cable television systems (the "Pending
Contribution Cable Systems") serving approximately 1.2 million basic customers
to joint ventures in which the Company will retain non-controlling ownership
interests (the "Pending Contribution Transactions"). Following the completion of
the Pending Contribution Transactions, the Company will no longer consolidate
the Pending Contribution Cable Systems. Accordingly it is anticipated that the
completion of the Pending Contribution Transactions, as currently contemplated,
will result in aggregate estimated reductions (based on 1998 amounts) to the
Company's debt, annual revenue and annual operating cash flow of $1.5 billion,
$500 million and $200 million, respectively. No assurance can be given that any
of the Pending Contribution Transactions will be consummated.
Pursuant to an Agreement and Plan of Exchange and Merger entered into
in August 1996, Silver King Communications Inc. ("Silver King") acquired Home
Shopping Network, Inc. ("HSN") by merger of HSN with a subsidiary of Silver King
in December 1996 (the "HSN Merger") where HSN is the surviving corporation and a
subsidiary of Silver King following the HSN Merger. As a result of the HSN
Merger, HSN is no longer included in the consolidated financial results of the
Company. Subsequent to the HSN Merger, Silver King was renamed HSN, Inc.
("HSNI"). Revenue and expenses related to HSNI are included under the captions
"Net sales from electronic retailing services" and "cost of sales from
electronic retailing services", respectively, in the accompanying consolidated
Statement of Operations and Comprehensive Earnings for the year ended December
31, 1996. For additional information on the HSN Merger, see note 6 to the
accompanying consolidated financial statements of the Company.
II-20
<PAGE> 75
On July 31, 1996, the Company acquired an entity from Viacom, Inc. that
owned cable television assets valued at $2.326 billion at the acquisition date.
Upon consummation of such acquisition (the "Viacom Acquisition"), the acquired
entity was renamed TCI Pacific Communications, Inc. For additional information
concerning the Viacom Acquisition, see note 10 to the accompanying consolidated
financial statements of the Company.
Through December 4, 1996, the Company had an investment in Primestar
Partners L.P. ("Primestar"). Primestar provided programming and marketing
support to each of its cable partners, including the Company, who provided
satellite television service to their customers. On December 4, 1996, TCI
distributed (the "Satellite Spin-off") to the holders of shares of TCI Group
Stock all of the issued and outstanding common stock of TCI Satellite
Entertainment, Inc. ("Satellite"). At the time of the Satellite Spin-off,
Satellite's assets and operations included the Company's interest in Primestar,
the Company's business of distributing Primestar programming and two
communications satellites. As a result of the Satellite Spin-off, Satellite's
operations subsequent to December 4, 1996 are not consolidated with those of the
Company. For additional information on the Satellite Spin-Off, see note 11 to
the accompanying consolidated financial statements.
The Company has also completed certain other acquisitions and
dispositions during the three years ended December 31, 1998. See note 10 to the
accompanying consolidated financial statements of the Company. The timing and
magnitude of such acquisitions and dispositions may also affect the
comparability of financial results between periods. Consequently, the historical
amounts included in the accompanying consolidated financial statements are not
comparable year to year. The following table presents adjustments to remove the
effects of the aforementioned acquisitions and dispositions from selected
operating items.
<TABLE>
<CAPTION>
Effect of
acquisitions
Historical and dispositions As adjusted
---------- ---------------- -----------
Year ended December 31, 1998: amounts in millions
<S> <C> <C> <C>
Revenue $ 7,351 (1,499) 5,852
Operating expenses $ (2,997) 644 (2,353)
Selling, general and administrative expenses $ (1,642) 336 (1,306)
Year ended December 31, 1997:
Revenue $ 7,570 (1,962) 5,608
Operating expenses $ (2,995) 816 (2,179)
Selling, general and administrative expenses $ (1,600) 402 (1,198)
Year ended December 31, 1996:
Revenue $ 8,022 (2,422) 5,600
Operating expenses $ (3,677) 1,231 (2,446)
Selling, general and administrative expenses $ (2,069) 708 (1,361)
</TABLE>
II-21
<PAGE> 76
Revenue and Expenses
The Company's revenue decreased $219 million or 3% and $452 million or
6% for the years ended December 31, 1998 and 1997, respectively, as compared to
the prior year. Exclusive of the effects of acquisitions and dispositions,
revenue increased $244 million or 4% and $8 million or less than 1% during 1998
and 1997, respectively.
Exclusive of the effects of acquisitions and dispositions, revenue from
domestic cable operations increased 2% during 1998 as compared to 1997. Revenue
from domestic cable customers accounted for this 2% increase, primarily due to
the net effect of a 5% increase in basic revenue, an increase in revenue from
digital products and a 10% decrease in premium revenue. The Company experienced
a 5% increase in its average basic rate, an increase of less than 1% in the
number of average basic customers, a 5% decrease in its average rate for
traditional premium services and a 5% decrease in the number of average
traditional premium subscriptions. Additionally, the December 31, 1997
termination of an agreement pursuant to which the Company provided fulfillment
services to a third party resulted in a 1% decrease, and advertising sales and
other revenue accounted for a 1% increase, in revenue from domestic cable
operations. A significant portion of the increase in advertising sales is
attributable to arrangements with programming suppliers that may not continue at
current levels in future periods.
Exclusive of the effects of acquisitions and dispositions, revenue from
domestic cable operations increased 6% during 1997 as compared to 1996. Revenue
from domestic cable customers accounted for 3% of the 1997 increase in revenue
from domestic cable operations, primarily as a result of the net effect of a 7%
increase in basic revenue and a 4% decrease in premium revenue. The Company
experienced a 9% increase in its average basic rate, a 1% decrease in the number
of average basic customers, a 7% increase in its average premium rate and an 11%
decrease in the number of average premium subscriptions. Advertising sales and
other revenue accounted for the remaining 3% increase in revenue from domestic
cable operations.
Exclusive of the effects of acquisitions and dispositions, revenue from
programming services increased 15% and 29% for the years ended December 31, 1998
and 1997, respectively, as compared to the prior year. The increases related
primarily to higher revenue from the distribution of "Encore" premium movie
services to cable operators, including TCI Group, and higher revenue from TV
Guide, Inc. (formerly United Video Satellite Group, Inc. ("UVSG")).
Additionally, Netlink International had increased revenue during 1998 compared
to the same period in 1997, primarily due to increased rates as a result of
increased copyright fees.
Operating expenses increased $2 million or less than 1% and decreased
$682 million or 19% for the years ended December 31, 1998 and 1997,
respectively, as compared to the prior year. Exclusive of the effects of
acquisitions and dispositions, operating expenses increased $174 million or 8%
and decreased $267 million or 11% during 1998 and 1997, respectively.
Exclusive of the effects of acquisitions and dispositions, operating
expenses from domestic cable operations increased 5% during each of 1998 and
1997, respectively, as compared to the prior year. Such changes relate primarily
to higher programming and labor costs, which in 1998 were partially offset by
reductions attributable to higher capitalized labor and overhead resulting
primarily from increased installation and construction activities. It is
anticipated that the Company's programming costs will increase in future
periods.
II-22
<PAGE> 77
Exclusive of the effects of acquisitions and dispositions, operating
expenses from programming operations increased 73% and 85% during 1998 and 1997,
respectively, as compared to the prior year. The increases relate primarily to
higher costs to acquire programming content from suppliers due primarily to an
increase in first run movie content as a percent of Encore's total movie content
in both 1998 and 1997. Such first run movies are generally obtained at higher
costs than movies which are not first run. Other miscellaneous increases include
higher music rights costs and higher copyright fees.
Selling, general and administrative expenses increased $42 million or
3% and decreased $469 million or 23% for the years ended December 31, 1998 and
1997, respectively, as compared to the prior year. Exclusive of the effects of
acquisitions and dispositions, the expenses increased $108 million or 9% and
decreased $163 million or 12% during 1998 and 1997, respectively.
Exclusive of the effects of acquisitions and dispositions, selling,
general and administrative expenses from domestic cable operations increased 12%
and decreased 6% during 1998 and 1997, respectively, as compared to the prior
year. The 1998 increase is due primarily to general increases in expenses
relating to the launch of digital products and other initiatives, which
increases were partially offset by an increase in marketing incentives received
from programming suppliers. The majority of such marketing incentives are
associated with the Company's launch of digital services and accordingly may not
continue at current levels in the future periods. The 1997 decrease is due
primarily to lower marketing costs due primarily to launch and other incentives
from programming suppliers, a reduction in salaries and related payroll expenses
due to work force reductions in the fourth quarter of 1996, and other reductions
in general and administrative expenses in 1997.
Exclusive of the effects of acquisitions and dispositions, selling,
general and administrative expenses from programming operations increased 3% and
less than 1% during 1998 and 1997, respectively, as compared to the prior year.
The increase relates primarily to higher contract labor, marketing and marketing
support costs.
Year 2000 costs include fees and other expenses incurred directly in
connection with TCI's comprehensive efforts to review and correct computer
systems, equipment and related software to ensure readiness for the year 2000.
See detailed discussion above.
AT&T merger costs include investment advisory, legal and accounting
fees, and other incremental pre-closing costs directly related to the AT&T
Merger. See note 2 to the accompanying consolidated financial statements of the
Company.
The Company records stock compensation relating to restricted stock
awards, options and/or stock appreciation rights granted by the Company to
certain employees and directors. The amount of expense associated with stock
compensation is based on the vesting of the related stock options and stock
appreciation rights and the market price of the underlying common stock as of
the date of the accompanying consolidated financial statements. The estimated
compensation liability relating to stock appreciation rights has been recorded
as of December 31, 1998, and is subject to future adjustment based upon vesting
and market values and, ultimately, on the final determination of market values
when such rights are exercised.
During the fourth quarter of 1998, the Company recorded a $90 million
charge to provide for the estimated losses that are expected to result from the
Company's obligation under a certain contribution agreement. See note 20 to the
accompanying consolidated financial statements of the Company.
II-23
<PAGE> 78
During 1998, @Home issued performance-based warrants to certain cable
operators to purchase up to 10.3 million shares of @Home Series A common stock
at an exercise price of $10.50 per share. Warrants to purchase approximately
920,000 shares of @Home's Series A common stock became exercisable in 1998.
@Home recorded non-cash charges to operations of $50 million for the fair value
of these warrants. Such charges are included in cost of distribution agreements
in the accompanying consolidated statements of operations and comprehensive
earnings of the Company. In the event the performance milestones are met with
respect to the remaining unexercisable performance based warrants, @Home will
record non-cash charges to operations in future periods based on the difference
between the then fair market value of @Home's Series A common stock and the
exercise price of $10.50 per share.
During the fourth quarter of 1996, the Company restructured certain of
its operating and accounting functions. In connection with such restructuring,
the Company recognized a charge of $41 million related primarily to work force
reductions. As of December 31, 1998, all of such charges had been paid.
Depreciation expense increased $44 million or 4% and decreased $16
million or 1% for the years ended December 31, 1998 and 1997, respectively, as
compared to the prior year. The 1998 increase represents the net effect of (i)
increases attributable to acquisitions, capital expenditures and differences in
the composition of TCI's depreciable property and equipment and (ii) decreases
attributable to the 1998 Contribution Transactions and other dispositions. The
1997 decrease represents the net effect of a decrease due to the Satellite
Spin-off and another disposition that more than offset increases attributable to
acquisitions and capital expenditures.
Amortization expense increased $68 million or 12% and $23 million or 4%
for the years ended December 31, 1998 and 1997, respectively, as compared to the
prior year. Such increases are primarily attributable to the net effects of
acquisitions and dispositions and the amortization of certain intangible assets
arising from certain distribution agreements entered into in 1997 and 1998 by
@Home. See note 18 to the accompanying consolidated financial statements of the
Company.
Due to the effects of purchase accounting, the Company anticipates that
its depreciation and amortization expenses will increase significantly following
the AT&T Merger.
Other Income and Expenses
The Company's interest expense decreased $99 million or 9% from 1997 to
1998 and increased $64 million or 6% from 1996 to 1997. The decrease in 1998 is
primarily the result of debt reductions attributable to the 1998 Contribution
Transactions and a lower effective borrowing rate as compared to the prior year.
The increase in 1997 is primarily the result of higher average debt balances, as
a result of the Viacom Acquisition on July 31, 1996. The Company's weighted
average interest rate on borrowings was 7.32%, 7.71% and 7.75% during 1998, 1997
and 1996, respectively.
II-24
<PAGE> 79
Interest and dividend income increased $34 million or 39% and $24
million or 38% during 1998 and 1997, respectively, as compared to the prior
year. The 1998 increase is attributable to (i) higher dividend income due
primarily to dividends received on AT&T Common Stock that was acquired in July
1998 and dividends received on preferred stock of Fox Kids Worldwide, Inc. ("FKW
Preferred Stock") that was acquired in August 1997, and (ii) increased interest
income due primarily to increases in the Company's cash and restricted cash
balances and other interest-earning assets. Subsequent to the AT&T Merger, any
dividends received on AT&T Common Stock ($31 million during 1998) will not be
recognized as income, but instead will be recorded as increases to the Company's
additional paid-in capital. The 1997 increase is attributable to (i) higher
dividend income due to dividends received on a series of Time Warner, Inc.
common stock with limited voting rights that was acquired in October 1996 and
dividends received on FKW Preferred Stock that was acquired in August 1997, and
(ii) increased interest income due to higher balances of interest-earning assets
in 1997, as compared to 1996. See notes 5, 7, 8 and 10 to the accompanying
consolidated financial statements of the Company.
TCI's investments in affiliates are comprised of limited partnerships
and other entities that are primarily engaged in the domestic cable television
business or other communications services businesses. TCI's share of earnings
(losses) of affiliates were ($1,384 million), ($930 million) and ($450 million)
in 1998, 1997 and 1996, respectively. Of these earnings (losses), ($352
million), ($90 million) and ($79 million), respectively, relate to the Company's
domestic cable operations, ($67 million), ($12 million) and $8 million,
respectively, relate to the Company's programming operations and ($965 million),
($828 million) and ($379 million), respectively, relate to the Company's other
businesses.
The majority of the 1998 increase in the Company's share of losses of
its domestic cable affiliates is attributable to the Company's share of losses
of CSC, which was partially offset by the Company's share of 1998 gains
recognized by two affiliates on the sale of certain assets. The 1997 increase is
primarily due to the Company's share of losses of a 49%-owned cable television
partnership that was acquired by the Company in July 1996.
The 1998 increase in the Company's share of losses of its programming
affiliates is primarily attributable to an $83 million increase in the Company's
share of Fox/Liberty Networks' ("Fox Sports") losses, offset in part by a $33
million increase in the Company's share of the earnings of QVC, Inc. ("QVC").
Prior to the first quarter of 1998, the Company had no obligation, nor
intention, to fund Fox Sports. During 1998, the Company made the determination
to provide funding to Fox Sports based on specific transactions consummated by
Fox Sports. Consequently, the Company's share of losses of Fox Sports for 1998
includes previously unrecognized losses of Fox Sports of approximately $64
million. Losses for Fox Sports were not recognized in prior periods due to the
fact that the Company's investment in Fox Sports was less than zero. The 1997
change in the Company's share of earnings (losses) of its programming affiliates
is attributable to a $30 million decrease in the Company's share of Discovery's
earnings, offset in part by a $7 million increase in the Company's share of
QVC's earnings.
II-25
<PAGE> 80
The Company's share of losses of its other affiliates is primarily
comprised of the Company's share of the losses of the PCS Ventures and various
foreign affiliates. During the years ended December 31, 1998, 1997 and 1996, the
Company's share of the PCS Ventures' losses was $629 million, $493 million and
$167 million, respectively. During the years ended December 31, 1998, 1997 and
1996, the Company's share of losses from its foreign affiliates was $282
million, $264 million and $184 million, respectively. The increases in the
losses of the PCS Ventures are primarily attributable to increases in (i)
selling, general and administrative costs associated with Sprint Spectrum
Holding Company L.P.'s ("Sprint Spectrum") efforts to increase its customer
base, (ii) depreciation expense resulting from capital expenditures made to
expand its PCS network and (iii) interest expense associated with higher amounts
of outstanding debt. As a result of a November 1998 transaction, the Company no
longer accounts for its investment in the PCS Ventures under the equity method.
See notes 2, 6 and 9 to the accompanying consolidated financial statements of
the Company.
In connection with certain repurchases of notes payable, TCI recognized
losses on early extinguishment of debt of $60 million, $39 million and $62
million during the years ended December 31, 1998, 1997 and 1996, respectively.
Such losses related to prepayment penalties amounting to $52 million, $33
million and $60 million for the years ended December 31, 1998, 1997 and 1996,
respectively, and the retirement of deferred loan costs. Also, during the year
ended December 31, 1996, certain TCI subsidiaries terminated, at such
subsidiaries' option, certain revolving bank credit facilities with aggregate
commitments of approximately $2 billion and refinanced certain other bank credit
facilities. In connection with such termination and refinancings, TCI recognized
a loss on early extinguishment of debt of $9 million related to the retirement
of deferred loan costs.
Minority interests in earnings of consolidated subsidiaries aggregated
$88 million, $154 million and $56 million for the years ended December 31, 1998,
1997 and 1996, respectively. Such amounts include dividends on preferred
securities of the Company's subsidiaries of $191 million, $180 million and $86
million, respectively, offset in part by the minority interests share of the
losses of @Home and certain other majority-owned subsidiaries of the Company.
During the years ended December 31, 1998 and 1997, the minority interests' share
of @Home's net losses was approximately $89 million and $34 million,
respectively. See notes 6, 10 and 18 to the accompanying consolidated financial
statements of the Company.
Gains on issuance of equity interests by subsidiaries were $89 million
and $60 million during the years ended December 31, 1998 and 1997, respectively.
The gains relate to the 1998 and 1997 public offering of securities by the
Company's @Home subsidiary and the February 1998 equity issuance by the
Company's then subsidiary, Superstar/Netlink Group LLC. See note 18 to the
accompanying consolidated financial statements of the Company.
Gains on issuance of stock by equity investees were $268 million, $112
million and $12 million during the years ended December 31, 1998, 1997 and 1996,
respectively. The gains relate to the dilution of the Company's interest in
various equity method investments. See notes 6, 8 and 18 to the accompanying
consolidated financial statements of the Company.
II-26
<PAGE> 81
Gains on disposition of assets of $5,760 million during 1998 include
(i) a $2.3 billion gain (excluding related deferred income tax expense of $883
million) attributable to the June 23, 1998 consummation of a merger in which TCG
was acquired by AT&T, (ii) a $1.9 billion gain (excluding related deferred
income tax expense of $647 million) attributable to the November 23, 1998
exchange of the Company's interest in the PCS Ventures, and (iii) an aggregate
gain of $898 million gain attributable to the March 4, 1998 contribution of
cable television systems to CSC and certain other of the 1998 Contribution
Transactions. See notes 6, 7, 8, 9 and 10 to the accompanying consolidated
financial statements of the Company.
Net Earnings (Loss)
As a result of the above-described fluctuations in the Company's
results of operations, (i) TCI's net earnings (before preferred stock dividend
requirements) of $1,943 million for the year ended December 31, 1998 changed by
$2,504 million, as compared to TCI's net loss (before preferred stock dividend
requirements) of $561 million for the year ended December 31, 1997, and (ii)
TCI's net loss (before preferred stock dividend requirements) of $561 million
for the year ended December 31, 1997 changed by $853 million, as compared to
TCI's net earnings (before preferred stock dividend requirements) of $292
million for the year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
As described in greater detail in note 2 to the accompanying
consolidated financial statements of the Company, on March 9, 1999, TCI was
acquired by AT&T in a merger and TCI thereby became a wholly-owned subsidiary of
AT&T. The AT&T Merger also resulted in the deconsolidation of the businesses and
assets attributed to the Liberty/Ventures Group (exclusive of @Home, NDTC and
WTCI which were transferred to TCI Group immediately prior to the AT&T Merger)
at the time of the AT&T Merger.
Pursuant to the Merger Agreement, immediately prior to the AT&T Merger,
certain assets previously attributed to TCI Ventures Group (including, among
others, the shares of AT&T Common Stock received in the merger of AT&T and TCG,
the stock of @Home attributed to TCI Ventures Group, the assets and business of
NDTC and TCI Ventures Group's equity interest in WTCI) were transferred to TCI
Group in exchange for approximately $5.5 billion in cash. Also, upon
consummation of the AT&T Merger, through a new tax sharing agreement between
Liberty/Ventures Group and AT&T, Liberty/Ventures Group became entitled to the
benefit of approximately $2.0 billion of net operating loss carryforwards
attributable to all entities included in TCI's consolidated federal income tax
return as of the date of the AT&T Merger. Such net operating loss carryforwards
are subject to adjustment by the Internal Revenue Service and are subject to
limitations on usage which may affect the ultimate amount utilized. See note 19
to the accompanying consolidated financial statements of the Company.
Additionally, certain warrants previously attributed to TCI Group were
transferred to Liberty/Ventures Group in exchange for approximately $176 million
in cash. TCI funded the $5.5 billion payment to Liberty/Ventures Group through
borrowings from AT&T. Such borrowings are evidenced by a note payable to AT&T in
the amount of $5.5 billion (the "AT&T Note"). The AT&T Note accrues interest at
LIBOR, plus 15 basis points, and is due and payable on demand on or before March
9, 2004.
II-27
<PAGE> 82
Immediately prior to the AT&T Merger, TCI restructured its ownership of
certain of its subsidiaries. This restructuring included merging TCI's cable
subsidiary, TCIC, into TCI. As a result of TCIC's merger with TCI, all assets
and liabilities of TCIC have been assumed by TCI, including TCIC's public debt.
In connection with TCIC's merger with TCI, each share of TCIC's Cumulative
Exchangeable Preferred Stock, Series A, was converted into 2.119 shares of TCI
Group Series A Stock, and such shares of TCI Group Series A Stock were
subsequently converted into AT&T Common Stock in connection with the AT&T
Merger. All other public securities issued by subsidiaries of TCIC (other than
Pacific) otherwise remained unaffected. Furthermore, as part of the
restructuring, (i) certain asset transfers were made between TCI and its
subsidiaries, (ii) 123,896 shares of Series F Preferred Stock, which were held
by subsidiaries of TCI, were converted into 185,428,946 shares of TCI Group
Series A Stock (which in turn were converted into 143,837,233 shares of AT&T
Common Stock in the AT&T Merger and continue to be held by subsidiaries of TCI),
(iii) the remaining 154,411 shares of Series F Preferred Stock which were
formerly held by subsidiaries of TCI were distributed to TCI through a series of
liquidations and canceled, and (iv) 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 Liberty
Group Series A Stock, 3,417,187 shares of Liberty Group Series B Stock, and
67,536 shares of Class B Preferred Stock, each formerly held by subsidiaries of
TCI, were distributed to TCI through a series of liquidations and canceled.
After the AT&T Merger, under the terms of the Exchangeable Preferred
Stock of Pacific, each share of that preferred stock is exchangeable, from and
after August 1, 2001, for approximately 4.225 shares of AT&T Common Stock,
subject to certain anti-dilution adjustments. Additionally, after the AT&T
Merger, Pacific may elect to make any dividend, redemption or liquidation
payment on the Exchangeable Preferred Stock in cash, by delivery of shares of
AT&T Common Stock or by a combination of the foregoing forms of consideration.
As a result of the deconsolidation of Liberty/Ventures Group in
connection with the AT&T Merger, Liberty/Ventures Group's liquidity sources
(including the $5.5 billion payment from TCI) will be used towards the liquidity
requirements of Liberty/Ventures Group and will not represent a source of
liquidity to TCI. Conversely, TCI anticipates that Liberty/Ventures Group will
not require funds from TCI to satisfy the Liberty/Ventures Group's liquidity
requirements.
At December 31, 1998, the Company had approximately $3.7 billion of
availability in unused lines of credit (excluding amounts related to lines of
credit which provide availability to support commercial paper). At December 31,
1998, $999 million of such unused lines of credit related to Liberty/Ventures
Group (inclusive of @Home, NDTC and WTCI). Following the AT&T Merger, it is
anticipated that such unused lines of credit of Liberty/Ventures Group will not
represent a source of liquidity to the Company. It is anticipated that TCI's
remaining lines of credit will be terminated in the first half of 1999 and,
accordingly, will no longer provide a source of liquidity for the Company
(exclusive of @Home, NDTC and WTCI). To the extent that funds generated by the
Company's operating activities are not sufficient to meet its liquidity needs,
the Company anticipates that it would obtain additional financing from AT&T or
external sources. No assurance can be given that any such additional financing
could be obtained on terms acceptable to the Company.
At December 31, 1998, the Company held cash and cash equivalents of
$419 million which were held entirely by @Home. The cash balances of @Home are
intended to be applied towards the liquidity needs of @Home, accordingly @Home's
cash balances will not be made available to TCI. TCI's restricted cash is
primarily comprised of proceeds received in connection with certain asset
dispositions. Such proceeds, which aggregated $162 million and $34 million
December 31, 1998 and 1997, respectively, are designated to be reinvested in
certain identified assets for income tax purposes.
II-28
<PAGE> 83
During the years ended December 31, 1998, 1997 and 1996 the Company had
"operating cash flow" (as defined by the Company as operating income before
depreciation, amortization, other non-cash items, year 2000 costs, AT&T merger
costs and stock compensation) of $2,712 million, $2,975 million and $2,276
million, respectively. Operating cash flow is a measure of value and borrowing
capacity within the cable television industry and is not intended to be a
substitute for cash flows provided by operating activities, a measure of
performance prepared in accordance with generally accepted accounting
principles, and should not be relied upon as such. Operating cash flow, as
defined, does not take into consideration substantial costs of doing business,
such as interest expense, and should not be considered in isolation to other
measures of performance.
The Company's operating activities provided cash of $1,223 million,
$1,710 million and $1,278 million during the years ended December 31, 1998, 1997
and 1996, respectively. Net cash provided by operating activities generally
reflects net cash from operations of TCI available for TCI's liquidity needs
after taking into consideration the aforementioned additional substantial costs
of doing business not reflected in operating cash flow. Following the
deconsolidation of Liberty/Ventures Group in connection with the AT&T Merger,
Liberty/Ventures Group's cash flows will no longer be included in the Company's
consolidated statements of cash flows. Liberty/Ventures Group's operating
activities provided cash of $66 million, $172 million and $245 million during
the years ended December 31, 1998, 1997 and 1996, respectively (inclusive of the
operating activities of @Home, NDTC and WTCI).
Cash used by the Company's investing activities aggregated $637
million, $1,156 million and $2,508 million during the years ended December 31,
1998, 1997 and 1996, respectively. Cash used by Liberty/Ventures Group's
investing activities aggregated $1,234 million, $497 million and $770 million
during the years ended December 31, 1998, 1997 and 1996, respectively (inclusive
of the investing activities of @Home, NDTC and WTCI). Following the
deconsolidation of Liberty/Ventures Group in connection with the AT&T Merger,
Liberty/Ventures Group's cash flows (exclusive of the cash flows of @Home, NDTC
and WTCI) will no longer be included in the Company's consolidated statements of
cash flows.
The amount of capital expended by TCI for property and equipment was
$1,917 million, $709 million and $2,055 million during 1998, 1997 and 1996,
respectively. Such expenditures primarily relate to TCI's cable distribution
systems. TCI estimates that it will expend approximately $5 billion over the
next two years to expand the capacity of its cable distribution systems to allow
for the provision of two-way service offerings. No assurance can be given that
actual capital costs will not exceed such estimated capital costs. Additionally,
the foregoing estimate does not include customer specific capital costs required
to deliver local telephony services. TCI cannot reasonably estimate such costs
since such costs are dependent upon the extent of customer increases and the
average per-unit-cost to install customer premise equipment. As described below,
TCI is obligated to purchase a significant number of digital set-top devices
over the next three years.
II-29
<PAGE> 84
On March 4, 1998, the Company contributed to CSC certain of its cable
television systems serving approximately 830,000 customers in exchange for
approximately 48.9 million newly issued CSC Class A common shares. CSC also
assumed and repaid approximately $574 million of debt owed by TCI to external
parties and $95 million of debt owed to the Company. The Company has also
entered into letters of intent with CSC which provide for the Company to acquire
a cable system in Michigan and an additional 4% 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 the Company's debt. The ability
of the Company to sell or increase its investment in CSC is subject to certain
restrictions and limitations set forth in a stockholders agreement with CSC. At
December 31, 1998, the Company owned 49,982,572 shares of CSC Class A common
stock, which had a closing market price of $50.13 per share on such date. Such
shares represented an approximate 33.0% equity interest in CSC's total
outstanding shares and an approximate 9% voting interest in CSC in all matters
except for (i) the election of directors, in which case the Company effectively
has the right to designate two of CSC's directors, and (ii) any increase in
authorized shares, in which case the Company has agreed to vote its interest in
proportion with the public holders of CSC Class A common shares. For additional
information concerning the CSC Transaction, see note 6 to the accompanying
consolidated financial statements of the Company.
In addition to the CSC Transaction, the Company also completed, during
1998, eight transactions whereby TCI contributed cable television systems
serving in the aggregate approximately 1,924,000 customers to 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 the Company to external parties aggregating $323 million and
intercompany debt owed to the Company aggregating $2,374 million. The Company
has agreed to take certain steps to support compliance by certain of the 1998
Joint Ventures with their payment obligations under certain debt instruments, up
to an aggregate contingent commitment of $980 million. In light of such
contingent commitments, the Company has deferred any gains on the formation of
such 1998 Joint Ventures. During the year ended December 31, 1998, the Company's
revenue and operating cash flow (defined by the Company as operating income
before depreciation, amortization, other non-cash items, year 2000 costs, AT&T
merger costs and stock compensation) included $622 million and $278 million,
respectively, from the cable television systems included in the 1998
Contribution Transactions.
In addition to the 1998 Contribution Transactions, the Company, as of
December 31, 1998, has signed agreements or letters of intent to contribute
within the next twelve months, the Pending Contribution Cable Systems serving
approximately 1.2 million basic customers to joint ventures in which the Company
will retain non-controlling ownership interests. Following the completion of the
Pending Contribution Transactions, the Company will no longer consolidate the
Pending Contribution Cable Systems. Accordingly it is anticipated that the
completion of the Pending Contribution Transactions, as currently contemplated,
will result in aggregate estimated reductions (based on 1998 amounts) to the
Company's debt, annual revenue and annual operating income of $1.5 billion, $500
million and $200 million, respectively. No assurance can be given that any of
the Pending Contribution Transactions will be consummated
II-30
<PAGE> 85
During the year ended December 31, 1998, the Company contributed cash
to various equity affiliates of the Liberty/Ventures Group and participated in
other transactions with respect to such Liberty/Ventures Group equity
affiliates. Following the AT&T Merger, transactions between Liberty/Ventures
Group and its equity affiliates will no longer be reflected in the Company's
consolidated financial statements. For additional information concerning the
historical effects on liquidity and capital resources of transactions involving
the Liberty/Ventures Group's equity affiliates, see notes 6, 9 and 10 to the
accompanying consolidated financial statements of the Company.
On November 19, 1998, the Company exchanged, in a merger transaction,
0.58 of a share of Liberty Group Series A Stock for each share of the issued and
outstanding Series A Common Stock of its then majority-owned subsidiary,
Tele-Communications International, Inc. ("TINTA"), not beneficially owned by the
Company. Such transaction was accounted for as an acquisition of a minority
interest. The aggregate value assigned to the 10,086,594 shares of Liberty Group
Series A stock issued by TCI was based upon the market value of Liberty Group
Series A Stock at the time the merger was announced. TINTA is attributed to the
Liberty/Ventures Group.
On January 19, 1999, @Home entered into a merger agreement with Excite,
Inc. ("Excite"), a global internet media company that offers consumers and
advertisers comprehensive internet navigation services with extensive
personalization capabilities. Under the terms of the merger agreement, @Home
will issue approximately 55 million shares of its common stock for all of the
outstanding common stock of Excite based on an exchange ratio of 1.041902 shares
of @Home's common stock for each share of Excite's common stock. @Home may issue
up to approximately 15 million additional shares of common stock in connection
with the assumption of obligations under Excite's stock option and employer
stock purchase plans and outstanding warrants. @Home will account for the
transaction as a purchase. @Home's preliminary estimate of the total purchase
consideration is approximately $7 billion, based on the fair value at the time
of announcement of the merger, of common stock to be issued and stock option,
stock purchase plan and warrant obligations assumed, plus estimated transaction
costs. As a result of the proposed merger, the Company's economic interest in
@Home would decrease from 39% to 27%. The merger is subject to several
conditions, including approval by both companies' stockholders and the
expiration of applicable waiting periods under certain antitrust laws. TCI
Ventures Group's investment in @Home was transferred to TCI Group in connection
with the AT&T Merger.
During the year ended December 31, 1998, pursuant to a stock repurchase
program, 66,041 shares of TCI Group Series A Stock, 145,450 shares of TCI
Ventures Group Series A Stock, 94,000 shares of TCI Ventures Group Series B
Stock and 766,783 shares of Liberty Group Series A Stock were repurchased at an
aggregate cost of $31 million.
As security for borrowings under one of Liberty/Ventures Group's credit
facilities, Liberty/Ventures Group has pledged a portion of its shares of Time
Warner common stock with limited voting rights. At December 31, 1998 such
pledged portion had an aggregate fair value of approximately $2.7 billion. As
collateral for borrowings under another one of Liberty/Ventures Group's credit
facilities the banks lend against certain assets designated by Liberty/Ventures
Group (the "Designated Assets"). The carrying amount of the Designated Assets at
December 31, 1998 was $617 million. Following the deconsolidation of
Liberty/Ventures Group in connection with the AT&T Merger, Liberty/Ventures
Group's assets and liabilities (exclusive of @Home, NDTC, and WTCI) will not be
included in the Company's consolidated financial statements.
II-31
<PAGE> 86
On July 23, 1998, a merger in which TCG agreed to be acquired by AT&T,
was consummated. As a result of such merger, the Company received in exchange
for all of its interest in TCG, approximately 47 million shares of AT&T Common
Stock. Such AT&T Common Stock was transferred from TCI Ventures Group to TCI
Group in connection with the AT&T Merger. Following the AT&T Merger, TCI will
treat its investment in AT&T Common Stock as an investment in its parent.
Accordingly, the fair value of TCI's investment in AT&T Common Stock will be
reflected as a reduction of TCI's equity, and any dividends received on such
AT&T Common Stock will be recorded as an increase to TCI's additional paid-in
capital. During 1998, TCI recognized dividends of $31 million on its investment
in AT&T Common Stock.
In connection with the Magness Settlement TCI paid $274 million during
1998 pursuant to certain call agreements. Additionally, on February 1, 1999, the
Company began to terminate the transactions under the agreements with the
Investment Bankers described above, and as of March 5, 1999, such transactions
were terminated. In connection with the termination of such transactions the
Company received an aggregate cash payment of $509 million. For additional
information see note 17 to the accompanying consolidated financial statements of
the Company.
During the fourth quarter of 1997, TCI entered into a total return
equity swap facility (the "Equity Swap Facility"). Pursuant to the Equity Swap
Facility, TCI would have the right to direct the counterparty (the
"Counterparty") to use the Equity Swap Facility to purchase Equity Swap Shares
of TCI Group Series A Stock and TCI Ventures Group Series A Stock with an
aggregate purchase price of up to $300 million. TCI would have the right, but
not the obligation, to purchase Equity Swap Shares through the September 30,
2000 termination date of the Equity Swap Facility. During such period, TCI would
settle periodically any increase or decrease in the market value of the Equity
Swap Shares. If the market value of the Equity Swap Shares should exceed the
Counterparty's cost, Equity Swap Shares with a fair value equal to the
difference between the market value and cost would be segregated from the other
Equity Swap Shares. If the market value of the Equity Swap Shares should be less
than the Counterparty's cost, TCI, at its option, would settle such difference
with shares of TCI Group Series A Stock or TCI Ventures Group Series A Stock or,
subject to certain conditions, with cash or letters of credit. In addition, TCI
would be required to periodically pay the Counterparty a fee equal to a
LIBOR-based rate on the Counterparty's cost to acquire the Equity Swap Shares.
Due to TCI's ability to issue shares to settle periodic price fluctuations and
fees under the Equity Swap Facility, TCI records all amounts received or paid
under this arrangement as increases or decreases, respectively, to equity. As of
December 31, 1998, the Equity Swap Facility had acquired 4,935,780 shares of TCI
Group Series A Stock and 1,171,800 shares of TCI Ventures Group Series A Stock
at an aggregate cost that was approximately $135 million less than the fair
value of such Equity Swap Shares at December 31, 1998. From February 10, 1999 to
March 5, 1999, the Company terminated all transactions under the Equity Swap
Facility and the related swap agreement. In connection with the termination of
such transactions the Company received an aggregate cash payment of $170
million.
The Company's programming and other business segments have investments
in certain entities which will require significant additional capital in order
to develop their respective businesses and assets, to fund future operating
losses and to fund future growth. In certain cases, the Company has contractual
commitments pursuant to which (subject to certain conditions) it may be required
to make significant additional capital contributions to the entities in which it
has investments. The majority of such investments are included in
Liberty/Ventures Group. Following the deconsolidation of Liberty/Ventures Group
in connection with the AT&T Merger, any capital contributions or fundings to
such entities will be made using Liberty/Ventures Group's liquidity sources.
II-32
<PAGE> 87
Many of the Company's subsidiaries operate in industries, primarily the
telecommunications industry and the internet services industry, which have
experienced and are expected to continue to experience (i) rapid and significant
changes in technology, (ii) ongoing improvements in the capacity and quality of
such services, (iii) frequent and new product and service introductions, and
(iv) enhancements and changes in end-user requirements and preferences. The
degree to which these changes will affect such entities and the ability of such
entities to compete in their respective businesses cannot be predicted. If
markets fail to develop, develop more slowly than expected, or become highly
competitive, the Company's operating results and financial condition may be
materially adversely affected.
TCI is committed to purchase billing services from an unaffiliated
third party pursuant to three successive five year agreements. Pursuant to such
arrangement, TCI is obligated at December 31, 1998 to make minimum payments
aggregating approximately $1.6 billion through 2012. Such minimum payments are
subject to inflation and other adjustments pursuant to the terms of the
underlying agreements.
Prior to the AT&T Merger, transactions between TCI Group and
Liberty/Ventures Group were eliminated in TCI's consolidated financial
statements. Following the deconsolidation of Liberty/Ventures Group in
connection with the AT&T Merger, Liberty/Ventures Group's results of operations
(exclusive of the results of operations of @Home, NDTC and WTCI) will no longer
be included in the consolidated operating income of TCI. In this regard, TCI has
agreed to make fixed monthly payments to an entity attributed to
Liberty/Ventures Group pursuant to an affiliation agreement. The fixed annual
commitments increase annually from $220 million in 1998 to $315 million in 2003,
and will increase with inflation through 2022. In addition, pursuant to certain
agreements between TCI and an entity attributed to Liberty/Ventures Group, TCI
is obligated at December 31, 1998 to make minimum revenue payments through 2017
and minimum license fee payments through 2007 aggregating approximately $405
million to such attributed entity. Such minimum payments are subject to
inflation and other adjustments pursuant to the terms of the underlying
agreements.
The Company has guaranteed notes payable and other obligations of
affiliated and other companies with outstanding balances of approximately $415
million at December 31, 1998, of which $391 million relates to amounts
guaranteed by entities attributed to Liberty/Ventures Group. Following the
deconsolidation of Liberty/Ventures Group in connection with the AT&T Merger,
notes payable and other obligations guaranteed by entities attributed to
Liberty/Ventures Group (exclusive of @Home, NDTC and WTCI) will no longer be
included with those of TCI. As described in note 10 to the accompanying
consolidated financial statements, the Company also has provided certain credit
enhancements with respect to the 1998 Joint Ventures. The Company also has
guaranteed the performance of certain affiliates and other parties with respect
to such parties' contractual and other obligations. Although there can be no
assurance, management of the Company believes that it will not be required to
meet its obligations under such guarantees, or if it is required to meet any of
such obligations, that they will not be material to the Company.
Subsequent to December 31, 1998, a subsidiary of the Company agreed to
enter into a contribution agreement (the "Contribution Agreement") with certain
shareholders of Primestar pursuant to which the Company would, to the extent it
is relieved of $166 million of contingent liabilities currently owed to certain
creditors of Primestar and its subsidiaries, contribute up to $166 million to
Primestar to the extent necessary to satisfy liabilities of Primestar. During
the fourth quarter of 1998, the Company recorded a $90 million charge to provide
for the estimated losses that are expected to result from the Contribution
Agreement. The Company's obligation under the Contribution Agreement will expire
in 2001.
II-33
<PAGE> 88
Liberty/Ventures Group is obligated to pay fees for the rights to
exhibit certain films that are released by various producers through 2017 and
has made certain financial commitments related to the acquisition of
programming. Based on customer levels at December 31, 1998, these agreements
require minimum payments aggregating approximately $808 million. Following the
deconsolidation of Liberty/Ventures Group in connection with the AT&T Merger
such rights fee obligations will no longer be included with TCI's financial
commitments. However, TCI Group's guarantee of $320 million of such rights fee
obligations of Liberty/Ventures Group will continue to be included with TCI's
contingent obligations. The amount of the total obligation under these license
agreements is not currently estimable because such amount is dependent upon the
number of qualifying films released theatrically by certain motion picture
studios as well as the domestic theatrical exhibition receipts upon the release
of such qualifying films. Nevertheless, it is anticipated that the required
payments under these obligations will be significant. In addition, an entity
attributed to Liberty/Ventures Group has guaranteed the obligation of an
affiliate to pay fees for the license to exhibit certain films through 2000. If
such entity were to fail to fulfill its obligations under the guarantee, the
beneficiaries have the right to demand an aggregate payment from such entity of
approximately $26 million.
TCI is a party to affiliation agreements with programming suppliers.
Pursuant to certain of such agreements, TCI is committed to carry such
suppliers' programming on its cable systems. Additionally, certain of such
agreements provide for penalties and charges in the event the programming is not
carried or not delivered to a contractually specific number of customers.
Effective as of December 16, 1997, NDTC, on behalf of TCIC and other
cable operators that may be designated from time to time by NDTC ("Approved
Purchasers"), entered into an agreement (the "Digital Terminal Purchase
Agreement") with General Instrument Corporation ("GI") to purchase advanced
digital set-top devices. The hardware and software incorporated into these
devices are designed and manufactured to be compatible and interoperable with
the OpenCable(TM) architecture specifications adopted by CableLabs, the cable
television industry's research and development consortium, in November 1997.
NDTC has agreed that Approved Purchasers will purchase, in the aggregate, a
minimum of 6.5 million set-top devices during calendar years 1998, 1999 and 2000
at an average price of $318 per set-top device. Through December 31, 1998,
approximately 1.6 million set-top devices had been purchased pursuant to this
commitment. GI agreed to provide NDTC and its Approved Purchasers the most
favorable prices, terms and conditions made available by GI to any customer
purchasing advanced digital set-top devices. In connection with NDTC's purchase
commitment, GI agreed to grant warrants to purchase its common stock
proportional to the number of devices ordered by each organization, which as of
the effective date of the Digital Terminal Purchase Agreement, would have
represented at least a 10% equity interest in GI (on a fully diluted basis).
Such warrants vest as annual purchase commitments are met. On December 31, 1998,
the Company vested in 4,928,000 warrants pursuant to such arrangements, which
were recorded at their fair value of $64 million on such date. Vested warrants
are accounted for as available-for-sale securities in the Company's consolidated
financial statements. NDTC has the right to terminate the Digital Terminal
Purchase Agreement if, among other reasons, GI fails to meet a material
milestone designated in the Digital Terminal Purchase Agreement with respect to
the development, testing and delivery of advanced digital set-top devices. In
connection with the AT&T Merger, the above described warrants were transferred
to Liberty/Ventures Group in exchange for approximately $176 million in cash. To
the extent that such warrants do not vest because TCI fails to meet its purchase
commitments, TCI is required to repay a proportional amount of such cash to
Liberty/Ventures Group.
II-34
<PAGE> 89
The Company leases business offices, has entered into converter lease
agreements, pole rental agreements, transponder lease agreements and uses
certain equipment under lease arrangements. For additional information on the
Company's future minimum lease payments under noncancellable operating losses,
see note 20 to the accompanying consolidated financial statements of the
Company.
The Company's various partnerships and other affiliates accounted for
by the equity method generally fund their acquisitions, required debt repayments
and capital expenditures through borrowings under and refinancing of their own
credit facilities (which are generally not guaranteed by the Company), through
net cash provided by their own operating activities and in certain circumstances
through required capital contributions from their partners.
In order to achieve the desired balance between variable and fixed rate
indebtedness, the Company may enter into interest rate exchange agreements
("Interest Rate Swaps") pursuant to which it (i) pays fixed interest rates (the
"Fixed Rate Agreements") and receives variable interest rates and (ii) pays
variable interest rates (the "Variable Rate Agreements") and receives fixed
interest rates. During 1998, 1997 and 1996, the Company's net payments pursuant
to the Fixed Rate Agreements were less than $1 million, $7 million and $14
million, respectively; and the Company's net receipts (payments) pursuant to the
Variable Rate Agreements were $10 million, (less than $1 million) and $15
million, respectively. At December 31, 1998, all of the Company's Fixed Rate
Agreements had expired. At December 31, 1998, the Company would be entitled to
receive $63 million upon termination of the Variable Rate Agreements.
In addition to the Variable Rate Agreements, the Company entered into
fixed Interest Rate Swaps pursuant to which it pays a variable rate based on
LIBOR (5.5% at December 31, 1998) and receives a variable rate based on Constant
Maturity Treasury Index ("CMT") (4.9% at December 31, 1998) on a notional amount
of $400 million through September 2000; and pays a variable rate based on LIBOR
(5.4% at December 31, 1998) and receives a variable rate based on CMT (5.0% at
December 31, 1998) on notional amounts of $95 million through February 2000.
During the years ended December 31, 1998 and 1997, the Company's net payments
(receipts) pursuant to such agreements were $2 million and (less than $1
million), respectively. At December 31, 1998, the Company would be required to
pay an estimated $4 million to terminate such Interest Rate Swaps.
The Company is exposed to credit losses for the periodic settlements of
amounts due under the Interest Rate Swaps in the event of nonperformance by the
other parties to the agreements. However, the Company does not anticipate that
it will incur any material credit losses because it does not anticipate
nonperformance by the counterparties. Further, as of December 31, 1998, the
Company does not anticipate material near-term losses in future earnings, fair
values or cash flows resulting from derivative financial instruments. See note
12 to the accompanying consolidated financial statements of the Company for
additional information regarding Interest Rate Swaps.
II-35
<PAGE> 90
At December 31, 1998, after considering the net effect of the
aforementioned Interest Rate Swaps, the Company had $8.0 billion (or 57%) of
fixed rate debt and $6.1 billion (or 43%) of variable-rate debt. At December 31,
1998, Liberty/Ventures Group (inclusive of @Home, NDTC and WTCI) had $2.0
billion of variable rate debt and $700 million of fixed rate debt. Following the
deconsolidation of Liberty/Ventures Group in connection with the AT&T Merger,
Liberty/Ventures Group's debt (exclusive of @Home, NDTC and WTCI) will no longer
be included in TCI's debt. TCI's interest rate exposure was primarily to changes
in LIBOR rates. The aggregate hypothetical decrease in the fair value of TCI's
fixed rate debt and interest rate swaps as of December 31, 1998 that would have
resulted from a hypothetical adverse change of 10% in the related LIBOR rates is
estimated to be $504 million. The aggregate hypothetical loss in earnings and
cash flows on an annual basis on TCI's variable rate debt and interest rate
swaps as of December 31, 1998 that would have resulted from a hypothetical
adverse change of 10% in the related LIBOR rates, sustained for one year, is
estimated to be $26 million.
Approximately twenty-five percent of the cable television franchises
held by TCI, involving approximately 4.6 million basic customers, expire within
five years. In connection with a renewal of a franchise, the franchising
authority may require the cable operator to comply with different and more
stringent conditions than those originally imposed, subject to the provisions of
the Cable Television Consumer Protection and Competition Act of 1992 and the
Telecommunications Act of 1996 and other applicable federal, state and local
law. Such provisions establish an orderly process for franchise renewal which
protects cable operators against unfair denials of renewals when the operator's
past performance and proposal for future performance meet established standards.
TCI believes that its cable television systems generally have been operated in a
manner which satisfies such standards and allows for the renewal of such
franchises; however, there can be no assurance that the franchises for such
systems will be successfully renewed as they expire.
During 1998, TCI has continued to experience a competitive impact from
medium power and high power direct broadcast satellite ("DBS") operators that
use high frequencies to transmit signals that can be received by home satellite
dishes ("HSDs") much smaller in size than traditional HSDs. DBS operators have
the right to distribute substantially all of the significant cable television
programming services currently carried by cable television systems. The DBS
industry has grown rapidly over the last several years and now serves
approximately 9 million subscribers nationwide. Recently announced mergers could
strengthen the surviving DBS companies. TCI is unable to predict what effect
such competition will have on TCI's financial position.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of Tele-Communications, Inc. are
filed under this Item, beginning on Page II-38. The financial statement
schedules required by Regulation S-X are filed under Item 14 of this Annual
Report on Form 10-K.
II-36
<PAGE> 91
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
In view of the AT&T Merger, described in detail under Item 1, Business
- - General Development of Business, it has been determined that it will be more
efficient and effective for the Company to have its independent auditing
function performed by AT&T's external auditors, PricewaterhouseCoopers LLP. For
that reason, the Company has notified KPMG LLP that the Company will no longer
retain that firm as its independent auditor, effective upon the completion of
the audits of the Company's financial statements for the fiscal year ended
December 31, 1998 and for the two-month period ended February 28, 1999. The
Company retained PricewaterhouseCoopers, LLP effective as of March 9, 1999 for
the audit of the Company's financial statements for the period ending December
31, 1999. The Company maintains high regard for KPMG LLP and is grateful for the
work it has performed over the years.
During the Company's two most recent fiscal years ended December 31,
1998 and December 31, 1997, the reports of KPMG LLP on the Company's financial
statements contained no adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company's two most recent fiscal years ended December 31,
1998 and December 31, 1997, and interim periods thereafter:
(1) No disagreements with KPMG LLP have occurred on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
KPMG LLP, would have caused it to make reference to the subject matter of the
disagreement in connection with its reports on the Company's financial
statements.
(2) No reportable events involving KPMG LLP have occurred that must be
disclosed under Item 304(a)(1)(v) of Regulation S-K.
(3) The Company has not consulted with PricewaterhouseCoopers LLP on
items that concerned the application of accounting principles to a specific
transaction, either completed or proposed, or on the type of audit opinion that
might be rendered on the Company's financial statements.
The Company requested, and KPMG LLP has furnished, a letter addressed
to the Securities and Exchange Commission (the "Commission") stating that KPMG
LLP agrees with the statements set forth in the second paragraph above and in
numbered paragraphs (1) and (2) above. A copy of the letter from KPMG LLP to the
Commission is filed as Exhibit 16.1 to this Form 10-K.
II-37
<PAGE> 92
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We have audited the accompanying consolidated balance sheets of
Tele-Communications, Inc. and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations and comprehensive earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tele-Communications,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Denver, Colorado
March 9, 1999
II-38
<PAGE> 93
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------- --------
amounts in millions
<S> <C> <C>
Assets
Cash and cash equivalents $ 419 244
Restricted cash (note 5) 185 40
Trade and other receivables, net 593 529
Prepaid program rights 146 104
Committed program rights 117 115
Investments in affiliates, accounted for under the
equity method, and related receivables (notes 6
and 17) 4,765 3,063
Investment in Time Warner, Inc. ("Time Warner") (note 7) 7,118 3,555
Investment in AT&T Corp. ("AT&T") (note 8) 3,556 --
Investment in Sprint Corporation ("Sprint") (notes 2 and 9) 2,446 --
Property and equipment, at cost:
Land 63 96
Distribution systems 10,107 10,784
Support equipment and buildings 1,769 1,558
--------- ---------
11,939 12,438
Less accumulated depreciation 4,786 4,759
--------- ---------
7,153 7,679
--------- ---------
Franchise costs 14,658 17,910
Less accumulated amortization 2,590 2,763
--------- ---------
12,068 15,147
--------- ---------
Other assets, net of accumulated amortization (note 18) 3,285 2,001
--------- ---------
$ 41,851 32,477
========= =========
</TABLE>
(continued)
II-39
<PAGE> 94
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Balance Sheets, continued
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------- --------
amounts in millions
<S> <C> <C>
Liabilities and Stockholders' Equity
Accounts payable $ 229 169
Accrued interest 253 258
Accrued programming expense 471 399
Other accrued expenses 1,128 997
Deferred option premium (note 7) -- 306
Debt (note 12) 14,052 15,250
Deferred income taxes (note 19) 9,749 6,104
Other liabilities 1,819 664
-------- --------
Total liabilities 27,701 24,147
-------- --------
Minority interests in equity of consolidated subsidiaries 1,460 1,664
Redeemable securities:
Preferred stock (note 13) 300 655
Common stock (note 3) 22 5
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts ("Trust Preferred
Securities") holding solely subordinated debt securities
of TCI Communications, Inc. ("TCIC") (note 14) 1,500 1,500
Stockholders' equity (note 15):
Series Preferred Stock, $.01 par value -- --
Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock, $.01 par value -- --
Common stock, $1 par value:
Series A TCI Group. Authorized 1,750,000,000 shares;
issued 610,748,188 shares in 1998 and 605,616,143
shares in 1997 611 606
Series B TCI Group. Authorized 150,000,000 shares;
issued 73,929,229 shares in 1998 and 78,203,044
shares in 1997 74 78
Series A Liberty Media Group. Authorized 750,000,000
shares; issued 367,890,546 shares in 1998 and
344,962,521 shares in 1997 368 345
Series B Liberty Media Group. Authorized 75,000,000
shares; issued 35,198,156 shares in 1998 and
35,180,385 shares in 1997 35 35
Series A TCI Ventures Group. Authorized 750,000,000
shares; issued 377,253,230 shares in 1998 and
377,386,032 shares in 1997 377 377
Series B TCI Ventures Group. Authorized 75,000,000
shares; issued 45,750,534 shares in 1998 and
32,532,800 shares in 1997 46 33
Additional paid-in capital 5,987 5,063
Accumulated other comprehensive earnings, net of taxes (notes
1 and 16) 3,749 772
Retained earnings (accumulated deficit) 1,124 (812)
-------- --------
12,371 6,497
Treasury stock and common stock held by subsidiaries, at cost
(note 15) (1,503) (1,991)
-------- --------
Total stockholders' equity 10,868 4,506
-------- --------
Commitments and contingencies (notes 2, 6, 10, 20 and 21) $ 41,851 32,477
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
II-40
<PAGE> 95
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Earnings
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Revenue:
Communications and programming services $ 7,351 7,570 7,038
Net sales from electronic retailing services -- -- 984
-------- -------- --------
7,351 7,570 8,022
-------- -------- --------
Operating costs and expenses:
Operating 2,997 2,995 3,072
Cost of sales from electronic retailing
services -- -- 605
Selling, general and administrative 1,642 1,600 2,069
Year 2000 costs (note 21) 11 -- --
AT&T merger costs (note 2) 14 -- --
Stock compensation 866 488 (13)
Reserve for loss arising from contingent
obligation (note 20) 90 -- --
Cost of distribution agreements (note 18) 50 -- --
Impairment of assets 5 15 --
Restructuring charges -- -- 41
Depreciation 1,121 1,077 1,093
Amortization 614 546 523
-------- -------- --------
7,410 6,721 7,390
-------- -------- --------
Operating income (loss) (59) 849 632
Other income (expense):
Interest expense (1,061) (1,160) (1,096)
Interest and dividend income 122 88 64
Share of losses of affiliates, net (note 6) (1,384) (930) (450)
Loss on early extinguishment of debt (note 12) (60) (39) (71)
Minority interests in earnings of consolidated
subsidiaries, net (note 14) (88) (154) (56)
Gains on issuance of equity interests by
subsidiaries (notes 10 and 18) 89 60 --
Gains on issuance of stock by equity investees
(notes 6, 8 and 18) 268 112 12
Gains on disposition of assets, net (notes 6, 7
8, 9 and 10) 5,760 401 1,593
Other, net (49) (22) (65)
-------- -------- --------
3,597 (1,644) (69)
-------- -------- --------
Earnings (loss) before income taxes 3,538 (795) 563
Income tax benefit (expense) (note 19) (1,595) 234 (271)
-------- -------- --------
Net earnings (loss) 1,943 (561) 292
Dividend requirements on preferred stocks (24) (42) (35)
-------- -------- --------
Net earnings (loss) attributable to common
stockholders $ 1,919 (603) 257
======== ======== ========
</TABLE>
(continued)
II-41
<PAGE> 96
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Earnings, continued
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Net earnings (loss) attributable to common stockholders:
TCI Group Series A and Series B common stock $ (240) (537) (799)
Liberty Media Group Series A and Series B common stock 156 125 1,056
TCI Ventures Group Series A and Series B common stock
2,003 (191) --
-------- -------- --------
$ 1,919 (603) 257
======== ======== ========
Basic earnings (loss) attributable to common stockholders
per common share (note 4):
TCI Group Series A and Series B common stock $ (.46) (.85) (1.20)
======== ======== ========
Liberty Media Group Series A and Series B common stock $ .43 .34 2.82
======== ======== ========
TCI Ventures Group Series A and Series B common stock $ 4.75 (.47) --
======== ======== ========
Diluted earnings (loss) attributable to common
stockholders per common and potential common share
(note 4): TCI Group Series A and Series B common stock $ (.49) (.85) (1.20)
======== ======== ========
Liberty Media Group Series A and Series B common stock $ .39 .31 2.58
======== ======== ========
TCI Ventures Group Series A and Series B common stock $ 4.44 (.47) --
======== ======== ========
Net earnings (loss) $ 1,943 (561) 292
-------- -------- --------
Other comprehensive earnings, net of taxes (note 16):
Foreign currency translation adjustments 2 (22) 35
Unrealized gains on securities:
Unrealized holding gains arising during period 2,977 753 41
Less: reclassification adjustment for gains
included in net earnings (2) -- (364)
-------- -------- --------
Other comprehensive earnings 2,977 731 (288)
-------- -------- --------
Comprehensive earnings $ 4,920 170 4
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
II-42
<PAGE> 97
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
----------------------------------------
Class B TCI Group Liberty Media Group
Preferred ------------------- -------------------
Stock Series A Series B Series A Series B
--------- -------- -------- -------- --------
amounts in millions
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ -- 672 85 337 32
Net earnings -- -- -- -- --
Issuance of common stock for
acquisition -- 11 -- 6 --
Issuance of common stock upon
conversion of notes -- 2 -- 2 --
Issuance of common stock upon
conversion of preferred stock -- 1 -- -- --
Exchange of cost investment for
TCI Group and Liberty Media
Group common stock -- (6) -- (3) --
Contribution of common stock to
subsidiary -- 16 -- -- --
Spin-off of TCI Satellite
Entertainment, Inc. -- -- -- -- --
Accreted dividends on all classes
of preferred stock -- -- -- -- --
Accreted dividends on all classes
of preferred stock not subject to
mandatory redemption requirements -- -- -- -- --
Payment of preferred stock dividends -- -- -- -- --
Foreign currency translation
adjustments, net of taxes (note 16) -- -- -- -- --
Unrealized gains on securities, net
of taxes and reclassification
adjustment (note 16) -- -- -- -- --
--------- -------- -------- -------- --------
Balance at December 31, 1996 $ -- 696 85 342 32
========= ======== ======== ======== ========
<CAPTION>
Treasury
stock and
Accumulated common
other Retained stock
Additional comprehensive earnings held by Total
paid-in earnings, (accumulated subsidiaries, stockholders'
capital net of taxes deficit) at cost equity
---------- ------------- ------------ ------------- -------------
amounts in millions
<S> <C> <C> <C> <C> <C>
3,863 329 (543) (314) 4,461
Net earnings -- -- 292 -- 292
Issuance of common stock for
acquisition 248 -- -- -- 265
Issuance of common stock upon
conversion of notes (2) -- -- -- 2
Issuance of common stock upon
conversion of preferred stock 15 -- -- -- 16
Exchange of cost investment for
TCI Group and Liberty Media
Group common stock (121) -- -- -- (130)
Contribution of common stock to
subsidiary (16) -- -- -- --
Spin-off of TCI Satellite
Entertainment, Inc. (405) -- -- -- (405)
Accreted dividends on all classes
of preferred stock (35) -- -- -- (35)
Accreted dividends on all classes
of preferred stock not subject to
mandatory redemption requirements 10 -- -- -- 10
Payment of preferred stock dividends (10) -- -- -- (10)
Foreign currency translation
adjustments, net of taxes (note 16) -- 35 -- -- 35
Unrealized gains on securities, net
of taxes and reclassification
adjustment (note 16) -- (323) -- -- (323)
---------- ------------- ------------ ------------- -------------
Balance at December 31, 1996 3,547 41 (251) (314) 4,178
========== ============= ============ ============= =============
</TABLE>
(continued)
II-43
<PAGE> 98
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity, continued
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
----------------------------------------------------------------------
Class B TCI Group Liberty Media Group TCI Ventures Group
Preferred ---------------------- -------------------- -----------------------
Stock Series A Series B Series A Series B Series A Series B
--------- ---------- --------- --------- -------- -------- --------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ -- 696 85 342 32 -- --
Net loss -- -- -- -- -- -- --
Issuance of TCI Ventures Group
common stock in exchange for
TCI Group common stock (note 1) -- (189) (16) -- -- 377 33
Costs associated with TCI Ventures
Exchange -- -- -- -- -- -- --
Exchange of common stock with an
officer/director (note 17) -- -- 7 -- 3 -- --
Issuance of common stock for
acquisitions and investment -- 63 2 2 -- -- --
Issuance of Series A TCI Group
common stock in exchange for Series
B TCI Group common stock (the
"Exchange") (note 17) -- 31 -- -- -- -- --
Recognition of fees related to the
Exchange (note 17) -- -- -- -- -- -- --
Repurchase of common stock -- -- -- -- -- -- --
Cancellation of common stock -- -- -- -- -- -- --
Reclassification to redeemable
securities of redemption amount of
common stock subject to put obligation -- -- -- -- -- -- --
Gain from issuance of equity by
subsidiary and equity investee, net
of taxes -- -- -- -- -- -- --
Issuance of common stock upon exercise
of stock options -- -- -- -- -- -- --
Issuance of restricted stock granted
pursuant to stock incentive plan -- 1 -- -- -- -- --
Issuance of common stock upon conversion
of notes and preferred stock -- 3 -- 1 -- -- --
Issuance of common stock to
Tele-Communications, Inc. Employee
Stock Purchase Plan -- 1 -- -- -- -- --
Accreted dividends on all classes of
preferred stock -- -- -- -- -- -- --
Accreted dividends on all classes of
preferred stock not subject to mandatory
redemption requirements -- -- -- -- -- -- --
Payment of preferred stock dividends -- -- -- -- -- -- --
Foreign currency translation adjustments,
net of taxes (note 16) -- -- -- -- -- -- --
Unrealized gains on securities, net of
taxes and reclassification adjustment
(note 16) -- -- -- -- -- -- --
----- --------- --------- -------- --------- ---------- ---------
Balance at December 31, 1997 $ -- 606 78 345 35 377 33
===== ========= ========= ======== ========= ========== =========
<CAPTION>
Treasury
stock and
Accumulated common
other Retained stock held
Additional comprehensive earnings by Total
paid-in earnings, (accumulated subsidiaries, stockholders'
capital net of taxes deficit) at cost equity
---------- ------------- ------------ ------------- --------------
amounts in millions
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 3,547 41 (251) (314) 4,178
Net loss
Issuance of TCI Ventures Group -- -- (561) -- (561)
common stock in exchange for
TCI Group common stock (note 1)
Costs associated with TCI Ventures (205) -- -- -- --
Exchange
Exchange of common stock with an (7) -- -- -- (7)
officer/director (note 17)
Issuance of common stock for 160 -- -- (170) --
acquisitions and investment
Issuance of Series A TCI Group 1,058 -- -- (484) 641
common stock in exchange for Series
B TCI Group common stock (the
"Exchange") (note 17) 481 -- -- (512) --
Recognition of fees related to the
Exchange (note 17) (11) -- -- -- (11)
Repurchase of common stock -- -- -- -- (529)
Cancellation of common stock (18) -- -- (529) --
Reclassification to redeemable
securities of redemption amount of
common stock subject to put obligation (4) -- -- 18 (4)
Gain from issuance of equity by
subsidiary and equity investee, net
of taxes 86 -- -- -- 86
Issuance of common stock upon exercise
of stock options 4 -- -- -- 4
Issuance of restricted stock granted
pursuant to stock incentive plan 3 -- -- -- 4
Issuance of common stock upon conversion
of notes and preferred stock 3 -- -- -- 7
Issuance of common stock to
Tele-Communications, Inc. Employee
Stock Purchase Plan 8 -- -- -- 9
Accreted dividends on all classes of
preferred stock (42) -- -- -- (42)
Accreted dividends on all classes of
preferred stock not subject to mandatory
redemption requirements 10 -- -- -- 10
Payment of preferred stock dividends (10) -- -- -- (10)
Foreign currency translation adjustments,
net of taxes (note 16) -- (22) -- -- (22)
Unrealized gains on securities, net of
taxes and reclassification adjustment
(note 16) -- 753 -- -- 753
---------- ----------- ------------ --------- ----------
Balance at December 31, 1997 5,063 772 (812) (1,991) 4,506
========== =========== ============ ========= ==========
</TABLE>
II-44
<PAGE> 99
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity, continued
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------------------------------
Class B TCI Group Liberty Media Group TCI Ventures Group
Preferred --------------------- -------------------- ---------------------
Stock Series A Series B Series A Series B Series A Series B
--------- -------- -------- -------- -------- -------- --------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ -- 606 78 345 35 377 33
Net earnings -- -- -- -- -- -- --
Exchange of common stock in connection with
the Magness Settlement (note 17) -- -- 11 -- -- -- 13
Issuance of common stock in connection with
settlement of litigation -- 1 1 -- -- -- --
Reclassification to redeemable securities
of redemption amount of common stock
subject to put obligation -- -- -- -- -- -- --
Premium received in connection with put
obligation -- -- -- -- -- -- --
Issuance of common stock for acquisitions
(note 10) -- 1 -- 7 -- 13 --
Repurchase of common stock to be held in
treasury (note 15) -- -- -- -- -- -- --
Repurchase and retirement of common stock
(note 15) -- -- -- -- -- -- --
Retirement of common stock held in treasury -- (12) (16) -- -- (13) --
Gain from issuance of equity by subsidiary
and equity investee, net of taxes (note 6) -- -- -- -- -- -- --
Issuance of common stock upon conversion of
notes and preferred stock (notes 12 and
13) -- 15 -- 6 -- -- --
Payments for call agreements (note 17) -- -- -- -- -- -- --
Issuance of common stock upon exercise of
Malone Right (note 17) -- -- -- -- -- -- --
Issuance of common stock to acquire
minority interest of subsidiary -- -- -- 10 -- -- --
Issuance of common stock upon exercise of
stock options -- -- -- -- -- -- --
Recognition of fees related to the Equity
Swap Facility and the Exchange (notes 15
and 17) -- -- -- -- -- -- --
Reimbursement of fees related to Exchange
(note 17) -- -- -- -- -- -- --
Recognition of stock compensation related
to restricted stock awards -- -- -- -- -- -- --
Accreted dividends on all classes of
preferred stock -- -- -- -- -- -- --
Accreted dividends on all classes of
preferred stock not subject to mandatory
redemption requirements -- -- -- -- -- -- --
Payment of preferred stock dividends -- -- -- -- -- -- --
Foreign currency translation adjustments,
net of taxes (note 16) -- -- -- -- -- -- --
Unrealized gains on securities, net of
taxes and reclassification adjustment
(note 16) -- -- -- -- -- -- --
------- ------- ------- ------ ------ -------- ---------
Balance at December 31, 1998 $ -- 611 74 368 35 377 46
======= ======= ======= ====== ====== ======== =========
<CAPTION>
Treasury
stock and
Accumulated common
other Retained stock held
Additional comprehensive earnings by Total
paid-in earnings, (accumulated subsidiaries, stockholders'
capital net of taxes deficit) at cost equity
---------- ------------ ------------ ------------- -------------
amounts in millions
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 5,063 772 (812) (1,991) 4,506
Net earnings -- -- 1,943 -- 1,943
Exchange of common stock in connection with
the Magness Settlement (note 17) 509 -- -- (533) --
Issuance of common stock in connection with
settlement of litigation 48 -- -- (3) 47
Reclassification to redeemable securities
of redemption amount of common stock
subject to put obligation (17) -- -- -- (17)
Premium received in connection with put
obligation 3 -- -- -- 3
Issuance of common stock for acquisitions
(note 10) 353 -- -- -- 374
Repurchase of common stock to be held in
treasury (note 15) -- -- -- (20) (20)
Repurchase and retirement of common stock
(note 15) (11) -- -- -- (11)
Retirement of common stock held in treasury (760) -- -- 801 --
Gain from issuance of equity by subsidiary
and equity investee, net of taxes (note 6) 70 -- -- -- 70
Issuance of common stock upon conversion of
notes and preferred stock (notes 12 and
13) 331 -- -- -- 352
Payments for call agreements (note 17) (274) -- -- -- (274)
Issuance of common stock upon exercise of
Malone Right (note 17) 273 -- -- 243 516
Issuance of common stock to acquire
minority interest of subsidiary 416 -- -- -- 426
Issuance of common stock upon exercise of
stock options 10 -- -- -- 10
Recognition of fees related to the Equity
Swap Facility and the Exchange (notes 15
and 17) (31) -- -- -- (31)
Reimbursement of fees related to Exchange
(note 17) 11 -- -- -- 11
Recognition of stock compensation related
to restricted stock awards 11 -- -- -- 11
Accreted dividends on all classes of
preferred stock (13) -- (12) -- (25)
Accreted dividends on all classes of
preferred stock not subject to mandatory
redemption requirements 5 -- 5 -- 10
Payment of preferred stock dividends (10) -- -- -- (10)
Foreign currency translation adjustments,
net of taxes (note 16) -- 2 -- -- 2
Unrealized gains on securities, net of
taxes and reclassification adjustment
(note 16) -- 2,975 -- -- 2,975
---------- ---------- ------------ --------- -----------
Balance at December 31, 1998 5,987 3,749 1,124 (1,503) 10,868
========== ========== ============ ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
II-45
<PAGE> 100
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
amounts in millions
(see note 5)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,943 (561) 292
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,735 1,623 1,616
Stock compensation 866 488 (13)
Payments of obligation relating to stock
compensation (187) (132) (3)
Share of losses of affiliates, net 1,384 930 450
Loss on early extinguishment of debt 60 39 71
Minority interests in earnings of consolidated
subsidiaries, net 88 154 56
Restructuring charges -- -- 41
Payments of restructuring charges (9) (24) (8)
Reserve for loss arising from contingent obligation 90 -- --
Gains on issuance of equity interests by subsidiaries (89) (60) --
Gains on issuance of stock by equity investees (268) (112) (12)
Gains on disposition of assets, net (5,760) (401) (1,593)
Deferred income tax expense (benefit) 1,461 (275) 233
Cost of distribution agreements 50 -- --
Other noncash charges 10 25 11
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Change in receivables (183) (53) (115)
Change in inventories -- -- (8)
Change in prepaids (44) (77) (23)
Change in other accruals and payables 76 146 283
-------- -------- --------
Net cash provided by operating activities 1,223 1,710 1,278
-------- -------- --------
Cash flows from investing activities:
Cash paid for acquisitions (459) (323) (664)
Capital expended for property and equipment (1,917) (709) (2,055)
Investments in and loans to affiliates (1,503) (636) (778)
Collections of loans to affiliates 2,497 133 647
Proceeds from disposition of assets 889 541 341
Change in restricted cash (145) (1) (39)
Cash received in exchanges 45 18 66
Other investing activities (44) (179) (26)
-------- -------- --------
Net cash used in investing activities (637) (1,156) (2,508)
-------- -------- --------
Cash flows from financing activities:
Borrowings of debt 5,553 2,513 8,163
Repayments of debt (5,978) (3,036) (7,969)
Prepayment penalties (52) (33) (60)
Repurchase of common stock to be held in treasury (20) (529) --
Repurchase and retirement of common stock (11) -- --
Repurchase of subsidiary common stock (24) (42) --
Payment of preferred stock dividends (27) (42) (35)
Payment of dividends on subsidiary preferred stock
and Trust Preferred Securities (189) (179) (95)
Payments for call agreements (274) -- --
Proceeds from issuance of common stock 516 5 --
Proceeds from issuance of subsidiary common stock
and preferred stock 94 148 223
Proceeds from issuance of Trust Preferred Securities -- 490 971
Contributions by minority stockholders of subsidiaries -- 6 319
Other financing activities 1 (16) --
-------- -------- --------
Net cash provided (used) by financing activities (411) (715) 1,517
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 175 (161) 287
Cash and cash equivalents at beginning of year 244 405 118
-------- -------- --------
Cash and cash equivalents at end of year $ 419 244 405
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
II-46
<PAGE> 101
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Basis of Presentation
Nature of Business
Tele-Communications, Inc. ("TCI" or the "Company"), through its
subsidiaries and affiliates, is principally engaged in the
construction, acquisition, ownership, and operation of domestic cable
television systems and the provision of satellite-delivered video
entertainment, information and home shopping programming services to
various video distribution media, principally cable television systems.
The Company also has investments in cable and telecommunications
operations and television programming in certain international markets
as well as investments in companies and joint ventures involved in
developing and providing programming for new television and
telecommunications technologies.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of TCI and those of all majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation. Preferred stock of TCI which is owned by subsidiaries of
TCI eliminates in consolidation. Common stock of the Company held by
subsidiaries is treated similar to treasury stock in consolidation.
Targeted Stock
The Company's assets and operations were previously included in three
separate groups, each of which was tracked separately by public equity
securities. These groups were known as the "Liberty Media Group", the
"TCI Ventures Group" and the "TCI Group".
The Liberty Media Group was intended to reflect the separate
performance of TCI's assets which produce and distribute programming
services.
The TCI Ventures Group was intended to reflect the separate performance
of TCI's principal international assets and businesses and
substantially all of TCI's non-cable and non-programming assets.
The TCI Group was intended to reflect the separate performance of TCI
and its subsidiaries and assets not attributed to Liberty Media Group
or TCI Ventures Group. Such subsidiaries and assets are comprised
primarily of TCI's domestic cable and communications business.
(continued)
II-47
<PAGE> 102
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The TCI Group was tracked separately through the Tele-Communications,
Inc. Series A TCI Group Common Stock (the "TCI Group Series A Stock")
and Series B TCI Group Common Stock (the "TCI Group Series B Stock,"
and together with the TCI Group Series A Stock, the "TCI Group Stock").
The Liberty Media Group was tracked through the Tele-Communications,
Inc. Series A Liberty Media Group Common Stock ("Liberty Group Series A
Stock") and Series B Liberty Media Group Common Stock ("Liberty Group
Series B Stock" and together with the Liberty Group Series A Stock, the
"Liberty Group Stock"). The TCI Ventures Group was tracked separately
through the Tele-Communications, Inc. Series A TCI Ventures Group
Common Stock ("TCI Ventures Group Series A Stock") and Series B TCI
Ventures Group Common Stock ("TCI Ventures Group Series B Stock" and
together with the TCI Ventures Group Series A Stock, the "TCI Ventures
Group Stock").
On August 5, 1995, the shareholders of TCI authorized the Board of
Directors of TCI (the "Board") to issue the Liberty Group Stock.
Additionally, the shareholders of TCI approved the redesignation of the
previously authorized Class A and Class B common stock into TCI Group
Series A Stock and TCI Group Series B Stock, respectively. On August
10, 1995, TCI distributed, in the form of a dividend, 2.25 shares of
Liberty Group Stock for each four shares of TCI Group Stock owned (the
"Liberty Distribution").
In August 1997, TCI commenced offers (the "Exchange Offers") to
exchange shares of TCI Ventures Group Series A Stock and TCI Ventures
Group Series B Stock for up to 188,661,300 shares of TCI Group Series A
Stock and up to 16,266,400 shares of TCI Group Series B Stock,
respectively. The exchange ratio for the Exchange Offers was two shares
of the applicable series of TCI Ventures Group Stock for each share of
the corresponding series of TCI Group Stock properly tendered up to the
indicated maximum numbers. Upon the September 10, 1997 consummation of
the Exchange Offers, 188,661,300 shares of TCI Group Series A Stock and
16,266,400 shares of TCI Group Series B Stock were exchanged for
377,322,600 shares of TCI Ventures Group Series A Stock and 32,532,800
shares of TCI Ventures Group Series B Stock (the "TCI Ventures
Exchange").
Each of the separate series of Tele-Communications, Inc. common stock
was converted to a series of common stock of AT&T Corporation ("AT&T")
upon the March 9, 1999 merger of the Company into AT&T. See note 2.
Collectively, the TCI Group, the Liberty Media Group and the TCI
Ventures Group are referred to as the "Groups" and individually, may be
referred to herein as a "Group." The TCI Group Series A Stock, TCI
Ventures Group Series A Stock and the Liberty Group Series A Stock are
sometimes collectively referred to herein as the "Series A Stock," and
the TCI Group Series B Stock, TCI Ventures Group Series B Stock and
Liberty Group Series B Stock are sometimes collectively referred to
herein as the "Series B Stock."
(continued)
II-48
<PAGE> 103
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Notwithstanding the attribution of assets and liabilities, equity and
items of income and expense among TCI Group, Liberty Media Group and
TCI Ventures Group, each such Group in the capital structure of TCI,
which encompassed the TCI Group Stock, Liberty Group Stock and TCI
Ventures Group Stock, did not affect the ownership or the respective
legal title to such assets or responsibility for liabilities of TCI or
any of its subsidiaries. TCI and its subsidiaries each were responsible
for their respective liabilities. Holders of TCI Group Stock, Liberty
Group Stock and TCI Ventures Group Stock were common stockholders of
TCI and were subject to risks associated with an investment in TCI and
all of its businesses, assets and liabilities.
Accounting Standards
Effective January 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"). The Company has reclassified its
prior period consolidated balance sheet and consolidated statements of
operations and comprehensive earnings to conform to the requirements of
SFAS 130. SFAS 130 requires that all items which are components of
comprehensive earnings or losses be reported in a financial statement
in the period in which they are recognized. The Company has included
cumulative foreign currency translation adjustments and unrealized
holding gains and losses on available-for-sale securities in other
comprehensive earnings that are recorded directly in stockholders'
equity. Pursuant to SFAS 130, these items are reflected, net of related
tax effects, as components of comprehensive earnings in the Company's
consolidated statements of operations and comprehensive earnings, and
are included in accumulated other comprehensive earnings in the
Company's consolidated balance sheets and statements of stockholders'
equity.
During 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, ("SFAS 133"), which is effective
for all fiscal years beginning after June 15, 1999. SFAS 133
establishes accounting and reporting standards for derivative
instruments and hedging activities by requiring that all derivative
instruments be reported as assets or liabilities and measured at their
fair values. Under SFAS 133, changes in the fair values of derivative
instruments are recognized immediately in earnings unless those
instruments qualify as hedges of the (1) fair values of existing
assets, liabilities, or firm commitments, (2) variability of cash flows
of forecasted transactions, or (3) foreign currency exposures of net
investments in foreign operations. Although management of the Company
has not completed its assessment of the impact of SFAS 133 on its
consolidated results of operations and financial position, management
currently estimates that the impact of SFAS 133 will not be material.
(continued)
II-49
<PAGE> 104
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Merger with AT&T
On March 9, 1999, AT&T acquired TCI in a merger (the "AT&T Merger") in
which Italy Merger Corp., a wholly-owned subsidiary of AT&T, merged
with and into TCI, and TCI thereby became a wholly-owned subsidiary of
AT&T. As a result of the AT&T Merger, (i) each share of TCI Group
Series A Stock was converted into 0.7757 of a share of common stock,
par value $1.00 per share, of AT&T ("AT&T Common Stock"), (ii) each
share of TCI Group Series B Stock was converted into 0.8533 of a share
of AT&T Common Stock, (iii) each share of Liberty Group Series A Stock
was converted into one share of a newly created class of AT&T common
stock designated as the Class A Liberty Media Group Common Stock, par
value $1.00 per share (the "AT&T Liberty Class A Tracking Stock"), (iv)
each share of Liberty Group Series B Stock was converted into one share
of a newly created class of AT&T common stock designated as the Class B
Liberty Media Group Common Stock, par value $1.00 per share (the "AT&T
Liberty Class B Tracking Stock" and together with the AT&T Liberty
Class A Tracking Stock, the "AT&T Liberty Tracking Stock"), (v) each
share of TCI Ventures Group Series A Stock was converted into 0.52 of a
share of AT&T Liberty Class A Tracking Stock, (vi) each share of TCI
Ventures Group Series B Stock was converted into 0.52 of a share of
AT&T Liberty Class B Tracking Stock, (vii) each share of TCI's
Convertible Preferred Stock, Series C-TCI Group (the "Series C-TCI
Group Preferred Stock") was converted into 103.059502 shares of AT&T
Common Stock, (viii) each share of TCI's Convertible Preferred Stock
Series C-Liberty Media Group (the "Series C-Liberty Media Group
Preferred Stock") was converted into 56.25 shares of AT&T Liberty Class
A Tracking Stock, (ix) each share of TCI's Redeemable Convertible TCI
Group Preferred Stock, Series G ("Series G Preferred Stock") was
converted into 0.923083 shares of AT&T Common Stock and (x) each share
of TCI's Redeemable Convertible Liberty Media Group Preferred Stock,
Series H ("Series H Preferred Stock") was converted into 0.590625 of a
share of AT&T Liberty Class A Tracking Stock. Following the AT&T
Merger, each share of TCI's Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock ("Class B Preferred Stock")
continues to be outstanding as the Class B Preferred Stock of TCI with
the same rights and preferences such stock had prior to the AT&T
Merger. In general, the holders of shares of AT&T Liberty Class A
Tracking Stock and the holders of shares of AT&T Liberty Class B
Tracking 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, with the holders being entitled to one-tenth (1/10th) of
a vote for each share of AT&T Liberty Class A Tracking Stock held, 1
vote per share of AT&T Liberty Class B Tracking Stock held and 1 vote
per share of AT&T Common Stock held.
(continued)
II-50
<PAGE> 105
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The shares of AT&T Liberty Tracking Stock issued in the AT&T Merger are
intended to reflect the separate performance of the businesses and
assets attributed to "Liberty/Ventures Group," which following the AT&T
Merger, is comprised of the businesses and assets attributed to Liberty
Media Group and TCI Ventures Group at the time of the AT&T Merger.
Pursuant to, and subject to the terms and conditions set forth in, the
Agreement and Plan of Restructuring and Merger, dated as of June 23,
1998 (the "Merger Agreement"), immediately prior to the AT&T Merger,
certain assets previously attributed to 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. ("TCG"), the stock of At
Home Corporation ("@Home") attributed to TCI Ventures Group, the assets
and business of the National Digital Television Center, Inc. ("NDTC")
and TCI Ventures Group's equity interest in Western
Tele-Communications, Inc.) were transferred to TCI Group in exchange
for approximately $5.5 billion in cash. Also, upon consummation of the
AT&T Merger, through a new tax sharing agreement between
Liberty/Ventures Group and AT&T, Liberty/Ventures Group became entitled
to the benefit of approximately $2.0 billion of net operating loss
carryforwards attributable to all entities included in TCI's
consolidated federal income tax return as of the date of the AT&T
Merger. Such net operating loss carryforwards are subject to adjustment
by the Internal Revenue Service and are subject to limitations on usage
which may affect the ultimate amount utilized. See note 19 to the
accompanying consolidated financial statements of the Company.
Additionally, certain warrants previously attributed to TCI Group were
transferred to Liberty/Ventures Group in exchange for approximately
$176 million in cash. Certain agreements entered into at the time of
the AT&T Merger provide, among other things, for preferred vendor
status to Liberty/Ventures Group for digital basic distribution on
AT&T's systems of new programming services created by Liberty/Ventures
Group and for a renewal of existing affiliation agreements. The
transfer of other immaterial assets was also effected.
Pursuant to amended corporate governance documents for the entities
included in Liberty/Ventures Group and certain agreements among AT&T
and TCI, the business of Liberty/Ventures Group will continue to be
managed by certain persons who were members of TCI's management prior
to the AT&T Merger. AT&T will initially designate one third of the
directors of such entities and its rights as the sole shareholder of
the common stock of such entities following the AT&T Merger will, in
accordance with Delaware law, be limited to actions which will require
shareholder approval. Therefore, management has concluded that TCI does
not have a controlling financial interest (as that term is used in
Statement of Financial Accounting Standards No. 94) in the entities
comprising the Liberty/Ventures Group following the AT&T Merger, and
will account for its investment in such entities under the equity
method.
(continued)
II-51
<PAGE> 106
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Pursuant to a proposed final judgment (the "Final Judgment") agreed to
by TCI, AT&T and the United States Department of Justice (the "DOJ") on
December 30, 1998, Liberty/Ventures Group prior to the AT&T Merger
transferred all of the equity securities of Sprint Corporation
("Sprint") beneficially owned by the Liberty/Ventures Group (the
"Sprint Securities") to a trust with an independent trustee (the
"Trustee"), pursuant to a trust agreement approved by the DOJ (the
"Trust Agreement"). The Final Judgment, if entered by the United States
District Court for the District of Columbia, would require the Trustee,
on or before May 23, 2002, to dispose of a portion of the Sprint
Securities held by the trust and beneficially owned by Liberty/Ventures
Group sufficient to cause Liberty/Ventures Group to own beneficially no
more than 10% of the outstanding Series 1 PCS Stock of Sprint on a
fully diluted basis (assuming the issuance of all shares of Series 1
PCS Stock of Sprint ultimately issuable in respect of the applicable
securities of Sprint upon the exercise, conversion or other issuance
thereof in accordance with the terms of such securities) on such date.
On or before May 23, 2004, the Trustee must divest the remainder of the
Sprint Securities beneficially owned by Liberty/Ventures Group.
The Trust Agreement grants the Trustee the sole right to sell the
Sprint Securities and provides that all decisions regarding such
divestiture will be made by the Trustee without discussion or
consultation with AT&T or the entities in the Liberty/Ventures Group;
however, the Final Judgment would provide that the Trustee shall
consult with the board of directors of the Liberty/Ventures Group
entity that owns the Sprint Securities regarding such divestiture
(other than certain directors appointed by AT&T following the AT&T
Merger and any director, officer or shareholder that owns more than
0.10% of the outstanding AT&T Common Stock). The Trustee has the power
and authority to accomplish such divestiture only in a manner
reasonably calculated to maximize the value of the Sprint Securities
beneficially owned by Liberty/Ventures Group.
The Final Judgment would provide that the Trustee vote the Sprint
Securities beneficially owned by Liberty/Ventures Group in the same
proportion as other holders of Sprint's PCS Stock so long as such
securities are held by the trust. The Final Judgment also would
prohibit the acquisition by Liberty/Ventures Group of additional Sprint
Securities (other than in connection with the exercise or conversion,
as applicable, of certain Sprint Securities) without the prior written
consent of the DOJ.
(continued)
II-52
<PAGE> 107
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Immediately prior to the AT&T Merger, TCI restructured its ownership of
certain of its subsidiaries. This restructuring included merging TCI's
cable subsidiary, TCIC, into TCI. As a result of TCIC's merger with
TCI, all assets and liabilities of TCIC have been assumed by TCI,
including TCIC's public debt. In connection with TCIC's merger with
TCI, each share of TCIC's Cumulative Exchangeable Preferred Stock,
Series A was converted into 2.119 shares of TCI Group Series A Stock,
and such shares of TCI Group Series A Stock were subsequently converted
into AT&T Common Stock in connection with the AT&T Merger. All other
public securities issued by subsidiaries of TCIC (other than TCI
Pacific Communications, Inc. ("Pacific")) otherwise remained
unaffected. Furthermore, as part of the restructuring, (i) certain
asset transfers were made between TCI and its subsidiaries, (ii)
123,896 shares of the Company's Convertible Redeemable Participating
Preferred Stock, Series F ("Series F Preferred Stock") which were held
by subsidiaries of TCI, were converted into 185,428,946 shares of TCI
Group Series A Stock (which in turn were converted into 143,837,233
shares of AT&T Common Stock in the AT&T Merger and continue to be held
by subsidiaries of TCI), (iii) the remaining 154,411 shares of Series F
Preferred Stock which were formerly held by subsidiaries of TCI were
distributed to TCI through a series of liquidations and canceled, and
(iv) 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 Liberty Group Series A
Stock, 3,417,187 shares of Liberty Group Series B Stock, and 67,536
shares of Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock ("Class B Preferred Stock"), each formerly held by
subsidiaries of TCI, were distributed to TCI through a series of
liquidations and canceled.
After the AT&T Merger, under the terms of the 5% Class A Senior
Cumulative Exchangeable Preferred Stock of Pacific (the "Exchangeable
Preferred Stock"), each share of that preferred stock is exchangeable,
from and after August 1, 2001, for approximately 4.225 shares of AT&T
Common Stock, subject to certain anti-dilution adjustments.
Additionally, after the AT&T Merger, Pacific may elect to make any
dividend, redemption or liquidation payment on the Exchangeable
Preferred Stock in cash, by delivery of shares of AT&T Common Stock or
by a combination of the foregoing forms of consideration.
(3) Summary of Significant Accounting Policies
Cash Equivalents
Cash equivalents consist of investments which are readily convertible
into cash and have maturities of three months or less at the time of
acquisition.
Receivables
Receivables are reflected net of an allowance for doubtful accounts.
Such allowance at December 31, 1998 and 1997 was not significant.
Program Rights
Prepaid program rights are amortized on a film-by-film basis over the
specific number of exhibitions. Committed program rights and program
rights payable are recorded at the estimated costs of the programs when
the film is available for airing less prepayments. Such amounts are
amortized on a film-by-film basis over the anticipated number of
exhibitions.
(continued)
II-53
<PAGE> 108
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Investments
Marketable equity securities held by the Company are classified as
available-for-sale and are reported at fair value. Unrealized holding
gains and losses on securities classified as available-for-sale are
carried net of taxes as a component of accumulated other comprehensive
earnings in stockholders' equity. Realized gains and losses are
determined on a specific-identification basis.
Other investments in which the ownership interest is less than 20% and
are not considered marketable securities are generally carried at the
lower of cost or net realizable value. For those investments in
affiliates in which the Company's voting interest is 20% to 50%, the
equity method of accounting is generally used. Under this method, the
investment, originally recorded at cost, is adjusted to recognize the
Company's share of the net earnings or losses of the affiliates as they
occur rather than as dividends or other distributions are received. The
Company's share of losses are generally limited to the extent of the
Company's investment in, advances to and commitments for the investee.
The Company's share of net earnings or losses of affiliates includes
the amortization of the difference between the Company's investment and
its share of the net assets of the investee. Recognition of gains on
sales of properties to affiliates accounted for under the equity method
is deferred in proportion to the Company's ownership interest in such
affiliates.
Changes in the Company's proportionate share of the underlying equity
of a subsidiary or equity method investee, which result from the
issuance of additional equity securities by such subsidiary or equity
investee, generally are recognized as gains or losses in the Company's
consolidated statements of operations and comprehensive earnings.
Property and Equipment
Property and equipment is stated at cost, including acquisition costs
allocated to tangible assets acquired. Construction costs, labor and
applicable overhead related to installations and interest during
construction are capitalized. During 1998, 1997 and 1996, interest
capitalized was not significant.
Depreciation is computed on a straight-line basis using estimated
useful lives of 3 to 15 years for distribution systems and 3 to 40
years for support equipment and buildings.
Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. At the time of ordinary retirements, sales
or other dispositions of property, the original cost and cost of
removal of such property are charged to accumulated depreciation, and
salvage, if any, is credited thereto. Gains or losses are only
recognized in connection with the sales of properties in their
entirety.
(continued)
II-54
<PAGE> 109
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Franchise Costs
Franchise costs include the difference between the cost of acquiring
cable television systems and amounts allocated to their tangible
assets. Such amounts are generally amortized on a straight-line basis
over 40 years. Costs incurred by the Company in negotiating and
renewing franchise agreements are amortized on a straight-line basis
over the life of the franchise, generally 10 to 20 years.
Impairment of Long-Lived Assets
The Company periodically reviews the carrying amounts of property,
plant and equipment and its identifiable intangible assets to determine
whether current events or circumstances warrant adjustments to such
carrying amounts. If an impairment adjustment is deemed necessary, such
loss is measured by the amount that the carrying value of such assets
exceeds their fair value. Considerable management judgment is necessary
to estimate the fair value of assets, accordingly, actual results could
vary significantly from such estimates. Assets to be disposed of are
carried at the lower of their financial statement carrying amount or
fair value less costs to sell.
Derivative Financial Instruments
The Company has entered into variable and fixed interest rate exchange
agreements ("Interest Rate Swaps") which it uses to manage interest
rate risk arising from the Company's financial liabilities. Such
Interest Rate Swaps are accounted for as hedges; and accordingly,
amounts receivable or payable under Interest Rate Swaps are recognized
as adjustments to interest expense. Gains and losses on early
terminations of Interest Rate Swaps are included in the carrying amount
of the related debt and amortized as yield adjustments over the
remaining term of the derivative financial instruments or the remaining
term of the related debt, whichever is shorter. The Company does not
use such instruments for trading purposes.
Derivative financial instruments that can be settled, at the Company's
option, in shares of the Company's common stock are accounted for as
equity instruments. Periodic settlements of amounts payable/receivable
pursuant to such financial instruments are included in additional
paid-in capital.
In conjunction with a stock repurchase program or similar transaction,
the Company may elect to sell put options on its own common stock.
Proceeds from any such sales are reflected as an increase to additional
paid-in capital and an amount equal to the maximum redemption amount
under unexpired put options is reflected as redeemable common stock.
(continued)
II-55
<PAGE> 110
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
From time to time, the Company uses certain derivative financial
instruments to manage its foreign currency risks. Because the Company
generally views its foreign operating subsidiaries and affiliates as
long-term investments, the Company generally does not attempt to hedge
existing investments in its foreign affiliates and subsidiaries.
However, the Company may enter into forward contracts to reduce its
exposure to short-term (generally no more than one year) movements in
the exchange rates applicable to firm funding commitments that are
denominated in currencies other than the U.S. dollar. When high
correlation of changes in the market value of the forward contract and
changes in the fair value of the firm commitment is probable, the
forward contract is accounted for as a hedge. Changes in the market
value of a forward contract that qualifies as a hedge and any gains or
losses on early termination of such a forward contract are deferred and
included in the measurement of the item (generally an investment in, or
an advance to, a foreign affiliate) that results from the funding of
such commitment. Market value changes in derivative financial
instruments that do not qualify as hedges are recognized currently in
the consolidated statements of operations and comprehensive earnings.
To date, the Company's use of forward contracts, as described above,
has not had a material impact on the Company's financial position or
results of operations.
Minority Interests
Recognition of minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests'
allocable portion of the common equity of those consolidated
subsidiaries. Further, the minority interests' share of losses is not
recognized if the minority holders of common equity of consolidated
subsidiaries have the right to cause the Company to repurchase such
holders' common equity.
Included in minority interests in equity of consolidated subsidiaries
is $925 million and $927 million in 1998 and 1997, respectively, of
preferred stocks (and accumulated dividends thereon) of certain
subsidiaries. Dividend requirements on such subsidiary preferred stocks
are reflected as minority interests in the accompanying consolidated
statements of operations and comprehensive earnings.
Foreign Currency Translation
All balance sheet accounts of foreign investments are translated at the
current exchange rate as of the end of the accounting period. Statement
of operations items are translated at average currency exchange rates.
The resulting translation adjustment is recorded as a separate
component of accumulated other comprehensive earnings in stockholders'
equity.
Transactions denominated in currencies other than the functional
currency are recorded based on exchange rates at the time such
transactions arise. Subsequent changes in exchange rates result in
transaction gains and losses which are reflected in the combined
statements of operations as unrealized (based on the applicable period
end translation) or realized upon settlement of the transactions. Such
realized and unrealized gains and losses were not material to the
accompanying consolidated financial statements.
(continued)
II-56
<PAGE> 111
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Revenue Recognition
Cable revenue for customer fees, equipment rental, advertising,
pay-per-view programming and revenue sharing agreements is recognized
in the period that services are delivered. Installation revenue is
recognized in the period the installation services are provided to the
extent of direct selling costs. Any remaining amount is deferred and
recognized over the estimated average period that customers are
expected to remain connected to the cable distribution system.
Stock Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS 123") establishes financial accounting
and reporting standards for stock-based employee compensation plans as
well as transactions in which an entity issues its equity instruments
to acquire goods or services from non-employees. As allowed by SFAS
123, the Company continues to account for stock-based compensation
pursuant to Accounting Principles Board Opinion No. 25 ("APB Opinion
No. 25"). The Company has included the disclosures required by SFAS 123
in note 15.
Operating Segments
The Company has significant operations principally in two operating
segments: domestic cable and communications services and programming
services. Substantially all of the Company's domestic cable and
communications businesses and assets ("cable") were attributed to TCI
Group, and substantially all of the Company's programming businesses
and assets ("programming") have been attributed to Liberty Media Group.
The Company's principal international businesses and assets and the
Company's remaining non-cable and non-programming domestic businesses
and assets have been attributed to TCI Ventures Group. No individual
business or asset within TCI Ventures Group constituted a reportable
segment of the Company. See note 22 for additional segment information.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified for comparability
with the 1998 presentation.
(continued)
II-57
<PAGE> 112
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Earnings (Loss) Per Common and Potential Common Share
Basic earnings per share ("EPS") is measured as the income or loss
attributable to common stockholders divided by the weighted average
outstanding common shares for the period. Diluted EPS is similar to
basic EPS but presents the dilutive effect on a per share basis of
potential common shares (e.g., convertible securities, options, etc.)
as if they had been converted at the beginning of the periods
presented. Potential common shares that have an anti-dilutive effect
(i.e., those that increase income per share or decrease loss per share)
are excluded from diluted EPS.
(a) TCI Group Stock
The basic loss attributable to TCI Group common stockholders
per common share for the years ended December 31, 1998, 1997
and 1996 and the diluted loss attributable to TCI Group common
stockholders per common share for the years ended December 31,
1997 and 1996 was computed by dividing net loss attributable
to TCI Group common stockholders ($240 million, $537 million
and $799 million, respectively) by the weighted average number
of common shares outstanding of TCI Group Stock during the
period (525 million, 632 million and 665 million,
respectively). Potential common shares were not included in
the diluted calculation of weighted average shares outstanding
because their inclusion would be anti-dilutive. At December
31, 1998, 1997 and 1996, there were 100 million, 113 million,
and 126 million potential common shares, respectively,
consisting of stock options and other performance awards and
convertible securities that could potentially dilute future
EPS calculations in periods of net earnings. Such potential
common share amounts do not take into account the assumed
number of shares that would be repurchased by the Company upon
the exercise of stock options and other performance awards.
The diluted loss attributable to TCI Group common stockholders
per common share for the year ended December 31, 1998 was
computed by dividing net loss attributable to TCI Group common
stockholders, which is increased by aggregate payments of $15
million made during 1998 under certain contracts which may be
settled in shares or cash, but for the purpose of computing
diluted EPS, are assumed to be settled in shares (see notes 15
and 17), by the weighted average number of common shares
outstanding of TCI Group Stock during the period. Potential
common shares were not included in the diluted calculation of
weighted average shares outstanding because their inclusion
would be anti-dilutive.
In conjunction with the March 9, 1999 AT&T Merger, TCI Group
Stock was converted into AT&T Common Stock. See note 2.
(b) Liberty Group Stock
The basic earnings attributable to Liberty Media Group common
stockholders per common share for the years ended December 31,
1998, 1997 and 1996 was computed by dividing net earnings
attributable to Liberty Media Group common stockholders by the
weighted average number of common shares outstanding of
Liberty Group Stock during the period.
(continued)
II-58
<PAGE> 113
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The diluted earnings attributable to Liberty Media Group common
stockholders per common and potential common share for the years ended
December 31, 1998, 1997 and 1996 was computed by dividing earnings
attributable to Liberty Media Group common stockholders, adjusted for
Liberty Media Group's share of interest expense of an affiliate
accrued during the year-ended 1998, assuming the conversion of the
affiliate's convertible securities into Liberty Group Stock as of the
beginning of the period, by the weighted average number of common and
dilutive potential common shares outstanding of Liberty Group Stock
during the period. Shares issuable upon conversion of the Series
C-Liberty Media Group Preferred Stock, the Convertible Preferred
Stock, Series D, the Series H Preferred Stock, convertible notes
payable, convertible debentures of affiliate and stock options and
other performance awards have been included in the diluted calculation
of weighted average shares to the extent that the assumed issuance of
such shares would have been dilutive, as illustrated below. All of the
outstanding shares of Convertible Preferred Stock, Series D, were
redeemed effective April 1, 1998 (see note 13). Numerator adjustments
for dividends and interest associated with the convertible preferred
shares and convertible notes payable, respectively, were not made to
the computation of diluted earnings per share as such dividends and
interest was paid by TCI Group. See notes 12 and 13 for descriptions
of the convertible notes payable and convertible preferred shares,
respectively. See note 15 for descriptions of stock options.
In conjunction with the March 9, 1999 AT&T Merger, Liberty Group Stock
was converted into AT&T Liberty Tracking Stock. See note 2.
(continued)
II-59
<PAGE> 114
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Information concerning the reconciliation of basic EPS to diluted
EPS with respect to Liberty Group Stock is presented below:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1998 1997 1996
-------- -------- --------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Basic EPS:
Earnings attributable to common
stockholders $ 156 125 1,056
======== ======== ========
Weighted average common shares 359 366 374
======== ======== ========
Basic earnings per share attributable to
common stockholders $ .43 .34 2.82
======== ======== ========
Diluted EPS:
Earnings attributable to common
stockholders $ 156 125 1,056
Add interest expense 1 -- --
-------- -------- --------
Adjusted earnings attributable to common
stockholders assuming conversion of
convertible notes payable of
affiliate $ 157 125 1,056
======== ======== ========
Weighted average common shares 359 366 374
Add dilutive potential common shares:
Employee and director options and
other performance awards 8 4 3
Convertible notes payable 19 19 21
Convertible debentures of affiliate 7 -- --
Series C- Liberty Media Group
Preferred Stock 4 4 4
Convertible Preferred Stock, Series D -- 6 5
Series H Preferred Stock 4 4 2
-------- -------- --------
Dilutive potential common shares 42 37 35
-------- -------- --------
Diluted weighted average common shares 401 403 409
======== ======== ========
Diluted earnings per share attributable
to common stockholders $ .39 .31 2.58
======== ======== ========
</TABLE>
(c) TCI Ventures Group Stock
The basic earnings (loss) attributable to TCI Ventures Group
stockholders per common share for the year ended December 31,
1998 and the period from September 10, 1997 (the date of the
TCI Ventures Exchange) through December 31, 1997 was computed
by dividing earnings (loss) attributable to TCI Ventures
Group stockholders by the weighted average number of common
shares outstanding of TCI Ventures Group Stock during the
period.
(continued)
II-60
<PAGE> 115
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The diluted earnings (loss) attributable to TCI Ventures Group
stockholders per common and potential common share for the year ended
December 31, 1998 and the period from September 10, 1997 through
December 31, 1997 was computed by dividing earnings (loss)
attributable to TCI Ventures Group stockholders by the weighted
average number of common and dilutive potential common shares
outstanding of TCI Ventures Group stock during the period. Shares
issuable upon conversion of convertible notes payable and stock
options and other performance awards have been included in the diluted
calculation of weighted average shares to the extent that the assumed
issuance of such shares would have been dilutive, as illustrated
below. Numerator adjustments for interest associated with convertible
notes payable were not made to the computation of diluted earnings per
share as such interest was paid by TCI Group. In conjunction with the
March 9, 1999 AT&T Merger, TCI Ventures Group Stock was converted into
AT&T Liberty Tracking Stock. See note 2.
Information concerning the reconciliation of basic EPS to dilutive EPS
with respect to TCI Ventures Group Stock is presented below:
<TABLE>
<CAPTION>
September 10,
Year ended 1997 through
December 31, December 31,
1998 1997
------------ ------------
amounts in millions,
except per share amounts
<S> <C> <C>
Basic EPS:
Earnings (loss) attributable to common
stockholders $ 2,003 (191)
============ ============
Weighted average common shares 422 410
============ ============
Basic (loss) earnings per share
attributable to common stockholders $ 4.75 (.47)
============ ============
Diluted EPS:
Earnings (loss) attributable to common
stockholders $ 2,003 (191)
============ ============
Weighted average common shares 422 410
------------ ------------
Add dilutive potential common shares:
Employee and director options and
other performance awards 8 --
Convertible notes payable 21 --
------------ ------------
Dilutive potential common shares 29 --
------------ ------------
Diluted weighted average common shares 451 410
============ ============
Diluted earnings (loss) per share
attributable to common stockholders $ 4.44 (.47)
============ ============
</TABLE>
(continued)
II-61
<PAGE> 116
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Supplemental Disclosures to Consolidated Statements of Cash Flows
Cash paid for interest was $1,066 million, $1,183 million and $1,056
million for the years ended December 31, 1998, 1997 and 1996,
respectively. Cash paid for income taxes was $57 million, $141 million,
and $41 million in 1998, 1997 and 1996, respectively. In addition, the
Company received income tax refunds amounting to $76 million and $36
million during the years ended December 31, 1998 and 1997,
respectively.
Significant noncash investing and financing activities are reflected
in the following table:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------------------------
1998 1997 1996
-------- -------- --------
amounts in millions
<S> <C> <C> <C>
Cash paid for acquisitions:
Recorded value of assets acquired $ (1,098) (1,857) (5,064)
Net liabilities assumed 11 720 1,811
Deferred tax liability recorded in acquisitions 71 145 1,379
Change in minority interests in equity of consolidated
subsidiaries (169) 93 113
Elimination of notes receivable from affiliates 350 -- --
Common stock and preferred stock issued in acquisitions 376 1,060 457
TCI common stock and preferred stock held by acquired
company -- (484) --
Preferred stock of subsidiaries issued in acquisitions -- -- 640
-------- -------- --------
Cash paid for acquisitions $ (459) (323) (664)
======== ======== ========
Cash received in exchanges:
Recorded value of assets acquired $ (136) (392) (709)
Historical cost of assets exchanged 151 399 754
Gain recorded on exchange of assets 30 11 21
-------- -------- --------
Cash received in exchanges $ 45 18 66
======== ======== ========
Capitalized costs of distribution agreements (note 18) $ 74 173 --
======== ======== ========
Exchange of consolidated subsidiaries for note receivable
and equity investments $ -- -- 894
======== ======== ========
</TABLE>
For a description of certain non-cash transactions, see notes 6 and
10.
@Home's cash and cash equivalent balances of $419 million and $120
million are included in the Company's cash and cash equivalent
balances at December 31, 1998 and 1997, respectively. Such @Home
balances are available to be applied towards the liquidity
requirements of @Home. Accordingly, it is not anticipated that any
portion of such @Home balances will be distributed or otherwise made
available to the Company.
The Company's restricted cash is primarily comprised of proceeds
received in connection with certain asset dispositions. Such proceeds,
which aggregated $162 million and $34 million at December 31, 1998 and
1997, respectively, are designated to be reinvested in certain
identified assets for income tax purposes. The Company's restricted
cash also includes amounts held as collateral for interest payment
obligations pursuant to certain bank credit facilities. Such amounts
aggregated $17 million and $5 million at December 31, 1998 and 1997,
respectively.
(continued)
II-62
<PAGE> 117
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company ceased to consolidate Flextech p.l.c. ("Flextech") and
Cablevision S.A. ("Cablevision") and began to account for Flextech and
Cablevision using the equity method of accounting, effective January
1, 1997 and October 1, 1997, respectively. The effects of changing the
method of accounting for the Company's ownership interest in Flextech
and Cablevision from the consolidation method to the equity method are
summarized below (amounts in millions):
<TABLE>
<S> <C>
Assets (other than cash and cash equivalents) reclassified to
equity investments $ 596
Liabilities reclassified to equity investments (484)
Minority interests in equity of subsidiaries reclassified to
equity investments (151)
-------
Decrease in cash and cash equivalents $ (39)
=======
</TABLE>
(6) Investments in Affiliates
The Company has various investments accounted for under the equity
method. The following table includes the Company's carrying value and
percentage ownership of the Company's more significant investments as
of the indicated dates:
<TABLE>
<CAPTION>
Percentage Carrying value at
Percentage December 31,
ownership at ----------------------
December 31, 1998 1998 1997
----------------- -------- --------
amounts in millions
<S> <C> <C> <C>
USA Networks, Inc. ("USAI") and related
investments (a) (a) $ 1,042 348
Cablevision Systems Corporation ("CSC") (b) 33% 945 15
Telewest Communications plc ("Telewest") (c) 22% 515 324
Flextech (d) 37% 320 261
Cablevision (e) 28% 315 239
Various foreign equity investments (other
than Telewest, Flextech and
Cablevision) (f) various 346 209
InterMedia Capital Partners IV, L.P.
("InterMedia IV") and InterMedia
Capital Management IV, L.P. ("ICM IV")
(collectively, "IP IV") (g) 50% 207 262
Falcon Communications, L.P. 46% 189 --
QVC, Inc. ("QVC") 43% 197 134
Parnassos, L.P. 33% 120 --
Sprint Spectrum Holding Company L.P.,
MinorCo, L.P. and PhillieCo Partnership
I L.P. (the "PCS Ventures") (h) -- -- 607
TCG (i) -- -- 295
Other (j) 569 369
-------- --------
$ 4,765 3,063
======== ========
</TABLE>
(continued)
II-63
<PAGE> 118
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- -----------
(a) USAI
Pursuant to an agreement among the Company, Barry Diller and certain
of their respective affiliates entered into in August 1995 and amended
in August 1996 (the "BDTV Agreement"), the Company contributed to BDTV
INC. ("BDTV-I"), in August 1996, an option (the "Silver King Option")
to purchase 2 million shares of Class B common stock of Silver King
Communications, Inc. ("Silver King") (which shares represented voting
control of Silver King at such time) and $4 million in cash,
representing the exercise price of the Silver King Option. BDTV-I is a
corporation formed by the Company and Mr. Diller pursuant to the BDTV
Agreement, in which the Company owns over 99% of the equity and none
of the voting power (except for protective rights with respect to
certain fundamental corporate actions) and Mr. Diller owns less than
1% of the equity and all of the voting power. BDTV-I exercised the
Silver King Option shortly after its contribution, thereby becoming
the controlling stockholder of Silver King. Such change in control of
Silver King had been approved by the Federal Communications Commission
("FCC") in June 1996, subject, however, to the condition that the
equity interest of the Company in Silver King not exceed 21.37%
without the prior approval of the FCC (the "FCC Order").
Pursuant to an Agreement and Plan of Exchange and Merger entered into
in August 1996, Silver King acquired Home Shopping Network, Inc.
("HSN") by merger of HSN with a subsidiary of Silver King in December
1996 (the "HSN Merger") where HSN is the surviving corporation and a
subsidiary of Silver King following the HSN Merger. The Company
accounted for the HSN Merger as a sale of a portion of its investment
in HSN and accordingly, recorded a pre-tax gain of approximately $47
million. In order to effect the HSN Merger in compliance with the FCC
Order, the Company agreed to defer receiving certain shares of Silver
King that would otherwise have become issuable to it in the HSN Merger
until such time as it was permitted to own such shares. As a result,
the HSN Merger was structured so that the Company received (i) 15.6
million shares of Class B common stock of Silver King, all of which
shares the Company contributed to BDTV II INC. ("BDTV-II"), (ii) the
contractual right to be issued up to an additional 5.2 million shares
of Class B common stock of Silver King from time to time upon the
occurrence of certain events which would allow the Company to own
additional shares in compliance with the FCC Order (including events
resulting in the dilution of the Company's percentage equity
interest), and (iii) approximately 739,000 shares of Class B common
stock and 17.6 million shares of common stock of HSN (representing
approximately 19.9% of the equity of HSN). BDTV-II is a corporation
formed by the Company and Barry Diller pursuant to the BDTV Agreement,
in which the relative equity ownership and voting power of the Company
and Mr. Diller are substantially the same as their respective equity
ownership and voting power in BDTV-I.
As a result of the HSN Merger, HSN is no longer included in the
consolidated financial results of the Company. Subsequent to the HSN
Merger, Silver King was renamed HSN, Inc. ("HSNI").
(continued)
II-64
<PAGE> 119
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In February 1998, pursuant to an Investment Agreement among Universal
Studios, Inc. ("Universal"), HSNI, HSN and the Company, dated as of
October 1997 and amended and restated as of December 1997, HSNI
consummated a transaction (the "Universal Transaction") through which
USA Networks Partners, Inc., a subsidiary of Universal, sold its 50%
interest in USAI, a New York general partnership, to HSNI and
Universal contributed the remaining 50% interest in USAI and its
domestic television production and distribution operations to HSNI.
Subsequent to these transactions, HSNI was renamed USAI. In connection
with the Universal Transaction, Universal, USAI, HSN and the Company
became parties to a number of other agreements relating to, among
other things, (i) the management of USAI, (ii) the purchase and sale
or other transfer of voting securities of USAI, including securities
convertible or exchangeable for voting securities of USAI, and (iii)
the voting of such securities.
At the closing of the Universal Transaction, Universal (i) was issued
6 million shares of USAI's Class B common stock, 7 million shares of
USAI's common stock and 109 million common equity shares ("LLC
Shares") of USANi LLC, a limited liability company formed to hold all
of the businesses of USAI and its subsidiaries, except for its
broadcasting business and its equity interest in Ticketmaster Group,
Inc. and (ii) received a cash payment of $1.3 billion. Pursuant to an
Exchange Agreement relating to the LLC Shares (the "LLC Exchange
Agreement"), approximately 74 million of the LLC Shares issued to
Universal are each exchangeable for one share of USAI's Class B common
stock and the remainder of the LLC Shares issued to Universal are each
exchangeable for one share of USAI's common stock.
At the closing of the Universal Transaction, the Company was issued
1.2 million shares of USAI's Class B common stock. Of such shares,
800,000 shares of Class B common stock were contributed to BDTV IV
INC. (collectively with BDTV-I, BDTV-II and BDTV III INC., "BDTV"), a
newly-formed entity having substantially the same terms as BDTV-I,
BDTV-II and BDTV III INC. (with the exception of certain transfer
restrictions) in which the Company owns over 99% of the equity and
none of the voting power (except for protective rights with respect to
certain fundamental corporate actions) and Barry Diller owns less than
1% of the equity and all of the voting power. The Company accounts for
its investment in BDTV under the equity method. In addition, the
Company purchased 10 LLC Shares at the closing of the Universal
Transaction for an aggregate purchase price of $200.
On June 24, 1998, USAI consummated the previously announced agreement
to acquire the remaining stock of Ticketmaster Group, Inc. which it
did not previously own through a tax-free merger (the "Ticketmaster
Transaction"). In connection with the increases in USAI's equity, net
of the dilution of the Company's ownership interest, that resulted
from the issuance of common stock by USAI in the Universal Transaction
and the Ticketmaster Transaction, the Company recorded a $64 million
increase to equity (after deducting a deferred income tax liability of
$42 million) and an increase to the carrying value of the Company's
investment in USAI of $106 million. No gain was recognized in the
consolidated statements of operations and comprehensive earnings due
primarily to the Company's commitment to purchase additional equity
interests in USAI.
(continued)
II-65
<PAGE> 120
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In connection with the Universal Transaction, each of Universal and
the Company was granted a preemptive right with respect to future
issuances of USAI's common stock, subject to certain limitations, to
maintain their respective percentage ownership interests in USAI that
they had prior to such issuances. In connection with such right,
during 1998, the Company purchased approximately 4.7 million shares of
USAI's common stock and approximately 22.9 million LLC Shares for an
aggregate cost of approximately $560 million. Pursuant to the LLC
Exchange Agreement, each LLC Share issued or to be issued to the
Company is exchangeable for one share of USAI's common stock.
At December 31, 1998, the Company held 24.4 million shares of USAI's
common stock through BDTV and 5.2 million shares of USAI's common
stock directly. Additionally, the Company held 22.9 million LLC Shares
at December 31, 1998 as well as shares of HSN's common stock which are
exchangeable for 16.6 million shares of USAI's common stock. The
Company's direct ownership of USAI is restricted under the FCC.
Assuming the exchange of the Company's shares in HSN and its LLC
Shares for USAI common stock, and the exchange of certain securities
owned by Universal and certain of its affiliates for USAI common
stock, the Company would own 69.1 million shares or approximately 21%
of USAI, including shares held through BDTV at December 31, 1998.
USAI's common stock had a closing market value of $33-1/8 per share on
December 31, 1998.
During the years ended December 31, 1998, 1997 and 1996, the Company's
share of affiliates' earnings (losses) from its interests in USAI and
related investments accounted for $30 million, $3 million and ($1
million), respectively.
(b) CSC
On March 4, 1998, the Company contributed to CSC certain of its cable
television systems serving approximately 830,000 customers in exchange
for approximately 48.9 million newly issued CSC Class A common shares
(the "CSC Transaction"). CSC also assumed and repaid approximately
$574 million of debt owed by the Company to external parties and $95
million of debt owed to the Company. As a result of the CSC
Transaction, the Company recognized a $506 million gain in the
accompanying consolidated statement of operations and comprehensive
earnings for the year ended December 31, 1998. Such gain represents
the excess of the $1,161 million fair value of the CSC Class A common
shares received over the historical cost of the net assets transferred
by the Company to CSC. The $1.9 billion difference between the
carrying value of the Company's investment in CSC and CSC's net
deficiency is being amortized over an estimated useful life of 20
years. Including the amortization of such difference, CSC accounted
for $240 million of the Company's share of its affiliates' losses
during the year ended December 31, 1998.
The Company has also entered into letters of intent with CSC which
provide for the Company to acquire a cable system in Michigan and an
additional 4% 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 the Company's debt.
(continued)
II-66
<PAGE> 121
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 1998, the Company owned 49,982,572 shares of CSC Class
A common stock, which had a closing market price of $50.13 per share
on such date. Such shares represented an approximate 33.0% equity
interest in CSC's total outstanding shares and an approximate 9%
voting interest in CSC in all matters except for (i) the election of
directors, in which case the Company effectively has the right to
designate two of CSC's directors, and (ii) any increase in authorized
shares, in which case the Company has agreed to vote its interest in
proportion with the public holders of CSC Class A common shares. The
ability of the Company to sell or increase its investment in CSC is
subject to certain restrictions and limitations set forth in a
stockholders agreement with CSC.
(c) Telewest
Telewest currently operates and constructs cable television and
telephone systems in the United Kingdom ("UK"). Telewest accounted for
$134 million, $145 million and $109 million of the Company's share of
its affiliates' losses during the years ended December 31, 1998, 1997
and 1996, respectively.
At December 31, 1998, the Company indirectly owned 463 million or
21.6% of the issued and outstanding Telewest ordinary shares. The
reported closing price on the London Stock Exchange of Telewest
ordinary shares was (pound)1.74 ($2.88) per share at December 31,
1998.
Effective September 1, 1998, Telewest and General Cable PLC ("General
Cable") consummated a merger (the "General Cable Merger") in which
holders of General Cable received 1.243 new Telewest shares and
(pound)0.65 ($1.11) in cash for each share of General Cable. In
addition, holders of American Depository shares of General Cable
("General Cable ADS") (each representing five General Cable shares)
received 6.215 new Telewest shares and (pound)3.25 ($5.53) in cash for
each share of General Cable ADS. Based upon Telewest's closing share
price of (pound)0.89 ($1.51) on April 14, 1998, the General Cable
Merger was valued at approximately (pound)649 million ($1.1 billion).
The cash portion of the General Cable Merger was financed through an
offer to qualifying Telewest shareholders for the purchase of
approximately 261 million new Telewest shares at a price of
(pound)0.925 ($1.57) per share (the "Telewest Offer"). The Company
subscribed to 85 million Telewest ordinary shares at an aggregate cost
of (pound)78 million ($133 million) in connection with the Telewest
Offer. Immediately following the Telewest Offer, the Company held 28%
of the issued and outstanding Telewest ordinary shares.
In connection with the General Cable Merger, the Company converted its
entire holdings of Telewest convertible preference shares (133 million
shares) into Telewest ordinary shares. As a result of the General
Cable Merger, the Company's ownership interest in Telewest decreased
to 21.6%. In connection with the increase in Telewest's equity, net of
the dilution of the Company's interest in Telewest, that resulted from
the General Cable Merger, the Company recorded a non-cash gain of $60
million (before deducting deferred income tax expense of $21 million)
during 1998.
(continued)
II-67
<PAGE> 122
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(d) Flextech
In January 1997, the Company's voting interest in Flextech was reduced
to 50% and the Company ceased to include Flextech in its consolidated
financial results and began to account for Flextech using the equity
method of accounting. In April 1997, Flextech and BBC Worldwide
Limited formed two separate joint ventures (the "BBC Joint Ventures")
and entered into certain related transactions. The consummation of the
BBC Joint Ventures and related transactions resulted in, among other
things, a reduction of the Company's economic ownership interest in
Flextech from 46.2% to 36.8%. The Company continues to maintain a
voting interest in Flextech of approximately 50%. As a result of such
dilution, the Company recorded a $152 million increase to the carrying
amount of the Company's investment in Flextech, a $53 million increase
to deferred income tax liability, a $66 million increase to equity and
a $33 million increase to minority interests in equity of consolidated
subsidiaries. No gain was recognized in the statement of operations
and comprehensive earnings due primarily to certain contingent
obligations of the Company with respect to one of the BBC Joint
Ventures. Flextech accounted for $21 million and $16 million of the
Company's share of its affiliates' losses during the years ended
December 31, 1998 and 1997, respectively.
Based on the (pound)6.07 ($10.07) per share closing price of the
Flextech ordinary shares on the London Stock Exchange, the 58 million
Flextech ordinary shares owned by the Company had an aggregate market
value of (pound)351 million ($583 million) at December 31, 1998.
(e) Cablevision
On October 9, 1997, the Company sold a portion of its 51% interest in
Cablevision to unaffiliated third parties. In connection with such
sale and certain related transactions, the Company recognized a gain
of $49 million. Additionally, effective October 1, 1997, the Company
ceased to consolidate Cablevision and began to account for Cablevision
using the equity method of accounting. Cablevision accounted for $23
million and $3 million of the Company's share of its affiliates'
losses during the years ended December 31, 1998 and 1997,
respectively. See note 20.
(continued)
II-68
<PAGE> 123
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(f) Various Foreign Investments
Internationally, The News Corporation Limited ("News Corp.") and the
Company formed a venture ("Fox Sports International") to operate sports
programming services in Latin American and Australia and a variety of
new sports services throughout the world except in Asia and in the
United Kingdom, Japan and New Zealand where prior arrangements preclude
an immediate collaboration. The Company owns 50% of Fox Sports
International with News Corp. owning the other 50%. Fox Sports
International accounted for $34 million, $30 million and $21 million of
the Company's share of its affiliates' losses during the years ended
December 31, 1998, 1997 and 1996, respectively.
In addition to Telewest, Flextech and Fox Sports International and
Cablevision, the Company has other less significant equity method
investments in video distribution and programming businesses located
in the UK, other parts of Europe, Asia, Latin America and certain
other foreign countries. In the aggregate, such other foreign
investments in affiliates accounted for $70 million, $70 million and
$54 million of the Company's share of its affiliates losses during the
years ended December 31, 1998, 1997 and 1996, respectively.
(g) IP IV
In July 1996, the Company completed a series of transactions that
resulted in the transfer of all or part of the Company's ownership
interests in certain cable television systems to InterMedia IV in
exchange for a 49% limited partnership interest in InterMedia IV and
assumed debt of $120 million. Simultaneously, the Company received a
cable television system and cash from InterMedia IV in exchange for a
cable television system that had been recently acquired by the
Company. The Company recognized no gain or loss in connection with the
above-described transactions. The $225 million excess of the Company's
investment in InterMedia IV over the Company's share of the partners'
capital of InterMedia IV is being amortized over an estimated useful
life of 20 years. Including such amortization, the Company's share of
InterMedia IV's losses was $53 million, $46 million and $16 million
during the years ended December 31, 1998, 1997 and 1996, respectively.
ICM IV owns a 1.12% limited partnership interest in InterMedia IV. The
Company acquired its limited partnership interest in ICM IV in August
1997 pursuant to the transactions described in note 17.
(h) PCS Ventures
PCS Ventures accounted for $629 million, $493 million and $167 million
of the Company's share of its affiliates' losses during the years
ended December 31, 1998, 1997 and 1996, respectively. The 1996 amount
includes $34 million related to prior periods. See notes 2 and 9.
(i) TCG
TCG accounted for $32 million, $66 million and $51 million of the
Company's share of affiliates' losses during the years ended December
31, 1998, 1997 and 1996, respectively. See Note 8.
(j) Other
As of April 29, 1996, the Company and News Corp. formed two sports
programming ventures. In the U.S., the Company and News Corp. formed
Fox/Liberty Networks LLC ("Fox Sports") into which the Company
contributed interests in its national and regional sports networks and
into which News Corp. contributed its fx cable network and certain
other assets. The Company received a 50% interest in Fox Sports and a
distribution of $350 million in cash. No gain or loss was recognized as
the cash distribution approximated the carrying amount of the assets
contributed.
Prior to the first quarter of 1998, the Company had no obligation, nor
intention, to fund Fox Sports. During 1998, the Company made the
determination to provide funding to Fox Sports based on specific
transactions consummated by Fox Sports. Consequently, the Company's
share of losses of Fox Sports of $83 million for the year ended
December 31, 1998 includes previously unrecognized losses of Fox Sports
of approximately $64 million. Losses for Fox Sports were not recognized
in prior periods due to the fact that the Company's investment in Fox
Sports was less than zero.
Certain of the Company's affiliates are general partnerships and any subsidiary
of the Company that is a general partner in a general partnership is, as such,
liable as a matter of partnership law for all debts (other than non-recourse
debts) of that partnership in the event liabilities of that partnership were to
exceed its assets.
(continued)
II-69
<PAGE> 124
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Summarized unaudited combined financial information for the Company's
affiliates for the periods in which the Company used the equity method to
account for such affiliates is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
-------- --------
amounts in millions
<S> <C> <C>
Combined Financial Position
Property and equipment, net $ 11,018 8,319
Franchise costs, net 7,994 3,582
Other assets, net 21,109 20,849
-------- --------
Total assets $ 40,121 32,750
======== ========
Debt $ 23,159 18,973
Other liabilities 11,361 6,836
Redeemable securities 1,727 1,137
Owners' equity 3,874 5,804
-------- --------
Total liabilities and equity $ 40,121 32,750
======== ========
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------
1998 1997 1996
-------- -------- --------
amounts in millions
<S> <C> <C> <C>
Combined Operations
Revenue $ 15,528 7,811 6,088
Operating expenses (13,889) (7,815) (5,576)
Depreciation and
amortization (3,152) (1,506) (1,070)
-------- -------- --------
Operating loss (1,513) (1,510) (558)
Interest expense (2,056) (921) (615)
Other, net (141) (360) (354)
-------- -------- --------
Net loss $ (3,710) (2,791) (1,527)
======== ======== ========
</TABLE>
(7) Investment in Time Warner
On October 10, 1996, Time Warner and Turner Broadcasting System, Inc.
("TBS") consummated a merger (the "TBS/Time Warner Merger") whereby
TBS shareholders received 1.5 Time Warner common shares (as adjusted
for a two-for-one stock split) for each TBS Class A and Class B common
share held, and each holder of TBS Class C preferred stock received
1.6 Time Warner common shares (as adjusted for a two-for-one stock
split) for each of the 6 shares of TBS Class B common stock into which
each share of Class C preferred stock could have been converted.
(continued)
II-70
<PAGE> 125
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Time Warner, TBS and TCI entered into an Agreement Containing Consent
Order with the Federal Trade Commission ("FTC") dated August 14, 1996,
as amended on September 4, 1996 (the "FTC Consent Decree"). Pursuant
to the FTC Consent Decree, among other things, the Company agreed to
exchange the shares of Time Warner common stock to be received in the
TBS/Time Warner Merger for shares of a separate series of Time Warner
common stock with limited voting rights (the "TW Exchange Stock").
Holders of the TW Exchange Stock are entitled to one one-hundredth
(l/100th) of a vote for each share with respect to the election of
directors. Holders of the TW Exchange Stock will not have any other
voting rights, except as required by law or with respect to limited
matters, including amendments of the terms of the TW Exchange Stock
adverse to such holders. Subject to the federal communications laws,
each share of the TW Exchange Stock will be convertible at any time at
the option of the holder on a one-for-one basis for a share of Time
Warner common stock. Holders of TW Exchange Stock are entitled to
receive dividends ratably with the Time Warner common stock and to
share ratably with the holders of Time Warner common stock in assets
remaining for common stockholders upon dissolution, liquidation or
winding up of Time Warner.
In connection with the TBS/Time Warner Merger, the Company received
approximately 101.2 million shares (as adjusted for a two-for-one
stock split) of the TW Exchange Stock in exchange for its TBS
holdings. As a result of the TBS/Time Warner Merger, the Company
recognized a pre-tax gain of $1.5 billion in the fourth quarter of
1996. The Company accounts for its investment in Time Warner as an
available-for-sale security. See note 12.
On June 24, 1997 the Company granted Time Warner an option to acquire
the business of Southern Satellite Systems, Inc. ("Southern") and
certain of its subsidiaries (together with Southern, the "Southern
Business") through a purchase of assets (the "Southern Option"). The
Company received 12.8 million shares (as adjusted for a two-for-one
stock split) of TW Exchange Stock valued at $306 million in
consideration for the grant. In September 1997, Time Warner exercised
the Southern Option. Pursuant to the Southern Option, Time Warner
acquired the Southern Business, effective January 1, 1998, for $213
million in cash. The Company recognized a $515 million pre-tax gain in
connection with such transactions in the first quarter of 1998.
(8) Investment in AT&T
On July 23, 1998, a merger in which TCG agreed to be acquired by AT&T,
was consummated. As a result of such merger, TCI received in exchange
for all of its interest in TCG, approximately 47 million shares of
AT&T Common Stock. TCI recognized a $2.3 billion gain (before
deducting deferred income tax expense of $883 million) on such
transaction during the third quarter of 1998 based on the difference
between the carrying amount of TCI's interest in TCG and the fair
value of the AT&T Common Stock received. TCI had accounted for its
ownership interest in AT&T Common Stock as an available-for-sale
security. Such AT&T Common Stock was transferred from TCI Ventures
Group to TCI Group in connection with the AT&T Merger. Following the
AT&T Merger, TCI will treat its investment in AT&T Common Stock as an
investment in its parent. Accordingly, the fair value of TCI's
investment in AT&T Common Stock will be reflected as a reduction of
TCI's equity, and any dividends received on such AT&T Common Stock
will be recorded as an increase to TCI's additional paid-in capital.
During 1998, TCI recognized dividends of $31 million on its investment
in AT&T Common Stock.
(continued)
II-71
<PAGE> 126
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On April 22, 1998, TCG completed a merger transaction with ACC Corp.
("ACC") in which ACC shares were exchanged with shares of TCG in the
ratio of .90909 of a share of TCG stock for each share of ACC stock.
As a result of such merger transaction, TCI's interest in TCG was
reduced to approximately 26%. In connection with the increase in TCG's
equity, net of the dilution of TCI's interest in TCG, that resulted
from such merger, TCI recorded a non-cash gain of $201 million (before
deducting deferred income tax expense of $71 million).
During the year ended December 31, 1997, TCG issued 6.6 million shares
of its Class A common stock for certain acquisitions. The total
consideration paid by TCG through the issuance of common stock was
approximately $123 million. In addition, effective November 5, 1997,
TCG consummated a public offering of 7.3 million shares of its Class A
common stock. TCG received net proceeds from its sale of shares
pursuant to such offering of $318 million. As a result of the above
transactions, TCI's ownership interest in TCG was reduced to
approximately 28%. Accordingly, as a result of the increase in TCG's
equity, net of the dilution of TCI's ownership interest in TCG, TCI
recognized non-cash gains aggregating $112 million (before deducting
deferred income tax expense of $43 million).
On July 2, 1996, TCG conducted an initial public offering (the "TCG
IPO") in which it sold 27 million shares of Class A common stock at
$16.00 per share to the public for aggregate net proceeds of
approximately $410 million. As a result of the TCG IPO, TCI's
ownership interest in TCG was reduced from approximately 35% to
approximately 31%. Accordingly, TCI recognized a gain amounting to $12
million (before deducting deferred income tax expense of approximately
$5 million).
(9) Investment in Sprint
Prior to November 23, 1998, the PCS Ventures included Sprint Spectrum
Holding Company, L. P. and MinorCo, L.P. (collectively, "Sprint PCS")
and PhillieCo Partnership I, L.P. ("PhillieCo"). The partners of each
of the Sprint PCS partnerships were subsidiaries of Sprint, Comcast
Corporation ("Comcast"), Cox Communications, Inc. ("Cox") and the
Company. The partners of PhillieCo were subsidiaries of Sprint, Cox
and the Company. The Company had a 30% partnership interest in each of
the Sprint PCS partnerships and a 35% partnership interest in
PhillieCo.
On November 23, 1998, the Company, Comcast, and Cox exchanged their
respective interests in Sprint PCS and PhillieCo (the "PCS Exchange")
for shares of "Sprint PCS Group Stock" which tracks the performance of
Sprint's newly created "PCS Group" (consisting initially of the PCS
Ventures and certain PCS licenses which were separately owned by
Sprint). The Sprint PCS Group Stock collectively represents an
approximate 17% voting interest in Sprint. As a result of the PCS
Exchange, the Company holds shares of Sprint PCS Group Stock, as well
as certain additional securities of Sprint exercisable for or
convertible into such Sprint Securities, representing approximately
24% of the equity value of Sprint attributable to its PCS Group and
less than 1% of the voting interest in Sprint. Through November 23,
1998, the Company accounted for its interest in the PCS Ventures using
the equity method of accounting; however, as a result of the PCS
Exchange and the Company's less than 1% voting interest in Sprint, the
Company no longer exercises significant influence with respect to its
investment in the PCS Ventures. Accordingly, the Company accounts for
its investment in the Sprint PCS Group Stock as an available-for-sale
security.
(continued)
II-72
<PAGE> 127
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As a result of the PCS Exchange, the Company recorded a non-cash gain
of $1.9 billion (before deducting deferred income tax expense of $647
million) during the fourth quarter of 1998 based on the difference
between the carrying amount of the Company's interest in PCS Ventures
and the fair value of the Sprint Securities received. In connection
with the March 9, 1999 AT&T Merger, the Company consented to divest
its interest in the Sprint Securities. See note 2.
(10) Acquisitions and Dispositions
In addition to the CSC Transaction described in note 6, the Company
completed, during 1998, eight transactions whereby the Company
contributed cable television systems serving in the aggregate
approximately 1,924,000 customers to eight 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 the Company to external parties aggregating $323
million and intercompany debt owed to the Company aggregating $2,374
million. The Company has agreed to take certain steps to support
compliance by certain of the 1998 Joint Ventures with their payment
obligations under certain debt instruments, up to an aggregate
contingent commitment of $980 million. In light of such contingent
commitments, the Company has deferred any gains on the formation of
such 1998 Joint Ventures. Accordingly, the Company has recorded
deferred gains aggregating $163 million and recognized net gains
aggregating $392 million in connection with the formation of the 1998
Joint Ventures. The deferred gains will not be recognized until such
time as the Company's contingent commitments are eliminated. The
Company uses the equity method of accounting to account for its
investments in the 1998 Joint Ventures. The CSC Transaction (see note
6) and the formation of the 1998 Joint Ventures are collectively
referred to herein as the "1998 Contribution Transactions." During the
year ended December 31, 1998, the Company's revenue and operating cash
flow (defined by the Company as operating income before depreciation,
amortization, other non-cash items, year 2000 costs, AT&T merger costs
and stock compensation) included $622 million and $278 million,
respectively, from the cable television systems included in the 1998
Contribution Transactions.
In addition to the 1998 Contribution Transactions, the Company, as of
December 31, 1998, has signed agreements or letters of intent to
contribute within the next twelve months, certain cable television
systems (the "Pending Contribution Cable Systems") serving
approximately 1.2 million basic customers to joint ventures in which
the Company will retain non-controlling ownership interests (the
"Pending Contribution Transactions"). Following the completion of the
Pending Contribution Transactions, the Company will no longer
consolidate the Pending Contribution Cable Systems. Accordingly it is
anticipated that the completion of the Pending Contribution
Transactions, as currently contemplated, will result in aggregate
estimated reductions (based on 1998 amounts) to the Company's debt,
annual revenue and annual operating cash flow of $1.5 billion, $500
million and $200 million, respectively. No assurance can be given that
any of the Pending Contribution Transactions will be consummated.
(continued)
II-73
<PAGE> 128
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On March 1, 1999, TV Guide, Inc. (Formerly United Video Satellite
Group, Inc. ("UVSG")) and The News Corporation Limited ("News Corp.")
completed a transaction whereby News Corp.'s TV Guide properties were
combined with UVSG to create a platform for offering television guide
services and advertising to consumers. As part of this combination, a
unit of News Corp. received consideration consisting of $800 million
in cash and 60 million shares of UVSG's stock, including 22.5 million
shares of its Class A common stock and 37.5 million shares of its
Class B common stock. In addition, News Corp. elected to purchase
approximately 6.5 million additional shares of UVSG Class A common
stock for $129 million in order to equalize its ownership with that of
the Company. Prior to such transactions, UVSG was a subsidiary of the
Company. As a result of these transactions, and another transaction
completed on the same date, News Corp., TCI and UVSG's public
stockholders own, on an economic basis, approximately 44%, 44% and
12%, respectively, of UVSG. Following such transactions, News Corp.
and TCI each have approximately 49% of the voting power of UVSG's
outstanding stock. Upon consummation, TCI began accounting for its
interest in UVSG under the equity method of accounting.
On November 19, 1998, TCI exchanged, in a merger transaction, 0.58 of
a share of Liberty Group Series A Stock for each share of the issued
and outstanding Series A common stock of its then majority-owned
subsidiary, Tele-Communications International, Inc. ("TINTA"), not
beneficially owned by TCI (the "TINTA Merger"). Such transaction was
accounted for as an acquisition of a minority interest. The aggregate
value assigned to the 10,086,594 shares of Liberty Group Series A
Stock issued by TCI was based upon the market value of Liberty Group
Series A Stock at the time the TINTA Merger was announced. Assuming
the TINTA Merger had occurred on January 1, 1997, the Company's
results of operations and comprehensive earnings would not have been
materially different from the Company's historical results of
operations and comprehensive earnings for the years ended December 31,
1998 and 1997.
On August 1, 1997, Liberty IFE, Inc., a wholly-owned subsidiary of
TCI, which held non-voting class C common stock of International
Family Entertainment, Inc. ("IFE") ("Class C Stock") and $23 million
of IFE 6% convertible secured notes due 2004, convertible into Class C
Stock, ("Convertible Notes"), contributed its Class C Stock and
Convertible Notes to Fox Kids Worldwide, Inc. ("FKW") in exchange for
a new series of 30 year non-convertible 9% preferred stock of FKW with
a stated value of $345 million (the "FKW Preferred Stock"). As a
result of the exchange, TCI recognized a gain of approximately $304
million.
Effective July 31, 1997, a wholly-owned subsidiary of TCI merged with
and into Kearns-Tribune Corporation ("Kearns-Tribune"). The merger was
valued at $808 million. TCI exchanged 47.2 million shares of TCI Group
Series A Stock for shares of Kearns-Tribune which held 17.9 million
shares of TCI Group Stock and 10.1 million shares of Liberty Group
Stock. The merger of Kearns-Tribune has been accounted for by the
purchase method. Accordingly, the results of operations of
Kearns-Tribune have been combined with those of the Company since the
date of acquisition, and the Company recorded Kearns-Tribune's assets
and liabilities at fair value.
(continued)
II-74
<PAGE> 129
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In January 1997, the Company acquired the 50% ownership interest in
TKR Cable Company ("TKR Cable") that the Company did not previously
own and certain additional assets for aggregate consideration of
approximately $970 million. The Company issued approximately 16
million shares of TCI Group Series A Stock, assumed $584 million of
TKR Cable's debt and paid cash of $88 million and shares of Time
Warner common stock valued at $41 million upon consummation of such
acquisition. Prior to the acquisition date, the Company accounted for
its 50% interest in TKR Cable under the equity method. This
acquisition has been treated as a step acquisition for accounting
purposes. Accordingly, the results of operations of TKR Cable have
been combined with those of TCI Group since the date of acquisition
and TCI Group's aggregate cost basis in TKR Cable has been allocated
to TKR Cable's assets and liabilities based on their fair values.
On July 31, 1996, pursuant to certain agreements entered into among
TCIC, TCI, Viacom International, Inc. and Viacom, Inc. ("Viacom"),
TCIC acquired all of the common stock of a subsidiary of Viacom
("Cable Sub") which owned Viacom's cable systems and related assets
(the "Viacom Acquisition").
The transaction was structured as a tax-free reorganization in which
Cable Sub transferred all of its non-cable assets, as well as all of
its liabilities other than current liabilities, to a new subsidiary of
Viacom ("New Viacom Sub"). Cable Sub also transferred to New Viacom
Sub the proceeds (the "Loan Proceeds") of a $1.7 billion loan facility
(the "Loan Facility") arranged by TCIC, TCI and Cable Sub. Following
these transfers, Cable Sub retained cable assets with a value at
closing of approximately $2.326 billion and the obligation to repay
the Loan Proceeds. Neither Viacom nor New Viacom Sub has any
obligation with respect to repayment of the Loan Proceeds.
(continued)
II-75
<PAGE> 130
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Prior to the consummation of the Viacom Acquisition, Viacom offered to
the holders of shares of Viacom Class A Common Stock and Viacom Class
B Common Stock (collectively, "Viacom Common Stock") the opportunity
to exchange (the "Viacom Exchange Offer") a portion of their shares of
Viacom Common Stock for shares of Class A Common Stock, par value $100
per share, of Cable Sub ("Cable Sub Class A Stock"). Immediately
following the completion of the Viacom Exchange Offer, TCIC acquired
from Cable Sub shares of Cable Sub Class B Common Stock (the "Share
Issuance") for $350 million (which was used to reduce Cable Sub's
obligations under the Loan Facility). At the time of the Share
Issuance, the Cable Sub Class A Stock received by Viacom stockholders
pursuant to the Viacom Exchange Offer automatically converted into 5%
Class A Senior Cumulative Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock") of Cable Sub with a stated value of
$100 per share (the "Stated Value"). The Exchangeable Preferred Stock
was exchangeable, at the option of the holder commencing after the
fifth anniversary of the date of issuance, for shares of TCI Group
Series A Stock at an exchange rate of 5.447 shares of TCI Group Series
A Stock for each share of Exchangeable Preferred Stock exchanged. The
Exchangeable Preferred Stock is subject to redemption, at the option
of Cable Sub, after the fifth anniversary of the date of issuance,
initially at a redemption price of $102.50 per share and thereafter at
prices declining ratably annually to $100 per share on and after the
eighth anniversary of the date of issuance, plus accrued and unpaid
dividends to the date of redemption. The Exchangeable Preferred Stock
is also subject to mandatory redemption on the tenth anniversary of
the date of issuance at a price equal to the Stated Value per share
plus accrued and unpaid dividends. Amounts payable by Cable Sub in
satisfaction of its optional or mandatory redemption obligations with
respect to the Exchangeable Preferred Stock could have been made in
cash or, at the election of Cable Sub, in shares of TCI Group Series A
Stock, or in any combination of the foregoing. Upon completion of the
Viacom Acquisition, Cable Sub was renamed TCI Pacific Communications,
Inc. ("TCI Pacific"). See note 2.
The Viacom Acquisition has been accounted for by the purchase method.
Accordingly, the results of operations of TCI Pacific have been
consolidated with those of the Company since the date of acquisition,
and the Company recorded TCI Pacific's assets and liabilities at fair
value.
(11) Spin-Off of TCI Satellite Entertainment, Inc.
Through December 4, 1996, the Company had an investment in a direct
broadcast satellite partnership, PRIMESTAR Partners L.P. ("Primestar
L.P."), which the Company accounted for by the equity method.
Primestar L.P. had provided programming and marketing support to each
of its cable partners who provided satellite television service to
their customers. On December 4, 1996, the Company distributed (the
"Satellite Spin-off") to the holders of shares of TCI Group Stock all
of the issued and outstanding common stock of TCI Satellite
Entertainment, Inc. ("Satellite"). At the time of the Satellite
Spin-off, Satellite's assets and operations included the Company's
interest in Primestar L.P., the Company's business of distributing
Primestar L.P. programming and two communications satellites. As a
result of the Satellite Spin-off, Satellite's operations are no longer
consolidated with the Company's.
(continued)
II-76
<PAGE> 131
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Summarized financial information of Satellite as of December 4, 1996
and from January 1, 1996 through December 4, 1996 is as follows
(amounts in millions):
<TABLE>
<S> <C>
Financial Position
Cash, receivables and other assets $ 104
Investment in Primestar L. P 32
Property and equipment, net 1,111
-------
$ 1,247
=======
Accounts payable and accrued liabilities $ 60
Due to Primestar L. P 458
Due to TCI 324
Equity 405
-------
$ 1,247
=======
Operations
Revenue $ 377
Operating expenses (373)
Depreciation (166)
-------
Loss before income tax benefit (162)
Income tax benefit 53
--------
Net loss $ (109)
=======
</TABLE>
(12) Debt
Debt is summarized as follows:
<TABLE>
<CAPTION>
Weighted average December 31,
interest rate at ----------------------
December 31, 1998 1998 1997
----------------- -------- --------
amounts in millions
<S> <C> <C> <C>
Debt of subsidiaries:
Notes payable (a) 7.7% $ 9,412 9,017
Bank credit facilities (b) 6.1% 3,773 5,233
Commercial paper 5.6% 109 533
Convertible notes (c) 9.5% 40 40
Other debt, at varying rates 718 427
-------- --------
$ 14,052 15,250
======== ========
</TABLE>
(a) During the year ended December 31, 1998, the Company purchased certain
notes payable which had an aggregate principal balance of $416 million
and fixed interest rates ranging from 8.67% to 10.25% (the "1998
Purchases"). In connection with the 1998 Purchases, the Company
recognized a loss on early extinguishment of debt of $60 million. Such
loss related to prepayment penalties amounting to $52 million and the
retirement of deferred loan costs.
(continued)
II-77
<PAGE> 132
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During the year ended December 31, 1997, the Company purchased certain
notes payable which had an aggregate principal balance of $409 million
and fixed interest rates ranging from 8.75% to 10.13% (the "1997
Purchases"). In connection with the 1997 Purchases, the Company
recognized a loss on early extinguishment of debt of $39 million. Such
loss related to prepayment penalties amounting to $33 million and the
retirement of deferred loan costs.
During the year ended December 31, 1996, the Company purchased certain
notes payable which had an aggregate principal balance of $904 million
and fixed interest rates ranging from 7.88% to 10.44% (the "1996
Purchases"). In connection with the 1996 Purchases, the Company
recognized a loss on early extinguishment of debt of $62 million. Such
loss related to prepayment penalties amounting to $60 million and the
retirement of deferred loan costs.
(b) At December 31, 1998, subsidiaries of the Company had approximately
$3.7 billion in unused lines of credit, excluding amounts related to
lines of credit which provide availability to support commercial
paper.
As security for borrowings under one of the Company's credit
facilities, the Company has pledged a portion of its TW Exchange Stock
with an estimated market value at December 31, 1998 of $2.7 billion
based upon the market value of the marketable common stock into which
it is convertible. Additionally, as security for borrowings under
another of its credit facilities, the Company has pledged its holdings
in Discovery Communications, Inc., QVC and the FKW Preferred Stock. At
December 31, 1998, the carrying value of such holdings aggregated $617
million.
Certain of TCI's subsidiaries are required to maintain unused
availability under bank credit facilities to the extent of outstanding
commercial paper. Also, certain of TCI's subsidiaries pay fees ranging
to 1/2% per annum on the average unborrowed portion of the total
amount available for borrowings under bank credit facilities.
During the year ended December 31, 1996, certain subsidiaries of the
Company terminated, at such subsidiaries' option, certain revolving
bank credit facilities with aggregate commitments of approximately $2
billion and refinanced certain other bank credit facilities. In
connection with such termination and refinancings, the Company
recognized a loss on early extinguishment of debt of $9 million
related to the retirement of deferred loan costs.
(continued)
II-78
<PAGE> 133
(c) The convertible notes, which are stated net of unamortized discount of
$166 million at December 31, 1998 and 1997, mature on December 11,
2021. Such notes are held by a director of the Company, as well as
several members of his family. In connection with the AT&T Merger,
such director resigned. The notes require, so long as conversion of
the notes has not occurred, an annual interest payment through 2003
equal to 1.85% of the face amount of the notes. During the year ended
December 31, 1997, certain of these notes were converted, pursuant to
their existing terms, into 2,533,116 shares of TCI Group Series A
Stock, 1,448,341 shares of Liberty Group Series A Stock and 256,484
shares of Series A Common Stock, $1.00 par value per share, of
Satellite ("Satellite Series A Common Stock") and 63,432 shares of TCI
Ventures Group Series A Stock. No such conversions occurred during
1998. At December 31, 1998, the notes were convertible, at the option
of the holders, into an aggregate of 24,163,259 shares of TCI Group
Series A Stock, 19,416,889 shares of Liberty Group Series A Stock,
20,711,364 shares of TCI Ventures Group Series A Stock and 3,451,897
shares of Satellite Series A Common Stock. Pursuant to the terms of
the Merger Agreement and a certain stock purchase agreement, dated as
of July 9, 1986, among the Company and the holders of such convertible
notes, the conversion features of the convertible notes were adjusted
such that as of the March 9, 1999 consummation date of the AT&T
Merger, such notes were convertible into 19,088,081 shares of AT&T
Common Stock, 30,186,816 shares of AT&T Liberty Class A Tracking Stock
and 3,451,897 shares of Satellite Series A Common Stock.
The bank credit facilities and various other debt instruments of the Company's
subsidiaries generally contain restrictive covenants which require, among other
things, the maintenance of certain earnings, specified cash flow and financial
ratios (primarily the ratios of cash flow to total debt and cash flow to debt
service, as defined), and include certain limitations on indebtedness,
investments, guarantees, dispositions, stock repurchases and/or dividend
payments.
The fair value of the debt of the Company's subsidiaries is estimated based on
the quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. At December
31, 1998, the fair value of the Company's debt was $17,816 million (including
$2,724 million attributable to the value of the common stock underlying the
convertible notes) as compared to a carrying value of $14,052 million on such
date.
In order to achieve the desired balance between variable and fixed rate
indebtedness, the Company may enter into Interest Rate Swaps pursuant to which
it (i) pays fixed interest rates (the "Fixed Rate Agreements") and receives
variable interest rates and (ii) pays variable interest rates (the "Variable
Rate Agreements") and receives fixed interest rates. During the years ended
December 31, 1998, 1997 and 1996, the Company's net payments pursuant to the
Fixed Rate Agreements were less than $1 million, $7 million and $14 million,
respectively; and the Company's net receipts (payments) pursuant to the
Variable Rate Agreements were $10 million, (less than $1 million) and $15
million, respectively. At December 31, 1998, all of the Company's Fixed Rate
Agreements had expired.
(continued)
II-79
<PAGE> 134
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During the year ended December 31, 1996, the Company terminated certain
Variable Rate Agreements with an aggregate notional amount of $700 million. The
Company received $16 million upon such terminations. The Company will amortize
such termination settlement over the remainder of the original terms of the
terminated Variable Rate Agreements.
Information concerning the Company's Variable Rate Agreements at December 31,
1998 is as follows (dollar amounts in millions):
<TABLE>
<CAPTION>
Amount to be
Expiration Interest rate Notional received upon
date to be received amount termination (a)
-------------- -------------- ----------- ---------------
<S> <C> <C> <C>
April 1999 7.4% $ 50 $ 1
September 1999 6.4% 350 3
February 2000 5.8%-6.6% 300 4
March 2000 5.8%-6.0% 675 7
September 2000 5.1% 75 --
March 2027 9.7% 300 36
December 2036 9.7% 200 12
----------- -----------
$ 1,950 $ 63
=========== ===========
</TABLE>
- ----------
(a) The estimated amount that the Company would receive to terminate the
agreements at December 31, 1998, taking into consideration current
interest rates and the current creditworthiness of the counterparties,
represents the fair value of the Interest Rate Swaps.
In addition to the Variable Rate Agreements, the Company entered into Interest
Rate Swaps pursuant to which it pays a variable rate based on the London
Interbank Offered Rate ("LIBOR") (5.5% at December 31, 1998) and receives a
variable rate based on the Constant Maturity Treasury Index ("CMT") (4.9% at
December 31, 1998) on a notional amount of $400 million through September 2000;
and pays a variable rate based on LIBOR (5.4% at December 31, 1998) and
receives a variable rate based on CMT (5.0% at December 31, 1998) on notional
amounts of $95 million through February 2000. During the years ended December
31, 1998 and 1997, the Company's net payments (receipts) pursuant to such
agreements were $2 million and (less than $1 million), respectively. At
December 31, 1998, the Company would be required to pay an estimated $4 million
to terminate such Interest Rate Swaps.
The Company is exposed to credit losses for the periodic settlements of amounts
due under the Interest Rate Swaps in the event of nonperformance by the other
parties to the agreements. However, the Company does not anticipate that it
will incur any material credit losses because it does not anticipate
nonperformance by the counterparties. Further, the Company does not anticipate
material near-term losses in future earnings, fair values or cash flows
resulting from derivative financial instruments as of December 31, 1998.
(continued)
II-80
<PAGE> 135
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Annual maturities of debt for each of the next five years are as follows
(amounts in millions):
<TABLE>
<S> <C>
1999 $ 1,539*
2000 1,574
2001 1,029
2002 661
2003 2,298
</TABLE>
* Includes $109 million of commercial paper.
(13) Redeemable Preferred Stocks
Convertible Preferred Stock, Series C. TCI issued 70,575 shares of a
series of TCI Series Preferred Stock designated "Convertible Preferred
Stock, Series C," par value $.01 per share, as partial consideration
for an acquisition by TCI ("Series C Preferred Stock"). All of the
issued and outstanding shares of Series C Preferred Stock were retired
on December 31, 1997, with the effect that such retired shares have
been restored to the status of authorized and unissued shares of
Series Preferred Stock, and may be reissued as shares of another
series of Series Preferred Stock but may not be reissued as Series C
Preferred Stock. Dividends paid on such shares aggregated $12 million
and $9 million during 1997 and 1996, respectively.
Series C-TCI Group Preferred Stock. On December 31, 1997, TCI issued
70,575 shares designated as Series C-TCI Group Preferred Stock as
partial consideration for retired Series C Preferred Stock. See also
Series C-Liberty Media Group Preferred Stock below. There were 43,575
shares of Series C-TCI Group Preferred Stock outstanding at December
31, 1998. No dividends on such shares were paid in 1998. In connection
with the AT&T Merger, shares of Series C-TCI Group Preferred Stock
were converted into shares of AT&T Common Stock. See note 2.
Series C-Liberty Media Group Preferred Stock. On December 31, 1997,
TCI issued 70,575 shares designated as Series C-Liberty Media Group
Preferred Stock as remaining consideration for retired Series C
Preferred Stock. There were 70,575 shares of Series C-Liberty Media
Group Preferred Stock authorized and outstanding at December 31, 1998.
No dividends on such shares were paid in 1998. In connection with the
AT&T Merger, shares of Series C-Liberty Media Group Preferred Stock
were converted into shares of AT&T Liberty Class A Tracking Stock. See
note 2.
Convertible Preferred Stock, Series D. The Company had designated and
issued 1,000,000 shares of a series of TCI Series Preferred Stock
designated "Convertible Preferred Stock, Series D", par value $.01 per
share. Outstanding shares during the years ended December 31, 1998,
1997 and 1996 accrued dividends at a rate of 5-1/2% per annum of the
liquidation value ($300 per share). Dividends paid on such shares
aggregated $10 million, $16 million and $17 million during 1998, 1997
and 1996, respectively.
(continued)
II-81
<PAGE> 136
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On February 20, 1998, the Company issued a Notice of Redemption which
called for the redemption of all of its outstanding Convertible
Preferred Stock, Series D for $304.0233 per share. Effective April 1,
1998, all of the outstanding shares of Convertible Preferred Stock,
Series D were redeemed to the extent not previously converted into
shares of TCI Group Series A Stock and Liberty Group Series A Stock.
The shares of Convertible Preferred Stock, Series D, that were
redeemed, as well as previously unissued shares of Convertible
Preferred Stock, Series D, were retired, undesignated and restored to
the status of authorized and unissued shares of Series Preferred
Stock.
Series F Preferred Stock. The Company is authorized to issue 500,000
shares of Series F Preferred Stock, par value $.01 per share. Prior to
the March 9, 1999 consummation of the AT&T Merger and related
transactions, subsidiaries of TCI held all the issued and outstanding
shares (278,307 shares). See note 2.
Series G Preferred Stock and Series H Preferred Stock. In January,
1996, TCI designated and issued 7,259,380 shares of a series of TCI
Series Preferred Stock designated "Redeemable Convertible TCI Group
Preferred Stock, Series G" and 7,259,380 shares of a series of TCI
Series Preferred Stock designated "Redeemable Convertible Liberty
Media Group Preferred Stock, Series H" as consideration for an
acquisition. At December 31, 1998, there were 6,444,244 shares of
Series G Preferred Stock and 6,564,794 shares of Series H Preferred
Stock outstanding. The initial liquidation value for the Series G
Preferred Stock and Series H Preferred Stock was $21.60 per share and
$5.40 per share, respectively, subject in both cases, to increase in
an amount equal to aggregate accrued but unpaid dividends, if any.
Dividends began to accrue on the Series G and Series H Preferred Stock
on the first anniversary of issuance of the Series G and Series H
Preferred Stock, and were thereafter payable semi-annually commencing
January 25, 1997, at a rate of 4% per annum on the liquidation value.
Dividends paid on shares of Series G Preferred Stock aggregated $6
million and $3 million during 1998 and 1997, respectively. Dividends
paid on shares of Series H Preferred Stock aggregated $1 million in
each of 1998 and 1997. In connection with the AT&T Merger, shares of
Series G and Series H Preferred Stock were converted into shares of
AT&T Common Stock and AT&T Liberty Class A Tracking Stock,
respectively. See note 2.
(14) Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Subordinated Debt Securities of TCIC
The Company, through certain subsidiary trusts, (the "Trusts"), had
preferred securities outstanding at December 31, 1998 as follows:
<TABLE>
<CAPTION>
Subsidiary Trust Interest Rate Face Amount
---------------- ------------- -----------
in millions
<S> <C> <C>
TCI Communications Financing I 8.72% $ 500
TCI Communications Financing II 10.00% 500
TCI Communications Financing III 9.65% 300
TCI Communications Financing IV 9.72% 200
----------
$ 1,500
==========
</TABLE>
(continued)
II-82
<PAGE> 137
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Trusts exist for the exclusive purpose of issuing the Trust
Preferred Securities and investing the proceeds thereof into
Subordinated Deferrable Interest Notes (the "Subordinated Debt
Securities") of TCIC. The Subordinated Debt Securities have interest
rates equal to the interest rate of the corresponding Trust Preferred
Securities and have maturity dates ranging from 30 to 49 years from
the date of issuance. The Subordinated Debt Securities are unsecured
obligations of TCIC and are subordinate and junior in right of payment
to certain other indebtedness of the Company. Upon redemption of the
Subordinated Debt Securities, the Trust Preferred Securities will be
mandatorily redeemable. TCIC effectively provides a full and
unconditional guarantee of the Trusts' obligations under the Trust
Preferred Securities.
The Trust Preferred Securities are presented together in a separate
line item in the accompanying consolidated balance sheets captioned
"Company-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely subordinated debt securities of TCI
Communications, Inc." Dividends accrued and paid on the Trust
Preferred Securities aggregated $142 million, $132 million and $71
million for the years ended December 31, 1998, 1997 and 1996,
respectively, and are included in minority interests in earnings of
consolidated subsidiaries in the accompanying consolidated financial
statements.
(15) Stockholders' Equity
Common Stock
The Series A Stock each had one vote per share, and the Series B Stock
each had ten votes per share. Each share of Series B Stock was
convertible, at the option of the holder, into one share of Series A
Stock of the applicable Group. See notes 1 and 2.
The rights of holders of the TCI Group Stock, Liberty Media Group
Stock and TCI Ventures Group Stock upon liquidation of TCI were based
upon the ratio of the aggregate market capitalization, as defined, of
each of the TCI Group Stock, Liberty Group Stock and TCI Ventures
Group Stock to the aggregate market capitalization, as defined, of the
TCI Group Stock, Liberty Group Stock, and TCI Ventures Group Stock.
Stock Repurchases
During the year ended December 31, 1998, pursuant to a stock
repurchase program, 66,041 shares of TCI Group Series A Stock, 145,450
shares of TCI Ventures Group Series A Stock, 94,000 shares of TCI
Ventures Group Series B Stock and 766,783 shares of Liberty Group
Series A Stock were repurchased at an aggregate cost of approximately
$31 million.
During the year ended December 31, 1997, pursuant to a stock
repurchase program approved by the Board, Liberty Media Group
repurchased 916,500 shares of Liberty Group Series A Stock in open
market transactions and 219,937 shares of Liberty Group Series A Stock
from the spouse of an officer and director of TCI at an aggregate cost
of approximately $18 million. Such shares were canceled and returned
to an authorized but unissued status.
(continued)
II-83
<PAGE> 138
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In addition, pursuant to the stock repurchase program, 4,000,000
shares of TCI Group Series A Stock, 330,902 shares of TCI Group Series
B Stock and 338,196 shares of TCI Ventures Group Series B Stock were
repurchased at an aggregate cost of $77 million during the year ended
December 31, 1997. Such shares are reflected as treasury stock in the
accompanying consolidated financial statements.
Effective July 31, 1997, TCI merged Kearns-Tribune into a wholly-owned
TCI subsidiary attributed to TCI Group. TCI exchanged 47.2 million
shares of TCI Group Series A Stock for shares of Kearns-Tribune which
held 17.9 million shares of TCI Group Stock and 10.1 million shares of
Liberty Group Stock. Such shares are reflected as common stock held by
subsidiaries in the accompanying consolidated financial statements.
See note 2.
During the third quarter of 1997, TCI commenced a tender offer (the
"Liberty Tender Offer") to purchase up to an aggregate of 22.5 million
shares of Liberty Group Stock at a price of $20 per share through
October 3, 1997. During the fourth quarter of 1997, TCI repurchased
21.7 million shares of Liberty Group Series A Stock and 82,074 shares
of Liberty Group Series B Stock at an aggregate cost of approximately
$435 million pursuant to the Liberty Tender Offer. Such purchases are
reflected as treasury stock in the accompanying consolidated financial
statements. See note 2.
Employee Benefit Plans
The Company had several employee stock purchase plans to provide
employees an opportunity to create a retirement fund including
ownership interests in TCI. The primary employee stock purchase plan
provided for employees to contribute up to 10% of their compensation
to a trust for investment in several diversified investment choices,
including investment in Company common stock. The Company, by annual
resolution of the Board, generally contributed up to 100% of the
amount contributed by employees. Such TCI contribution was invested in
TCI Group Stock, Liberty Group Stock and TCI Ventures Group Stock.
Certain of the Company's subsidiaries had their own employee benefit
plans. Contributions to all plans aggregated $43 million, $38 million
and $35 million for 1998, 1997 and 1996, respectively. Subsequent to
the AT&T Merger, the significant terms of the employee stock purchase
plans will remain substantially unchanged and contributions on behalf
of employees will continue to be made in stock.
Preferred Stock
Series Preferred Stock. The TCI Series Preferred Stock is issuable,
from time to time, in one or more series, with such designations,
preferences and relative participating, option or other special
rights, qualifications, limitations or restrictions thereof, as shall
be stated and expressed in a resolution or resolutions providing for
the issue of such series adopted by the Board. The Company is
authorized to issue 50,000,000 shares of Series Preferred Stock.
All shares of any one series of the TCI Series Preferred Stock are
required to be alike for every particular and all shares are required
to rank equally and be identical in all respects, except insofar as
they may vary with respect to matters which the Board is expressly
authorized by the TCI Charter to determine in the resolution or
resolutions proving for the issue of any series of the TCI Series
Preferred Stock.
(continued)
II-84
<PAGE> 139
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Class A Preferred Stock. The Company is authorized to issue 700,000
shares of Class A Preferred Stock, par value $.01 per share. No such
shares were issued and outstanding as of December 31, 1998.
Class B Preferred Stock. The Company is authorized to issue 1,675,096
shares of Class B Preferred Stock and 1,552,490 of such shares are
issued and outstanding, net of shares held by a TCI subsidiary as of
December 31, 1998. Following the AT&T Merger, the rights of holders of
Class B Preferred Stock will remain unchanged, except that rights
applicable to TCI Group Series A Stock will continue to apply to AT&T
Common Stock. See note 2.
Dividends accrue cumulatively (but without compounding) at an annual
rate of 6% of the stated liquidation value of $100 per share (the
"Stated Liquidation Value"), whether or not such dividends are
declared or funds are legally available for payment of dividends.
Accrued dividends will be payable annually on March 1 of each year (or
the next succeeding business day if March 1 does not fall on a
business day), and, in the sole discretion of the Board, may be
declared and paid in cash, in shares of TCI Group Series A Stock or in
any combination of the foregoing. Accrued dividends not paid as
provided above on any dividend payment date will accumulate and such
accumulated unpaid dividends may be declared and paid in cash, shares
of TCI Group Series A Stock or any combination thereof at any time
(subject to the rights of any senior stock and, if applicable, to the
concurrent satisfaction of any dividend arrearages on any class or
series of TCI preferred stock ranking on a parity with the Class B
Preferred Stock with respect to dividend rights) with reference to any
regular dividend payment date, to holders of record of Class B
Preferred Stock as of a special record date fixed by the Board (which
date may not be more than 45 days nor less than 10 days prior to the
date fixed for the payment of such accumulated unpaid dividends).
Dividends paid on shares of Class B Preferred Stock aggregated $10
million in each of 1998, 1997 and 1996. The Class B Preferred Stock
ranks junior to the Series F Preferred Stock with respect to the
declaration and payment of dividends.
If all or any portion of a dividend payment is to be paid through the
issuance and delivery of shares of TCI Group Series A Stock, the
number of such shares to be issued and delivered will be determined by
dividing the amount of the dividend to be paid in shares of TCI Group
Series A Stock by the Average Market Price of the TCI Group Series A
Stock. For this purpose, "Average Market Price" means the average of
the daily last reported sale prices (or, if no sale price is reported
on any day, the average of the high and low bid prices on such day) of
a share of TCI Group Series A Stock for the period of 20 consecutive
trading days ending on the tenth trading day prior to the regular
record date or special record date, as the case may be, for the
applicable dividend payment.
In the event of any liquidation, dissolution or winding up of TCI, the
holders of Class B Preferred Stock will be entitled, after payment of
preferential amounts on any class or series of stock ranking prior to
the Class B Preferred Stock with respect to liquidating distributions,
to receive from the assets of TCI available for distribution to
stockholders an amount in cash or property or a combination thereof,
per share, equal to the Stated Liquidation Value thereof, plus all
accumulated and accrued but unpaid dividends thereon to and including
the redemption date. TCI does not have any mandatory obligation to
redeem the Class B Preferred Stock as of any fixed date, at the option
of the holders or otherwise.
(continued)
II-85
<PAGE> 140
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Subject to the prior preferences and other rights of any class or
series of TCI preferred stock, the Class B Preferred Stock will be
exchangeable at the option of TCI in whole but not in part at any time
for junior subordinated debt securities of TCI ("Junior Exchange
Notes"). The Junior Exchange Notes will be issued pursuant to an
indenture (the "Indenture"), to be executed by TCI and a qualified
trustee to be chosen by TCI.
If TCI exercises its optional exchange right, each holder of
outstanding shares of Class B Preferred Stock will be entitled to
receive in exchange therefor newly issued Junior Exchange Notes of a
series authorized and established for the purpose of such exchange,
the aggregate principal amount of which will be equal to the aggregate
Stated Liquidation Value of the shares of Class B Preferred Stock so
exchanged by such holder, plus all accumulated and accrued but unpaid
dividends thereon to and including the exchange date. The Junior
Exchange Notes will be issuable only in principal amounts of $100 or
any integral multiple thereof and a cash adjustment will be paid to
the holder for any excess principal that would otherwise be issuable.
The Junior Exchange Notes will mature on the fifteenth anniversary of
the date of issuance and will be subject to earlier redemption at the
option of TCI, in whole or in part, for a redemption price equal to
the principal amount thereof plus accrued but unpaid interest.
Interest will accrue, and be payable annually, on the principal amount
of the Junior Exchange Notes at a rate per annum to be determined
prior to issuance by adding a spread of 215 basis points to the
"Fifteen Year Treasury Rate" (as defined in the Indenture). Interest
will accrue on overdue principal at the same rate, but will not accrue
on overdue interest.
The Junior Exchange Notes will represent unsecured general obligations
of TCI and will be subordinated in right of payment to all "Senior
Debt" (as defined in the Indenture). Accordingly, holders of Class B
Preferred Stock who receive Junior Exchange Notes in exchange therefor
may have difficulty selling such Junior Exchange Notes.
(continued)
II-86
<PAGE> 141
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For so long as any dividends are in arrears on the Class B Preferred
Stock or any class or series of TCI preferred stock ranking pari passu
with the Class B Preferred Stock which is entitled to payment of
cumulative dividends prior to the redemption, exchange, purchase or
other acquisition of the Class B Preferred Stock, and until all
dividends accrued up to the immediately preceding dividend payment
date on the Class B Preferred Stock and such parity stock shall have
been paid or declared and set apart so as to be available for payment
in full thereof and for no other purpose, neither TCI nor any
subsidiary thereof may redeem, exchange, purchase or otherwise acquire
any shares of Class B Preferred Stock, any such parity stock or any
class or series of its capital stock ranking junior to the Class B
Preferred Stock (including the TCI common stock), or set aside any
money or assets for such purpose, unless all of the outstanding shares
of Class B Preferred Stock and such parity stock are redeemed. If TCI
fails to redeem or exchange shares of Class B Preferred Stock on a
date fixed for redemption or exchange, and until such shares are
redeemed or exchanged in full, TCI may not redeem or exchange any
parity stock or junior stock, declare or pay any dividend on or make
any distribution with respect to any junior stock or set aside money
or assets for such purpose and neither TCI nor any subsidiary thereof
may purchase or otherwise acquire any Class B Preferred Stock, parity
stock or junior stock or set aside money or assets for any such
purpose. The failure of TCI to pay any dividends on any class or
series of parity stock or to redeem or exchange on any date fixed for
redemption or exchange any shares of Class B Preferred Stock shall not
prevent TCI from (i) paying any dividends on junior stock solely in
shares of junior stock or the redemption purchase or other acquisition
of junior stock solely in exchange for (together with cash adjustment
for fractional shares, if any) or (but only in the case of a failure
to pay dividends on any parity stock) through the application of the
proceeds from the sale of, shares of junior stock; or (ii) the payment
of dividends on any parity stock solely in shares of parity stock
and/or junior stock or the redemption, exchange, purchase or other
acquisition of Class B Preferred Stock or parity stock solely in
exchange for (together with a cash adjustment for fractional shares,
if any), or (but only in the case of failure to pay dividends on any
parity stock) through the application of the proceeds from the sale
of, parity stock and/or junior stock.
The Class B Preferred Stock will vote in any general election of
directors, will have one vote per share for such purpose and will vote
as a single class with the TCI common stock and any class or series of
TCI preferred stock entitled to vote in any general election of
directors. The Class B Preferred Stock will have no other voting
rights except as required by the Delaware General Corporation Law.
Redeemable Convertible Preferred Stock, Series E. The Company is
authorized to issue 400,000 shares of Redeemable Convertible Preferred
Stock, Series E, par value $.01 per share. No such shares were issued
and outstanding as of December 31, 1998.
(continued)
II-87
<PAGE> 142
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Stock-Based Compensation
As of December 31, 1998, the Company and its subsidiaries had several
stock-based compensation plans for certain employees, officers,
directors and other persons. Such plans are described below.
Tele-Communications, Inc. Stock Incentive Plans. In 1994, the Company
adopted the Tele-Communications, Inc. 1994 Stock Incentive Plan (the
"1994 Plan"). The Plan provided for awards to be made in respect of a
maximum of 16 million shares of TCI Class A common stock. Awards may
be made as grants of stock options, stock appreciation rights,
restricted shares, stock units or any combination thereof.
In 1995, the Company adopted the Tele-Communications, Inc. 1995
Employee Stock Incentive Plan (the "1995 Plan"). In addition, the
Company has established the Tele-Communications, Inc. 1996 Stock
Incentive Plan (the "1996 Plan" and the Tele-Communications, Inc. 1998
Incentive Plan (the "1998 Plan") and together with the 1994 Plan and
the 1995 Plan, the "Incentive Plans"). The 1996 Plan provides (i) for
stock-based awards to be made in respect of a maximum of 16 million
shares of TCI Group Series A Stock and a maximum of 6 million shares
of Liberty Group Series A Stock (subject to certain adjustments
described below) and (ii) for cash awards in amounts determined by the
TCI compensation committee. The 1998 Plan provides (i) for stock-based
awards to be made in respect of a maximum of 10 million shares of any
combination of TCI Group Series A Stock or TCI Group Series B Stock, a
maximum of 7.5 million shares of any combination of Liberty Group
Series A Stock or Liberty Group Series B Stock, and a maximum of 7.5
million shares of any combination of TCI Ventures Group Series A Stock
or TCI Ventures Group Series B Stock; and (ii) for cash awards in
amounts determined by the TCI compensation committee.
Awards may be made as grants of stock options ("Options"), stock
appreciation rights ("SARs"), restricted shares ("Restricted Shares"),
stock units ("Stock Units"), performance awards, or any combination
thereof (collectively, "Awards"). Shares in respect of which Awards
are made may be either authorized but unissued shares of Series A
Stock or issued shares reacquired by the Company, including shares
purchased in the open market. Shares of Series A Stock that are
subject to Awards that expire, terminate or are annulled for any
reason without having been exercised (or, with respect to tandem SARs
deemed exercised, by virtue of the exercise of a related Option), or
are Restricted Shares or Stock Units that are forfeited prior to
becoming vested, or are subject to Awards of SAR's that are exercised
for cash, will return to the pool of such shares available for grant
under the 1996 Plan or 1998 Plan.
(continued)
II-88
<PAGE> 143
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In connection with the Liberty Distribution, each holder of an
outstanding option or SAR received an additional option or stock
appreciation right, as applicable, covering a number of shares of
Liberty Group Series A Stock equal to 56% (as adjusted) of the number
of shares of Class A common stock theretofore subject to the
outstanding option or stock appreciation right, and the outstanding
option or stock appreciation right would continue in effect as an
option or stock appreciation right covering the same number of shares
of TCI Group Series A Stock (as redesignated) that were theretofore
subject to the option or stock appreciation right. The aggregate
pre-adjustment strike price of the outstanding options or stock
appreciation rights was allocated between the outstanding options or
stock appreciation rights and the newly issued options or stock
appreciation rights in a ratio determined by the Compensation
Committee of TCI. The following descriptions of stock options and/or
stock appreciation rights have been adjusted to reflect such change.
As a result of the TCI Ventures Exchange, the Compensation Committee
of TCI elected to adjust the options in tandem with SARs to purchase
TCI Group Series A Stock to reflect the expected shift of attributable
value from TCI Group to the newly created TCI Ventures Group. The
options in tandem with SARs to purchase TCI Group Series A Stock
outstanding immediately prior to the TCI Ventures Exchange were
canceled and reissued as two separately exercisable options in tandem
with SARS: (i) with 70% of the options in tandem with SARs allocated
to an option in tandem with SARs to purchase TCI Group Series A Stock,
and (ii) with 30% of the options in tandem with SARs allocated to an
option in tandem with SARs to purchase TCI Ventures Group Series A
Stock. The terms of these adjusted options in tandem with SARs,
including the exercise price and the date of grant, are in all
material respects the same as the terms of the original options in
tandem with SARs. The following descriptions of stock options and/or
stock appreciation rights have been adjusted to reflect such change.
Awards granted subsequent to the Liberty Distribution may include
Awards relating to TCI Group Series A Stock or Liberty Group Series A
Stock and Awards granted subsequent to the TCI Ventures Exchange may
include Awards relating to TCI Group Series A Stock, Liberty Group
Series A Stock or TCI Ventures Group Series A Stock in such amounts
and types as the Compensation Committee of TCI determines in
accordance with the terms of the Incentive Plans.
(continued)
II-89
<PAGE> 144
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Awards of TCI Group Series A Stock made under the Incentive Plans
prior to the Satellite Spin-off were adjusted in connection with the
Satellite Spin-off such that immediately prior to the Satellite
Spin-off, each option was divided into two separately exercisable
options: (i) an option to purchase Satellite Series A Common Stock (an
"Add-on Satellite Option"), exercisable for the number of shares of
Satellite Series A Common Stock that would have been issued in the
Satellite Spin-off in respect of the shares of TCI Group Series A
Stock subject to the applicable TCI Option, if such TCI option had
been exercised in full immediately prior to the record date of the
Satellite Spin-off, and containing substantially equivalent terms as
the existing TCI Option, and (ii) an option to purchase TCI Group
Series A Stock (an "Adjusted TCI Option"), exercisable for the same
number of shares of TCI Group Series A Stock as the corresponding TCI
Option had been. The aggregate exercise price of each TCI Option was
allocated between the Add-on Satellite Option and the Adjusted TCI
Option into which it is divided, and all other terms of the Add-on
Satellite Option and Adjusted TCI Option will in all material respects
be the same as such TCI Option. Similar adjustments were made to the
outstanding TCI SARs, resulting in the holders thereof holding
Adjusted TCI SARs and Add-on Satellite SARs instead of TCI SARs,
effective immediately prior to the Satellite Spin-off.
As a result of the foregoing, certain persons who remain TCI employees
or non-employee directors after the Satellite Spin-off and certain
persons who were TCI employees prior to the Satellite Spin-off but
became Satellite employees after the Satellite Spin-off hold both
Adjusted TCI Options and separate Add-on Satellite Options and/or hold
both Adjusted TCI SARs and separate Add-on Satellite SARs. The
obligations with respect to the Adjusted TCI Options, Add-on Satellite
Options, Adjusted TCI SARs and Add-on Satellite SARs held by TCI
employees and non-employee directors following the Satellite Spin-off
are obligations solely of TCI. The obligations with respect to the
Adjusted TCI Options, Add-on Satellite Options, Adjusted TCI SARs and
Add-on Satellite SARs held by persons who are Satellite employees at
the time of the Satellite Spin-off and following the Satellite
Spin-off are no longer TCI employees are obligations solely of
Satellite. Prior to the Satellite Spin-off, TCI and Satellite entered
into an agreement to sell to each other from time to time at the then
current market price shares of TCI Group Series A Stock and Satellite
Series A common stock, respectively, as necessary to satisfy their
respective obligations under such securities.
(continued)
II-90
<PAGE> 145
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table presents the number and weighted average exercise
price ("WAEP") of certain options in tandem with SARs to purchase TCI
Group Series A Stock, Liberty Group Series A Stock and TCI Ventures
Group Series A Stock pursuant to the Incentive Plans.
<TABLE>
<CAPTION>
TCI
Liberty Ventures
TCI Group Group Group
Series A Series A Series A
Stock WAEP Stock WAEP Stock WAEP
--------- -------- --------- ------- -------- --------
amounts in thousands, except for WAEP
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1, 1996 17,702 $ 15.08 11,568 $ 9.39 --
Exercised (196) 12.70 (132) 7.93 --
Canceled (132) 15.35 (42) 8.45 --
------- ------- ------
Outstanding at December 31, 1996 17,374 12.97 11,394 9.41 --
Adjustment for TCI
Ventures Exchange (7,946) 14.22 -- 15,899 $ 7.11
Granted 12,395 15.27 3,514 15.89 300 7.84
Exercised (5,618) 11.95 (2,502) 8.42 (1,035) 6.76
Canceled (54) 14.27 (42) 10.25 (2) 7.10
------- ------- -------
Outstanding at December 31, 1997 16,151 14.47 12,364 11.45 15,162 7.15
Granted 1,175 33.51 8,245 43.23 20 16.50
Exercised (3,091) 13.50 (1,807) 8.13 (2,940) 6.69
Canceled (512) 15.47 (11) 9.78 (521) 6.92
------- ------- -------
Outstanding at December 31, 1998 13,723 16.28 18,791 25.71 11,721 7.29
======= ======= =======
Exercisable at December 31, 1998 5,093 13.99 5,522 10.64 5,025 6.91
======= ======= =======
Vesting Period 5 years 5 years 5 years
======= ======= =======
</TABLE>
(continued)
II-91
<PAGE> 146
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On December 13, 1995, pursuant to the 1994 Plan, the Company awarded
330,000 restricted shares of TCI Group Series A Stock and 67,500
restricted shares of Liberty Group Series A Stock to certain officers
and other key employees of the Company. Based on the terms at the date
of grant, such restricted shares vest as to 50% in December 1999 and
as to the remaining 50% in December 2000. Such restricted shares had a
fair value of $20.625 and $11.67, respectively, on the date of grant.
At December 31, 1998, 123,886 restricted shares of TCI Group Series A
Stock (after adjustment for TCI Ventures Exchange), 102,228 restricted
shares of TCI Ventures Group Series A Stock (after adjustment for TCI
Ventures Exchange and a stock dividend) and 45,000 restricted shares
of Liberty Group Series A Stock (after adjustment for stock dividends)
were unvested.
On July 23, 1997, pursuant to the 1996 Plan, the Company awarded
400,000 restricted shares of TCI Group Series A Stock to an officer
and a director of the Company. Such restricted shares vest as to 50%
in July 2001 and as to the remaining 50% in July 2002. Such restricted
shares had a fair value of $15.81 on the date of grant. At December
31, 1998, 338,154 restricted shares of TCI Group Series A Stock (after
adjustment for TCI Ventures Exchange) and 123,692 restricted shares of
TCI Ventures Group Series A Stock (after adjustment for TCI Ventures
Exchange and a stock dividend) were unvested.
On December 16, 1997, the Company granted options in tandem with stock
appreciation rights to acquire 2,800,000 shares of TCI Ventures Group
Series B Stock to an officer and director of the Company. The options
in tandem with stock appreciation rights have an exercise price of
$10.37 and vest ratably over five years with such vesting period
beginning December 16, 1997, first became exercisable on December 16,
1998 and expire on December 16, 2007.
On June 23, 1998, pursuant to the 1998 Plan, the Company awarded
1,350,000 restricted shares of TCI Group Series A Stock to certain
officers of the Company. Such restricted shares vest as to 50% in June
2002 and as to the remaining 50% in June 2003. Such restricted shares
had a fair value of $38.69 on the date of grant.
On September 3, 1998, pursuant to the 1998 Plan, the Company awarded
1,509,880 restricted shares of TCI Group Series A Stock to certain
officers and other key employees of the Company. Such restricted
shares vest as to 50% in September 2002 and as to the remaining 50% in
September 2003. Such restricted shares had a fair value of $33.75 on
the date of grant.
On December 10, 1998, pursuant to the 1998 Plan, the Company awarded
287,500 restricted shares of TCI Group Series A Stock to an officer
and a director of the Company. Such restricted shares vest as to 50%
in December 2002 and as to the remaining 50% in December 2003. Such
restricted shares had a fair value of $48.375 on the date of grant.
SARs with respect to 150,000 shares of TCI Group Series A Stock,
569,553 shares of Liberty Group Series A Stock and 577,526 shares of
TCI Ventures Group Series A Stock were outstanding at December 31,
1998. These rights have an adjusted strike price of $.52, $.36 and
$.26 per share, respectively. All such SARs are 100% vested at
December 31, 1998 and expire on March 28, 2001. The Company has the
option of paying the holder in stock or cash. During the year ended
December 31, 1998, SARs with respect to 358,350 shares of TCI Group
Series A Stock were exercised.
(continued)
II-92
<PAGE> 147
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Tele-Communications, Inc. Director Stock Option Plan. On August 3,
1995, stockholders of the Company approved the Director Stock Option
Plan (the "DSOP") including the grant, effective as of November 16,
1994, to each person that as of that date was a member of the Board and
was not an employee of the Company or any of its subsidiaries, of
options to purchase 50,000 shares of TCI Class A common stock. Pursuant
to the DSOP, options to purchase 300,000 shares of TCI Class A common
stock were granted at an exercise price of $22.00 per share. Such
options had a weighted average fair value of $16.49 on the date of
grant. Options issued pursuant to the DSOP vest and become exercisable
over a five-year period from the date of grant and expire 10 years from
the date of grant. During the year ended December 31, 1995, options to
purchase 50,000 shares of TCI Group Series A Stock and options to
purchase 28,125 shares of Liberty Group Series A Stock were canceled.
During the year ended December 31, 1996, options to purchase 150,000
shares of TCI Group Series A Stock and options to purchase 84,375
shares of Liberty Group Series A Stock with a WAEP of $14.75 and
$11.52, respectively, were issued pursuant to the DSOP. Such options
had a weighted average fair value of $9.83 and $7.67, respectively, on
the date of grant.
At December 31, 1998, 330,000 options with respect to TCI Group Stock
granted pursuant to the DSOP were outstanding, 204,000 of which were
exercisable. Such options had a range of exercise prices of $12.25 to
$16.99, with a WAEP of $14.08, and a weighted average remaining
contractual life of 6.76 years.
At December 31, 1998, 225,000 options with respect to Liberty Group
Stock granted pursuant to the DSOP were outstanding, 146,250 of which
were exercisable. Such options had a range of exercise prices of $9.78
to $11.67, with a WAEP of $10.18, and a weighted average remaining
contractual life of 6.63 years.
Tele-Communications International, Inc. Stock Incentive Plan. In 1995,
TINTA adopted the Tele-Communications International, Inc. 1995 Stock
Incentive Plan (the "TINTA 1995 Plan"). The TINTA 1995 Plan provides
for Awards to be made in respect of a maximum of 3,000,000 shares of
TINTA Series A common stock ("TINTA Series A Stock") (subject to
certain anti-dilution adjustments). Shares of TINTA Series A Stock that
are subject to Awards that expire, terminate or are annulled for any
reason without having been exercised (or deemed exercised, by virtue of
the exercise of a related stock appreciation right), or are forfeited
prior to becoming vested will return to the pool of such shares
available for grant under the TINTA 1995 Plan.
On December 13, 1995, stock options in tandem with SARs to purchase
1,352,000 shares of TINTA Series A Stock were granted pursuant to the
TINTA 1995 Plan. Such options vest evenly over five years, first became
exercisable August 4, 1996 and expire on August 4, 2005. During 1997,
TINTA granted stock options in tandem with SARs to purchase 1,130,000
shares of TINTA Series A Stock. Such options vest evenly over five
years, first become exercisable one year after date of grant, and
expire ten years after date of grant.
(continued)
II-93
<PAGE> 148
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As a result of the TINTA Merger on November 19, 1998, each stock
option and SAR to purchase TINTA Series A Stock was converted into a
stock option or SAR to purchase Liberty Group Series A Stock
determined by multiplying the number of TINTA stock options or SARs by
0.58 at an exercise price per share of such stock option or SAR
divided by 0.58. The following descriptions of stock options and/or
SARs have been adjusted to reflect such change.
The following table presents the number and WAEP of certain options in
tandem with SARs to purchase TINTA Series A Stock and Liberty Group
Series A Stock pursuant to the TINTA 1995 Plan (amounts in thousands,
except for WAEP).
<TABLE>
<CAPTION>
Liberty
TINTA Group
Series A Series A
Stock WAEP Stock WAEP
-------- --------- -------- ------
amounts in thousands, except for WAEP
<S> <C> <C> <C> <C>
Outstanding at January 1, 1996 and 1997 1,352 $ 16.00 -- --
Granted 1,130 14.69 -- --
------ --------
Outstanding at December 31, 1997 2,482 15.40 -- --
Adjustment for TINTA Merger (1,982) 15.31 1,150 $26.40
Exercised (500) 15.75 (1) 25.21
------ --------
Outstanding at December 31, 1998 -- -- 1,149 26.40
====== ========
Exercisable at December 31, 1998 -- -- 448 26.97
====== ========
Vesting Period -- 5 years
====== ========
</TABLE>
On December 13, 1995, pursuant to the TINTA 1995 Plan, 40,000
restricted shares of TINTA Series A Stock were awarded to certain
officers and directors of TINTA. Such restricted shares vest as to 50%
in December 1999 and as to the remaining 50% in December 2000. Such
restricted shares had a fair value of $25.375 on the date of grant. At
December 31, 1998, 23,200 restricted shares of Liberty Group Series A
Stock (after adjustment for TINTA Merger) were unvested.
On July 23, 1997, pursuant to the TINTA 1995 Plan, 150,000 restricted
shares of TINTA Series A Stock were awarded to a director of TINTA.
Such restricted shares vest as to 50% in July 2001 and as to the
remaining 50% in July 2002. Such restricted shares had a fair value of
$14.625 on the date of grant. At December 31, 1998, 87,000 restricted
shares of Liberty Group Series A Stock (after adjustment for TINTA
Merger) were unvested.
(continued)
II-94
<PAGE> 149
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Tele-Communications International, Inc. Nonemployee Director Stock
Option Plan. On April 11, 1996, TINTA adopted the Tele-Communications
International, Inc. 1996 Nonemployee Director Stock Option Plan (the
"TINTA Director Plan"). The TINTA Director Plan provides for grants to
be made to nonemployee directors of TINTA of options to purchase a
maximum of 1,000,000 shares of TINTA Series A Stock (subject to
certain anti-dilution adjustments). Shares that are subject to such
options that expire or terminate for any reason without having been
exercised will return to the pool of shares underlying options
available to grant under the TINTA Director Plan. Pursuant to the
TINTA Director Plan, options to purchase 200,000 shares of TINTA
Series A Stock were granted in April 1996 at an exercise price of
$16.00 per share. Such options had a weighted average fair value of
$14.01 on the date of grant. Options issued pursuant to the TINTA
Director Plan vest and become exercisable over a five-year period from
the date of grant and expire 10 years from the date of grant.
At December 31, 1998, 116,000 options with respect to Liberty Group
Series A Stock (after adjustment for TINTA Merger) granted pursuant to
the TINTA Director Plan were outstanding, 46,400 of which were
exercisable. Such options had an exercise price of $27.58 and a
weighted average remaining contractual life of 8 years.
Founders Options. Effective December 1, 1996, certain officers and key
employees of the Company were each granted options (the "Telephony
Option") representing 1.0% of the Company's common equity in TCI
Telephony Services, Inc., a consolidated subsidiary of the Company,
("Telephony Services"). The aggregate exercise price for each such
option was equal to 1.0% of (i) the Company's cumulative investment in
Telephony Services as of December 1, 1996, adjusted for a 6% per annum
interest factor from the date each such investment was made to the
date of such exercise, less (ii) the sum of (x) $500 million and (y)
the amount of the tax benefits generated by Telephony Services (up to
$500 million) as and when used by TCI. Such options had a fair value
of $1,347,700 per option on the date of grant. Each such option was
replaced during 1997 with a separate SAR with respect to each of
Telephony Services' two direct wholly-owned subsidiaries, TCI Teleport
Holdings, Inc. ("TCI Teleport") and TCI Wireless Holdings, Inc. ("TCI
Wireless"). Each of the SAR with respect to TCI Teleport (the "CLEC
SAR") and the SAR with respect to TCI Wireless (the "Wireless SAR")
entitles the holder to the excess of the value of the shares subject
to the SAR (based on the percentage that such shares represent of the
total value of the common equity of TCI Teleport or TCI Wireless, as
applicable, as of the exercise date) over the "strike price" (i.e., 1%
of TCI's cumulative investment in TCI Teleport or TCI Wireless, as
applicable, and their respective subsidiaries at December 1, 1996,
plus a 6% per annum interest factor from the date when each such
investment was made to the date of exercise). The material terms of
the CLEC SAR and the Wireless SAR are the same as those of the
Telephony Option, except that the strike price for each such SAR is an
allocated portion of the exercise price under the Telephony Option
based on TCI's cumulative investment in TCI Teleport and TCI Wireless.
All such SARs will vest and become exercisable in five equal annual
installments, with the first annual installment vesting on February 1,
1997, and will expire on February 1, 2006. Any exercise by one of such
executive officers of all or part of the CLEC SAR would need to be
accompanied by the exercise by such executive officer of a pro rata
portion of Wireline Option described below.
(continued)
II-95
<PAGE> 150
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Each such officer and key employee was also granted a similar option
(the "Wireline Option") representing 1.0% of the Company's common
equity in TCI Wireline, Inc., another consolidated subsidiary of the
Company, ("Wireline"). The aggregate exercise price for each such
Wireline Option is equal to 1.0% of the Company's cumulative
investment in Wireline as of December 1, 1996, adjusted for a 6% per
annum interest factor from the date each such investment was made to
the date of such exercise. All of such options vest 20% per annum
beginning February 1, 1997 and expire on February 1, 2006. Such
options had a fair value of $4,400 per option on the date of grant.
Such options must be exercised on a pro rata basis with the CLEC SARs
discussed above. On February 19, 1999 the Company repurchased from the
holders of the Wireline Options all shares of the common stock of
Wireline acquired by such holders pursuant to the Wireline Options. At
such time the Company canceled the Wireline Options and deleted the
requirement in the CLEC SARs that holders thereof exercise their
Wireline Option in order to exercise their CLEC SAR.
(continued)
II-96
<PAGE> 151
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Effective December 1, 1996, certain officers and key employees of the
Company were each granted options (the "Internet Option") representing
1% of the Company's common equity in TCI Internet Services, Inc. ("TCI
Internet"), a consolidated subsidiary of the Company. The aggregate
exercise price for each Internet Option was equal to 1.0% of the
Company's cumulative investment in TCI Internet as of December 1,
1996, adjusted for a 6% per annum interest factor from the date each
such investment was made to the date of such exercise price. Such
options vest 20% per annum beginning February 1, 1997 and expire on
February 1, 2006. Such options had a fair value of $346,800 on the
date of grant. In anticipation of the transfer to TCI.NET, Inc.
("TCI.NET") of the Internet services distribution business conducted
through subsidiaries of TCI Internet, each such option was replaced
during 1997 with an option to acquire a number of shares equal to 1.0%
of TCI's common equity in TCI.NET at December 1, 1996 and a SAR with
respect to a number of shares equal to 1.0% of TCI's common equity in
TCI Internet at December 1, 1996. The material terms of the option to
acquire shares of TCI.NET are the same as those of the Internet
Option, except that the exercise price, which will be payable to TCI.
NET, is an allocated portion of the exercise price under the Internet
Option based on TCI's cumulative investment in the Internet services
distribution business relative to the balance of its cumulative
investment in TCI Internet at December 1, 1996. The SAR entitles the
holder to the excess of the value of the shares subject to the SAR
(based on the percentage that such shares represent of the total value
of the common equity of TCI Internet as of the exercise date) over 1%
of TCI's cumulative investment in TCI Internet at December 1, 1996,
plus a 6% per annum interest factor from the date when each such
investment was made to the date of exercise. Any exercise by the
holder of all or part of the TCI.NET option must be accompanied by the
exercise by such holder of a pro rata portion of the TCI Internet SAR,
and vice versa. On February 19, 1999 the Company repurchased from the
holders of the TCI.NET options all shares of the common stock of
TCI.NET acquired by such holders pursuant to the TCI.NET option. At
such time the Company canceled the TCI.NET options and deleted the
requirement in the TCI Internet SARs that holders thereof exercise
their TCI.NET option in order to exercise their TCI Internet SAR. In
connection with the AT&T Merger, the TCI Ventures Group's equity
interest in @Home, which constituted substantially all of the value of
the assets of TCI Internet, was transferred to the TCI Group. As a
result, on March 8, 1999 each Internet SAR was amended to provide,
among other things, that following the AT&T Merger the amounts payable
upon exercise of the Internet SARs would not be determined by
reference to the fair market value of TCI Internet, but would instead
be based upon the fair market value (determined as of the date of
exercise of an Internet SAR) of the investment securities held by TCI
Internet prior to the AT&T Merger, subject to certain adjustments.
Such amendment also provided that the cash settlement value of the
Internet SAR would be paid, at the grantor's election, in cash, AT&T
stock or other stock owned by the grantor. In connection with such
amendment, TCI or Liberty Media Corporation ("Liberty") (depending
upon which entity employed the holder of the Internet SAR) was
substituted for TCI Internet as the obligor under the Internet SARs.
(continued)
II-97
<PAGE> 152
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 1998, 20 Wireless SARs were outstanding, all of which
were exercisable. Such SARs had an exercise price of $1,040,968 and an
average remaining contractual life of 8 years.
At December 31, 1998, 12 TCI Internet SARs were outstanding, none of
which were exercisable. Such SARs and options had an exercise price of
$37,023 and an average remaining contractual life of 8 years.
At December 31, 1998, all of the CLEC SARs had been exercised.
United Video Satellite Group, Inc. Equity Incentive Plan and United
Video Satellite Group, Inc. Stock Option Plan for Non-Employee
Directors. UVSG sponsors the United Video Satellite Group, Inc. Equity
Incentive Plan under which 8.0 million shares of UVSG's Class A Common
Stock are authorized to be issued in connection with the exercise of
awards of stock options, stock appreciation rights and restricted stock
granted under the plan. UVSG's Equity Incentive Plan provides that the
price at which each share of stock covered by an option may be acquired
shall in no event be less than 100% of the fair market value of the
stock on the date the option is granted, except in certain limited
circumstances. Additionally, UVSG sponsors the United Video Satellite
Group, Inc. Stock Option Plan for Non-Employee Directors under which
500,000 shares of UVSG's Class A Common Stock are authorized to be
issued in connection with the exercise of stock options granted
thereunder.
At December 31, 1998, 6.3 million shares of UVSG's Class A Common Stock
were reserved for issuance under the stock option plans. The options
granted under the stock option plans expire ten years from the date of
grant. Options outstanding are as follows (amounts in thousands, except
for WAEP):
<TABLE>
<CAPTION>
UVSG
Class A Common
Stock (1) WAEP (1)
-------------- --------
<S> <C> <C>
At January 1, 1996 $ 4,121 4.25
Granted 1,276 11.11
Exercised (815) 4.04
Canceled (805) 9.21
-------
At December 31, 1996 3,777 5.56
Granted 916 8.54
Exercised (2,089) 4.04
Canceled (252) 5.88
-------
At December 31, 1997 2,352 8.03
Granted 709 16.61
Exercised (254) 6.84
Canceled (36) 9.41
-------
Exercisable at December 31, 1998 2,771 10.32
=======
</TABLE>
- ----------
(1) Adjusted for two-for-one stock split.
Exercise prices for options outstanding as of December 31, 1998 ranged
from $4 to $17. The weighted-average remaining contractual life of such
options is 7.8 years.
(continued)
II-98
<PAGE> 153
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On March 1, 1999, the Company's voting interest in UVSG was reduced to
49% and the Company ceased to include UVSG in its consolidated
financial results and began to account for UVSG using the equity method
of accounting. See note 10.
At Home Corporation Stock Option Plans. @Home adopted certain stock
option plans (the "@Home Plans") during 1996, 1997 and 1998. The @Home
Plans provide for the grant of incentive stock options, nonqualified
stock options, restricted stock awards and stock bonuses to employees,
directors and consultants of @Home. Options under the @Home Plans
generally vest at the rate of 25% after one year and ratably on a
monthly basis for three years thereafter.
Options outstanding are as follows (amounts in thousands, except for
WAEP):
<TABLE>
<CAPTION>
@Home
Series A Common
Stock WAEP
--------------- ------
<S> <C> <C>
At January 1, 1996 -- $ --
Granted 5,296 .06
Exercised (4,875) .06
Canceled (198) .05
-------
At December 31, 1996 223 .06
Granted 5,158 6.30
Exercised (2,170) .25
Canceled (153) 3.78
-------
At December 31, 1997 3,058 10.26
Granted 7,648 40.73
Exercised (425) 7.01
Canceled (268) 18.83
-------
At December 31, 1998 10,013 33.44
=======
Exercisable at December 31, 1998 1,616 6.69
=======
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged
from $.05 to $71.50. The weighted-average remaining contractual life of
such options is 8.31 to 9.97 years.
TCI Music, Inc. Stock Incentive Plan. During 1997 and 1998, TCI Music,
Inc., a subsidiary of the Company, ("TCI Music") granted stock options
with tandem SARs to employees under the TCI Music, Inc. 1997 Stock
Incentive Plan (the "TCI Music Stock Plan") which is authorized to
issue up to 4,000,000 shares. Options granted under the TCI Music Stock
Plan expire ten years from the date of grant. In addition TCI Music
granted stock options with tandem SARs to the board of directors and
employees in connection with certain mergers. Options issued under the
TCI Music Stock Plan and in connection with certain mergers generally
vest annually in 20% cumulative increments.
On December 21, 1998, TCI Music re-priced the stock options with tandem
SARs pursuant to the TCI Music Stock Plan at $4.00 for all grants to
executive officers and employees of TCI Music and its subsidiaries.
(continued)
II-99
<PAGE> 154
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table presents the number and WAEP of options in tandem
with SARs to purchase TCI Music Series A Common Stock, after giving
effect to the re-pricing at $4.00 for certain options and tandem SARs
(amounts in thousands, except for WAEP):
<TABLE>
<CAPTION>
TCI Music
Series A
Common Stock WAEP
------------ ----
<S> <C> <C>
At January 1, 1997 -- --
Granted 3,609 5.75
------
At December 31, 1997 3,609 5.75
Granted 1,771 4.00
Exercised (21) 4.00
Canceled (311) 4.00
------
At December 31, 1998 5,048 5.25
======
Exercisable at December 31, 1998 1,373 5.84
======
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged
from $4.00 to $6.25. The weighted average remaining contractual life of
such options is 8.7 years. The weighted average fair value of options
granted during 1998, after giving effect to the re-pricing at $4.00 for
certain options and tandem SARs, and 1997 was $3.51 and $3.31,
respectively.
The estimated fair values of the Options noted above are based on the
Black-Scholes model and are stated in current annualized dollars on a
present value basis. The key assumptions used in the model for purposes
of these calculations generally include the following: (a) a discount
rate equal to the 10-year Treasury rate on the date of grant; (b) a 35%
volatility factor, (c) the 10-year option term; (d) the closing price
of the respective common stock on the date of grant; and (e) an
expected dividend rate of zero.
(continued)
II-100
<PAGE> 155
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Estimated compensation relating to restricted stock awards, options
with tandem SARs and SARs has been recorded through December 31, 1998
pursuant to APB Opinion No. 25. Such estimate is subject to future
adjustment based upon market value, and ultimately, on the final
determination of market value when the rights are exercised or the
restricted stock awards are vested. Compensation recognized for options
with tandem SARs and SARs for the years ended December 31, 1998, 1997
and 1996 was $858 million, $485 million and $(14 million),
respectively. Compensation recognized for restricted stock awards for
the years ended December 31, 1998, 1997 and 1996 was $8 million, $3
million and $1 million, respectively. Had the Company accounted for its
stock based compensation pursuant to the fair value based accounting
method in SFAS 123, the Company's net earnings (loss) and net earnings
(loss) per share would have changed to the pro forma amounts indicated
below (amounts in millions, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Pro forma net earnings (loss) attributable to common
stockholders $ 1,902 (608) 256
Pro forma basic net earnings (loss) attributable to
common stockholders per common share
TCI Group Series A and Series B $ (.46) (.86) (1.20)
Liberty Media Group Series A and Series B $ .43 .34 2.82
TCI Ventures Group Series A and Series B $ 4.71 (.47) --
Pro forma diluted net earnings (loss) attributable to common
stockholders per common and potential common share
TCI Group Series A and Series B $ (.49) (.86) (1.20)
Liberty Media Group Series A and Series B $ .39 .31 2.58
TCI Ventures Group Series A and Series B $ 4.41 (.47) --
</TABLE>
(continued)
II-101
<PAGE> 156
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Treasury Stock and Common Stock Held by Subsidiaries, at Cost
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------- -------------------------
Number of Number of
shares Cost basis shares Cost basis
------------ ------------ ---------- ------------
(dollar amounts in millions)
<S> <C> <C> <C> <C>
Treasury stock is summarized as follows:
TCI Group Series A Stock 11,362,365 $ 182 11,296,324 $ 180
TCI Group Series B Stock 330,902 7 30,876,766 518
Liberty Group Series A Stock 25,561,455 505 25,082,172 489
Liberty Group Series B Stock 82,074 2 82,074 2
TCI Ventures Group Series A Stock 61,450 1 -- --
TCI Ventures Group Series B Stock 432,196 5 338,196 4
Common stock held by subsidiaries is
summarized as follows:
TCI Group Series A Stock 125,728,816 466 125,645,656 464
TCI Group Series B Stock 9,154,134 161 9,112,500 160
Liberty Group Series A Stock 6,654,367 113 6,654,367 113
Liberty Group Series B Stock 3,417,187 61 3,417,187 61
------------ ------------
$ 1,503 $ 1,991
============ ============
</TABLE>
In conjunction with the AT&T Merger, such shares held in treasury and
such shares held by subsidiaries were canceled. See note 2.
(continued)
II-102
<PAGE> 157
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
General
During the fourth quarter of 1997, the Company entered into a total
return equity swap facility (the "Equity Swap Facility"). Pursuant to
the Equity Swap Facility, the Company would have the right to direct
the counterparty (the "Counterparty") to use the Equity Swap Facility
to purchase shares ("Equity Swap Shares") of TCI Group Series A Stock
and TCI Ventures Group Series A Stock with an aggregate purchase price
of up to $300 million. The Company would have the right, but not the
obligation, to purchase Equity Swap Shares through the September 30,
2000 termination date of the Equity Swap Facility. During such period,
the Company would settle periodically any increase or decrease in the
market value of the Equity Swap Shares. If the market value of the
Equity Swap Shares should exceed the Counterparty's cost, Equity Swap
Shares with a fair value equal to the difference between the market
value and cost would be segregated from the other Equity Swap Shares.
If the market value of Equity Swap Shares should be less than the
Counterparty's cost, the Company, at its option, would settle such
difference with shares of TCI Group Series A Stock or TCI Ventures
Group Series A Stock or, subject to certain conditions, with cash or
letters of credit. In addition, the Company would be required to
periodically pay the Counterparty a fee equal to a LIBOR-based rate on
the Counterparty's cost to acquire the Equity Swap Shares. Due to the
Company's ability to issue shares to settle periodic price fluctuations
and fees under the Equity Swap Facility, the Company records all
amounts received or paid under this arrangement as increases or
decreases, respectively, to equity. As of December 31, 1998, the Equity
Swap Facility had acquired 4,935,780 shares of TCI Group Series A Stock
and 1,171,800 shares of TCI Ventures Group Series A Stock at an
aggregate cost that was approximately $135 million less than the fair
value of such Equity Swap Shares at December 31, 1998. From February
10, 1999 to March 5, 1999, the Company terminated all transactions
under the Equity Swap Facility and the related swap agreement. In
connection with the termination of such transactions the Company
received an aggregate cash payment of $170 million.
At December 31, 1998, there were 99,890,031 shares of TCI Group Series
A Stock, 55,828,238 shares of Liberty Group Series A Stock, 33,009,606
shares of TCI Ventures Group Series A Stock and 2,800,000 shares of TCI
Ventures Group Series B Stock reserved for issuance under exercise
privileges related to options, convertible debt securities and
convertible preferred stock. Also, one share of Series A Stock is
reserved for each share of Series B Stock. Additionally, at December
31, 1998, subsidiaries of TCI owned an aggregate of 278,307 shares of
Series F Preferred Stock. In connection with a restructuring, 123,896
shares of Series F Preferred Stock were converted into 185,428,946
shares of TCI Group Series A Stock and the remaining 154,411 shares of
Series F Preferred Stock were canceled. See note 2.
(continued)
II-103
<PAGE> 158
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) Other Comprehensive Earnings
Accumulated other comprehensive earnings included in the Company's
consolidated balance sheets and consolidated statements of
stockholders' equity reflect the aggregate of foreign currency
translation adjustments and unrealized holding gains and losses on
securities classified as available-for-sale. The change in the
components of accumulated other comprehensive earnings, net of taxes,
is summarized as follows:
<TABLE>
<CAPTION>
Foreign Unrealized Accumulated
currency gains other
translation (losses) on comprehensive
adjustments securities earnings
--------------- -------------- -----------------
amounts in millions
<S> <C> <C> <C>
Balance at January 1, 1996 $ (9) 338 329
Other comprehensive earnings (loss) 35 (323) (288)
------------- -------------- -----------------
Balance at December 31, 1996 26 15 41
Other comprehensive earnings (loss) (22) 753 731
------------- -------------- -----------------
Balance at December 31, 1997 4 768 772
Other comprehensive earnings 2 2,975 2,977
------------- -------------- -----------------
Balance at December 31, 1998 $ 6 3,743 3,749
============= ============== =================
</TABLE>
(continued)
II-104
<PAGE> 159
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The components of other comprehensive earnings are reflected in the
Company's consolidated statements of operations and comprehensive
earnings, net of taxes and reclassifications adjustments for gains
realized in net earnings (loss). The following table summarizes the tax
effects and reclassification adjustments related to each component of
other comprehensive earnings.
<TABLE>
<CAPTION>
Tax
Before-tax (expense) Net-of-tax
amount benefit amount
------------- -------------- ---------------
amounts in millions
<S> <C> <C> <C>
Year ended December 31, 1998:
Foreign currency translation adjustments $ 3 (1) 2
------------- -------------- ---------------
Unrealized gains on securities:
Unrealized holding gains arising during period 4,889 (1,912) 2,977
Less: reclassification adjustment for gains
realized in net earnings (4) 2 (2)
------------- -------------- ---------------
Net unrealized gains 4,885 (1,910) 2,975
------------- -------------- ---------------
Other comprehensive earnings $ 4,888 (1,911) 2,977
============= ============== ===============
Year ended December 31, 1997:
Foreign currency translation adjustments $ (34) 12 (22)
------------- -------------- ---------------
Unrealized gains on securities:
Unrealized holding gains arising during period 1,236 (483) 753
Less: reclassification adjustment for gains
realized in net earnings -- -- --
------------- -------------- ---------------
Net unrealized gains 1,236 (483) 753
------------- -------------- ---------------
Other comprehensive earnings $ 1,202 (471) 731
============= ============== ===============
Year ended December 31, 1996:
Foreign currency translation adjustments $ 54 (19) 35
------------- -------------- ---------------
Unrealized gains on securities:
Unrealized holding gains arising during period 67 (26) 41
Less: reclassification adjustment for gains
realized in net earnings (598) 234 (364)
------------- -------------- ---------------
Net unrealized gains (531) 208 (323)
------------- -------------- ---------------
Other comprehensive earnings $ (477) 189 (288)
============= ============== ===============
</TABLE>
(continued)
II-105
<PAGE> 160
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Transactions with Officers and Directors
On June 16, 1997, (a) the Company issued 30,545,864 shares of TCI Group
Series A Stock (which shares are entitled to one vote per share) to the
Estate of Bob Magness (the "Magness Estate"), the late founder and
former Chairman of the Board of TCI in exchange (the "Exchange") for an
equal number of shares of TCI Group Series B Stock (which shares are
entitled to ten votes per share) owned by the Magness Estate, (b) the
Magness Estate sold (the "Sale") the shares of TCI Group Series A Stock
received in the Exchange, together with approximately 1.5 million
shares of TCI Group Series A Stock that the Magness Estate previously
owned (collectively, the "Option Shares"), to two investment banking
firms (the "Investment Bankers") for approximately $530 million (the
"Sale Price") and (c) TCI entered into an agreement with the Investment
Bankers whereby TCI would have the option, but not the obligation, to
purchase the Option Shares at any time on or before June 16, 1999 (the
"Option Period"). The preceding transactions are referred to
collectively as the "June 16 Stock Transaction". During the Option
Period, the Company and the Investment Bankers would settle quarterly
any increase or decrease in the market value of the Option Shares. If
the market value of the Option Shares should exceed the Investment
Bankers' cost, Option Shares with a fair value equal to the difference
between the market value and cost would be segregated from the other
Option Shares in an account at the Investment Bankers. If the market
value of the Option Shares should be less than the Investment Bankers'
cost, the Company, at its option, would settle such difference with
shares of TCI Group Series A Stock or TCI Ventures Group Series A Stock
or, subject to certain conditions, with cash or letters of credit. In
addition, the Company would be required to pay the Investment Bankers a
quarterly fee equal to LIBOR plus 1% on the Sale Price, as adjusted for
payments made by the Company pursuant to any quarterly settlement with
the Investment Bankers. Due to the Company's ability to settle
quarterly price fluctuations and fees with shares of TCI Group Series A
Stock or TCI Ventures Group Series A Stock, the Company records all
amounts received or paid under this arrangement as increases or
decreases, respectively, to equity. During the fourth quarter of 1997,
the Company repurchased 4 million shares of TCI Group Series A Stock
from one of the Investment Bankers for an aggregate cash purchase price
of $66 million. Additionally, as a result of the Exchange Offers and
certain open market transactions that were completed to obtain the
desired weighting of TCI Group Series A Stock and TCI Ventures Group
Series A Stock, the Investment Bankers disposed of 4,210,308 shares of
TCI Group Series A Stock and acquired 23,407,118 shares of TCI Ventures
Group Series A Stock during the last half of 1997. As a result of the
foregoing transactions and certain transactions related to the January
5, 1998 settlement of litigation involving the Magness Estate, as
described below, the Option Shares were comprised of 6,201,042 shares
of TCI Group Series A Stock and 11,740,610 shares of TCI Ventures Group
Series A Stock at December 31, 1998. At December 31, 1998, the market
value of the Option Shares exceeded the Investment Bankers' cost by
$421 million.
Pursuant to a certain letter agreement, dated June 16, 1997, between
Dr. Malone, TCI's Chairman and Chief Executive Officer, and the Magness
Estate, Dr. Malone agreed to waive certain rights of first refusal with
respect to shares of TCI Group Series B Stock beneficially owned by the
Magness Estate. Such rights of first refusal arise from a letter
agreement, dated June 17, 1988, among Bob Magness, Kearns-Tribune
Corporation and Dr. Malone, pursuant to which Dr. Malone was granted a
right of first refusal to acquire any shares of TCI Group Series B
Stock which the other parties proposed to sell. As a result of Dr.
Malone's rights under such June 17, 1988 letter agreement, such waiver
was necessary in order for the Magness Estate to consummate the
Exchange and the Sale.
(continued)
II-106
<PAGE> 161
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In consideration for such waiver, TCI granted Dr. Malone the right (the
"Malone Right") to acquire from time to time until June 30, 1999, from
TCI up to 30,545,864 shares of the TCI Group Series B Stock acquired by
TCI from the Magness Estate pursuant to the Exchange. Such acquisition
may be made in exchange for either, or any combination of, shares of
TCI Group Series A Stock owned by Dr. Malone (exchanged on a one for
one basis), or cash in an amount equal to the average closing sale
price of the TCI Group Series B Stock for the five trading days
preceding the acquisition.
In connection with certain legal proceedings relative to the probate of
the Magness Estate, one or more of Gary Magness and Kim Magness, Bob
Magness' sons, Sharon Magness, Bob Magness' surviving second wife and
the original personal representatives of the Magness Estate advanced
various claims, causes of action, demands, complaints and requests
against one or more of the others. In addition, Kim Magness and Gary
Magness, in a Complaint And Request To Void Sale Of TCI Stock, And For
Damages And Surcharge, filed on October 29, 1997 (the "Voiding
Action"), advanced various claims relating to the June 16 Stock
Transaction against TCI, Dr. Malone and the original personal
representatives of the Magness Estate. Among other matters, the Voiding
Action challenged the June 16 Stock Transaction on various fiduciary
bases and requested rescission of such transaction and damages.
Pursuant to an agreement effective as of January 5, 1998, TCI, Gary
Magness, Kim Magness, Sharon Magness, the Magness Estate, the Estate of
Betsy Magness (the first wife of Bob Magness) and Dr. Malone agreed to
settle their respective claims against each other relating to the
Magness Estate and the June 16 Stock Transaction, in each case without
any of those parties admitting any of the claims or allegations against
that party (the "Magness Settlement").
In connection with the Magness Settlement, portions of the Exchange and
Sale were unwound such that (i) 10,201,041 shares of TCI Group Series A
Stock and 11,666,506 shares of TCI Ventures Group Series A Stock were
returned to TCI as authorized but unissued shares, (ii) the Magness
Estate returned to the Investment Bankers the portion of the Sale Price
attributable to such returned shares and (iii) the Magness Estate paid
$11 million to TCI representing a reimbursement of the Exchange fees
incurred by TCI from June 16, 1997 through February 9, 1998 with
respect to such returned shares. TCI then issued to the Magness Estate
10,017,145 shares of TCI Group Series B Stock and 12,034,298 shares of
TCI Ventures Group Series B Stock. In addition, as part of the Magness
Settlement, TCI issued 1,339,415 shares of TCI Group Series B Stock to
the Estate of Betsy Magness in exchange for an equal number of shares
of TCI Group Series A Stock and issued 1,531,834 shares of TCI Ventures
Group Series B Stock for an equal number of shares of TCI Ventures
Group Series A Stock.
(continued)
II-107
<PAGE> 162
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On February 9, 1998, in connection with the Magness Settlement, TCI
entered into a call agreement (the "Malone Call Agreement") with Dr.
Malone and Dr. Malone's wife (together with Dr. Malone, the "Malones"),
under which the Malones granted to TCI the right to acquire any shares
of TCI stock which are entitled to cast more than one vote per share
(the "High-Voting Shares") owned by the Malones, which at December 31,
1998 consisted of an aggregate of approximately 69 million High-Voting
Shares upon Dr. Malone's death or upon a contemplated sale of the
High-Voting Shares (other than a minimal amount) to third persons. In
either such event, TCI has the right to acquire the shares at a maximum
price equal to the then relevant market price of shares of "low-voting"
Series A Stock plus a ten percent premium. The Malones also agreed that
if TCI were ever to be sold to another entity, then the maximum premium
that the Malones would receive on their High-Voting Shares would be no
greater than a ten percent premium over the price paid for the relevant
shares of Series A Stock. TCI paid $150 million to the Malones in
consideration of their entering into the Malone Call Agreement.
Also on February 9, 1998, in connection with the Magness Settlement,
certain members of the Magness family, individually and in certain
cases, on behalf of the Estate of Betsy Magness and the Magness Estate
(collectively, the "Magness Family") also entered into a call agreement
with TCI (with substantially the same terms as the one entered into by
the Malones, including a call on the shares owned by the Magness Family
upon Dr. Malone's death) (the "Magness Call Agreement") on the Magness
Family's, which at December 31, 1998 consisted of an aggregate of
approximately 55 million High-Voting Shares. The Magness Family was
paid $124 million by TCI in consideration of their entering into the
Magness Call Agreement.
(continued)
II-108
<PAGE> 163
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Additionally, on February 9, 1998, the Magness Family entered into a
Shareholders' Agreement (the "Shareholders' Agreement") with the
Malones and TCI under which (i) the Magness Family and the Malones
agree to consult with each other in connection with matters to be
brought to the vote of TCI's stockholders, subject to the proviso that
if they cannot mutually agree on how to vote the shares, Dr. Malone has
an irrevocable proxy to vote the High-Voting Shares owned by the
Magness Family, (ii) the Magness Family may designate a nominee for the
Board and Dr. Malone has agreed to vote his High-Voting Shares for such
nominee and (iii) certain "tag along rights" have been created in favor
of the Magness Family and certain "drag along rights" have been created
in favor of the Malones. In addition, the Malone Right granted by TCI
to Dr. Malone to acquire 30,545,864 shares of TCI Group Series B Stock
was reduced to an option to acquire 14,511,570 shares of TCI Group
Series B Stock. Pursuant to the terms of the Shareholders' Agreement,
the Magness Family has the right to participate in the reduced Malone
Right on a proportionate basis with respect to 12,406,238 shares of the
14,511,570 shares subject to the Malone Right. On June 24, 1998, Dr.
Malone delivered notice to TCI exercising his right to purchase
(subject to the Magness Family proportionate right) up to 14,511,570
shares of TCI Group Series B Stock at a per share price of $35.5875
pursuant to the Malone Right. In addition, a representative of the
Magness Family advised Dr. Malone that the Magness Family would
participate in such purchase up to the Magness Family's proportionate
right. On October 14, 1998, 8,718,770 shares of TCI Group Series B
Stock were issued to Dr. Malone upon payment of cash consideration
totaling $310 million. On October 16, 1998, 5,792,800 shares of TCI
Group Series B Stock were issued to the Magness Family upon payment of
cash consideration totaling $206 million. In connection with the
acquisition of the TCI Group Series B Stock by Dr. Malone, TCI executed
certain waivers to the Malone Call Agreement and TCI and the Magness
Family executed a waiver to the Shareholders' Agreement to, among other
things, permit (subject to certain limitations) the pledge of TCI Group
Series B Stock owned by Dr. Malone as collateral to the lenders who
provided the funds for his purchase of shares of TCI Group Series B
Stock. In connection with the AT&T Merger, Liberty became entitled to
exercise TCI's rights under each Call Agreement and the Shareholders'
Agreement with respect to the AT&T Liberty Class B Tracking Stock
acquired by the Malones and the Magness Family as a result of the AT&T
Merger and the Malones and the Magness Family agreed that the
Shareholders' Agreement would continue to apply to the AT&T Liberty
Class B Tracking Stock.
On February 1, 1999, the Company began to terminate the transactions
under the agreements with the Investment Bankers described above, and
as of March 5, 1999, such transactions were terminated. In connection
with the termination of such transactions the Company received an
aggregate cash payment of $509 million.
After the Company's stockholders voted to approve the terms of the AT&T
Merger, on February 17, 1999, the Board approved the payment by
Liberty/Ventures Group of $1 million to each of two directors of the
Company for their services on the Special Committee of the Company's
Board in evaluating the AT&T Merger and the consideration to be
received by the stockholders of the Company.
(continued)
II-109
<PAGE> 164
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Prior to the AT&T Merger, a limited liability company owned by Dr.
Malone acquired, from certain subsidiaries of the Company, for $17
million working cattle ranches located in Wyoming. No gain or loss was
recognized on such acquisition. The purchase price was paid by such
limited liability company was in the form of a 12-month note in the
amount of $17 million having an interest rate of 7%. Such note is
payable at any time without penalty and is personally guaranteed by Dr.
Malone.
On April 30, 1998, TCI ICM VI, Inc., a subsidiary of the Company,
acquired a 99.999% limited partnership interest in InterMedia Capital
Management VI, L.P. ("ICM VI") from an individual who is an executive
officer and a director of the Company, in exchange for (i) 153,183
shares of Liberty Group Series B Stock (the "Liberty Shares") valued at
$5 million and (ii) a .495% limited partnership interest in InterMedia
Capital Partners VI, L.P. ("ICP VI") having a capital account of $1
million (the "InterMedia VI Transaction"). Such individual acquired his
partnership interest in ICM VI in July 1996 for $10,000. On the
InterMedia VI Transaction closing date, the .001% general partnership
interest in ICM VI was held by InterMedia Management, Inc. ("IMI"), a
corporation all of the stock of which is owned by a former officer of
the Company. The other partnership interests in ICP VI are held by TCI
IP-VI, LLC, a wholly owned subsidiary of the Company (49.005% limited
partnership interest), Blackstone Cable Acquisition Company, LLC or its
affiliates (49.500% limited partnership interest), ICM VI (.999%
limited partnership interest), and InterMedia Capital Management VI,
LLC, an entity of which IMI is the sole member (.001% general
partnership interest).
On August 5, 1998, a then director of the Company paid $1.8 million to
purchase, at fair value, the Company's interest in General
Communication, Inc.
On December 10, 1998, the Board approved the grant to a director of the
Company of 250,000 restricted shares of TCI Group Series A Stock
contingent upon the consummation of the AT&T Merger. In addition,
Liberty paid such director $10 million immediately prior to the AT&T
Merger for his services in negotiating the merger agreement with AT&T
and completing the AT&T Merger.
On September 25, 1997, certain subsidiaries of the Company entered into
an Asset Contribution Agreement with, among others, Fisher
Communications Associates, L.L.C. ("Fisher Communications"), a Colorado
limited liability company, controlled by a then director of the
Company. On January 15, 1998, pursuant to the agreement, the cable
television assets of the applicable cable systems of the Company were
contributed to Peak Cablevision in exchange for a 66.7% partnership
interest in Peak Cablevision. Additionally, cable television assets of
Fisher Communications were contributed in 1998 in exchange of a 33.3%
interest in Peak Cablevision. In connection with the formation of Peak
Cablevision, the Company contributed approximately 87,000 customers
passing 136,500 homes and Fisher Communications contributed
approximately 27,000 customers passing 42,100 homes. The Company
contributed debt amounting to $93 million and Fisher Communications
contributed debt amounting to $19 million.
On July 23, 1997, Dr. Malone acquired from the Company an aggregate of
7,296,324 shares of TCI Group Series B Stock and 3,417,187 shares of
Liberty Group Series B Stock, in exchange for a like number of shares
of TCI Group Series A Stock and Liberty Group Series A Stock,
respectively, held by such executive officer and director.
(continued)
II-110
<PAGE> 165
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On July 24, 1997, the Company repurchased 219,937 shares of Liberty
Group Series A Stock from the spouse of Dr. Malone at an aggregate cost
of approximately $4 million.
On June 10, 1997 (the "IP Phase I Closing Date"), the Company issued
139,513 shares of TCI Group Series B Stock (the "IP I Shares") to the
IP Series B Trust I ("Trust"). An executive officer who is also a
director of the Company is the trustee of the Trust. The IP I Shares
were issued in connection with a partial closing under two Partnership
Interest Purchase Agreements both dated as of June 10, 1997 (the "IP-I
and IP-III Purchase Agreements"), pursuant to which the Company
acquired on the IP Phase I Closing Date (a) a 99.998% limited
partnership interest in InterMedia Capital Management III, L.P., (b) a
75% limited partnership interest in InterMedia CM - LP, and (c) a
99.998% limited partnership interest in InterMedia Capital Management,
L.P. in exchange for total consideration of the IP I Shares and cash
and assumption of current liabilities in an aggregate amount of $6
million. As a result of such transactions the Company increased its
direct and indirect ownership of the limited partnership interests of
InterMedia Partners, a California limited partnership, from
approximately 53.6% to 54.7% and obtained the right to receive an
administrative fee from InterMedia Partners and the right to receive a
20% overriding interest on any distributions in excess of the partners'
capital contributions. In light of such increased ownership interests
and rights and the January 1, 1998 consummation of a transaction in
which InterMedia Partners acquired substantially all of the equity
interests held by partners other than TCI, the Company retroactively
adopted the equity method of accounting for its investment in
InterMedia Partners for all periods ended prior to January 1, 1998. On
January 1, 1998, the Company began consolidating its investment in
InterMedia Partners. InterMedia Partners, InterMedia IV and ICM IV are
all managed by the same management group. See note 6.
On August 5, 1997 (the "IP Phase II Closing Date"), the Company issued
2,405,942 shares of TCI Group Series B Stock (the "IP II Shares") to
the IP Series B Trust II ("Trust II"). An executive officer who is also
a director of the Company is the trustee of the Trust II. The IP II
Shares were issued in connection with the closing under the Partnership
Interest Purchase Agreement dated as of August 5, 1997, and a partial
and final closing under the IP-I and IP-III Purchase Agreements,
pursuant to which the Company acquired on the IP Phase II Closing Date
a 99.997% limited partnership interest in ICM IV and an additional
.001% limited partnership interest in InterMedia Capital Management,
L.P. in exchange for total consideration of the IP II Shares and $4.8
million in cash and TCI's assumption of liabilities in an aggregate
amount of $18 million. See note 6.
In connection with the three Partnership Interest Purchase Agreements,
a director of the Company received a consulting fee in the amount of
$400,000 in cash and 31,030 shares of TCI Group Series B Stock and the
son of a director of the Company received an advisory fee in the amount
of 36,364 shares of TCI Group Series B Stock.
(continued)
II-111
<PAGE> 166
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On January 27, 1999, the Company announced the planned acquisition by
Charter Communications ("Charter") and TCI of certain cable television
systems owned by InterMedia IV and InterMedia Partners. Charter will
pay consideration consisting of cash and cable television systems for
the systems its acquires from InterMedia IV. TCI will acquire certain
other cable systems in a non-cash transaction. Upon the consummation of
the transactions described above, TCI will own all of the partnership
interests in InterMedia IV and InterMedia Partners. The transactions
are subject to the negotiation and signing of definitive documents and
various closing conditions.
An individual who is a director and executive officer of TCI, currently
has a .001% special limited partnership interest in ICM IV, which in
turn has a 1.19% limited partnership interest in InterMedia IV. Such
individual's special limited partnership interest in ICM IV was created
in August 1997 in connection with TCI's acquisition of all of the
partnership interests (other than a .002% general partnership interest
and a .001% special limited partnership interest) in ICM IV. Such
individual also indirectly owns a minimal interest in InterMedia
Partners. In connection with the proposed transaction described above,
it is anticipated that such individual, by virtue of his .001% special
limited partnership interest in ICM IV, will participate in a profit
sharing mechanism of InterMedia IV and receive cash consideration based
on the valuation of InterMedia IV in the transaction described above.
Although the amount of such consideration is uncertain at this time,
its is expected that such consideration will be approximately $10
million. In the transaction described above, it is expected that such
individual will receive less than $50,000 for his indirect interest in
InterMedia Partners.
In connection with the July 1997 Kearns-Tribune merger (see note 10),
the former Chairman of the Board of Kearns-Tribune who was also a
director of TCI (the "Former Kearns-Tribune Chairman") received (i) a
cash payment of $1.6 million and (ii) an assignment of all of
Kearns-Tribune right, title and interest in and to all patented mining
claims owned by Kearns-Tribune, including but not limited to royalties,
buildings, fixtures, surface rights, licenses and contracts related
thereto, which patented mining claims are valued at $438,000. With
respect to the assignment of the mining claims, the Former
Kearns-Tribune Chairman agreed to assume all liabilities with respect
thereto and agreed to indemnify Kearns-Tribune for any and all
liabilities of Kearns-Tribune, if any, relating to the mining claims,
including those arising from past operations. As of December 31, 1997,
Kearns-Tribune had made the cash payment to the Former Kearns-Tribune
Chairman. As of November 11, 1998, Kearns-Tribune completed the
transfers of the mining claims to a corporation designated by the
Former Kearns-Tribune Chairman.
Also in connection with the Kearns-Tribune Merger, Silver King Group
L.L.C. ("SKG"), which is owned and controlled by a director of TCI,
entered into an agreement with Kearns-Tribune to purchase assets
consisting primarily of land, oil and gas royalties and patents for
$10.87 million. On November 30, 1997 such purchase was consummated and
SKG paid Kearns-Tribune $9.5 million of the $10.87 million purchase
price in cash and the remainder of such purchase price in the form of a
non-interest bearing promissory note. As of March 10, 1999, $1,318,000
of such note remains outstanding.
(continued)
II-112
<PAGE> 167
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On March 4, 1997, Dr. Malone received an advance from a wholly-owned
subsidiary of the Company in the amount of $6 million. On March 5,
1997, Dr. Malone received a second advance from a wholly-owned
subsidiary of the Company in the amount of $6 million. The terms of the
advances were memorialized by a promissory note. The interest rate on
such loans is 1% over the one-month LIBOR rate compounded annually. Dr.
Malone used the proceeds of the advance to purchase shares of Satellite
Series A Common Stock. On February 9, 1998, Dr. Malone repaid the $12
million promissory note balance and accrued interest in the amount of
$723,000.
On the date of the Satellite Spin-off, the Company granted options to
two of its then executive officers and a key employee of TCIC to
acquire an aggregate of 1,660,190 shares of Satellite Series A Common
Stock. The exercise price for each such option is equal to $8.86 per
share. Such options vest 20% per annum beginning February 1, 1997 and
expire on February 1, 2006.
Effective January 31, 1996, a then director of the Company purchased
one-third of the Company's interest in two limited partnerships and
obtained two ten-year options to purchase the Company's remaining
partnership interests. The purchase price for the one-third partnership
interests was 37.209 shares of WestMarc Communications, Inc.
("WestMarc", a wholly-owned subsidiary of the Company) 12% Series C
Cumulative Compounding Preferred Stock owned by such director, and the
purchase price for the ten-year options was $100 for each option. All
options were exercised during the first quarter of 1998. The aggregate
exercise price of $3 million was satisfied with five non-interest
bearing promissory notes that are due and payable to the Company in
2006.
On July 1, 1996, pursuant to a Restricted Stock Award Agreement, a then
executive officer of TCI was transferred all of TCI's right title and
interest in and to 62 shares of the 12% Series C Cumulative Compounding
Preferred Stock of WestMarc owned by TCI. Such preferred stock has a
liquidation value of $1,999,500 and is subject to forfeiture by such
former officer in the event of certain circumstances from the date of
grant through December 13, 2005.
(18) At Home Corporation
On January 19, 1999, @Home entered into a merger agreement with Excite,
Inc. ("Excite"), a global internet media company that offers consumers
and advertisers comprehensive internet navigation services with
extensive personalization capabilities. Under the terms of the merger
agreement, @Home will issue approximately 55 million shares of its
common stock for all of the outstanding common stock of Excite based on
an exchange ratio of 1.041902 shares of @Home's common stock for each
share of Excite's common stock. @Home may issue up to approximately 15
million additional shares of common stock in connection with the
assumption of obligations under Excite's stock option and employer
stock purchase plans and outstanding warrants. @Home will account for
the transaction as a purchase. @Home's preliminary estimate of the
total purchase consideration is approximately $7 billion, based on the
fair value at the time of announcement of the merger, of common stock
to be issued and stock option, stock purchase plan and warrant
obligations assumed, plus estimated transaction costs. As a result of
the proposed merger, TCI's economic interest in @Home would decrease
from 38.8% to 26.5%, which economic interest would represent an
approximate 58% voting interest. The merger is subject to several
conditions, including approval by both companies' stockholders and the
expiration of applicable waiting periods under certain antitrust laws.
(continued)
II-113
<PAGE> 168
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During 1998, @Home completed a public offering (the "@Home Offering")
in which 2.9 million shares of @Home common stock were sold for net
cash proceeds of approximately $125 million. In connection with the
@Home Offering, TCI paid $37 million to purchase 800,000 shares of
@Home common stock. Additionally, @Home issued 1.2 million shares of
common stock in certain acquisitions, along with the assumption of
options to purchase @Home's common stock. As a result of these stock
issuances, TCI's economic interest in @Home decreased to 38.8%, which
then represented an approximate 70.88% voting interest. As a result of
the increase in @Home's equity in connection with such stock issuances,
net of the dilution of TCI's ownership interest in @Home, TCI
recognized a gain of $51 million.
In April 1997, @Home issued 240,000 shares of convertible preferred
stock, resulting in cash proceeds of $48 million, less issuance costs.
On July 11, 1997, @Home completed its initial public offering (the
"@Home IPO"), in which 10.4 million shares of @Home common stock were
sold for net cash proceeds of approximately $100 million. As a result
of the @Home IPO, TCI's economic interest in @Home decreased from 43%
to 39%, which economic interest then represented an approximate 72%
voting interest. In connection with the increase in @Home's equity, net
of the dilution of TCI's ownership interest in @Home, TCI recognized a
gain of $60 million during the third quarter of 1997.
In 1997, @Home entered into an exclusive distribution agreement with
CSC. In connection with such agreement, CSC was issued a warrant to
purchase up to 7.9 million shares of @Home's Series A common stock at
an exercise price of $0.50 per share (the "Warrant"), which was
immediately exercisable. In 1997, @Home recorded the $173 million fair
value of the Warrant as an intangible asset which is being amortized
ratably over 56 months. The agreement with CSC also provided for the
issuance of an additional warrant to CSC to purchase up to 3.1 million
shares of @Home's Series A common stock at an exercise price of $0.50
per share under certain circumstances (the "Contingent Warrant").
During 1998, the Contingent Warrant became exercisable for 2.4 million
shares of @Home's Series A common stock and @Home recorded the $74
million fair value of the exercisable portion of the Contingent Warrant
as an intangible asset which is being amortized ratably over 51 months.
During 1998, @Home issued performance-based warrants to certain cable
operators to purchase up to 10.3 million shares of @Home Series A
common stock at an exercise price of $10.50 per share. Warrants to
purchase approximately 920,000 shares of @Home's Series A common stock
became exercisable in 1998. @Home recorded non-cash charges to
operations of $50 million for the fair value of these warrants. Such
charges are included in cost of distribution agreements in the
accompanying consolidated statements of operations and comprehensive
earnings. In the event the performance milestones are met with respect
to the remaining unexercisable performance-based warrants, @Home will
record non-cash charges to operations in future periods based on the
difference between the then fair market value of @Home's Series A
common stock and the exercise price of $10.50 per share.
(continued)
II-114
<PAGE> 169
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(19) Income Taxes
TCI files a consolidated federal income tax return with all of its
80%-or-more owned subsidiaries. Consolidated subsidiaries in which the
Company owns less than 80% each file a separate income tax return. TCI
and such subsidiaries calculate their respective tax liabilities on a
separate return basis which are combined in the accompanying
consolidated financial statements.
Income tax benefit (expense) for the years ended December 31, 1998,
1997 and 1996 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
---------- ---------- ----------
amounts in millions
<S> <C> <C> <C>
Year ended December 31, 1998:
Federal $ (115) (1,244) (1,359)
State and local (19) (217) (236)
---------- ---------- ----------
$ (134) (1,461) (1,595)
========== ========== ==========
Year ended December 31, 1997:
Federal $ (10) 264 254
State and local (31) 11 (20)
---------- ---------- ----------
$ (41) 275 234
========== ========== ==========
Year ended December 31, 1996:
Federal $ (25) (184) (209)
State and local (13) (49) (62)
---------- ---------- ----------
$ (38) (233) (271)
========== ========== ==========
</TABLE>
Income tax benefit (expense) differs from the amounts computed by
applying the federal income tax rate of 35% as a result of the
following:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
1998 1997 1996
---------- ---------- ----------
amounts in millions
<S> <C> <C> <C>
Computed "expected" tax benefit (expense) $ (1,238) 278 (197)
Amortization not deductible for tax purposes (37) (27) (22)
Minority interest in losses (earnings)of
consolidated subsidiaries 32 27 (3)
Gain on sale of subsidiary stock 31 21 --
State and local income taxes, net of federal
income tax benefit (153) (5) (50)
Increase in valuation allowance (43) (26) (24)
Settlement of tax contingencies (99) -- --
Effect of deconsolidations on deferred taxes (34) -- --
Other (54) (34) 25
---------- ---------- ----------
$ (1,595) 234 (271)
========== ========== ==========
</TABLE>
(continued)
II-115
<PAGE> 170
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are presented below:
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
---------- ----------
amounts in millions
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 853 920
Less - valuation allowance (227) (183)
Investment tax credit carryforwards 74 117
Less - valuation allowance (40) (41)
Alternative minimum tax credit carryforwards 153 95
Gains deferred for financial statement purposes 210 --
Future deductible amount attributable to accrued
stock appreciation rights and deferred compensation 387 132
Future deductible amounts principally due to
non-deductible accruals 133 150
Other 20 5
---------- ----------
Net deferred tax assets 1,563 1,195
---------- ----------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation 1,099 1,295
Franchise costs, principally due to differences in
amortization 3,429 4,354
Investment in affiliates, due principally to
undistributed earnings of affiliates 6,455 1,277
Deferred intercompany gains 151 181
Other 178 192
---------- ----------
Total gross deferred tax liabilities 11,312 7,299
---------- ----------
Net deferred tax liability $ 9,749 6,104
========== ==========
</TABLE>
The valuation allowance for deferred tax assets as of December 31,
1998 and 1997 was $267 million and $224 million, respectively.
At December 31, 1998, the Company had net operating loss carryforwards
for income tax purposes aggregating approximately $1,555 million of
which, if not utilized to reduce taxable income in future periods, $3
million expires in 2001, $69 million in 2002, $82 million in 2003, $66
million in 2004, $332 million in 2005, $221 million in 2006, $267
million in 2010, $226 million in 2011, $210 million in 2012 and $79
million in 2013. Certain subsidiaries of the Company had additional net
operating loss carryforwards for income tax purposes aggregating
approximately $488 million and these net operating losses are subject
to certain rules limiting their usage. In addition, certain
subsidiaries of the Company file their own separate federal and state
tax returns. These subsidiaries had additional net operating loss
carryforwards aggregating approximately $94 million. These net
operating losses are subject to certain rules limiting their usage.
(continued)
II-116
<PAGE> 171
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Upon consummation of the AT&T Merger, Liberty/Ventures Group became
entitled to the benefit of 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. See note 2.
At December 31, 1998, the Company had remaining available investment
tax credits of approximately $63 million which, if not utilized to
offset future federal income taxes payable, expire at various dates
through 2005. Certain subsidiaries of the Company had additional
investment tax credit carryforwards aggregating approximately $63
million and these investment tax credit carryforwards are subject to
certain rules limiting their usage.
During 1998, TCI settled examinations by the IRS of certain federal
income tax returns for the years 1983 through 1992. Certain of the
federal income tax returns of TCI and its subsidiaries which filed
separate income tax returns are presently under examination by the
Internal Revenue Service (the "IRS") for the years 1993 through 1995
(the "IRS Examinations"). In the opinion of management, any additional
tax liability, not previously provided for, resulting from the IRS
Examinations ultimately determined to be payable, should not have a
material adverse effect on the consolidated financial position of the
Company.
(20) Commitments and Contingencies
On October 5, 1992, the United States Congress enacted the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"). In 1993 and 1994, the FCC adopted certain rate regulations
required by the 1992 Cable Act and imposed a moratorium on certain rate
increases. As a result of such actions, the Company's basic and tier
service rates and its equipment and installation charges (the
"Regulated Services") are subject to the jurisdiction of local
franchising authorities and the FCC. Basic and tier service rates are
evaluated against competitive benchmark rates as published by the FCC,
and equipment and installation charges are based on actual costs. Any
rates for Regulated Services that exceeded the benchmarks were reduced
as required by the 1993 and 1994 rate regulations. The rate regulations
do not apply to the relatively few systems which are subject to
"effective competition" or to services offered on an individual service
basis, such as premium movie and pay-per-view services.
The Company believes that it has complied in all material respects with
the provisions of the 1992 Cable Act, including its rate setting
provisions. However, the Company's rates for Regulated Services are
subject to review by the FCC, if a complaint has been filed by a
customer, or the appropriate franchise authority, if such authority has
been certified by the FCC to regulate rates. If, as a result of the
review process, a system cannot substantiate its rates, it could be
required to retroactively reduce its rates to the appropriate benchmark
and refund the excess portion of rates received. Any refunds of the
excess portion of tier service rates would be retroactive to the date
of complaint. Any refunds of the excess portion of all other Regulated
Service rates would be retroactive to one year prior to the
implementation of the rate reductions.
(continued)
II-117
<PAGE> 172
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company is obligated to pay fees for the rights to exhibit certain
films that are released by various producers through 2017 (the "Film
Licensing Obligations"). Based on customer levels at December 31, 1998,
these agreements require minimum payments aggregating approximately
$808 million. The aggregate amount of the Film Licensing Obligations
under these license agreements is not currently estimable because such
amount is dependent upon the number of qualifying films released
theatrically by certain motion picture studios as well as the domestic
theatrical exhibition receipts upon the release of such qualifying
films. Nevertheless, required aggregate payments under the Film
Licensing Obligations could prove to be significant.
The Company is a party to affiliation agreements with programming
suppliers. Pursuant to certain of such agreements, the Company is
committed to carry such suppliers' programming on its cable systems.
Additionally, certain of such agreements provide for penalties and
charges in the event the programming is not carried or not delivered to
a contractually specified number of customers.
The Company is committed to purchase billing services from an
unaffiliated third party pursuant to three successive five year
agreements. Pursuant to such arrangement, the Company is obligated at
December 31, 1998 to make minimum payments aggregating approximately
$1.6 billion through 2012. Such minimum payments are subject to
inflation and other adjustments pursuant to the terms of the underlying
agreements.
The Company has guaranteed notes payable and other obligations of
affiliated and other companies with outstanding balances of
approximately $415 million at December 31, 1998. As described in note
10, the Company also has provided certain credit enhancements with
respect to obligations of the 1998 Joint Ventures. The Company also has
guaranteed the performance of certain affiliates and other parties with
respect to such parties' contractual and other obligations. Although
there can be no assurance, management of the Company believes that it
will not be required to meet its obligations under such guarantees, or
if it is required to meet any of such obligations, that they will not
be material to the Company.
Subsequent to December 31, 1998, a subsidiary of the Company agreed to
enter into a contribution agreement ("Contribution Agreement") with
certain shareholders of Primestar, Inc. ("Primestar") pursuant to which
the Company would, to the extent it is relieved of $166.3 million of
contingent liabilities currently owed to certain creditors of Primestar
and its subsidiaries, contribute $166.3 million to Primestar to the
extent necessary to satisfy liabilities of Primestar. During the fourth
quarter of 1998, the Company recorded a $90 million charge to provide
for the estimated losses that are expected to result from the
Contribution Agreement. The Company's obligation under the Contribution
Agreement will expire in 2001.
TINTA has guaranteed the obligation of an affiliate ("The Premium Movie
Partnership") to pay fees for the license to exhibit certain films
through 2000. Although the aggregate amount of The Premium Movie
Partnership's license fee obligations is not currently estimable, TINTA
believes that the aggregate payments pursuant to such obligations could
be significant. If TINTA were to fail to fulfill its obligations under
the guarantee, the beneficiaries have the right to demand an aggregate
payment from TINTA of approximately $26 million. Although TINTA has not
had to perform under such guarantee to date, TINTA cannot be certain
that it will not be required to perform under such guarantee in the
future.
(continued)
II-118
<PAGE> 173
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company leases business offices, has entered into converter lease
agreements, pole rental agreements, transponder lease agreements and
uses certain equipment under lease arrangements. Rental expense under
such arrangements amounted to $230 million, $212 million and $187
million in 1998, 1997 and 1996, respectively.
Future minimum lease payments under noncancellable operating leases for
each of the next five years are summarized as follows (amounts in
millions):
<TABLE>
<CAPTION>
Years ending
December 31,
----------------------
<S> <C>
1999 $ 153
2000 130
2001 111
2002 97
2003 83
Thereafter 309
</TABLE>
It is expected that, in the normal course of business, expiring leases
will be renewed or replaced by leases on other properties.
Effective as of December 16, 1997, NDTC, a subsidiary of TCI, on behalf
of TCIC and other cable operators that may be designated from time to
time by NDTC ("Approved Purchasers"), entered into an agreement (the
"Digital Terminal Purchase Agreement") with General Instrument
Corporation ("GI") to purchase advanced digital set-top devices. The
hardware and software incorporated into these devices are designed and
manufactured to be compatible and interoperable with the OpenCable(TM)
architecture specifications adopted by CableLabs, the cable television
industry's research and development consortium, in November 1997. NDTC
has agreed that Approved Purchasers will purchase, in the aggregate, a
minimum of 6.5 million set-top devices during calendar years 1998, 1999
and 2000 at an average price of $318 per set-top device. Through
December 31, 1998, approximately 1.6 million set-top devices had been
purchased pursuant to this commitment. GI agreed to provide NDTC and
its Approved Purchasers the most favorable prices, terms and conditions
made available by GI to any customer purchasing advanced digital
set-top devices. In connection with NDTC's purchase commitment, GI
agreed to grant warrants to purchase its common stock proportional to
the number of devices ordered by each organization, which as of the
effective date of the Digital Terminal Purchase Agreement, would have
represented at least a 10% equity interest in GI (on a fully diluted
basis). Such warrants vest as annual purchase commitments are met. On
December 31, 1998, the Company vested in 4,928,000 warrants pursuant to
such arrangements. Such warrants were recorded at their fair value of
$64 million on such date resulting in a reduction in the basis of the
set-top devices. Vested warrants are accounted for as
available-for-sale securities in the Company's consolidated financial
statements. NDTC has the right to terminate the Digital Terminal
Purchase Agreement if, among other reasons, GI fails to meet a material
milestone designated in the Digital Terminal Purchase Agreement with
respect to the development, testing and delivery of advanced digital
set-top devices.
(continued)
II-119
<PAGE> 174
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On July 17, 1998, the Company acquired 21.4 million shares of common
stock of GI in exchange for (i) certain of the assets of NDTC's set-top
authorization business, (ii) the license of certain related software to
GI, (iii) a $50 million promissory note from the Company to GI, and
(iv) a nine-year revenue guarantee from the Company in favor of GI. In
connection therewith, NDTC also entered into a services agreement
pursuant to which it will provide certain postcontract services to GI's
set-top authorization business. The 21.4 million shares of GI common
stock are, in addition to other transfer restrictions, restricted as to
their sale by NDTC for a three year period, and represent approximately
13% of the outstanding common stock of GI at December 31, 1998. The
Company recorded its investment in such shares at fair value which
included a discount attributable to the above-described liquidity
restriction. The Company carries its investment in such shares at the
lower of cost or net realizable value. The $346 million excess of the
fair value of GI common stock received over (i) the book value of
certain assets transferred from NDTC to GI, and (ii) the $42 million
present value of the promissory note due from the Company to GI, has
been deferred by the Company in the accompanying consolidated financial
statements. A portion of such excess equal to the $160 million present
value of the annual amounts specified by the revenue guarantee will be
amortized to revenue over nine years in proportion to such annual
guaranteed amounts. The remaining $186 million excess will be amortized
to revenue on a straight-line basis over the nine-year period that NDTC
is required to perform postcontract services.
Certain key employees of the Company and members of the Board hold
restricted stock awards, options and options with tandem SARs to
acquire shares of certain subsidiaries' common stock. Estimates of the
compensation related to SARs have been recorded in the accompanying
consolidated financial statements pursuant to APB Opinion No. 25. Such
estimates are subject to future adjustment based upon the market value
of the respective common stock and, ultimately, on the final market
value when the rights are exercised.
Estimates of compensation relating to phantom stock appreciation rights
granted to employees of a subsidiary of TCI have been recorded in the
accompanying consolidated financial statements, but are subject to
future adjustment based upon a valuation model derived from such
subsidiary's cash flow, working capital and debt.
The Company has contingent liabilities related to legal proceedings and
other matters arising in the ordinary course of business. Although it
is reasonably possible the Company may incur losses upon conclusion of
such matters, an estimate of any loss or range of loss cannot be made.
In the opinion of management, it is expected that amounts, if any,
which may be required to satisfy such contingencies will not be
material in relation to the accompanying consolidated financial
statements.
(continued)
II-120
<PAGE> 175
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(21) Year 2000
During 1998, the Company continued its enterprise-wide, comprehensive
efforts to assess and remediate its computer systems and related
software and equipment to ensure such systems, software and equipment
recognize, process and store information in the year 2000 and
thereafter. The Company's year 2000 remediation efforts include an
assessment of its most critical systems, such as customer service and
billing systems, headends and other cable plant systems that support
the Company's programming services, business support operations, and
other equipment and facilities. The Company also continued its efforts
to verify the year 2000 readiness of its significant suppliers and
vendors and continued to communicate with significant business partners
and affiliates to assess such partners and affiliates' year 2000
status.
The Company has a year 2000 Program Management Office (the "PMO") to
organize and manage its year 2000 remediation efforts. The PMO is
responsible for overseeing, coordinating and reporting on the Company's
year 2000 remediation efforts.
During 1998, the Company continued its survey of significant
third-party vendors and suppliers whose systems, services or products
are important to the Company's operations (e.g., suppliers of
addressable controllers and set-top devices, and the provider of the
Company's billing services). The year 2000 readiness of such providers
is critical to continued provision of the Company's cable service.
In addition to the survey process described above, management of the
Company has identified its most critical supplier/vendor relationships
and has instituted a verification process to determine the vendor's
year 2000 readiness. Such verification includes, as deemed necessary,
reviewing vendors' test and other data and engaging in regular
conferences with vendors' year 2000 teams. The Company is also
requiring testing to validate the year 2000 compliance of certain
critical products and services.
Significant market value is associated with the Company's investments
in certain public and private corporations, partnerships and other
businesses. Accordingly, the Company is monitoring the public
disclosure of such publicly-held business entities to determine their
year 2000 readiness. In addition, the Company has surveyed and
monitored the year 2000 status of certain privately-held business
entities in which the Company has significant investments.
Year 2000 expenses and capital expenditures incurred during the year
ended December 31, 1998 were $11 million and $2 million, respectively.
Management of the Company currently estimates the remaining costs to be
not less than $113 million, bringing the total estimated cost
associated with the Company's year 2000 remediation efforts to be not
less than $126 million (including $33 million for replacement of
noncompliant information technology systems). Also included in this
estimate is $14 million in future payments to be made pursuant to
unfulfilled executory contracts or commitments with vendors for year
2000 remediation services.
(continued)
II-121
<PAGE> 176
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The failure to correct a material year 2000 problem could result in an
interruption or failure of certain important business operations. There
can be no assurance that the Company's systems or the systems of other
companies on which the Company relies will be converted in time or that
any such failure to convert by the Company or other companies will not
have a material adverse effect on its financial position, results of
operations or cash flows.
(22) Information about the Company's Operating Segments
The Company has two reportable operating segments: domestic cable and
communications services and domestic programming services. Domestic
cable and communications services receives video, audio and data
signals from various sources, and amplify and distribute the signals by
coaxial cable and optical fiber to the premises of customers who pay a
fee for the service. Domestic programming services are produced,
acquired, and distributed, through all available formats and media,
branded entertainment and informational programming and software,
including multimedia products, delivered in both analog and digital
form. The Company's domestic cable and communications services business
and assets were included in TCI Group, and the Company's domestic
programming business and assets were included in Liberty Media Group.
The Company's principal international businesses and assets and the
Company's remaining non-cable and non-programming domestic businesses
and assets were included in TCI Ventures Group.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company
evaluates performance based on a measure of operating cash flow
(operating income before depreciation, amortization, other non-cash
items, year 2000 costs, AT&T merger costs and stock compensation).
Operating cash flow is a measure of value and borrowing capacity within
the cable television industry and is not intended to be a substitute
for cash flow provided by operating activities, a measure of
performance prepared in accordance with generally accepted accounting
principles, and should not be relied upon as such. The Company
generally accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, that is, at current market prices.
The Company's reportable segments are strategic business units that
offer different products and services. They are managed separately
because each segment requires different technology and marketing
strategies.
(continued)
II-122
<PAGE> 177
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company utilizes the following financial information for purposes
of making decisions about allocating resources to a segment and
assessing a segment's performance:
<TABLE>
<CAPTION>
Domestic cable Domestic
& communications programming All
services services other Total
------------------ ------------- ------- -----
amounts in millions
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Revenues from external customers
including intersegment revenue $ 6,022 680 947 7,649
Intersegment revenue -- 232 66 298
Segment operating cash flow 2,469 100 143 2,712
Year ended December 31, 1997:
Revenues from external customers
including intersegment revenue $ 6,429 374 969 7,772
Intersegment revenue -- 173 29 202
Segment operating cash flow 2,766 55 154 2,975
Year ended December 31, 1996:
Revenues from external customers
including intersegment revenue $ 5,881 1,339 926 8,146
Intersegment revenue -- 107 17 124
Segment operating cash flow 2,016 164 96 2,276
As of December 31, 1998
Segment assets $ 21,476 10,181 10,630 42,287
Investment in equity method
investees 1,686 1,979 1,708 5,373
Expenditures for segment assets 1,773 19 125 1,917
As of December 31, 1997
Segment assets $ 23,578 5,039 3,934 32,551
Investment in equity method
investees 414 524 2,113 3,051
Expenditures for segment assets 538 4 167 709
</TABLE>
(continued)
II-123
<PAGE> 178
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A reconciliation of reportable segment amounts to the Company's
consolidated balances is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------
1998 1997 1996
----------- ----------- -----------
amounts in millions
<S> <C> <C> <C>
Revenue
Total revenue for reportable segments $ 6,702 6,803 7,220
Other revenue 947 969 926
Elimination of intersegment revenue (298) (202) (124)
----------- ----------- -----------
Total consolidated revenue $ 7,351 7,570 8,022
=========== =========== ===========
Reconciliation of Operating Cash Flow to Earnings
(Loss) Before Income Tax
Total operating cash flow for reportable segments $ 2,569 2,821 2,180
Other operating cash flow 143 154 96
Other items excluded from operating cash flow:
Year 2000 costs (11) -- --
AT&T merger costs (14) -- --
Stock compensation (866) (488) 13
Reserve for loss arising from contingent
obligation (90) -- --
Cost of distribution agreements (50) -- --
Impairment of assets (5) (15) --
Restructuring charges -- -- (41)
Depreciation (1,121) (1,077) (1,093)
Amortization (614) (546) (523)
Interest expense (1,061) (1,160) (1,096)
Interest and dividend income 122 88 64
Share of losses of affiliates, net (1,384) (930) (450)
Loss on early extinguishment of debt (60) (39) (71)
Minority interest in earnings of
consolidated subsidiaries, net (88) (154) (56)
Gains on issuance of equity interests by
subsidiaries 89 60 --
Gains on issuance of stock by equity
investees 268 112 12
Gains on disposition of assets, net 5,760 401 1,593
Other, net (49) (22) (65)
----------- ----------- -----------
Earnings (loss) before income taxes $ 3,538 (795) 563
=========== =========== ===========
</TABLE>
(continued)
II-124
<PAGE> 179
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
As of December 31,
----------------------------
1998 1997
----------- -----------
amounts in millions
<S> <C> <C>
Assets
Total assets for reportable segments $ 31,657 28,617
Other segment assets 10,630 3,934
Consolidating and eliminating adjustments (436) (74)
----------- -----------
Consolidated total $ 41,851 32,477
=========== ===========
Other Significant Items
Equity method investments for reportable segments $ 3,665 938
Other equity method investments 1,708 2,113
Consolidating and eliminating adjustments (608) 12
----------- -----------
Consolidated equity method investments $ 4,765 3,063
=========== ===========
Expenditures for reportable segment assets $ 1,792 542
Other asset expenditures 125 167
----------- -----------
Consolidated total asset expenditures $ 1,917 709
=========== ===========
</TABLE>
Substantially all revenue and assets of TCI's reportable segments are
attributed to or located in the United States.
The Company does not have a single external customer which represents
10 percent or more of its consolidated revenues.
(continued)
II-125
<PAGE> 180
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(23) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
amounts in millions,
except per share data
<S> <C> <C> <C> <C>
1998:
Revenue $ 1,872 1,813 1,825 1,841
========= ========= ========= =========
Operating income (loss) $ 43 39 241 (382)
========= ========= ========= =========
Net earnings (loss) $ 346 (299) 1,340 556
========= ========= ========= =========
Basic earnings (loss) attributable to common
stockholders per common share:
TCI Group Stock $ .44 (.28) .09 (.69)
========= ========= ========= =========
Liberty Group Stock $ .85 (.18) (.03) (.20)
========= ========= ========= =========
TCI Ventures Group Stock $ (.46) (.22) 3.07 2.35
========= ========= ========= =========
Diluted earnings (loss) attributable to common
stockholders per common and potential common share:
TCI Group Stock $ .38 (.28) .08 (.70)
========= ========= ========= =========
Liberty Group Stock $ .78 (.18) (.03) (.20)
========= ========= ========= =========
TCI Ventures Group Stock $ (.46) (.22) 2.88 2.19
========= ========= ========= =========
1997:
Revenue $ 1,821 1,882 1,934 1,933
========= ========= ========= =========
Operating income $ 349 253 222 25
========= ========= ========= =========
Net loss $ (58) (154) (22) (327)
========= ========= ========= =========
Basic earnings (loss) attributable to common
stockholders per common share:
TCI Group Stock $ (.12) (.25) (.34) (.11)
========= ========= ========= =========
Liberty Group Stock $ .04 .02 .44 (.17)
========= ========= ========= =========
TCI Ventures Group Stock $ -- -- .07 (.54)
========= ========= ========= =========
Diluted earnings (loss) attributable to common
stockholders per common and potential common share:
TCI Group Stock $ (.12) (.25) (.34) (.11)
========= ========= ========= =========
Liberty Group Stock $ .04 .02 .40 (.17)
========= ========= ========= =========
TCI Ventures Group Stock $ -- -- .07 (.54)
========= ========= ========= =========
</TABLE>
II-126
<PAGE> 181
PART III.
Item 10. Directors and Executive Officers of the Registrant.
DIRECTORS
Immediately prior to the acquisition of Tele-Communications, Inc. (the
"Company" or "TCI") by AT&T Corp. (the "AT&T Merger") the following individuals
were directors of the Company. The following list includes with respect to such
directors the birth date of each person, the positions with the Company or
principal occupations of each person, certain other directorships held and the
year each person became a director of the Company. After the AT&T Merger,
directors may be appointed and removed by AT&T Corp. ("AT&T").
<TABLE>
<CAPTION>
Name Positions
- -------------------------- ----------------------------------------------
<S> <C>
Donne F. Fisher A director of the Company since June 1994. Mr.
Born May 24, 1938 Fisher was an Executive Vice President of the
Company from January 1994 through January 1,
1996. On January 1, 1996, Mr. Fisher resigned
his position as Executive Vice President of the
Company and has been providing consulting
services to the Company since January 1996. Mr.
Fisher served as an Executive Vice President of
TCI Communications, Inc., a subsidiary of the
Company engaged in the ownership and operation
of cable television systems and the predecessor
company to the Company ("TCIC"), from December
1991 to October 1994. Mr. Fisher has served as
a director of TCIC since 1980, has served as a
director of TCI Pacific Communications, Inc.,
an operator of cable television systems and a
subsidiary of the Company ("TPAC"), since July
1996, and has served as a director of TCI Music
Inc., an operator of music distribution
internet sites and a subsidiary of the Company
("TCI Music"), since January 1997. Mr. Fisher
is a director of General Communications, Inc.
John W. Gallivan A director of the Company since June 1994. Mr.
Born June 28, 1915 Gallivan served as the Chairman of the Board
and a director of Kearns Tribune Corporation, a
newspaper conglomerate ("Kearns"), from 1953
until the acquisition of Kearns by the Company
on July 31, 1997. In August 1997, Mr. Gallivan
was appointed as a director of Kearns following
Kearns becoming a subsidiary of the Company.
Mr. Gallivan served as a director of TCIC from
1980 to August 1994, and has served as a
director of TCIC since January 1996. Mr.
Gallivan is a director of the Silver King
Mining Company.
Paul A. Gould A director of the Company since December 1996.
Born September 27, 1945 Mr. Gould has been a Managing Director and an
Executive Vice President of Allen & Company
Incorporated, an investment banking services
company, for more than the last five years. Mr.
Gould served as a director of
Tele-Communications International, Inc.
("TINTA"), a subsidiary of the Company which
provides cable television and programming
services outside of the United States, from
July 1995 to November 1998. Mr. Gould is a
director of Ascent Entertainment Group, Inc.
and Sunburst Hospitality Corporation.
</TABLE>
(continued)
III-1
<PAGE> 182
<TABLE>
<CAPTION>
Name Positions
- -------------------------- ----------------------------------------------
<S> <C>
Leo J. Hindery, Jr. A director of the Company since May 1997. Mr.
Born October 31, 1947 Hindery has served as Chief Executive Officer
of the Company since the AT&T Merger. Mr.
Hindery has served as the President and Chief
Operating Officer of the Company from March
1997 through the AT&T Merger. Mr. Hindery has
served as President and Chief Executive Officer
of TCIC from March 1997 to June 1998 and since
November 1998. Mr. Hindery has served as
President and Chief Executive Officer of TPAC
since September 1997. Mr. Hindery has served as
a director of TCIC since March 1997, has served
as a director of TPAC since September 1997, and
has served as Chairman of the Board and a
director of TCI Music since January 1997. Mr.
Hindery served as a director of TINTA from
April 1998 to November 1998. In addition, Mr.
Hindery is President, Chief Executive Officer
and/or a director of many of the Company's
subsidiaries. Mr. Hindery was previously
founder, Managing General Partner and Chief
Executive Officer of InterMedia Partners, a
cable TV operator, and its affiliated entities
from 1988 to March 1997. Until March 8, 1999,
Mr. Hindery was a director of United Video
Satellite Group, Inc. (now known as TV Guide,
Inc.) ("UVSG"), a distributor of satellite
based television services that prior to March
1, 1999 was a consolidated subsidiary of the
Company. Mr. Hindery is also a director of At
Home Corporation ("@Home"), a consolidated
subsidiary of the Company, TCI Satellite
Entertainment, Inc., a distributor of
satellite-based television services ("TSAT"),
Cablevision Systems Corporation ("CSC") and
Lenfest Communications, Inc. ("LCI").
Jerome H. Kern A director of the Company since June 1994. Mr.
Born June 1, 1937 Kern is a consultant and has been Vice Chairman
of the Company since June 1998. Mr. Kern was
Special Counsel with the law firm of Baker &
Botts, L.L.P. from July 1996 to June 1998 and
was a senior partner with Baker & Botts, L.L.P.
from September 1992 to July 1996. Mr. Kern
served as a director of TCIC from December 1993
to August 1994, served as a director of TINTA
from May 1995 to November 1998, and has served
as a director of TPAC since February 1998.
Kim Magness A director of the Company since June 1994. Mr.
Born May 17, 1952 Magness manages numerous personal and business
investments, and is Chairman and President of a
company developing liners for irrigation
canals. Mr. Magness served as a director of
TCIC from 1985 to August 1994 and from January
1996 to October 1997. See "Item 11. Executive
Compensation - Compensation Committee
Interlocks and Insider Participation in
Compensation Decisions - Magness and Malone
Transactions" for additional information
concerning certain arrangements between Dr.
Malone and Mr. Magness relating to Mr. Magness'
directorship.
</TABLE>
(continued)
III-2
<PAGE> 183
<TABLE>
<CAPTION>
Name Positions
- -------------------------- ----------------------------------------------
<S> <C>
John C. Malone A director of the Company since June 1994. Dr.
Born March 7, 1941 Malone has served as Chairman of the Board of
the Company since November 1996. Dr. Malone
served as Chief Executive Officer of the
Company from January 1994 through the AT&T
Merger; President of the Company from January
1994 through March 1997; Chief Executive
Officer of TCIC from March 1992 to October
1994; and President of TCIC from 1973 to
October 1994. Dr. Malone served as a director
of TCIC since 1973. Dr. Malone has served as
Chairman of the Board and a director of TINTA
from May 1995 to November 1998 and has served
as a director of TPAC since July 1996. Dr.
Malone is a director of The Bank of New York,
@Home, TSAT, CSC, and LCI. Dr. Malone also
became a director of AT&T upon consummation of
the AT&T Merger.
Robert A. Naify A director of the Company since June 1994. Mr.
Born February 17, 1922 Naify is Co-Chairman and a director of The
Todd-AO Corporation, a provider of services to
the motion picture industry. Mr. Naify served
as a TCIC director from June 1987 to August
1994.
J C Sparkman A director of the Company since December 1996.
Born September 12, 1932 Mr. Sparkman served as an Executive Vice
President of the Company from January 1994 to
March 1995. Mr. Sparkman retired in March 1995
and has provided consulting services to the
Company since March 1995. Mr. Sparkman served
as an Executive Vice President of TCIC from
1987 to October 1994. Mr. Sparkman is a
director of Shaw Communications, Inc. and TCI
Music.
</TABLE>
In connection with the AT&T Merger, Messrs. Fisher, Magness, Naify and
Sparkman resigned as directors of the Company.
(continued)
III-3
<PAGE> 184
EXECUTIVE OFFICERS
Immediately prior to the AT&T Merger the following individuals, in
addition to the directors listed above, were executive officers of the Company.
The following list includes with respect to such executive officers their birth
dates, a description of their business experience and positions held with the
Company immediately prior to the AT&T Merger. All officers are appointed for an
indefinite term, serving at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Name Positions
- -------------------------- ----------------------------------------------
<S> <C>
Robert R. Bennett Has served as an Executive Vice President of
Born April 19, 1958 the Company since April 1997. Mr. Bennett has
served as President and Chief Executive Officer
of Liberty Media Corporation ("Liberty"), a
subsidiary of the Company engaged in the
production and distribution of television
programming services, since April 1997. From
June 1995 through March 1997, Mr. Bennett was
an Executive Vice President and Chief Financial
Officer, Secretary and Treasurer of Liberty.
Mr. Bennett served as Senior Vice President of
Liberty from September 1991 to June 1995.
Stephen M. Brett Has served as an Executive Vice President, the
Born September 20, 1940 General Counsel, and the Secretary of the
Company since January 1994. Mr. Brett has
served as an Executive Vice President of TCIC
since October 1997, served as a Senior Vice
President of TCIC from 1991 to October 1997,
and has served as General Counsel of TCIC since
1991. Mr. Brett is a Vice President and
Secretary of most of the Company's
subsidiaries.
William R. Fitzgerald Mr. Fitzgerald has served as Chief Operating
Born May 20, 1957 Officer of TCIC since November 1998 and as an
Executive Vice President of TCIC since December
1997. Mr. Fitzgerald served as a Senior Vice
President of TCIC from March 1996 to December
1997. Mr. Fitzgerald serves as a Vice President
of various subsidiaries of the Company. Mr.
Fitzgerald was a Senior Vice President and a
Partner in Daniels & Associates, a brokerage
and investment banking company, from 1988 to
1996.
Gary S. Howard Has served as an Executive Vice President of
Born February 22, 1951 the Company since December 1997. Mr. Howard has
served as Executive Vice President and Chief
Operating Officer of Liberty since March 1999.
Mr. Howard has served as President and Chief
Executive Officer of TCI Ventures Group, LLC
("TVG LLC"), a subsidiary of the Company
engaged in international cable, telephony and
programming businesses, from December 1997
through the AT&T Merger. Mr. Howard has served
as Chief Executive Officer of TSAT since
December 1996 and also served as President of
TSAT from February 1995 to August 1997. Since
June 1997, Mr. Howard also has served as
Chairman of the Board and Chief Executive
Officer of UVSG. Mr. Howard served as President
of UVSG from June 1997 to September 1997, a
Senior Vice President of TCIC from October 1994
to December 1996 and as a Vice President of
TCIC from December 1991 to October 1994.
</TABLE>
(continued)
III-4
<PAGE> 185
<TABLE>
<CAPTION>
Name Positions
- -------------------------- ----------------------------------------------
<S> <C>
Marvin L. Jones Has served as an Executive Vice President of
Born September 11, 1937 the Company since April 1998. Mr. Jones served
as President and Chief Executive Officer of
TCIC from June 1998 to November 1998. Mr. Jones
served as an Executive Vice President and the
Chief Operating Officer of TCIC from March 1997
to June 1998. Mr. Jones was appointed a
director of TCIC in October 1997. From November
1996 to March 1997, Mr. Jones served as the
President of one of TCIC's three cable units.
Previously, Mr. Jones was a consultant in the
cable television industry from 1991 to November
1996. Mr. Jones serves as a Vice President or
the President of various subsidiaries of the
Company.
Ann M. Koets Ms. Koets has served as an Executive Vice
Born January 21, 1958 President of TCIC since December 1997. Ms.
Koets served as a Senior Vice President of TCIC
from May 1997 to December 1997 and has served
in various other capacities with TCIC for more
than the past five years. Ms. Koets is a Vice
President of most of the Company's
subsidiaries.
Larry E. Romrell Has served as an Executive Vice President of
Born December 30, 1939 the Company since January 1994 through the AT&T
Merger. Mr. Romrell is currently a consultant
to the Company. Mr. Romrell has served as the
Executive Vice President and Chief Executive
Officer of TCI Business Alliance and Technology
Co., Inc., a subsidiary of the Company which
oversees and develops the Company's technology
activities, a Senior Vice President of TVG LLC
since December 1997, and the President of TCI
Technology Ventures, Inc., a subsidiary of the
Company which invests in and develops companies
engaged in advancing telecommunications
technology, from September 1994 to October
1997. Mr. Romrell served as a Senior Vice
President of TCIC from 1991 to October 1994.
Bernard W. Schotters, II Has served as a Senior Vice President and
Born November 25, 1944 Treasurer of the Company since October 1997.
Mr. Schotters has served as an Executive Vice
President and Treasurer of TCIC since January
1998 and served as the Senior Vice President --
Finance of TCIC from December 1991 to December
1997. Mr. Schotters has served as the Treasurer
of TCIC since December 1991. Mr. Schotters is a
Vice President and the Treasurer of most of the
Company's subsidiaries.
</TABLE>
After the AT&T Merger, one or more of the foregoing executive officers
may resign their positions with the Company.
There are no family relations, of first cousin or closer, among the
Company's directors or executive officers, by blood, marriage or adoption.
During the past five years, none of the above persons has had any
involvement in such legal proceedings as would be material to an evaluation of
his or her ability or integrity.
(continued)
III-5
<PAGE> 186
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires TCI's executive officers and directors, and persons who own more than
ten percent of a registered class of TCI's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish TCI with copies of all Section 16(a) forms
they file.
Based solely on review of the copies of such Forms 3, 4 and 5 and
amendments thereto furnished to TCI with respect to its most recent fiscal year,
or written representations that no Forms 5 were required, TCI believes that,
during the year ended December 31, 1998, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with except that one report, covering two transactions,
were filed late by Mr. Gary S. Howard, an officer of the Company; one report,
covering one transaction, was filed late by Dr. John C. Malone, a director and
officer of the Company; and one report, covering one transaction, was filed late
by Mr. Gallivan, a director of the Company.
Item 11. Executive Compensation.
Background of Stock Adjustments.
On December 4, 1996, the Company distributed (the "Satellite
Distribution") to the holders of shares of TCI Group Series A Stock and TCI
Group Series B Stock all of the issued and outstanding common stock of TSAT.
Prior to December 4, 1996, certain directors, officers and employees of TCI and
its subsidiaries were granted options to purchase shares of TCI Group Series A
Stock ("TCI Options") and stock appreciation rights with respect to shares of
TCI Group Series A Stock ("TCI SARs"). The TCI Options and the TCI SARs have
been granted pursuant to various stock incentive plans of the Company (the "TCI
Plans"). The TCI Plans give the Board of Directors of the Company the authority
to make equitable adjustments to outstanding TCI Options and TCI SARs in the
event of certain types of transactions, including transactions such as the
Satellite Distribution.
The Board of Directors determined that, immediately prior to the
Satellite Distribution, each TCI Option would be divided into two separately
exercisable options: (a) an option to purchase TCI Satellite Entertainment, Inc.
Series A Common Stock ("TSAT Option"), exercisable for the number of shares of
TCI Satellite Entertainment, Inc. Series A Common Stock ("TSAT Series A Stock")
that would have been issued in the Satellite Distribution in respect of the
shares of TCI Group Series A Stock subject to the applicable TCI Option, if such
TCI Option had been exercised in full immediately prior to the record date of
the Satellite Distribution, and containing substantially equivalent terms as the
existing TCI Option; and (b) an option to purchase TCI Group Series A Stock (a
"TCI Group Series A Option"), exercisable for the same number of shares of TCI
Group Series A Stock as the corresponding TCI Option had been. The aggregate
exercise price of each TCI Option was allocated between the TSAT Option and the
TCI Group Series A Option into which it was divided, and all other terms,
including date of grant, of the TSAT Option and TCI Group Series A Option are in
all material respects the same as the terms of such TCI Option. Similar
adjustments were made to the outstanding TCI SARs, resulting in the holders
thereof holding TCI Group Series A SARs and TSAT SARs instead of TCI SARs, and
to outstanding restricted stock awards, resulting in the holders thereof holding
restricted shares of TSAT Series A Stock in addition to restricted shares of TCI
Group Series A Stock. The foregoing adjustments were made pursuant to the
anti-dilution provisions of the TCI Plans pursuant to which the respective TCI
Options and TCI SARs were granted.
(continued)
III-6
<PAGE> 187
Prior to the Satellite Distribution, the Company and TSAT entered into
an agreement to sell to each other from time to time at the then current market
price shares of TCI Group Series A Stock and TSAT Series A Stock, respectively,
as necessary to satisfy their respective obligations under the plans.
Effective January 14, 1997, the Company issued a stock dividend to
holders of Liberty Group Series A Stock and Liberty Group Series B Stock
consisting of one share of Liberty Group Series A Stock for every two shares of
Liberty Group Series A Stock owned and one share of Liberty Group Series A Stock
for every two shares of Liberty Group Series B Stock owned (the "1997 Liberty
Group Stock Dividend"). As a result of the 1997 Liberty Group Stock Dividend,
the number of shares underlying options granted in tandem with stock
appreciation rights to purchase Liberty Group Series A Stock and the exercise
prices of such options in tandem with stock appreciation rights have been
adjusted.
On September 10, 1997, the Company concluded an exchange offer with its
stockholders (the "Exchange Offer") whereby the Company issued shares of two new
series of tracking stocks, the Ventures Group Series A Stock and the Ventures
Group Series B Stock. Pursuant to the Exchange Offer, the Company offered to
exchange: (a) shares of Ventures Group Series A Stock for TCI Group Series A
Stock; and (b) shares of Ventures Group Series B Stock for TCI Group Series B
Stock.
As stated above, the TCI Plans give the Company's Board of Directors
the authority to make equitable adjustments to outstanding TCI Options and TCI
SARs in the event of certain types of transactions, of which the Exchange Offer
was one. The Compensation Committee of the Board of Directors elected to adjust
the TCI Group Series A Options and TCI Group Series A SARs to reflect the
expected shift of attributed value from the TCI Group Common Stock to the newly
created Ventures Group Common Stock. As a result, the TCI Group Series A Options
outstanding immediately prior to the Exchange Offer have been canceled and
reissued as two separately exercisable options: (a) with 70% of the shares of
TCI Group Series A Stock underlying the TCI Group Series A Options allocated to
an option to purchase TCI Group Series A Stock; and (b) with 30% of the shares
of TCI Group Series A Stock underlying the TCI Group Series A Options allocated
to an option to purchase Ventures Group Series A Stock. The terms of these
adjusted options, including the exercise price and the date of grant, are in all
material respects the same as the terms of the TCI Group Series A Options. The
Board of Directors made corresponding adjustments to outstanding TCI Group
Series A SARs.
Effective February 6, 1998, the Company issued a stock dividend to
holders of Liberty Media Group Common Stock consisting of one share of Liberty
Group Series A Stock for every two shares of Liberty Group Series A Stock held
and one share of Liberty Group Series B Stock for every two shares of Liberty
Group Series B Stock held (the "1998 Liberty Stock Dividend"). In addition, the
Company issued a stock dividend to holders of Ventures Group Common Stock
consisting of one share of Ventures Group Series A Stock for each share of
Ventures Group Series A Stock held and one share of Ventures Group Series B
Stock for each share of Ventures Group Series B Stock held (the "1998 Ventures
Stock Dividend" and together with the 1998 Liberty Stock Dividend, the "1998
Stock Dividends"). As a result of the 1998 Stock Dividends, the number of shares
underlying the options granted in tandem with stock appreciation rights to
purchase Liberty Group Series A Stock, Ventures Group Series A Stock, and
Ventures Group Series B Stock, respectively, and the respective exercise prices
of such options in tandem with stock appreciation rights have been adjusted.
(continued)
III-7
<PAGE> 188
On November 19, 1998, the Company acquired all of the outstanding
shares of common stock of TINTA not already beneficially owned by the Company,
(the "TINTA Merger"). Each outstanding share of TINTA Series A Common Stock was
converted into .58 of a share of Liberty Group Series A Stock. As a result, the
number of shares underlying the options granted in tandem with stock
appreciation rights to purchase TINTA Series A Common Stock and the respective
exercise prices have been converted into options granted in tandem with stock
appreciation rights to purchase Liberty Group Series A Stock.
On March 9, 1999, AT&T acquired TCI in a merger in which Italy Merger
Corp., a wholly-owned subsidiary of AT&T, merged with and into TCI, and TCI
thereby became a wholly-owned subsidiary of AT&T. As a result of the AT&T
Merger, shares of TCI's common stocks and certain shares of preferred stock were
converted into AT&T securities. See "Item 8. Financial Statements and
Supplementary Data" for additional information regarding the AT&T Merger.
(a) Summary Compensation Table of Tele-Communications, Inc.
The following table shows, for the three years ended December 31, 1998,
all forms of compensation for the Chief Executive Officer and each of the four
most highly compensated executive officers of TCI, whose total annual salary and
bonus exceeded $100,000 for the year ended December 31, 1998. The following
table has not been adjusted to reflect the impact of the AT&T Merger.
<TABLE>
<CAPTION>
Long-term Compensation
---------------------------------
Annual Compensation Awards
----------------------------------------------- ---------------------------------
Securities
Restricted Underlying
Other Annual Stock Options/ All Other
Name and Principal Compensation Award(s) SARs Compensation
Position Year Salary ($) Bonus ($) ($) ($) (#) (1) ($)
- -------------------- ---- ------------ ----------- ------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
John C. Malone 1998 $ 950,000 $ --- $ --- $ --- --- $ 15,000 (5)
Chairman of the 1997 $ 819,346 $ --- $ 3,318 (2) $ --- 2,800,000 (3) $ 15,000 (5)
Board and Chief 1996 $ 900,000 $ --- $ 4,496 (2) $ --- 29,000 (4) $ 17,500 (5)(6)
Executive Officer
Leo J. Hindery, Jr. 1998 $ 946,538 $ --- $ 102,102 (8) $38,687,500 (9) --- $ 15,000 (5)
President and 1997 $ 617,961(7) $ --- $ 92,727 (8) $ 3,162,500 (10) 5,267,334 (11)(12)(20) $ 34,462 (13)
Chief Operating 1996 $ --- $ --- $ --- $ --- --- $ ---
Officer
Stephen M. Brett 1998 $ 580,192 $ --- $ --- $ 3,723,125 (14) --- $ 15,000 (5)
Executive Vice 1997 $ 482,250 $ --- $ 2,796 (2) $ --- 627,500 (12) $ 15,000 (5)
President 1996 $ 450,000 $ --- $ 4,239 (2) $ --- --- $ 15,000 (5)
Larry E. Romrell 1998 $ 580,192 $ --- $ --- $ 3,723,125 (14) --- $ 15,000 (5)
Executive Vice 1997 $ 549,615 $ --- $ 2,782 (2) $ --- 351,000 (12)(15) $ 15,000 (5)
President 1996 $ 500,000 $ --- $ 4,910 (2) $ --- 694,096 (16)(21) $ 15,000 (5)
Marvin L. Jones 1998 $ 580,192 $ --- $ --- $ 3,602,813 (18) --- $ 15,000 (5)
Executive Vice 1997 $ 498,791 $ --- $ --- $ --- 448,500 (12)(15) $ 15,000 (5)
President 1996 $ 61,207(17) $ --- $ --- $ --- --- $ 386,653 (19)
</TABLE>
- --------------------
(1) Adjusted to reflect the effect of the Satellite Distribution, the 1997
Liberty Group Stock Dividend, the Exchange Offer, the 1998 Stock Dividends,
and the TINTA Merger.
(continued)
III-8
<PAGE> 189
(2) Consists of amounts reimbursed during the year indicated for the payment of
taxes.
(3) On December 16, 1997, pursuant to the Tele-Communications, Inc. 1998
Incentive Plan (the "1998 Incentive Plan"), Dr. Malone was granted options
in tandem with stock appreciation rights to acquire 2,800,000 shares of
Ventures Group Series B Stock at an exercise price of $10.37 per share. The
options in tandem with stock appreciation rights granted to Dr. Malone vest
evenly over five years with such vesting period beginning on December 16,
1997. Such options with tandem stock appreciation rights first became
exercisable on December 16, 1998 and expire on December 16, 2007.
Notwithstanding the vesting schedule as set forth in Dr. Malone's option
agreement, the option shares and stock appreciation rights shall
immediately vest and become exercisable if Dr. Malone's employment with
TCI: (a) shall terminate by reason of: (i) termination by TCI without
cause; (ii) termination by Dr. Malone for good reason (as defined in the
agreement); or (iii) disability; (b) shall terminate pursuant to the
provisions of a written employment agreement, if any, between Dr. Malone
and TCI which expressly permits Dr. Malone to terminate such employment
upon the occurrence of certain specified events; or (c) shall terminate if
Dr. Malone dies while employed by TCI. Further, the option shares and stock
appreciation rights will immediately vest and become exercisable in the
event of an Approved Transaction, Board Change, or Control Purchase (each
as defined in the 1998 Incentive Plan), unless in the case of an Approved
Transaction, the Compensation Committee, under the circumstances specified
in the 1998 Incentive Plan, determines otherwise.
(4) On April 11, 1996, Dr. Malone (along with three other TINTA non-employee
directors) was granted, pursuant to TINTA's 1996 Nonemployee Director Stock
Option Plan (the "TINTA Director Stock Option Plan"), options to acquire
29,000 shares of Liberty Group Series A Stock. Such grants of options were
made at an exercise price of $27.58 per share. Such options vest evenly
over five years, first became exercisable on April 11, 1997, and expire on
April 11, 2006.
(5) Amounts represent contributions to the TCI 401(k) Stock Plan (the "TCI
Stock Plan"). The TCI Stock Plan provides benefits upon an employee's
retirement which normally is when the employee reaches 65 years of age. TCI
Stock Plan participants may contribute up to 10% of their compensation and
the Company (by annual resolution of the Board of Directors) may contribute
up to a matching 100% of the participants' contributions. Participant
contributions to the TCI Stock Plan are fully vested upon contribution.
Generally, participants acquire a vested right in the Company contributions
as follows:
<TABLE>
<CAPTION>
Years of service Vesting Percentage
---------------- ------------------
<S> <C>
Less than 1 0%
1-2 33%
2-3 66%
3 or more 100%
</TABLE>
With respect to the Company contributions made to the TCI Stock Plan in
1998, 1997 and 1996, Messrs. Malone, Brett, Romrell, Jones and Howard are
fully vested. The TCI Stock Plan also includes a salary deferral feature in
respect of employee contributions. Forfeitures (due to participants'
withdrawal prior to full vesting) are used to reduce the Company's
otherwise determined contributions.
(continued)
III-9
<PAGE> 190
Directors who are not employees of the Company are ineligible to
participate in the TCI Stock Plan. Under the terms of the TCI Stock Plan,
employees are eligible to participate after three months of service.
Although the Company has not expressed an intent to terminate the TCI Stock
Plan, it may do so at any time. The TCI Stock Plan provides for full
immediate vesting of all participants' rights upon termination the TCI
Stock Plan.
(6) Includes fees paid to directors for attendance at each meeting of the Board
of Directors at the rate of $500 per meeting. During 1996 a total of $2,500
of such fees were paid to Dr. Malone. Dr. Malone waived his right to
receive such fees in 1997 and 1998.
(7) Mr. Hindery commenced his employment with the Company as of March 1997.
Accordingly, the 1997 salary information included in the table represents
only ten months of employment during 1997.
(8) Includes the following benefits paid to Mr. Hindery: (i) 1998 - a housing
allowance of $28,582 and use of a Company plane valued at $52,727 and (ii)
1997 - a housing allowance of $43,853 and use of a Company plane valued at
$16,458.
(9) On June 23, 1998, pursuant to the 1998 Incentive Plan, the Company granted
Mr. Hindery 1,000,000 restricted shares of TCI Group Series A Stock, which
vests as to 50% of such shares in June 2002 and as to the remaining 50% in
June 2003. At the end of 1998, the restricted shares had an aggregate value
of $55,312,500, based upon the closing sales price per share of the TCI
Group Series A Stock on the National Market tier of The Nasdaq Stock Market
("Nasdaq") on December 31, 1998. TCI has not paid cash dividends on its
securities and does not anticipate declaring and paying cash dividends on
such securities at any time in the foreseeable future.
(10) On July 23, 1997, pursuant to the Tele-Communications, Inc. 1996 Incentive
Plan (the "1996 Plan"), the Company granted Mr. Hindery 174,534 restricted
shares of TCI Group Series A Stock and 50,932 restricted shares of Ventures
Group Series A Stock, which vest as to 50% of such shares in July 2001 and
as to the remaining 50% in July 2002. At the end of 1998, the restricted
shares of TCI Group Series A Stock had an aggregate value of $9,653,912,
based upon the closing sales price per share of the TCI Group Series A
Stock on Nasdaq on December 31, 1998. At the end of 1998, the restricted
shares of Ventures Group Series A Stock had an aggregate value of
$1,200,085, based upon the closing sales price per share of the Ventures
Group Series A Stock on Nasdaq on December 31, 1998.
(11) On February 7, 1997, Mr. Hindery, pursuant to the 1996 Plan, was granted
options in tandem with stock appreciation rights to acquire 700,000 shares
of TCI Group Series A Stock, 600,000 shares of Ventures Group Series A
Stock, 375,000 shares of Liberty Group Series A Stock, and 29,000 shares of
Liberty Group Series A Stock (after adjustment for the TINTA Merger) at
exercise prices of $13.75, $6.88, $13.04 and $27.58 per share,
respectively. Such options in tandem with stock appreciation rights granted
to Mr. Hindery vest evenly over five years with such vesting period
beginning on February 7, 1997. Such options with tandem stock appreciation
rights first became exercisable on February 7, 1998 and expire on February
7, 2007.
(continued)
III-10
<PAGE> 191
Notwithstanding the vesting schedule as set forth in the option agreement,
the option shares and stock appreciation rights shall immediately vest and
become exercisable if grantee's employment with the Company: (a) shall
terminate by reason of: (i) termination by the Company without cause; (ii)
termination by the grantee for good reason (as defined in the agreement);
or (iii) disability; (b) shall terminate pursuant to the provisions of a
written employment agreement, if any, between the grantee and the Company
which expressly permits the grantee to terminate such employment upon the
occurrence of certain specified events; or (c) shall terminate if grantee
dies while employed by the Company. Further, the option shares and stock
appreciation rights will immediately vest and become exercisable in the
event of an Approved Transaction, Board Change, or Control Purchase (each
as defined in the applicable TCI Plan), unless in the case of an Approved
Transaction, the Compensation Committee under the circumstances specified
in the applicable TCI Plan, determines otherwise.
(12) On July 23, 1997, Mr. Hindery, Mr. Brett, Mr. Romrell and Mr. Jones
pursuant to the 1996 Plan, were granted options in tandem with stock
appreciation rights to acquire 1,050,000, 241,500, 31,500 and 84,000
shares, respectively, of TCI Group Series A Stock at an exercise price of
$15.68 per share, 900,000, 207,000, 27,000 and 72,000 shares, respectively,
of Ventures Group Series A Stock at an exercise price of $7.84 per share.
Also, Mr. Hindery and Mr. Brett were granted options in tandem with stock
appreciation rights to acquire 750,000 and 150,000 shares, respectively, of
Liberty Group Series A Stock at an exercise price of $16.75 per share. Such
options in tandem with stock appreciation rights granted to Messrs.
Hindery, Brett, Romrell and Jones vest evenly over five years with such
vesting period beginning on July 23, 1997. Such options with tandem stock
appreciation rights first became exercisable on July 23, 1998 and expire on
July 23, 2007. See note 11 above for additional information on vesting and
other provisions of the 1996 Plan.
In addition, on July 23, 1997, Mr. Brett, pursuant to TINTA's 1995 Stock
Incentive Plan (the "TINTA Plan"), was granted options in tandem with stock
appreciation rights to acquire 29,000 shares of Liberty Group Series A
Stock at an exercise price of $25.21 per share (after adjustment for the
TINTA Merger). Such options in tandem with stock appreciation rights
granted to Mr. Brett vest evenly over five years with such vesting period
beginning on July 23, 1997. Such options with tandem stock appreciation
rights first became exercisable on July 23, 1998 and expire on July 23,
2007.
Notwithstanding the vesting schedule as set forth in the grantee's option
agreement, the option shares and stock appreciation rights shall
immediately vest and become exercisable if grantee's employment with TINTA:
(a) shall terminate by reason of: (i) termination by TINTA without cause;
(ii) termination by the grantee for good reason (as defined in the
agreement); or (iii) disability; (b) shall terminate pursuant to the
provisions of a written employment agreement, if any, between grantee and
TINTA which expressly permits the grantee to terminate such employment upon
the occurrence of certain specified events; or (c) shall terminate if
grantee dies while employed by TINTA. Further, the option shares and stock
appreciation rights will immediately vest and become exercisable in the
event of an Approved Transaction, Board Change, or Control Purchase (each
as defined in the TINTA Plan), unless in the case of an Approved
Transaction, the Compensation Committee under the circumstances specified
in the TINTA Plan, determines otherwise.
(13) Includes $34,462 received as consulting fees prior to the commencement of
Mr. Hindery's employment in March 1997.
(continued)
III-11
<PAGE> 192
(14) On June 23, 1998, pursuant to the 1998 Incentive Plan, Mr. Brett and Mr.
Romrell were each granted 50,000 restricted shares of TCI Group Series A
Stock by the Company, which vest as to 50% of such shares in June 2002 and
as to the remaining 50% in June 2003. At the end of 1998, each such grant
of restricted shares had an aggregate value of $2,765,625, based upon the
closing sales price per share of the TCI Group Series A Stock on Nasdaq on
December 31, 1998. In addition, on September 3, 1998, pursuant to the 1998
Incentive Plan, Mr. Brett and Mr. Romrell were each granted 53,000
restricted shares of TCI Group Series A Stock by the Company, which vest as
to 50% of such shares in September 2002 and as to the remaining 50% in
September 2003. At the end of 1998, each such grant of restricted shares
had an aggregate value of $2,931,563, based upon the closing sales price
per share of the TCI Group Series A Stock on Nasdaq on December 31, 1998.
(15) On May 15, 1997, Mr. Romrell and Mr. Jones, pursuant to the 1996 Plan, were
each granted options in tandem with stock appreciation rights to acquire
157,500 shares of TCI Group Series A Stock and 135,000 shares of Ventures
Group Series A Stock at exercise prices of $14.00 and $7.00 per share,
respectively. Such options in tandem with stock appreciation rights granted
to Mr. Romrell and Mr. Jones vest evenly over five years with such vesting
period beginning on May 15, 1997. Such options with tandem stock
appreciation rights first became exercisable on May 15, 1998 and expire on
May 15, 2007. See note 11 above for additional information on vesting and
other provisions of the 1996 Plan.
(continued)
III-12
<PAGE> 193
(16) Effective December 1, 1996, Mr. Romrell and a former officer of TCIC and a
former officer of TCI were each granted options ("Internet Options") to
acquire 1.0% of TCI's common equity in TCI Internet Services, Inc., a
subsidiary of the Company ("TCI Internet"). The aggregate exercise price
for each such Internet Option, which is payable to TCI Internet, is equal
to 1.0% of TCI's cumulative investment in TCI Internet and its subsidiaries
as of December 1, 1996, adjusted for a 6% per annum interest factor from
the date each such investment was made to the date of such exercise. All of
such options will vest and become exercisable in five equal annual
installments, with the first annual installment having vested on February
1, 1997. The Internet Options will expire on February 1, 2006. In
anticipation of the transfer to TCI.NET, Inc., a subsidiary of the Company
("TCI.NET") of the internet services distribution business conducted
through subsidiaries of TCI Internet, each such Internet Option was
replaced during 1997 with an option to acquire a number of shares equal to
1.0% of TCI's common equity in TCI.NET at December 1, 1996 (the "TCI.NET
Option") and a stock appreciation right with respect to a number of shares
equal to 1.0% of TCI's common equity in TCI Internet at December 1, 1996
(the "Internet SAR"). The material terms of the option to acquire shares of
TCI.NET are the same as those of the Internet Option, except that the
exercise price, which will be payable to TCI.NET, is an allocated portion
of the current exercise price under the Internet Option based on TCI's
cumulative investment in the internet services distribution business
relative to the balance of its cumulative investment in TCI Internet at
December 1, 1996. The stock appreciation right entitles the holder to the
excess of the value of the shares subject to the stock appreciation right
(based on the percentage that such shares represent of the total value of
the common equity of TCI Internet as of the exercise date) over 1% of TCI's
cumulative investment in TCI Internet at December 1, 1996, plus a 6% per
annum interest factor from the date when each such investment was made to
the date of exercise. Amounts payable upon exercise of the stock
appreciation right may be paid in cash or, at TCI's election, TCI Group
Series A Stock, Ventures Group Series A Stock or common stock of TCI
Internet (if then publicly traded), or any combination of the foregoing,
subject to certain conditions. Any exercise by the holder of all or part of
the TCI.NET Option must be accompanied by the exercise by such holder of a
pro rata portion of the Internet SAR, and vice versa. On February 19, 1999
the Company repurchased from the holders of TCI.NET Options all shares of
the common stock of TCI.NET acquired by such holders pursuant to the
TCI.NET Options. At such time the Company canceled the TCI.NET Options and
deleted the requirement in the Internet SARs that holders thereof exercise
their TCI.NET Option in order to exercise their Internet SAR. In connection
with the AT&T Merger, the TCI Venture Group's equity interest in @Home,
which constituted substantially all of the value of the assets of TCI
Internet, was transferred to the TCI Group. As a result, on March 8, 1999
each Internet SAR was amended to provide, among other things, that
following the AT&T Merger the amounts payable upon exercise of the Internet
SARs would not be determined by reference to the fair market value of TCI
Internet, but would instead be based upon the fair market value (determined
as of the date of exercise of an Internet SAR) of the investment securities
held by TCI Internet prior to the AT&T Merger, subject to certain
adjustments. Such amendment also provided that the cash settlement value of
the Internet SAR would be paid, at the grantor's election, in cash, AT&T
stock or other stock owned by the grantor. In connection with such
amendment, TCI or Liberty (depending upon which entity employed the holder
of the Internet SAR) was substituted for TCI Internet as the obligor under
the Internet SARs.
(continued)
III-13
<PAGE> 194
On December 4, 1996, Mr. Romrell was granted an option (along with three
other officers) to purchase 664,076 shares of TSAT Series A Stock
representing 1.0% of the number of shares of TSAT common stock issued and
outstanding on the date of the Satellite Distribution, determined
immediately after giving effect to the Satellite Distribution, but before
giving effect to the exercise of such option or certain other options. The
exercise price for each such option is equal to $8.86 per share,
representing in the aggregate 1.0% of TCI's net investment in TSAT as of
the date of the Satellite Distribution, but excluding any portion of TCI's
net investment that as of such date was represented by a promissory note or
other evidence of indebtedness from TSAT to TCI. All of such options will
vest and become exercisable in five equal annual installments, with the
first annual installment having vested on February 1, 1997. Such options
will expire on February 1, 2006.
(17) Mr. Jones commenced his employment with the Company in November 1996.
Accordingly, the 1996 salary information included in the table with respect
to Mr. Jones represents only two months of employment during 1996.
(18) On September 3, 1998, pursuant to the 1998 Incentive Plan, the Company
granted Mr. Jones 53,000 restricted shares of TCI Group Series A Stock,
which vest as to 50% of such shares in September 2002 and as to the
remaining 50% in September 2003. At the end of 1998, the restricted shares
had an aggregate value of $2,931,563, based upon the closing sales price
per share of the TCI Group Series A Stock on Nasdaq on December 31, 1998.
In addition, on December 10, 1998, pursuant to the 1998 Incentive Plan, the
Company granted Mr. Jones 37,500 restricted shares of TCI Group Series A
Stock by the Company, which vest as to 50% of such shares in December 2002
and as to the remaining 50% in December 2003. At the end of 1998, the
restricted shares had an aggregate value of $2,074,219, based upon the
closing sales price per share of the TCI Group Series A Stock on Nasdaq on
December 31, 1998.
(19) Consists of consulting fees paid to Mr. Jones, prior to Mr. Jones'
employment with the Company.
(20) On July 11, 1997, Mr. Hindery was granted, pursuant to TCI Music's 1997
Stock Incentive Plan (the "TCI Music 1997 Plan"), options to acquire
833,334 shares of TCI Music's Series A Common Stock. Such grant of options
was made at an exercise price of $6.25 per share. Such options vest evenly
over five years, first became exercisable on July 11, 1998, and expire on
July 11, 2007.
Notwithstanding the vesting schedule, the option shares become available
for purchase if Mr. Hindery ceases to be a director of TCI Music for any
reason other than voluntary termination. Further, the option shares will
become available for purchase in the event of an Approved Transaction,
Board Change, or Control Purchase (each as defined in the TCI Music 1997
Plan), unless, in the case of an Approved Transaction, the compensation
committee under the circumstances specified in the TCI Music 1997 Plan,
determines otherwise.
(continued)
III-14
<PAGE> 195
In addition, on November 5, 1997, Mr. Hindery was granted, pursuant to
UVSG's Stock Option Plan for Non-Employee Directors, options to acquire
30,000 shares of UVSG's Class A Common Stock. Such grant of options was
made at an exercise price of $13.38 per share. Under the plan, Mr.
Hindery's options were to vest evenly over five years, which first became
exercisable on November 5, 1998. In February 1999, Mr. Hindery resigned as
a director of UVSG, at which time, the vesting of his remaining options was
accelerated. Upon his resignation, Mr. Hindery notified UVSG of his
intention to exercise his vested options.
(21) On May 15, 1996, Mr. Romrell was granted, pursuant to UVSG's Stock Option
Plan for Non-Employee Directors, options to acquire 30,000 shares of UVSG's
Class A Common Stock. Such grant of options was made at an exercise price
of $11.50 per share. Such options vest evenly over five years, first became
exercisable on May 15, 1997, and expire on May 15, 2006.
(b) Option/SAR Grants Table of Tele-Communications, Inc. - None.
(c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
of Tele-Communications, Inc. The following table shows each exercise of
stock options and SARs during the year ended December 31, 1998 by each of
the named executive officers of TCI and the December 31, 1998 number and
year-end value of unexercised options and SARs on an aggregated basis. The
following table has not been adjusted to reflect the impact of the AT&T
Merger.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1998 (#) 1998 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) (1) ($) Unexercisable Unexercisable
---- ------------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
John C. Malone
Exercisable
TCI Group Series A
Stock 50,000 $ 1,575,000 1,070,000 $ 46,056,475
Ventures Group
Series A Stock -- -- 960,000 $ 16,760,400
Ventures Group
Series B Stock -- -- 560,000 $ 7,212,800
Liberty Group
Series A Stock -- -- 911,600 $ 33,884,522
TSAT Series A Stock -- -- 160,000 --
Unexercisable
TCI Group Series A
Stock -- -- 280,000 $ 11,393,900
Ventures Group
Series A Stock -- -- 240,000 $ 3,900,600
Ventures Group
Series B Stock -- -- 2,240,000 $ 28,851,200
Liberty Group
Series A Stock -- -- 242,400 $ 8,284,908
TSAT Series A Stock -- -- 40,000 --
</TABLE>
(continued)
III-15
<PAGE> 196
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1998 (#) 1998 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) (1) ($) Unexercisable Unexercisable
---- ------------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Leo J. Hindery, Jr.
Exercisable
TCI Group Series A
Stock -- -- 350,000 $ 14,141,575
Ventures Group
Series A Stock -- -- 300,000 $ 4,831,950
Liberty Group
Series A Stock -- -- 230,800 $ 6,980,761
TCI Music Series A
Common Stock -- -- 166,667 --
UVSG Series A
Common Stock -- -- 6,000 $ 61,470
Unexercisable
TCI Group Series A
Stock -- -- 1,400,000 $ 56,566,300
Ventures Group
Series A Stock -- -- 1,200,000 $ 19,327,800
Liberty Group
Series A Stock -- -- 923,200 $ 27,923,044
TCI Music Series A
Common Stock -- -- 666,667 --
UVSG Series A
Common Stock -- -- 24,000 $ 245,880
Stephen M. Brett
Exercisable
TCI Group Series A
Stock 16,000 $ 434,880 270,300 $ 10,989,265
Ventures Group
Series A Stock 8,000 $ 112,640 237,400 $ 3,854,882
Liberty Group
Series A Stock 120,500 $ 2,702,760 236,450 $ 7,479,591
TSAT Series A Stock -- -- 54,000 --
Unexercisable
TCI Group Series A
Stock -- -- 305,200 $ 12,226,599
Ventures Group
Series A Stock -- -- 261,600 $ 4,168,926
Liberty Group
Series A Stock -- -- 244,800 $ 7,311,000
TSAT Series A Stock -- -- 16,000 --
</TABLE>
(continued)
III-16
<PAGE> 197
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
December 31, December 31,
1998 (#) 1998 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) (1) ($) Unexercisable Unexercisable
---- ------------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Larry E. Romrell
Exercisable
TCI Group Series A
Stock -- -- 275,800 $ 11,284,004
Ventures Group
Series A Stock -- -- 356,400 $ 6,049,659
Liberty Group
Series A Stock 56,250 $ 1,778,794 247,500 $ 8,581,331
Internet SAR 2 $ 3,456,048 -- --
TSAT Series A Stock -- -- 319,630 --
UVSG Series A
Common Stock -- -- 12,000 $ 145,500
Unexercisable
TCI Group Series A
Stock -- -- 263,200 $ 10,773,714
Ventures Group
Series A Stock -- -- 225,600 $ 3,693,636
Liberty Group
Series A Stock -- -- 90,000 $ 3,095,325
Internet SAR -- -- 6 $ 20,719,146
TSAT Series A Stock -- -- 414,446 --
UVSG Series A
Common Stock -- -- 18,000 $ 218,250
Marvin L. Jones
Exercisable
TCI Group Series A
Stock 48,300 $ 1,089,606 -- --
Ventures Group
Series A Stock 41,400 $ 457,344 -- --
Unexercisable
TCI Group Series A
Stock -- -- 193,200 $ 7,868,679
Ventures Group
Series A Stock -- -- 165,600 $ 2,694,366
</TABLE>
-------------------
(1) Represents the number of shares underlying the stock
appreciation rights which were exercised in 1998.
(continued)
III-17
<PAGE> 198
(d) Compensation of directors. The standard arrangement by which TCI's
directors are compensated for all services (including any amounts payable for
committee participation or special assignments) as a director is as follows:
each non-employee director receives a fee of $500 plus travel expenses for
attendance at each meeting of the Board of Directors and each director who is
not a full time employee of TCI or its subsidiaries also receives additional
compensation of $30,000 per year. Each director who is also a full-time employee
of the Company receives reimbursement for travel expenses but does not receive a
fee for meeting attendance.
In addition, the Company's stockholders approved an option plan for its
directors (the "Director Stock Option Plan") and in connection with such
approval, approved the grant effective as of November 16, 1994, to each person
who as of such date was a member of the Board of Directors and was not an
employee of the Company or any of its subsidiaries, of options to purchase
50,000 shares of TCI Group Series A Stock and 28,125 shares of Liberty Group
Series A Stock. Such options have a purchase price of $14.19 per share and $9.78
per share, respectively, and vest and become exercisable over a five-year
period, commencing on November 16, 1995, and will expire on November 16, 2004.
Each person who becomes a director of the Company and is not an employee of the
Company or any of its subsidiaries will be automatically granted similar options
upon such person's becoming a director. Additionally, each person who is an
employee and director of the Company who ceases to be an employee but remains a
director will be automatically granted similar options upon such event. The
exercise price of each such subsequently granted option will be equal to the
fair market value of the TCI Group Series A Stock or Liberty Group Series A
Stock, as applicable, on the date the option is granted. In general, such fair
market value will be 95% of the last sale price for the shares of the TCI Group
Series A Stock or Liberty Group Series A Stock, as applicable, as reported on
Nasdaq on the date of the grant, with the price resulting from such percentage
rounded down to the nearest quarter dollar.
The Company has a deferred compensation plan for all non-employee
directors. Each director may elect to defer receipt of all, but not less than
all, of the annual compensation (excluding meeting fees and reimbursable
expenses) payable to the director for serving on the Company's Board of
Directors for each calendar year for which such deferral is elected. An election
to defer may be made as to the compensation payable for a single calendar year
or period of years. Any compensation deferred shall be credited to the
director's account on the last day of the quarter for which compensation has
accrued. Such deferred compensation bears interest from the date credited to the
date of payment at a rate of 8% per annum in 1993 and 120% of the applicable
federal long-term rate thereafter, compounded annually.
A director may elect payment of deferred compensation to be made at a
specified year in the future or upon termination of the director's service as
director of the Company. Each director may elect payment in a lump sum, three
substantially equal consecutive annual installments or five substantially equal
consecutive annual installments. In the event that a director dies prior to
payment of all the amounts payable pursuant to the deferred compensation plan,
any amounts remaining in the director's deferred compensation account, together
with accrued interest thereon, shall be paid to the director's designated
beneficiary.
There are no other arrangements whereby any of TCI's directors received
compensation for services as a director during 1998 in addition to or in lieu of
that specified by the previously described standard arrangement.
(continued)
III-18
<PAGE> 199
(e) Employment Contracts and Termination of Employment and Change of
Control Arrangements. Except as described below, the Company has no employment
contracts, termination of employment agreements or change of control agreements
with any of the named executive officers of the Company.
Dr. Malone's Employment Agreement. Effective November 1, 1992, the
employment agreement between TCIC and Dr. Malone, as amended, was further
amended and restated. Pursuant to an Assignment Agreement, dated August 4, 1994,
the payment, performance and other obligations of such employment agreement were
assumed by the Company. Pursuant to an Assignment Agreement, dated as of March
9, 1999, the payment, performance and other obligations of Dr. Malone's
agreement were subsequently assigned by the Company to, and assumed by, Liberty.
The term of such agreement is extended daily so that the remainder of the
employment term is, at all times on and prior to the effective date of the
termination of employment as provided by such agreement, five years. Dr.
Malone's employment agreement provides for an annual salary of $800,000, subject
to increase upon approval of the Board of Directors. Additionally, the
employment agreement provides for personal use of the Company's aircraft and
flight crew, limited to an aggregate value of $35,000 per year.
Dr. Malone's employment agreement provides, among other things, for
deferral of a portion, which currently is not in excess of 40%, of the monthly
compensation payable to him. The deferred amounts will be payable in monthly
installments over a 20-year period commencing on the termination of Dr. Malone's
employment, together with interest thereon at the rate of 8% per annum
compounded annually from the date of deferral to the date of payment. The
amendment also provides for the payment of certain benefits, as discussed below.
Dr. Malone's employment agreement also provides that, upon termination
of his employment by the Company (other than for cause, as defined in the
agreement) or if Dr. Malone elects to terminate the agreement because of a
change in control of the Company, all remaining compensation due under the
agreement for the balance of the employment term shall be immediately due and
payable.
Dr. Malone's agreement provides that, during his employment with the
Company and for a period of two years following the effective date of his
termination of employment with the Company, unless termination results from a
change in control of the Company, he will not be connected with any entity in
any manner specified in the agreement, which competes in a material respect with
the business of the Company. Notwithstanding the foregoing, Dr. Malone may serve
as Chairman of the Board of Liberty and own securities of Liberty without regard
to the percentage limitation in the following sentence. The agreement provides
that Dr. Malone may own securities of any corporation listed on a national
securities exchange or quoted in the Nasdaq Stock Market to the extent of an
aggregate of 5% of the amount of such securities outstanding.
For a period of twelve (12) months following a change in control, as
defined in Dr. Malone's employment agreement, the Company's ability to terminate
Dr. Malone's employment for cause will be limited to situations in which Dr.
Malone has entered a plea of guilty to, or has been convicted of, the commission
of a felony offense.
(continued)
III-19
<PAGE> 200
Dr. Malone's agreement also provides that, in the event of termination
of his employment with the Company, he will be entitled to receive 240
consecutive monthly payments of $15,000 (increased at the rate of 12% per annum
compounded annually from January 1, 1988 to the date payment commences), the
first of which will be payable on the first day of the month succeeding the
termination of Dr. Malone's employment. In the event of Dr. Malone's death, his
beneficiaries will be entitled to receive the foregoing monthly payments. The
Company currently owns a whole-life insurance policy on Dr. Malone, the face
value of which is sufficient to meet its obligation under the salary
continuation arrangement. The premiums payable by the Company on such insurance
policy are currently being funded through earnings on the policy. Dr. Malone has
no interest in this policy.
The Company pays a portion of the annual premiums (equal to the cost to
buy one-year term insurance coverage as set forth in IRS Pension Service Table
No. 58) on three whole-life insurance policies of which Dr. Malone is the
insured and trusts for the benefit of members of his family are the owners. The
Company is the designated beneficiary of the proceeds of such policies less an
amount equal to the greater of the cash surrender value thereof at the time of
Dr. Malone's death and the amount of the premiums paid by the policy owners.
Dr. Malone deferred a portion of his monthly compensation under his
previous employment agreement. Such deferred compensation (together with
interest thereon at the rate of 13% per annum compounded annually from the date
of deferral to the date of payment) will continue to be payable under the terms
of the previous agreement. The rate at which interest accrues on such previously
deferred compensation was established in 1983 pursuant to such earlier
agreement.
Mr. Jones' Employment Agreement. TCIC and Mr. Jones entered into an
employment agreement dated November 7, 1997. The term of Mr. Jones' employment
agreement extends through January 1, 2000, or such later date as Mr. Jones' and
TCIC agree. Mr. Jones' agreement provides for a base salary of $560,000 per
year. TCIC will consider increases to Mr. Jones' salary from time to time.
While he is employed by TCIC pursuant to his employment agreement, Mr.
Jones is entitled to the same benefits that other executives of his level at
TCIC or Executive Vice Presidents of the Company receive.
Mr. Jones' employment agreement also provides that, upon his voluntary
resignation or an earlier termination of his employment by the Company without
cause, the Company shall pay to Mr. Jones an amount equal to the greater of (1)
the balance due between the date of termination and January 1, 2000, or (2) two
years' annual compensation at its then current level. In addition, upon Mr.
Jones' voluntary resignation or termination without cause, all options and
restricted stock granted to Mr. Jones will immediately vest.
Prior to the AT&T Merger, TCIC merged with and into TCI, with TCI being
the surviving corporation (the "TCIC Merger"). As a result of the TCIC Merger,
all of the assets and liabilities of TCIC have been assumed by TCI, including
TCIC's obligations under Mr. Jones' employment agreement.
Mr. Romrell's Employment Agreement. The Company and Mr. Romrell entered
into an employment agreement on January 1, 1998. This employment agreement
superseded an earlier employment agreement, dated as of January 1, 1993, between
Mr. Romrell and TCIC, the payment, performance and other obligations of which
were assigned to, and assumed by, the Company on August 4, 1994. The term of Mr.
Romrell's employment extends through December 31, 2007. Mr. Romrell's agreement
provides for a base salary of $560,000 per year. Mr. Romrell's salary is subject
to annual review by the Board of Directors, which may in its sole discretion
increase his salary.
(continued)
III-20
<PAGE> 201
While he is employed by the Company pursuant to his employment
agreement, Mr. Romrell is entitled to participate in all formal incentive
compensation plans, stock incentive plans, employee stock purchase plans,
retirement plans and insurance plans or policies adopted for the benefit of
TCI's executive officers or employees generally.
Mr. Romrell's employment agreement also provides that, upon an earlier
termination of Mr. Romrell's employment by the Company without cause, all
remaining compensation due under such agreement for the balance of the
employment term would become immediately due and payable to Mr. Romrell. Upon
his death during the employment term, the Company would pay to Mr. Romrell's
beneficiaries a lump sum in an amount equal to the lesser of: (a) the
compensation due under his employment agreement for the balance of the
employment term; and (b) one year's salary. In the event of his disability, the
Company would continue to pay Mr. Romrell 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.
Mr. Romrell's agreement provides that, during his employment with the
Company and for a period of two years following the effective date of his
termination of employment therewith, he will not be connected with any entity in
any manner specified in the agreement, which competes in a material respect with
the business of the Company or the Company's majority owned subsidiaries.
However, the agreement provides that Mr. Romrell may own securities of any
corporation listed on a national securities exchange or quoted on Nasdaq to the
extent of an aggregate of 5% of the amount of such securities outstanding. Under
the employment agreement, substantially all of Mr. Romrell's business time,
attention and efforts will be devoted to the affairs of the Company.
For a period of twelve (12) months following a change in control, as
defined in Mr. Romrell's employment agreement, the Company's ability to
terminate Mr. Romrell's employment for cause will be limited to situations in
which Mr. Romrell has entered a plea of guilty to, or has been convicted of, the
commission of a felony offense.
Mr. Romrell's employment agreement also provided that he had the right
to convert his employment agreement into a consulting agreement. Mr. Romrell
exercised this election and on March 8, 1999 Mr. Romrell resigned as an officer
and employee of the Company and entered into a consulting agreement with the
Company. During the term of the consulting agreement, which extends until
December 31, 2007 unless sooner terminated as provided in the agreement, Mr.
Romrell is required to provide consulting services as and if requested by the
Company's chief executive officer, subject to the limitation that he is not
required to provide more than 70 hours of such services in any month or more
than 700 hours during any period of 12 consecutive months. Whether or not his
services are requested, Mr. Romrell will receive compensation at the rate of
$610,000 per annum. If he dies before the end of the term of his consulting
agreement, the Company is required to pay his designated beneficiaries a lump
sum equal to one year's compensation. During the term of the agreement, Mr.
Romrell will continue to be entitled to participate in, and to be accorded all
rights and benefits under, all group insurance policies (including, but not
limited to, all disability, life, health and medical insurance policies)
maintained by the Company for the benefit of its employees.
(continued)
III-21
<PAGE> 202
Mr. Romrell's consulting agreement provides that during its term, Mr.
Romrell will not be connected in any manner specified in such agreement with any
entity which competes in a material respect with the business of the Company;
however, he may own securities of any corporation listed on a national
securities exchange or quoted on Nasdaq to the extent of an aggregate of 5% of
the amount of such securities outstanding and Mr. Romrell may continue to serve
as a director of Liberty.
Mr. Brett's Employment Agreement. The Company and Mr. Brett entered
into an employment agreement on June 1, 1998. The term of Mr. Brett's employment
agreement is extended daily so that the remainder of the employment term is, at
all times on and prior to the effective date of termination of employment as
provided by such agreement, five years. Mr. Brett's agreement provides for a
base salary of $560,000 per year. Mr. Brett's salary is subject to annual review
by the Board of Directors, which may in its sole discretion increase his salary.
While he is employed by the Company pursuant to his employment
agreement, Mr. Brett 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 the
Company's executive officers or employees generally.
Mr. Brett's employment agreement also provides that, upon an early
termination of his employment by the Company without cause, the Company will pay
to Mr. Brett, in a lump sum, an amount equal to five year's compensation
calculated at the annual rate then in effect. Upon his death during the
employment term, the Company will pay to Mr. Brett's beneficiaries a lump sum in
an amount equal to one year's salary at the rate currently in effect. In the
event of his disability, the Company will continue to pay Mr. Brett his annual
salary as and when it would have otherwise become due for a period of five years
from the date of termination of his employment as a result of such disability.
Mr. Brett's agreement provides that, during his employment with the
Company and for a period of two years following the effective date of his
termination of employment with the Company, he will not be connected with any
entity in any manner specified in the agreement, which competes in a material
respect with the business of the Company or the Company's majority owned
subsidiaries. However, the agreement provides that Mr. Brett may own securities
of any corporation listed on a national securities exchange or quoted on Nasdaq
to the extent of an aggregate of 5% of the amount of such securities
outstanding. Under the employment agreement, substantially all of Mr. Brett's
business time, attention and efforts will be devoted to the affairs of the
Company.
For a period of twelve (12) months following a change in control, as
defined in Mr. Brett's employment agreement, the Company's ability to terminate
Mr. Brett's employment for cause will be limited to situations in which Mr.
Brett has entered a plea of guilty to, or has been convicted of, the commission
of a felony offense.
Mr. Hindery's Employment Agreement. TCI and Mr. Hindery entered into an
employment agreement, dated as of June 23, 1998. Effective upon the consummation
of the AT&T Merger, AT&T assumed Mr. Hindery's employment agreement. Pursuant to
the terms of the assumption agreement by AT&T, the term of Mr. Hindery's
employment began on March 9, 1999 and will continue for a period of five years.
Mr. Hindery's agreement provides for a base salary of $900,000 per year. Mr.
Hindery's salary is subject to annual review by the Board of Directors, which
may in its sole discretion increase his salary.
(continued)
III-22
<PAGE> 203
Mr. Hindery's employment agreement also provides that, upon termination
of his employment by the Company (other than for cause, as defined in the
agreement), he will receive the greater of (i) two years' compensation (other
than deferred compensation), or (ii) all remaining compensation (other than
deferred compensation) due under the agreement for the balance of the employment
term, which compensation shall be immediately due and payable.
Mr. Hindery's employment agreement provides, among other things, for
deferral of a portion (0% in 1998 and not in excess of 40% thereafter) of the
monthly compensation payable to him. The deferred amounts will be payable in
substantially equal monthly installments over a 120-month period commencing on
the first business day of the first calendar month following the termination of
Mr. Hindery's employment with the Company, together with interest thereon at the
rate of 8% per annum compounded annually from the date of deferral to the date
of payment. In the event Mr. Hindery dies while he is a full time employee of
the Company or before the expiration of the 120-month period in which he is to
receive such deferred payments, the remaining deferred payments will be paid in
a lump sum to Mr. Hindery's designated beneficiary or beneficiaries. Mr.
Hindery's right to receive deferred payments is conditioned upon his compliance
with certain terms of his employment agreement which survive for portions of the
120-month payment period therefor.
While he is employed by the Company pursuant to his employment
agreement, Mr. Hindery is entitled to participate in all formal incentive
compensation plans, stock incentive plans, employee stock purchase plans,
retirement plans and insurance plans or policies adopted for the benefit of
TCI's executive officers or employees generally. In addition, the Company has
agreed that its Compensation Committee of the Board of Directors will grant to
Mr. Hindery, for each calendar year or portion thereof that he is employed by
the Company, a Performance Award under the terms of the Amended and Restated
Tele-Communications, Inc. 1996 Incentive Plan (or any successor plan), with a
target bonus opportunity for Mr. Hindery of not less than $2,100,000, determined
as of the commencement of the employment period. The Compensation Committee will
determine the maximum Performance Award, the criteria applicable to such Award
and the achievement of performance goals in connection therewith for each
employment period. Mr. Hindery shall have the right to receive all or any
portion of his Performance Award in shares of the Company's Common Stock.
On the date of Mr. Hindery's employment agreement, the Company granted
to him 1,000,000 restricted stock units for the Company's Series A TCI Group
Common Stock, 50% of which will vest on each of the fourth and the fifth
anniversaries of the date of the grant. Upon consummation of the AT&T Merger,
such restricted stock units were equitably converted into restricted stock units
for AT&T Common Stock.
Mr. Hindery's agreement provides that, during his employment with the
Company and for a period of two years following the effective date of his
termination of employment with the Company, he will not be connected with any
entity in any manner specified in the agreement, which competes in a material
respect with the business of AT&T or any of its affiliates, including the
Company or the Company's majority owned subsidiaries. However, the agreement
provides that Mr. Hindery may own securities of any corporation listed on a
national securities exchange or quoted on Nasdaq to the extent of an aggregate
of 5% of the amount of such securities outstanding. Under the employment
agreement, substantially all of Mr. Hindery's business time, attention and
efforts will be devoted to the affairs of the Company.
(continued)
III-23
<PAGE> 204
(f) Compensation Committee Interlocks and Insider Participation in
Compensation Decisions.
In addition, please refer to the discussion under "Item 11. Executive
Compensation - Background of Stock Adjustments" for additional information
regarding changes in the capital structure of the Company. References to share
amounts and per share prices have also been adjusted retroactively to give
effect to such changes.
The members of the Company's compensation committee are Messrs. Paul A.
Gould and Kim Magness, both directors of the Company. Each of Mr. Gould and Mr.
Magness are not and have not been officers of the Company or any of its
subsidiaries.
On February 17, 1999, the date of the stockholders meeting approving
the AT&T Merger, the Board approved the payment by Liberty of $1 million to Paul
A. Gould for his services on the Special Committee of the Company's Board of
directors in evaluating the merger transaction with AT&T and the consideration
to be received by the stockholders of the Company.
Mr. Fisher is a member of the compensation committee of TCI Music.
Messrs. Hindery and Sparkman, as well as Mr. Fisher, are executive officers of
TCI Music. See "Item 13 - Certain Relationships and Related Transactions -
Transactions with Management and Others and Indebtedness of Management" for more
information regarding transactions involving Messrs. Fisher, Hindery and
Sparkman.
Magness and Malone Transactions. On June 16, 1997, (a) the Company
issued 30,545,864 shares of TCI Group Series A Stock (which shares are entitled
to one vote per share) to the Estate of Bob Magness (the "Magness Estate"), the
late founder and former Chairman of the Board of TCI in exchange (the
"Exchange") for an equal number of shares of TCI Group Series B Stock (which
shares are entitled to ten votes per share) owned by the Magness Estate, (b) the
Magness Estate sold (the "Sale") the shares of TCI Group Series A Stock received
in the Exchange, together with approximately 1.5 million shares of TCI Group
Series A Stock that the Magness Estate previously owned (collectively, the
"Option Shares"), to two investment banking firms (the "Investment Bankers") for
approximately $530 million (the "Sale Price") and (c) TCI entered into an
agreement with the Investment Bankers whereby TCI would have the option, but not
the obligation, to purchase the Option Shares at any time on or before June 16,
1999. The preceding transactions are referred to collectively as the "June 16
Stock Transaction." Pursuant to a certain Letter Agreement, dated June 16, 1997,
between Dr. Malone, TCI's Chairman and Chief Executive Officer, and the Magness
Estate, Dr. Malone agreed to waive certain rights of first refusal with respect
to shares of TCI Group Series B Stock beneficially owned by the Magness Estate.
Such rights of first refusal arise from a letter agreement, dated June 17, 1988,
among Bob Magness, Kearns-Tribune Corporation and Dr. Malone, pursuant to which
Dr. Malone was granted a right of first refusal to acquire any shares of TCI
Group Series B Stock which the other parties proposed to sell. As a result of
Dr. Malone's rights under such June 17, 1988 letter agreement, such waiver was
necessary in order for the Magness Estate to consummate the Exchange and the
Sale.
In consideration for such waiver, TCI granted Dr. Malone the right (the
"Malone Right") to acquire from time to time until June 30, 1999, from TCI up to
30,545,864 shares of the TCI Group Series B Stock acquired by TCI from the
Magness Estate pursuant to the Exchange. Such acquisition may be made in
exchange for either, or any combination of, shares of TCI Group Series A Stock
owned by Dr. Malone (exchanged on a one for one basis), or cash in an amount
equal to the average closing sale price of the TCI Group Series B Stock for the
five trading days preceding the acquisition.
(continued)
III-24
<PAGE> 205
In connection with certain legal proceedings relative to the probate of
the Magness Estate, one or more of Gary Magness and Kim Magness, Bob Magness'
sons, Sharon Magness, Bob Magness' surviving second wife, and the original
personal representatives of the Magness Estate advanced various claims, causes
of action, demands, complaints and request against one or more of the others. In
addition, Kim Magness and Gary Magness, in a Complaint And Request To Void Sale
of TCI Stock, And For Damages And Surcharge, filed on October 29, 1997 (the
"Voiding Action"), advanced various claims relating to the June 16 Stock
Transaction against TCI, Dr. Malone and the original personal representatives of
the Magness Estate. Among other matters, the Voiding Action challenged the June
16 Stock Transaction on various fiduciary bases and requested rescission of such
transaction and damages.
Pursuant to an agreement effective as of January 5, 1998, (the
"Settlement Agreement"), TCI, Gary Magness, Kim Magness, Sharon Magness, the
Magness Estate, the Estate of Betsy Magness (the first wife of Bob Magness) and
Dr. Malone agreed to settle their respective claims against each other relating
to the Magness Estate and the June 16 Stock Transaction, in each case without
any of those parties admitting any of the claims or allegations against that
party (the "Magness Settlement").
In connection with the Magness Settlement, portions of the Exchange and
Sale were unwound such that (a) 10,201,041 shares of TCI Group Series A Stock
and 11,666,506 shares of TCI Ventures Group Series A Stock were returned to TCI
as authorized but unissued shares, (b) the Magness Estate returned to the
Investment Bankers the portion of the Sales Price attributable to such returned
shares and (c) the Magness Estate paid $11 million to TCI representing a
reimbursement of the Exchange fees incurred by TCI from June 16, 1997 through
February 9, 1998 with respect to such returned shares. TCI then issued to the
Magness Estate 10,017,145 shares of TCI Group Series B Stock and 12,034,298
shares of TCI Ventures Group Series B Stock. In addition, as part of the Magness
Settlement, TCI issued 1,339,415 shares of TCI Group Series B Stock to the
Estate of Betsy Magness in exchange for an equal number of shares of TCI Group
Series A Stock and issued 1,531,834 shares of TCI Ventures Group Series B Stock
for an equal number of shares of TCI Ventures Group Series A Stock.
On February 9, 1998, in connection with the Magness Settlement, the
Company entered into a call agreement (the "Malone Call Agreement") with Dr.
Malone and Dr. Malone's wife (together with Dr. Malone, the "Malones"), under
which the Malones granted to the Company the right to acquire any shares of the
Company's common stock which are entitled to cast more than one vote per share
(the "High-Voting Shares") owned by the Malones, which at December 31, 1998
consisted of an aggregate of approximately 69 million High-Voting Shares, upon
Dr. Malone's death or upon a contemplated sale of the High-Voting Shares (other
than a minimal amount) to third persons. In either such event, the Company has
the right to acquire such shares at a maximum price equal to the then relevant
market price of shares of the Company's "low-voting" Series A common stock plus
a ten percent premium. The Malones also agreed that if the Company were ever to
be sold to another entity, then the maximum premium that the Malones would
receive on their High-Voting Shares would be no greater than a ten percent
premium over the price paid for the relevant shares of Series A common stock.
The Company paid $150 million to the Malones in consideration of their entering
into the Malone Call Agreement.
(continued)
III-25
<PAGE> 206
Also on February 9, 1998, in connection with the Magness Settlement,
certain members of the Magness family, individually, and in certain cases, on
behalf of the Estate of Betsy Magness and the Magness Estate (collectively, the
"Magness Family") also entered into a call agreement with the Company (with
substantially the same terms as the one entered into by the Malones, including a
call on the shares owned by the Magness Family upon Dr. Malone's death) (the
"Magness Call Agreement") on the Magness Family's, which at December 31, 1998
consisted of an aggregate of approximately 55 million High-Voting Shares. The
Magness Family was paid $124 million by the Company in consideration of their
entering into the Magness Call Agreement.
Additionally, on February 9, 1998, the Magness Family entered into a
shareholders' agreement (the "Shareholders' Agreement") with the Malones and the
Company under which (1) the Magness Family and the Malones agreed to consult
with each other in connection with matters to be brought to the vote of the
Company's stockholders, subject to the proviso that if they cannot mutually
agree on how to vote the shares, Dr. Malone has an irrevocable proxy to vote the
High-Voting Shares owned by the Magness Family, (2) the Magness Family may
designate a nominee for the Board and Dr. Malone has agreed to vote his
High-Voting Shares for such nominee and (3) certain "tag along rights" have been
created in favor of the Magness Family and certain "drag along rights" have been
created in favor of the Malones. In addition, the Malone Right granted by the
Company to Dr. Malone to acquire 30,545,864 shares of TCI Group Series B Stock
was reduced to an option to acquire 14,511,570 shares of TCI Group Series B
Stock. Pursuant to the terms of the Shareholders' Agreement, the Magness Family
has the right to participate in the reduced Malone Right on a proportionate
basis with respect to 12,406,238 shares of the 14,511,570 shares subject to the
Malone Right. On June 24, 1998, Dr. Malone delivered notice to the Company
exercising his right to purchase (subject to the Magness Family proportionate
right) up to 14,511,570 shares of TCI Group Series B Stock at a per share price
of $35.5875 pursuant to the Malone Right. In addition, a representative of the
Magness Family advised Dr. Malone that the Magness Family would participate in
such purchase up to the Magness Family's proportionate right. On October 14,
1998, 8,718,770 shares of TCI Group Series B Stock were issued to Dr. Malone
upon payment of cash consideration totaling $310 million. On October 16, 1998,
5,792,800 shares of TCI Group Series B Stock were issued to the Magness Family
upon payment of cash consideration totaling $206 million. In connection with the
acquisition of the TCI Group Series B Stock by Dr. Malone, the Company executed
certain waivers to the Malone Call Agreement and the Company and the Magness
Family executed a waiver to the Shareholders' Agreement to, among other things,
permit (subject to certain limitations) the pledge of TCI Group Series B Stock
owned by Dr. Malone as collateral to the lenders who provided the funds for his
purchase of shares of TCI Group Series B Stock. In connection with the AT&T
Merger, Liberty Media Corporation ("Liberty") became entitled to exercise TCI's
rights under each Call Agreement and the Shareholders' Agreement with respect to
the AT&T Liberty Class B Tracking Stock acquired by the Malones and the Magness
Family as a result of the AT&T Merger and the Malones and the Magness Family
agreed that the Shareholders' Agreement would continue to apply to the AT&T
Liberty Class B Tracking Stock.
On February 1, 1999, the Company began to terminate the transactions
under the agreements with the Investment Bankers described above, and as of
March 5, 1999, such transactions were terminated.
(continued)
III-26
<PAGE> 207
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Please refer to the discussion under "Item 11. Executive Compensation -
Background of Stock Adjustments" for information regarding changes in the
capital structure of the Company. References to share amounts and per share
prices have been adjusted retroactively to give effect to such changes, except
as otherwise noted.
(a) Security ownership of certain beneficial owners. The following
table sets forth, as of December 31, 1998, information with respect to the
ownership of TCI Group Series A Stock, TCI Group Series B Stock, Liberty Group
Series A Stock, Liberty Group Series B Stock, Ventures Group Series A Stock,
Ventures Group Series B Stock, TCI Group Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock ("Class B Preferred Stock"), Series C-TCI
Group Preferred Stock, Series C-Liberty Media Group Preferred Stock, Redeemable
Convertible TCI Group Preferred Stock, Series G ("Series G Preferred Stock") and
Redeemable Convertible Liberty Media Group Preferred Stock, Series H ("Series H
Preferred Stock") by each person known to the Company to own beneficially more
than 5% of any such class outstanding on that date. The aforementioned
securities shall be referred to, from time to time, as the "Voting Securities."
Unless otherwise indicated, the information in the table and the footnotes is as
of December 31, 1998. Shares issuable upon exercise of options, conversion of
convertible securities, exchange of exchangeable securities or 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. Voting power in the table is computed with respect to a
general election of directors and, therefore, the Class B Preferred Stock, the
Series G Preferred Stock and the Series H Preferred Stock are included in the
calculation notwithstanding the fact that the Class B Preferred Stock, the
Series G Preferred Stock and the Series H Preferred Stock do not generally vote
with respect to matters submitted to a vote of stockholders. So far as is known
to TCI, the persons indicated below have sole voting and investment power with
respect to the shares indicated as owned by them except as otherwise stated in
the notes to the table.
The following security ownership table has not been adjusted to reflect
the impact of the AT&T Merger.
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class (1) Power (1)
----- ------------------- -------------------- ------------- -----------
<S> <C> <C> <C> <C>
TCI Group Series A John C. Malone
Stock 5619 DTC Parkway 1,350,146 (2) * 47.74%
TCI Group Series B Englewood, Colorado 80111
Stock 54,400,430 (3)(4)(5)(6) 84.41%
Liberty Group Series A
Stock 1,166,807 (2)(3) *
Liberty Group Series B
Stock 27,234,311 (3)(4)(6) 85.92%
Ventures Group Series
A Stock 1,200,000 (2) *
Ventures Group Series
B Stock 44,821,938 (2)(3)(4)(5)(6) 93.15%
Class B Preferred
Stock 273,600 (3) 17.62%
</TABLE>
(continued)
III-27
<PAGE> 208
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class (1) Power (1)
----- ------------------- -------------------- ------------- -----------
<S> <C> <C> <C> <C>
TCI Group Series A Kim Magness
Stock 5619 DTC Parkway 50,000 (7) * 20.98%
TCI Group Series B Englewood, Colorado 80111,
Stock individually and as co- 21,874,613 (4)(8)(9) 33.94%
Liberty Group Series A personal representative of the
Stock Estate of Bob Magness 9,221,009 (7)(8) 2.75%
Liberty Group Series B and as personal representative
Stock of the Estate 14,044,522 (4)(8)(9) 44.31%
Ventures Group Series of Betsy Magness
B Stock 18,236,450 (4)(8)(9) 40.24%
Class B Preferred
Stock 62,500 4.03%
TCI Group Series A Gary Magness
Stock 5619 DTC Parkway 16,963 (10) * 15.65%
TCI Group Series B Englewood, Colorado 80111,
Stock individually and as co- 16,403,415 (4)(8)(9)(10) 25.45%
Liberty Group Series A personal representative of the
Stock Estate of Bob Magness 6,861,365 (8)(10) 2.04%
Liberty Group Series B
Stock 11,703,390 (4)(8)(9)(10) 36.92%
Ventures Group Series
A Stock 242,628 (10) *
Ventures Group Series
B Stock 12,263,932 (4)(8)(9)(10) 27.06%
Class B Preferred
Stock 64,598 4.16%
TCI Group Series A The Associated Group, Inc.
Stock 200 Gateway Towers 9,111,202 (11) 1.92% 4.64%
TCI Group Series B Pittsburgh, Pennsylvania 15222
Stock 7,123,167 (11) 11.05%
Liberty Group Series A
Stock 8,180,954 (11) 2.44%
Liberty Group Series B
Stock 2,651,944 (11) 8.37%
Ventures Group Series
A Stock 6,737,548 (11) 1.79%
TCI Group Series A The Capital Group Companies, Inc.
Stock and Capital Research 8,880,820 (12) 1.87% 2.58%
Liberty Group Series A and Management Company
Stock 333 South Hope Street 36,138,420 (12) 10.77%
Ventures Group Series Los Angeles, California 90071
A Stock 22,599,350 (12) 5.99%
TCI Group Series A The Equitable Companies
Stock Incorporated 5,432,135 (13) 1.15% 3.06%
Liberty Group Series A 1290 Avenue of the Americas
Stock New York, New York 10104; 44,430,625 (14) 13.24%
Ventures Group Series and The Mutuelles AXA (as
A Stock defined) 30,559,324 (15) 8.10%
100-101 Terrasse Boieldieu
92042
Paris La Defense France
</TABLE>
(continued)
III-28
<PAGE> 209
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Name and Address Beneficial Percent Voting
Class of Beneficial Owner Ownership of Class (1) Power (1)
----- ------------------- -------------------- ------------- -----------
<S> <C> <C> <C> <C>
TCI Group Series A Putnam Investments, Inc.
Stock One Post Office Square 24,144,990 (16) 5.10% 2.43%
Ventures Group Series Boston, Massachusetts 02109
A Stock 39,590,372 (17) 10.50%
TCI Group Series A Janus Capital Corporation and
Stock Thomas H. Bailey 29,569,829 (18) 6.24% 1.13%
100 Fillmore Street
Denver, Colorado 80206
Liberty Group Series A Lawrence Flinn, Jr.
Stock 209 Taconic Road 7,336,744 (19) 2.19% 1.23%
Ventures Group Series Greenwich, Connecticut 06830
A Stock 12,688,812 (19) 3.36%
Series G Preferred
Stock 6,186,647 (19) 96.00%
Series H Preferred
Stock 6,186,647 (19) 94.24%
TCI Group Series A Bill Daniels
Stock c/o Daniels & Associates 1,725 (19) * *
Liberty Group Series A 3200 Cherry Creek Drive South
Stock Denver, Colorado 80209 1,021 (19) *
Ventures Group Series
A Stock 188 (19) *
Class B Preferred
Stock 20 *
Series C-TCI Group
Preferred Stock 43,575 (20) 100%
Series C-Liberty Media
Group Preferred
Stock 70,575 (20) 100%
TCI Group Series A FMR Corp. and Fidelity Management
Stock and Research 33,337,607 (21) 7.04% 2.13%
Ventures Group Company
Series A Stock 82 Devonshire Street 22,494,698 (22) 5.96%
Boston, Massachusetts 02109
Class B Preferred Salomon Brothers Inc.
Stock Salomon Brothers Holding 100,142 (23) 6.45% *
Company Inc. Salomon Smith
Barney Holdings Inc.
Travelers Group Inc.
388 Greenwich Street
New York, New York 10013
</TABLE>
- --------------------
* Less than one percent.
(1) Based on 473,657,007 shares of TCI Group Series A Stock, 64,444,193 shares
of TCI Group Series B Stock, 335,674,724 shares of Liberty Group Series A
Stock, 31,698,895 shares of Liberty Group Series B Stock, 377,191,780
shares of Ventures Group Series A Stock, 45,318,338 shares of Ventures
Group Series B Stock, 1,552,490 shares of Class B Preferred Stock, 43,575
shares of Series C-TCI Group Preferred Stock, 70,575 shares of Series
C-Liberty Media Group Preferred Stock, 6,444,244 shares of Series G
Preferred Stock and 6,564,794 shares of Series H Preferred Stock
outstanding on December 31, 1998, in each case after elimination of shares
then held in treasury and shares held by the Company and its majority owned
subsidiaries.
(continued)
III-29
<PAGE> 210
(2) Assumes the exercise in full of the following: (a) stock options granted in
tandem with stock appreciation rights in November 1992 to acquire 650,000
shares of TCI Group Series A Stock, 562,500 shares of Liberty Group Series
A Stock, and 600,000 shares of Ventures Group 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
Groups Series A Stock, 562,500 shares of Liberty Group Series A Stock, and
600,000 shares of Ventures Group Series A Stock, of which options to
acquire 420,000, 337,500 and 360,000, respectively, of such shares are
currently exercisable; (c) stock options granted in April 1996, pursuant to
the TINTA Director Stock Option Plan to acquire 29,000 shares of Liberty
Group Series A Stock, of which options to acquire 11,600 shares are
currently exercisable; and (d) stock options granted in tandem with stock
appreciation rights in December 1997 to acquire 2,800,000 shares of
Ventures Group Series B Stock, of which options to acquire 560,000 shares
are currently exercisable.
(3) Includes 784,892 shares of TCI Group Series B Stock, 12,726 shares of
Liberty Group Series A Stock, 439,875 shares of Liberty Group Series B
Stock, 793,240 shares of Ventures Group 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.
(4) Pursuant to a letter agreement dated June 17, 1988, the late Mr. Bob
Magness and Kearns, 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 to acquire, at any time and from time to time prior to
June 30, 1999 (the "Malone Right"), up to 30,545,864 shares of TCI Group
Series B Stock for either (or any combination of): (a) shares of TCI Group
Series A Stock on a one-for-one basis; or (b) cash based on the closing
sales price of the TCI Group Series B Stock on Nasdaq 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") had 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. On June 24, 1998, Dr. Malone delivered notice
to the Company exercising his right to purchase (subject to the Magness
Group proportionate right) up to 14,511,570 shares of TCI Group Series B
Stock at a per share price of $35.5875 pursuant to the Malone Right. In
addition, a representative of the Magness Group advised Dr. Malone that the
Magness Group would participate in such purchase up to the Magness Group's
proportionate right. On October 14, 1998, 8,718,770 shares of TCI Group
Series B Stock were issued to Dr. Malone upon payment of cash consideration
totaling $310 million. On October 16, 1998, 5,792,800 shares of TCI Group
Series B Stock were issued to the Magness Group upon payment of cash
consideration totaling $206 million.
(continued)
III-30
<PAGE> 211
In connection with the foregoing changes to the TCI-Estates Agreement, on
February 9, 1998, Dr. Malone and his spouse (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, Liberty Group Series B Stock and
Ventures Group Series B Stock held by the Malone Group and the Magness
Group will be voted in the manner directed by Dr. Malone pursuant to an
irrevocable proxy given by the Magness Group. See "Item 11. Executive
Compensation - Compensation Committee Interlocks and Insider Participation
in Compensation Decisions" for additional information.
As a result of the aforementioned transactions, Dr. Malone's beneficial
ownership of TCI common stock includes the following shares held by the
Magness Group: 22,313,883 shares of TCI Group Series B Stock, 14,293,219
shares of Liberty Group Series B Stock, and 18,466,084 shares of Ventures
Group Series B Stock.
(5) Includes 1,684,775 shares of TCI Group Series B Stock and 1,721,360 shares
of Ventures Group Series B Stock held by trusts to which Mr. Hindery is the
trustee and over which Dr. Malone has the power to direct the voting. Dr.
Malone 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 Ventures Group Series A Stock for such Ventures Group
Series B Stock. If not exercised by Dr. Malone, the right of first refusal
may be exercised by the Company. See note 6 to the table in "Security
Ownership of Management" for additional information.
(6) Dr. and Mrs. Malone's shares of TCI Group Series B Stock, Liberty Group
Series B Stock, and Ventures Group Series B Stock are subject to the terms
of a Call Agreement, dated as of February 9, 1998, among Dr. and Mrs.
Malone and TCI. See "Item 11. Executive Compensation - Compensation
Committee Interlocks and Insider Participation in Compensation Decision -
Magness and Malone Transactions" for additional information regarding the
terms of such Call Agreement.
(7) Assumes the exercise in full of options granted to Mr. Magness in November
1994, pursuant to the Company's Director Stock Option Plan, to acquire
50,000 shares of TCI Group Series A Stock and 28,125 shares of Liberty
Group Series A Stock. Options to acquire 40,000 and 22,500, respectively,
of such shares are currently exercisable.
(8) Effective January 5, 1998, Mr. Kim Magness and Mr. Gary Magness were
appointed co-personal representatives of the Estate of Bob Magness.
Accordingly, the following shares beneficially owned by the Estate of Bob
Magness are reflected in full in Mr. Kim Magness' and Mr. Gary Magness'
share information: (a) 15,964,145 shares of TCI Group Series B Stock; (b)
6,583,228 shares of Liberty Group Series A Stock; (c) 11,454,693 shares of
Liberty Group Series B Stock; and (d) 12,034,298 shares of Ventures Group
Series B Stock.
(continued)
III-31
<PAGE> 212
(9) The shares of TCI Group Series B Stock, Liberty Group Series B Stock, and
Ventures Group Series B Stock beneficially owned by Mr. Kim Magness, Mr.
Gary Magness, the Estate of Bob Magness, and the Estate of Betsy Magness
are subject to the terms of a Call Agreement, dated as of February 9, 1998,
among members of the Magness Group and TCI. See "Item 11. Executive
Compensation - Compensation Committee Interlocks and Insider Participation
in Compensation Decisions - Magness and Malone Transactions" for additional
information regarding the terms of such Call Agreement.
(10) Includes 7,851 shares of TCI Group Series A Stock, 102 shares of TCI Group
Series B Stock, 12,800 shares of Liberty Group Series A Stock, 11,606
shares of Ventures Group Series A Stock and 5,796 shares of Ventures Group
Series B Stock held by Mr. Gary Magness' wife. Also, includes 2,750 shares
of TCI Group Series A Stock, 1,100 shares of TCI Group Series B Stock, 420
shares of Liberty Group Series A Stock and 500 shares of Liberty Group
Series B Stock held by Mr. Gary Magness' daughter.
(11) The number of shares in the table is based upon disclosure made by The
Associated Group, Inc. to the Company as of February 23, 1999. All shares
are beneficially owned through a wholly owned subsidiary of The Associated
Group, Inc.
(12) The number of shares in the table is based upon Schedule 13Gs filed by the
Capital Group Companies, Inc. dated February 11, 1999. The Capital Group
Companies, Inc. is the parent holding company of a group of investment
management companies that hold investment power and, in some cases, voting
power over the securities reported in the Schedule 13Gs. The investment
management companies, which include a bank and several investment advisors,
provide investment advisory and management services for their respective
clients which include registered investment companies and institutional
accounts. The Capital Group Companies, Inc. does not have investment power
or voting power over any of the securities reported; however, The Capital
Group Companies, Inc., may be deemed to beneficially own such securities.
Capital Research and Management Company, an investment adviser and wholly
owned subsidiary of The Capital Group Companies, Inc., is the beneficial
owner of the securities reported.
(13) The number of shares of TCI Group Series A Stock in the table is based upon
a Schedule 13G, dated February 17, 1998, filed by The Equitable Companies
Incorporated and other related companies (defined therein as the Mutuelles
AXA). The Schedule 13G reflects that said corporations have sole voting
power over 1,073,613 shares and shared voting power over 3,867,425 shares
of TCI Group Series A Stock. The Schedule 13G also reflects that said
corporations have sole disposition power over 5,407,128 shares and shared
disposition power over 25,007 shares of TCI Group Series A Stock. No
additional information is given with respect to the voting power over the
remaining shares.
(14) The number of shares of Liberty Group Series A Stock in the table is based
upon a Schedule 13G, dated February 16, 1999, filed by the Equitable
Companies Incorporated and other related companies (defined therein as the
Mutuelles AXA). The Schedule 13G reflects that said corporations have sole
voting power over 23,181,796 shares and shared voting power over 11,269,586
shares of Liberty Group Series A Stock. The Schedule 13G also reflects that
said corporations have sole disposition power over 44,414,521 shares and
shared disposition power over 8,779 shares of Liberty Group Series A Stock.
No additional information is given with respect to the voting power over
the remaining shares.
(continued)
III-32
<PAGE> 213
(15) The number of shares of Ventures Group Series A Stock in the table is based
upon a Schedule 13G, dated February 16, 1999, filed by the Equitable
Companies Incorporated and other related companies (defined therein as the
Mutuelles AXA). The Schedule 13G reflects that said corporations have sole
voting power over 3,698,056 shares and shared voting power over 26,581,886
shares of Ventures Group Series A Stock. The Schedule 13G also reflects
that said corporations have sole disposition power over 30,534,690 shares
and shared disposition power over 24,634 shares of Ventures Group Series A
Stock. No additional information is given with respect to the voting power
over the remaining shares.
(16) The number of shares of TCI Group Series A Stock in the table is based upon
a Schedule 13G, dated February 12, 1999, filed by Putnam Investments, Inc.
and other related companies. The Schedule 13G reflects that said
corporations have shared voting power over 2,752,932 shares and shared
disposition power over all the shares. No additional information is given
with respect to the voting power over the remaining shares.
(17) The number of shares of Ventures Group Series A Stock in the table is based
upon a Schedule 13G, dated February 6, 1998, filed by Putnam Investments,
Inc. and other related companies. The Schedule 13G reflects that said
corporations have shared voting power over 3,706,552 shares and shared
disposition power over all the shares. No additional information is given
with respect to the voting power over the remaining shares.
(18) The number of shares of TCI Group Series A Stock in the table is based upon
a Schedule 13G, dated February 12, 1999, filed by Janus Capital
Corporation. The Schedule 13G reflects that said corporation has shared
voting power and shared disposition power over all of the shares of TCI
Group Series A Stock. Amount includes 358,185 shares of TPAC preferred
stock convertible into TCI Group Series A Stock on a 5.447-for-1 basis.
(19) The number of shares in the table is based upon the Company's review of the
record of stockholders provided by the Company's transfer agent, The Bank
of New York.
(20) Based upon the Company's review of its internally maintained stock records.
(21) The number of shares of TCI Group Series A Stock in the table is based upon
a Schedule 13G, dated February 12, 1999, filed by FMR Corp. and other
related companies. The Schedule 13G reflects that said corporations have
sole voting power over 1,591,587 shares and shared disposition power over
33,336,607 shares. No additional information is given with respect to the
voting power over the remaining shares.
(22) The number of shares of Ventures Group Series A Stock in the table is based
upon a Schedule 13G, dated February 16, 1999, filed by FMR Corp. and other
related companies. The Schedule 13G reflects that said corporations have
sole voting power over 946,420 shares and shared disposition power over
22,494,698 shares. No additional information is given with respect to the
voting power over the remaining shares.
(23) The number of shares of Class B Preferred Stock in the table is based upon
a Schedule 13G, dated December 10, 1997, filed by Salomon Brothers Inc. The
Schedule 13G reflects that said corporation has shared voting power and
shared disposition power over all of the shares of Class B Preferred Stock.
(continued)
III-33
<PAGE> 214
(b) Security ownership of management. The following table sets forth,
as of December 31, 1998, information with respect to the ownership of the Voting
Securities by all directors and each of the named executive officers of TCI and
by all executive officers and directors of TCI as a group. Shares issuable upon
exercise of options, conversion of convertible securities, exchange of
exchangeable securities or 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. Voting power in the table is
computed with respect to a general election of directors and, therefore, the
Class B Preferred Stock, the Series G Preferred Stock and the Series H Preferred
Stock are included in the calculation notwithstanding the fact that the Class B
Preferred Stock, the Series G Preferred Stock and the Series H Preferred Stock
do not generally vote with respect to matters submitted to a vote of
stockholders. The number of TCI Group Series A Stock, Liberty Group Series A
Stock and Ventures Group Series A Stock in the table include interests of the
named directors or executive officers or of members of the group of directors
and executive officers in shares held by the trustee of United Artists
Entertainment Company's Employee Stock Ownership Plan for their respective
accounts. So far as is known to TCI, the persons indicated below have sole
voting and investment power with respect to the shares indicated as owned by
them except as otherwise stated in the notes to the table.
The following security ownership table has not been adjusted to reflect
the impact of the AT&T Merger.
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1) (1)
-------------- ---------------- ----------------------- ------------ -------
<S> <C> <C> <C> <C>
TCI Group Series A Donne F. Fisher
Stock 435,884 (2) * *
TCI Group Series B
Stock 184,818 *
Liberty Group Series A
Stock 381,838 (2) *
Liberty Group Series B
Stock 93,402 *
Ventures Group Series A
Stock 285,434 (2) *
Ventures Group Series B
Stock 174,738 *
Class B Preferred
Stock 4,299 (2) *
TCI Group Series A John W. Gallivan
Stock 73,154 (3) * *
Liberty Group Series A
Stock 29,318 (3) *
Ventures Group Series A
Stock 23,696 *
Class B Preferred
Stock 14 (3) *
</TABLE>
(continued)
III-34
<PAGE> 215
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1) (1)
-------------- ---------------- ----------------------- ------------ -------
<S> <C> <C> <C> <C>
TCI Group Series A Paul A. Gould
Stock 88,090 (4) * *
TCI Group Series B
Stock 246,271 *
Liberty Group Series A
Stock 208,907 (4) *
Liberty Group Series B
Stock 58,621 *
Ventures Group Series A
Stock 56,266 *
Ventures Group Series B
Stock 57,964 *
Class B Preferred
Stock 12,248 *
TCI Group Series A Leo J. Hindery, Jr.
Stock 2,924,534 (5) * 1.51%
TCI Group Series B
Stock 1,684,775 (6) 2.61%
Liberty Group Series A
Stock 1,154,000 (5) *
Ventures Group Series A
Stock 1,550,932 (5) *
Ventures Group Series B
Stock 1,721,360 (6) 3.80%
TCI Group Series A Jerome H. Kern
Stock 1,929,746 (7) * *
Liberty Group Series A
Stock 1,406,105 (7) *
Ventures Group Series A
Stock 1,474,876 (7) *
TCI Group Series A Kim Magness, individually
Stock and as 50,000 (8) * 20.98%
TCI Group Series B co-personal
Stock representative of 21,874,613 (9) 33.94%
Liberty Group Series A the Estate of Bob
Stock Magness and as 9,221,009 (10) 2.75%
Liberty Group Series B personal
Stock representative of 14,044,522 (11) 44.31%
Ventures Group Series B the Estate of Betsy
Stock Magness 18,236,450 (11) 40.24%
Class B Preferred
Stock 62,500 4.03%
TCI Group Series A John C. Malone
Stock 1,350,146 (12) * 47.74%
TCI Group Series B
Stock 54,400,430 (13) 84.41%
Liberty Group Series A
Stock 1,166,807 (14) *
Liberty Group Series B
Stock 27,234,311 (15) 85.92%
Ventures Group Series A
Stock 1,200,000 (12) *
Ventures Group Series B
Stock 44,821,938 (16) 93.15%
Class B Preferred
Stock 273,600 (17) 17.62%
</TABLE>
(continued)
III-35
<PAGE> 216
<TABLE>
<CAPTION>
Percent Voting
Name of Amount and Nature of Class Power
Title of Class Beneficial Owner of Beneficial Ownership (1) (1)
-------------- ---------------- ----------------------- ------------ -------
<S> <C> <C> <C> <C>
TCI Group Series A Robert A. Naify
Stock 16,604,945 (18) 3.39% 1.65%
Liberty Group Series A
Stock 13,324,954 (18) 3.82%
Ventures Group Series A
Stock 14,167,826 (18) 3.62%
Class B Preferred
Stock 1,000 *
TCI Group Series A J. C. Sparkman
Stock 171,056 (19) * *
Liberty Group Series A
Stock 141,751 (19) *
Ventures Group Series A
Stock 107,102 (19) *
TCI Group Series A Stephen M. Brett
Stock 719,282 (20) * *
Liberty Group Series A
Stock 506,294 (20) *
Ventures Group Series A
Stock 508,314 (20) *
TCI Group Series A Larry E. Romrell
Stock 672,672 (21) * *
TCI Group Series B
Stock 20 *
Liberty Group Series A
Stock 369,735 (21) *
Liberty Group Series B
Stock 220 *
Ventures Group Series A
Stock 617,080 (21) *
Ventures Group Series B
Stock 1,136 *
TCI Group Series A Marvin L. Jones
Stock 290,268 (22) * *
Liberty Group Series A
Stock 5,806 (22) *
Ventures Group Series A
Stock 173,112 (22) *
TCI Group Series A All directors and
Stock executive officers 26,817,325 (2)(3)(7)(18)(23) 5.38% 49.81%
TCI Group Series B as a group (17
Stock persons) 54,831,597 (2)(6)(9)(13) 85.08%
Liberty Group Series A
Stock 35,690,749 (3)(7)(17)(18)(23) 9.89%
Liberty Group Series B
Stock 27,387,197 (9)(15) 86.40%
Ventures Group Series A
Stock 21,186,040 (7)(18)(23) 5.33%
Ventures Group Series B
Stock 45,059,092 (6)(9)(13)(24) 93.64%
Class B Preferred
Stock 355,165 (2)(3)(17) 22.88%
</TABLE>
- -------------------------
* Less than one percent.
(1) See note 1 to the table in "Security Ownership of Certain Beneficial
Owners."
(continued)
III-36
<PAGE> 217
(2) Assumes the exercise in full of the following: (a) stock options granted in
tandem with stock appreciation rights to Mr. Fisher in November 1994 to
acquire 140,000 shares of TCI Group Series A Stock, 112,500 shares of
Liberty Group Series A Stock, and 120,000 Ventures Group Series A Stock of
which options to acquire 112,000, 90,000 and 96,000, respectively, of such
shares are currently exercisable; and (b) stock options granted in January
1996, pursuant to the Director Stock Option Plan, to acquire 50,000 shares
of TCI Group Series A Stock and 28,125 shares of Liberty Group Series A
Stock, of which options to acquire 20,000 and 11,250, respectively, of such
shares are currently exercisable. In addition, includes 51,724 shares of
TCI Group Series A Stock, 66,946 shares of TCI Group Series B Stock and 210
shares of Class B Preferred Stock held by Mr. Fisher's wife.
(3) Includes 1,524 shares of TCI Group Series A Stock, 856 shares of Liberty
Group Series A Stock and 14 shares of Class B Preferred Stock held by Mr.
Gallivan's wife. Also, assumes the exercise in full of stock options
granted in November 1994, pursuant to the Director Stock Option Plan, to
acquire 20,000 shares of TCI Group Series A Stock and 28,125 shares of
Liberty Group Series A Stock, of which options to acquire 10,000 and
22,500, respectively, of such shares are currently exercisable.
(4) Assumes the exercise in full of the following: (a) stock options granted in
December 1996, pursuant to the Director Stock Option Plan, to acquire
50,000 shares of TCI Group Series A Stock and 28,125 shares of Liberty
Group Series A Stock, of which options to acquire 20,000 and 11,250,
respectively, of such shares are currently exercisable; and (b) stock
options granted in April 1996, pursuant to the TINTA Director Stock Option
Plan to acquire 29,000 shares of Liberty Group Series A Stock, of which
options to acquire 11,600 shares are currently exercisable.
(5) 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, 404,000 shares of Liberty Group Series
A Stock, and 600,000 shares of Ventures Group Series A Stock, of which
options to acquire 140,000, 80,800 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 Liberty Group Series A Stock,
and 900,000 shares of Ventures Group Series A Stock, of which options to
acquire 210,000, 150,000 and 180,000, respectively, of such shares are
currently exercisable.
In addition, assumes the vesting in full of (a) 174,534 shares of
restricted TCI Group Series A Stock and 50,932 shares of restricted
Ventures Group Series A Stock which vest as to 50% in July 2001 and as to
the remaining 50% in July 2002 and (b) 1,000,000 shares of restricted TCI
Group Series A Stock which vests as to 50% in June 2002 and as to the
remaining 50% in June 2003.
(6) Includes 1,684,775 shares of TCI Group Series B Stock and 1,721,360 shares
of Ventures Group Series B Stock held by trusts to which Mr. Hindery is the
trustee and over which Dr. Malone has the power to vote such shares. Dr.
Malone 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 Ventures Group Series A Stock for such Ventures Group
Series B Stock. If not exercised by Dr. Malone, the right of first refusal
may be exercised by the Company.
(continued)
III-37
<PAGE> 218
(7) Includes 11,000 shares of TCI Group Series A Stock, 14,000 shares of
Liberty Group Series A Stock and 5,000 shares of Ventures Group Series A
Stock held by Mr. Kern's wife and as to which Mr. Kern disclaims beneficial
ownership. Also, assumes the exercise in full of the following: (a) stock
options granted in November 1994, pursuant to the Director Stock Option
Plan, to purchase 25,000 shares of TCI Group Series A Stock and 14,063
shares of Liberty Group Series A Stock, of which options to acquire 20,000
and 11,250, 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 Liberty Group Series A Stock and 150,000 shares of Ventures Group Series
A Stock, of which options to acquire 105,000, 84,375 and 90,000,
respectively, of such shares are currently exercisable; (c) stock options
granted in April 1996, pursuant to the TINTA Director Stock Option Plan to
acquire 14,500 shares of Liberty Group Series A Stock, of which options to
acquire 5,800 shares are currently exercisable; (d) stock options granted
in tandem with stock appreciation rights in July 1997 to acquire 850,000
shares of TCI Group Series A Stock, 843,750 shares of Liberty Group Series
A Stock and 900,000 shares of Ventures Group Series A Stock, of which
options to acquire 170,000, 168,750 and 180,000, respectively, of such
shares are currently exercisable; and (e) 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 Liberty Group series A
Stock, and 300,000 shares of Ventures Group Series A Stock, of which
options to acquire 70,000, 50,000 and 60,000, respectively, of such shares
are currently exercisable.
In addition, assumes the vesting in full of (a) 163,620 shares of
restricted TCI Group Series A Stock and 72,760 shares of restricted
Ventures Group Series A Stock which vest as to 50% in July 2001 and as to
the remaining 50% in July 2002 and (b) 250,000 shares of restricted TCI
Group Series A Stock which vests as to 50% in December 2002 and as to the
remaining 50% in December 2003.
(8) See note (7) to the table in "Security Ownership of Certain Beneficial
Owners."
(9) See notes (4), (8) and (9) to the table in "Security Ownership of Certain
Beneficial Owners."
(10) See notes (7) and (8) to the table in "Security Ownership of Certain
Beneficial Owners."
(11) See notes (4), (8) and (9) to the table in "Security Ownership of Certain
Beneficial Owners."
(12) See note (2) to the table in "Security Ownership of Certain Beneficial
Owners."
(13) See notes (3), (4), (5) and (6) to the table in "Security Ownership of
Certain Beneficial Owners."
(14) See notes (2) and (3) to the table in "Security Ownership of Certain
Beneficial Owners."
(15) See notes (3), (4) and (6) to the table in "Security Ownership of Certain
Beneficial Owners."
(16) See notes (2), (3), (4), (5) and (6) to the table in "Security Ownership of
Certain Beneficial Owners."
(17) See note (3) to the table in "Security Ownership of Certain Beneficial
Owners."
(continued)
III-38
<PAGE> 219
(18) Mr. Robert Naify received notes, which are currently convertible into
15,712,848 shares of TCI Group Series A Stock, 12,626,396 shares of Liberty
Group Series A Stock, 13,468,156 shares of Ventures Group Series A Stock,
as partial consideration for the sale to the Company of the stock owned by
him in United Artists Communications, Inc. Mr. Naify is also a co-trustee,
along with Mr. Naify's brother, Marshall, and their sister, of a trust for
the benefit of Marshall Naify, which holds additional notes convertible
into 239,124 shares of TCI Group Series A Stock, 192,153 shares of Liberty
Group Series A Stock, and 204,964 shares of Ventures Group Series A Stock.
The number of shares indicated as held by Mr. Naify assumes the conversion
of these notes. Also, assumes the exercise in full of options granted in
November 1994, pursuant to the Director Stock Option Plan, to acquire
50,000 shares of TCI Group Series A Stock and 28,125 shares of Liberty
Group Series A Stock. Options to acquire 40,000 and 22,500, respectively,
of such shares are currently exercisable.
(19) Assumes the exercise in full of the following: (a) stock options granted in
tandem with stock appreciation rights in May 1995 to acquire 40,000 shares
of TCI Group Series A Stock, 30,000 shares of Liberty Group Series A Stock,
and 60,000 shares of Ventures Group Series A Stock, all of which options
are currently exercisable; and (b) stock options granted in December 1996,
pursuant to the Director Stock Option Plan, to acquire 50,000 shares of TCI
Group Series A Stock and 28,125 shares of Liberty Group Series A Stock, of
which options to acquire 20,000 and 11,250, respectively, of such shares
are currently exercisable.
(20) 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 Liberty Group Series
A Stock and 112,000 shares of Ventures Group Series A Stock, of which
options to acquire 96,000, 82,000 and 88,000, 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, 197,750 shares of Liberty Group Series A Stock and 180,000
shares of Ventures Group Series A Stock, of which options to acquire
126,000, 118,650 and 108,000, 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, 179,000 shares of Liberty Group Series A Stock and 207,000
shares of Ventures Group Series A Stock, of which options to acquire
48,300, 35,800 and 41,400, respectively, of such shares are currently
exercisable.
In addition, assumes the vesting in full of (a) 35,634 shares of restricted
TCI Group Series A Stock, 22,500 shares of restricted Liberty Group Series
A Stock and 8,732 shares of restricted Ventures Group Series A Stock which
vest as to 50% in December 1999 and as to the remaining 50% in December
2000; (b) 50,000 shares of restricted TCI Group Series A Stock which vests
as to 50% in June 2002 and as to the remaining 50% in June 2003; and (c)
53,000 shares of restricted TCI Group Series A Stock which vests as to 50%
in September 2002 and as to the remaining 50% in September 2003.
(continued)
III-39
<PAGE> 220
(21) Assumes the exercise in full of the following: (a) stock options granted in
tandem with stock appreciation rights in November 1992 to acquire 60,000
shares of Ventures Group Series A Stock, all of which options are currently
exercisable; (b) stock options granted in tandem with stock appreciation
rights in October 1993 to acquire 56,250 shares of Liberty Group Series A
Stock and 60,000 shares of Ventures Group 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 140,000 shares of TCI
Group Series A Stock, 112,500 shares of Liberty Group Series A Stock and
120,000 shares of Ventures Group Series A Stock, of which options to
acquire 112,000, 90,000 and 96,000, respectively, of such shares are
currently exercisable; (d) 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 Liberty Group Series A Stock and 180,000
shares of Ventures Group Series A Stock, of which options to acquire
126,000, 101,250 and 108,000, respectively, of such shares are currently
exercisable; (e) stock options granted in tandem with stock appreciation
rights in May 1997 to acquire 157,500 shares of TCI Group Series A Stock
and 135,000 shares of Ventures Group Series A Stock, of which options to
acquire 31,500 and 27,000, respectively, of such shares are currently
exercisable; and (f) stock options granted in tandem with stock
appreciation rights in July 1997 to acquire 31,500 shares of TCI Group
Series A Stock and 27,000 shares of Ventures Group Series A Stock, of which
options to acquire 6,300 and 5,400, respectively, of such shares are
currently exercisable.
In addition, assumes the vesting in full of (a) 25,448 restricted shares of
TCI Group Series A Stock, 22,500 restricted shares of Liberty Group Series
A Stock, and 29,104 restricted shares of Ventures Group Series A Stock
which vest as to 50% in December 1999 and as to the remaining 50% in
December 2000; (b) 50,000 shares of restricted TCI Group Series A Stock
which vests as to 50% in June 2002 and as to the remaining 50% in June
2003; and (c) 53,000 shares of restricted TCI Group Series A Stock which
vests as to 50% in September 2002 and as to the remaining 50% in September
2003.
(22) Assumes the exercise in full of the following: (a) stock options granted in
tandem with stock appreciation rights in May 1997 to acquire 126,000 shares
of TCI Group Series A Stock and 108,000 shares of Ventures Group Series A
Stock. None of the options remaining from the original grant are
exercisable until May 1999; and (b) stock options granted in tandem with
stock appreciation rights in July 1997 to acquire 67,200 shares of TCI
Group Series A Stock and 57,600 shares of Ventures Group Series A Stock.
None of the options remaining from the original grant are exercisable until
July 1999.
In addition, assumes the vesting in full of (a) 53,000 shares of restricted
TCI Group Series A Stock which vests as to 50% in September 2002 and as to
the remaining 50% in September 2003; and (b) 37,500 shares of restricted
TCI Group Series A Stock which vests as to 50% in December 2002 and as to
the remaining 50% in December 2003.
(23) Certain executive officers and directors of the Company hold options which
were granted in tandem with stock appreciation rights in November 1992 to
acquire an aggregate of 720,000 shares of TCI Group Series A Stock, 576,562
shares of Liberty Group Series A Stock, and 720,000 shares of Ventures
Group Series A Stock. All of such options are currently exercisable.
(continued)
III-40
<PAGE> 221
Additionally, certain executive officers hold stock options granted in
tandem with stock appreciation rights in October 1993 to acquire an
aggregate of 70,000 shares of TCI Group Series A Stock, 112,500 shares of
Liberty Group Series A Stock and 120,000 shares of Ventures Group Series A
Stock. All of such options are currently exercisable.
Also, certain executive officers and a director hold stock options which
were granted in tandem with stock appreciation rights in November 1994 to
acquire an aggregate of 498,014 shares of TCI Group Series A Stock, 405,047
shares of Liberty Group Series A Stock, and 432,584 shares of Ventures
Group Series A Stock. Options to acquire 394,455, 321,830, and 343,819,
respectively, of such shares are currently exercisable.
Additionally, certain executive officers and directors hold stock options
which were granted in tandem with stock appreciation rights in December
1995 to acquire an aggregate of 1,547,482 shares of TCI Group Series A
Stock, 2,223,625 shares of Liberty Group Series A Stock, and 1,326,413
shares of Ventures Group Series A Stock. Options to acquire 925,689,
1,334,175 and 793,448, respectively, of such shares are currently
exercisable.
Additionally, certain executive officers hold stock options which were
granted in tandem with stock appreciation rights in May 1997 to acquire an
aggregate of 388,500 shares of TCI Group Series A Stock and 333,000 shares
of Ventures Group Series A Stock. Options to acquire 52,500 and 45,000,
respectively, of such shares are currently exercisable.
Additionally, certain executive officers and a director hold stock options
which were granted in tandem with stock appreciation rights in July 1997 to
acquire an aggregate of 1,652,700 shares of TCI Group Series A Stock,
1,646,501 shares of Liberty Group Series A Stock, and 1,416,600 shares of
Ventures Group Series A Stock. Options to acquire 308,700, 323,300 and
264,600, respectively, of such shares are currently exercisable.
Additionally, an executive officer holds stock appreciation rights which
were granted in March 1991 to acquire an aggregate of 150,000 shares of TCI
Group Series A Stock, 150,000 shares of Liberty Group Series A Stock, and
130,000 shares of Ventures Group Series A Stock. All of such options are
currently exercisable.
Additionally, Mr. Kern holds stock options which were granted in tandem
with stock appreciation rights in July 1997 to acquire an aggregate of
850,000 shares of TCI Group Series A Stock, 843,750 shares of Liberty Group
Series A Stock, and 900,000 shares of Venture Group Series A Stock. Options
to acquire 170,000, 168,750 and 180,000, respectively, of such shares are
currently exercisable.
Additionally, Mr. Kern holds stock options which were granted in tandem
with stock appreciation rights in December 1997 to acquire an aggregate of
350,000 shares of TCI Group Series A Stock, 250,000 shares of Liberty Group
Series A Stock, and 300,000 shares of Ventures Group Series A Stock.
Options to acquire 70,000, 50,000 and 60,000, respectively, of such shares
are currently exercisable.
(continued)
III-41
<PAGE> 222
Also, certain executive officers hold an aggregate of 81,759 restricted
shares of TCI Group Series A Stock, 45,000 restricted shares of Liberty
Group Series A Stock, and 61,483 restricted shares of Ventures Group Series
A Stock. Such shares vest as to 50% in December 1999 and as to the
remaining 50% in December 2000. Messrs. Hindery and Kern hold an aggregate
of 338,154 restricted shares of TCI Group Series A Stock and 123,692
restricted shares of Ventures Group Series A Stock. Such shares vest as to
50% in July 2001 and as to the remaining 50% in July 2002.
Additionally, certain executive officers hold an aggregate of (a) 1,350,000
restricted shares of TCI Group Series A Stock which vest as to 50% in June
2002 and as to the remaining 50% in June 2003 and (b) 278,250 restricted
shares of TCI Group Series A Stock which vest as to 50% in September 2002
and as to the remaining 50% in September 2003. Messrs. Kern and Jones hold
an aggregate of 287,500 restricted shares of TCI Group Series A Stock. Such
shares vest as to 50% in December 2002 and as to the remaining 50% in
December 2003.
Mr. Hindery holds options to acquire 700,000 shares of TCI Group Series A
Stock, 404,000 shares of Liberty Group Series A Stock, and 600,000 shares
of Ventures Group Series A Stock as described in note 5 above. Mr. Sparkman
holds options to acquire 40,000 shares of TCI Group Series A Stock, 30,000
shares of Liberty Group Series A Stock and 60,000 shares of Ventures Group
Series A Stock as described in note 19 above.
Additionally, certain executive officers hold stock options which were
granted in tandem with stock appreciation rights in December 1998 to
acquire an aggregate of 5,500,000 shares of Liberty Group Series A Stock.
None of such options are exercisable until December 29, 1999.
Pursuant to the Director Stock Option Plan, certain directors hold options
to purchase an aggregate of 145,000 shares of TCI Group Series A Stock and
an aggregate of 98,438 shares of Liberty Group Series A Stock. Options to
purchase an aggregate of 110,000 and 78,750, respectively, of such shares
are currently exercisable. Mr. Fisher holds an option to purchase 50,000
shares of TCI Group Series A Stock and 28,125 shares of Liberty Group
Series A Stock. Options to purchase 20,000 and 11,250, respectively, of
such shares are currently exercisable. Messrs. Gould and Sparkman hold
options to purchase an aggregate of 100,000 shares of TCI Group Series A
Stock and 56,250 shares of Liberty Group Series A Stock. Options to
purchase 40,000 and 22,500, respectively, of such shares are currently
exercisable.
Pursuant to the TINTA Director Stock Option Plan, certain directors hold
options to purchase 72,500 shares of Liberty Group Series A Stock. Options
to purchase 29,000 shares are currently exercisable.
All of the aforementioned options with tandem stock appreciation rights,
options and restricted stock are reflected in this table assuming the
exercise or vesting in full of such securities.
(24) 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
Ventures Group Series B Stock. Options to acquire 560,000 shares are
currently exercisable.
No equity securities in any subsidiary of the Company, other than
directors' qualifying shares, are owned by any of the Company's executive
officers or directors, except for the securities discussed below. The following
discussion sets forth ownership information as of December 31, 1998.
(Continued)
III-42
<PAGE> 223
Mr. Kim Magness, a director of the Company, owns 31 shares of 12%
Series C Cumulative Compounding Preferred Stock ("WestMarc Preferred Stock") of
WestMarc Communications, Inc., a wholly owned subsidiary of the Company, and
beneficially owns 667 and 281 shares of WestMarc Preferred Stock held by the
Estate of Bob Magness and the Estate of Betsy Magness, respectively. Dr. Malone,
a director and an executive officer of the Company, owns, as trustee for his
children, 68 shares of WestMarc Preferred Stock. Mr. Larry Romrell, an officer
of the Company, owns 103 shares of WestMarc Preferred Stock and holds a stock
appreciation right in TCI Internet. See note 16 to "Item 11. Executive
Compensation -- Summary Compensation Table of Tele-Communications, Inc." for
additional information about this award.
Additionally, the following executive officers and directors own
options to purchase shares of Class A Common Stock of UVSG: (a) Mr. Hindery
beneficially owns options to purchase 30,000 shares, of which options to
purchase 6,000 shares are currently exercisable; and (b) Messrs. Romrell, Fisher
and Gould each beneficially own options to purchase 30,000 shares, of which
options to purchase 12,000 shares of each grant are currently exercisable.
Additionally, two executive officers beneficially own options to purchase
193,053 shares of Class A Common Stock of UVSG, of which options to purchase
32,611 shares are currently exercisable.
In addition, the following executive officers and directors
beneficially own shares of Series A Common Stock of @Home: (a) Mr. Jones
beneficially owns 1,000 shares of Series A Common Stock; (b) Mr. Kern
beneficially owns jointly with his son 25,000 shares of Series A Common Stock;
(c) Dr. Malone beneficially owns 27,475 shares of Series A Common Stock; (d) Mr.
Naify beneficially owns 16,134 shares of Series A Common Stock; and (e) Mr.
Romrell beneficially owns 2,238 shares of Series A Common Stock. Additionally,
an executive officer beneficially owns 1,500 shares of Series A Common Stock of
@Home.
Additionally, the following executive officers and directors own
options to purchase shares of Series A Common Stock of TCI Music: (a) Mr. Fisher
beneficially owns options to purchase 833,334 shares, of which options to
purchase 166,667 shares are currently exercisable; (b) Mr. Hindery beneficially
owns options to purchase 833,334 shares, of which options to purchase 166,667
shares are currently exercisable; and (c) Mr. Sparkman beneficially owns options
to purchase 100,000 shares, of which options to purchase 20,000 shares are
currently exercisable. In addition, Mr. Sparkman beneficially owns 37,500 shares
of Series A Common Stock of TCI Music, Inc. Additionally, an executive officer
beneficially owns options to purchase 100,000 shares of Series A Common Stock of
TCI Music, of which options to purchase 20,000 shares are currently exercisable.
An executive officer beneficially owns as trustee for his children 364
shares of Senior Cumulative Exchangeable Preferred Stock, Series A of TPAC.
(c) Change of control. On March 9, 1999, the Company became a
wholly-owned subsidiary of AT&T pursuant to the AT&T Merger. See "Item 8.
Financial Statements and Supplementary Data" for additional information
regarding the AT&T Merger. The Company knows of no arrangements, including any
pledge by any person of securities of the Company, the operation of which may at
a subsequent date result in a change in control of the Company.
(continued)
III-43
<PAGE> 224
Item 13. Certain Relationships and Related Transactions.
In addition, please refer to the discussion under "Item 11. Executive
Compensation -- Background of Stock Adjustments" for additional information
regarding changes in the capital structure of the Company. References to share
amounts and per share prices also have been adjusted retroactively to give
effect to such changes.
(a) Transactions with Management and Others.
Transactions with Mr. Fisher. Under the terms of the settlement
agreement with respect to the Magness Settlement, Mr. Fisher, who had served as
a co-personal representative of the Estate of Bob Magness since November 1996,
resigned. On January 1, 1998 the Estate of Bob Magness paid Mr. Fisher $1.5
million for his services on behalf of the Estate. Mr. Fisher donated such
payment, in its entirety, net of taxes, to a charitable organization.
On August 5, 1998, Mr. Fisher paid $1.8 million to purchase, at fair
value, the Company's interest in General Communications, Inc.
InterMedia Transactions. On April 30, 1998, TCI ICM VI, Inc., a
subsidiary of the Company, acquired a 99.999% limited partnership interest in
InterMedia Capital Management VI, L.P. ("ICM VI") from Mr. Hindery, an executive
officer and a director of the Company, in exchange for (i) 153,183 shares of
Liberty Group Series B Stock (the "Liberty Shares") valued at $5 million and
(ii) a .495% limited partnership interest in InterMedia Capital Partners VI,
L.P. ("ICPVI") having a capital account of $1 million (the "InterMedia VI
Transaction"). On the InterMedia VI Transaction closing date, the .001% general
partnership interest in ICM VI was held by InterMedia Management, Inc. ("IMI"),
a corporation all of the stock of which is owned by Robert J. Lewis. Mr. Lewis
is an experienced cable executive who was an officer of the Company from May
1987 through April 1993. The other partnership interests in ICP VI are held by
TCI IP-VI, LLC, a wholly owned subsidiary of the Company (49.005% limited
partnership interest), Blackstone Cable Acquisition Company, LLC or its
affiliates (49.500% limited partnership interest), ICM VI (.999% limited
partnership interest), and InterMedia Capital Management VI, LLC, an entity of
which IMI is the sole member (.001% general partnership interest). Mr. Hindery
acquired his partnership interest in ICM VI in July 1996 for $10,000.
Prior to the AT&T Merger, Dr. Malone, an executive officer and director
of the Company, had the power to direct the voting of the Liberty Shares
pursuant to a voting agreement, and Dr. Malone also had a right of first refusal
with respect to any proposed transfer of the Liberty Shares. Dr. Malone was
entitled to exercise the right of first refusal either by the payment of cash
or, subject to certain exceptions, by exchanging shares of Liberty Group Series
A Stock for the Liberty Shares. If not exercised by Dr. Malone, the right of
first refusal was exercisable by the Company. The Company's right of first
refusal terminated upon consummation of the AT&T Merger.
The interests of Messrs. Hindery and Malone in the InterMedia VI
Transaction were disclosed to the Board of Directors at the time it approved the
agreement in principle for such transaction. Dr. Malone abstained from voting on
such matter. Mr. Hindery was not a director of the Company at the time of such
vote.
(continued)
III-44
<PAGE> 225
On January 27, 1999, the Company announced the planned acquisition by
Charter Communications ("Charter") and TCI of certain cable television systems
owned by InterMedia Capital Partners IV, L.P. ("IP4") and InterMedia Partners, a
California Limited Partnership ("InterMedia"). Charter will pay consideration
consisting of cash and cable television systems for the systems it acquires
from IP4. TCI will acquire certain other cable systems in a non-cash
transaction. Upon the consummation of the transactions described above, TCI will
own all of the partnership interests in IP4 and InterMedia. The transactions are
subject to the negotiation and signing of definitive documents and various
closing conditions.
Mr. Hindery, a director and executive officer of TCI, currently has a
.001% special limited partnership interest in InterMedia Capital Management IV,
L.P. ("ICM4"), which in turn has a 1.19% limited partnership interest in IP4.
Mr. Hindery's special limited partnership interest in ICM4 was created in
August 1997 in connection with TCI's acquisition of all of the partnership
interests (other than a .002% general partnership interest and a .001% special
limited partnership interest) in ICM4. Mr. Hindery also indirectly owns a
minimal interest in InterMedia. In connection with the proposed transaction
described above, it is anticipated that Mr. Hindery, by virtue of his .001%
special limited partnership interest in ICM4, will participate in a profit
sharing mechanism of IP4 and receive cash consideration based on the valuation
of IP4 in the transaction described above. Although the amount of such
consideration is uncertain at this time, its is expected that such
consideration will be approximately $10 million. In the transaction described
above, it is expected that Mr. Hindery will receive less than $50,000 for his
indirect interest in InterMedia.
Malone Transactions. For a discussion of certain transactions between
the Malones, the Magness Family and TCI, see "Item 11. Executive Compensation -
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions - Magness and Malone Transactions."
Prior to the AT&T Merger, a limited liability company owned by Dr.
Malone acquired from certain subsidiaries of the Company for $17 million working
cattle ranches located in Wyoming. The purchase price was paid by such limited
liability company in the form of a 12-month note in the amount of $17 million
having an interest rate of 7%. Such note is payable at any time without penalty
and is personally guaranteed by Dr.
Malone.
Transactions with Mr. Gallivan. Prior to Kearns becoming a subsidiary
of TCI as a result of the merger of Kearns with a wholly owned subsidiary of the
Company, Kearns and Mr. John W. Gallivan, the former Chairman of the Board of
Kearns and a director of the Company, entered into a Transfer Agreement dated
July 30, 1997 (the "Transfer Agreement"). Pursuant to the terms of the Transfer
Agreement, Kearns agreed to award Mr. Gallivan for his services as Chairman and
his involvement in the pending Kearns Merger: (a) a cash payment of $1,562,413;
and (b) an assignment of all of Kearns right, title and interest in and to all
patented mining claims owned by Kearns, including but not limited to royalties,
buildings, fixtures, surface rights, licenses and contracts related thereto,
which patented mining claims were valued at $437,587. With respect to the
assignment of the mining claims, Mr. Gallivan agreed to assume all liabilities
with respect thereto and agreed to indemnify Kearns for any and all liabilities
of Kearns, if any, relating to the mining claims, including those arising from
past operations. As of December 31, 1997, Kearns had made the cash payment to
Mr. Gallivan, and as of November 11, 1998, Kearns transferred such mining claims
to a corporation designated by Mr. Gallivan.
(continued)
III-45
<PAGE> 226
Also in connection with the Kearns Merger, Silver King Group L.L.C.
("SKG"), which is owned and controlled by Mr. Gallivan, entered into an
agreement with Kearns to purchase assets consisting primarily of land, oil and
gas royalties and patents for $10.87 million. On November 30, 1997 such purchase
was consummated and SKG paid Kearns $9.5 million of the $10.87 million purchase
price in cash and the remainder of such purchase price in the form of a
non-interest bearing promissory note. As of March 10, 1999, $1,318,000 of such
note remains outstanding.
Consulting Agreements. Effective January 1, 1996, Mr. Fisher resigned
as an executive officer of the Company and Mr. Fisher and the Company entered
into a consulting agreement. During the term of the consulting agreement, which
extends until January 1, 2006 unless sooner terminated as provided in the
agreement, Mr. Fisher is obligated to provide consulting services for up to 70
hours per month and 700 hours during any period of twelve consecutive months as
and if requested by the Company's chief executive officer. Whether or not his
services are requested, Mr. Fisher will receive compensation as follows: (a)
during the period from January 1, 1996 through December 31, 2000, inclusive, the
rate of $475,000 per annum, increased annually by the amount of $25,000 per
annum in each successive year of such period commencing January 1, 1997; and (b)
from and after January 1, 2001 through the balance of the term of such
consulting agreement, the rate of $500,000 per annum. If he dies before the end
of the term of his consulting services, the Company is required to pay his
designated beneficiaries a lump sum equal to one year's compensation at the
then-current rate. During the term of the agreement, Mr. Fisher will continue to
be entitled to participate in, and to be accorded all rights and benefits under,
all group insurance policies (including, but not limited to, all disability,
life, health and medical insurance policies) maintained by the Company for the
benefit of its employees. The consulting agreement also provides for Mr.
Fisher's personal use of the Company's aircraft and flight crew, limited to an
aggregate value of $35,000 per year.
Under a prior employment agreement between Mr. Fisher and the Company,
a portion of Mr. Fisher's salary was deferred, and the deferred amounts, plus
interest at an annual rate of 13%, were to be paid to him in 240 monthly
installments which would have commenced on the date of termination of his
full-time employment with the Company. The consulting agreement provides for
such payment to be made to Mr. Fisher in 240 monthly installments of $21,425.92
each, without interest, commencing on January 1, 2001, with any remaining
payments due after Mr. Fisher's death being paid in a lump-sum to his designated
beneficiaries. Similarly, Mr. Fisher's 1992 employment agreement with the
Company provided for Mr. Fisher to receive, commencing on termination of his
employment, 240 consecutive monthly salary continuation payments of $6,250,
increased at the rate of 12% per annum, compounded annually from January 1, 1988
to the date of such termination. The consulting agreement provides that such
salary continuation payments will be made in 240 consecutive monthly payments of
$27,271.84 each, without interest, commencing on January 1, 2001, with any
remaining payments due after Mr. Fisher's death being made to his designated
beneficiaries.
(continued)
III-46
<PAGE> 227
Mr. Fisher's consulting agreement provides that during its term, Mr.
Fisher will not be connected in any manner specified in such agreement with any
entity which competes in a material respect with the business of the Company;
however, he may own securities of any corporation listed on a national
securities exchange or quoted on Nasdaq to the extent of an aggregate of 5% of
the amount of such securities outstanding.
Effective March 11, 1995, Mr. Sparkman resigned as an executive officer
of the Company and the Company and Mr. Sparkman entered into a consulting
agreement. During the term of the consulting agreement, which extends until
September 30, 2002 unless sooner terminated as provided in the agreement, Mr.
Sparkman is required to provide consulting services for no more than 700 hours
per year as and if requested by the Company's chief executive officer. Whether
or not his services are requested, Mr. Sparkman will receive compensation at the
rate of $500,000 per annum. If he dies before the end of the term of his
consulting services, the Company is required to pay his designated beneficiaries
a lump sum equal to one year's compensation. During the term of the agreement,
Mr. Sparkman will continue to be entitled to participate in, and to be accorded
all rights and benefits under, all group insurance policies (including, but not
limited to, all disability, life, health and medical insurance policies)
maintained by the Company for the benefit of its employees.
Under a prior employment agreement between Mr. Sparkman and the
Company, a portion of Mr. Sparkman's salary was deferred, and the deferred
amounts, plus interest at an annual rate of 8%, were to be paid to him in 120
monthly installments which would have commenced on the date of termination of
his full-time employment with the Company. The consulting agreement provides for
such payment to be made to Mr. Sparkman in 120 monthly installments of $7,294.32
each, without interest, commencing on January 1, 1998, with any remaining
payments due after Mr. Sparkman's death being paid in a lump-sum to his
designated beneficiaries. Under Mr. Sparkman's 1993 employment agreement with
the Company, a portion of Mr. Sparkman's salary was deferred, and the deferred
amounts, plus interest at an annual rate of 13%, were to be paid to him in 240
monthly installments which would have commenced on the date of termination of
his full-time employment with the Company. The consulting agreement provides for
such payment to be made to Mr. Sparkman in 240 monthly payments of $15,116.03
each, without interest, commencing on January 1, 1998, with any remaining
payments due after Mr. Sparkman's death being paid in a lump-sum to his
designated beneficiaries. Similarly, Mr. Sparkman's 1993 employment agreement
with the Company provided for Mr. Sparkman to receive, commencing on termination
of his employment, 240 consecutive monthly salary continuation payments of
$6,250, increased at the rate of 12% per annum, compounded annually from January
1, 1988 to the date of such termination. The consulting agreement provides that
such salary continuation payments will be made in 240 consecutive monthly
payments of $19,411.55 each, without interest, commencing on January 1, 1998,
with any remaining payments due after Mr. Sparkman's death being made to his
designated beneficiaries.
Mr. Sparkman's consulting agreement provides that during its term, Mr.
Sparkman will not be connected in any manner specified in such agreement with
any entity which competes in a material respect with the business of the
Company; however, he may own securities of any corporation listed on a national
securities exchange or quoted on Nasdaq to the extent of an aggregate of 5% of
the amount of such securities outstanding.
The Company has a consulting agreement with Peter Kern, who is the son
of Jerome H. Kern, a director and Vice Chairman of and consultant to the
Company. Pursuant to such agreement, Peter Kern provides consulting services to
the Company on business transactions for which he is paid on a transactional
basis. For such consulting services, Peter Kern received approximately $1.3
million in 1998.
(continued)
III-47
<PAGE> 228
In connection with the AT&T Merger, Larry Romrell converted his
employment agreement with the Company into a consulting agreement with AT&T. See
"Item 11. Executive Compensation - Employment Contracts and Termination of
Employment and Change of Control Arrangements - Mr. Romrell's Employment
Agreement".
Miscellaneous. See "Item 11. Executive Compensation - Employment
Contracts and Termination of Employment and Change of Control Arrangements - Mr.
Romrell's Employment Agreement" for a discussion of the TCI.NET Option and the
Internet SARs held by Mr. Romrell.
On July 1, 1998 Jerome H. Kern, a director of the Company, became
Vice-Chairman of the Company. For his services as Vice-Chairman, the Company has
been compensating Mr. Kern at the annual rate of $1 million. On December 10,
1998, the Board of Directors approved the grant to Mr. Kern of 250,000
restricted shares of TCI Group Series A Stock contingent upon the consummation
of the AT&T Merger. 50% of such shares will vest on December 10, 2002 and the
remainder will vest on December 10, 2003. See "Item 12 - Security Ownership of
Certain Beneficial Owners and Management - Security Ownership of Management." In
addition, Liberty paid Mr. Kern $10 million immediately prior to the AT&T Merger
for his services in negotiating the merger agreement with AT&T and completing
the AT&T Merger.
On February 17, 1999, the date of the stockholders meeting approving
the AT&T Merger, the Board approved the payment by Liberty of $1 million to John
W. Gallivan, a director of the Company, for his services on the Special
Committee of the Company's Board of directors in evaluating the merger
transaction with AT&T and the consideration to be received by the stockholders
of the Company.
In 1986, pursuant to the terms of a Stock Purchase Agreement (the "UACI
Agreement") Robert Naify, a director of the Company, and several members of Mr.
Naify's family received convertible notes (the "Naify Notes") of TCI UA, Inc., a
subsidiary of the Company as consideration for their stock in United Artists
Communications, Inc. As of December 31, 1998, Naify Notes having an aggregate
principal amount of approximately $205.4 million were outstanding. At that date,
the Naify Notes were convertible into an aggregate of 24,163,259 shares of TCI
Group Series A Stock, 19,416,889 shares of Liberty Group Series A Stock,
20,711,364 shares of TCI Ventures Group Series A Stock and 3,451,897 shares of
TSAT's Series A Common Stock. In connection with the TCIC Merger and an internal
restructuring that preceded such merger, the Company became the obligor of the
Naify Notes. As a result of the AT&T Merger and pursuant to the terms of the
Naify Notes and the UACI Agreement, the conversion price of the Naify Notes was
adjusted such that as of the March 9, 1999 consummation date of the AT&T Merger,
the outstanding Naify Notes were convertible into 19,088,081 shares of AT&T
Common Stock, 30,186,816 shares of AT&T Liberty Class A Tracking Stock and
3,451,897 shares of TSAT's Series A Common Stock.
Also pursuant to the terms of the Naify Notes and the UACI Agreement,
if in the future the AT&T Liberty Tracking Stock is converted into cash,
securities or other property in a transaction where the holders of AT&T Liberty
Class B Tracking Stock receive greater per share economic consideration than the
holders of AT&T Liberty Class A Tracking Stock, then the holders of Naify Notes
will be entitled to receive such greater economic consideration with respect to
18% of the total number of shares of AT&T Liberty Class A Tracking Stock
beneficially held by them on March 9, 1999 or the date of such transaction,
whichever is less.
(continued)
III-48
<PAGE> 229
On January 12, 1998, the Company purchased approximately 12.4 million
shares of Series A Common Stock of UVSG, held by Lawrence Flinn, Jr., UVSG's
Chairman Emeritus. As part of the transaction, which encompassed the total
number of UVSG shares held by Mr. Flinn, the Company issued approximately 12.7
million shares of Ventures Group Series A Stock and approximately 7.3 million
shares of Liberty Group Series A Stock to Mr. Flinn.
The Company believes that the foregoing business dealings with
management were based upon terms no less advantageous to the Company than those
which would be available in dealing with unaffiliated persons.
Transactions in Connection with the AT&T Merger.
Management of the Liberty/Ventures Group. Following the AT&T Merger,
Dr. Malone, currently Chairman of the Company, will be Chairman of the
Liberty/Ventures Group, Mr. Bennett, currently President and Chief Executive
Officer of Liberty, will be President and Chief Executive Officer of the
Liberty/Ventures Group and Mr. Howard, currently President of the TCI Ventures
Group, will be Executive Vice President and Chief Operating Officer of the
Liberty/Ventures Group.
Following the AT&T Merger, all of the equity interests in the
Liberty/Ventures Group are owned by AT&T; however, a majority of the members of
the Board of Directors of Liberty (the "Liberty Board") are individuals
designated by TCI prior to the AT&T Merger. Liberty has three classes of
directors: one class elected for a term of one year; one class elected for a
term of seven years; and one class elected for a term of 10 years. Each class of
directors has an equal number of members. Such directors may not be removed
other than for "cause," and, in the event of the death or resignation of a
director, the remaining directors of such class will choose a successor to fill
the remaining term of such deceased or resigning director. Thus, the second and
third classes of directors will constitute a majority of the Liberty Board until
at least 2006. Under Delaware law, the business of a corporation is managed by
its board of directors. As a result, although AT&T owns all of the equity
interests in the Liberty/Ventures Group and, initially, all of the common stock
of Liberty, the incumbent directors of Liberty (and their successors) will be
able to control most aspects of the day-to-day business of Liberty and its
subsidiaries following the AT&T Merger.
In addition, in the event the incumbent directors (and their designated
successors) cease to constitute a majority of the Liberty Board, or Liberty
Management LLC determines that, in its reasonable judgment, the incumbent
Liberty Board is likely to cease to constitute a majority of the Liberty Board,
such event will constitute a "Triggering Event." Liberty Management LLC is a
limited liability company, the equity interests of which are owned by Dr.
Malone. Upon the occurrence of a Triggering Event, subject to the terms and
conditions of a contribution agreement (the "Contribution Agreement") that TCI
caused Liberty and Liberty Ventures LLC to enter into in connection with the
AT&T Merger, all of the assets of Liberty and of certain other entities included
in the Liberty/Ventures Group will be contributed to a limited liability company
("Liberty Media Group LLC"), substantially all of the equity interests of which
are owned by AT&T, unless the Triggering Event is waived by Liberty Management
LLC. Liberty Management LLC will own the remaining equity interests in Liberty
Media Group LLC and will be the sole manager of Liberty Media Group LLC.
(continued)
III-49
<PAGE> 230
Stock Ownership. In the AT&T Merger, the Company's common stock was
converted as described under "Item 1. General Development of Business." The
difference in the conversion ratios applicable to the TCI Group Series A Stock
and the TCI Group Series B Stock constituted an approximate 10% premium payable
to the holders of TCI Group Series B Stock. As of December 31, 1998, Dr. Malone
and his spouse collectively owned 30,401,772 shares of TCI Group Series B Stock
(excluding shares that they had the right to vote but in which they did not have
a direct economic interest), or approximately 47.2% of the total number of
shares of TCI Group Series B Stock outstanding as of such date. In addition, as
of December 31, 1998, the other directors and members of management of the
Company owned an aggregate of 23,990,555 shares of TCI Group Series B Stock
(including shares in which they had a direct economic interest but did not have
the right to vote) or approximately 37.2% of the total number of shares of TCI
Group Series B Stock outstanding as of such date. The Board and the Special
Committee of the Board of Directors (the "Special Committee") carefully
considered the premium payable to the holders of the TCI Group Series B Stock in
connection with its decision to approve the AT&T Merger and determined that such
premium was an acceptable control premium to such holders under the
circumstances, and, in the case of Dr. Malone and Leslie Malone and the Estate
of Bob Magness, the Estate of Betsy Magness, Gary Magness (individually and in
certain representative capacities) and Kim Magness (individually and in certain
representative capacities), did not exceed the control premium limit established
by the Company in separate agreements entered into with such individuals.
As described under "Item 1. Business - General Development of
Business", in the AT&T Merger holders of Liberty Group Series A Stock and TCI
Ventures Group Series A Stock, respectively, received shares of AT&T Liberty
Class A Tracking Stock that entitle such holders to cast 1/10 vote per share. In
the AT&T Merger, holders of Liberty Group Series B Stock and TCI Ventures Group
Series B Stock, respectively, received shares of AT&T Liberty Class B Stock that
entitle such holders to cast one vote per share. The distinction between the
shares of AT&T Liberty Class A Tracking Stock and AT&T Liberty Class B Tracking
Stock maintains the 10-to-one voting ratio between the holders of Liberty Group
Series B Stock and TCI Ventures Group Series B Stock on the one hand and the
holders of Liberty Group Series A Stock and TCI Ventures Group Series A Stock on
the other hand. As of December 31, 1998, Dr. Malone and his spouse beneficially
owned 34,775,586 shares of Liberty Group Series B Stock and TCI Ventures Group
Series B Stock, or approximately 45.2% of such shares outstanding as of such
date. In addition, as of December 31, 1998, the other directors and members of
management of the Company owned an aggregate of 34,392,372 of such shares, or
approximately 44.7% of such shares outstanding as of such date. Dr. Malone also
held options to acquire an additional 1,154,000 shares of Liberty Group Series A
Stock, 1,200,000 shares of TCI Ventures Group Series A Stock and 2,800,000
shares of TCI Ventures Group Series B Stock. Such options were adjusted in
connection with the AT&T Merger to be exercisable for shares of AT&T Liberty
Class A Tracking Stock and AT&T Liberty Class B Tracking Stock, as the case may
be. Pursuant to the terms of the Shareholders' Agreement, Dr. Malone has the
power to vote all shares of AT&T Liberty Class B Tracking Stock held by the
Magness Family. Dr. Malone also has the power to vote all shares of AT&T Liberty
Media Class B Tracking Stock held by certain trusts of which Mr. Hindery is the
trustee. As a result, immediately following the AT&T Merger and assuming the
exercise of his options to purchase shares of AT&T Liberty Class A Tracking
Stock and AT&T Liberty Class B Tracking Stock, Dr. Malone will have the power to
vote securities having approximately 46.6% of the voting power with respect to
any matters upon which the holders of AT&T Liberty Tracking Stock will vote as a
separate class.
(continued)
III-50
<PAGE> 231
Westmarc Communications, Inc. Three persons who are directors and/or
executive officers of the Company own shares of the 12% Series C Cumulative
Compounding preferred stock of WestMarc Communications, Inc., a subsidiary of
the Company. Dr. Malone, an executive officer and director of the Company, owns,
as trustee for his children, 68 shares, Kim Magness, a director of the Company,
owns 31 shares individually and owns 948 shares as personal representative of
the Estates of Bob Magness and Betsy Magness, and Larry E. Romrell, an executive
officer of the Company, owns 103 shares.
In connection with the AT&T Merger, AT&T has agreed that, for a period
of 15 years following the effective time of the AT&T Merger, neither it nor TCI
will take certain actions with regard to the preferred stock of WestMarc
Communications, including any redemption of, or modification of the terms of,
such preferred stock or any actions that would adversely affect WestMarc
Communications' ability to pay the required dividends of 12% per annum on such
preferred stock. The terms of such preferred stock provide that it may be
redeemed by WestMarc Communications following a "change in control" of the
Company.
Tax Protection Agreements. In connection with the AT&T Merger the
Company entered into agreements with certain of its employees (including
directors and executive officers of the Company) providing for indemnification
of such individuals from the effects of certain U.S. federal excise taxes that
may become payable by such employees as a result of the AT&T Merger and the
resulting change in control of the Company. After the AT&T Merger, TCI is
required to assume the financial obligations under such agreements with respect
to employees of the TCI Group and the Liberty/Ventures Group is required to
assume the financial obligations under such agreements with respect to employees
of the Liberty/Ventures Group.
Employment Agreements and Other Arrangements. The following executive
officers had employment agreements with the Company prior to the AT&T Merger:
Dr. Malone, Mr. Hindery, Marvin Jones, Executive Vice President, Stephen M.
Brett, Executive Vice President, Secretary and General Counsel, and Mr. Romrell.
In addition, Mr. Fisher and J.C. Sparkman, former executive officers of the
Company who are members of the Board, had consulting agreements with TCI prior
to the AT&T Merger. AT&T has agreed to cause TCI to honor, from and after the
effective time of the AT&T Merger, the obligations of the Company with respect
to the executive, employment and other agreements and arrangements of those
officers who are officers of the TCI Group (other than Mr. Romrell, whose
employment agreement with the Company was converted into a consulting agreement
with AT&T). In addition, AT&T has agreed to assume the obligations under all of
the employee plans and benefit arrangements relating to the TCI Group.
Contingent Grants. Prior to the AT&T Merger, certain executive officers
of TCI were granted options to purchase 5.5 million shares of Liberty Group
Stock, contingent upon completion of the AT&T Merger. Additionally, prior to the
AT&T Merger, awards of 528,250 restricted shares of TCI Group Stock were granted
to certain directors and executive officers of TCI, contingent upon completion
of the AT&T Merger. See "Item 12 - Security Ownership of Certain Beneficial
Owners and Management - Security Ownership of Management."
The Special Committee and the Board were aware of the aforementioned
interests of the Company's management and the Board described above and
considered such interests, among other matters, in approving the AT&T Merger and
the transactions contemplated thereby.
(continued)
III-51
<PAGE> 232
(b) Certain Business Relationship.
Jerome H. Kern, a director and Vice Chairman of the Company, was
special counsel with the law firm of Baker & Botts, L.L.P., the principal
outside counsel for the Company, until June 16, 1998. Fees paid to Baker &
Botts, L.L.P. by the Company and its consolidated subsidiaries did not exceed
five percent of Baker & Botts, L.L.P.'s gross revenues for the 1998 fiscal year.
TSAT Transactions. John Malone is currently the Chief Executive
Officer, Chairman of the Board and a director of the Company and is also the
Chairman of the Board and a director of TSAT. Dr. Malone is also a principal
stockholder of both the Company and TSAT.
On March 6, 1998, the stockholders of TSAT voted to approve a two step
roll-up plan which consisted, among other related transactions, of: (1) the
contribution of substantially all TSAT's assets and liabilities to a newly
formed corporation (referred to herein as "New PRIMESTAR"), and the concurrent
contribution to New PRIMESTAR by TSAT's existing partners of their respective
interests in the PRIMESTAR digital satellite business (collectively, the
"PRIMESTAR Restructuring Transaction"); and (2) subject to regulatory approval
and other conditions, the subsequent merger of TSAT with and into New PRIMESTAR,
in a transaction in which TSAT's outstanding common shares will be converted
into common shares of New PRIMESTAR (the "TSAT Merger"). On April 1, 1998, the
PRIMESTAR Restructuring Transaction was consummated; however the consummation of
the TSAT Merger was delayed pending regulatory approval.
On January 22, 1999, TSAT and New PRIMESTAR announced the signing of
agreements providing for (i) the sale by New PRIMESTAR to Hughes Electronics
Corporation ("Hughes") of New PRIMESTAR's existing medium power satellite
television service, comprising substantially all the business and assets of New
PRIMESTAR (the "Medium-Power Sale"), and (ii) the sale to Hughes by Tempo
Satellite, Inc., a wholly owned subsidiary of TSAT ("Tempo"), of Tempo's high
power satellite assets, including Tempo's rights to two satellites constructed
for Tempo by Space Systems/Loral, Inc. and Tempo's rights under an FCC
authorization to construct a high power direct broadcast satellite system using
11 transponders in the 119(0) W.L. orbital position. The agreement to sell
Tempo's satellite assets provides for (i) the assignment by New PRIMESTAR to
Hughes of New PRIMESTAR's option to acquire such assets (which option was
obtained by New PRIMESTAR in connection with the PRIMESTAR Restructuring
Transaction), (ii) the exercise of such option by Hughes, (iii) the
relinquishment by PRIMESTAR Partners L.P., a wholly owned subsidiary of New
PRIMESTAR ("PRIMESTAR Partners"), of its rights under a prior agreement to
purchase or lease 100% of the capacity of Tempo's proposed satellite system, and
(iv) the assumption and satisfaction by Hughes of Tempo's existing obligation to
reimburse PRIMESTAR Partners for amounts advanced by PRIMESTAR Partners to Tempo
to fund construction of such satellite system. The transactions with Hughes are
subject to various conditions, including, in the case of Tempo's proposed
assignment of its rights to 119(0) W.L. orbital position and related assets, FCC
approval. It is anticipated that the TSAT Merger Agreement will be terminated on
or before the closing of the Medium-Power Sale.
(continued)
III-52
<PAGE> 233
On December 4, 1996, the Company distributed (the "TSAT Distribution")
to the holders of shares of TCI Group Series A Stock and TCI Series B Stock all
of the issued and outstanding common stock of TSAT. Since the consummation of
the TSAT Distribution, TSAT and the Company have operated independently.
However, for purposes of governing certain of the ongoing relationships between
TSAT and the Company after the TSAT Distribution, and to provide mechanisms for
an orderly transition, TSAT and the Company entered into various agreements in
connection with the TSAT Distribution, including those agreements described
below. Certain of such agreements have since terminated or expired, or have been
modified in connection with the PRIMESTAR Restructuring Transaction.
Contribution Agreement. Subsequent to December 31, 1998, a subsidiary
of the Company agreed to enter into a contribution agreement ("Contribution
Agreement") with certain shareholders of New PRIMESTAR pursuant to which the
Company would, to the extent it is relieved of $166,250,000 of contingent
liabilities currently owed to certain creditors of New PRIMESTAR and its
subsidiaries, contribute $166,250,000 to New PRIMESTAR to the extent necessary
to satisfy liabilities of New PRIMESTAR. During the fourth quarter of 1998, the
Company recorded a $90 million charge to provide for estimated losses that are
expected to result from the Contribution Agreement. The Company's obligation
under the Contribution Agreement will expire in 2001.
Reorganization Agreement. On December 4, 1996, the TSAT Distribution
was consummated (the "TSAT Distribution Date"), and the Company, TCIC and a
number of the Company's other subsidiaries, including TSAT, entered into a
reorganization agreement (the "Reorganization Agreement"), which provided for,
among other things, the principal corporate transactions required to effect the
TSAT Distribution, the conditions thereto and certain provisions governing the
relationship between TSAT and the Company with respect to and resulting from the
TSAT Distribution. Pursuant to the Reorganization Agreement, TSAT assumed the
Company's obligations under options granted to Brendan R. Clouston, a former
executive officer of the Company, Larry E. Romrell, an executive officer of the
Company, and David P. Beddow, an executive officer of certain subsidiaries of
the Company, to purchase shares of TSAT Series A Stock representing 1.0%, 1.0%
and 0.5%, respectively, of the shares of TSAT Series A Stock issued and
outstanding on the TSAT Distribution Date, determined immediately after giving
effect to the TSAT Distribution but before giving effect to the issuance of the
shares of TSAT Series A Stock issuable upon exercise of such options. Further,
pursuant to the Reorganization Agreement, TSAT granted to the Company an option
to purchase up to 4,765,000 shares of TSAT Series A Stock (as such number may be
adjusted to reflect stock dividends, stock splits and the like), for a purchase
price equal to the par value of such shares, as necessary to satisfy the
Company's obligations to deliver shares of TSAT Series A Stock upon conversion
of certain of the Company's convertible securities. During the year ended
December 31, 1998, TSAT issued to the Company under this arrangement 991,330
shares of TSAT Series A Stock for an aggregate consideration of $991,330.
(continued)
III-53
<PAGE> 234
Transition Services Agreement. During 1997, pursuant to a transition
services agreement entered into in connection with the TSAT Distribution (the
"Transition Services Agreement"), the Company provided to TSAT certain services
including: (1) tax reporting, financial reporting, payroll, employee benefit
administration, workers' compensation administration, telephone, fleet
management, package delivery, management information systems, billing, lock box
and remittance processing and risk management services; (2) other services
typically performed by the Company's accounting, finance, treasury, corporate,
legal, tax, benefits, insurance, facilities, purchasing, fleet management and
advanced information technology department personnel; (3) use of
telecommunications and data facilities and of systems and software developed,
acquired or licensed by the Company from time to time for financial forecasting,
budgeting and similar purposes, including without limitation, any such software
for use on personal computers, in any case to the extent available under
copyright law or any applicable third-party contract; (4) technology support and
consulting services; and (5) such other management, supervisory, strategic
planning or other services as TSAT and the Company determined to be necessary or
desirable. As compensation for services rendered to TSAT and for the benefits
made available to TSAT pursuant to the Transition Services Agreement, TSAT was
required to pay the Company a fee of $1.50 per qualified subscribing household
or other residential or commercial unit (counted as one subscriber regardless of
the number of satellite receivers) per month, up to a maximum of $3 million per
month, and reimburse the Company quarterly for direct, out-of-pocket expenses
incurred by the Company to third parties in providing the services. During the
period ended March 31, 1998, TSAT was charged $3,174,000 pursuant to the
Transition Services Agreement. Pursuant to the terms of the PRIMESTAR
Restructuring Transaction, the Transition Services Agreement was terminated on
April 1, 1998.
Tax Sharing Agreement. Through the TSAT Distribution Date, TSAT's
results of operations were included in the Company's consolidated U.S. federal
income tax returns, in accordance with the existing tax sharing arrangements
among the Company and its consolidated subsidiaries. Effective July 1, 1995, the
Company, TCIC and certain other subsidiaries of the Company entered into a tax
sharing agreement (the "1995 Tax Sharing Agreement"), which formalized such
pre-existing tax sharing arrangements and implemented additional procedures for
the allocation of certain consolidated income tax attributes and the settlement
of certain intercompany tax allocations. The 1995 Tax Sharing Agreement
encompasses U.S. federal, state, local and foreign tax consequences and relies
upon the Internal Revenue Code of 1986, as amended (the "Code") and any
applicable state, local and foreign tax law and related regulations. In
connection with the TSAT Distribution, the 1995 Tax Sharing Agreement was
amended to provide that TSAT be treated as if it had been a party to the 1995
Tax Sharing Agreement, effective July 1, 1995.
(continued)
III-54
<PAGE> 235
In connection with the PRIMESTAR Restructuring Transaction, TSAT and
the Company entered into a tax sharing agreement dated as of June 1997, to
confirm that pursuant to the amended 1995 Tax Sharing Agreement: (1) neither
TSAT nor any of its subsidiaries has any obligation to indemnify the Company,
the Company's tax consolidated subsidiaries, or the Company's shareholders for
any tax resulting from the TSAT Distribution failing to qualify as a tax-free
distribution pursuant to Section 355 of the Code; (2) the Company is obligated
to indemnify TSAT and its subsidiaries for any taxes resulting from the TSAT
Distribution failing to qualify as a tax-free distribution pursuant to Section
355 of the Code; (3) to the best knowledge of the Company, TSAT's total payment
obligation under the 1995 Tax Sharing Agreement could not reasonably be expected
to exceed $5 million; and (4) the sole agreement between the Company or the
Company's tax consolidated subsidiaries, on the one hand, and TSAT or any of its
subsidiaries, on the other, relating to taxes is the 1995 Tax Sharing Agreement.
Indemnification Agreements. On the TSAT Distribution Date, TSAT entered
into an indemnification agreement with each of TCIC and TCI UA 1, Inc. ("TCI UA
1"), an indirect subsidiary of TCIC. As of December 31, 1997, TSAT and each of
TCIC and TCI UA 1 entered into amendments to such indemnification agreements
(collectively, as amended, the "Indemnification Agreements" and individually,
each the "Indemnification Agreement"). The Indemnification Agreement with TCIC
provides for TSAT to reimburse TCIC for any amounts drawn under an irrevocable
transferable letter of credit issued for the account of TCIC to support TSAT's
share of certain obligations to PRIMESTAR Partners, L.P. (the "Partnership")
under an agreement with GE American Communications, Inc. with respect to the
Partnership's use of transponders on a satellite. The drawable amount of such
letter of credit was $25,000,000 at December 31, 1998. TCIC has agreed to keep
such letter of credit in place through June 30, 1999. The Indemnification
Agreement with TCI UA 1 provides for TSAT to reimburse TCI UA 1 for any amounts
drawn under an irrevocable transferable letter of credit issued for the account
of TCI UA 1 (the "TCI UA 1 Letter of Credit") which supports a credit facility
of the Partnership that was obtained to finance advances for the construction of
a certain satellite. The drawable amount of the TCI UA 1 Letter of Credit was
$141,250,000 at December 31, 1998. TCI UA 1 has agreed to keep the TCI UA 1
Letter of Credit in place through June 30, 1999.
The Indemnification Agreements further provide for TSAT to indemnify
and hold harmless TCIC and TCI UA 1 and certain related persons from and against
any losses, claims, and liabilities arising out of the respective letters of
credit or any drawings thereunder. The payment obligations of TSAT to TCIC and
TCI UA 1 under such Indemnification Agreements are subordinated in right of
payment with respect to TSAT's obligations under its bank credit facilities.
During the year ended December 31, 1998, the aggregate amount paid by TSAT (and
following the PRIMESTAR Restructuring Transaction, New PRIMESTAR) to the Company
under the Indemnification Agreements was $2,203,000. Such amounts represent the
aggregate fees incurred by the Company with respect to the TCI UA 1 Letter of
Credit.
Pursuant to the Restructuring Transaction, New PRIMESTAR assumed the
rights and obligations of TSAT under the Indemnification Agreements, including
the reimbursement obligations in favor of TCIC and TCI UA 1, and the
Indemnification Agreements were amended to, among other things, extend the
subordination provisions for the benefit of certain other indebtedness of New
PRIMESTAR.
(continued)
III-55
<PAGE> 236
Trade Name and Service Mark License Agreement. Pursuant to a Trade Name
and Service Mark License Agreement (the "License Agreement"), the Company
granted to TSAT, for an initial term of three years following the TSAT
Distribution, a non-exclusive, non-assignable license to use certain trade names
and service marks specifically identified in the License Agreement, including
the mark "TCI" in the context of the digital satellite business. The License
Agreement provides, among other things, that all advertising, promotion and use
of certain of the Company's trade names and service marks by TSAT shall be
consistent with the Company's guidelines and standards, as well as subject to
the Company's approval in certain circumstances. Since the TSAT Distribution,
TSAT has taken steps to phase out the use of the Company's names and marks
covered by the License Agreement, except in connection with its corporate name.
TSAT and the Company amended the License Agreement immediately prior to the
closing of the PRIMESTAR Restructuring Transaction to reflect such limited use.
Call Center LLC. In March 1997, TSAT and the Company agreed to form a
limited liability company (the "Call Center LLC") through which TSAT and the
Company were to conduct various customer call service operations. The initial
ownership interests of TSAT and the Company in the Call Center LLC were to be
28% and 72%, respectively. In June 1997, TSAT and the Company agreed not to form
the Call Center LLC. In March 1997, the Company began providing customer call
services to TSAT based upon a per call charge and has provided such services to
New PRIMESTAR on the same basis since the consummation of the PRIMESTAR
Restructuring Transaction. Charges for such services aggregated $24,938,000 in
1998. There can be no assurances that the Company will continue to provide such
services to Hughes following its proposed purchase of the New PRIMESTAR
business.
Other Arrangements. As a result of the TSAT Distribution, the Company
and TSAT entered into a Share Purchase Agreement, which obligates the Company
and TSAT to sell to each other from time to time, at the then current market
price, shares of TCI Group Series A Stock and TSAT Series A Stock, respectively,
as necessary to satisfy their respective obligations under the TCI Group Series
A Options and TSAT Options held by their respective employees and non-employee
directors. During the year ended December 31, 1998, TSAT did not issue any
shares of TSAT Series A Stock to the Company under this arrangement.
Certain officers of TSAT who were officers or directors of the Company
and/or TCIC prior to the TSAT Distribution received undertakings of
indemnification from the Company and/or TCIC. Such undertakings survived the
TSAT Distribution.
(continued)
III-56
<PAGE> 237
(c) Indebtedness of Management.
Indebtedness of Dr. Malone. On March 4, 1997, Dr. Malone received an
advance from a wholly owned subsidiary of the Company in the amount of
$5,787,505. On March 5, 1997, Dr. Malone received a second advance from a wholly
owned subsidiary of the Company in the amount of $5,813,755. The terms of the
advances were memorialized by a promissory note entered into by Dr. Malone. The
interest rate on such loans is 1% over the one-month LIBOR rate compounded
annually. Dr. Malone used the proceeds of the advance to purchase shares of TSAT
Series A Stock. On February 9, 1998 Dr. Malone repaid the $12 million promissory
note balance and accrued interest in the amount of $723,000.
See "Item 13. Certain Relationships and Related Transactions -
Transactions with Management and Others - Malone Transactions" for a discussion
of additional indebtedness of Dr. Malone.
Indebtedness of Mr. Fisher. Fisher Communications Associates, L.L.C.
("Fisher Communications"), a Colorado limited liability company controlled by
Mr. Donne Fisher, a director of the Company, has issued five non-interest
bearing promissory notes (the "Fisher Notes") to the following five subsidiaries
of the Company: ECP Holdings, Inc. ("ECP"), American Televenture of Minersville,
Inc. ("ATM"), TCI Cablevision of Nevada, Inc. ("TCINV"), TCI Cablevision of
Utah, Inc. ("TCIU") and TEMPO Cable Inc. ("Tempo Cable"). Each of the Fisher
Notes matures on January 31, 2006. The Fisher Notes have an aggregate principal
amount of $3 million, all of which is outstanding, and are payable in the
following amounts to the following entities:
<TABLE>
<CAPTION>
Payee Principal Amount of Note
----- ------------------------
<S> <C>
ECP $1,200,000
ATM 42,120
TCINV 233,100
TCIU 351,180
Tempo Cable 1,173,600
</TABLE>
Fisher Communications issued certain of the Fisher Notes to each of ATM, TCINV,
TCIU and Tempo Cable in payment of the exercise price of certain options to
purchase certain partnership interests in Halcyon Communications Limited
Partnership, an Oklahoma limited partnership, held by such entities. Fisher
Communications acquired such options as of January 31, 1996. Fisher
Communications issued certain of the Fisher Notes to ECP in payment of the
exercise price of an option to purchase ECP's partnership interest in Halcyon
Communications Partners, an Oklahoma general partnership. Fisher Communications
acquired such option as of January 31, 1996.
Indebtedness of Mr. Gallivan. See "Item 13. Certain Relationships and
Related Transactions - Transactions with Management and Others - Transactions
with Mr. Gallivan."
III-57
<PAGE> 238
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
<TABLE>
<CAPTION>
Included in Part II of this Report: Page No.
--------
<S> <C>
Tele-Communications, Inc.:
Independent Auditors' Report II-38
Consolidated Balance Sheets,
December 31, 1998 and 1997 II-39 to II-40
Consolidated Statements of Operations and
Comprehensive Earnings,
Years ended December 31, 1998, 1997 and 1996 II-41 to II-42
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1998, 1997 and 1996 II-43 to II-45
Consolidated Statements of Cash Flows,
Years ended December 31, 1998, 1997 and 1996 II-46
Notes to Consolidated Financial Statements,
December 31, 1998, 1997 and 1996 II-47 to II-126
</TABLE>
IV-1
<PAGE> 239
(a) (2) Financial Statement Schedules
<TABLE>
<CAPTION>
Included in Part IV of this Report: Page No.
--------
<S> <C>
(i) Financial Statement Schedules required to be filed:
Independent Auditors' Report IV-14
Schedule I - Condensed Information as to the
Financial Position of the Registrant, December 31, 1998
and 1997; Condensed Information as to the Operations
and Cash Flows of the Registrant, Years ended
December 31, 1998, 1997 and 1996 IV-15 to IV-17
Schedule II - Valuation and Qualifying Accounts,
Years ended December 31, 1998, 1997 and 1996 IV-18
(ii) Separate financial statements for Sprint Spectrum
Holding Company, L.P. and Subsidiaries
Consolidated Financial Statements
Report of Independent Auditors IV-19
Consolidated Statements of Operations IV-20
Consolidated Balance Sheets IV-21
Consolidated Statements of Cash Flows IV-22
Notes to Consolidated Financial Statements IV-23 to IV-32
</TABLE>
IV-2
<PAGE> 240
(a) (3) Exhibits
Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):
3 - Articles of Incorporation and Bylaws:
3.1 The Restated Certificate of Incorporation, dated March 9, 1999
3.2 The Bylaws effective as of March 9, 1999.
4 - Instruments Defining the Rights of Securities Holders, including Indentures:
No instrument which defines the rights of holders of long term
debt, of the registrant and all of its consolidated subsidiaries,
is filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation, the registrant
hereby agrees to furnish a copy of any such instrument to the
Commission upon request.
10 - Material Contracts:
<TABLE>
<S> <C>
10.1 Amended and Restated Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Registration Statement on Form S-8
(Commission File No. 333-40141).
10.2 Amended and Restated Tele-Communications, Inc. 1995 Employee Stock Incentive Plan.*
Incorporated herein by reference to the Company's Registration Statement on Form S-8
(Commission File No. 333-40141).
10.3 Amended and Restated Tele-Communications, Inc. 1996 Incentive Plan.*
Incorporated herein by reference to the Company's Registration Statement on Form S-8
(Commission File No. 333-40141).
10.4 Restated and Amended Employment Agreement, dated as of November 1, 1992, between the Company and
John C. Malone.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992, as amended by Form 10-K/A for the year ended December 31, 1992
(Commission File No. 0-5550).
10.5 Assignment and Assumption Agreement, dated as of August 4, 1994, among TCI/Liberty Holding Company,
Tele-Communications, Inc. and John C. Malone.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, as amended by Form 10-K/A (Commission File No. 0-20421).
10.6 Call Agreement, dated February 9, 1998, between Tele-Communications, Inc., John C. Malone and Leslie
Malone.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated February
25, 1998 (Commission File No. 0-20421).
10.7 Call Agreement, dated February 9, 1998, between Tele-Communications, Inc., Gary Magness, both
individually and as representative, Kim Magness, both individually and as representative, the
Estate of Bob Magness, the Estate of Betsy Magness and any individual or entity which
thereafter becomes a party thereto.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated February
25, 1998 (Commission File No. 0-20421).
</TABLE>
(continued)
IV-3
<PAGE> 241
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.8 Consulting Agreement, dated as of January 1, 1996, between Tele-Communications, Inc. and Donne F.
Fisher.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.9 Consulting Agreement, dated as March 11, 1995, between Tele-Communications, Inc. and J.C. Sparkman.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (Commission File No. 0-20421).
10.10 Deferred Compensation Plan for Non-Employee Directors, effective on November 1, 1992.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992, as amended by Form 10-K/A for the year ended December 31, 1992
(Commission File No. 0-5550).
10.11 Form of Consulting Agreement, dated as of March 8, 1999, between the Company and Larry E. Romrell *
10.12 Employment Agreement, dated as of June 1, 1998, between the Company and Stephen M. Brett *
Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q as amended
by Form 10-Q/A, for the quarterly period ended June 30, 1998 (Commission File No.
0-20421).
10.13 Employment Agreement, dated as of June 23, 1998, between the Company and Leo J. Hindery, Jr. *
Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q as amended
by Form 10-Q/A, for the quarterly period ended June 30, 1998 (Commission File No.
0-20421).
10.14 Form of 1992 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
10.15 Form of 1993 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
10.16 Non-Qualified Stock Option and Stock Appreciation Rights Agreement, dated as of November 12, 1993,
by and between Tele-Communications, Inc. and Jerome H. Kern.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
</TABLE>
(continued)
IV-4
<PAGE> 242
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.17 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, Liberty
Media Corporation and grantee relating to stock appreciation rights granted pursuant to letter
dated September 17, 1991.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.18 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, Liberty
Media Corporation and grantee relating to the assumption of options and related stock
appreciation rights granted under the Liberty Media Corporation 1991 Stock Incentive Plan
pursuant to letter dated July 26, 1993.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.19 Assumption and Amended and Restated Stock Option Agreement between the Company, TCI/Liberty Holding
Company and a director of Tele-Communications, Inc. relating to assumption of options and
related stock appreciation rights granted outside of an employee benefit plan pursuant to
Tele-Communications, Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.20 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, TCI/Liberty
Holding Company and grantee relating to assumption of options and related stock appreciation
rights granted under Tele-Communications, Inc.'s 1992 Stock Incentive Plan pursuant to
Tele-Communications, Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.21 Form of letter dated September 17, 1991 from Liberty Media Corporation to grantee relating to grant
of stock appreciation rights.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.22 Form of letter dated July 26, 1993 from Liberty Media Corporation to grantee relating to grant of
options and stock appreciation rights.*
Incorporated by reference to Tele-Communications, Inc.'s Post Effective Amendment No. 1 to
Form S-4 Registration Statement on Form S-8 Registration Statement (Commission File No.
33-54263).
10.23 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, TCI/Liberty
Holding Company and grantee relating to assumption of options and related stock appreciation
rights under Tele-Communications, Inc.'s 1992 Stock Incentive Plan pursuant to
Tele-Communications, Inc.'s 1992 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
</TABLE>
(continued)
IV-5
<PAGE> 243
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.24 Form of Indemnification Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
10.25 Form of 1994 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K dated December
31, 1994, as amended by Form 10-K/A (Commission File No. 0-20421).
10.26 TCI 401(k) Stock Plan, restated effective January 1, 1998.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.27 Form of Restricted Stock Award Agreement for 1995 Award of Series A TCI Group Restricted Stock
pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.28 Form of Restricted Stock Award Agreement for 1995 Award of Series A Liberty Media Group Restricted
Stock pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.29 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.30 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.31 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1995 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
</TABLE>
(continued)
IV-6
<PAGE> 244
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.32 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1995 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.33 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.34 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.35 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan. *
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.36 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Ventures Group common
stock pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan. *
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.37 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan. *
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.38 Form of Restricted Stock Award Agreement for 1997 Award of Series A TCI Group Restricted Stock
pursuant to the Tele-Communications, Inc. 1996 Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
</TABLE>
(continued)
IV-7
<PAGE> 245
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.39 Form of Restricted Stock Award Agreement for 1997 Award of Series A TCI Ventures Group Restricted
Stock pursuant to the Tele-Communications, Inc. 1996 Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.40 Form of 1998 Incentive Plan of Tele-Communications, Inc., effective December 16, 1997*
Incorporated herein by reference to the Company's Definitive Proxy Statement on Schedule
14A, dated April 30, 1998 (Commission File No. 0-20421).
10.41 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement, dated June 16, 1998, of
Tele-Communications, Inc., TCI Group Series A Common Stock, pursuant to the
Tele-Communications, Inc., 1998 Incentive Plan. *
10.42 Form of Restricted Stock Award Agreement, dated June 23, 1998, of Tele-Communications, Inc., TCI
Group Series A Common Stock, pursuant to the Tele-Communications, Inc., 1998 Incentive Plan. *
10.43 Form of Restricted Stock Award Agreement, dated November 15, 1998, of Tele-Communications, Inc.,
TCI Group Series A Common Stock, pursuant to the Tele-Communications, Inc., 1998 Incentive
Plan. *
10.44 Form of Restricted Stock Award Agreement, dated December 10, 1998, of Tele-Communications, Inc.,
TCI Group Series A Common Stock, pursuant to the Tele-Communications, Inc., 1998 Incentive
Plan. *
10.45 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement, dated March 1, 1999, of
Tele-Communications, Inc., TCI Group Series A Common Stock pursuant to the Tele-Communications,
Inc., 1998 Incentive Plan. *
10.46 Form of Restricted Stock Award Agreement, dated March 1, 1999, of Tele-Communications, Inc., TCI
Group Series A Common Stock pursuant to the Tele-Communications, Inc., 1998 Incentive Plan. *
10.47 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated July 23, 1997, pertaining to shares of
Tele-Communications, Inc., TCI Group Series A Common Stock.*
10.48 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated July 23, 1997, pertaining to shares of
Tele-Communications, Inc. Liberty Media Group Series A Common Stock. *
10.49 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated July 23, 1997, pertaining to shares of
Tele-Communications, Inc., TCI Ventures Group Series A Common Stock. *
10.50 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated May 14, 1997, pertaining to shares of Tele-Communications,
Inc., TCI Group Series A Common Stock. *
</TABLE>
(continued)
IV-8
<PAGE> 246
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.51 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated May 14, 1997, pertaining to shares of Tele-Communications,
Inc., TCI Ventures Group Series A Common Stock. *
10.52 The Tele-Communications International, Inc. 1995 Stock Incentive Plan.*
Incorporated herein by reference to Tele-Communications International, Inc. Registration
Statement on Form S-1 (Commission File No. 33-91876).
10.53 Form of Restricted Stock Award Agreement for 1995 Award of Series A Tele-Communications
International, Inc. Restricted Stock pursuant to the Tele-Communications International, Inc.
1995 Stock Incentive Plan.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.54 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock pursuant to the Tele-Communications International, Inc. 1995
Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.55 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.56 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock pursuant to the Tele-Communications International, Inc. 1995
Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.57 Form of Restricted Stock Award Agreement for 1997 Award of Series A Tele-Communications
International, Inc. Restricted Stock pursuant to the Tele-Communications International. Inc.
1995 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.58 Form of Stock Appreciation Rights Agreement made as of the 1st day of December, 1996, by and among
TCI Wireless Holdings, Inc., Grantee, TCI Telephony Services, Inc. and Tele-Communications,
Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
</TABLE>
(continued)
IV-9
<PAGE> 247
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.59 Form of Stock Appreciation Rights Agreement made as of the 1st day of December, 1996, by and among
TCI Teleport Holdings, Inc., Grantee, TCI Telephony Services, Inc. and Tele-Communications,
Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.60 Form of Amended and Restated Option Agreement made as of the 1st day of December, 1996, by and
among TCI Wireline, Inc., Grantee and Tele-Communications, Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.61 Form of Option to Purchase Common Stock Agreement made as of the 1st day of December, 1996, by and
among TCI.Net, Inc., Grantee and Tele-Communications, Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.62 Form of Amended and Restated Stock Appreciation Right Agreement made as of the 8th day of March,
1999, by and among TCI Internet Services, Inc., Tele-Communications, Inc. and Larry E. Romrell.*
10.63 Form of Amended and Restated Stock Appreciation Right Agreement made as of the 8th day of March,
1999, by and among TCI Internet Services, Inc., Tele-Communications, Inc. and Bruce W. Ravenel.*
10.64 Form of Agreement, dated February 19, 1999, between the Company, TCI.Net, Inc. ("TCI.NET"), TCI
Internet Services, Inc. ("Internet") and Larry E. Romrell relating to the share repurchase and
option cancellation under an Option to Purchase Common Stock Agreement, dated December 31,
1996, and an amendment to a Stock Appreciation Rights Agreement, dated December 1, 1996. *
10.65 Form of Agreement, dated February 19, 1999, between the Company, TCI.Net, TCI Internet and Brendan
Clouston relating to the share repurchase and option cancellation under an Option to Purchase
Common Stock Agreement, dated December 31, 1996, and an amendment to a Stock Appreciation
Rights Agreement, dated December 1, 1996. *
10.66 Form of Agreement, dated February 19, 1999, between the Company, TCI.Net, TCI Internet ") and Bruce
W. Ravenel relating to share repurchase and option cancellation under an Option to Purchase
Common Stock Agreement, dated December 31, 1996, and an amendment to a Stock Appreciation
Rights Agreement, dated December 1, 1996. *
10.67 Form of Agreement, dated February 19, 1999, between the Company, TCI Wireline, Inc., TCI Teleport
Holdings, Inc., TCI Telephony Services, Inc., and Brendan Clouston related to share repurchase
and option cancellation under an Amended and Restated Option Agreement, dated December 1, 1996,
and an amendment to a Stock Appreciation Rights Agreement, dated December 1, 1996. *
</TABLE>
(continued)
IV-10
<PAGE> 248
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.68 InterMedia Capital Management, L.P. Agreement of Limited Partnership, dated as of June 10, 1997 and
effective as of May 22, 1997, by and between InterMedia Management, Inc., Leo J. Hindery, Jr.
and TCI ICM I, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.69 InterMedia Capital Management III, L.P. Amended and Restated Agreement of Limited Partnership,
dated as of June 10, 1997, by and among Leo J. Hindery, Jr., InterMedia Management, Inc. and
TCI ICM III, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.70 InterMedia Capital Management IV, L.P. Amended and Restated Agreement of Limited Partnership, dated
as of August 5, 1997, by and between InterMedia Management, Inc., TCI ICM IV, Inc. and Leo J.
Hindery, Jr.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.71 Amended and Restated Contribution and Merger Agreement, dated as of June 6, 1997, among TCI
Communications, Inc., Cablevision Systems Corporation, CSC Parent Corporation and CSC Merger
Corporation.
Stockholders Agreement dated as of March 4, 1998, by and among Cablevision Systems Corporation,
Tele-Communications, Inc. and the Class B Entities (as defined therein)
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated March
6, 1998 (Commission File No. 0-20421).
10.72 Amended and Restated Asset Contribution Agreement, dated September 25, 1997, by and among Fisher
Communications Associates, L.L.C. and Tempo Cable, Inc., Communications Services, Inc., TCI
Cablevision of Oklahoma, Inc., TCI of Kansas, Inc., Wentronics, Inc., TCI Cablevision of Utah,
Inc., TCI Cablevision of Arizona, Inc., Tulsa Cable Television, Inc. and TCI American Cable
Holdings III, L.P. and Peak Cablevision, LLC.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.73 Amended and Restated Operating Agreement of Peak Cablevision, LLC, made as of September 25, 1997,
by TCI American Cable Holdings III, L.P. and Fisher Communications Associates, L.L.C.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.74 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and ECP
Holdings, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.75 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and
American Televentures of Minersville, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
</TABLE>
(continued)
IV-11
<PAGE> 249
10 - Material contracts, continued:
<TABLE>
<S> <C>
10.76 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and TCI
Cablevision of Utah, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.77 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and Tempo
Cable, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.78 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and TCI
Cablevision of Nevada, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.79 Agreement and Plan of Restructuring and Merger among AT&T Corp., Italy Merger Corp. and
Tele-Communications, Inc. dated as of June 23, 1998.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated July 1,
1998 (Commission File No. 0-20421). (1)
10.80 Agreement and Plan of Merger dated August 24, 1998, among Tele-Communications, Inc., Liberty Group
Acquisition Co. and Tele-Communications International, Inc.
Incorporated herein by reference to Amendment No. 1 of the Company's Registration Statement
on Form S-4 (Commission File No. 333-64297).
10.81 TCIC Merger Agreement, dated January 12, 1999, among the Company and TCI Communications, Inc.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated March
11, 1999 (Commission File No. 020421).
16.1 Letter, dated March 9, 1999, from KPMG LLP
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated March
11, 1999.
21 - Subsidiaries of Tele-Communications, Inc.
23 - Consent of Experts and Counsel
23.1 Consent of KPMG LLP.
23.2 Consent of Deloitte & Touche LLP.
27 - Financial data schedule
</TABLE>
*Constitutes management contract or compensatory arrangement.
(1) Certain exhibits to agreement have been omitted. A copy of any omitted
exhibit or schedule will be furnished supplementally to the Commission
upon request.
IV-12
<PAGE> 250
(b) Report on Form 8-K filed during the quarter ended December 31, 1998:
<TABLE>
<CAPTION>
Item
Date of Report Reported Financial Statements Filed
-------------- -------- --------------------------
<S> <C> <C>
October 22, 1998 Item 5 None
December 8, 1998 Items 5 and 7 None
</TABLE>
IV-13
<PAGE> 251
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Tele-Communications, Inc.:
Under date of March 9, 1999, we reported on the consolidated balance sheets of
Tele-Communications, Inc. and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations and comprehensive earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998, which are included in the December 31, 1998
annual report on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedules as listed in the accompanying index. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG LLP
Denver, Colorado
March 9, 1999
IV-14
<PAGE> 252
Schedule I
Page 1 of 3
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Information as to the
Financial Position of the Registrant
December 31, 1998 and 1997
<TABLE>
<CAPTION>
Assets 1998 1997
- ------ ---- ----
amounts in millions
<S> <C> <C>
Investments in and advances to consolidated subsidiaries - eliminated upon
consolidation $ 13,457 6,864
Other assets, at cost, net of accumulated amortization 16 18
----------- -------------
$ 13,473 6,882
=========== =============
Liabilities and Stockholders' Equity
Accrued liabilities $ 1,022 455
Redeemable securities:
Preferred stock 300 655
Common stock 22 5
Stockholders' equity:
Series Preferred Stock, $.01 par value -- --
Convertible Redeemable Participating Preferred Stock, Series F, $.01 par
value -- --
Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock, $.01
par value -- --
Common stock, $1 par value:
Series A TCI Group. Authorized 1,750,000,000 shares; issued 610,748,188
shares in 1998 and 605,616,143 shares in 1997 611 606
Series B TCI Group. Authorized 150,000,000 shares; issued 73,929,229
shares in 1998 and 78,203,044 shares in 1997 74 78
Series A Liberty Media Group. Authorized 750,000,000 shares; issued
367,890,546 shares in 1998 and 344,962,521 shares in 1997 368 345
Series B Liberty Media Group. Authorized 75,000,000 shares; issued
35,198,156 shares in 1998 and 35,180,385 shares in 1997 35 35
Series A TCI Ventures Group. Authorized 750,000,000 shares; issued
377,253,230 shares in 1998 and 377,386,032 shares in 1997 377 377
Series B TCI Ventures Group. Authorized 75,000,000 shares; issued
45,750,534 shares in 1998 and 32,532,800 shares in 1997 46 33
Additional paid-in capital 7,248 6,324
Accumulated other comprehensive earnings, net of taxes 3,749 772
Retained earnings (accumulated deficit) 1,124 (812)
----------- -------------
13,632 7,758
Treasury stock and common stock held by subsidiaries, at cost (1,503) (1,991)
----------- -------------
Total stockholders' equity 12,129 5,767
----------- -------------
$ 13,473 $ 6,882
=========== =============
</TABLE>
IV-15
<PAGE> 253
Schedule I
Page 2 of 3
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Information as to the
Operations of the Registrant
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ------------- ---------
amounts in millions
<S> <C> <C> <C>
Income (expenses):
Selling, general and administrative $ (24) (19) (82)
AT&T Merger costs (14) -- --
Stock compensation (47) (73) 13
---------- ------------- ---------
Loss before share of earnings (loss) of consolidated
subsidiaries (85) (92) (69)
Share of earnings (loss) of consolidated subsidiaries 2,028 (469) 361
---------- ------------- ---------
Net earnings (loss) 1,943 (561) 292
Dividend requirements on preferred stocks (24) (42) (35)
---------- ------------- ---------
Net earnings (loss) attributable to common stockholders $ 1,919 (603) 257
========== ============= =========
</TABLE>
IV-16
<PAGE> 254
Schedule I
Page 3 of 3
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Information as to
Cash Flows of the Registrant
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
amounts in millions
<S> <C> <C> <C>
Cash flows from operating activities:
Loss before share of earnings (loss) of consolidated subsidiaries $ (85) (92) (69)
Adjustments to reconcile loss to net cash provided by (used in)
operating activities:
Stock compensation 47 73 (13)
Payments of obligation relating to stock compensation (4) (43) (3)
Change in accrued liabilities 535 276 56
----- ----- -----
Net cash provided by (used in)operating
activities 493 214 (29)
----- ----- -----
Cash flows from investing activities:
Reductions in (additional investments in and advances to)
consolidated subsidiaries, net (152) 370 75
Other investing activities 2 (2) (11)
----- ----- -----
Net cash provided by (used in) investing
activities (150) 368 64
----- ----- -----
Cash flows from financing activities:
Payment of preferred stock dividends (27) (42) (35)
Payments for call agreements (274) -- --
Proceeds from issuances of common stock -- 5 --
Repurchase of common stock to be held in treasury (20) (529) --
Repurchase and retirement of common stock (11) -- --
----- ----- -----
Other financing activities (11) (16) --
----- ----- -----
Net cash used in financing activities (343) (582) (35)
----- ----- -----
Change in cash -- -- --
Cash at beginning of year -- -- --
----- ----- -----
Cash at end of year $ -- -- --
===== ===== =====
</TABLE>
See also note 4 to the consolidated financial statements.
IV-17
<PAGE> 255
Schedule II
TELE-COMMUNICATIONS, INC.
AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Additions Deductions
Balance at Charged to Write-offs Balance
beginning profit net of at end
Description of year and loss recoveries of year
- ----------- --------- --------- ---------- -------
amounts in millions
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful receivables
- trade $ 34 90 (91) 33
====== =========== =========== ===========
Year ended December 31, 1997:
Allowance for doubtful receivables
- trade $ 36 96 (98) 34
====== =========== =========== ===========
Year ended December 31, 1996:
Allowance for doubtful receivables
- trade $ 34 121 (119) 36
====== =========== =========== ===========
</TABLE>
IV-18
<PAGE> 256
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Sprint Corporation and
Partners of Sprint Spectrum Holding Company, L.P.
We have audited the consolidated balance sheets of Sprint Spectrum Holding
Company, L.P. and subsidiaries (the "Holdings") as of December 31, 1998 and
1997, and the related consolidated statements of operations and cash flows for
the three years in the period ended December 31, 1998. Our audits also included
the financial statement schedule ("Schedule II"). These financial statements and
Schedule II are the responsibility of Partnership management. Our responsibility
is to express an opinion on these consolidated financial statements and Schedule
II based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sprint Spectrum Holding Company,
L.P. and subsidiaries at December 31, 1998 and 1997, and the results of their
operations and their cash flows for the three years ended December 31, 1998, in
conformity with generally accepted accounting principles. Also, in our opinion,
Schedule II, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Deloitte & Touche LLP
Kansas City, Missouri
February 2, 1999
IV-19
<PAGE> 257
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
<TABLE>
<CAPTION>
Years Ended December 31, 1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
NET OPERATING REVENUES $ 1,175.5 $ 248.6 $ 4.2
---------- ---------- ---------
OPERATING EXPENSES
Costs of services and products 1,142.8 555.0 36.1
Selling, general and administrative 1,334.9 696.9 312.7
Depreciation 637.1 258.6 9.6
Amortization 76.0 48.8 1.7
---------- ---------- ---------
Total operating expenses 3,190.8 1,559.3 360.1
---------- ---------- ---------
OPERATING LOSS (2,015.3) (1,310.7) (355.9)
Interest expense (469.6) (121.9) (0.3)
Minority interest 144.5 6.2 (0.2)
Equity in loss of unconsolidated partnerships -- (168.9) (96.9)
Other income, net 33.5 31.9 10.2
---------- ---------- ---------
LOSS BEFORE EXTRAORDINARY ITEM (2,306.9) (1,563.4) (443.1)
Extraordinary item (51.1) -- --
---------- ---------- ---------
NET LOSS $ (2,358.0) $ (1,563.4) $ (443.1)
========== ========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
IV-20
<PAGE> 258
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
December 31, 1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 123.5 $ 117.2
Accounts receivable, net of allowance for doubtful accounts of $21.0 and $9.0
in 1998 and 1997, respectively 280.5 113.5
Receivable from affiliates 147.6 96.3
Inventories 113.2 101.4
Prepaid expenses 31.2 28.4
---------- ----------
Total current assets 696.0 456.8
Property, plant and equipment
Buildings and leasehold improvements 924.2 618.3
Network equipment 3,371.4 2,265.2
Construction work in progress 864.1 632.9
Other 338.1 167.4
---------- ----------
Total property, plant and equipment 5,497.8 3,683.8
Accumulated depreciation (861.0) (254.6)
---------- ----------
Net property, plant and equipment 4,636.8 3,429.2
Investment in unconsolidated partnership -- 273.5
Minority interest -- 56.7
Intangibles
PCS licenses 2,464.3 2,223.0
Goodwill 381.6 125.6
Microwave relocations 335.7 269.4
---------- ----------
Total intangibles 3,181.6 2,618.0
Accumulated amortization (124.5) (50.4)
---------- ----------
Net intangibles 3,057.1 2,567.6
Other assets 45.8 113.2
---------- ----------
Total $ 8,435.7 $ 6,897.0
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current maturities of long-term debt $ 119.4 $ 34.6
Accounts payable 539.2 416.0
Construction obligations 636.0 705.3
Accrued expenses and other current liabilities 566.2 300.0
---------- ----------
Total current liabilities 1,860.8 1,455.9
Long-term debt 6,491.6 3,533.9
Limited partner interest in consolidated subsidiary 34.0 13.7
Other 79.0 49.0
Partners' capital and accumulated deficit
Partners' capital 4,448.5 3,964.7
Accumulated deficit (4,478.2) (2,120.2)
---------- ----------
Partners' capital and accumulated deficit (29.7) 1,844.5
---------- ----------
Total $ 8,435.7 $ 6,897.0
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
IV-21
<PAGE> 259
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Years Ended December 31, 1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (2,358.0) $ (1,563.4) $ (443.1)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Equity in losses of unconsolidated partnerships -- 168.9 96.9
Minority interest (144.5) (6.2) 0.2
Extraordinary item 51.1 -- --
Depreciation and amortization 712.1 307.9 11.3
Amortization of debt discount and issuance costs 58.8 49.1 14.0
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net (195.1) (182.9) (15.9)
Inventories (2.2) (24.9) (72.4)
Prepaid expenses and other assets 4.7 (12.4) (21.6)
Accounts payable and other current liabilities 219.8 361.5 946.7
Other noncurrent liabilities 29.9 37.6 9.5
---------- ---------- ---------
Net cash provided by (used in) operating activities (1,623.4) (864.8) 525.6
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,495.0) (2,041.3) (1,386.3)
Microwave relocation costs, net (46.8) (116.3) (135.8)
Purchase of APC, net of cash acquired (28.9) (6.8) --
Purchase of Cox PCS, net of cash acquired (28.3) -- --
Investment in unconsolidated partnerships -- (191.2) (190.4)
Loan to unconsolidated partnership -- (111.4) (232.0)
Payment received on loan to unconsolidated partnership -- 246.7 5.9
---------- ---------- ---------
Net cash used in investing activities (1,599.0) (2,220.3) (1,938.6)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from partners -- -- 167.8
Net borrowings under revolving credit facilities 1,253.6 605.0 --
Proceeds from issuance of long-term debt 1,358.6 1,763.0 674.2
Long-term borrowings from parent 3,526.6 -- --
Payments on long-term debt (3,393.9) (170.8) --
Debt issuance costs -- (20.0) (71.8)
Partner capital contributions 517.1 966.8 711.7
Return of capital (33.3) (11.7) --
---------- ---------- ---------
Net cash provided by financing activities 3,228.7 3,132.3 1,481.9
---------- ---------- ---------
INCREASE IN CASH AND EQUIVALENTS 6.3 47.2 68.9
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 117.2 70.0 1.1
---------- ---------- ---------
CASH AND EQUIVALENTS, END OF PERIOD $ 123.5 $ 117.2 $ 70.0
========== ========== =========
Supplemental Disclosure of Cash Flow Information:
o Interest paid, net of amount capitalized $ 264.8 $ 35.6 $ 0.3
Non-cash Investing and Financing Activities:
o Accrued interest of $154.2 million and $51.7 million
related to vendor financing was converted to long-term debt during the
years ended December 31, 1998 and 1997, respectively
o A PCS license covering the Omaha MTA and valued at $6.2 million was
contributed to Holdings by Cox Communications during the year ended
December 31, 1997
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
IV-22
<PAGE> 260
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
- --------------------------------------------------------------------------------
SPRINT SPECTRUM HOLDING COMPANY, L.P.
Sprint Spectrum Holding Company, L.P. (Holdings) is the 99% general partner of,
and is consolidated with, its subsidiaries, including NewTelco, L.P. (NewTelco)
and Sprint Spectrum L.P., which, in turn, has several subsidiaries. Sprint
Spectrum L.P.'s subsidiaries are Sprint Spectrum Equipment Company, L.P.
(EquipmentCo), Sprint Spectrum Realty Company, L.P. (RealtyCo), Sprint Spectrum
Finance Corporation (FinCo), and WirelessCo, L.P. (WirelessCo).
MinorCo, L.P. (MinorCo) holds the minority limited partnership interests of 1%
in NewTelco, Sprint Spectrum L.P., EquipmentCo, RealtyCo, WirelessCo and 0.25%
in American PCS, L.P. (APC) at December 31, 1998 and 1997.
The results of APC are consolidated from November 1997, the date the Federal
Communications Commission ("FCC") approved Holdings as the new managing partner
(Note 3). APC, through subsidiaries, owns a PCS license for and operates a
broadband GSM (global system for mobile communications) in the Washington
D.C./Baltimore Major Trading Area ("MTA"), and has launched a code division
multiple access ("CDMA") overlay for its existing GSM PCS system. APC includes
American PCS Communications, LLC, APC PCS, LLC, APC Realty and Equipment
Company, LLC and American Personal Communications Holdings, Inc.
As discussed in Note 3, Holdings also became the managing partner of Cox
Communications PCS, L.P. ("Cox PCS") in June 1998. Cox PCS results have been
included in the consolidated statements of operations from January 1, 1998. Cox
PCS, through subsidiaries, holds a PCS license for and operates a PCS system in
the Los Angeles-San Diego-Las Vegas MTA. Cox PCS includes Cox PCS License,
L.L.C., Cox PCS Assets, L.L.C., and PCS Leasing Co., L.P.
RESTRUCTURING AND REORGANIZATION
In November 1998, Sprint Corporation (Sprint) acquired the remaining ownership
interests in Holdings. Sprint acquired these ownership interests from
Tele-Communications, Inc., Comcast Corporation and Cox Communications, Inc. (the
Cable Partners). The purchase of the Cable Partners' interests is referred to as
the PCS Restructuring, which included the formation of the PCS Group. Sprint
accounted for the transaction as a purchase. Purchase accounting was not "pushed
down" to Holdings. PhillieCo, L.P. (PhillieCo) and SprintCom, Inc. (SprintCom)
are affiliates of Holdings through common ownership, and provide PCS service in
license areas not owned by Holdings.
SPRINT SPECTRUM HOLDING COMPANY, L.P. PARTNERSHIP AGREEMENT
Holdings was originally formed as a Delaware limited partnership on March 28,
1995, by Sprint Enterprises, L.P., TCI Spectrum Holdings, Inc., Cox Telephony
Partnership and Comcast Telephony Services. The Partnership Agreement was
amended concurrent with the PCS Restructuring discussed above. This amendment
provided for the interests of the Cable Partners in Holdings to be acquired by
wholly owned subsidiaries of Sprint.
EMERGENCE FROM DEVELOPMENT STAGE COMPANY
Prior to the third quarter of 1997, Holdings reported its operations as a
development stage enterprise. Holdings has commenced service in all of the MTAs
in which it owns a license. As a result, Holdings is no longer considered a
development stage enterprise, and the consolidated balance sheets and statements
of operations and cash flows are no longer presented in development stage
format.
IV-23
<PAGE> 261
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BASIS OF CONSOLIDATION
The assets, liabilities, results of operations and cash flows of entities in
which Holdings has a controlling interest have been consolidated. All
significant intercompany accounts and transactions have been eliminated.
Holdings' consolidated financial statements are prepared using generally
accepted accounting principles. These principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses. Actual results could differ from
those estimates.
Certain prior year amounts have been reclassified to conform to the current year
presentation. These reclassifications had no effect on the results of operations
or partners' capital as previously reported.
ALLOCATION OF SHARED SERVICES AND GROUP FINANCING
Sprint directly assigns, where possible, certain general and administrative
costs to Holdings based on the actual use of those services. Where direct
assignment of costs is not possible or practicable Sprint uses other methods to
estimate the assignment of costs to Holdings.
Financing activities for Holdings are managed by Sprint on a centralized basis.
Debt and the related interest expense incurred by Sprint and its subsidiaries on
behalf of Holdings are specifically allocated to and reflected in these
financial statements. Interest expense is allocated to Holdings based on an
interest rate that is largely equal to the rate Holdings would be able to obtain
from third parties as a direct or indirect wholly owned Sprint subsidiary, but
without the benefit of any guaranty by Sprint.
MINORITY INTERESTS
In 1998, minority interest consisted primarily of Cox Pioneer Partnership's
(CPP) ownership in Cox PCS. Prior to 1998, minority interest primarily included
losses attributable to American Personal Communications, II, L.P.
(APC II).
TRADEMARK AGREEMENT
Sprint owns various trademarks and service marks utilized by Holdings. Sprint
expects to apply for and develop trademarks, service marks and patents for the
benefit of Holdings in the ordinary course of business. Sprint(R) is a
registered trademark of Sprint and Sprint PCS(SM) is a registered service mark
of Sprint, both of which are utilized by Holdings on a royalty-free basis under
trademark license agreements.
REVENUE RECOGNITION
Holdings recognizes operating revenues as services are rendered or as products
are delivered to customers. Holdings records operating revenues net of an
estimate for uncollectible accounts.
CASH AND EQUIVALENTS
Cash equivalents generally include highly liquid investments with original
maturities of three months or less. They are stated at cost, which approximates
market value.
INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-out
method) or replacement value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Generally, ordinary asset
retirements and disposals are charged against accumulated depreciation with no
gain or loss recognized. Property, plant and equipment is depreciated on a
straight-line basis over estimated economic useful lives. Repair and maintenance
costs are expensed as incurred.
IV-24
<PAGE> 262
CAPITALIZED INTEREST
Interest costs associated with the construction of capital assets incurred
during the period of construction are capitalized. Capitalized interest totaled
approximately $63 million in 1998, $99 million in 1997 and $31 million in 1996.
PCS LICENSES
Holdings acquired licenses from the Federal Communications Commission (FCC) to
operate as a PCS service provider. These licenses are granted for up to 10-year
terms with renewals for additional 10-year terms if license obligations are met.
These licenses are recorded at cost and are amortized over 40 years when service
begins in a specific geographic area. Accumulated amortization totaled
approximately $104 million at year-end 1998 and $45 million at year-end 1997.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of the
net assets acquired in business combinations accounted for as purchases.
Goodwill is being amortized over 40 years using the straight-line method for
Holdings. Accumulated amortization totaled $8 million at year-end 1998 and $0.4
million at year-end 1997.
MICROWAVE RELOCATIONS
Holdings has incurred costs related to microwave relocation in constructing the
PCS network. Microwave relocation costs are being amortized over the remaining
lives of the PCS licenses. Accumulated amortization for microwave relocation
costs totaled approximately $13 million at year-end 1998 and $5 million at
year-end 1997.
INCOME TAXES
Holdings has not provided for federal or state income taxes since such taxes are
the responsibility of the Partners.
DERIVATIVE FINANCIAL INSTRUMENTS
Prior to the PCS Restructuring, derivative financial instruments (interest rate
contracts) were utilized by APC to reduce interest rate risk. APC established a
control environment which included risk assessment and management approval,
reporting and monitoring of derivative financial instrument activities. APC did
not hold or issue derivative financial instruments for trading purposes. At
year-end 1998, no derivatives were outstanding.
COMPREHENSIVE INCOME
Holdings' total comprehensive loss for all periods presented did not differ from
those amounts reported as net loss in the consolidated statements of operations.
MAJOR CUSTOMER
Holdings markets its products through multiple distribution channels, including
its own retail stores as well as other retail outlets. Holdings' subscribers are
dispersed throughout the United States. Equipment sales to one retail outlet,
and service revenues generated by sales to its customers represented
approximately 25% and 21% of net operating revenues in the consolidated
statements of operations in 1998 and 1997, respectively.
IV-25
<PAGE> 263
- --------------------------------------------------------------------------------
3. INVESTMENTS IN PARTNERSHIPS
- --------------------------------------------------------------------------------
APC - In September 1997, Holdings increased its ownership in APC to 58.3%
through additional capital contributions of $30 million, and became the managing
partner in November 1997. At the beginning of 1998, Holdings increased its
ownership percentage to 99.75% of the partnership interests for approximately
$30 million. APC II has been allocated approximately $7 million in losses in APC
since November 1997. Prior to November 1997, APC II had been allocated
approximately $50 million in losses in excess of its investment. At year-end
1997, these losses totaled $57 million and were recorded as minority interest in
Holdings' consolidated balance sheet. This treatment reflects APC II's continued
responsibility for funding its share of losses until January 1, 1998 when
Holdings and MinorCo acquired the remaining interest in APC.
COX PCS - At year-end 1996, Holdings acquired a 49% limited partner interest in
Cox PCS. CPP held a 50.5% general and a 0.5% limited partner interest and was
the general and managing partner. Holdings increased its ownership in Cox PCS to
59.2% through an additional capital contribution of approximately $81 million
and became managing partner upon FCC approval in June 1998. CPP's remaining
ownership interest in Cox PCS is reflected as minority interest in the
consolidated balance sheet and statements of operations. CPP has been allocated
approximately $145 million in losses in Cox PCS since the date of acquisition.
Under the partnership agreement, Cox has the right to require Holdings to
purchase, under certain circumstances, all or part of CPP's interest in Cox PCS,
which could involve significant cash requirements. Cox may require Holdings to
acquire an additional 10.2% interest in Cox PCS per year through 2000. Beginning
in 2001 through 2005, CPP may require Holdings to acquire up to all of its
interest in Cox PCS. Cox has given Holdings notice to start the appraisal
process related to a potential put of all or a portion of CPP's remaining
partnership interest to Holdings.
The acquisition of APC was accounted for as a purchase and, accordingly, the
operating results of APC have been consolidated since the acquisition. The
acquisition of Cox PCS increasing ownership to 59.2% was also accounted for as a
purchase. The operating results of Cox PCS have been consolidated since the
beginning of 1998. In conjunction with the acquisitions liabilities assumed were
(in millions):
<TABLE>
<CAPTION>
APC Cox PCS
------------ ------------
<S> <C> <C>
Assets acquired............... $ 503 $ 725
Cash paid..................... (30) (81)
Minority interest............. 50 (104)
------------ ------------
Liabilities assumed........... $ 523 $ 540
============ ============
</TABLE>
The purchase price was allocated to the assets acquired and the liabilities
assumed based on an estimate of fair value. The ultimate purchase price of Cox
PCS may differ from the initial estimate. In connection with the above
acquisitions, the excess of the purchase price over the fair value of the net
assets acquired was accounted for as goodwill.
Prior to acquisition of controlling interest, Holdings' investments in APC and
Cox PCS were accounted for under the equity method. Losses of APC and Cox PCS of
approximately $61 million and $108 million, respectively, in 1997 and losses of
APC of $97 million in 1996 are included in equity in losses of unconsolidated
partnerships during the period prior to the acquisition of controlling interest.
Under the terms of the partnership agreement, CPP and Holdings are obligated to
make additional capital contributions in an amount equal to such partner's
percentage interest times the amount of additional capital contributions being
requested. In 1998, Holdings completed its funding obligation to Cox PCS under
the partnership agreement by contributing $34 million, including $33 million in
interest that had accrued on the unfunded obligation. Holdings had previously
contributed equity of approximately $180 million in 1997 and $168 million in
1996.
The following unaudited pro forma financial information assumes the acquisition
of APC had occurred on January 1 of each year and the acquisition of Cox PCS had
occurred on January 1, 1997. It also assumes that Holdings had owned 100% of
each entity and consolidated their results in the Holdings' financial statements
(in millions):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 392 $ 76
Net loss (before minority interest) (1,747) (553)
</TABLE>
These proforma amounts are for comparative purposes only and do not necessarily
represent what actual results of operations would have been, nor do they
indicate the results of future operations.
IV-26
<PAGE> 264
- --------------------------------------------------------------------------------
4. EMPLOYEE BENEFIT PLANS
- --------------------------------------------------------------------------------
DEFINED CONTRIBUTION AND PROFIT SHARING PLANS
Holdings sponsors a savings and retirement program (the "Savings Plan") for
certain employees. Most permanent full-time, and certain part-time, employees
are eligible to participate after one year of service or on their 35th birthday,
whichever occurs first. The maximum contribution for any participant for any
year is 16% of their pay. Holdings matches contributions equal to 50% of the
contribution of each participant, up to the first 6% that the employee elects to
contribute. Contributions to the Savings Plan are invested, at the participant's
discretion, in several designated investment funds. Expense under the Savings
Plan was $6 million in 1998, $5 million in 1997 and $1 million in 1996.
Effective January 1999, Holdings' employees began making contributions to
Sprint's defined contribution plan. The existing assets of the Savings Plan will
be rolled over to Sprint's defined contribution plan in early 1999. Effective
January 1999, Holdings' employees were also eligible to participate in Sprint's
pension and postretirement plans.
The Cox PCS Savings and Investment Plan (the "Cox PCS Plan") was established
effective July 1, 1997. Substantially all Cox PCS employees are eligible to
participate in the Cox PCS Plan after completing one year of eligible service
(as defined) and attaining age 21. Employees may make contributions to the Cox
PCS Plan on a pretax basis pursuant to Section 401(k) of the Internal Revenue
Code. Cox PCS makes matching contributions equal to 75% of the employee's
contribution up to a maximum amount equal to 4.5% of the employee's annual
compensation. Employee contributions vest immediately, and Cox PCS' matching
contributions vest over three years of service. Expense under the Cox PCS Plan
approximated $1 million in 1998. The Cox PCS Plan will be terminated in early
1999, and the existing assets will be rolled over to Sprint's defined
contribution plan.
PROFIT SHARING (RETIREMENT) PLAN
Effective January, 1996, Holdings established a profit sharing plan for its
employees. Employees are eligible to participate in the plan after completing
one year of service. Profit sharing contributions are based on the compensation,
age, and years of service of the employee. Profit sharing contributions are
deposited into individual accounts of Holdings' retirement plan. Vesting occurs
once a participant completes five years of service. Expense under the profit
sharing plan approximated $3 million in 1998, $3 million in 1997 and $1 million
in 1996. The existing assets of the profit sharing will be rolled over to
Sprint's defined contribution plan in early 1999.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
Effective January, 1997, Holdings established a non-qualified deferred
compensation plan which permits certain eligible executives to defer a portion
of their compensation. The plan allows the participants to defer up to 80% of
their base salary and up to 100% of their annual short-term incentive
compensation. The deferred amounts earn interest at the prime rate. Payments
will be made to participants upon retirement, disability, death or the
expiration of the deferral election under the payment method selected by the
participant. The deferred compensation plan will be terminated in early 1999,
and participants will be eligible to participate in Sprint's deferred
compensation plan.
LONG-TERM INCENTIVE PLAN
Holdings maintains a long-term incentive plan. Prior to the PCS Restructuring
employees meeting certain eligibility requirements were included in Holdings'
long-term incentive plan (LTIP). Under this plan, participants received
appreciation units based on independent appraisals. The 1997 plan appreciation
units vest 25% per year beginning on the first anniversary of the grant date and
expire after 10 years. Under the 1996 plan, appreciation units vest 25% per year
beginning two years after the grant date, and expire after 10 years. Holdings
expensed $3 million in 1998, $18 million in 1997 and $10 million in 1996. In
1996, Holdings adopted the pro forma disclosure requirements under SFAS 123,
"Accounting for Stock-Based Compensation." Holdings has continued to apply
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." No significant difference would have resulted had SFAS 123 been
applied.
After the PCS Restructuring, Sprint discontinued the LTIP plan. The appreciation
units were replaced with PCS shares and options to buy PCS shares based on a
formula designed to replace the appreciated value of the units at the beginning
of July 1998. For vested units at year-end 1998, participants could elect to
receive the appreciation in cash, or in shares and options. Most elected to
receive shares and options. Sprint will issue the shares, and the options will
become exercisable, based on the vesting requirements of the units those awards
replaced.
IV-27
<PAGE> 265
SPRINT CORPORATION MANAGEMENT INCENTIVE STOCK OPTION PLAN AND STOCK OPTION PLAN
Effective January 1, 1999, employees are eligible to participate in Sprint's
Management Incentive Stock Option Plan (MISOP) and the Sprint Corporation Stock
Option Plan (SOP). Under the MISOP, Sprint may grant stock options to employees
who are eligible to receive annual incentive compensation. Eligible employees
are entitled to receive stock options in lieu of a portion of the target
incentive under Sprint's management incentive plans. The options generally
become exercisable on December 31 of the year granted and have a maximum term of
10 years. MISOP options are granted with exercise prices equal to the market
price of Sprint's FON Group and PCS Group stock on the grant date.
Under the SOP, Sprint may grant stock options to officers and key employees. The
options generally become exercisable at the rate of 25% per year, beginning one
year from the grant date, and have a maximum term of 10 years. SOP options are
granted with exercise prices equal to the market price of Sprint's FON Group and
PCS Group stock on the grant date.
EMPLOYEE STOCK PURCHASE PLAN
Under Sprint's Employees Stock Purchase Plan (ESPP), employees may elect to
purchase Sprint common stock at a price equal to 85% of the market value on the
grant or exercise date, whichever is less.
- --------------------------------------------------------------------------------
5. LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long term debt consists of the following as of December 31, 1998 and 1997 (in
millions):
<TABLE>
<CAPTION>
Maturing 1998 1997
------------- ----------- -----------
<S> <C> <C> <C>
Senior notes
8.6% to 9.5% (1) 2008 to 2028 $ 3,346.6 $ --
11.0% to 12.5% (2) 2006 613.8 572.3
Revolving credit facilities
variable rates 2005 to 2006 1,800.0 746.4
Due to FCC at 7.75% (3) 2001 265.2 90.4
Vendor Financing -- 1,612.9
Other
2.3% to 14.4% (4) 1998 to 2007 585.4 546.5
----------- ----------
Total Debt 6,611.0 3,568.5
Less: current maturities 119.4 34.6
----------- ----------
Long-term debt $ 6,491.6 $ 3,533.9
----------- ----------
</TABLE>
(1) Holdings has notes payable to Sprint totaling $3.3 billion. See Note 2 for
a more detailed description of Holdings and PCS Group financing.
(2) Balances are net of unamortized discounts of $136.2 million in 1998 and
$177.7 million in 1997. Sprint holds approximately $133 million at year-end
1998 and $118 million at year-end 1997 of the Senior Discount Notes.
(3) Balances are net of unamortized discounts of $8.0 million in 1998 and $12.0
million in 1997.
(4) In 1998, Holdings received $180 million under grid notes from Sprint. These
notes had a weighted average interest rate of 7.8% at year-end 1998 and
mature in 2001.
Holdings' long-term debt maturities, during each of the next five years are as
follows:
<TABLE>
<CAPTION>
-----------------------------------------
(in millions)
<S> <C>
1999 $ 119.4
2000 126.4
2001 354.6
2002 301.1
2003 462.1
-----------------------------------------
</TABLE>
IV-28
<PAGE> 266
Revolving Credit Facilities
At year-end 1998, available revolving credit facilities with banks totaled $2.1
billion and Holdings had borrowed $1.8 billion at a weighted average interest
rate of 5.8%. At year-end 1997, $746 million had been drawn under the revolving
credit facilities at a weighted average interest rate of 8.4%. Availability will
be reduced commencing January 2002 and expires in 2007. Borrowings under the
term loans are included in Other debt and totaled $400 million with a weighted
average interest rate of 7.7% at year-end 1998 and $300 million with a weighted
average interest rate of 8.4% at year-end 1997.
Provisions of the credit facilities required the transfer of certain of
Holdings' assets into special purpose subsidiaries to facilitate the
collateralization of Holdings' assets.
SENIOR NOTES AND SENIOR DISCOUNT NOTES (THE NOTES)
On August 15, 2001, Holdings will be required to redeem an amount equal to $192
million in aggregate principal amount at maturity, assuming all of the Senior
Discount Notes remain outstanding at such date. The Notes are redeemable at the
option of Holdings, in whole or in part, at any time on or after August 15, 2001
at the stipulated redemption prices plus accrued and unpaid interest. Interest
on the Senior Discount Notes is not payable prior to August 15, 2001.
VENDOR FINANCING
In 1996, Holdings entered into financing agreements with Northern Telecom, Inc.
(Nortel) and Lucent Technologies, Inc. (Lucent and together with Nortel, the
Vendors) for multiple drawdown term loan facilities totaling $1.3 billion and
$1.8 billion, respectively. At year-end 1997, approximately $1.6 billion,
including converted accrued interest of $52 million, had been borrowed at a
weighted average interest rate of 9.0% under the vendor financing agreements.
Amounts outstanding at year-end 1997 included $300 million that was syndicated
to Sprint. In 1998, all borrowings under the Vendor Financing were repaid using
long-term borrowings from Sprint.
OTHER
In 1998, Holdings redeemed, prior to scheduled maturities, $3.3 billion of debt
with a weighted average interest rate of 8.3%. This resulted in a $51 million
extraordinary loss. The debt was repaid with a portion of the long-term
borrowings from Sprint.
Holdings has complied with all restrictive or financial covenants relating to
its debt arrangements at year-end 1998.
Holdings' PCS licenses and property, plant and equipment totaling $4.4 billion
is pledged as security for certain notes.
FAIR VALUE
The estimated fair value of Holdings' long-term debt was $6.8 billion at
year-end 1998 and $3.6 billion at year-end 1997.
IV-29
<PAGE> 267
- --------------------------------------------------------------------------------
6. EQUITY
- --------------------------------------------------------------------------------
Following is a reconciliation of Holdings' equity:
<TABLE>
<CAPTION>
Partners' Accumulated
Capital Deficit Total
---------- ----------- ----------
(in millions)
<S> <C> <C> <C>
Balance January 1, 1996 $ 2,291.7 $ (113.7) $ 2,178.0
Contributions of capital 711.7 -- 711.7
Net loss -- (443.1) (443.1)
---------- ----------- ----------
Balance December 31, 1996 3,003.4 (556.8) 2,446.6
Contributions of capital 973.0 -- 973.0
Net loss -- (1,563.4) (1,563.4)
Return of capital (11.7) -- (11.7)
---------- ----------- ----------
Balance December 31, 1997 3,964.7 (2,120.2) 1,844.5
Contributions of capital 517.1 -- 517.1
Net loss -- (2,358.0) (2,358.0)
Return of capital (33.3) -- (33.3)
========== =========== ==========
Balance December 31, 1998 $ 4,448.5 $ (4,478.2) $ (29.7)
========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
LITIGATION, CLAIMS AND ASSESSMENTS
Various suits arising in the ordinary course of business are pending against
Holdings. Holdings cannot predict the final outcome of these actions but
believes they will not be material to its consolidated financial statements.
COMMITMENTS
In 1998 Holdings amended a procurement and services contract with a vendor for
the engineering and construction of a PCS network. This contract provides for an
initial term of three years with renewals for additional one-year periods. The
minimum commitment for the initial term is $400 million. At year-end 1998, $257
million had been purchased under the commitment with remaining minimum
commitment of $143 million.
In 1996 Holdings entered into a purchase and supply agreement with a vendor for
the purchase of handsets and other equipment. The total purchase commitment must
be satisfied by April 2000. Purchases under the commitment totaled $289 million
in 1998 and $148 million in 1997. No purchases were made in 1996. At year-end
1998, remaining commitments totaled $163 million.
Holdings has an agreement with a vendor to provide PCS call record and retention
services. Monthly rates per subscriber are variable based on overall subscriber
volume. If subscriber fees are less than specified annual minimum charges,
Holdings will be obligated to pay the difference between the amounts paid for
processing fees and the annual minimum. Annual minimums range from $20 million
to $60 million through 2001. The agreement extends through December 31, 2001,
with two automatic, two-year renewal periods, unless terminated by Holdings.
Holdings may terminate the agreement prior to the expiration date, but would be
subject to specified termination penalties.
Holdings has a contract for consulting services. Under the terms of the
agreement, consulting services will be provided at specified hourly rates for a
minimum number of hours. Purchases under the contract totaled $38 million in
1998 and $20 million in 1997. The remaining commitment of $67 million must be
satisfied by the end of June 2000.
IV-30
<PAGE> 268
OPERATING LEASES
Minimum rental commitments at year-end 1998 for all noncancelable operating
leases, consisting mainly of leases for cell and switch sites and office space,
are as follows:
<TABLE>
<CAPTION>
--------------------------------------
(in millions)
<S> <C>
1999 $ 139.2
2000 131.8
2001 92.3
2002 43.3
2003 19.0
Thereafter 56.7
--------------------------------------
</TABLE>
Gross rental expense totaled $192 million in 1998, $125 million in 1997 and $25
million in 1996. The table excludes renewal options related to certain cell and
switch site leases. These renewal options are generally for five-year terms and
may be exercised from time to time.
- --------------------------------------------------------------------------------
8. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
SPRINT
Sprint provides management, printing/mailing and warehousing services to
Holdings. Charges to Holdings for these services totaled $25 million in 1998,
$11 million in 1997, and $12 million in 1996.
Holdings has entered into agreements with Sprint for invoicing services,
operator services, and switching equipment. Holdings is also using the long
distance division of Sprint as its interexchange carrier. Charges to Holdings
for these services totaled $125 million in 1998, $61 million in 1997 and $1
million in 1996.
Holdings makes payments for inventory and payroll for PhillieCo and SprintCom,
resulting in receivables due from the affiliates. These receivables are
reflected on the consolidated balance sheet.
APC
Holdings has an affiliation agreement with APC which provides for the
reimbursement of certain allocable costs and payment of affiliation fees. In
1997, the reimbursement of allocable costs of approximately $14 million is
included in selling, general and administrative expenses. There were no
reimbursements recognized in 1996. Additionally, affiliation fees were
recognized based on a percentage of APC's net revenues. In 1997, affiliation
fees of $4 million were included in other income.
COX PCS
Holdings has entered into an affiliation agreement with Cox PCS which provides
for the reimbursement of certain allocable costs and payment of affiliate fees.
These costs totaled $20 million in 1997 and $7 million in 1996 and are netted
against selling, general and administrative expenses in the accompanying
consolidated statements of operations. Of these total allocated costs,
approximately $2 million in 1997 and $7 million in 1996 were included in
receivables from affiliates in the consolidated balance sheets. In addition,
Holdings purchases certain equipment, such as handsets, on behalf of Cox PCS.
Receivables from affiliates for handsets and related equipment were
approximately $31 million in 1997 and $6 million in 1996.
PHILLIECO
Allocable costs of approximately $21 million in 1998 and $36 million in 1997
were allocated to PhillieCo and are included as a reduction of selling, general
and administrative expenses in the accompanying consolidated statements of
operations. Additionally, affiliation fees are recognized based on a percentage
of PhillieCo's net revenues. Affiliation fees of $1 million in 1998 and $0.3
million in 1997 are included in other income in the accompanying consolidated
statements of operations. The allocated costs and affiliate fees of $3 million
in 1998 and $37 million in 1997 are included in receivable from affiliates.
There were no such costs in 1996.
IV-31
<PAGE> 269
SPRINTCOM
In 1997 Holdings began building out the network infrastructure for SprintCom.
These services include engineering, management, purchasing, accounting and other
related services. Costs totaling $100 million in 1998 and $29 million in 1997
were allocated to SprintCom, and are included as a reduction of selling, general
and administrative expenses in the accompanying consolidated statements of
operations. Receivables from affiliates included $78 million at year-end 1998
and $14 million at year-end 1997.
- --------------------------------------------------------------------------------
9. QUARTERLY FINANCIAL DATA (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter
--------------------------------------------------
1998 1st 2nd 3rd 4th
--------- ---------- ------------ ---------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 197.2 256.0 311.8 410.5
Operating loss (435.3) (471.0) (506.9) (602.1)
Loss before extraordinary items (497.9) (543.4) (599.3) (666.3)
Net loss (497.9) (543.4) (599.3) (717.4)
</TABLE>
<TABLE>
<CAPTION>
Quarter
--------------------------------------------------
1997 1st 2nd 3rd 4th
--------- ---------- ------------ ---------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 9.5 $ 25.4 $ 72.5 $ 141.2
Operating loss (190.8) (277.7) (382.7) (459.5)
Net Loss (188.9) (287.7) (420.9) (665.9)
</TABLE>
SPRINT SPECTRUM HOLDING COMPANY, L.P.
SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Additions
--------------------------
Charged to Balance
Beginning Charged to Other Other End of
Balance Income Accounts Deductions Year
--------- ---------- ----------- ---------- --------
(in millions)
Allowance for doubtful accounts:
<S> <C> <C> <C> <C> <C>
1998 $ 9.0 $ 76.7 $ -- $ (64.7)(1) $ 21.0
1997 0.2 11.3 -- (2.5)(1) 9.0
1996 -- 0.2 -- -- 0.2
</TABLE>
(1) Accounts written off, net of recoveries.
IV-32
<PAGE> 270
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TELE-COMMUNICATIONS, INC.
Dated: March 15, 1999 By /s/ John C. Malone
-------------------------------
John C. Malone
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John C. Malone Chairman of the Board, March 15, 1999
- -------------------------------------- Chief Executive
John C. Malone Officer and Director
/s/ Leo J. Hindery, Jr. Director, President and Chief March 15, 1999
- -------------------------------------- Operating Officer
Leo J. Hindery, Jr.
/s/ John W. Gallivan Director March 15, 1999
- --------------------------------------
John W. Gallivan
/s/ Jerome H. Kern Director March 15, 1999
- --------------------------------------
Jerome H. Kern
/s/ Paul A. Gould Director March 15, 1999
- --------------------------------------
Paul A. Gould
/s/ Stephen M. Brett Executive Vice President, March 15, 1999
- -------------------------------------- General Counsel and Secretary
Stephen M. Brett
/s/ Bernard W. Schotters Senior Vice President and March 15, 1999
- -------------------------------------- Treasurer (Principal Financial
Bernard W. Schotters Officer)
/s/ Ann M. Koets Executive Vice President March 15, 1999
- -------------------------------------- Finance and Accounting
Ann M. Koets TCI Communications, Inc.
(Principal Accounting Officer)
</TABLE>
IV-33
<PAGE> 271
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 The Restated Certificate of Incorporation, dated March 9, 1999
3.2 The Bylaws effective as of March 9, 1999.
10.1 Amended and Restated Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Registration Statement on Form S-8
(Commission File No. 333-40141).
10.2 Amended and Restated Tele-Communications, Inc. 1995 Employee Stock Incentive Plan.*
Incorporated herein by reference to the Company's Registration Statement on Form S-8
(Commission File No. 333-40141).
10.3 Amended and Restated Tele-Communications, Inc. 1996 Incentive Plan.*
Incorporated herein by reference to the Company's Registration Statement on Form S-8
(Commission File No. 333-40141).
10.4 Restated and Amended Employment Agreement, dated as of November 1, 1992, between the Company and
John C. Malone.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992, as amended by Form 10-K/A for the year ended December 31, 1992
(Commission File No. 0-5550).
10.5 Assignment and Assumption Agreement, dated as of August 4, 1994, among TCI/Liberty Holding Company,
Tele-Communications, Inc. and John C. Malone.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, as amended by Form 10-K/A (Commission File No. 0-20421).
10.6 Call Agreement, dated February 9, 1998, between Tele-Communications, Inc., John C. Malone and Leslie
Malone.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated February
25, 1998 (Commission File No. 0-20421).
10.7 Call Agreement, dated February 9, 1998, between Tele-Communications, Inc., Gary Magness, both
individually and as representative, Kim Magness, both individually and as representative, the
Estate of Bob Magness, the Estate of Betsy Magness and any individual or entity which
thereafter becomes a party thereto.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated February
25, 1998 (Commission File No. 0-20421).
</TABLE>
<PAGE> 272
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.8 Consulting Agreement, dated as of January 1, 1996, between Tele-Communications, Inc. and Donne F.
Fisher.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.9 Consulting Agreement, dated as March 11, 1995, between Tele-Communications, Inc. and J.C. Sparkman.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (Commission File No. 0-20421).
10.10 Deferred Compensation Plan for Non-Employee Directors, effective on November 1, 1992.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992, as amended by Form 10-K/A for the year ended December 31, 1992
(Commission File No. 0-5550).
10.11 Form of Consulting Agreement, dated as of March 8, 1999, between the Company and Larry E. Romrell *
10.12 Employment Agreement, dated as of June 1, 1998, between the Company and Stephen M. Brett *
Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q as amended
by Form 10-Q/A, for the quarterly period ended June 30, 1998 (Commission File No.
0-20421).
10.13 Employment Agreement, dated as of June 23, 1998, between the Company and Leo J. Hindery, Jr. *
Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q as amended
by Form 10-Q/A, for the quarterly period ended June 30, 1998 (Commission File No.
0-20421).
10.14 Form of 1992 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
10.15 Form of 1993 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
10.16 Non-Qualified Stock Option and Stock Appreciation Rights Agreement, dated as of November 12, 1993,
by and between Tele-Communications, Inc. and Jerome H. Kern.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
</TABLE>
<PAGE> 273
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.17 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, Liberty
Media Corporation and grantee relating to stock appreciation rights granted pursuant to letter
dated September 17, 1991.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.18 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, Liberty
Media Corporation and grantee relating to the assumption of options and related stock
appreciation rights granted under the Liberty Media Corporation 1991 Stock Incentive Plan
pursuant to letter dated July 26, 1993.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.19 Assumption and Amended and Restated Stock Option Agreement between the Company, TCI/Liberty Holding
Company and a director of Tele-Communications, Inc. relating to assumption of options and
related stock appreciation rights granted outside of an employee benefit plan pursuant to
Tele-Communications, Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.20 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, TCI/Liberty
Holding Company and grantee relating to assumption of options and related stock appreciation
rights granted under Tele-Communications, Inc.'s 1992 Stock Incentive Plan pursuant to
Tele-Communications, Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.21 Form of letter dated September 17, 1991 from Liberty Media Corporation to grantee relating to grant
of stock appreciation rights.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
10.22 Form of letter dated July 26, 1993 from Liberty Media Corporation to grantee relating to grant of
options and stock appreciation rights.*
Incorporated by reference to Tele-Communications, Inc.'s Post Effective Amendment No. 1 to
Form S-4 Registration Statement on Form S-8 Registration Statement (Commission File No.
33-54263).
10.23 Form of Assumption and Amended and Restated Stock Option Agreement between the Company, TCI/Liberty
Holding Company and grantee relating to assumption of options and related stock appreciation
rights under Tele-Communications, Inc.'s 1992 Stock Incentive Plan pursuant to
Tele-Communications, Inc.'s 1992 Non-Qualified Stock Option and Stock Appreciation Rights
Agreement.*
Incorporated herein by reference to the Company's Post Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-8 Registration Statement (Commission File No. 33-54263).
</TABLE>
<PAGE> 274
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.24 Form of Indemnification Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, as amended by Form 10-K/A for the year ended December 31, 1993
(Commission File No. 0-5550).
10.25 Form of 1994 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K dated December
31, 1994, as amended by Form 10-K/A (Commission File No. 0-20421).
10.26 TCI 401(k) Stock Plan, restated effective January 1, 1998.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.27 Form of Restricted Stock Award Agreement for 1995 Award of Series A TCI Group Restricted Stock
pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.28 Form of Restricted Stock Award Agreement for 1995 Award of Series A Liberty Media Group Restricted
Stock pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.29 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.30 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1994 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.31 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1995 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
</TABLE>
<PAGE> 275
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.32 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1995 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.33 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.34 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.35 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Group common stock
pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan. *
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.36 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A TCI Ventures Group common
stock pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan. *
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.37 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A Liberty Media Group common
stock pursuant to the Tele-Communications, Inc. 1996 Stock Incentive Plan. *
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.38 Form of Restricted Stock Award Agreement for 1997 Award of Series A TCI Group Restricted Stock
pursuant to the Tele-Communications, Inc. 1996 Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
</TABLE>
<PAGE> 276
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.39 Form of Restricted Stock Award Agreement for 1997 Award of Series A TCI Ventures Group Restricted
Stock pursuant to the Tele-Communications, Inc. 1996 Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.40 Form of 1998 Incentive Plan of Tele-Communications, Inc., effective December 16, 1997*
Incorporated herein by reference to the Company's Definitive Proxy Statement on Schedule
14A, dated April 30, 1998 (Commission File No. 0-20421).
10.41 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement, dated June 16, 1998, of
Tele-Communications, Inc., TCI Group Series A Common Stock, pursuant to the
Tele-Communications, Inc., 1998 Incentive Plan. *
10.42 Form of Restricted Stock Award Agreement, dated June 23, 1998, of Tele-Communications, Inc., TCI
Group Series A Common Stock, pursuant to the Tele-Communications, Inc., 1998 Incentive Plan. *
10.43 Form of Restricted Stock Award Agreement, dated November 15, 1998, of Tele-Communications, Inc.,
TCI Group Series A Common Stock, pursuant to the Tele-Communications, Inc., 1998 Incentive
Plan. *
10.44 Form of Restricted Stock Award Agreement, dated December 10, 1998, of Tele-Communications, Inc.,
TCI Group Series A Common Stock, pursuant to the Tele-Communications, Inc., 1998 Incentive
Plan. *
10.45 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement, dated March 1, 1999, of
Tele-Communications, Inc., TCI Group Series A Common Stock pursuant to the Tele-Communications,
Inc., 1998 Incentive Plan. *
10.46 Form of Restricted Stock Award Agreement, dated March 1, 1999, of Tele-Communications, Inc., TCI
Group Series A Common Stock pursuant to the Tele-Communications, Inc., 1998 Incentive Plan. *
10.47 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated July 23, 1997, pertaining to shares of
Tele-Communications, Inc., TCI Group Series A Common Stock.*
10.48 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated July 23, 1997, pertaining to shares of
Tele-Communications, Inc. Liberty Media Group Series A Common Stock. *
10.49 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated July 23, 1997, pertaining to shares of
Tele-Communications, Inc., TCI Ventures Group Series A Common Stock. *
10.50 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated May 14, 1997, pertaining to shares of Tele-Communications,
Inc., TCI Group Series A Common Stock. *
</TABLE>
<PAGE> 277
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.51 Form of Amendment to Agreement, dated March 1, 1999, to the Non-Qualified Stock Option and Stock
Appreciation Rights Agreement, dated May 14, 1997, pertaining to shares of Tele-Communications,
Inc., TCI Ventures Group Series A Common Stock. *
10.52 The Tele-Communications International, Inc. 1995 Stock Incentive Plan.*
Incorporated herein by reference to Tele-Communications International, Inc. Registration
Statement on Form S-1 (Commission File No. 33-91876).
10.53 Form of Restricted Stock Award Agreement for 1995 Award of Series A Tele-Communications
International, Inc. Restricted Stock pursuant to the Tele-Communications International, Inc.
1995 Stock Incentive Plan.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.54 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock pursuant to the Tele-Communications International, Inc. 1995
Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.55 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1995 Grant of
Options with tandem stock appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-20421).
10.56 Form of Non-Qualified Stock Option and Stock Appreciation Rights Agreement for 1997 Grant of
Options with tandem stock appreciation rights to purchase Series A Tele-Communications
International, Inc. common stock pursuant to the Tele-Communications International, Inc. 1995
Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.57 Form of Restricted Stock Award Agreement for 1997 Award of Series A Tele-Communications
International, Inc. Restricted Stock pursuant to the Tele-Communications International. Inc.
1995 Stock Incentive Plan.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.58 Form of Stock Appreciation Rights Agreement made as of the 1st day of December, 1996, by and among
TCI Wireless Holdings, Inc., Grantee, TCI Telephony Services, Inc. and Tele-Communications,
Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
</TABLE>
<PAGE> 278
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.59 Form of Stock Appreciation Rights Agreement made as of the 1st day of December, 1996, by and among
TCI Teleport Holdings, Inc., Grantee, TCI Telephony Services, Inc. and Tele-Communications,
Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.60 Form of Amended and Restated Option Agreement made as of the 1st day of December, 1996, by and
among TCI Wireline, Inc., Grantee and Tele-Communications, Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.61 Form of Option to Purchase Common Stock Agreement made as of the 1st day of December, 1996, by and
among TCI.Net, Inc., Grantee and Tele-Communications, Inc.*
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.62 Form of Amended and Restated Stock Appreciation Right Agreement made as of the 8th day of March,
1999, by and among TCI Internet Services, Inc., Tele-Communications, Inc. and Larry E. Romrell.*
10.63 Form of Amended and Restated Stock Appreciation Right Agreement made as of the 8th day of March,
1999, by and among TCI Internet Services, Inc., Tele-Communications, Inc. and Bruce W. Ravenel.*
10.64 Form of Agreement, dated February 19, 1999, between the Company, TCI.Net, Inc. ("TCI.NET"), TCI
Internet Services, Inc. ("Internet") and Larry E. Romrell relating to the share repurchase and
option cancellation under an Option to Purchase Common Stock Agreement, dated December 31,
1996, and an amendment to a Stock Appreciation Rights Agreement, dated December 1, 1996. *
10.65 Form of Agreement, dated February 19, 1999, between the Company, TCI.Net, TCI Internet and Brendan
Clouston relating to the share repurchase and option cancellation under an Option to Purchase
Common Stock Agreement, dated December 31, 1996, and an amendment to a Stock Appreciation
Rights Agreement, dated December 1, 1996. *
10.66 Form of Agreement, dated February 19, 1999, between the Company, TCI.Net, TCI Internet ") and Bruce
W. Ravenel relating to share repurchase and option cancellation under an Option to Purchase
Common Stock Agreement, dated December 31, 1996, and an amendment to a Stock Appreciation
Rights Agreement, dated December 1, 1996. *
10.67 Form of Agreement, dated February 19, 1999, between the Company, TCI Wireline, Inc., TCI Teleport
Holdings, Inc., TCI Telephony Services, Inc., and Brendan Clouston related to share repurchase
and option cancellation under an Amended and Restated Option Agreement, dated December 1, 1996,
and an amendment to a Stock Appreciation Rights Agreement, dated December 1, 1996. *
</TABLE>
<PAGE> 279
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.68 InterMedia Capital Management, L.P. Agreement of Limited Partnership, dated as of June 10, 1997 and
effective as of May 22, 1997, by and between InterMedia Management, Inc., Leo J. Hindery, Jr.
and TCI ICM I, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.69 InterMedia Capital Management III, L.P. Amended and Restated Agreement of Limited Partnership,
dated as of June 10, 1997, by and among Leo J. Hindery, Jr., InterMedia Management, Inc. and
TCI ICM III, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.70 InterMedia Capital Management IV, L.P. Amended and Restated Agreement of Limited Partnership, dated
as of August 5, 1997, by and between InterMedia Management, Inc., TCI ICM IV, Inc. and Leo J.
Hindery, Jr.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.71 Amended and Restated Contribution and Merger Agreement, dated as of June 6, 1997, among TCI
Communications, Inc., Cablevision Systems Corporation, CSC Parent Corporation and CSC Merger
Corporation.
Stockholders Agreement dated as of March 4, 1998, by and among Cablevision Systems Corporation,
Tele-Communications, Inc. and the Class B Entities (as defined therein)
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated March
6, 1998 (Commission File No. 0-20421).
10.72 Amended and Restated Asset Contribution Agreement, dated September 25, 1997, by and among Fisher
Communications Associates, L.L.C. and Tempo Cable, Inc., Communications Services, Inc., TCI
Cablevision of Oklahoma, Inc., TCI of Kansas, Inc., Wentronics, Inc., TCI Cablevision of Utah,
Inc., TCI Cablevision of Arizona, Inc., Tulsa Cable Television, Inc. and TCI American Cable
Holdings III, L.P. and Peak Cablevision, LLC.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.73 Amended and Restated Operating Agreement of Peak Cablevision, LLC, made as of September 25, 1997,
by TCI American Cable Holdings III, L.P. and Fisher Communications Associates, L.L.C.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.74 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and ECP
Holdings, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.75 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and
American Televentures of Minersville, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
</TABLE>
<PAGE> 280
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.76 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and TCI
Cablevision of Utah, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.77 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and Tempo
Cable, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.78 Promissory Note, dated January 15, 1998, between Fisher Communications Associates, L.L.C. and TCI
Cablevision of Nevada, Inc.
Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended by Form 10-K/A (Commission File No. 0-20421).
10.79 Agreement and Plan of Restructuring and Merger among AT&T Corp., Italy Merger Corp. and
Tele-Communications, Inc. dated as of June 23, 1998.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated July 1,
1998 (Commission File No. 0-20421). (1)
10.80 Agreement and Plan of Merger dated August 24, 1998, among Tele-Communications, Inc., Liberty Group
Acquisition Co. and Tele-Communications International, Inc.
Incorporated herein by reference to Amendment No. 1 of the Company's Registration Statement
on Form S-4 (Commission File No. 333-64297).
10.81 TCIC Merger Agreement, dated January 12, 1999, among the Company and TCI Communications, Inc.
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated March
11, 1999 (Commission File No. 020421).
16.1 Letter, dated March 9, 1999, from KPMG LLP
Incorporated herein by reference to the Company's Current Report on Form 8-K, dated March
11, 1999.
21 Subsidiaries of Tele-Communications, Inc.
23.1 Consent of KPMG LLP.
23.2 Consent of Deloitte & Touche LLP.
27 Financial data schedule
</TABLE>
*Constitutes management contract or compensatory arrangement.
(1) Certain exhibits to agreement have been omitted. A copy of any omitted
exhibit or schedule will be furnished supplementally to the Commission
upon request.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
TELE-COMMUNICATIONS, INC.
ARTICLE I
The name of the corporation (which is hereinafter referred to
as the "Corporation") is:
Tele-Communications, Inc.
ARTICLE II
The address of the Corporation's registered office in the
State of Delaware is The Corporation Trust Center, 1209 Orange Street in the
City of Wilmington, County of New Castle. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any
lawful act or activity for which corporations may be organized and incorporated
under the General Corporation Law of the State of Delaware.
ARTICLE IV
Section 1. Authorized Shares. The aggregate number of shares
of capital stock which the Corporation shall have authority to issue is three
billion five hundred fifty two million three hundred seventy-five thousand
ninety-six (3,552,375,096) shares, consisting of three billion five hundred
fifty million (3,550,000,000) shares of Common Stock, par value $.01 per share
("Common Stock"), and two million three hundred seventy-five thousand ninety-six
(2,375,096) shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"). The Preferred Stock shall be divided into the following classes: seven
hundred thousand (700,000) shares shall be of a class designated Class A
Preferred Stock, par value $.01 per share ("Class A Preferred Stock"), and one
million six hundred seventy five thousand ninety six (1,675,096) shares shall be
of a class designated Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock, par value $.01 per share ("Class B Preferred Stock").
Section 2. Certain Definitions. Unless the context otherwise
requires, the terms defined in this Section 2 shall have, for all purposes of
this Article IV, the meanings herein specified:
<PAGE> 2
"Board of Directors" shall mean the Board of Directors of the
Corporation and, unless the context indicates otherwise, shall also mean, to the
extent permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Corporation with respect to such matter.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the City of New York, New York,
are not required to be open.
"capital stock" shall mean any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Certificate" shall mean this Certificate of Incorporation of
the Corporation, as it may from time to time hereafter be amended or restated.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof, or other
entity, whether acting in an individual fiduciary or other capacity.
"Subsidiary" of any Person shall mean (i) a corporation a
majority of the capital stock of which, having voting power under ordinary
circumstances to elect directors, is at the time, directly or indirectly, owned
by such Person and/or one or more Subsidiaries of such Person and (ii) any other
Person (other than a corporation) in which such Person and/or one or more
Subsidiaries of such Person, directly or indirectly, has (x) a majority
ownership interest or (y) the power to elect or direct the election of a
majority of the members of the governing body of such first-named Person.
"Voting Securities" shall include the Common Stock and any
class or series of Preferred Stock entitled to vote with the holders of Common
Stock generally upon all matters which may be submitted to a vote of
stockholders at any annual meeting or special meeting thereof.
Section 3. Class A Preferred Stock. The Class A Preferred
Stock shall have the following preferences, limitations and relative rights:
1. Certain Definitions. Unless the context otherwise
requires, the terms defined in this paragraph 1 shall have, for all
purposes of this Section 3, the meanings herein specified:
"Common Stock" shall mean the Common Stock, par value
$.01 per share, of the Corporation, which term shall include, where
appropriate, in the case of any reclassification, recapitalization or
other change in the Common Stock, or in the case of a consolidation or
merger of the Corporation with or into another Person affecting the
Common Stock, such capital stock to which a holder of Common Stock
shall be entitled upon the occurrence of such event.
-2-
<PAGE> 3
"Dividend Payment Date" shall mean, for any Dividend
Period, the last day of such Dividend Period which shall be the first
day of March of each year, commencing with March 1, 1995, or the next
succeeding Business Day if any such day is not a Business Day.
"Dividend Period" shall mean the period from the
Issue Date to and including the first Dividend Payment Date and each
annual period between consecutive Dividend Payment Dates.
"Issue Date" shall mean the date on which shares of
Class A Preferred Stock are first issued.
"Junior Stock" shall mean (i) the Common Stock, (ii)
the Class B Preferred Stock, (iii) any other class or series of capital
stock, whether now existing or hereafter created, of the Corporation,
other than (A) the Class A Preferred Stock, (B) any class or series of
Parity Stock (except to the extent provided under clause (v) hereof)
and (C) any Senior Stock, and (iv) any class or series of Parity Stock
to the extent that it ranks junior to the Class A Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation, as the
case may be. For purposes of clause (iv) above, a class or series of
Parity Stock shall rank junior to the Class A Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the
holders of shares of Class A Preferred Stock shall be entitled to
dividend payment, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of shares of such class or series.
"Liquidation Preference" measured per share of the
Class A Preferred Stock as of any date in question (the "Determination
Date") shall mean an amount equal to the sum of (a) the Stated
Liquidation Value of such share, plus (b) an amount equal to all
dividends accrued on such share which pursuant to paragraph 2(b) of
this Section 3 have been added to and remain a part of the Liquidation
Preference as of the Determination Date, plus (c) for purposes of
determining the amounts payable pursuant to paragraph 3 and paragraph 4
of this Section 3 and the definition of Redemption Price, an amount
equal to all unpaid dividends accrued on such share during the period
from the immediately preceding Dividend Payment Date (or the Issue Date
if the Determination Date is on or prior to the first Dividend Payment
Date) through and including the Determination Date, and, in the case of
clauses (b) and (c) hereof, whether or not such unpaid dividends have
been earned or declared or there are any unrestricted funds of the
Corporation legally available for the payment of dividends. In
connection with the determination of the Liquidation Preference of a
share of Class A Preferred Stock upon redemption or upon liquidation,
dissolution or winding up of the Corporation, the Determination Date
shall be the applicable date of redemption or the date of distribution
of amounts payable to stockholders in connection with any such
liquidation, dissolution or winding up.
"Parity Stock" shall mean any class or series of
capital stock, whether now existing or hereafter created, of the
Corporation ranking on a parity basis with the Class A
-3-
<PAGE> 4
Preferred Stock as to dividend rights, rights of redemption or rights
on liquidation. Capital stock of any class or series shall rank on a
parity as to dividend rights, rights of redemption or rights on
liquidation with the Class A Preferred Stock, whether or not the
dividend rates, dividend payment dates, redemption or liquidation
prices per share or sinking fund or mandatory redemption provisions, if
any, are different from those of the Class A Preferred Stock, if the
holders of shares of such class or series shall be entitled to dividend
payments, payments on redemption or payments of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as the
case may be, in proportion to their respective accumulated and accrued
and unpaid dividends, redemption prices or liquidations prices,
respectively, without preference or priority, one over the other, as
between the holders of shares of such class or series and the holders
of Class A Preferred Stock. No class or series of capital stock that
ranks junior to the Class A Preferred Stock as to rights on liquidation
shall rank or be deemed to rank on a parity basis with the Class A
Preferred Stock as to dividend rights or rights of redemption, unless
the instrument creating or evidencing such class or series of capital
stock otherwise expressly provides.
"Record Date" for the dividends payable on any
Dividend Payment Date means the fifteenth day of the month preceding
the month during which such Dividend Payment Date shall occur, or if
any such day is not a Business Day, then on the next preceding Business
Day, as and if designated by the Board of Directors.
"Redemption Date" as to any share of Class A
Preferred Stock shall mean the date fixed for redemption of such share
pursuant to paragraph 4(a) or (b) of this Section 3, provided that no
such date will be a Redemption Date unless the applicable Redemption
Price is actually paid in full on such date.
"Redemption Price" as to any share of Class A
Preference Stock which is to be redeemed on any Redemption Date shall
mean the Liquidation Preference thereof on such Redemption Date.
"Senior Stock" shall mean any class or series of
capital stock, whether now existing or hereafter created, of the
Corporation ranking prior to the Class A Preferred Stock as to dividend
rights, rights of redemption or rights on liquidation. Capital stock of
any class or series shall rank prior to the Class A Preferred Stock as
to dividend rights, rights of redemption or rights on liquidation if
the holders of shares of such class or series shall be entitled to
dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of shares of Class A Preferred Stock. No class or series of
capital stock that ranks on a parity basis with or junior to the Class
A Preferred Stock as to rights on liquidation shall rank or be deemed
to rank prior to the Class A Preferred Stock as to dividend rights or
rights of redemption, notwithstanding that the dividend rate, dividend
payment dates, sinking fund provisions, if any, or mandatory redemption
provisions thereof are different from those of the Class A Preferred
Stock, unless the instrument creating or evidencing such class or
series of capital stock otherwise expressly provides.
-4-
<PAGE> 5
"Special Record Date" has the meaning ascribed to
such term in paragraph 2(b) of this Section 3.
"Stated Liquidation Value" of a share of Class A
Preferred Stock means $322.84.
2. Dividends.
(a) DIVIDEND RIGHTS; DIVIDEND PAYMENT DATES. Subject
to the prior preferences and other rights of any Senior Stock and the
provisions of paragraph 5 hereof, the holders of Class A Preferred
Stock shall be entitled to receive, when and as declared by the Board
of Directors, out of unrestricted funds legally available therefor,
cumulative dividends, in preference to dividends on any Junior Stock,
that shall accrue on each share of Class A Preferred Stock at the rate
of 9 3/8% per annum of the Stated Liquidation Value of such share from
the Issue Date to and including the date on which the Liquidation
Preference of such share is made available (whether on liquidation,
dissolution, or winding up of the Corporation or, in the case of
paragraph 4 of this Section 3, upon the applicable Redemption Date).
Accrued dividends on the Class A Preferred Stock will be payable, as
provided in paragraph 2(c) below, annually on each Dividend Payment
Date to the holders of record of the Class A Preferred Stock as of the
close of business on the Record Date for such dividend payment.
Dividends shall be fully cumulative and shall accrue (without interest
or compounding) on a daily basis without regard to the occurrence of a
Dividend Payment Date and whether or not such dividends are declared
and whether or not there are any unrestricted funds of the Corporation
legally available for the payment of dividends. The amount of dividends
"accrued" as of the first Dividend Payment Date and as of any date that
is not a Dividend Payment Date shall be calculated on the basis of the
foregoing rate per annum for the actual number of days elapsed from the
Issue Date (in the case of the first Dividend Payment Date and any date
prior to the first Dividend Payment Date) or the last preceding
Dividend Payment Date (in the case of any other date) to and including
the date as of which such determination is to be made, based on a 365-
or 366-day year, as the case may be.
(b) SPECIAL RECORD DATE. On each Dividend Payment
Date, all dividends that have accrued on each share of Class A
Preferred Stock during the immediately preceding Dividend Period shall,
to the extent not paid as provided in paragraph 2(c) below on such
Dividend Payment Date for any reason (whether or not such unpaid
dividends have been earned or declared or there are any unrestricted
funds of the Corporation legally available for the payment of
dividends), be added to the Liquidation Preference of such share and
will remain a part thereof until such dividends are paid as provided in
paragraph 2(c) below. No interest or additional dividends will accrue
or be payable with respect to any dividend payment on the Class A
Preferred Stock that may be in arrears or with respect to that portion
of any other payment on the Class A Preferred Stock that is in arrears
which consists of accumulated or accrued and unpaid dividends. Such
accumulated or accrued and unpaid dividends may be declared and paid at
any time (subject to the rights of any Senior Stock and, if applicable,
to the concurrent satisfaction of any dividend arrearages then existing
with respect to any Parity Stock which ranks on a
-5-
<PAGE> 6
parity basis with the Class A Preferred Stock as to the payment of
dividends) without reference to any regular Dividend Payment Date, to
holders of record as of the close of business on such date, not more
than 45 days nor less than 10 days preceding the payment date thereof,
as may be fixed by the Board of Directors (the "Special Record Date").
Notice of each Special Record Date shall be given, not more than 45
days nor less than 10 days prior thereto, to the holders of record of
the shares of Class A Preferred Stock.
(c) METHOD OF PAYMENT. All dividends payable with
respect to the shares of Class A Preferred Stock shall be declared and
paid in cash. All dividends paid with respect to the shares of Class A
Preferred Stock pursuant to this paragraph 2 shall be paid pro rata to
all the holders of shares of Class A Preferred Stock outstanding on the
applicable Record Date or Special Record Date, as the case may be.
3. Distributions Upon Liquidation, Dissolution or
Winding Up.
Subject to the prior payment in full of the
preferential amounts to which any Senior Stock is entitled, in the
event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of Class A Preferred
Stock shall be entitled to receive from the assets of the Corporation
available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an
amount in cash or property at its fair market value, as determined by
the Board of Directors in good faith, or a combination thereof, per
share, equal to the Liquidation Preference of a share of Class A
Preferred Stock as of the date of payment or distribution, which
payment or distribution shall be made pari passu with any such payment
or distribution made to the holders of any Parity Stock ranking on a
parity basis with the Class A Preferred Stock with respect to
distributions upon liquidation, dissolution or winding up of the
Corporation. The holders of Class A Preferred Stock shall be entitled
to no other or further distribution of or participation in any
remaining assets of the Corporation after receiving the Liquidation
Preference per share. If, upon distribution of the Corporation's assets
in liquidation, dissolution or winding up, the assets of the
Corporation to be distributed among the holders of the Class A
Preferred Stock and to all holders of any Parity Stock ranking on a
parity basis with the Class A Preferred Stock with respect to
distributions upon liquidation, dissolution or winding up shall be
insufficient to permit payment in full to such holders of the
respective preferential amounts to which they are entitled, then the
entire assets of the Corporation to be distributed to holders of the
Class A Preferred Stock and such Parity Stock shall be distributed pro
rata to such holders based upon the aggregate of the full preferential
amounts to which the shares of Class A Preferred Stock and such Parity
Stock would otherwise respectively be entitled. Neither the
consolidation or merger of the Corporation with or into any other
corporation or corporations nor the sale, transfer or lease of all or
substantially all of the assets of the Corporation shall itself be
deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this paragraph 3. Notice of the
liquidation, dissolution or winding up of the Corporation shall be
given, not less than 20 days prior to the date on which such
liquidation, dissolution or winding up is expected to take place or
become effective, to the holders or record of the shares of Class A
Preferred Stock.
-6-
<PAGE> 7
4. Redemption.
(a) MANDATORY REDEMPTION. Subject to the rights of
any Senior Stock and the provisions of paragraph 5 of this Section 3,
the Corporation shall redeem, out of funds legally available therefor,
on the twelfth anniversary of the Issue Date (or, if such day is not a
Business Day, on the first Business Day thereafter), all shares of
Class A Preferred Stock remaining outstanding at the Redemption Price
on the Redemption Date. If the funds of the Corporation legally
available for redemption of shares of the Class A Preferred Stock or
Parity Stock then required to be redeemed are insufficient to redeem
the total number of such shares remaining outstanding, those funds
which are legally available shall, subject to the rights of any Senior
Stock and the provisions of paragraph 5, be used to redeem the maximum
possible number of shares of Class A Preferred Stock and Parity Stock.
Subject to the rights of any Senior Stock and the provisions of
paragraph 5 hereof, at any time and from time to time thereafter when
additional funds of the Corporation are legally available for such
purpose, such funds shall immediately be used to redeem the shares of
Class A Preferred Stock and Parity Stock which are required to be
redeemed that the Corporation failed to redeem until the balance of
such shares has been redeemed. The selection of shares to be redeemed
pursuant to the two immediately preceding sentences shall be made on a
pro rata basis as among the different classes or series and as among
the holders of shares of a particular class or series.
(b) OPTIONAL REDEMPTION. Subject to the rights of any
Senior Stock and the provisions of paragraph 5 of this Section 3, the
shares of Class A Preferred Stock may be redeemed, at the option of the
Corporation by the action of the Board of Directors, in whole or from
time to time in part, on any Business Day occurring after the Issue
Date, at the Redemption Price on the Redemption Date. If less than all
outstanding shares of Class A Preferred Stock are to be redeemed on any
Redemption Date, the shares of Class A Preferred Stock to be redeemed
shall be chosen pro rata among all holders of Class A Preferred Stock.
The Corporation shall not be required to register a transfer of (i) any
shares of Class A Preferred Stock for a period of 15 days next
preceding any selection of shares of Class A Preferred Stock to be
redeemed or (ii) any shares of Class A Preferred Stock selected or
called for redemption.
(c) NOTICE OF REDEMPTION. Notice of redemption shall
be given by or on behalf of the Corporation, not more than 60 days nor
less than 30 days prior to the Redemption Date, to the holders of
record of the shares of Class A Preferred Stock to be redeemed; but no
defect in such notice or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of Class A
Preferred Stock. In addition to any information required by law or by
the applicable rules of any national securities exchange or national
interdealer quotation system on which the Class A preferred Stock may
be listed or admitted to trading or quoted, such notice shall set forth
the Redemption Price, the Redemption Date, the number of shares to be
redeemed and the place at which the shares called for redemption will,
upon presentation and surrender of the stock certificates evidencing
such shares, be redeemed. In the event that fewer than the total number
of shares of Class A Preferred Stock represented by a certificate are
-7-
<PAGE> 8
redeemed, a new certificate representing the number of unredeemed
shares will be issued to the holder thereof without cost to such
holder.
(d) DEPOSIT OF REDEMPTION PRICE. If notice of any
redemption by the Corporation pursuant to this paragraph 4 shall have
been given as provided in paragraph 4(c) above, and if on or before the
Redemption Date specified in such notice an amount in cash sufficient
to redeem in full on the Redemption Date at the Redemption Price all
shares of Class A Preferred Stock called for redemption shall have been
set apart so as to be available for such purpose and only for such
purpose, then effective as of the close of business on the Redemption
Date, the shares of Class A Preferred Stock called for redemption,
notwithstanding that any certificate therefor shall not have been
surrendered for cancellation, shall no longer be deemed outstanding,
and the holders thereof shall cease to be stockholders with respect to
such shares and all rights with respect to such shares shall forthwith
cease and terminate, except the right of the holders thereof to receive
the Redemption Price of such shares, without interest, upon the
surrender of certificates representing the same.
(e) STATUS OF REDEEMED SHARES. All shares of Class A
Preferred Stock redeemed, exchanged, purchased or otherwise acquired by
the Corporation shall be retired and shall not be reissued.
5. Limitations on Dividends and Redemptions.
If at any time the Corporation shall have failed to
pay, or declare and set aside the consideration sufficient to pay, full
cumulative dividends for all prior dividends periods on any Parity
Stock which by the terms of the instrument creating or evidencing such
Parity Stock is entitled to the payment of such cumulative dividends
prior to the redemption, exchange, purchase or other acquisition of the
Class A Preferred Stock, and until full cumulative dividends on such
Parity Stock for all prior dividend periods are paid, or declared and
the consideration sufficient to pay the same in full is set aside so as
to be available for such purpose and no other purpose, neither the
Corporation nor any Subsidiary thereof shall redeem, exchange, purchase
or otherwise acquire any shares of Class A Preferred Stock, Parity
Stock or Junior Stock, or set aside any money or assets for any such
purpose, pursuant to paragraph 4 hereof, a sinking fund or otherwise,
unless all then outstanding shares of Class A Preferred Stock, of such
Parity Stock and of any other class of series of Parity Stock that by
the terms of the instrument creating or evidencing such Parity Stock is
required to be redeemed under such circumstances are redeemed or
exchanged pursuant to the terms hereof and thereof.
If at any time the Corporation shall have failed to
pay, or declare and set aside the consideration sufficient to pay, full
cumulative dividends on the Class A Preferred Stock for all Dividend
Periods ending on or before the immediately preceding Dividend Payment
Date, and until full cumulative dividends on the Class A Preferred
Stock for all Dividend Periods ending on or before the immediately
preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to
be available for such purpose and no other purpose, neither the
-8-
<PAGE> 9
Corporation nor any Subsidiary thereof shall redeem, exchange, purchase
or otherwise acquire any shares of Class A Preferred Stock, Parity
Stock or Junior Stock, or set aside any money or assets for any such
purpose, pursuant to paragraph 4 hereof, a sinking fund or otherwise,
unless all then outstanding shares of Class A Preferred Stock and of
any other class or series of Parity Stock that by the terms of the
instrument creating or evidencing such Parity Stock is required to be
redeemed under such circumstances are redeemed or exchanged pursuant to
the terms hereof and thereof.
If at any time the Corporation shall have failed to
pay, or declare and set aside the consideration sufficient to pay, full
cumulative dividends on the Class A Preferred Stock for all Dividend
Periods ending on or before the immediately preceding Dividend Payment
Date, and until full cumulative dividends on the Class A Preferred
Stock for all Dividend Periods ending on or before the immediately
preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside for such
purpose and no other purpose, the Corporation shall not declare or pay
any dividend on or make any distribution with respect to any Junior
Stock or Parity Stock or set aside any money or assets for any such
purpose, except that the Corporation may declare and pay a dividend on
any Parity Stock ranking on a parity basis with the Class A Preferred
Stock with respect to the right to receive dividend payments,
contemporaneously with the declaration and payment of a dividend on the
Class A Preferred Stock, provided that such dividends are declared and
paid pro rata so that the amount of dividends declared and paid per
share of the Class A Preferred Stock and such Parity Stock shall in all
cases bear to each other the same ratio that accumulated and accrued
and unpaid dividends per share on the Class A Preferred Stock and such
Parity Stock bear to each other.
If the Corporation shall fail to redeem on any date
fixed for redemption or exchange pursuant to paragraph 4 hereof any
shares of Class A Preferred Stock called for redemption on such date,
and until such shares are redeemed in full, the Corporation shall not
redeem or exchange any Parity Stock or Junior Stock or declare or pay
any dividend on or make any distribution with respect to any Junior
Stock, or set aside any money or assets for any such purpose, and
neither the Corporation nor any Subsidiary thereof shall purchase or
otherwise acquire any Class A Preferred Stock, Parity Stock or Junior
Stock, or set aside any money or assets for any such purpose.
Neither the Corporation nor any Subsidiary thereof
shall redeem, exchange, purchase or otherwise acquire any Parity Stock
or Junior Stock, or set aside any money or assets for any such purpose,
if after giving effect to such redemption, exchange, purchase or other
acquisition, the amount (as determined by the Board of Directors in
good faith) that would be available for distribution to the holders of
the Class A Preferred Stock upon liquidation, dissolution or winding up
of the Corporation if such liquidation, dissolution or winding up were
to occur on the date fixed for such redemption, exchange, purchase or
other acquisition of such Parity Stock or Junior Stock would be less
than the aggregate Liquidation Preference as of such date of all shares
of Class A Preferred Stock then outstanding.
-9-
<PAGE> 10
Nothing contained in the first, fourth or fifth
paragraph of this paragraph 5 shall prevent (i) the payment of
dividends on any Junior Stock solely in shares of Junior Stock or the
redemption, purchase or other acquisition of Junior Stock solely in
exchange for (together with a cash adjustment for fractional shares, if
any), or (but only in the case of the first and fifth paragraphs
hereof) through the application of the proceeds from the sale of,
shares of Junior Stock; or (ii) the payment of dividends on any Parity
Stock solely in shares of Parity Stock and/or Junior Stock or the
redemption, exchange, purchase or other acquisition of Class A
Preferred Stock or Parity Stock solely in exchange for (together with a
cash adjustment for fractional shares, if any), or (but only in the
case of the first and fifth paragraphs hereof) through the application
of the proceeds from the sale of, shares of Parity Stock and/or Junior
Stock.
The provisions of the first paragraph of this
paragraph 5 are for the sole benefit of the holders of Class A
Preferred Stock and Parity Stock having the terms described therein and
accordingly, at any time when there are no shares of any such class or
series of Parity Stock outstanding or if the holders of each such class
or series of Parity Stock have, by such vote or consent of the holders
thereof as may be provided for in the instrument creating or evidencing
such class or series, waived in whole or in part the benefit of such
provisions (either generally or in the specific instance), then the
provisions of the first paragraph of this paragraph 5 shall not (to the
extent waived, in the case of any partial waiver) restrict the
redemption, exchange, purchase or other acquisition of any shares of
Class A Preferred Stock, Parity Stock or Junior Stock. All other
provisions of this paragraph 5 are for the sole benefit of the holders
of Class A Preferred Stock and accordingly, if the holders of shares of
Class A Preferred Stock shall have waived (as provided in paragraph 7
of this Section 3 ) in whole or in part the benefit of the applicable
provisions, either generally or in the specific instance, such
provision shall not (to the extent of such waiver, in the case of a
partial waiver) restrict the redemption, exchange, purchase or other
acquisition of, or declaration, payment or making of any dividends or
distributions on the Class A Preferred Stock, any Parity Stock or any
Junior Stock.
6. Voting.
(a) VOTING RIGHTS. The holders of Class A Preferred
Stock shall have no voting rights whatsoever, except as required by law
and except for the voting rights described in this paragraph 6;
provided, however, that the number of authorized shares of Class A
Preferred Stock may be increased or decreased (but not below the number
of shares of Class A preferred Stock then outstanding) by the
affirmative vote of the holders of at least 66 2/3 of the total voting
power of the then outstanding Voting Securities, voting together as a
single class. Without limiting the generality of the foregoing, no vote
or consent of the holders of Class A Preferred Stock shall be required
for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation or designation of any class or series of
Senior Stock, Parity Stock or Junior Stock, or (c) any amendment to
this Certificate that would increase the number of authorized shares of
Preferred Stock or the number of authorized shares of Class A Preferred
Stock or that would decrease the number of authorized shares of Class A
Preferred Stock or the number
-10-
<PAGE> 11
of authorized shares of Class A Preferred Stock (but not below the
number of shares of Preferred Stock or Class A Preferred Stock, as the
case may be, then outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Class A
Preferred Stock shall have the right to vote at any annual or special
meeting of stockholders for the purpose of electing directors. Each
share of Class A Preferred Stock shall have one vote for such purpose,
and shall vote as a single class with any other class or series of
capital stock of the Corporation entitled to vote in any general
election of directors, unless the instrument creating or evidencing
such class or series of capital stock otherwise expressly provides.
7. Waiver.
Any provision of this Section 3 which, for the
benefit of the holders of Class A Preferred Stock, prohibits, limits or
restricts actions by the Corporation, or imposes obligations on the
Corporation, may be waived in whole or in part, or the application of
all or any part of such provision in any particular circumstance or
generally may be waived, in each case with the consent of the holders
of at least a majority of the number of shares of Class A Preferred
Stock then outstanding (or such greater percentage thereof as may be
required by applicable law or any applicable rules of any national
securities exchange or national interdealer quotation system), either
in writing or writing or by vote at an annual meeting or a meeting
called for such purpose at which the holders of Class A Preferred Stock
shall vote as a separate class.
8. Method of Giving Notices.
Any notice required or permitted by the provisions of
this Section 3 to be given to the holders of share of Class A Preferred
Stock shall be deemed duly given if deposited in the United States
mail, first class mail, postage prepaid, and addressed to each holder
of record at his address appearing on the books of the Corporation or
supplied by him in writing to the Corporation for the purpose of such
notice.
9. Exclusion of Other Rights.
Except as may otherwise be required by law and except
for the equitable rights and remedies which may otherwise be available
to holders of Class A Preferred Stock, the shares of Class A Preferred
Stock shall not have any designations, preferences, limitations or
relative rights other than those specifically set forth in this
Certificate.
10. Heading of Subdivisions.
The headings of the various subdivisions of this
Section are for convenience of reference only and shall not affect the
interpretation of any of the provisions of this Section.
Section 4. Class B Preferred Stock. The Class B Preferred Stock shall
have the following preferences, limitations and relative rights:
-11-
<PAGE> 12
1. Certain Definitions. Unless the context otherwise
requires, the terms defined in this paragraph 1 shall have, for all
purposes of this Section 4, the meanings herein specified:
"Average Market Price" as of any Record Date or
Special Record Date for a dividend payment declared by the Board of
Directors means the average of the daily Current Market Prices of the
Common Stock for a period of 20 consecutive trading days ending on the
tenth trading day prior to such Record Date or Special Record Date,
appropriately adjusted to take into account any stock dividends on the
Common Stock, or any stock splits, reclassifications or combinations of
the Common Stock, during the period following the first of such 20
trading days and ending on the last full trading day immediately
preceding the Dividend Payment Date or other date fixed for the payment
of dividends to which such Record Date or Special Record Date, as the
case may be, relates.
"Common Stock" shall mean the common stock, par value
$.01 per share, of the Corporation, which term shall include, where
appropriate, in the case of any reclassification, recapitalization or
other change in the Common Stock, or in the case of a consolidation or
merger of the Corporation with or into another Person affecting the
Common Stock, such capital stock to which a holder of Common Stock
shall be entitled upon the occurrence of such event.
"Current Market Price" of a share of Common Stock on
any day means the last reported per share sale price (or, if no sale
price is reported, the average of the high and low bid prices) of the
Common Stock on such day on the Nasdaq National Market or as quoted by
the National Quotation Bureau incorporated, or if the Common Stock is
listed on an exchange, on the principal exchange on which the Common
Stock is listed. In the event that no such quotation is available for
any day, the Board of Directors shall be entitled to determine the
Current Market Price on the basis of such quotations as it considers
appropriate.
"Dividend Payment Date" shall mean, for any Dividend
Period, the last day of such Dividend Period which shall be the first
day of March of each year, commencing with March 1, 1995, or the next
succeeding Business Day if any such day is not a Business Day.
"Dividend Period" shall mean the period from the
Initial Accrual Date to and including the first Dividend Payment Date
and each annual period between consecutive Dividend Payment Dates.
"Initial Accrual Date", when used with respect to the
shares of Class B Preferred Stock, shall mean March 2, 1994.
"Issue Date" shall mean the date on which shares of
Class B Preferred Stock are first issued.
-12-
<PAGE> 13
"Junior Exchange Notes" shall mean junior
subordinated debt securities of the Corporation of a series to be
issued under the Junior Exchange Note Indenture in exchange for shares
of Class B Preferred Stock as contemplated by paragraphs 4(d) and (f)
of this Section 4.
"Junior Exchange Note Indenture" shall mean an
indenture substantially in the form annexed as Exhibit 4.5 to the S-4
Registration Statement, as supplemented by a supplemental indenture
substantially in the form annexed as Exhibit 1 to such form of
indenture, as said indenture and supplemental indenture may be amended
or further supplemented from time to time (subject to any applicable
restrictions of this Certificate) and, unless the context indicates
otherwise, shall include the form and terms of the Junior Exchange
Notes established as contemplated thereunder.
"Junior Stock" shall mean (i) the Common Stock, (ii)
any other class or series of capital stock, whether now existing or
hereafter created, of the Corporation, other than (A) the Class A
Preferred Stock, (B) the Class B Preferred Stock, (C) any class or
series of Parity Stock (except to the extent provided under clause (iv)
hereof) and (D) any Senior Stock, and (iii) any class or series of
Parity Stock to the extent that it ranks junior to the Class B
Preferred Stock as to dividend rights, rights of redemption or rights
on liquidation, as the case may be. For purposes of clause (iii) above,
a class or series of Parity Stock shall rank junior to the Class B
Preferred Stock as to dividend rights, rights of redemption or rights
on liquidation if the holders of shares of Class B Preferred Stock
shall be entitled to dividend payments, payments on redemption or
payments of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, as the case may be, in preference or
priority to the holders of shares of such class or series.
"Liquidation Preference" measured per share of the
Class B Preferred Stock as of any date in question (the "Determination
Date") shall mean an amount equal to the sum of (a) the Stated
Liquidation Value of such share, plus (b) an amount equal to all
dividends accrued on such share which pursuant to paragraph 2(b) of
this Section 4 have been added to and remain a part of the Liquidation
Preference as of the Determination Date, plus (c) for purposes of
determining the amounts payable pursuant to paragraph 3 and paragraph 4
of this Section 4 and the definition of Redemption Price, an amount
equal to all unpaid dividends accrued on such share during the period
from the immediately preceding Dividend Payment Date (or the Initial
Accrual Date if the Determination Date is on or prior to the first
Dividend Payment Date) through and including the Determination Date,
and, in the case of clauses (b) and (c) hereof, whether or not such
unpaid dividends have been earned or declared or there are any
unrestricted funds of the Corporation legally available for the payment
of dividends. In connection with the determination of the Liquidation
Preference of a share of Class B Preferred Stock upon redemption or
upon liquidation, dissolution or winding up of the Corporation, the
Determination Date shall be the applicable date of redemption or the
date of distribution of amounts payable to stockholders in connection
with any such liquidation, dissolution or winding up.
-13-
<PAGE> 14
"1933 Act" shall mean the Securities Act of 1933, as
amended from time to time, or any successor statute, and the rules and
regulations promulgated thereunder.
"Optional Exchange Date" shall mean the date fixed
for the exchange of shares of Class B Preferred Stock pursuant to
paragraph 4(d) of this Section 4, provided that such date will not be
the Optional Exchange Date unless on or before such date all conditions
to the issuance and delivery of Junior Exchange Notes upon such
exchange contained in paragraph 4(f) of this Section 4 have been
satisfied.
"Parity Stock" shall mean any class or series of
capital stock, whether now existing or hereafter created, of the
Corporation ranking on a parity basis with the Class B Preferred Stock
as to dividend rights, rights of redemption or rights on liquidation.
Capital stock of any class or series shall rank on a parity as to
dividend rights, rights of redemption or rights on liquidation with the
Class B Preferred Stock, whether or not the dividend rates, dividend
payment dates, redemption or liquidation prices per share or sinking
fund or mandatory redemption provisions, if any, are different from
those of the Class B Preferred Stock, if the holders of shares of such
class or series shall be entitled to dividend payments, payments on
redemption or payments of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
proportion to their respective accumulated and accrued and unpaid
dividends, redemption prices or liquidations prices, respectively,
without preference or priority, one over the other, as between the
holders of shares of such class or series and the holders of Class B
Preferred Stock. No class or series of capital stock that ranks junior
to the Class B Preferred Stock as to rights on liquidation shall rank
or be deemed to rank on a parity basis with the Class B Preferred Stock
as to dividend rights of redemption, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly
provides.
"Record Date" for the dividends payable on any
Dividend Payment Date means the fifteen day of the month preceding the
month during which such Dividend Payment Date shall occur, or if any
such day is not a Business Day, then on the next preceding Business
Day, as and if designated by the Board of Directors.
"Redemption Agent" has the meaning ascribed to such
term in paragraph 4(c) of this Section 4.
"Redemption Date" as to any share of Class B
Preferred Stock shall mean the date fixed for redemption of such share
pursuant to paragraph 4(a) of this Section 4, provided that no such
date will be a Redemption Date unless the applicable Redemption Price
is actually paid in full on such date or the consideration sufficient
for the payment thereof, and for no purpose, has been set apart or
deposited in trust as contemplated by paragraph 4(c) of this Section 4.
"Redemption Price" as to any share of Class B
Preferred Stock which is to redeemed on any Redemption Date shall mean
the Liquidation Preference thereof on such Redemption Date.
-14-
<PAGE> 15
"S-4 Registration Statement" shall mean the
Corporation's Registration Statement on Form S-4 (Reg. No. 33-54263)
filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933 and declared effective on June 28, 1994.
"Senior Stock" shall mean (i) the Class A Preferred
Stock and (ii) any other class or series of capital stock, whether now
existing or hereafter created, of the Corporation ranking prior to the
Class B Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation. Capital stock of any class or series shall rank
prior to the Class B Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation if the holders of shares of such
class or series shall be entitled to dividend payments, payments on
redemption or payments of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the holders of shares of Class B Preferred
Stock. No class or series of capital stock that ranks on a parity basis
with or junior to the Class B Preferred Stock as to rights on
liquidation shall rank or be deemed to rank prior to the Class B
Preferred Stock as to dividend rights or rights of redemption,
notwithstanding that the dividend rate, dividend payment dates, sinking
fund provisions, if any, or mandatory redemption provisions thereof are
different from those of the Class B Preferred Stock, unless the
instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
"Special Record Date" has the meaning ascribed to
such term in paragraph 2(b) of this Section 4.
"Stated Liquidation Value" of a share of Class B
Preferred Stock means $100.
"TIA" shall mean the Trust Indenture Act of 1939 (or
any successor statute) as in effect on the date the Junior Exchange
Note Indenture is or is required to be qualified thereunder in
accordance with paragraph 4 of this Section 4.
2. Dividends.
(a) DIVIDEND RIGHTS; DIVIDEND PAYMENT DATES. Subject
to the prior preferences and other rights of any Senior Stock and the
provisions of paragraph 5 hereof, the holders of Class B Preferred
Stock shall be entitled to receive, when and as declared by the Board
of Directors, out of unrestricted funds legally available therefor,
cumulative dividends, in preference to dividends on any Junior Stock,
that shall accrue on each share of Class B Preferred Stock at the rate
of 6.0% per annum of the Stated Liquidation Value of such share from
the Initial Accrual Date to and including the date on which the
Liquidation Preference of such share is made available (whether on
liquidation, dissolution, or winding up of the Corporation or, in the
case of paragraph 4 of this Section 4, upon the applicable Redemption
Date or Optional Exchange Date). Accrued dividends on the Class B
Preferred Stock will be payable, as provided in paragraph 2(c) below,
annually on each Dividend Payment Date to the holders of record
-15-
<PAGE> 16
of the Class B Preferred Stock as of the close of business on the
Record Date for such dividend payment. Dividends shall be fully
cumulative and shall accrue (without interest or compounding) on a
daily basis without regard to the occurrence of a Dividend Payment Date
and whether or not such dividends are declared and whether or not there
are any unrestricted funds of the Corporation legally available for the
payment of dividends. The amount of dividends "accrued" as of the first
Dividend Payment Date and as of any date that is not a Dividend Payment
Date shall be calculated on the basis of the foregoing rate per annum
for the actual number of days elapsed from the Initial Accrual Date (in
the case of the first Dividend Payment Date and any date prior to the
first Dividend Payment Date) or the last preceding Dividend Payment
Date (in the case of any other date) to and including the date as of
which such determination is to be made, based on a 365- or 366-day
year, as the case may be.
(b) SPECIAL RECORD DATE. On each Dividend Payment
Date, all dividends that have accrued on each share of Class B
Preferred Stock during the immediately preceding Dividend Period shall,
to the extent not paid as provided in paragraph 2(c) below on such
Dividend Payment Date for any reason (whether or not such unpaid
dividends have been earned or declared or there are any unrestricted
funds of the Corporation legally available for the payment of
dividends), be added to the Liquidation Preference of such share and
will remain a part thereof until such dividends are paid as provided in
paragraph 2(c) below. No interest or additional dividends will accrue
or be payable (whether in cash, shares of Common Stock or otherwise)
with respect to any dividend payment on the Class B Preferred Stock
that may be in arrears or with respect to that portion of any other
payment on the Class B Preferred Stock that is in arrears which
consists of accumulated or accrued and unpaid dividends. Such
accumulated or accrued and unpaid dividends may be declared and paid at
any time (subject to the rights of any Senior Stock and, if applicable,
to the concurrent satisfaction of any dividend arrearages then existing
with respect to any Parity Stock which ranks on a parity basis with the
Class B Preferred Stock as to the payment of dividends) without
reference to any regular Dividend Payment Date, to holders of record as
of the close of business on such date, not more than 45 days nor less
than 10 days preceding the payment date thereof, as may be fixed by the
Board of Directors (the "Special Record Date"). Notice of each Special
Record Date shall be given, not more than 45 days nor less than 10 days
prior thereto, to the holders of record of the shares of Class B
Preferred Stock.
(c) METHOD OF PAYMENT. All dividends payable with
respect to the shares of Class B Preferred Stock may be declared and
paid, in the sole discretion of the Board of Directors, in cash,
through the issuance of shares of Common Stock or in any combination of
the foregoing, provided, however, that if on any Dividend Payment Date
or other date fixed for the payment of dividends declared by the Board
of Directors, the Corporation pursuant to applicable law or otherwise
is prohibited or restricted from paying in cash the full amount of
dividends declared payable to the holders of Class B Preferred Stock on
such date, then the portion of such dividends the payment of which in
cash is so prohibited or restricted (or such greater portion of such
dividends as the Board of Directors may determine) shall be paid
through the issuance of shares of Common Stock. If any dividend payment
declared by the Board of Directors with respect to the
-16-
<PAGE> 17
shares of Class B Preferred Stock is to be paid in whole or in part
through the issuance of shares of Common Stock, the amount of such
dividend payment to be paid per share of Class B Preferred Stock in
shares of Common Stock (the "Stock Dividend Amount") shall be satisfied
and paid by the delivery to the holders of record of such shares of
Class B Preferred Stock on the Record Date or Special Record Date, as
the case may be, for such dividend payment, of a number of shares of
Common Stock determined by dividing the Stock Dividend Amount by the
Average Market Price of a share of Common Stock as of such Record Date
or Special Record Date. The Corporation shall not be required to issue
any fractional share of Common Stock to which any holder of Class B
Preferred Stock may become entitled pursuant to this paragraph 2(c).
The Board of Directors may elect to settle any final fraction of a
share of Common Stock which a holder of one or more shares of Class B
Preferred Stock would otherwise be entitled to receive pursuant to this
paragraph 2(c) by having the Corporation pay to such holder, in lieu of
issuing such fractional share, cash in an amount (rounded upward to the
nearest whole cent) equal to the same fraction of the Average Market
Price of a share of Common Stock as of the Record Date or Special
Record Date, as the case may be, for the dividend payment with respect
to which such shares of Common Stock are being delivered. Such
election, if made, shall be made as to all holders of Class B Preferred
Stock who would otherwise be entitled to receive a fractional share of
Common Stock on the Dividend Payment Date or other date fixed for the
payment of such dividend.
All dividends paid with respect to the shares of
Class B Preferred Stock pursuant to this paragraph 2 shall be paid pro
rata to all the holders of shares Class B Preferred Stock outstanding
on the applicable Record Date or Special Record Date, as the case may
be.
3. Distributions Upon Liquidation, Dissolution or
Winding Up.
Subject to the prior payment in full of the
preferential amounts to which any Senior Stock is entitled, in the
event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of Class B Preferred
Stock shall be entitled to receive from the assets of the Corporation
available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an
amount in cash or property at its fair market value, as determined by
the Board of Directors in good faith, or a combination thereof, per
share, equal to the Liquidation Preference of a share of Class B
Preferred Stock of the date of payment or distribution, which payment
or distribution shall be made pari passu with any such payment or
distribution made to the holders of any Parity Stock ranking on a
parity basis with the Class B Preferred Stock with respect to
distributions upon liquidation, dissolution or winding up of the
Corporation. The holders of Class B Preferred Stock shall be entitled
to no other or further distribution of participation in any remaining
assets of the Corporation's assets in liquidation, dissolution or
winding up, the assets of the Corporation to be distributed among the
holders of the Class B Preferred Stock and to all holders of any Parity
Stock ranking on a parity basis with the Class B Preferred Stock with
respect to distributions upon liquidation, dissolution or winding up
shall be insufficient to permit payment in full to such holders of the
respective referential amounts to which they are entitled, then the
entire assets of the Corporation to be distributed to holders of the
Class B Preferred Stock and such Parity Stock shall be distributed pro
rata to such holders based upon the aggregate of the full preferential
amounts
-17-
<PAGE> 18
to which the shares of Class B Preferred Stock and such Parity Stock
would otherwise respectively be entitled. Neither the consolidation or
merger of the Corporation with or into any other corporation or
corporations nor the sale, transfer or lease of all or substantially
all of the assets of the Corporation shall itself be deemed to be a
liquidation, dissolution or winding up of the Corporation within the
meaning of this paragraph 3. Notice of the liquidation, dissolution or
winding up of the Corporation shall be given, not less than 20 days
prior to the date on which such liquidation, dissolution or winding up
is expected to take place or become effective, to the holders of record
of the shares of Class B Preferred Stock.
4. Redemption or Exchange.
(a) OPTIONAL REDEMPTION. Subject to the rights of any
Senior Stock and the provisions of paragraph 5 of this Section 4, the
shares of Class B Preferred Stock may be redeemed, at the option of the
Corporation by the action of the Board of Directors, in whole or from
time to time in part, on any Business Day occurring after the Issue
Date, at the Redemption Price on the Redemption Date. If less than all
outstanding shares of Class B Preferred Stock are to be redeemed on any
Redemption Date, the shares of Class B Preferred Stock to be redeemed
shall be chosen by lot or by such other method as the Board of
Directors considers fair and appropriate (and which complies with the
requirements, if any, of any national securities exchange or national
interdealer quotation system on which the Class B Preferred Stock may
be listed or admitted to trading or quoted). The Corporation shall not
be required to register a transfer of (i) any shares of Class B
Preferred Stock for a period of 15 days next preceding any selection of
shares of Class B Preferred Stock to be redeemed or (ii) any shares of
Class B Preferred Stock selected or called for redemption.
(b) NOTICE OF REDEMPTION. Notice of redemption shall
be given by or on behalf of the Corporation, not more than 60 days nor
less than 30 days prior to the Redemption Date, to the holders of
record of the shares of Class B Preferred Stock to be redeemed; but no
defect in such notice or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of Class B
Preferred Stock. In addition to any information required by law or by
the applicable rules of any national securities exchange or national
interdealer quotation system on which the Class B Preferred Stock may
be listed or admitted to trading or quoted, such notice shall set forth
the Redemption Price, the Redemption Date, the number of shares to be
redeemed and the place at which the shares called for redemption will,
upon presentation and surrender of the stock certificates evidencing
such shares, be redeemed, and if the Corporation has elected to deposit
the Redemption Price with a Redemption Agent in accordance with
paragraph 4(c) below, shall state the name and address of the
Redemption Agent and the date on which such deposit was or will be
made. In the event that fewer than the total number of shares of Class
B Preferred Stock represented by a certificate are redeemed, a new
certificate representing the number of unredeemed shares will be issued
to the holder thereof without cost to such holder.
-18-
<PAGE> 19
(c) DEPOSIT OF REDEMPTION PRICE. If notice of any
redemption by the Corporation pursuant to this paragraph 4 shall have
been given as provided in paragraph 4 (b) above, and if on or before
the Redemption Date specified in such notice an amount in cash
sufficient to redeem in full on the Redemption Date at the Redemption
Price all shares of Class B Preferred Stock called for redemption shall
have been set apart so as to be available for such purpose and only for
such purpose, then effective as of the close of business on the
Redemption Date, the shares of Class B Preferred Stock called for
redemption, notwithstanding that any certificate therefor shall not
have been surrendered for cancellation, shall no longer be deemed
outstanding, and the holders thereof shall cease to be stockholders
with respect to such shares and all rights with respect to such shares
shall forthwith cease and terminate, except the right of the holders
thereof to receive the Redemption Price of such shares, without
interest, upon the surrender of certificates representing the same.
At its election, the Corporation on or prior to the
Redemption Date (but no more than 60 days prior to the Redemption Date)
may deposit immediately available funds in an amount equal to the
aggregate Redemption Price of the shares of Class B Preferred Stock
called for redemption in trust for the holders thereof with any bank or
trust company organized under the laws of the United States of America
or any state thereof having capital, undivided profits and surplus
aggregating at least $50 million (the "Redemption Agent"), with
irrevocable instructions and authority to the Redemption Agent, on
behalf and at the expense of the Corporation, to mail the notice of
redemption as soon as practicable after receipt of such irrevocable
instructions (or to complete such mailing previously commenced, if it
has not already been completed) and to pay, on and after the Redemption
Date or prior thereto, the Redemption Price of the shares of Class B
Preferred Stock to be redeemed to their respective holders upon the
surrender of the certificates therefor. A deposit made in compliance
with the immediately receding sentence shall be deemed to constitute
full payment for the shares of Class B Preferred Stock to be redeemed
and from and after the close of business on the date of such deposit
(although prior to the Redemption Date), the shares of Class B
Preferred Stock to be redeemed shall no longer be deemed outstanding
and the holders thereof shall cease to be stockholders with respect to
such shares and shall have no rights with respect to such shares except
the right of the holders thereof to receive the Redemption Price of
such shares (calculated through the Redemption Date), without interest,
upon surrender of the certificates therefor. Any interest accrued on
the funds so deposited shall be paid to the Corporation from time to
time. Any funds so deposited with the Redemption Agent which shall
remain unclaimed by the holders of such shares of Class B Preferred
Stock at the end of one year after the Redemption Date shall be
returned by the Redemption Agent to the Corporation, after which
repayment the holders of such shares of Class B Preferred Stock called
for redemption shall look only to the Corporation for the payment
thereof, without interest, unless an applicable escheat or abandoned
property law designates another Person.
(d) OPTIONAL EXCHANGE FOR JUNIOR EXCHANGE NOTES.
Subject to the rights of any Senior Stock and the provisions of
paragraph 5 of this Section 4, the shares of Class B Preferred Stock
may be exchanged, out of funds legally available
-19-
<PAGE> 20
therefor, at the option of the Corporation by action of the Board of
Directors, in whole but not in part, on any Business Day occurring
after the Issue Date, for Junior Exchange Notes. Each holder of
outstanding shares of Class B Preferred Stock shall be entitled to
receive, in exchange for his shares of Class B Preferred Stock pursuant
to this paragraph 4 (d), newly issued Junior Exchange Notes of a series
authorized and established for the purpose of such exchange, the
aggregate principal amount of which shall be equal to the aggregate
Liquidation Preference on the Optional Exchange Date of the shares of
Class B Preferred Stock so exchanged by such holder, provided that the
Junior Exchange Notes will be issuable only in principal amounts of
$100 or any integral multiple thereof and an adjustment will be paid by
the Corporation, in cash or by its check, in an amount equal to any
excess principal amount otherwise issuable.
(e) NOTICE OF EXCHANGE. Notice of the Corporation's
election to exercise its optional exchange right pursuant to paragraph
4(d) (an "Optional Exchange Notice") shall be given by or on behalf of
the Corporation, not more than 60 days nor less than 30 days prior to
the Optional Exchange Date, to the holders of record of the shares of
Class B Preferred Stock; but no defect in such notice or in the mailing
thereof shall affect the validity of the proceedings for the exchange
of any shares of Class B Preferred Stock. In addition to any
information required by law or by the applicable rules of any national
securities exchange or national interdealer quotation system on which
the shares of Class B Preferred Stock may be listed or admitted to
trading or quoted, such notice shall set forth the Optional Exchange
Date, the place at which shares of Class B Preferred Stock will, upon
presentation and surrender of the stock certificates evidencing such
shares, be exchanged for Junior Exchange Notes, and the material terms
(or, as to the rate per annum at which the Junior Exchange Notes will
bear interest, and, if applicable, as to any other of such terms, the
method of determining the same), consistent with the provisions hereof
and of the Junior Exchange Note Indenture, of the series of Junior
Exchange Notes to be issued upon such exchange.
Upon determination of the rate per annum at which the
Junior Exchange Notes to be issued upon such exchange will bear
interest and any other terms of such Junior Exchange Notes, the method
of determining which was set forth in the Optional Exchange Notice, the
Corporation shall promptly give notice of such determination to the
holders of shares of Class B Preferred Stock, which notice may be given
by (or, if required by applicable law, shall be given by) publication
of such determination in a daily newspaper of national circulation.
(f) CONDITIONS TO EXCHANGE FOR JUNIOR EXCHANGE NOTES.
Prior to the giving of an Optional Exchange Notice, the Corporation
shall execute and deliver, with a bank or trust company selected by the
Corporation, the Junior Exchange Note Indenture, substantially in the
form annexed to the S-4 Registration Statement with only such changes
as (i) are necessary to comply with law, any applicable rules of any
securities exchange or usage, (ii) are requested by the Corporation and
which would make any provisions of the Junior Exchange Note Indenture,
or of the Junior Exchange Notes of the series established thereunder
for the purpose of such exchange, more restrictive to the Corporation
or beneficial to the holders of the Junior Exchange
-20-
<PAGE> 21
Notes of such series, as determined by the Board of Directors in good
faith, such determination to be conclusive, (iii) are requested by the
Corporation to add to the covenants and agreements of the Corporation
contained in the Junior Exchange Note Indenture or to remove any right
or power therein reserved to or conferred upon the Corporation, (iv)
are requested by the Corporation in the event of any amendment to this
Certificate that effects a change in the terms of the Class B Preferred
Stock, to conform (as nearly as may be taking into account the
differences between debt securities and equity securities) the
provisions of the Junior Exchange Note Indenture (including, without
limitation, the provisions relating to the establishment of the terms
of any series of Junior Exchange Notes authorized to be issued
thereunder) to the terms of the Class B Preferred Stock as so changed,
(v) are consented to by the holders of at least a majority of the
number of shares of Class B Preferred Stock then outstanding (or such
greater percentage thereof as may be required by applicable law or any
applicable rules of any national securities exchange or national
interdealer quotation system), either in writing or by vote at a
meeting called for that purpose at which the holders of Class B
Preferred Stock shall vote as a separate class, or (vi) would not
adversely affect the rights of the holders of Junior Exchange Notes of
such series issuable thereunder.
Prior to the Optional Exchange Date, the Corporation
shall (i) establish in the manner contemplated by the Junior Exchange
Note Indenture the terms of the series of Junior Exchange Notes to be
issued thereunder on the Optional Exchange Date, and (ii) file at the
office of the exchange agent for the Class B Preferred Stock (or with
the books of the Corporation if there is no exchange agent) an opinion
of counsel to the effect that (A) the Junior Exchange Note Indenture
has been duly authorized, executed and delivered by the Corporation,
and constitutes a valid and binding instrument enforceable against the
Corporation in accordance with its terms (subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general principles of equity and except that the
Corporation may be prohibited from making payments on the Junior
Exchange Notes of the series to be issued if and to the extent it would
at the time be prohibited from redeeming capital stock and subject to
other qualifications as are then customarily contained in opinions of
counsel experienced in such matters); (B) that the Junior Exchange
Notes of such series have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Junior Exchange
Note Indenture and delivered in exchange for the shares of Class B
Preferred Stock, will constitute valid and binding obligations of the
Corporation entitled to the benefits of the Junior Exchange Note
Indenture (subject as aforesaid); (c) that the issuance and delivery of
the Junior Exchange Notes of such series in exchange for the shares of
Class B Preferred Stock will not violate the laws of the state of
incorporation of the Corporation; and (D) that (x) the Junior Exchange
Note Indenture has been duly qualified under the TIA (or that such
qualification is not necessary) and (y) that the issuance and delivery
of the Junior Exchange Notes of such series in exchange for the shares
of Class B Preferred Stock is exempt from the registration or
qualification requirements of the 1933 Act and applicable state
securities laws or, if no such exemption is available, that the Junior
Exchange Notes of such series have been duly registered or qualified
for such exchange under the 1933 Act and such applicable state
securities laws.
-21-
<PAGE> 22
(g) METHOD OF EXCHANGE. If an Optional Exchange
Notice shall have been given by the Corporation pursuant to paragraph
4(e) of this Section 4, and if the Corporation shall have satisfied the
conditions to such exchange contained in paragraph 4(f), then effective
as of the close of business on the Optional Exchange Date, the shares
of Class B Preferred Stock, notwithstanding that any certificate
therefor shall not have been surrendered for cancellation, shall no
longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all rights with respect to
such shares shall forthwith cease and terminate, except the right of
the holders thereof upon the surrender of certificates evidencing the
same to receive the Junior Exchange Notes exchangeable therefor, and
the cash adjustment, if any, in lieu of Junior Exchange Notes in other
than authorized denominations, without interest.
Before any holder of shares of Class B Preferred
Stock called for exchange shall be entitled to receive the Junior
Exchange Notes deliverable in exchange therefor, such holder shall
surrender the certificate or certificates representing the shares to be
exchanged at such place as the Corporation shall have specified in the
Optional Exchange Notice, which certificate or certificates shall be
duly endorsed to the Corporation or in blank (or accompanied by duly
executed instruments to transfer to the Corporation or in blank) with
signatures guaranteed (such endorsements or instruments of transfer to
be in form satisfactory to the Corporation), together with a written
notice to the Corporation, specifying the name or names (with
addresses) in which the Junior Exchange Notes are to be issued. If any
transfer is involved in the issuance or delivery of any Junior Exchange
Notes in a name other than that of the registered holder of the shares
of Class B Preferred Stock surrendered for exchange, such holder shall
also deliver to the Corporation a sum sufficient for all taxes payable
in respect of such transfer or evidence satisfactory to the Corporation
that such taxes have been paid. Except as provided in the immediately
preceding sentence, the Corporation shall pay any issue, stamp or other
similar tax in respect of such issuance or delivery.
As soon as practicable after the later of the
Optional Exchange Date and the proper surrender of the certificate(s)
for such shares of Class B Preferred Stock as provided above, the
Corporation shall deliver at the place specified in the Optional
Exchange Notice, to the holder of the shares of Class B Preferred Stock
so surrendered, or to his nominee(s) or, subject to compliance with
applicable law, transferee(s), a Junior Exchange Note or Notes (of
authorized denominations) in the principal amount to which he shall be
entitled upon such exchange, together with a check in the amount of any
cash adjustment as provided in paragraph 4 (d). The Person in whose
name any Junior Exchange Note is issued upon an exchange pursuant to
paragraph 4(d) shall be treated for all purposes as the holder of
record thereof as of the close of business on the Optional Exchange
Date.
(h) STATUS OF REDEEMED SHARES. All shares of Class B
Preferred Stock redeemed, exchanged, purchased or otherwise acquired by
the Corporation shall be retired and shall not be reissued.
5. Limitations on Dividends and Redemptions.
-22-
<PAGE> 23
If at any time the Corporation shall have failed to
pay, or declare and set aside the consideration sufficient to pay, full
cumulative dividends for all prior dividend periods on any Parity Stock
which by the terms of the instrument creating or evidencing such Parity
Stock is entitled to the payment of such cumulative dividends prior to
the redemption, exchange, purchase or other acquisition of the Class B
Preferred Stock, and until full cumulative dividends on such Parity
Stock for all prior dividend periods are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to
be available for such purpose and no other purpose, neither the
Corporation nor any subsidiary thereof shall redeem, exchange, purchase
or otherwise acquire any shares of Class B Preferred Stock, Parity
Stock or Junior Stock, or set aside any money or assets for any such
purpose, pursuant to paragraph 4 hereof, a sinking fund or otherwise,
unless all then outstanding shares of Class B Preferred Stock, of such
Parity Stock and of any other class of series of Parity Stock that by
the terms of the instrument creating or evidencing such Parity Stock is
required to be redeemed under such circumstances are redeemed or
exchanged pursuant to the terms hereof and thereof.
If at any time the Corporation shall have failed to
pay, or declare and set aside the consideration sufficient to pay, full
cumulative dividends on the Class B Preferred Stock for all Dividend
Periods ending on or before the immediately preceding Dividend Payment
Date, and until full cumulative dividends on the Class B Preferred
Stock for all Dividend Periods ending on or before the immediately
preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to
be available for such purpose and no other purpose, neither the
Corporation nor any Subsidiary thereof shall redeem, exchange, purchase
or otherwise acquire any shares of Class B Preferred Stock, Parity
Stock or Junior Stock, or set aside any money or assets for any such
purpose, pursuant to paragraph 4 hereof, a sinking fund or otherwise,
unless all then outstanding shares of Class B Preferred Stock and of
any other class or series of Parity Stock that by the terms of the
instrument creating or evidencing such Parity Stock is required to be
redeemed under such circumstances are redeemed or exchanged pursuant to
the terms hereof and thereof.
If at any time the Corporation shall have failed to
pay, or declare and set aside the consideration sufficient to pay, full
cumulative dividends on the Class B Preferred Stock for all Dividend
Periods ending on or before the immediately preceding Dividend Payment
Date, and until the full cumulative dividends on the Class B Preferred
Stock for all Dividend Periods ending on or before the immediately
preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside for such
purpose and no other purpose, the Corporation shall not declare or pay
any dividend on or make any distribution with respect to any Junior
Stock or Parity Stock or set aside any money or assets for any such
purpose, except that the Corporation may declare and pay a dividend on
any Parity Stock ranking on a parity basis with the Class B Preferred
Stock with respect to the right to receive dividend payments,
contemporaneously with the declaration and payment of a dividend on the
Class B Preferred Stock, provided that such dividends are declared and
paid pro rata so that the amount of dividends declared and paid per
share of the Class B Preferred Stock and such Parity Stock shall in all
cases bear to each other the same ratio that accumulated and
-23-
<PAGE> 24
accrued and unpaid dividends per share on the Class B Preferred Stock
and such Parity Stock bear to each other.
If the Corporation shall fail to redeem or exchange
on any date fixed for redemption or exchange pursuant to paragraph 4(a)
or 4(d) hereof any shares of Class B Preferred Stock called for
redemption or exchange on such date, and until such shares are redeemed
or exchanged in full, the Corporation shall not redeem or exchange any
Parity Stock or Junior Stock or declare or pay any dividend on or make
any distribution with respect to any Junior Stock, or set aside any
money or assets for any such purpose, and neither the Corporation nor
any Subsidiary thereof shall purchase or otherwise acquire any Class B
Preferred Stock, Parity Stock or Junior Stock, or set aside any money
or assets for any such purpose.
Neither the Corporation nor any Subsidiary thereof
shall redeem, exchange, purchase or otherwise acquire any Parity Stock
or Junior Stock, or set aside any money or assets for any such purpose,
if after giving effect to such redemption, exchange, purchase or other
acquisition, the amount (as determined by the Board or Directors in
good faith) that would be available for distribution to the holders of
the Class B Preferred Stock upon liquidation, dissolution or winding up
of the Corporation if such liquidation, dissolution or winding up were
to occur on the date fixed for such redemption, exchange, purchase or
other acquisition of such Parity Stock or Junior Stock would be less
than the aggregate Liquidation Preference as of such date of all shares
of Class B Preferred Stock then outstanding.
Nothing contained in the first, fourth or fifth
paragraph of this paragraph 5 shall prevent (i) the payment of
dividends on any Junior Stock solely in shares of Junior Stock or the
redemption, purchase or other acquisition of Junior Stock solely in
exchange for (together with a cash adjustment for fractional shares, if
any), or (but only in the case of the first and fifth paragraphs
hereof) through the application of the proceeds from the sale of,
shares of Junior Stock; or (ii) the payment of dividends on any Parity
Stock solely in shares of Parity Stock and/or Junior Stock or the
redemption, exchange, purchase or other acquisition of Class B
Preferred Stock or Parity Stock solely in exchange for (together with a
cash adjustment for fractional shares, if any), or (but only in the
case of the first and fifth paragraphs hereof) through the application
of the proceeds from the sale of, shares of Parity Stock and/or Junior
Stock.
The provisions of the first paragraph of this
paragraph 5 are for the sole benefit of the holders of Class B
Preferred Stock and Parity Stock having the terms described therein and
accordingly, at any time when there are no shares of any such class or
series of Parity Stock outstanding or if the holders of each such class
or series of Parity Stock have, by such vote or consent of the holders
thereof as may be provided for in the instrument creating or evidencing
such class or series, waived in whole or in part the benefit of such
provisions (either generally or in the specific instance), then the
provisions of the first paragraph of this paragraph 5 shall not (to the
extent waived, in the case of any partial waiver) restrict the
redemption, exchange, purchase or other acquisition of any shares of
Class B Preferred Stock, Parity Stock or Junior Stock. All other
provisions of
-24-
<PAGE> 25
this paragraph 5 are for the sole benefit of the holders of Class B
Preferred Stock and accordingly, if the holders of shares of Class B
Preferred Stock shall have waived (as provided in paragraph 7 of this
Section 4) in whole or in part the benefit of the applicable
provisions, either generally or in the specific instance, such
provision shall not (to the extent of such waiver, in the case of a
partial waiver) restrict the redemption, exchange, purchase or other
acquisition of, or declaration, payment or making of any dividends or
distributions on the Class B Preferred Stock, any Parity Stock or any
Junior Stock.
6. Voting.
(a) VOTING RIGHTS. The holders of Class B preferred
Stock shall have no voting rights whatsoever, except as required by law
and except for the voting rights described in this paragraph 6;
provided, however, that the number of authorized shares of Class B
Preferred Stock may be increased or decreased (but not below the number
of shares of Class B Preferred Stock then outstanding) by the
affirmative vote of the holders of at least 66 2/3% of the total voting
power of the then outstanding Voting Securities, voting together as a
single class. Without limiting the generality of the foregoing, no vote
or consent of the holders of Class B Preferred Stock shall be required
for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation or designation of any class or series of
Senior Stock, Parity Stock or Junior Stock, or (c) any amendment to
this Certificate that would increase the number of authorized shares of
Preferred Stock or the number of authorized shares of Class B Preferred
Stock or that would decrease the number of authorized shares of
Preferred Stock or the number of authorized shares of Class B Preferred
Stock (but not below the number of shares of Preferred Stock or Class B
Preferred Stock, as the case may be, then outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Class B
Preferred Stock shall have the right to vote at any annual or special
meeting of stockholders for the purpose of electing directors. Each
share of Class B Preferred Stock shall have one vote for such purpose,
and shall vote as a single class with any other class or series of
capital stock of the Corporation entitled to vote in any general
election of directors, unless the instrument creating or evidencing
such class or series of capital stock otherwise expressly provides.
7. Waiver.
Any provision of this Section 4 which, for the
benefit of the holders of Class B Preferred Stock, prohibits, limits or
restricts actions by the Corporation, or imposes obligations on the
Corporation, may be waived in whole or in part, or the application of
all or any part of such provision in any particular circumstance or
generally may be waived, in each case with the consent of the holders
of at least a majority of the number of shares of Class B Preferred
Stock then outstanding (or such greater percentage thereof as may be
required by applicable law or any applicable rules of any national
securities exchange or national interdealer quotation system), either
in writing or by vote at an annual meeting or a meeting called for such
purpose at which the holders of Class B Preferred Stock shall vote as a
separate class.
-25-
<PAGE> 26
8. Method of Giving Notices.
Any notice required or permitted by the provisions of
this Section 4 to be given to the holders of shares of Class B
Preferred Stock shall be deemed duly given if deposited in the United
States mail, first class mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the
Corporation or supplied by him in writing to the Corporation for the
purpose of such notice.
9. Exclusion of Other Rights.
Except as may otherwise be required by law and except
for the equitable rights and remedies which may otherwise be available
to holders of Class B Preferred Stock, the shares of Class B Preferred
Stock shall not have any designations, preferences, limitations or
relative rights other than those specifically set forth in this
Certificate.
10. Heading of Subdivisions.
The headings of the various subdivisions of this
Section 4 are for convenience of reference only and shall not affect
the interpretation of any of the provisions of this Section 4.
Section 5. Voting Rights. Except as otherwise provided by law
or by the terms of the Preferred Stock, the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes. Each share of Common Stock shall have one vote, and the Common Stock
shall vote together as a single class.
ARTICLE V
Unless and except to the extent that the By-Laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
ARTICLE VI
In furtherance and not in limitation of the powers conferred
by law, the Board of Directors is expressly authorized and empowered to make,
alter and repeal the By-Laws of the Corporation by a majority vote at any
regular or special meeting of the Board of Directors or by written consent,
subject to the power of the stockholders of the Corporation to alter or repeal
any By-Laws made by the Board of Directors.
ARTICLE VII
The Corporation reserves the right at any time from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and any other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons
-26-
<PAGE> 27
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
ARTICLE VIII
Section 1. Elimination of Certain Liability of Directors. A
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification.
Section 2. Indemnification and Insurance.
1. Right to Indemnification.
Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or
a person of whom he or she 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 or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, to the fullest extent permitted by law,
only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines,
amounts paid or to be paid in settlement, and excise taxes or penalties
arising under the Employee Retirement Income Security Act of 1974)
reasonably incurred or suffered by such person in connection therewith
and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in paragraph (b) hereof, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person
only if such proceeding (or part thereof) was authorized by the Board
of Directors. The right to indemnification conferred in this Section 4
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the
General Corporation Law of the State of
-27-
<PAGE> 28
Delaware requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to
an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this
Section 4 or otherwise. The Corporation may, by action of the Board of
Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
2. Right of Claimant to Bring Suit.
If a claim under paragraph (a) of this Section 4 is
not paid in full by the Corporation within thirty days after a written
claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of prosecuting
such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending
any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation)
that the claimant has not met the standards of conduct which make it
permissible under the General Corporation Law of the State of Delaware
for the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because
he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the
applicable standard of conduct.
3. Non-Exclusivity of Rights.
The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 4 shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, By-law,
agreement, vote of stockholders or disinterested directors or
otherwise.
4. Insurance.
The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any such expense, liability or loss,
whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
-28-
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
TELE-COMMUNICATIONS, INC.
----------------------------------
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE -- The registered office of
Tele-Communications, Inc. (the ?Corporation?) shall be established and
maintained at the office of The Corporation Trust Company at The Corporation
Trust Center, 1209 Orange Street in the City of Wilmington, County of New
Castle, State of Delaware, and said Corporation Trust Company shall be the
registered agent of the Corporation in charge thereof.
SECTION 2. OTHER OFFICES -- The Corporation may have other
offices, either within or without the State of Delaware, at such place or places
as the Board of Directors may from time to time select or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS -- Annual meetings of stockholders
for the election of directors, and for such other business as may be stated in
the notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting. If
the Board of Directors fails so to determine the time, date and place of
meeting, the annual meeting of stockholders shall be held at the registered
office of the Corporation on the first Tuesday in April. If the date of the
annual meeting shall fall upon a legal holiday, the meeting shall be held on the
next succeeding business day. At each annual meeting, the stockholders entitled
to vote shall elect a Board of Directors and they may transact such other
corporate business as shall be stated in the notice of the meeting.
<PAGE> 2
SECTION 2. SPECIAL MEETINGS -- Special meetings of the
stockholders for any purpose or purposes may be called by the President or the
Secretary, or by resolution of the Board of Directors.
SECTION 3. VOTING -- Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation of the Corporation
and these By-Laws may vote in person or by proxy, but no proxy shall be voted
after three years from its date unless such proxy provides for a longer period.
All elections for directors shall be decided by plurality vote; all other
questions shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is entitled to be present.
SECTION 4. QUORUM -- Except as otherwise required by law, by
the Certificate of Incorporation of the Corporation or by these By-Laws, the
presence, in person or by proxy, of stockholders holding shares constituting a
majority of the voting power of the Corporation shall constitute a quorum at all
meetings of the stockholders. In case a quorum shall not be present at any
meeting, a majority in interest of the stockholders entitled to vote thereat,
present in person or by proxy, shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until the
requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote shall
be represented, any business may be transacted that might have been transacted
at the meeting as originally noticed; but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 5. NOTICE OF MEETINGS -- Written notice, stating the
place, date and time of the meeting, and the general nature of the business to
be considered, shall be given to each stockholder entitled to vote thereat, at
his or her address as it appears on the records of the Corporation, not less
than ten nor more than sixty days before the date of the meeting. No business
other than that stated in the notice shall be transacted at any meeting without
the unanimous consent of all the stockholders entitled to vote thereat.
SECTION 6. ACTION WITHOUT MEETING -- Unless otherwise provided
by the Certificate of Incorporation of the Corporation, any action required or
permitted to be taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders
2
<PAGE> 3
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM -- The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors which
shall consist of not less than three persons. The exact number of directors
shall initially be three and may thereafter be fixed from time to time by the
Board of Directors. Directors shall be elected at the annual meeting of
stockholders and each director shall be elected to serve until his or her
successor shall be elected and shall qualify. A director need not be a
stockholder.
SECTION 2. RESIGNATIONS -- Any director may resign at any
time. Such resignation shall be made in writing, and shall take effect at the
time specified therein, and if no time be specified, at the time of its receipt
by the President or the Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
SECTION 3. VACANCIES -- If the office of any director becomes
vacant, the remaining directors in the office, though less than a quorum, by a
majority vote, may appoint any qualified person to fill such vacancy, who shall
hold. office for the unexpired term and until his or her successor shall be duly
chosen. If the office of any director becomes vacant and there are no remaining
directors, the stockholders, by the affirmative vote of the holders of shares
constituting a majority of the voting power of the Corporation, at a special
meeting called for such purpose, may appoint any qualified person to fill such
vacancy.
SECTION 4. REMOVAL -- Except as hereinafter provided, any
director or directors may be removed either for or without cause at any time by
the affirmative vote of the holders of a majority of the voting power entitled
to vote for the election of directors, at an annual meeting or a special meeting
called for the purpose, and the vacancy thus created may be filled, at such
meeting, by the affirmative vote of holders of shares constituting a majority of
the voting power of the Corporation.
SECTION 5. COMMITTEES -- The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one or more committees, each committee to consist of one or more
directors of the Corporation.
Any such committee, to the extent provided in the resolution
of the Board of Directors, or in these By-Laws, shall have and may exercise all
the powers and authority of the Board
3
<PAGE> 4
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it.
SECTION 6. MEETINGS -- The newly elected directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent of
all the Directors.
Regular meetings of the Board of Directors may be held without
notice at such places and times as shall be determined from time to time by
resolution of the Board of Directors.
Special meetings of the Board of Directors may be called by
the President, or by the Secretary on the written request of any director, on at
least one day?s notice to each director (except that notice to any director may
be waived in writing by such director) and shall be held at such place or places
as may be determined by the Board of Directors, or as shall be stated in the
call of the meeting.
Unless otherwise restricted by the Certificate of
Incorporation of the Corporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in any meeting of the Board of Directors or any committee thereof by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
SECTION 7. QUORUM -- A majority of the Directors shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum is
obtained, and no further notice thereof need be given other than by announcement
at the meeting which shall be so adjourned. The vote of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors unless the Certificate of Incorporation of the
Corporation or these By-Laws shall require the vote of a greater number.
SECTION 8. COMPENSATION -- Directors shall not receive any
stated salary for their services as directors or as members of committees, but
by resolution of the Board of Directors a fixed fee and expenses of attendance
may be allowed for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent or otherwise, and receiving compensation therefor.
SECTION 9. ACTION WITHOUT MEETING -- Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if a written consent thereto is
signed by all members of the Board of Directors or
4
<PAGE> 5
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board of Directors or such committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS -- The officers of the Corporation shall
be a President, a Vice President, a Treasurer, a Secretary and an Assistant
Secretary all of whom shall be elected by the Board of Directors and shall hold
office until their successors are duly elected and qualified. In addition, the
Board of Directors may elect such Assistant Secretaries and Assistant Treasurers
as they may deem proper. The Board of Directors may appoint such other officers
and agents as it may deem advisable, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
SECTION 2. PRESIDENT -- The President shall be the Chief
Operating Officer of the Corporation. He or she shall have the general powers
and duties of supervision and management usually vested in the office of
President of a corporation. The President shall have the power to execute bonds,
mortgages and other contracts on behalf of the Corporation, and to cause the
seal to be affixed to any instrument requiring it, and when so affixed the seal
shall be attested to by the signature of the Secretary or the Treasurer or an
Assistant Secretary or an Assistant Treasurer.
SECTION 3. VICE PRESIDENT -- The Vice President shall have
such powers and shall perform such duties as shall be assigned to him or her by
the Board of Directors.
SECTION 4. TREASURER -- The Treasurer shall be the Chief
Financial Officer of the Corporation. He or she shall have the custody of the
Corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He or she
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositaries as may be designated by the Board of
Directors. He or she shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or the President, taking proper vouchers for
such disbursements. He or she shall render to the President and Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation. If required by the Board of
Directors, he or she shall give the Corporation a bond for the faithful
discharge of his or her duties in such amount and with such surety as the Board
of Directors shall prescribe.
SECTION 5. SECRETARY -- The Secretary shall give, or cause to
be given, notice of all meetings of stockholders and of the Board of Directors
and all other notices required by law or by these By-Laws, and in case of his or
her absence or refusal or neglect so to do, any such notice may be given by any
person thereunto directed by the President or by the Board of Directors, upon
whose request the meeting is called as provided in these By-Laws. He or she
shall record all the
5
<PAGE> 6
proceedings of the meetings of the Board of Directors, any committees thereof
and the stockholders of the Corporation in a book to be kept for that purpose,
and shall perform such other duties as may be assigned to him or her by the
Board of Directors or the President. He or she shall have the custody of the
seal of the Corporation and shall affix the same to all instruments requiring
it, when authorized by the Board of Directors or the President, and attest to
the same.
SECTION 6. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES --
Assistant Treasurers and Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the Board of Directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK -- A certificate of stock
shall be issued to each stockholder certifying the number of shares owned by
such stockholder in the Corporation. Certificates of stock of the Corporation
shall be of such form and device as the Board of Directors may from time to time
determine.
SECTION 2. LOST CERTIFICATES -- A new certificate of stock may
be issued in the place of any certificate theretofore issued by the Corporation,
alleged to have been lost or destroyed, and the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or such
owner?s legal representatives, to give the Corporation a bond, in such sum as
they may direct, not exceeding double the value of the stock, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss of any such certificate, or the issuance of any such new
certificate.
SECTION 3. TRANSFER OF SHARES -- The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the Board of Directors may designate, by
whom they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE -- In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose
6
<PAGE> 7
of any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and which record date: (1) in
the case of determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall, unless otherwise required by law,
not be more than sixty nor less than ten days before the date of such meeting;
(2) in the case of determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall not be more than ten days
from the date upon which the resolution fixing the record date is adopted by the
Board of Directors; and (3) in the case of any other action, shall not be more
than sixty days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no prior action of
the Board of Directors is required by law, shall be the first day on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 5. DIVIDENDS -- Subject to the provisions of the
Certificate of Incorporation of the Corporation, the Board of Directors may, out
of funds legally available therefor at any regular or special meeting, declare
dividends upon stock of the Corporation as and when they deem appropriate.
Before declaring any dividend there may be set apart out of any funds of the
Corporation available for dividends, such sum or sums as the Board of Directors
from time to time in their discretion deem proper for working capital or as a
reserve fund to meet contingencies or for equalizing dividends or for such other
purposes as the Board of Directors shall deem conducive to the interests of the
Corporation.
SECTION 6. SEAL -- The corporate seal of the Corporation shall
be in such form as shall be determined by resolution of the Board of Directors.
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise imprinted upon the subject document or paper.
SECTION 7. FISCAL YEAR -- The fiscal year of the Corporation
shall be determined by resolution of the Board of Directors.
SECTION 8. CHECKS -- All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed
7
<PAGE> 8
by such officer or officers, or agent or agents, of the Corporation, and in such
manner as shall be determined from time to time by resolution of the Board of
Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE -- Whenever any notice
is required to be given under these By-Laws, personal notice is not required
unless expressly so stated, and any notice so required shall be deemed to be
sufficient if given by depositing the same in the United States mail, postage
prepaid, addressed to the person entitled thereto at his or her address as it
appears on the records of the Corporation, and such notice shall be deemed to
have been given on the day of such mailing. Stockholders not entitled to vote
shall not be entitled to receive notice of any meetings except as otherwise
provided by law. Whenever any notice is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the Corporation or of these By-Laws, a waiver thereof, in
writing and signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to such
required notice.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered, amended or repealed at any
annual meeting of the stockholders (or at any special meeting thereof if notice
of such proposed alteration, amendment or repeal to be considered is contained
in the notice of such special meeting) by the affirmative vote of the holders of
shares constituting a majority of the voting power of the Corporation. Except as
otherwise provided in the Certificate of Incorporation of the Corporation, the
Board of Directors may by majority vote of those present at any meeting at which
a quorum is present alter, amend or repeal these By-Laws, or enact such other
By-Laws as in their judgment may be advisable for the regulation and conduct of
the affairs of the Corporation.
8
<PAGE> 1
EXHIBIT 10.11
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of March 8, 1999 between
TELE-COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and LARRY E.
ROMRELL, now residing at (*Address Redacted*) ("Consultant").
Effective as of the date hereof, the Company has accepted
Consultant's resignation as an officer and employee of the Company, its
subsidiaries and its other controlled affiliates. In order to continue to have
available the benefit of Consultant's knowledge of the Company and expertise,
the Company wishes to retain Consultant to provide consulting services on the
terms set forth herein, and Consultant has agreed to provide such services on
such terms. The Company and Consultant also desire to memorialize their
agreement concerning certain continuing rights and obligations under certain
other compensatory agreements.
In consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, do hereby agree as follows:
1. Term and Termination.
(a) Term. The term of Consultant's retention under this
Agreement (the "Term") shall commence on the date hereof and shall end
on December 31, 2007. During the Term, Consultant agrees to serve the
Company as a consultant upon and subject to the terms and conditions
set forth in this Agreement. The Company acknowledges that its
obligations under Sections 5, 6 and 7 hereof shall survive any
termination of Consultant's retention as a consultant under this
Agreement.
(b) Termination by the Company. Consultant's retention by the
Company as a consultant under this Agreement may be terminated by the
Company only as provided in clauses (i) and (ii) below.
(i) Upon the death of Consultant. The Company shall,
as promptly as practicable following Consultant's death, pay
to Consultant's designated beneficiary or beneficiaries in a
lump sum an amount equal to one year's compensation under
Section 4(a) of this Agreement. The phrase ?designated
beneficiary or beneficiaries' shall mean the person or persons
named by Consultant from time to time in a signed designation
filed with the Company from time to time.
(ii) Upon giving written notice of such termination
to Consultant six (6) months prior to the effective date
thereof and by paying to Consultant in a lump sum
<PAGE> 2
upon such termination all remaining compensation that would
have been payable under Section 4(a) hereof if this
Agreement remained in full force and effect for the full
balance of the Term.
2. Services to be Rendered by Consultant.
(a) During the Term, Consultant shall, upon the request of the
Company's Chief Executive Officer (the "CEO"), consult with and advise
the Company with respect to issues and matters of the general types for
which Consultant had responsibility as an officer of the Company during
calendar year 1998. If Consultant, with his consent, is elected or
appointed as a director of the Company or any of the Company's
affiliates, Consultant will serve in each such capacity without further
compensation, except as may be decided by the Company or such affiliate
in its sole discretion. The Company acknowledges that Consultant is a
director of Liberty Media Corporation, its successors and assigns
("Liberty"), each of the Covered Entities (as defined in the
Inter-Group Agreement (as defined below)) and certain of their
respective affiliates and that, in accordance with the Inter-Group
Agreement between AT&T Corp. ("AT&T") and Liberty, to be dated as of
March 9, 1999 (the "Inter-Group Agreement"), Consultant shall have no
duty to communicate, present, make available, or offer to the Company
any business or other corporate opportunities obtained or presented to
Consultant in his capacity as a director of Liberty, any Covered Entity
or any of their respective affiliates.
(b) Consultant is agreeing to and shall provide his services
under this Agreement as an independent contractor, and neither this
Agreement nor the provision of Consultant's services hereunder is
intended to create any partnership, joint venture or employment
relationship between Consultant and the Company or any of its
affiliates.
3. Time to be Devoted by Consultant; Support by the Company;
Location of Services.
(a) Consultant shall not be obligated to make available
consulting services to the Company of more than 70 hours during any
month or more than 700 hours during any period of 12 consecutive
months. The actual times during which Consultant performs consulting
services shall be mutually agreed by Consultant and the CEO, and the
Company will, whenever practicable, give Consultant at least 15 days
prior notice of any request by the Company for any consulting services;
provided, that Consultant will not be required to render consulting
services hereunder prior to 9:00 a.m. local time or after 8:00 p.m.
local time. Unless otherwise agreed by the Company and Consultant, the
Company will in good faith endeavor to spread the time required of
Consultant relatively evenly throughout the Term, recognizing that
Consultant may not be available for certain periods of time or may
agree (but will not be obligated) to spend concentrated amounts of time
on specific projects during certain periods during the Term. It is
expressly acknowledged by the Company that the relationship between the
Company and Consultant created by this Agreement is non-exclusive, and
nothing set forth in this Agreement shall prohibit or restrict
Consultant during or after the Term hereof from engaging in any
business or activities in any capacity on
2
<PAGE> 3
behalf of any other person, except as specifically set forth in
Section 8, 9 or 11 hereof. As such, the Company and Consultant will
work together in good faith to schedule the performance of
Consultant's services hereunder so as not to unreasonably interfere
with any such other business or activities.
(b) During the Term, the Company shall, at the Company's
expense, provide Consultant with all office space, facilities,
equipment, supplies, services and secretarial and other staff support
which Consultant reasonably requires in order to provide consulting
services hereunder.
(c) Consultant may perform his services hereunder in any
location which he deems to be appropriate and consistent with the needs
of the Company, including the home of Consultant.
4. Compensation Payable to Consultant.
(a) During the Term, the Company shall pay Consultant
compensation at the rate of $610,000 per annum. Consultant shall be
entitled to such compensation whether or not any service are requested
of him and regardless of the number of hours of such service that may
be rendered during any particular period.
(b) Consultant's annual compensation shall be paid to
Consultant in accordance with the Company's regular payroll policy for
executives, but not less frequently than once a month.
(c) The Company shall not withhold taxes from any payments due
to Consultant, except to the extent required by mandatory provisions of
applicable law.
5. Expenses. The Company shall reimburse Consultant for the
reasonable amount of dining, hotel, traveling, entertainment and other expenses
(consistent with the Company's reimbursement standards for its most senior
officers) necessarily incurred by Consultant in the discharge of his consulting
obligations hereunder.
6. Executive Benefit Plans. During the Term, Consultant shall be
entitled to participate in and to be accorded all rights and benefits under all
group insurance policies maintained or established by the Company for the
benefit of its employees, and for this purpose Consultant shall be deemed to be
a full-time employee of the Company during such period. In addition, during the
Term Consultant shall be entitled to free cable television service if Consultant
has residences located within areas serviced by the Company's cable television
services. Notwithstanding the foregoing, Consultant shall not be entitled to
participate in any benefit plan of the Company which, under mandatory provisions
of any applicable law, is available only to employees of the Company.
7. Indemnification. The Company will indemnify and hold harmless
Consultant, to the fullest extent permitted by applicable law, in respect of any
liability, damage, cost or expense
3
<PAGE> 4
(including reasonable counsel fees) incurred in connection with the defense of
any claim, action, suit or proceeding to which he is a party, or threat thereof,
by reason of his being or having been an officer, director, employee, consultant
or agent of the Company or any subsidiary of the Company, or his serving or
having served at the request of the Company as a director, officer, employee,
consultant or agent of another corporation or of a partnership, joint venture,
trust, business organization, enterprise or other entity, including service with
respect to employee benefit plans. Without limiting the generality of the
foregoing, the Company will pay the expenses (including reasonable counsel fees)
of defending any such claim, action, suit or proceeding in advance of its final
disposition, upon receipt of an undertaking by Consultant to repay all amounts
advanced if it should ultimately be determined that Consultant is not entitled
to be indemnified under this Section. The parties acknowledge and agree that the
Company shall not be required to provide indemnification to Consultant with
respect to his serving as a director of Liberty, any Covered Entity or their
respective affiliates with respect to service by Consultant on such boards
following the date of closing of AT&T's acquisition of the Company.
8. Noncompetition. Consultant agrees that while retained as a
consultant under this Agreement and for the Applicable Period (as defined below)
following the termination of such retention, he will not, directly or
indirectly, as principal or agent, or in any other capacity, own, manage,
operate, participate in or be employed by or otherwise be interested in, or
connected in any manner with, any person, firm, corporation or other enterprise
which directly competes in a material respect with the business of the Company
or any of its subsidiaries as then conducted. Nothing herein contained shall be
construed as denying Consultant the right to (i) own securities of any such
corporation which is listed on a national securities exchange or quoted in the
NASDAQ System to the extent of an aggregate of 5% of the amount of such
securities outstanding, (ii) provide consultancy services to others which may
violate the provisions of the first sentence of this Section if the Company's
CEO approves in writing of such provision of consultancy services or (iii) serve
as a director on the Boards of Directors of Liberty, any of the Covered
Entities, or their respective affiliates, and to provide services in connection
therewith. For purposes hereof, the term "Applicable Period" means the period
beginning on the effective date of the termination of Consultant's retention
hereunder as a consultant to the Company (the "Effective Date") and ending on
the second anniversary of the Effective Date.
9. Confidentiality. Consultant agrees that while retained
hereunder as a consultant of the Company (otherwise than in the performance of
his duties hereunder) and thereafter, not to, directly or indirectly, make use
of, or divulge to any person, firm, corporation, entity or business organization
and he shall use his best efforts to prevent the publication or disclosure of,
any confidential or proprietary information concerning the business, accounts or
finances of, or any of the methods of doing business used by the Company or of
the dealings, transactions or affairs of the Company or any of its customers
which have or which may have come to his knowledge during his retention with the
Company or period of retention as a consultant hereunder, but this Section 9
shall not prevent Consultant from responding to any subpoena, court order or
threat of other legal duress, provided Consultant notifies the Company thereof
with reasonable promptness so that the Company may seek a protective order or
other appropriate relief, but this Section 9 shall not prevent Consultant from
responding to any subpoena, court order or threat of other legal duress,
provided Consultant notifies
4
<PAGE> 5
the Company hereof with reasonable promptness so that the Company may seek a
protective order or other appropriate relief.
10. Delivery of Materials. Consultant agrees that, upon the
termination of his period of retention as a consultant hereunder, he will
deliver to the Company all documents, papers, materials and other property of
the Company relating to its affairs, which may then be in his possession or
under his control.
11. Noninterference. Consultant agrees that he will not, while
retained as a consultant hereunder and for the Applicable Period following the
termination of his period of retention as a consultant hereunder, solicit the
employment of any employee of the Company on behalf of any other person, firm,
corporation, entity or business organization, or otherwise materially interfere
with the employment relationship between any employee or officer of the Company
and the Company.
12. Effect on Equity Agreements. The Company hereby agrees that,
notwithstanding any provision of any options to acquire capital stock of the
Company, stock appreciation rights, restricted stock awards or other equity
incentive award ("Equity Award"), in each case granted to Consultant by the
Company or any of its subsidiaries, or any provision of any employee benefit
plan under which such Equity Award was granted, to the contrary, (a) none of
such Equity Awards currently held by Consultant shall terminate or otherwise be
affected by the resignation of Consultant as an officer and employee of the
Company and (b) all such Equity Awards which by their terms are not currently
exercisable shall continue to vest and become exercisable in accordance with
their terms, unless or until they expire or otherwise terminate in accordance
with their terms (other than by reason of Consultant's resignation as an officer
and employee of the Company).
13. Remedies. Consultant agrees that, in the event of a material
breach by Consultant of this Agreement, in addition to any other rights that the
Company may have pursuant to this Agreement, the Company shall be entitled, if
it so elects, to institute and prosecute proceedings, at law or in equity, to
obtain damages with respect to such breach or to enforce the specific
performance of this Agreement by Consultant or to enjoin Consultant from
engaging in any activity in violation hereof. Consultant agrees that because
Consultant's services to the Company are of such a unique and extraordinary
character, a suit at law may be an inadequate remedy with respect to a breach by
Consultant of Sections 8, 9, 10 and 11 hereof, and that upon any such breach or
threatened breach by him of such Sections the Company shall be entitled, in
addition to any other lawful remedies that may be available to it, to injunctive
relief. In the event of a breach by the Company of this Agreement (which is not
cured within 30 days from the date of notice of such breach), Consultant may
declare that the Company has terminated Consultant pursuant to Section 1(b)(ii)
hereof, and Consultant shall be entitled to the benefits and remedies as a
result of such deemed termination.
14. Notices. All notices to be given hereunder shall be deemed
duly given when delivered personally in writing or mailed, certified mail,
return receipt requested, postage prepaid and addressed as follows:
5
<PAGE> 6
(a) If to be given to the Company:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Dr. John C. Malone
with a copy similarly addressed
and marked to the attention of
the Legal Department
(b) If to be given to Consultant:
Mr. Larry E. Romrell
(* Address Redacted*)
or to such other address as a party may request by notice given in accordance
with this Section 14.
15. Miscellaneous. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and replaces and
supersedes as of the date hereof any and all prior agreements and understandings
with respect to Consultant's employment and/or retention as a consultant by the
Company, whether oral or written, between the parties hereto, including, without
limitation, that certain Employment Agreement between Consultant and the Company
dated as of January 1, 1998. This Agreement may not be changed nor may any
provision hereof be waived except by an instrument in writing duly signed by the
party to be charged. This Agreement shall be interpreted, governed and
controlled by the law of the State of Colorado, without reference to principles
of conflict of laws. Notwithstanding anything to the contrary set forth herein,
the Company's rights hereunder shall be subject, in all respects, to
Consultant's rights as a director of Liberty, each Covered Entity, and certain
of their respective affiliates, as provided in the Inter-Group Agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
TELE-COMMUNICATIONS, INC.
By:
----------------------------------
Name:
Title:
-------------------------------------
Larry E. Romrell
<PAGE> 1
EXHIBIT 10.41
1998 PLAN
TCIVB MALONE 12/16/97 GRANT
TELE-COMMUNICATIONS, INC.
1998 INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 16th day of June, 1998
(the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and the person signing adjacent to the caption
"Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1998 Incentive
Plan (the "Plan"), a copy of which is appended to this Agreement as Exhibit A
and by this reference made a part hereof, for the benefit of eligible employees
of the Company and its Subsidiaries. Capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board (the
"Committee"), which has been assigned responsibility for administering the Plan,
has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to provide
Grantee with additional remuneration for services rendered, to encourage Grantee
to remain in the employ of the Company or its Subsidiaries and to increase
Grantee's personal interest in the continued success and progress of the
Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein, the Company
grants to the Grantee during the period commencing on June 16, 1998 and expiring
at 5:00 p.m., Denver, Colorado time ("Close of Business") on December 16, 2007
(the "Option Term"), subject to earlier termination as provided in paragraphs 8
and 12(b) below, an option to purchase from the Company, at the price per share
set forth on Schedule 1 hereto (the "TCIVB Option Price"), the number of shares
of Series B TCI Ventures Group Common Stock ("TCIVB") set forth on said Schedule
1 (the "TCIVB Option Shares"). The TCIVB Option Price and TCIVB Option Shares
are subject to adjustment pursuant to paragraph 12 below. This option is a
"Nonqualified Stock Option" and is hereinafter referred to as the "TCIVB
Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and conditions
herein and in tandem with the TCIVB Option, the Grantee shall also have, during
the TCIVB Option Term, subject to earlier termination as provided in paragraphs
8 and 12(b) below, a stock appreciation right with respect to each TCIVB Option
Share (individually, a "TCIVB Tandem
1
<PAGE> 2
SAR" and collectively, the "TCIVB Tandem SARs"). Upon exercise of a TCIVB Tandem
SAR in accordance with this Agreement, the Company shall, subject to paragraph 6
below, make payment as follows:
(a) the amount of payment shall equal the amount by which the Fair
Market Value of the TCIVB Option Share on the date of exercise exceeds the
TCIVB Option Price; and
(b) payment of the amount determined in accordance with clause (i) shall
be made in shares of TCIVB (valued at their Fair Market Value as of the
date of exercise of such TCIVB Tandem SAR), or, in the sole discretion of
the Compensation Committee of the Board of Directors of the Company (the
"Committee"), in cash, or partly in cash and partly in shares of TCIVB.
3. REDUCTION UPON EXERCISE. The exercise of any number of TCIVB Tandem SARs
shall cause a corresponding reduction in the number of TCIVB Option Shares which
shall apply against the TCIVB Option Shares then available for purchase. The
exercise of the TCIVB Option to purchase any number of TCIVB Option Shares shall
cause a corresponding reduction in the number of TCIVB Tandem SARs.
4. CONDITIONS OF EXERCISE. The TCIVB Option and TCIVB Tandem SARs are
exercisable only in accordance with the conditions stated in this paragraph.
(a) Except as otherwise provided in paragraph 12(b) below or in the
last sentence of this subparagraph (a), the TCIVB Option shall not be
exercisable until September 3, 1999, and the TCIVB Option may only be
exercised to the extent the TCIVB Option Shares have become available for
purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of TCIVB Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
December 16, 1998 20%
December 16, 1999 40%
December 16, 2000 60%
December 16, 2001 80%
December 16, 2002 100%
</TABLE>
Notwithstanding the foregoing, all TCIVB Option Shares shall become
available for purchase if Grantee's employment with the Company and its
Subsidiaries (i) shall terminate by reason of (x) termination by the
Company without cause (as defined in Section 11.2(b) of the Plan), (y)
termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company which
expressly
2
<PAGE> 3
permit the Grantee to terminate such employment upon the occurrence of
specified events (other than the giving of notice and passage of time), or
(iii) if Grantee dies while employed by the Company or a Subsidiary.
(b) A TCIVB Tandem SAR with respect to an TCIVB Option Share shall be
exercisable only if the TCIVB Option Share is then available for purchase
in accordance with subparagraph (a).
(c) To the extent the TCIVB Option or TCIVB Tandem SARs become
exercisable, such TCIVB Option or TCIVB Tandem SARs may be exercised in
whole or in part (at any time or from time to time, except as otherwise
provided herein) until expiration of the TCIVB Option Term or earlier
termination thereof.
(d) Grantee acknowledges and agrees that the Committee may, in its
discretion and as contemplated by Section 7.5 of the Plan, adopt rules and
regulations from time to time after the date hereof with respect to the
exercise of TCIVB SARs and that the exercise by Grantee of the TCIVB Tandem
SARs will be subject to the further condition that such exercise is made in
accordance with all such rules and regulations as the Committee may
determine are applicable thereto.
5. MANNER OF EXERCISE. The TCIVB Option or a TCIVB Tandem SAR shall be
considered exercised (as to the number of TCIVB Option Shares or TCIVB Tandem
SARs specified in the notice referred to in subparagraph (a) below) on the
latest of (i) the date of exercise designated in the written notice referred to
in subparagraph (a) below, (ii) if the date so designated is not a business day,
the first business day following such date or (iii) the earliest business day by
which the Company has received all of the following:
(a) Written notice, in such form as the Committee may require,
designating, among other things, the date of exercise, the number of TCIVB
Option Shares to be purchased and/or the number of TCIVB Tandem SARs to be
exercised;
(b) If the TCIVB Option is to be exercised, payment of the TCIVB Option
Price for each TCIVB Option Share to be purchased in cash or in such other
form, or combination of forms, of payment contemplated by Section 6.6(a) of
the Plan as the Committee may permit; provided, however, that any shares of
TCIVB (or, if applicable, shares of Series B TCI Group Common Stock
("TCOMB")) delivered in payment of the TCIVB Option Price, if such form of
payment is so permitted by the Committee, shall be shares that the Grantee
has owned for a period of at least six months prior to the date of
exercise, and provided, further, that, notwithstanding clause (vii) of
Section 6.6(a) of the Plan, TCIVB Option Shares may not be withheld in
payment or partial payment of the TCIVB Option Price; and
(c) Any other documentation that the Committee may reasonably require.
3
<PAGE> 4
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and agrees that
the Company shall deduct from the cash and/or shares of TCIVB (or, if
applicable, shares of TCOMB) otherwise payable or deliverable upon exercise of
the TCIVB Option or a TCIVB Tandem SAR an amount of cash and/or number of shares
of TCIVB (valued at their Fair Market Value on the date of exercise) that is
equal to the amount of all federal, state and local taxes required to be
withheld by the Company upon such exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt of all
items referred to in paragraph 5, and subject to the withholding referred to in
paragraph 6, the Company shall deliver to the Grantee certificates issued in
Grantee's name for the number of TCIVB Option Shares purchased by exercise of
the TCIVB Option and for the number of shares of TCIVB to which the Grantee is
entitled by the exercise of TCIVB Tandem SARs and any cash payment to which the
Grantee is entitled by the exercise of TCIVB Tandem SARs. If delivery is by
mail, delivery of shares of TCIVB shall be deemed effected for all purposes when
a stock transfer agent of the Company shall have deposited the certificates in
the United States mail, addressed to the Grantee, and any cash payment shall be
deemed effected when a Company check, payable to Grantee and in an amount equal
to the amount of the cash payment, shall have been deposited in the United
States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise determined
by the Committee in its sole discretion, the TCIVB Option and TCIVB Tandem SARs
shall terminate, prior to the expiration of the TCIVB Option Term, at the time
specified below:
(a) If Grantee's employment with the Company and its Subsidiaries
terminates (i) other than (x) by the Company for "cause" (as defined in
Section 11.2(b) of the Plan), (y) by the Grantee with "good reason" (as
defined herein) or (z) by the Company without cause, and (ii) other than
(x) by reason of death or Disability, (y) with the written consent of the
Company or the applicable Subsidiary or (z) without such consent if such
termination is pursuant to provisions of a written employment agreement, if
any, between the Grantee and the Company which expressly permit the Grantee
to terminate such employment upon the occurrence of specified events (other
than the giving of notice and passage of time), then the TCIVB Option and
all TCIVB Tandem SARs shall terminate at the Close of Business on the first
business day following the expiration of the 90-day period which began on
the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a Subsidiary, or
prior to the expiration of a period of time following termination of
Grantee's employment during which the TCIVB Option and TCIVB Tandem SARs
remain exercisable as provided in paragraph (a), the TCIVB Option and all
TCIVB Tandem SARs shall terminate at the Close of Business on the first
business day following the expiration of the one-year period which began on
the date of death;
4
<PAGE> 5
(c) If Grantee's employment with the Company and its Subsidiaries
terminates by reason of Disability, then the TCIVB Option and all TCIVB
Tandem SARs shall terminate at the Close of Business on the first business
day following the expiration of the one-year period which began on the date
of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its Subsidiaries is
terminated by the Company for "cause" (as defined in Section 11.2(b) of the
Plan), then the TCIVB Option and all TCIVB Tandem SARs shall terminate
immediately upon such termination of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee (x) with "good
reason" (as defined herein), (y) with the written consent of the Company or
the applicable Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of notice and passage
of time), or (ii) by the Company without "cause" (as defined in Section
11.2(b) of the Plan), then the TCIVB Option Term shall terminate early only
as provided for in paragraph 8(b) above or 12(b) below.
In any event in which the TCIVB Option and TCIVB Tandem SARs remain
exercisable for a period of time following the date of termination of Grantee's
employment as provided above, the TCIVB Option and TCIVB Tandem SARs may be
exercised during such period of time only to the extent the same were
exercisable as provided in paragraph 4 above on such date of termination of
Grantee's employment. A change of employment is not a termination of employment
within the meaning of this paragraph 8 provided that, after giving effect to
such change, the Grantee continues to be an employee of the Company or any
Subsidiary. Notwithstanding any period of time referenced in this paragraph 8 or
any other provision of this paragraph that may be construed to the contrary, the
TCIVB Option and all TCIVB Tandem SARs shall in any event terminate upon the
expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to have
occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in effect any
employee benefit plan in which Grantee was participating or (y) the taking
of any action by the Company that would adversely affect Grantee's
participation in, or materially reduce Grantee's benefits under, any such
employee benefit plan, unless such failure or such taking of any action,
adversely affects the senior members of the corporate management of the
Company generally;
5
<PAGE> 6
(iii) the assignment to Grantee of duties and responsibilities that
are materially more oppressive or onerous than those attendant to Grantee's
position immediately after the date hereof;
(iv) the relocation of the office location as assigned to Grantee by
the Company to a location more than 20 miles from Grantee's then current
location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time of any
reorganization, merger, consolidation, disposition of all or substantially
all of the assets of the Company or similar transaction effective after the
date hereof, in which the Company is not the surviving person, the
unconditional assumption in writing or by operation of law of the Company's
obligations to Grantee under this Agreement by each direct successor to the
Company in any such transaction.
9. AUTOMATIC EXERCISE OF TCIVB TANDEM SARS. Immediately prior to the
termination of the TCIVB Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining TCIVB Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF TCIVB OPTION AND TCIVB TANDEM SARS. During
Grantee's lifetime, the TCIVB Option and TCIVB Tandem SARs are not transferable
(voluntarily or involuntarily) other than pursuant to a domestic relations order
and, except as otherwise required pursuant to a domestic relations order, are
exercisable only by the Grantee or Grantee's court appointed legal
representative. The Grantee may designate a beneficiary or beneficiaries to whom
the TCIVB Option and TCIVB Tandem SARs shall pass upon Grantee's death and may
change such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on the form annexed hereto as
Exhibit B or such other form as may be prescribed by the Committee, provided
that no such designation shall be effective unless so filed prior to the death
of Grantee. If no such designation is made or if the designated beneficiary does
not survive the Grantee's death, the TCIVB Option and TCIVB Tandem SARs shall
pass by will or the laws of descent and distribution. Following Grantee's death,
the TCIVB Option and any TCIVB Tandem SARs, if otherwise exercisable, may be
exercised by the person to whom such option or right passes accordingly to the
foregoing and such person shall be deemed the Grantee for purposes of any
applicable provisions of this Agreement.
11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any purpose
to be, or to have any of the rights of, a stockholder of the Company with
respect to any shares of TCIVB as to which this Agreement relates until such
shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 11.18 of the Plan.
6
<PAGE> 7
12. ADJUSTMENTS.
(a) The TCIVB Option and TCIVB Tandem SARs shall be subject to
adjustment (including, without limitation, as to the number of TCIVB Option
Shares and the TCIVB Option Price per share) in the sole discretion of the
Committee and in such manner as the Committee may deem equitable and
appropriate in connection with the occurrence of any of the events
described in Section 4.2 of the Plan following the Grant Date.
(b) In the event of any Approved Transaction, Board Change or Control
Purchase, the TCIVB Option and all TCIVB Tandem SARs shall become
exercisable in full without regard to paragraph 4(a); provided, however,
that to the extent not theretofore exercised the TCIVB Option and all TCIVB
Tandem SARs shall terminate upon the first to occur of the consummation of
the Approved Transaction, the expiration of the TCIVB Option Term or the
earlier termination of the TCIVB Option and TCIVB Tandem SARs pursuant to
paragraph 8 hereof. Notwithstanding the foregoing, the Committee may, in
its discretion, determine that the TCIVB Option and TCIVB Tandem SARs will
not become exercisable on an accelerated basis in connection with an
Approved Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the surviving or
acquiring corporation, as the case may be, shall have taken or made
effective provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for the
Award evidenced by this Agreement or to assume this Agreement and the Award
evidenced hereby and in order to make such new or assumed Award, as nearly
as may be practicable, equivalent to the Award evidenced by this Agreement
as then in effect (but before giving effect to any acceleration of the
exercisability hereof unless otherwise determined by the Committee), taking
into account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the TCIVB may be changed, converted
or exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section
11.9 of the Plan, the Grantee agrees that Grantee will not exercise the TCIVB
Option or any TCIVB Tandem SAR and that the Company will not be obligated to
deliver any shares of TCIVB or make any cash payment, if counsel to the Company
determines that such exercise, delivery or payment would violate any applicable
law or any rule or regulation of any governmental authority or any rule or
regulation of, or agreement of the Company with, any securities exchange or
association upon which the TCIVB is listed or quoted. The Company shall in no
event be obligated to take any affirmative action in order to cause the exercise
of the TCIVB Option or any TCIVB Tandem SAR or the resulting delivery of shares
of TCIVB or other payment to comply with any such law, rule, regulation or
agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of a
different procedure or address for the Company, any notice or other
communication to the Company with respect to this Agreement shall be in writing
and shall be:
7
<PAGE> 8
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P. O. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by first
class mail, postage prepaid, to Grantee's address as listed in the records of
the Company on the Grant Date, unless the Company has received written
notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this Agreement
may be supplemented or amended from time to time as approved by the Committee as
contemplated by Section 11.8(b) of the Plan. Without limiting the generality of
the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to cure any
ambiguity or to correct or supplement any provision herein which may be
defective or inconsistent with any other provision herein, or (ii) to add
to the covenants and agreements of the Company for the benefit of Grantee
or surrender any right or power reserved to or conferred upon the Company
in this Agreement, subject, however, to any required approval of the
Company's stockholders and, provided, in each case, that such changes or
corrections shall not adversely affect the rights of Grantee with respect
to the Award evidenced hereby, or (iii) to make such other changes as the
Company, upon advice of counsel, determines are necessary or advisable
because of the adoption or promulgation of, or change in or of the
interpretation of, any law or governmental rule or regulation, including
any applicable federal or state securities laws; and
(b) subject to Section 11.8(b) of the Plan and any required approval
of the Company's stockholders, the Award evidenced by this Agreement may be
cancelled by the Committee and a new Award made in substitution therefor,
provided that the Award so substituted shall satisfy all of the
requirements of the Plan as of the date such new Award is made and no such
action shall adversely affect the TCIVB Option or any TCIVB Tandem SAR to
the extent then exercisable.
8
<PAGE> 9
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action
of the Company or the Committee with respect hereto, shall confer or be
construed to confer on the Grantee any right to continue in the employ of the
Company or any of its Subsidiaries or interfere in any way with the right of the
Company or any employing Subsidiary to terminate the Grantee's employment at any
time, with or without cause; subject, however, to the provisions of any
employment agreement between the Grantee and the Company or any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
18. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits and
Schedules appended hereto, including the Plan. This Agreement is entered into,
and the Award evidenced hereby is granted, pursuant to the Plan and shall be
governed by and construed in accordance with the Plan and the administrative
interpretations adopted by the Committee thereunder. All decisions of the
Committee upon questions regarding the Plan or this Agreement shall be
conclusive. Unless otherwise expressly stated herein, in the event of any
inconsistency between the terms of the Plan and this Agreement, the terms of the
Plan shall control. The headings of the paragraphs of this Agreement have been
included for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
Grantee regarding the subject matter hereof. Grantee and the Company hereby
declare and represent that no promise or agreement not herein expressed has been
made and that this Agreement contains the entire agreement between the parties
hereto with respect to the TCIVB Options and TCIVB Tandem SARs and replaces and
makes null and void any prior agreements between Grantee and the Company
regarding the TCIVB Options.
9
<PAGE> 10
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms and
conditions of this Agreement by signing in the space provided at the end hereof
and returning a signed copy to the Company.
TELE-COMMUNICATIONS, INC.
By:
-------------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
Secretary and General Counsel
ACCEPTED:
-----------------------------------------
10
<PAGE> 11
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights Agreement
dated as of March 1, 1999
TELE-COMMUNICATIONS, INC. 1998 INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, ________________________________________ (the "Grantee"), hereby declare
that upon my death ______________________________________ (the "Beneficiary") of
Name
_______________________________________________________________________________,
Street Address City State Zip Code
who is my ____________________________________________, shall be entitled to the
Relationship to Grantee
TCIVB Option, TCIVB Tandem SARs and all other rights accorded the Grantee by the
above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant to
the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the laws
of descent and distribution.
It is further understood that all prior designations of beneficiary under
the Agreement are hereby revoked and that this Designation of Beneficiary may
only be revoked in writing, signed by the Grantee, and filed with the Company
prior to the Grantee's death.
- ------------------------------- --------------------------------------------
Date Grantee
11
<PAGE> 1
EXHIBIT 10.42
1998 PLAN
TCOMA RESTRICTED STOCK
6/23/98 GRANT
TELE-COMMUNICATIONS, INC.
1998 INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 23rd day of
June, 1998 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1998
Incentive Plan (the "Plan"), a copy of which is appended to this Agreement as
Exhibit A and by this reference made a part hereof, for the benefit of eligible
employees of the Company and its Subsidiaries. Capitalized terms used and not
otherwise defined herein shall have the meaning ascribed thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to encourage
Grantee to remain in the employ of the Company or its Subsidiaries and to
increase Grantee's personal interest in the continued success and progress of
the Company.
The Company and Grantee therefore agree as follows:
1. AWARD. Pursuant to the terms of the Plan and in consideration of the
covenants and promises of Grantee herein contained, the Company hereby awards to
Grantee as of the Grant Date, a total of 200,000 shares of Series A TCI Group
("TCOMA") Common Stock, subject to the conditions and restrictions set forth
below and in the Plan (the "Restricted Shares").
2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION
PERIOD. Upon issuance of the Restricted Shares the stock certificate or
certificates representing such Restricted Shares shall be registered in the name
of Grantee. During the Restriction Period, certificates representing the
Restricted Shares and any securities constituting Retained Distributions shall
bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in the
Plan and this Agreement. Such certificates shall remain in the custody of the
Company and Grantee shall deposit with the Company stock powers or other
instruments of assignment, each endorsed in blank, so as to permit retransfer to
the Company of all
-1-
<PAGE> 2
or any portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and this Agreement.
3. RESTRICTIONS. Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. Grantee will have
the right to vote such Restricted Shares, to receive and retain such dividends
and distributions, as the Committee may in its sole discretion designate, paid
or distributed on such Restricted Shares and to exercise all other rights,
powers and privileges of a Holder of Common Stock with respect to such
Restricted Shares; except, that (a) Grantee will not be entitled to delivery of
the stock certificate or certificates representing such Restricted Shares until
the Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled or waived; (b) the
Company will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period as provided in
Section 8.2 of the Plan; (c) other than such dividends and distributions as the
Committee may in its sole discretion designate, the Company will retain custody
of all distributions ("Retained Distributions") made or declared with respect to
the Restricted Shares (and such Retained Distributions will be subject to the
same restrictions, terms and vesting and other conditions as are applicable to
the Restricted Shares) until such time, if ever, as the Restricted Shares with
respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) Grantee may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares
or any Retained Distributions or his interest in any of them during the
Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.
4. VESTING AND FORFEITURE OF RESTRICTED STOCK: Subject to earlier
vesting in accordance with the provisions of Paragraph 7(b) below, Grantee shall
become vested as to 50% of the shares of Restricted Shares subject to this
Agreement as of four years following the Grant Date, and Grantee shall become
vested as to the remaining 50% of the shares of Restricted Shares subject to
this Agreement as of five years following the Grant Date, each such date being a
Vesting Date; provided, however, that Grantee shall not vest, pursuant to this
Paragraph 4, in shares of Restricted Shares as to which Grantee would otherwise
vest as of a given date if Grantee has not been continuously employed by the
Company or its Subsidiaries from the date of this Agreement through such date
(the vesting or forfeiture of such shares to be governed instead by the
provisions of Paragraph 5). Notwithstanding the foregoing, in the event that any
date on which vesting would otherwise occur is a Saturday, Sunday or a holiday,
such vesting shall instead occur on the business day next following such date.
5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the
Committee in its sole discretion, the Award shall terminate, to the extent not
theretofore vested, prior to the expiration of the Restricted Period, at the
time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 10.2(b) of the Plan),
-2-
<PAGE> 3
(y) by the Grantee with "good reason" (as defined herein) or (z) by the
Company without cause, and (ii) other than (x) by reason of death or
Disability, (y) with the written consent of the Company or the
applicable Subsidiary or (z) without such consent if such termination
is pursuant to provisions of a written employment agreement, if any,
between the Grantee and the Company which expressly permit the Grantee
to terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), then the Award,
to the extent not theretofore vested, shall be forfeited immediately;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which any portion of the
Award remains unvested as provided in paragraph (a), then the Award, to
the extent not theretofore vested, shall immediately become fully
vested;
(c) If Grantee's employment with the Company terminates by
reason of Disability, then the Award, to the extent not theretofore
vested, shall immediately become fully vested;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), then the Award, to the extent not
theretofore vested, shall be forfeited immediately; or
(e) If Grantee's employment (i) is terminated by Grantee (x)
with "good reason" (as defined herein), (y) with the written consent of
the Company or the applicable Subsidiary or (z) pursuant to provisions
of a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such employment
upon the occurrence of specified events (other than the giving of
notice and passage of time), or (ii) by the Company without "cause" (as
defined in Section 10.2(b) of the Plan), then the Award, to the extent
not theretofore vested, shall immediately become fully vested.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in effect
any employee benefit plan in which Grantee was participating or (y) the
taking of any action by the Company that would adversely affect
Grantee's participation in, or materially reduce Grantee's benefits
under, any such employee benefit plan, unless such failure or such
taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and responsibilities
that are materially more oppressive or onerous than those attendant to
Grantee's position immediately after the date hereof;
-3-
<PAGE> 4
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time of
any reorganization, merger, consolidation, disposition of all or
substantially all of the assets of the Company or similar transaction
effective after the date hereof, in which the Company is not the
surviving person, the unconditional assumption in writing or by
operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares shall
become vested to the extent that the Restricted Shares related thereto shall
have become vested and (c) any cash award to be received by Grantee with respect
to such Restricted Shares shall become payable, all in accordance with the terms
of this Agreement. Any such Restricted Shares, Retained Distributions and any
unpaid Dividend Equivalents that shall not become vested shall be forfeited to
the Company and Grantee shall not thereafter have any rights (including dividend
and voting rights) with respect to such Restricted Shares, Retained
Distributions and any unpaid Dividend Equivalents that shall have been so
forfeited. The Committee may, in its discretion, provide that the delivery of
any Restricted Shares, Retained Distributions and unpaid Dividend Equivalents
that shall have become vested, and payment of any cash awards that shall have
become payable, shall be deferred until such date or dates as the recipient may
elect. Any election of a recipient pursuant to the preceding sentence shall be
filed in writing with the Committee in accordance with such rules and
regulations, including any deadline for the making of such an election, as the
Committee may provide.
7. ADJUSTMENTS.
(a) The Restricted Shares shall be subject to adjustment
(including, without limitation, as to the number of Restricted Shares)
in the sole discretion of the Committee and in such manner as the
Committee may deem equitable and appropriate in connection with the
occurrence of any of the events described in Section 4.2 of the Plan
following the Grant Date.
-4-
<PAGE> 5
(b) In the event of any Approved Transaction, Board Change or
Control Purchase, the restrictions in Paragraph 3 shall lapse.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the restrictions in Paragraph 3 will not lapse on an
accelerated basis in connection with an Approved Transaction, if the
Board or the surviving or acquiring corporation, as the case may be,
shall have taken or made effective provision for the taking of such
action as in the opinion of the Committee is equitable and appropriate
to substitute a new Award for the Award evidenced by this Agreement or
to assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which the TCOMA Common Stock may be
changed, converted or exchanged in connection with the Approved
Transaction.
8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the
Restriction Period, Grantee (or Beneficiary, as defined in Paragraph 10 below)
must remit to the Company the amount of all federal, state and other
governmental withholding tax requirements imposed upon the Company with respect
to the vesting of shares of Restricted Stock, unless provisions to so pay such
withholding requirements have been made to the satisfaction of the Committee.
Upon the payment of any cash dividends with respect to shares of Restricted
Stock during the Restriction Period, the amount of such dividends shall be
reduced to the extent necessary to satisfy any withholding tax requirements
applicable thereto prior to payment to Grantee.
9. DELIVERY BY THE COMPANY. As soon as practicable after vesting in
Restricted Shares pursuant to Paragraphs 4 or 5, and subject to the withholding
referred to in paragraph 8, the Company shall deliver to Grantee certificates
issued in Grantee's name for the number of Restricted Shares. If delivery is by
mail, delivery of shares of TCOMA Common Stock shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to Grantee, and any cash
payment shall be deemed effected when a Company check, payable to Grantee and in
an amount equal to the amount of the cash payment, shall have been deposited in
the United States mail, addressed to Grantee.
10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before
vesting and during Grantee's lifetime, the Restricted Shares are not
transferable (voluntarily or involuntarily) other than pursuant to a domestic
relations order and, except as otherwise required pursuant to a domestic
relations order, are exercisable only by Grantee or Grantee's court appointed
legal representative. The Grantee may designate a beneficiary or beneficiaries
to whom the Restricted Shares shall pass upon Grantee's death and may change
such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on the form annexed hereto as
Exhibit B or such other form as may be prescribed by the Committee, provided
that no such designation shall be effective unless so filed prior to the death
of Grantee. If no such designation is made or if the designated beneficiary does
not survive the Grantee's death, the Restricted Shares
-5-
<PAGE> 6
shall pass by will or the laws of descent and distribution. Following Grantee's
death, the Restricted Shares shall pass accordingly to the designated
beneficiary and such person shall be deemed the Grantee for purposes of any
applicable provisions of this Agreement.
11. COMPANY'S RIGHTS. The existence of this Agreement shall not affect
in any way the right or power of the Company or its stockholders to accomplish
any corporate act, including, without limitation, the acts referred to in
Section 11.18 of the Plan.
12. LIMITATION OF RIGHTS: Nothing in this Agreement or the Plan shall
be construed to:
(a) give Grantee any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give Grantee or any other person any interest in any fund
or in any specified asset or assets of the Company or any subsidiary of
the Company; or
(c) confer upon Grantee the right to continue in the
employment or service of the Company or any subsidiary of the Company,
or affect the right of the Company or any subsidiary of the Company to
terminate the employment or service of Grantee at any time or for any
reason.
13. PREREQUISITES TO BENEFITS: Neither Grantee nor any person claiming
through Grantee shall have any right or interest in the Restricted Shares
awarded hereunder, unless and until all the terms, conditions and provisions of
this Agreement and the Plan which affect the Grantee or such other person shall
have been complied with as specified herein.
14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of
Section 11.9 of the Plan, Grantee agrees that Grantee will not require the
Company to deliver any Restricted Shares and that the Company will not be
obligated to deliver any Restricted Shares or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TCOMA Common Stock is listed or quoted.
The Company shall in no event be obligated to take any affirmative action in
order to cause the delivery of any Restricted Shares or other payment to comply
with any such law, rule, regulation or agreement.
15. NOTICE. Unless the Company notifies Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
-6-
<PAGE> 7
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and addressed as
follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P. O. Box 5630
Denver, Colorado 80217
Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by first
class mail, postage prepaid, to Grantee's address as listed in the records of
the Company on the Grant Date, unless the Company has received written
notification from Grantee of a change of address.
16. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 11.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of Grantee,
(a) this Agreement may be amended or supplemented (i) to cure
any ambiguity or to correct or supplement any provision herein which
may be defective or inconsistent with any other provision herein, or
(ii) to add to the covenants and agreements of the Company for the
benefit of Grantee or surrender any right or power reserved to or
conferred upon the Company in this Agreement, subject, however, to any
required approval of the Company's stockholders and, provided, in each
case, that such changes or corrections shall not adversely affect the
rights of Grantee with respect to the Award evidenced hereby, or (iii)
to make such other changes as the Company, upon advice of counsel,
determines are necessary or advisable because of the adoption or
promulgation of, or change in or of the interpretation of, any law or
governmental rule or regulation, including any applicable federal or
state securities laws; and
(b) subject to Section 11.8(b) of the Plan and any required
approval of the Company's stockholders, the Award evidenced by this
Agreement may be canceled by the Committee and a new Award made in
substitution therefor, provided that the Award so substituted shall
satisfy all of the requirements of the Plan as of the date such new
Award is made and no such action shall adversely affect the Restricted
Shares to the extent then vested.
17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no
action of the Company or the Committee with respect hereto, shall confer or be
construed to confer on Grantee
-7-
<PAGE> 8
any right to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or any employing Subsidiary
to terminate Grantee's employment at any time, with or without cause; subject,
however, to the provisions of any employment agreement between Grantee and the
Company or any Subsidiary.
18. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware.
19. CONSTRUCTION. References in this Agreement to "this Agreement" and
the words "herein," "hereof," "hereunder" and similar terms include all Exhibits
and Schedules appended hereto, including the Plan. This Agreement is entered
into, and the Award evidenced hereby is granted, pursuant to the Plan and shall
be governed by and construed in accordance with the Plan and the administrative
interpretations adopted by the Committee thereunder. All decisions of the
Committee upon questions regarding the Plan or this Agreement shall be
conclusive. Unless otherwise expressly stated herein, in the event of any
inconsistency between the terms of the Plan and this Agreement, the terms of the
Plan shall control. The headings of the paragraphs of this Agreement have been
included for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
20. DUPLICATE ORIGINALS. The Company and Grantee may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
21. RULES BY COMMITTEE. The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Committee may adopt from time to time hereafter.
22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu
of all prior discussions and agreements, oral or written, between the Company
and Grantee. Grantee and the Company hereby declare and represent that no
promise or agreement not herein expressed has been made and that this Agreement
contains the entire agreement between the parties hereto with respect to the
Restricted Shares and replaces and makes null and void any prior agreements
between Grantee and the Company regarding the Restricted Shares.
-8-
<PAGE> 9
23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms
and conditions of this Agreement by signing in the space provided at the end
hereof and returning a signed copy to the Company.
TELE-COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
ACCEPTED:
------------------------------------
-9-
<PAGE> 10
Exhibit B to Restricted Stock Award
Agreement dated as of June 23, 1998
TELE-COMMUNICATIONS, INC. 1998 INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, ___________________________________ (the "Grantee"), hereby declare
that upon my death _____________________________________ (the "Beneficiary") of
Name
_____________________________________________________________________________,
Street Address City State Zip Code
who is my ___________________________________________, shall be entitled to the
Relationship to Grantee
Restricted Shares and all other rights accorded the Grantee by the
above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the laws
of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------------- --------------------------------------
Date Grantee
-10-
<PAGE> 1
EXHIBIT 10.43
1998 PLAN
TCOMA RESTRICTED STOCK
11/15/98 GRANT
TELE-COMMUNICATIONS, INC.
1998 INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 15th day of November,
1998 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and the person signing adjacent to the caption
"Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1998 Incentive
Plan (the "Plan"), a copy of which is appended to this Agreement as Exhibit A
and by this reference made a part hereof, for the benefit of eligible employees
of the Company and its Subsidiaries. Capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board (the
"Committee"), which has been assigned responsibility for administering the Plan,
has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to encourage
Grantee to remain in the employ of the Company or its Subsidiaries and to
increase Grantee's personal interest in the continued success and progress of
the Company.
The Company and Grantee therefore agree as follows:
1. AWARD. Pursuant to the terms of the Plan and in consideration of the
covenants and promises of Grantee herein contained, the Company hereby awards to
Grantee as of the Grant Date, a total of 50,000 shares of Series A TCI Group
("TCOMA") Common Stock, subject to the conditions and restrictions set forth
below and in the Plan (the "Restricted Shares").
2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION PERIOD.
Upon issuance of the Restricted Shares the stock certificate or certificates
representing such Restricted Shares shall be registered in the name of Grantee.
During the Restriction Period, certificates representing the Restricted Shares
and any securities constituting Retained Distributions shall bear a restrictive
legend to the effect that ownership of the Restricted Shares (and such Retained
Distributions), and the enjoyment of all rights appurtenant thereto, are subject
to the restrictions, terms and conditions provided in the Plan and this
Agreement. Such certificates shall remain in the custody of the Company and
Grantee shall deposit with the Company stock powers or other instruments of
assignment, each endorsed in blank, so as to permit retransfer to the Company of
all
-1-
<PAGE> 2
or any portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and this Agreement.
3. RESTRICTIONS. Restricted Shares shall constitute issued and outstanding
shares of Common Stock for all corporate purposes. Grantee will have the right
to vote such Restricted Shares, to receive and retain such dividends and
distributions, as the Committee may in its sole discretion designate, paid or
distributed on such Restricted Shares and to exercise all other rights, powers
and privileges of a Holder of Common Stock with respect to such Restricted
Shares; except, that (a) Grantee will not be entitled to delivery of the stock
certificate or certificates representing such Restricted Shares until the
Restriction Period shall have expired and unless all other vesting requirements
with respect thereto shall have been fulfilled or waived; (b) the Company will
retain custody of the stock certificate or certificates representing the
Restricted Shares during the Restriction Period as provided in Section 8.2 of
the Plan; (c) other than such dividends and distributions as the Committee may
in its sole discretion designate, the Company will retain custody of all
distributions ("Retained Distributions") made or declared with respect to the
Restricted Shares (and such Retained Distributions will be subject to the same
restrictions, terms and vesting and other conditions as are applicable to the
Restricted Shares) until such time, if ever, as the Restricted Shares with
respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) Grantee may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares
or any Retained Distributions or his interest in any of them during the
Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.
4. VESTING AND FORFEITURE OF RESTRICTED STOCK: Subject to earlier vesting
in accordance with the provisions of Paragraph 7(b) below, Grantee shall become
vested as to 100% of the shares of Restricted Shares subject to this Agreement
as of two (2) years following the Grant Date; provided, however, that Grantee
shall not vest, pursuant to this Paragraph 4, in shares of Restricted Shares as
to which Grantee would otherwise vest as of a given date if Grantee has not been
continuously employed by the Company or its Subsidiaries from the date of this
Agreement through such date (the vesting or forfeiture of such shares to be
governed instead by the provisions of Paragraph 5). Notwithstanding the
foregoing, in the event that any date on which vesting would otherwise occur is
a Saturday, Sunday or a holiday, such vesting shall instead occur on the
business day next following such date.
5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the
Committee in its sole discretion, the Award shall terminate, to the extent not
theretofore vested, prior to the expiration of the Restricted Period, at the
time specified below:
(a) If Grantee's employment with the Company and its Subsidiaries
terminates (i) other than (x) by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), (y) by the Grantee with "good reason" (as
defined herein) or (z) by the Company without cause, and (ii) other than
(x) by reason of death or Disability, (y) with the written consent of
-2-
<PAGE> 3
the Company or the applicable Subsidiary or (z) without such consent if
such termination is pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which expressly
permit the Grantee to terminate such employment upon the occurrence of
specified events (other than the giving of notice and passage of time),
then the Award, to the extent not theretofore vested, shall be forfeited
immediately;
(b) If Grantee dies while employed by the Company or a Subsidiary, or
prior to the expiration of a period of time following termination of
Grantee's employment during which any portion of the Award remains
unvested as provided in paragraph (a), then the Award, to the extent not
theretofore vested, shall immediately become fully vested;
(c) If Grantee's employment with the Company terminates by reason of
Disability, then the Award, to the extent not theretofore vested, shall
immediately become fully vested;
(d) If Grantee's employment with the Company and its Subsidiaries is
terminated by the Company for "cause" (as defined in Section 10.2(b) of
the Plan), then the Award, to the extent not theretofore vested, shall be
forfeited immediately; or
(e) If Grantee's employment (i) is terminated by Grantee (x) with "good
reason" (as defined herein), (y) with the written consent of the Company
or the applicable Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of notice and
passage of time), or (ii) by the Company without "cause" (as defined in
Section 10.2(b) of the Plan), then the Award, to the extent not
theretofore vested, shall immediately become fully vested.
"Good reason" for purposes of the Agreement shall be deemed to have
occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in effect any
employee benefit plan in which Grantee was participating or (y) the taking
of any action by the Company that would adversely affect Grantee's
participation in, or materially reduce Grantee's benefits under, any such
employee benefit plan, unless such failure or such taking of any action,
adversely affects the senior members of the corporate management of the
Company generally;
(iii) the assignment to Grantee of duties and responsibilities that are
materially more oppressive or onerous than those attendant to Grantee's
position immediately after the date hereof;
(iv) the relocation of the office location as assigned to Grantee by
the Company to a location more than 20 miles from Grantee's current
location without
-3-
<PAGE> 4
Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time of any
reorganization, merger, consolidation, disposition of all or substantially
all of the assets of the Company or similar transaction effective after
the date hereof, in which the Company is not the surviving person, the
unconditional assumption in writing or by operation of law of the
Company's obligations to Grantee under this Agreement by each direct
successor to the Company in any such transaction.
6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with respect
to the award of Restricted Shares, and the satisfaction of any other applicable
restrictions, terms and conditions (a) all of such Restricted Shares shall
become vested, (b) any Retained Distributions and any unpaid Dividend
Equivalents with respect to such Restricted Shares shall become vested and (c)
any cash award to be received by Grantee with respect to such Restricted Shares
shall become payable, all in accordance with the terms of this Agreement. Any
such Restricted Shares, Retained Distributions and any unpaid Dividend
Equivalents that shall not become vested shall be forfeited to the Company and
Grantee shall not thereafter have any rights (including dividend and voting
rights) with respect to such Restricted Shares, Retained Distributions and any
unpaid Dividend Equivalents that shall have been so forfeited. The Committee
may, in its discretion, provide that the delivery of any Restricted Shares,
Retained Distributions and unpaid Dividend Equivalents that shall have become
vested, and payment of any cash awards that shall have become payable, shall be
deferred until such date or dates as the recipient may elect. Any election of a
recipient pursuant to the preceding sentence shall be filed in writing with the
Committee in accordance with such rules and regulations, including any deadline
for the making of such an election, as the Committee may provide.
7. ADJUSTMENTS.
(a) The Restricted Shares shall be subject to adjustment (including,
without limitation, as to the number of Restricted Shares) in the sole
discretion of the Committee and in such manner as the Committee may deem
equitable and appropriate in connection with the occurrence of any of the
events described in Section 4.2 of the Plan following the Grant Date.
-4-
<PAGE> 5
(b) In the event of any Approved Transaction, Board Change or Control
Purchase, the restrictions in Paragraph 3 shall lapse. Notwithstanding the
foregoing, the Committee may, in its discretion, determine that the
restrictions in Paragraph 3 will not lapse on an accelerated basis in
connection with an Approved Transaction, if the Board or the surviving or
acquiring corporation, as the case may be, shall have taken or made
effective provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for the
Award evidenced by this Agreement or to assume this Agreement and the
Award evidenced hereby and in order to make such new or assumed Award, as
nearly as may be practicable, equivalent to the Award evidenced by this
Agreement as then in effect (but before giving effect to any acceleration
of the exercisability hereof unless otherwise determined by the
Committee), taking into account, to the extent applicable, the kind and
amount of securities, cash or other assets into or for which the TCOMA
Common Stock may be changed, converted or exchanged in connection with the
Approved Transaction.
8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the Restriction
Period, Grantee (or Beneficiary, as defined in Paragraph 10 below) must remit to
the Company the amount of all federal, state and other governmental withholding
tax requirements imposed upon the Company with respect to the vesting of shares
of Restricted Stock, unless provisions to so pay such withholding requirements
have been made to the satisfaction of the Committee. Upon the payment of any
cash dividends with respect to shares of Restricted Stock during the Restriction
Period, the amount of such dividends shall be reduced to the extent necessary to
satisfy any withholding tax requirements applicable thereto prior to payment to
Grantee.
9. DELIVERY BY THE COMPANY. As soon as practicable after vesting in
Restricted Shares pursuant to Paragraphs 4 or 5, and subject to the withholding
referred to in paragraph 8, the Company shall deliver to Grantee certificates
issued in Grantee's name for the number of Restricted Shares. If delivery is by
mail, delivery of shares of TCOMA Common Stock shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to Grantee, and any cash
payment shall be deemed effected when a Company check, payable to Grantee and in
an amount equal to the amount of the cash payment, shall have been deposited in
the United States mail, addressed to Grantee.
10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before vesting
and during Grantee's lifetime, the Restricted Shares are not transferable
(voluntarily or involuntarily) other than pursuant to a domestic relations order
and, except as otherwise required pursuant to a domestic relations order, are
exercisable only by Grantee or Grantee's court appointed legal representative.
The Grantee may designate a beneficiary or beneficiaries to whom the Restricted
Shares shall pass upon Grantee's death and may change such designation from time
to time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the Restricted Shares shall pass by will or the laws of descent and
distribution. Following Grantee's death, the Restricted Shares
-5-
<PAGE> 6
shall pass accordingly to the designated beneficiary and such person shall be
deemed the Grantee for purposes of any applicable provisions of this Agreement.
11. COMPANY'S RIGHTS. The existence of this Agreement shall not affect in
any way the right or power of the Company or its stockholders to accomplish any
corporate act, including, without limitation, the acts referred to in Section
11.18 of the Plan.
12. LIMITATION OF RIGHTS: Nothing in this Agreement or the Plan shall be
construed to:
(a) give Grantee any right to be awarded any further restricted stock
other than in the sole discretion of the Committee;
(b) give Grantee or any other person any interest in any fund or in any
specified asset or assets of the Company or any subsidiary of the Company;
or
(c) confer upon Grantee the right to continue in the employment or
service of the Company or any subsidiary of the Company, or affect the
right of the Company or any subsidiary of the Company to terminate the
employment or service of Grantee at any time or for any reason.
13. PREREQUISITES TO BENEFITS: Neither Grantee nor any person claiming
through Grantee shall have any right or interest in the Restricted Shares
awarded hereunder, unless and until all the terms, conditions and provisions of
this Agreement and the Plan which affect the Grantee or such other person shall
have been complied with as specified herein.
14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of
Section 11.9 of the Plan, Grantee agrees that Grantee will not require the
Company to deliver any Restricted Shares and that the Company will not be
obligated to deliver any Restricted Shares or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TCOMA Common Stock is listed or quoted.
The Company shall in no event be obligated to take any affirmative action in
order to cause the delivery of any Restricted Shares or other payment to comply
with any such law, rule, regulation or agreement.
15. NOTICE. Unless the Company notifies Grantee in writing of a different
procedure, any notice or other communication to the Company with respect to this
Agreement shall be in writing and shall be:
-6-
<PAGE> 7
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P. O. Box 5630
Denver, Colorado 80217
Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by first
class mail, postage prepaid, to Grantee's address as listed in the records of
the Company on the Grant Date, unless the Company has received written
notification from Grantee of a change of address.
16. AMENDMENT. Notwithstanding any other provisions hereof, this Agreement
may be supplemented or amended from time to time as approved by the Committee as
contemplated by Section 11.8(b) of the Plan. Without limiting the generality of
the foregoing, without the consent of Grantee,
(a) this Agreement may be amended or supplemented (i) to cure any
ambiguity or to correct or supplement any provision herein which may be
defective or inconsistent with any other provision herein, or (ii) to add
to the covenants and agreements of the Company for the benefit of Grantee
or surrender any right or power reserved to or conferred upon the Company
in this Agreement, subject, however, to any required approval of the
Company's stockholders and, provided, in each case, that such changes or
corrections shall not adversely affect the rights of Grantee with respect
to the Award evidenced hereby, or (iii) to make such other changes as the
Company, upon advice of counsel, determines are necessary or advisable
because of the adoption or promulgation of, or change in or of the
interpretation of, any law or governmental rule or regulation, including
any applicable federal or state securities laws; and
(b) subject to Section 11.8(b) of the Plan and any required approval of
the Company's stockholders, the Award evidenced by this Agreement may be
canceled by the Committee and a new Award made in substitution therefor,
provided that the Award so substituted shall satisfy all of the
requirements of the Plan as of the date such new Award is made and no such
action shall adversely affect the Restricted Shares to the extent then
vested.
17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action
of the Company or the Committee with respect hereto, shall confer or be
construed to confer on Grantee
-7-
<PAGE> 8
any right to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or any employing Subsidiary
to terminate Grantee's employment at any time, with or without cause; subject,
however, to the provisions of any employment agreement between Grantee and the
Company or any Subsidiary.
18. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
19. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits and
Schedules appended hereto, including the Plan. This Agreement is entered into,
and the Award evidenced hereby is granted, pursuant to the Plan and shall be
governed by and construed in accordance with the Plan and the administrative
interpretations adopted by the Committee thereunder. All decisions of the
Committee upon questions regarding the Plan or this Agreement shall be
conclusive. Unless otherwise expressly stated herein, in the event of any
inconsistency between the terms of the Plan and this Agreement, the terms of the
Plan shall control. The headings of the paragraphs of this Agreement have been
included for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
20. DUPLICATE ORIGINALS. The Company and Grantee may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
21. RULES BY COMMITTEE. The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Committee may adopt from time to time hereafter.
22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
Grantee. Grantee and the Company hereby declare and represent that no promise or
agreement not herein expressed has been made and that this Agreement contains
the entire agreement between the parties hereto with respect to the Restricted
Shares and replaces and makes null and void any prior agreements between Grantee
and the Company regarding the Restricted Shares.
-8-
<PAGE> 9
23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms and
conditions of this Agreement by signing in the space provided at the end hereof
and returning a signed copy to the Company.
TELE-COMMUNICATIONS, INC.
By:
--------------------------------------
Name:
Title:
ACCEPTED:
-----------------------------------------
-9-
<PAGE> 10
Exhibit B to Restricted Stock Award
Agreement dated as of November 15, 1998
TELE-COMMUNICATIONS, INC. 1998 INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, ____________________________________ (the "Grantee"), hereby declare
that upon my death ______________________________________ (the "Beneficiary") of
Name
_______________________________________________________________________________'
Street Address City State Zip Code
who is my ___________________________________________ , shall be entitled to the
Relationship to Grantee
Restricted Shares and all other rights accorded the Grantee by the above-
referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the laws
of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ----------------------------------- -----------------------------------------
Date Grantee
-10-
<PAGE> 1
EXHIBIT 10.44
1998 PLAN
TCOMA RESTRICTED STOCK
12/10/98 GRANT
TELE-COMMUNICATIONS, INC.
1998 INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 10th day of December,
1998 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and the person signing adjacent to the caption
"Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1998 Incentive
Plan (the "Plan"), a copy of which is appended to this Agreement as Exhibit A
and by this reference made a part hereof, for the benefit of eligible employees
of the Company and its Subsidiaries. Capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board (the
"Committee"), which has been assigned responsibility for administering the Plan,
has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to encourage
Grantee to remain in the employ of the Company or its Subsidiaries and to
increase Grantee's personal interest in the continued success and progress of
the Company.
The Company and Grantee therefore agree as follows:
1. AWARD. Pursuant to the terms of the Plan and in consideration of the
covenants and promises of Grantee herein contained, the Company hereby awards to
Grantee as of the Grant Date, a total of 37,500 shares of Series A TCI Group
("TCOMA") Common Stock, subject to the conditions and restrictions set forth
below and in the Plan (the "Restricted Shares").
2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION PERIOD.
Upon issuance of the Restricted Shares the stock certificate or certificates
representing such Restricted Shares shall be registered in the name of Grantee.
During the Restriction Period, certificates representing the Restricted Shares
and any securities constituting Retained Distributions shall bear a restrictive
legend to the effect that ownership of the Restricted Shares (and such Retained
Distributions), and the enjoyment of all rights appurtenant thereto, are subject
to the restrictions, terms and conditions provided in the Plan and this
Agreement. Such certificates shall remain in the custody of the Company and
Grantee shall deposit with the Company stock powers or other instruments of
assignment, each endorsed in blank, so as to permit retransfer to the Company of
all
-1-
<PAGE> 2
or any portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and this Agreement.
3. RESTRICTIONS. Restricted Shares shall constitute issued and outstanding
shares of Common Stock for all corporate purposes. Grantee will have the right
to vote such Restricted Shares, to receive and retain such dividends and
distributions, as the Committee may in its sole discretion designate, paid or
distributed on such Restricted Shares and to exercise all other rights, powers
and privileges of a Holder of Common Stock with respect to such Restricted
Shares; except, that (a) Grantee will not be entitled to delivery of the stock
certificate or certificates representing such Restricted Shares until the
Restriction Period shall have expired and unless all other vesting requirements
with respect thereto shall have been fulfilled or waived; (b) the Company will
retain custody of the stock certificate or certificates representing the
Restricted Shares during the Restriction Period as provided in Section 8.2 of
the Plan; (c) other than such dividends and distributions as the Committee may
in its sole discretion designate, the Company will retain custody of all
distributions ("Retained Distributions") made or declared with respect to the
Restricted Shares (and such Retained Distributions will be subject to the same
restrictions, terms and vesting and other conditions as are applicable to the
Restricted Shares) until such time, if ever, as the Restricted Shares with
respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) Grantee may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares
or any Retained Distributions or his interest in any of them during the
Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.
4. VESTING AND FORFEITURE OF RESTRICTED STOCK: Subject to earlier vesting
in accordance with the provisions of Paragraph 7(b) below, Grantee shall become
vested as to 100% of the shares of Restricted Shares subject to this Agreement
as of one (1) year following the Grant Date; provided, however, that Grantee
shall not vest, pursuant to this Paragraph 4, in shares of Restricted Shares as
to which Grantee would otherwise vest as of a given date if Grantee has not been
continuously employed by the Company or its Subsidiaries from the date of this
Agreement through such date (the vesting or forfeiture of such shares to be
governed instead by the provisions of Paragraph 5). Notwithstanding the
foregoing, in the event that any date on which vesting would otherwise occur is
a Saturday, Sunday or a holiday, such vesting shall instead occur on the
business day next following such date.
5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the
Committee in its sole discretion, the Award shall terminate, to the extent not
theretofore vested, prior to the expiration of the Restricted Period, at the
time specified below:
(a) If Grantee's employment with the Company and its Subsidiaries
terminates (i) other than (x) by the Company for "cause" (as defined in
Section 10.2(b) of the Plan), (y) by the Grantee with "good reason" (as
defined herein) or (z) by the Company without cause, and (ii) other than
(x) by reason of death or Disability, (y) with the written consent of
-2-
<PAGE> 3
the Company or the applicable Subsidiary or (z) without such consent if
such termination is pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which expressly
permit the Grantee to terminate such employment upon the occurrence of
specified events (other than the giving of notice and passage of time),
then the Award, to the extent not theretofore vested, shall be forfeited
immediately;
(b) If Grantee dies while employed by the Company or a Subsidiary, or
prior to the expiration of a period of time following termination of
Grantee's employment during which any portion of the Award remains
unvested as provided in paragraph (a), then the Award, to the extent not
theretofore vested, shall immediately become fully vested;
(c) If Grantee's employment with the Company terminates by reason of
Disability, then the Award, to the extent not theretofore vested, shall
immediately become fully vested;
(d) If Grantee's employment with the Company and its Subsidiaries is
terminated by the Company for "cause" (as defined in Section 10.2(b) of
the Plan), then the Award, to the extent not theretofore vested, shall be
forfeited immediately; or
(e) If Grantee's employment (i) is terminated by Grantee (x) with "good
reason" (as defined herein), (y) with the written consent of the Company
or the applicable Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of notice and
passage of time), or (ii) by the Company without "cause" (as defined in
Section 10.2(b) of the Plan), then the Award, to the extent not
theretofore vested, shall immediately become fully vested.
"Good reason" for purposes of the Agreement shall be deemed to have
occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in effect any
employee benefit plan in which Grantee was participating or (y) the taking
of any action by the Company that would adversely affect Grantee's
participation in, or materially reduce Grantee's benefits under, any such
employee benefit plan, unless such failure or such taking of any action,
adversely affects the senior members of the corporate management of the
Company generally;
(iii) the assignment to Grantee of duties and responsibilities that are
materially more oppressive or onerous than those attendant to Grantee's
position immediately after the date hereof;
(iv) the relocation of the office location as assigned to Grantee by
the Company to a location more than 20 miles from Grantee's current
location without
-3-
<PAGE> 4
Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time of any
reorganization, merger, consolidation, disposition of all or substantially
all of the assets of the Company or similar transaction effective after
the date hereof, in which the Company is not the surviving person, the
unconditional assumption in writing or by operation of law of the
Company's obligations to Grantee under this Agreement by each direct
successor to the Company in any such transaction.
6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with respect
to the award of Restricted Shares, and the satisfaction of any other applicable
restrictions, terms and conditions (a) all of such Restricted Shares shall
become vested, (b) any Retained Distributions and any unpaid Dividend
Equivalents with respect to such Restricted Shares shall become vested and (c)
any cash award to be received by Grantee with respect to such Restricted Shares
shall become payable, all in accordance with the terms of this Agreement. Any
such Restricted Shares, Retained Distributions and any unpaid Dividend
Equivalents that shall not become vested shall be forfeited to the Company and
Grantee shall not thereafter have any rights (including dividend and voting
rights) with respect to such Restricted Shares, Retained Distributions and any
unpaid Dividend Equivalents that shall have been so forfeited. The Committee
may, in its discretion, provide that the delivery of any Restricted Shares,
Retained Distributions and unpaid Dividend Equivalents that shall have become
vested, and payment of any cash awards that shall have become payable, shall be
deferred until such date or dates as the recipient may elect. Any election of a
recipient pursuant to the preceding sentence shall be filed in writing with the
Committee in accordance with such rules and regulations, including any deadline
for the making of such an election, as the Committee may provide.
7. ADJUSTMENTS.
(a) The Restricted Shares shall be subject to adjustment (including,
without limitation, as to the number of Restricted Shares) in the sole
discretion of the Committee and in such manner as the Committee may deem
equitable and appropriate in connection with the occurrence of any of the
events described in Section 4.2 of the Plan following the Grant Date.
-4-
<PAGE> 5
(b) In the event of any Approved Transaction, Board Change or Control
Purchase, the restrictions in Paragraph 3 shall lapse. Notwithstanding the
foregoing, the Committee may, in its discretion, determine that the
restrictions in Paragraph 3 will not lapse on an accelerated basis in
connection with an Approved Transaction, if the Board or the surviving or
acquiring corporation, as the case may be, shall have taken or made
effective provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for the
Award evidenced by this Agreement or to assume this Agreement and the
Award evidenced hereby and in order to make such new or assumed Award, as
nearly as may be practicable, equivalent to the Award evidenced by this
Agreement as then in effect (but before giving effect to any acceleration
of the exercisability hereof unless otherwise determined by the
Committee), taking into account, to the extent applicable, the kind and
amount of securities, cash or other assets into or for which the TCOMA
Common Stock may be changed, converted or exchanged in connection with the
Approved Transaction.
8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the Restriction
Period, Grantee (or Beneficiary, as defined in Paragraph 10 below) must remit to
the Company the amount of all federal, state and other governmental withholding
tax requirements imposed upon the Company with respect to the vesting of shares
of Restricted Stock, unless provisions to so pay such withholding requirements
have been made to the satisfaction of the Committee. Upon the payment of any
cash dividends with respect to shares of Restricted Stock during the Restriction
Period, the amount of such dividends shall be reduced to the extent necessary to
satisfy any withholding tax requirements applicable thereto prior to payment to
Grantee.
9. DELIVERY BY THE COMPANY. As soon as practicable after vesting in
Restricted Shares pursuant to Paragraphs 4 or 5, and subject to the withholding
referred to in paragraph 8, the Company shall deliver to Grantee certificates
issued in Grantee's name for the number of Restricted Shares. If delivery is by
mail, delivery of shares of TCOMA Common Stock shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to Grantee, and any cash
payment shall be deemed effected when a Company check, payable to Grantee and in
an amount equal to the amount of the cash payment, shall have been deposited in
the United States mail, addressed to Grantee.
10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before vesting
and during Grantee's lifetime, the Restricted Shares are not transferable
(voluntarily or involuntarily) other than pursuant to a domestic relations order
and, except as otherwise required pursuant to a domestic relations order, are
exercisable only by Grantee or Grantee's court appointed legal representative.
The Grantee may designate a beneficiary or beneficiaries to whom the Restricted
Shares shall pass upon Grantee's death and may change such designation from time
to time by filing a written designation of beneficiary or beneficiaries with the
Committee on the form annexed hereto as Exhibit B or such other form as may be
prescribed by the Committee, provided that no such designation shall be
effective unless so filed prior to the death of Grantee. If no such designation
is made or if the designated beneficiary does not survive the Grantee's death,
the Restricted Shares shall pass by will or the laws of descent and
distribution. Following Grantee's death, the Restricted Shares
-5-
<PAGE> 6
shall pass accordingly to the designated beneficiary and such person shall be
deemed the Grantee for purposes of any applicable provisions of this Agreement.
11. COMPANY'S RIGHTS. The existence of this Agreement shall not affect in
any way the right or power of the Company or its stockholders to accomplish any
corporate act, including, without limitation, the acts referred to in Section
11.18 of the Plan.
12. LIMITATION OF RIGHTS: Nothing in this Agreement or the Plan shall be
construed to:
(a) give Grantee any right to be awarded any further restricted stock
other than in the sole discretion of the Committee;
(b) give Grantee or any other person any interest in any fund or in any
specified asset or assets of the Company or any subsidiary of the Company;
or
(c) confer upon Grantee the right to continue in the employment or
service of the Company or any subsidiary of the Company, or affect the
right of the Company or any subsidiary of the Company to terminate the
employment or service of Grantee at any time or for any reason.
13. PREREQUISITES TO BENEFITS: Neither Grantee nor any person claiming
through Grantee shall have any right or interest in the Restricted Shares
awarded hereunder, unless and until all the terms, conditions and provisions of
this Agreement and the Plan which affect the Grantee or such other person shall
have been complied with as specified herein.
14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of
Section 11.9 of the Plan, Grantee agrees that Grantee will not require the
Company to deliver any Restricted Shares and that the Company will not be
obligated to deliver any Restricted Shares or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TCOMA Common Stock is listed or quoted.
The Company shall in no event be obligated to take any affirmative action in
order to cause the delivery of any Restricted Shares or other payment to comply
with any such law, rule, regulation or agreement.
15. NOTICE. Unless the Company notifies Grantee in writing of a different
procedure, any notice or other communication to the Company with respect to this
Agreement shall be in writing and shall be:
-6-
<PAGE> 7
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and addressed as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P. O. Box 5630
Denver, Colorado 80217
Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by first
class mail, postage prepaid, to Grantee's address as listed in the records of
the Company on the Grant Date, unless the Company has received written
notification from Grantee of a change of address.
16. AMENDMENT. Notwithstanding any other provisions hereof, this Agreement
may be supplemented or amended from time to time as approved by the Committee as
contemplated by Section 11.8(b) of the Plan. Without limiting the generality of
the foregoing, without the consent of Grantee,
(a) this Agreement may be amended or supplemented (i) to cure any
ambiguity or to correct or supplement any provision herein which may be
defective or inconsistent with any other provision herein, or (ii) to add
to the covenants and agreements of the Company for the benefit of Grantee
or surrender any right or power reserved to or conferred upon the Company
in this Agreement, subject, however, to any required approval of the
Company's stockholders and, provided, in each case, that such changes or
corrections shall not adversely affect the rights of Grantee with respect
to the Award evidenced hereby, or (iii) to make such other changes as the
Company, upon advice of counsel, determines are necessary or advisable
because of the adoption or promulgation of, or change in or of the
interpretation of, any law or governmental rule or regulation, including
any applicable federal or state securities laws; and
(b) subject to Section 11.8(b) of the Plan and any required approval of
the Company's stockholders, the Award evidenced by this Agreement may be
canceled by the Committee and a new Award made in substitution therefor,
provided that the Award so substituted shall satisfy all of the
requirements of the Plan as of the date such new Award is made and no such
action shall adversely affect the Restricted Shares to the extent then
vested.
17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action
of the Company or the Committee with respect hereto, shall confer or be
construed to confer on Grantee
-7-
<PAGE> 8
any right to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or any employing Subsidiary
to terminate Grantee's employment at any time, with or without cause; subject,
however, to the provisions of any employment agreement between Grantee and the
Company or any Subsidiary.
18. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
19. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits and
Schedules appended hereto, including the Plan. This Agreement is entered into,
and the Award evidenced hereby is granted, pursuant to the Plan and shall be
governed by and construed in accordance with the Plan and the administrative
interpretations adopted by the Committee thereunder. All decisions of the
Committee upon questions regarding the Plan or this Agreement shall be
conclusive. Unless otherwise expressly stated herein, in the event of any
inconsistency between the terms of the Plan and this Agreement, the terms of the
Plan shall control. The headings of the paragraphs of this Agreement have been
included for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
20. DUPLICATE ORIGINALS. The Company and Grantee may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
21. RULES BY COMMITTEE. The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Committee may adopt from time to time hereafter.
22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
Grantee. Grantee and the Company hereby declare and represent that no promise or
agreement not herein expressed has been made and that this Agreement contains
the entire agreement between the parties hereto with respect to the Restricted
Shares and replaces and makes null and void any prior agreements between Grantee
and the Company regarding the Restricted Shares.
-8-
<PAGE> 9
23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms and
conditions of this Agreement by signing in the space provided at the end hereof
and returning a signed copy to the Company.
TELE-COMMUNICATIONS, INC.
By:
--------------------------------------
Name:
Title:
ACCEPTED:
-----------------------------------------
-9-
<PAGE> 10
Exhibit B to Restricted Stock Award
Agreement dated as of December 10, 1998
TELE-COMMUNICATIONS, INC. 1998 INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I,_____________________________________ (the "Grantee"), hereby declare
that upon my death _____________________________________ (the "Beneficiary") of
Name
______________________________________________________________________________ ,
Street Address City State Zip Code
who is my ___________________________________________ , shall be entitled to the
Relationship to Grantee
Restricted Shares and all other rights accorded the Grantee by the above-
referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the laws
of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ----------------------------------- -----------------------------------------
Date Grantee
-10-
<PAGE> 1
EXHIBIT 10.45
1998 PLAN
TCOMA 9/3/98 GRANT
TELE-COMMUNICATIONS, INC.
1998 INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 1st day of
March, 1999 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1998
Incentive Plan (the "Plan"), a copy of which is appended to this Agreement as
Exhibit A and by this reference made a part hereof, for the benefit of eligible
employees of the Company and its Subsidiaries. Capitalized terms used and not
otherwise defined herein shall have the meaning ascribed thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to grant the options and rights provided herein in order to
provide Grantee with additional remuneration for services rendered, to
encourage Grantee to remain in the employ of the Company or its Subsidiaries
and to increase Grantee's personal interest in the continued success and
progress of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions herein, the
Company grants to the Grantee during the period commencing on March 1, 1999.
and expiring at 5:00 p.m., Denver, Colorado time ("Close of Business") on
September 3, 2008 (the "Option Term"), subject to earlier termination as
provided in paragraphs 8 and 12(b) below, an option to purchase from the
Company, at the price per share set forth on Schedule 1 hereto (the "TCOMA
Option Price"), the number of shares of Series A TCI Group Common Stock
("TCOMA") set forth on said Schedule 1 (the "TCOMA Option Shares"). The TCOMA
Option Price and TCOMA Option Shares are subject to adjustment pursuant to
paragraph 12 below. This option is a "Nonqualified Stock Option" and is
hereinafter referred to as the "TCOMA Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the TCOMA Option, the Grantee shall also
have, during the TCOMA Option Term, subject to earlier termination as provided
in paragraphs 8 and 12(b) below, a stock appreciation right with respect to
each TCOMA Option Share (individually, a "TCOMA Tandem
1
<PAGE> 2
SAR" and collectively, the "TCOMA Tandem SARs"). Upon exercise of a TCOMA
Tandem SAR in accordance with this Agreement, the Company shall, subject to
paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which the
Fair Market Value of the TCOMA Option Share on the date of exercise
exceeds the TCOMA Option Price; and
(b) payment of the amount determined in accordance with
clause (i) shall be made in shares of TCOMA (valued at their Fair
Market Value as of the date of exercise of such TCOMA Tandem SAR), or,
in the sole discretion of the Compensation Committee of the Board of
Directors of the Company (the "Committee"), in cash, or partly in cash
and partly in shares of TCOMA.
3. REDUCTION UPON EXERCISE. The exercise of any number of TCOMA Tandem
SARs shall cause a corresponding reduction in the number of TCOMA Option Shares
which shall apply against the TCOMA Option Shares then available for purchase.
The exercise of the TCOMA Option to purchase any number of TCOMA Option Shares
shall cause a corresponding reduction in the number of TCOMA Tandem SARs.
4. CONDITIONS OF EXERCISE. The TCOMA Option and TCOMA Tandem SARs are
exercisable only in accordance with the conditions stated in this paragraph.
(a) Except as otherwise provided in paragraph 12(b) below or
in the last sentence of this subparagraph (a), the TCOMA Option shall
not be exercisable until September 3, 1999, and the TCOMA Option may
only be exercised to the extent the TCOMA Option Shares have become
available for purchase in accordance with the following schedule:
<TABLE>
<CAPTION>
Percentage of TCOMA Option
Date Shares Available for Purchase
---- -----------------------------
<S> <C>
September 3, 1999 20%
September 3, 2000 40%
September 3, 2001 60%
September 3, 2002 80%
September 3, 2003 100%
</TABLE>
Notwithstanding the foregoing, all TCOMA Option Shares shall become
available for purchase if Grantee's employment with the Company and
its Subsidiaries (i) shall terminate by reason of (x) termination by
the Company without cause (as defined in Section 11.2(b) of the Plan),
(y) termination by Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a written
employment agreement, if any, between the Grantee and the Company
which expressly
2
<PAGE> 3
permit the Grantee to terminate such employment upon the occurrence of
specified events (other than the giving of notice and passage of
time), or (iii) if Grantee dies while employed by the Company or a
Subsidiary.
(b) A TCOMA Tandem SAR with respect to an TCOMA Option Share
shall be exercisable only if the TCOMA Option Share is then available
for purchase in accordance with subparagraph (a).
(c) To the extent the TCOMA Option or TCOMA Tandem SARs
become exercisable, such TCOMA Option or TCOMA Tandem SARs may be
exercised in whole or in part (at any time or from time to time,
except as otherwise provided herein) until expiration of the TCOMA
Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee may,
in its discretion and as contemplated by Section 7.5 of the Plan,
adopt rules and regulations from time to time after the date hereof
with respect to the exercise of TCOMA SARs and that the exercise by
Grantee of the TCOMA Tandem SARs will be subject to the further
condition that such exercise is made in accordance with all such rules
and regulations as the Committee may determine are applicable thereto.
5. MANNER OF EXERCISE. The TCOMA Option or a TCOMA Tandem SAR shall be
considered exercised (as to the number of TCOMA Option Shares or TCOMA Tandem
SARs specified in the notice referred to in subparagraph (a) below) on the
latest of (i) the date of exercise designated in the written notice referred to
in subparagraph (a) below, (ii) if the date so designated is not a business
day, the first business day following such date or (iii) the earliest business
day by which the Company has received all of the following:
(a) Written notice, in such form as the Committee may
require, designating, among other things, the date of exercise, the
number of TCOMA Option Shares to be purchased and/or the number of
TCOMA Tandem SARs to be exercised;
(b) If the TCOMA Option is to be exercised, payment of the
TCOMA Option Price for each TCOMA Option Share to be purchased in cash
or in such other form, or combination of forms, of payment
contemplated by Section 6.6(a) of the Plan as the Committee may
permit; provided, however, that any shares of TCOMA (or, if
applicable, shares of Series B TCI Group Common Stock ("TCOMB"))
delivered in payment of the TCOMA Option Price, if such form of
payment is so permitted by the Committee, shall be shares that the
Grantee has owned for a period of at least six months prior to the
date of exercise, and provided, further, that, notwithstanding clause
(vii) of Section 6.6(a) of the Plan, TCOMA Option Shares may not be
withheld in payment or partial payment of the TCOMA Option Price; and
(c) Any other documentation that the Committee may reasonably
require.
3
<PAGE> 4
6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and agrees
that the Company shall deduct from the cash and/or shares of TCOMA (or, if
applicable, shares of TCOMB) otherwise payable or deliverable upon exercise of
the TCOMA Option or a TCOMA Tandem SAR an amount of cash and/or number of
shares of TCOMA (valued at their Fair Market Value on the date of exercise)
that is equal to the amount of all federal, state and local taxes required to
be withheld by the Company upon such exercise, as determined by the Committee.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt of
all items referred to in paragraph 5, and subject to the withholding referred
to in paragraph 6, the Company shall deliver to the Grantee certificates issued
in Grantee's name for the number of TCOMA Option Shares purchased by exercise
of the TCOMA Option and for the number of shares of TCOMA to which the Grantee
is entitled by the exercise of TCOMA Tandem SARs and any cash payment to which
the Grantee is entitled by the exercise of TCOMA Tandem SARs. If delivery is by
mail, delivery of shares of TCOMA shall be deemed effected for all purposes
when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the Grantee, and any cash
payment shall be deemed effected when a Company check, payable to Grantee and
in an amount equal to the amount of the cash payment, shall have been deposited
in the United States mail, addressed to the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee in its sole discretion, the TCOMA Option and TCOMA
Tandem SARs shall terminate, prior to the expiration of the TCOMA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 11.2(b) of the Plan), (y) by the Grantee with
"good reason" (as defined herein) or (z) by the Company without cause,
and (ii) other than (x) by reason of death or Disability, (y) with the
written consent of the Company or the applicable Subsidiary or (z)
without such consent if such termination is pursuant to provisions of
a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than the
giving of notice and passage of time), then the TCOMA Option and all
TCOMA Tandem SARs shall terminate at the Close of Business on the
first business day following the expiration of the 90-day period which
began on the date of termination of Grantee's employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the TCOMA Option and
TCOMA Tandem SARs remain exercisable as provided in paragraph (a), the
TCOMA Option and all TCOMA Tandem SARs shall terminate at the Close of
Business on the first business day following the expiration of the
one-year period which began on the date of death;
4
<PAGE> 5
(c) If Grantee's employment with the Company and its
Subsidiaries terminates by reason of Disability, then the TCOMA Option
and all TCOMA Tandem SARs shall terminate at the Close of Business on
the first business day following the expiration of the one-year period
which began on the date of termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 11.2(b) of the Plan), then the TCOMA Option and all TCOMA
Tandem SARs shall terminate immediately upon such termination of
Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee (x)
with "good reason" (as defined herein), (y) with the written consent
of the Company or the applicable Subsidiary or (z) pursuant to
provisions of a written employment agreement, if any, between the
Grantee and the Company which expressly permit the Grantee to
terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 11.2(b) of the Plan),
then the TCOMA Option Term shall terminate early only as provided for
in paragraph 8(b) above or 12(b) below.
In any event in which the TCOMA Option and TCOMA Tandem SARs
remain exercisable for a period of time following the date of termination of
Grantee's employment as provided above, the TCOMA Option and TCOMA Tandem SARs
may be exercised during such period of time only to the extent the same were
exercisable as provided in paragraph 4 above on such date of termination of
Grantee's employment. A change of employment is not a termination of employment
within the meaning of this paragraph 8 provided that, after giving effect to
such change, the Grantee continues to be an employee of the Company or any
Subsidiary. Notwithstanding any period of time referenced in this paragraph 8
or any other provision of this paragraph that may be construed to the contrary,
the TCOMA Option and all TCOMA Tandem SARs shall in any event terminate upon
the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed
to have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely
affect Grantee's participation in, or materially reduce Grantee's
benefits under, any such employee benefit plan, unless such failure or
such taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
5
<PAGE> 6
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or onerous than
those attendant to Grantee's position immediately after the date
hereof;
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
then current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time
of any reorganization, merger, consolidation, disposition of all or
substantially all of the assets of the Company or similar transaction
effective after the date hereof, in which the Company is not the
surviving person, the unconditional assumption in writing or by
operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF TCOMA TANDEM SARS. Immediately prior to the
termination of the TCOMA Option, as provided in paragraph 8 above, or the
expiration of the Option Term, all remaining TCOMA Tandem SARs shall be deemed
to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF TCOMA OPTION AND TCOMA TANDEM SARS. During
Grantee's lifetime, the TCOMA Option and TCOMA Tandem SARs are not transferable
(voluntarily or involuntarily) other than pursuant to a domestic relations
order and, except as otherwise required pursuant to a domestic relations order,
are exercisable only by the Grantee or Grantee's court appointed legal
representative. The Grantee may designate a beneficiary or beneficiaries to
whom the TCOMA Option and TCOMA Tandem SARs shall pass upon Grantee's death and
may change such designation from time to time by filing a written designation
of beneficiary or beneficiaries with the Committee on the form annexed hereto
as Exhibit B or such other form as may be prescribed by the Committee, provided
that no such designation shall be effective unless so filed prior to the death
of Grantee. If no such designation is made or if the designated beneficiary
does not survive the Grantee's death, the TCOMA Option and TCOMA Tandem SARs
shall pass by will or the laws of descent and distribution. Following Grantee's
death, the TCOMA Option and any TCOMA Tandem SARs, if otherwise exercisable,
may be exercised by the person to whom such option or right passes accordingly
to the foregoing and such person shall be deemed the Grantee for purposes of
any applicable provisions of this Agreement.
11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any
purpose to be, or to have any of the rights of, a stockholder of the Company
with respect to any shares of TCOMA as to which this Agreement relates until
such shares shall have been issued to Grantee by the Company. Furthermore, the
existence of this Agreement shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 11.18 of the Plan.
6
<PAGE> 7
12. ADJUSTMENTS.
(a) The TCOMA Option and TCOMA Tandem SARs shall be subject
to adjustment (including, without limitation, as to the number of
TCOMA Option Shares and the TCOMA Option Price per share) in the sole
discretion of the Committee and in such manner as the Committee may
deem equitable and appropriate in connection with the occurrence of
any of the events described in Section 4.2 of the Plan following the
Grant Date.
(b) In the event of any Approved Transaction, Board Change or
Control Purchase, the TCOMA Option and all TCOMA Tandem SARs shall
become exercisable in full without regard to paragraph 4(a); provided,
however, that to the extent not theretofore exercised the TCOMA Option
and all TCOMA Tandem SARs shall terminate upon the first to occur of
the consummation of the Approved Transaction, the expiration of the
TCOMA Option Term or the earlier termination of the TCOMA Option and
TCOMA Tandem SARs pursuant to paragraph 8 hereof. Notwithstanding the
foregoing, the Committee may, in its discretion, determine that the
TCOMA Option and TCOMA Tandem SARs will not become exercisable on an
accelerated basis in connection with an Approved Transaction and/or
will not terminate if not exercised prior to consummation of the
Approved Transaction, if the Board or the surviving or acquiring
corporation, as the case may be, shall have taken or made effective
provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for
the Award evidenced by this Agreement or to assume this Agreement and
the Award evidenced hereby and in order to make such new or assumed
Award, as nearly as may be practicable, equivalent to the Award
evidenced by this Agreement as then in effect (but before giving
effect to any acceleration of the exercisability hereof unless
otherwise determined by the Committee), taking into account, to the
extent applicable, the kind and amount of securities, cash or other
assets into or for which the TCOMA may be changed, converted or
exchanged in connection with the Approved Transaction.
13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of
Section 11.9 of the Plan, the Grantee agrees that Grantee will not exercise the
TCOMA Option or any TCOMA Tandem SAR and that the Company will not be obligated
to deliver any shares of TCOMA or make any cash payment, if counsel to the
Company determines that such exercise, delivery or payment would violate any
applicable law or any rule or regulation of any governmental authority or any
rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TCOMA is listed or quoted. The Company
shall in no event be obligated to take any affirmative action in order to cause
the exercise of the TCOMA Option or any TCOMA Tandem SAR or the resulting
delivery of shares of TCOMA or other payment to comply with any such law, rule,
regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of a
different procedure or address for the Company, any notice or other
communication to the Company with respect to this Agreement shall be in writing
and shall be:
7
<PAGE> 8
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and addressed
as follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P. O. Box 5630
Denver, Colorado 80217
Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by
first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 11.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to cure
any ambiguity or to correct or supplement any provision herein which
may be defective or inconsistent with any other provision herein, or
(ii) to add to the covenants and agreements of the Company for the
benefit of Grantee or surrender any right or power reserved to or
conferred upon the Company in this Agreement, subject, however, to any
required approval of the Company's stockholders and, provided, in each
case, that such changes or corrections shall not adversely affect the
rights of Grantee with respect to the Award evidenced hereby, or (iii)
to make such other changes as the Company, upon advice of counsel,
determines are necessary or advisable because of the adoption or
promulgation of, or change in or of the interpretation of, any law or
governmental rule or regulation, including any applicable federal or
state securities laws; and
(b) subject to Section 11.8(b) of the Plan and any required
approval of the Company's stockholders, the Award evidenced by this
Agreement may be cancelled by the Committee and a new Award made in
substitution therefor, provided that the Award so substituted shall
satisfy all of the requirements of the Plan as of the date such new
Award is made and no such action shall adversely affect the TCOMA
Option or any TCOMA Tandem SAR to the extent then exercisable.
8
<PAGE> 9
16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no
action of the Company or the Committee with respect hereto, shall confer or be
construed to confer on the Grantee any right to continue in the employ of the
Company or any of its Subsidiaries or interfere in any way with the right of
the Company or any employing Subsidiary to terminate the Grantee's employment
at any time, with or without cause; subject, however, to the provisions of any
employment agreement between the Grantee and the Company or any Subsidiary.
17. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware.
18. CONSTRUCTION. References in this Agreement to "this Agreement" and
the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered
a part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
20. RULES BY COMMITTEE. The rights of the Grantee and obligations of
the Company hereunder shall be subject to such reasonable rules and regulations
as the Committee may adopt from time to time hereafter.
21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu
of all prior discussions and agreements, oral or written, between the Company
and Grantee regarding the subject matter hereof. Grantee and the Company hereby
declare and represent that no promise or agreement not herein expressed has
been made and that this Agreement contains the entire agreement between the
parties hereto with respect to the TCOMA Options and TCOMA Tandem SARs and
replaces and makes null and void any prior agreements between Grantee and the
Company regarding the TCOMA Options.
9
<PAGE> 10
22. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms
and conditions of this Agreement by signing in the space provided at the end
hereof and returning a signed copy to the Company.
TELE-COMMUNICATIONS, INC.
By: /s/ STEPHEN M. BRETT
--------------------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
Secretary and General Counsel
ACCEPTED:
-----------------------------------------------
10
<PAGE> 11
Exhibit B to Non-Qualified Stock Option
and Stock Appreciation Rights Agreement
dated as of March 1, 1999
TELE-COMMUNICATIONS, INC. 1998 INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, ______________________________ (the "Grantee"), hereby declare that
upon my death ____________________________________ (the "Beneficiary") of
Name
_____________________________________________________________________________,
Street Address City State Zip Code
who is my ___________________________________________, shall be entitled to the
Relationship to Grantee
TCOMA Option, TCOMA Tandem SARs and all other rights accorded the Grantee by
the above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the
laws of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ---------------------- ------------------------------------------
Date Grantee
11
<PAGE> 1
EXHIBIT 10.46
1998 PLAN
TCOMA RESTRICTED STOCK
TELE-COMMUNICATIONS, INC.
1998 INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 1st day of March,
1999 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and the person signing adjacent to the caption
"Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the Tele-Communications, Inc. 1998
Incentive Plan (the "Plan"), a copy of which is appended to this Agreement as
Exhibit A and by this reference made a part hereof, for the benefit of eligible
employees of the Company and its Subsidiaries. Capitalized terms used and not
otherwise defined herein shall have the meaning ascribed thereto in the Plan.
Pursuant to the Plan, the Compensation Committee of the Board
(the "Committee"), which has been assigned responsibility for administering the
Plan, has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to encourage
Grantee to remain in the employ of the Company or its Subsidiaries and to
increase Grantee's personal interest in the continued success and progress of
the Company.
The Company and Grantee therefore agree as follows:
1. AWARD. Pursuant to the terms of the Plan and in consideration of
the covenants and promises of Grantee herein contained, the Company hereby
awards to Grantee as of the Grant Date the number of shares of Series A TCI
Group ("TCOMA") Common Stock set forth on Schedule 1 hereto, subject to the
conditions and restrictions set forth below and in the Plan (the "Restricted
Shares").
2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION
PERIOD. Upon issuance of the Restricted Shares the stock certificate or
certificates representing such Restricted Shares shall be registered in the name
of Grantee. During the Restriction Period, certificates representing the
Restricted Shares and any securities constituting Retained Distributions shall
bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in the
Plan and this Agreement. Such certificates shall remain in the custody of the
Company and Grantee shall deposit with the Company stock powers or other
instruments of assignment, each endorsed in blank, so as to permit retransfer to
the Company of
-1-
<PAGE> 2
all or any portion of the Restricted Shares and any securities constituting
Retained Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and this Agreement.
3. RESTRICTIONS. Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. Grantee will have
the right to vote such Restricted Shares, to receive and retain such dividends
and distributions, as the Committee may in its sole discretion designate, paid
or distributed on such Restricted Shares and to exercise all other rights,
powers and privileges of a Holder of Common Stock with respect to such
Restricted Shares; except, that (a) Grantee will not be entitled to delivery of
the stock certificate or certificates representing such Restricted Shares until
the Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled or waived; (b) the
Company will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period as provided in
Section 8.2 of the Plan; (c) other than such dividends and distributions as the
Committee may in its sole discretion designate, the Company will retain custody
of all distributions ("Retained Distributions") made or declared with respect to
the Restricted Shares (and such Retained Distributions will be subject to the
same restrictions, terms and vesting and other conditions as are applicable to
the Restricted Shares) until such time, if ever, as the Restricted Shares with
respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) Grantee may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares
or any Retained Distributions or his interest in any of them during the
Restriction Period; and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.
4. VESTING AND FORFEITURE OF RESTRICTED STOCK: Subject to earlier
vesting in accordance with the provisions of Paragraph 7(b) below, Grantee shall
become vested as to 50% of the shares of Restricted Shares subject to this
Agreement on September 3, 2002; and Grantee shall become vested as to the
remaining 50% of the shares of Restricted Shares subject to this Agreement as of
September 3, 2003, each such date being a Vesting Date; provided, however, that
Grantee shall not vest, pursuant to this Paragraph 4, in shares of Restricted
Shares as to which Grantee would otherwise vest as of a given date if Grantee
has not been continuously employed by the Company or its Subsidiaries from the
date of this Agreement through such date (the vesting or forfeiture of such
shares to be governed instead by the provisions of Paragraph 5). Notwithstanding
the foregoing, in the event that any date on which vesting would otherwise occur
is a Saturday, Sunday or a holiday, such vesting shall instead occur on the
business day next following such date.
5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the
Committee in its sole discretion, the Award shall terminate, to the extent not
theretofore vested, prior to the expiration of the Restricted Period, at the
time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 11.2(b) of the Plan),
-2-
<PAGE> 3
(y) by the Grantee with "good reason" (as defined herein) or (z) by the
Company without cause, and (ii) other than (x) by reason of death or
Disability, (y) with the written consent of the Company or the
applicable Subsidiary or (z) without such consent if such termination
is pursuant to provisions of a written employment agreement, if any,
between the Grantee and the Company which expressly permit the Grantee
to terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), then the Award,
to the extent not theretofore vested, shall be forfeited immediately;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which any portion of the
Award remains unvested as provided in paragraph (a), then the Award, to
the extent not theretofore vested, shall immediately become fully
vested;
(c) If Grantee's employment with the Company terminates by
reason of Disability, then the Award, to the extent not theretofore
vested, shall immediately become fully vested;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 11.2(b) of the Plan), then the Award, to the extent not
theretofore vested, shall be forfeited immediately; or
(e) If Grantee's employment (i) is terminated by Grantee (x)
with "good reason" (as defined herein), (y) with the written consent of
the Company or the applicable Subsidiary or (z) pursuant to provisions
of a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such employment
upon the occurrence of specified events (other than the giving of
notice and passage of time), or (ii) by the Company without "cause" (as
defined in Section 11.2(b) of the Plan), then the Award, to the extent
not theretofore vested, shall immediately become fully vested.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in effect
any employee benefit plan in which Grantee was participating or (y) the
taking of any action by the Company that would adversely affect
Grantee's participation in, or materially reduce Grantee's benefits
under, any such employee benefit plan, unless such failure or such
taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
-3-
<PAGE> 4
(iii) the assignment to Grantee of duties and responsibilities
that are materially more oppressive or onerous than those attendant to
Grantee's position immediately after the date hereof;
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time of
any reorganization, merger, consolidation, disposition of all or
substantially all of the assets of the Company or similar transaction
effective after the date hereof, in which the Company is not the
surviving person, the unconditional assumption in writing or by
operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares shall
become vested to the extent that the Restricted Shares related thereto shall
have become vested and (c) any cash award to be received by Grantee with respect
to such Restricted Shares shall become payable, all in accordance with the terms
of this Agreement. Any such Restricted Shares, Retained Distributions and any
unpaid Dividend Equivalents that shall not become vested shall be forfeited to
the Company and Grantee shall not thereafter have any rights (including dividend
and voting rights) with respect to such Restricted Shares, Retained
Distributions and any unpaid Dividend Equivalents that shall have been so
forfeited. The Committee may, in its discretion, provide that the delivery of
any Restricted Shares, Retained Distributions and unpaid Dividend Equivalents
that shall have become vested, and payment of any cash awards that shall have
become payable, shall be deferred until such date or dates as the recipient may
elect. Any election of a recipient pursuant to the preceding sentence shall be
filed in writing with the Committee in accordance with such rules and
regulations, including any deadline for the making of such an election, as the
Committee may provide.
7. ADJUSTMENTS.
(a) The Restricted Shares shall be subject to adjustment
(including, without limitation, as to the number of Restricted Shares)
in the sole discretion of the Committee and in such manner as the
Committee may deem equitable and appropriate in connection with the
occurrence of any of the events described in Section 4.2 of the Plan
following the Grant Date.
-4-
<PAGE> 5
(b) In the event of any Approved Transaction, Board Change or
Control Purchase, the restrictions in Paragraph 3 shall lapse.
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that the restrictions in Paragraph 3 will not lapse on an
accelerated basis in connection with an Approved Transaction, if the
Board or the surviving or acquiring corporation, as the case may be,
shall have taken or made effective provision for the taking of such
action as in the opinion of the Committee is equitable and appropriate
to substitute a new Award for the Award evidenced by this Agreement or
to assume this Agreement and the Award evidenced hereby and in order to
make such new or assumed Award, as nearly as may be practicable,
equivalent to the Award evidenced by this Agreement as then in effect
(but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into
account, to the extent applicable, the kind and amount of securities,
cash or other assets into or for which shares of TCOMA may be changed,
converted or exchanged in connection with the Approved Transaction.
8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the
Restriction Period, Grantee (or Beneficiary, as defined in Paragraph 10 below)
must remit to the Company the amount of all federal, state and other
governmental withholding tax requirements imposed upon the Company with respect
to the vesting of shares of Restricted Stock, unless provisions to so pay such
withholding requirements have been made to the satisfaction of the Committee.
Upon the payment of any cash dividends with respect to shares of Restricted
Stock during the Restriction Period, the amount of such dividends shall be
reduced to the extent necessary to satisfy any withholding tax requirements
applicable thereto prior to payment to Grantee.
9. DELIVERY BY THE COMPANY. As soon as practicable after vesting in
Restricted Shares pursuant to Paragraphs 4 or 5, and subject to the withholding
referred to in paragraph 8, the Company shall deliver to Grantee certificates
issued in Grantee's name for the number of Restricted Shares. If delivery is by
mail, delivery of shares of TCOMA shall be deemed effected for all purposes when
a stock transfer agent of the Company shall have deposited the certificates in
the United States mail, addressed to Grantee, and any cash payment shall be
deemed effected when a Company check, payable to Grantee and in an amount equal
to the amount of the cash payment, shall have been deposited in the United
States mail, addressed to Grantee.
10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before
vesting and during Grantee's lifetime, the Restricted Shares are not
transferable (voluntarily or involuntarily) other than pursuant to a domestic
relations order and, except as otherwise required pursuant to a domestic
relations order, are exercisable only by Grantee or Grantee's court appointed
legal representative. The Grantee may designate a beneficiary or beneficiaries
to whom the Restricted Shares shall pass upon Grantee's death and may change
such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on the form annexed hereto as
Exhibit B or such other form as may be prescribed by the Committee, provided
that no such designation shall be effective unless so filed prior to the death
of Grantee. If no such designation is made or if the designated beneficiary does
not survive the Grantee's death, the Restricted Shares shall pass by will or the
laws of descent and distribution. Following Grantee's death, the Restricted
Shares shall pass accordingly to the designated beneficiary and
-5-
<PAGE> 6
such person shall be deemed the Grantee for purposes of any applicable
provisions of this Agreement.
11. COMPANY'S RIGHTS. The existence of this Agreement shall not
affect in any way the right or power of the Company or its stockholders to
accomplish any corporate act, including, without limitation, the acts referred
to in Section 11.18 of the Plan.
12. LIMITATION OF RIGHTS. Nothing in this Agreement or the Plan shall
be construed to:
(a) give Grantee any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give Grantee or any other person any interest in any fund
or in any specified asset or assets of the Company or any subsidiary of
the Company; or
(c) confer upon Grantee the right to continue in the
employment or service of the Company or any subsidiary of the Company,
or affect the right of the Company or any subsidiary of the Company to
terminate the employment or service of Grantee at any time or for any
reason.
13. PREREQUISITES TO BENEFITS. Neither Grantee nor any person
claiming through Grantee shall have any right or interest in the Restricted
Shares awarded hereunder, unless and until all the terms, conditions and
provisions of this Agreement and the Plan which affect the Grantee or such other
person shall have been complied with as specified herein.
14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of
Section 11.9 of the Plan, Grantee agrees that Grantee will not require the
Company to deliver any Restricted Shares and that the Company will not be
obligated to deliver any Restricted Shares or make any cash payment, if counsel
to the Company determines that such exercise, delivery or payment would violate
any applicable law or any rule or regulation of any governmental authority or
any rule or regulation of, or agreement of the Company with, any securities
exchange or association upon which the TCOMA Common Stock is listed or quoted.
The Company shall in no event be obligated to take any affirmative action in
order to cause the delivery of any Restricted Shares or other payment to comply
with any such law, rule, regulation or agreement.
15. NOTICE. Unless the Company notifies Grantee in writing of a
different procedure or address, any notice or other communication to the Company
with respect to this Agreement shall be in writing and shall be:
-6-
<PAGE> 7
(a) delivered personally to the following address:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
or
(b) sent by first class mail, postage prepaid and addressed as
follows:
Tele-Communications, Inc.
c/o General Counsel, Tele-Communications, Inc.
P. O. Box 5630
Denver, Colorado 80217
Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by first
class mail, postage prepaid, to Grantee's address as listed in the records of
the Company on the Grant Date, unless the Company has received written
notification from Grantee of a change of address.
16. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 11.8(b) of the Plan. Without limiting the
generality of the foregoing, without the consent of Grantee,
(a) this Agreement may be amended or supplemented (i) to cure
any ambiguity or to correct or supplement any provision herein which
may be defective or inconsistent with any other provision herein, or
(ii) to add to the covenants and agreements of the Company for the
benefit of Grantee or surrender any right or power reserved to or
conferred upon the Company in this Agreement, subject, however, to any
required approval of the Company's stockholders and, provided, in each
case, that such changes or corrections shall not adversely affect the
rights of Grantee with respect to the Award evidenced hereby, or (iii)
to make such other changes as the Company, upon advice of counsel,
determines are necessary or advisable because of the adoption or
promulgation of, or change in or of the interpretation of, any law or
governmental rule or regulation, including any applicable federal or
state securities laws; and
(b) subject to Section 11.8(b) of the Plan and any required
approval of the Company's stockholders, the Award evidenced by this
Agreement may be canceled by the Committee and a new Award made in
substitution therefor, provided that the Award so substituted shall
satisfy all of the requirements of the Plan as of the date such new
Award is made and no such action shall adversely affect the Restricted
Shares to the extent then vested.
17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no
action of the Company or the Committee with respect hereto, shall confer or be
construed to confer on Grantee any right to continue in the employ of the
Company or any of its Subsidiaries or
-7-
<PAGE> 8
interfere in any way with the right of the Company or any employing Subsidiary
to terminate Grantee's employment at any time, with or without cause; subject,
however, to the provisions of any employment agreement between Grantee and the
Company or any Subsidiary.
18. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware.
19. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms of
the Plan shall control. The headings of the paragraphs of this Agreement have
been included for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
20. DUPLICATE ORIGINALS. The Company and Grantee may sign any number
of copies of this Agreement. Each signed copy shall be an original, but all of
them together represent the same agreement.
21. RULES BY COMMITTEE. The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Committee may adopt from time to time hereafter.
22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee. Grantee and the Company hereby declare and represent that
no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect
to the Restricted Shares and replaces and makes null and void any prior
agreements between Grantee and the Company regarding the Restricted Shares.
-8-
<PAGE> 9
23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms
and conditions of this Agreement by signing in the space provided at the end
hereof and returning a signed copy to the Company.
TELE-COMMUNICATIONS, INC.
By: /s/ STEPHEN M. BRETT
---------------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
Secretary and General Counsel
ACCEPTED:
------------------------------------------
-9-
<PAGE> 10
Exhibit B to Restricted Stock Award
Agreement dated as of March 1, 1999
TELE-COMMUNICATIONS, INC. 1998 INCENTIVE PLAN
DESIGNATION OF BENEFICIARY
I, ___________________________________________ (the "Grantee"), hereby
declare that upon my death __________________________________________ (the
Name
"Beneficiary") of _____________________________________________________________,
Street Address City State Zip Code
who is my ____________________________________________, shall be entitled to the
Relationship to Grantee
Restricted Shares and all other rights accorded the Grantee by the
above-referenced grant agreement (the "Agreement").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the laws
of descent and distribution.
It is further understood that all prior designations of beneficiary
under the Agreement are hereby revoked and that this Designation of Beneficiary
may only be revoked in writing, signed by the Grantee, and filed with the
Company prior to the Grantee's death.
- ------------------------------- --------------------------------------
Date Grantee
-10-
<PAGE> 1
EXHIBIT 10.47
7/23/97 TCOMA
AMENDMENT TO AGREEMENT
This Amendment to Agreement is made as of the 1st day of
March, 1999, and amends the Non-Qualified Stock Option and Stock Appreciation
Rights Agreement, dated as of July 23, 1997 (the "Agreement"), pertaining to
shares of TCI Group Series A Common Stock ("TCOMA") by and between
Tele-Communications, Inc. a Delaware corporation (the "Company") and the person
to whom such options were granted as provided in the Agreement (the "Grantee").
All terms used in this Amendment shall have the meanings set forth in the
Agreement except where specifically set forth herein.
This Amendment is made pursuant to paragraph 15(a) of the
Agreement which permits the Agreement to be amended to add to the agreements of
the Company for the benefit of the Grantee, provided that such amendment shall
not adversely affect the rights of the Grantee with respect to the Award
evidenced by the Agreement. It has been determined by the Committee that this
Amendment does not adversely affect the rights of the Grantee with respect to
the Award evidenced by the Agreement.
Pursuant to the Plan, the Compensation Committee of the Board
has determined that, pursuant to paragraph 15a(ii) of the Agreement:
1. Paragraph 4 of the Agreement shall be amended by deleting
the last full paragraph therein in its entirety and deleting the last sentence
of Paragraph 4(a) and replacing such sentence with the following language:
Notwithstanding the foregoing, all TCOMA Option Shares shall
become available for purchase if Grantee's employment with the
Company and its Subsidiaries (i) shall terminate by reason of
(x) termination by the Company without cause (as defined in
Section 11.2(b) of the Plan), (y) termination by Grantee for
good reason (as defined herein) or (z) Disability, (ii) shall
terminate pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon
the occurrence of specified events (other than the giving of
notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
2. Paragraph 8 of the Agreement shall be amended to read in
its entirety as follows:
8. EARLY TERMINATION OF OPTION AND TANDEM SARS.
Unless otherwise determined by the Committee in its sole
discretion, the TCOMA Option and TCOMA Tandem SARs shall
terminate, prior to the expiration of the TCOMA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for
"cause" (as defined in Section 11.2(b) of the Plan), (y) by
the Grantee with "good reason" (as defined herein) or (z) by
the Company without cause,
1
<PAGE> 2
and (ii) other than (x) by reason of death or Disability, (y)
with the written consent of the Company or the applicable
Subsidiary or (z) without such consent if such termination is
pursuant to provisions of a written employment agreement, if
any, between the Grantee and the Company which expressly
permit the Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of
notice and passage of time), then the TCOMA Option and all
TCOMA Tandem SARs shall terminate at the Close of Business on
the first business day following the expiration of the 90-day
period which began on the date of termination of Grantee's
employment;
(b) If Grantee dies while employed by the Company or
a Subsidiary, or prior to the expiration of a period of time
following termination of Grantee's employment during which the
TCOMA Option and TCOMA Tandem SARs remain exercisable as
provided in paragraph (a), the TCOMA Option and all TCOMA
Tandem SARs shall terminate at the Close of Business on the
first business day following the expiration of the one-year
period which began on the date of death;
(c) If Grantee's employment with the Company and its
Subsidiaries terminates by reason of Disability, then the
TCOMA Option and all TCOMA Tandem SARs shall terminate at the
Close of Business on the first business day following the
expiration of the one-year period which began on the date of
termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as
defined in Section 11.2(b) of the Plan), then the TCOMA Option
and all TCOMA Tandem SARs shall terminate immediately upon
such termination of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by
Grantee (x) with "good reason" (as defined herein), (y) with
the written consent of the Company or the applicable
Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than
the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 11.2(b) of the
Plan), then the TCOMA Option Term shall terminate early only
as provided for in paragraph 8(b) above or 12(b) below.
In any event in which the TCOMA Option and
TCOMA Tandem SARs remain exercisable for a period of time
following the date of termination of Grantee's employment as
provided above, the TCOMA Option and TCOMA Tandem SARs may be
exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such
date of termination of Grantee's employment. A change of
employment is not a termination of employment within the
meaning of this paragraph 8 provided that, after giving effect
to such change, the Grantee continues to be an employee of the
Company or any Subsidiary. Notwithstanding any period of time
referenced in this paragraph 8 or any other provision of this
paragraph that may be construed to the contrary, the TCOMA
2
<PAGE> 3
Option and all TCOMA Tandem SARs shall in any event terminate
upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement
shall be deemed to have occurred upon the happening of any of
the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue
in effect any employee benefit plan in which Grantee was
participating or (y) the taking of any action by the Company
that would adversely affect Grantee's participation in, or
materially reduce Grantee's benefits under, any such employee
benefit plan, unless such failure or such taking of any
action, adversely affects the senior members of the corporate
management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or
onerous than those attendant to Grantee's position immediately
after the date hereof;
(iv) the relocation of the office location as
assigned to Grantee by the Company to a location more than 20
miles from Grantee's then current location without Grantee's
consent; or
(v) the failure of the Company to obtain, prior to
the time of any reorganization, merger, consolidation,
disposition of all or substantially all of the assets of the
Company or similar transaction effective after the date
hereof, in which the Company is not the surviving person, the
unconditional assumption in writing or by operation of law of
the Company's obligations to Grantee under this Agreement by
each direct successor to the Company in any such transaction.
All other terms of the Agreement shall remain the same.
TELE-COMMUNICATIONS, INC.
By: /s/ STEPHEN M. BRETT
---------------------------------
Stephen M. Brett
Executive Vice President,
Secretary and General Counsel
3
<PAGE> 1
EXHIBIT 10.48
7/23/97 LBTYA
AMENDMENT TO AGREEMENT
This Amendment to Agreement is made as of the 1st day of
March, 1999, and amends the Non-Qualified Stock Option and Stock Appreciation
Rights Agreement, dated as of July 23, 1997 (the "Agreement"), pertaining to
shares of TCI Liberty Media Group Series A Common Stock ("LBTYA") by and between
Tele-Communications, Inc. a Delaware corporation (the "Company") and the person
to whom such options were granted as provided in the Agreement (the "Grantee").
All terms used in this Amendment shall have the meanings set forth in the
Agreement except where specifically set forth herein.
This Amendment is made pursuant to paragraph 15(a) of the
Agreement which permits the Agreement to be amended to add to the agreements of
the Company for the benefit of the Grantee, provided that such amendment shall
not adversely affect the rights of the Grantee with respect to the Award
evidenced by the Agreement. It has been determined by the Committee that this
Amendment does not adversely affect the rights of the Grantee with respect to
the Award evidenced by the Agreement.
Pursuant to the Plan, the Compensation Committee of the Board
has determined that, pursuant to paragraph 15a(ii) of the Agreement:
1. Paragraph 4 of the Agreement shall be amended by deleting
the last full paragraph therein in its entirety and deleting the last sentence
of Paragraph 4(a) and replacing such sentence with the following language:
Notwithstanding the foregoing, all LBTYA Option Shares shall
become available for purchase if Grantee's employment with the
Company and its Subsidiaries (i) shall terminate by reason of
(x) termination by the Company without cause (as defined in
Section 11.2(b) of the Plan), (y) termination by Grantee for
good reason (as defined herein) or (z) Disability, (ii) shall
terminate pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon
the occurrence of specified events (other than the giving of
notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
2. Paragraph 8 of the Agreement shall be amended to read in
its entirety as follows:
8. EARLY TERMINATION OF OPTION AND TANDEM SARS.
Unless otherwise determined by the Committee in its sole
discretion, the LBTYA Option and LBTYA Tandem SARs shall
terminate, prior to the expiration of the LBTYA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for
"cause" (as defined in Section 11.2(b) of the Plan), (y) by
the Grantee with
1
<PAGE> 2
"good reason" (as defined herein) or (z) by the Company
without cause, and (ii) other than (x) by reason of death or
Disability, (y) with the written consent of the Company or the
applicable Subsidiary or (z) without such consent if such
termination is pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon
the occurrence of specified events (other than the giving of
notice and passage of time), then the LBTYA Option and all
LBTYA Tandem SARs shall terminate at the Close of Business on
the first business day following the expiration of the 90-day
period which began on the date of termination of Grantee's
employment;
(b) If Grantee dies while employed by the Company or
a Subsidiary, or prior to the expiration of a period of time
following termination of Grantee's employment during which the
LBTYA Option and LBTYA Tandem SARs remain exercisable as
provided in paragraph (a), the LBTYA Option and all LBTYA
Tandem SARs shall terminate at the Close of Business on the
first business day following the expiration of the one-year
period which began on the date of death;
(c) If Grantee's employment with the Company and its
Subsidiaries terminates by reason of Disability, then the
LBTYA Option and all LBTYA Tandem SARs shall terminate at the
Close of Business on the first business day following the
expiration of the one-year period which began on the date of
termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as
defined in Section 11.2(b) of the Plan), then the LBTYA Option
and all LBTYA Tandem SARs shall terminate immediately upon
such termination of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by
Grantee (x) with "good reason" (as defined herein), (y) with
the written consent of the Company or the applicable
Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than
the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 11.2(b) of the
Plan), then the LBTYA Option Term shall terminate early only
as provided for in paragraph 8(b) above or 12(b) below.
In any event in which the LBTYA Option and
LBTYA Tandem SARs remain exercisable for a period of time
following the date of termination of Grantee's employment as
provided above, the LBTYA Option and LBTYA Tandem SARs may be
exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such
date of termination of Grantee's employment. A change of
employment is not a termination of employment within the
meaning of this paragraph 8 provided that, after giving effect
to such change, the Grantee continues to be an employee of the
Company or any Subsidiary. Notwithstanding any period of time
referenced in this paragraph 8 or any other provision of this
paragraph that may be construed to the contrary, the LBTYA
2
<PAGE> 3
Option and all LBTYA Tandem SARs shall in any event terminate
upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement
shall be deemed to have occurred upon the happening of any of
the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue
in effect any employee benefit plan in which Grantee was
participating or (y) the taking of any action by the Company
that would adversely affect Grantee's participation in, or
materially reduce Grantee's benefits under, any such employee
benefit plan, unless such failure or such taking of any
action, adversely affects the senior members of the corporate
management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or
onerous than those attendant to Grantee's position immediately
after the date hereof; or
(iv) the relocation of the office location as
assigned to Grantee by the Company to a location more than 20
miles from Grantee's then current location without Grantee's
consent.
All other terms of the Agreement shall remain the same.
TELE-COMMUNICATIONS, INC.
By:
-----------------------------------
Stephen M. Brett
Executive Vice President,
Secretary and General Counsel
3
<PAGE> 1
EXHIBIT 10.49
7/23/97 TCIVA
AMENDMENT TO AGREEMENT
This Amendment to Agreement is made as of the 1st day of
March, 1999, and amends the Non-Qualified Stock Option and Stock Appreciation
Rights Agreement, dated as of July 23, 1997 (the "Agreement"), pertaining to
shares of TCI Ventures Group Series A Common Stock ("TCIVA") by and between
Tele-Communications, Inc. a Delaware corporation (the "Company") and the person
to whom such options were granted as provided in the Agreement (the "Grantee").
All terms used in this Amendment shall have the meanings set forth in the
Agreement except where specifically set forth herein.
This Amendment is made pursuant to paragraph 15(a) of the
Agreement which permits the Agreement to be amended to add to the agreements of
the Company for the benefit of the Grantee, provided that such amendment shall
not adversely affect the rights of the Grantee with respect to the Award
evidenced by the Agreement. It has been determined by the Committee that this
Amendment does not adversely affect the rights of the Grantee with respect to
the Award evidenced by the Agreement.
Pursuant to the Plan, the Compensation Committee of the Board
has determined that, pursuant to paragraph 15a(ii) of the Agreement:
1. Paragraph 4 of the Agreement shall be amended by deleting
the last full paragraph therein in its entirety and deleting the last sentence
of Paragraph 4(a) and replacing such sentence with the following language:
Notwithstanding the foregoing, all TCIVA Option Shares shall
become available for purchase if Grantee's employment with the
Company and its Subsidiaries (i) shall terminate by reason of
(x) termination by the Company without cause (as defined in
Section 11.2(b) of the Plan), (y) termination by Grantee for
good reason (as defined herein) or (z) Disability, (ii) shall
terminate pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon
the occurrence of specified events (other than the giving of
notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
2. Paragraph 8 of the Agreement shall be amended to read in
its entirety as follows:
8. EARLY TERMINATION OF OPTION AND TANDEM SARS.
Unless otherwise determined by the Committee in its sole
discretion, the TCIVA Option and TCIVA Tandem SARs shall
terminate, prior to the expiration of the TCIVA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for
"cause" (as defined in Section 11.2(b) of the Plan), (y) by
the Grantee with
1
<PAGE> 2
and (ii) other than (x) by reason of death or Disability, (y)
with the written consent of the Company or the applicable
Subsidiary or (z) without such consent if such termination is
pursuant to provisions of a written employment agreement, if
any, between the Grantee and the Company which expressly
permit the Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of
notice and passage of time), then the TCIVA Option and all
TCIVA Tandem SARs shall terminate at the Close of Business on
the first business day following the expiration of the 90-day
period which began on the date of termination of Grantee's
employment;
(b) If Grantee dies while employed by the Company or
a Subsidiary, or prior to the expiration of a period of time
following termination of Grantee's employment during which the
TCIVA Option and TCIVA Tandem SARs remain exercisable as
provided in paragraph (a), the TCIVA Option and all TCIVA
Tandem SARs shall terminate at the Close of Business on the
first business day following the expiration of the one-year
period which began on the date of death;
(c) If Grantee's employment with the Company and its
Subsidiaries terminates by reason of Disability, then the
TCIVA Option and all TCIVA Tandem SARs shall terminate at the
Close of Business on the first business day following the
expiration of the one-year period which began on the date of
termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as
defined in Section 11.2(b) of the Plan), then the TCIVA Option
and all TCIVA Tandem SARs shall terminate immediately upon
such termination of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by
Grantee (x) with "good reason" (as defined herein), (y) with
the written consent of the Company or the applicable
Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than
the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 11.2(b) of the
Plan), then the TCIVA Option Term shall terminate early only
as provided for in paragraph 8(b) above or 12(b) below.
In any event in which the TCIVA Option and
TCIVA Tandem SARs remain exercisable for a period of time
following the date of termination of Grantee's employment as
provided above, the TCIVA Option and TCIVA Tandem SARs may be
exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such
date of termination of Grantee's employment. A change of
employment is not a termination of employment within the
meaning of this paragraph 8 provided that, after giving effect
to such change, the Grantee continues to be an employee of the
Company or any Subsidiary. Notwithstanding any period of time
referenced in this paragraph 8 or any other provision of this
paragraph that may be construed to the contrary, the TCIVA
Option and all TCIVA Tandem SARs shall in any event terminate
upon the expiration of the Option Term.
2
<PAGE> 3
"Good reason" for purposes of the Agreement
shall be deemed to have occurred upon the happening of any of
the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue
in effect any employee benefit plan in which Grantee was
participating or (y) the taking of any action by the Company
that would adversely affect Grantee's participation in, or
materially reduce Grantee's benefits under, any such employee
benefit plan, unless such failure or such taking of any
action, adversely affects the senior members of the corporate
management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or
onerous than those attendant to Grantee's position immediately
after the date hereof; or
(iv) the relocation of the office location as
assigned to Grantee by the Company to a location more than 20
miles from Grantee's then current location without Grantee's
consent.
All other terms of the Agreement shall remain the same.
TELE-COMMUNICATIONS, INC.
By: /s/ STEPHEN M. BRETT
-----------------------------------
Stephen M. Brett
Executive Vice President,
Secretary and General Counsel
3
<PAGE> 1
EXHIBIT 10.50
5/14/97 TCOMA
AMENDMENT TO AGREEMENT
This Amendment to Agreement is made as of the 1st day of
March, 1999, and amends the Non-Qualified Stock Option and Stock Appreciation
Rights Agreement, dated as of May 14, 1997 (the "Agreement"), pertaining to
shares of TCI Group Series A Common Stock ("TCOMA") by and between
Tele-Communications, Inc. a Delaware corporation (the "Company") and the person
to whom such options were granted as provided in the Agreement (the "Grantee").
All terms used in this Amendment shall have the meanings set forth in the
Agreement except where specifically set forth herein.
This Amendment is made pursuant to paragraph 15(a) of the
Agreement which permits the Agreement to be amended to add to the agreements of
the Company for the benefit of the Grantee, provided that such amendment shall
not adversely affect the rights of the Grantee with respect to the Award
evidenced by the Agreement. It has been determined by the Committee that this
Amendment does not adversely affect the rights of the Grantee with respect to
the Award evidenced by the Agreement.
Pursuant to the Plan, the Compensation Committee of the Board
has determined that, pursuant to paragraph 15a(ii) of the Agreement:
1. Paragraph 4 of the Agreement shall be amended by deleting
the last full paragraph therein in its entirety and deleting the last sentence
of Paragraph 4(a) and replacing such sentence with the following language:
Notwithstanding the foregoing, all TCOMA Option Shares shall
become available for purchase if Grantee's employment with
the Company and its Subsidiaries (i) shall terminate by
reason of (x) termination by the Company without cause (as
defined in Section 11.2(b) of the Plan), (y) termination by
Grantee for good reason (as defined herein) or (z)
Disability, (ii) shall terminate pursuant to provisions of a
written employment agreement, if any, between the Grantee and
the Company which expressly permit the Grantee to terminate
such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), or
(iii) if Grantee dies while employed by the Company or a
Subsidiary.
2. Paragraph 8 of the Agreement shall be amended to read in
its entirety as follows:
8. EARLY TERMINATION OF OPTION AND TANDEM SARS.
Unless otherwise determined by the Committee in its sole
discretion, the TCOMA Option and TCOMA Tandem SARs shall
terminate, prior to the expiration of the TCOMA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for
"cause" (as defined in Section 11.2(b) of the Plan), (y) by
the Grantee with "good reason" (as defined herein) or (z) by
the Company without cause,
1
<PAGE> 2
and (ii) other than (x) by reason of death or Disability, (y)
with the written consent of the Company or the applicable
Subsidiary or (z) without such consent if such termination is
pursuant to provisions of a written employment agreement, if
any, between the Grantee and the Company which expressly
permit the Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of
notice and passage of time), then the TCOMA Option and all
TCOMA Tandem SARs shall terminate at the Close of Business on
the first business day following the expiration of the 90-day
period which began on the date of termination of Grantee's
employment;
(b) If Grantee dies while employed by the Company or
a Subsidiary, or prior to the expiration of a period of time
following termination of Grantee's employment during which
the TCOMA Option and TCOMA Tandem SARs remain exercisable as
provided in paragraph (a), the TCOMA Option and all TCOMA
Tandem SARs shall terminate at the Close of Business on the
first business day following the expiration of the one-year
period which began on the date of death;
(c) If Grantee's employment with the Company and its
Subsidiaries terminates by reason of Disability, then the
TCOMA Option and all TCOMA Tandem SARs shall terminate at the
Close of Business on the first business day following the
expiration of the one-year period which began on the date of
termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as
defined in Section 11.2(b) of the Plan), then the TCOMA
Option and all TCOMA Tandem SARs shall terminate immediately
upon such termination of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by
Grantee (x) with "good reason" (as defined herein), (y) with
the written consent of the Company or the applicable
Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other
than the giving of notice and passage of time), or (ii) by
the Company without "cause" (as defined in Section 11.2(b) of
the Plan), then the TCOMA Option Term shall terminate early
only as provided for in paragraph 8(b) above or 12(b) below.
In any event in which the TCOMA Option and
TCOMA Tandem SARs remain exercisable for a period of time
following the date of termination of Grantee's employment as
provided above, the TCOMA Option and TCOMA Tandem SARs may be
exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on
such date of termination of Grantee's employment. A change of
employment is not a termination of employment within the
meaning of this paragraph 8 provided that, after giving
effect to such change, the Grantee continues to be an
employee of the Company or any Subsidiary. Notwithstanding
any period of time referenced in this paragraph 8 or any
other provision of this paragraph that may be construed to
the contrary, the TCOMA Option and all TCOMA Tandem SARs
shall in any event terminate upon the expiration of the
Option Term.
2
<PAGE> 3
"Good reason" for purposes of the Agreement
shall be deemed to have occurred upon the happening of any of
the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue
in effect any employee benefit plan in which Grantee was
participating or (y) the taking of any action by the Company
that would adversely affect Grantee's participation in, or
materially reduce Grantee's benefits under, any such employee
benefit plan, unless such failure or such taking of any
action, adversely affects the senior members of the corporate
management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or
onerous than those attendant to Grantee's position
immediately after the date hereof;
(iv) the relocation of the office location as
assigned to Grantee by the Company to a location more than 20
miles from Grantee's then current location without Grantee's
consent; or
(v) the failure of the Company to obtain, prior to
the time of any reorganization, merger, consolidation,
disposition of all or substantially all of the assets of the
Company or similar transaction effective after the date
hereof, in which the Company is not the surviving person, the
unconditional assumption in writing or by operation of law of
the Company's obligations to Grantee under this Agreement by
each direct successor to the Company in any such transaction.
All other terms of the Agreement shall remain the same.
TELE-COMMUNICATIONS, INC.
By:
----------------------------------
Stephen M. Brett
Executive Vice President,
Secretary and General Counsel
<PAGE> 1
EXHIBIT 10.51
5/14/97 TCIVA
AMENDMENT TO AGREEMENT
This Amendment to Agreement is made as of the 1st day of
March, 1999, and amends the Non-Qualified Stock Option and Stock Appreciation
Rights Agreement, dated as of May 14, 1997 (the "Agreement"), pertaining to
shares of TCI Ventures Group Series A Common Stock ("TCIVA") by and between
Tele-Communications, Inc. a Delaware corporation (the "Company") and the person
to whom such options were granted as provided in the Agreement (the "Grantee").
All terms used in this Amendment shall have the meanings set forth in the
Agreement except where specifically set forth herein.
This Amendment is made pursuant to paragraph 15(a) of the
Agreement which permits the Agreement to be amended to add to the agreements of
the Company for the benefit of the Grantee, provided that such amendment shall
not adversely affect the rights of the Grantee with respect to the Award
evidenced by the Agreement. It has been determined by the Committee that this
Amendment does not adversely affect the rights of the Grantee with respect to
the Award evidenced by the Agreement.
Pursuant to the Plan, the Compensation Committee of the Board
has determined that, pursuant to paragraph 15a(ii) of the Agreement:
1. Paragraph 4 of the Agreement shall be amended by deleting
the last full paragraph therein in its entirety and deleting the last sentence
of Paragraph 4(a) and replacing such sentence with the following language:
Notwithstanding the foregoing, all TCIVA Option Shares shall
become available for purchase if Grantee's employment with the
Company and its Subsidiaries (i) shall terminate by reason of
(x) termination by the Company without cause (as defined in
Section 11.2(b) of the Plan), (y) termination by Grantee for
good reason (as defined herein) or (z) Disability, (ii) shall
terminate pursuant to provisions of a written employment
agreement, if any, between the Grantee and the Company which
expressly permit the Grantee to terminate such employment upon
the occurrence of specified events (other than the giving of
notice and passage of time), or (iii) if Grantee dies while
employed by the Company or a Subsidiary.
2. Paragraph 8 of the Agreement shall be amended to read in
its entirety as follows:
8. EARLY TERMINATION OF OPTION AND TANDEM SARS.
Unless otherwise determined by the Committee in its sole
discretion, the TCIVA Option and TCIVA Tandem SARs shall
terminate, prior to the expiration of the TCIVA Option Term,
at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for
"cause" (as defined in Section 11.2(b) of the Plan), (y) by
the Grantee with "good reason" (as defined herein) or (z) by
the Company without cause,
1
<PAGE> 2
and (ii) other than (x) by reason of death or Disability, (y)
with the written consent of the Company or the applicable
Subsidiary or (z) without such consent if such termination is
pursuant to provisions of a written employment agreement, if
any, between the Grantee and the Company which expressly
permit the Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of
notice and passage of time), then the TCIVA Option and all
TCIVA Tandem SARs shall terminate at the Close of Business on
the first business day following the expiration of the 90-day
period which began on the date of termination of Grantee's
employment;
(b) If Grantee dies while employed by the Company or
a Subsidiary, or prior to the expiration of a period of time
following termination of Grantee's employment during which the
TCIVA Option and TCIVA Tandem SARs remain exercisable as
provided in paragraph (a), the TCIVA Option and all TCIVA
Tandem SARs shall terminate at the Close of Business on the
first business day following the expiration of the one-year
period which began on the date of death;
(c) If Grantee's employment with the Company and its
Subsidiaries terminates by reason of Disability, then the
TCIVA Option and all TCIVA Tandem SARs shall terminate at the
Close of Business on the first business day following the
expiration of the one-year period which began on the date of
termination of Grantee's employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as
defined in Section 11.2(b) of the Plan), then the TCIVA Option
and all TCIVA Tandem SARs shall terminate immediately upon
such termination of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by
Grantee (x) with "good reason" (as defined herein), (y) with
the written consent of the Company or the applicable
Subsidiary or (z) pursuant to provisions of a written
employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such
employment upon the occurrence of specified events (other than
the giving of notice and passage of time), or (ii) by the
Company without "cause" (as defined in Section 11.2(b) of the
Plan), then the TCIVA Option Term shall terminate early only
as provided for in paragraph 8(b) above or 12(b) below.
In any event in which the TCIVA Option and
TCIVA Tandem SARs remain exercisable for a period of time
following the date of termination of Grantee's employment as
provided above, the TCIVA Option and TCIVA Tandem SARs may be
exercised during such period of time only to the extent the
same were exercisable as provided in paragraph 4 above on such
date of termination of Grantee's employment. A change of
employment is not a termination of employment within the
meaning of this paragraph 8 provided that, after giving effect
to such change, the Grantee continues to be an employee of the
Company or any Subsidiary. Notwithstanding any period of time
referenced in this paragraph 8 or any other provision of this
paragraph that may be construed to the contrary, the TCIVA
Option and all TCIVA Tandem SARs shall in any event terminate
upon the expiration of the Option Term.
2
<PAGE> 3
"Good reason" for purposes of the Agreement
shall be deemed to have occurred upon the happening of any of
the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue
in effect any employee benefit plan in which Grantee was
participating or (y) the taking of any action by the Company
that would adversely affect Grantee's participation in, or
materially reduce Grantee's benefits under, any such employee
benefit plan, unless such failure or such taking of any
action, adversely affects the senior members of the corporate
management of the Company generally;
(iii) the assignment to Grantee of duties and
responsibilities that are materially more oppressive or
onerous than those attendant to Grantee's position immediately
after the date hereof; or
(iv) the relocation of the office location as
assigned to Grantee by the Company to a location more than 20
miles from Grantee's then current location without Grantee's
consent.
All other terms of the Agreement shall remain the same.
TELE-COMMUNICATIONS, INC.
By:
-------------------------------------
Stephen M. Brett
Executive Vice President,
Secretary and General Counsel
3
<PAGE> 1
EXHIBIT 10.62
AMENDED AND RESTATED STOCK APPRECIATION RIGHT
THIS AMENDED AND RESTATED STOCK APPRECIATION RIGHT AGREEMENT ("AGREEMENT")
is made as of this 8TH DAY OF MARCH, 1999, by and among TCI INTERNET SERVICES,
INC., a Colorado corporation (the "INTERNET SERVICES"), TELE-COMMUNICATIONS,
INC., a Delaware corporation (the "COMPANY"), and LARRY E. ROMRELL ("GRANTEE").
Capitalized terms used herein and not otherwise defined are defined in paragraph
18 below.
WHEREAS, Internet Services, the Company and Grantee have previously entered
into a Stock Appreciation Rights Agreement, dated as of December 1, 1996, as
amended (the "PRIOR SAR AGREEMENT");
WHEREAS, as a result of certain corporate restructurings and other
transactions which are occurring in connection with the consummation of the
merger of a wholly owned subsidiary of AT&T Corp. ("AT&T") with and into the
Company (the "MERGER"), TCI Internet Holdings Inc. ("HOLDINGS"), a Subsidiary of
Internet Services, will become a member of the Company Group (as defined in the
Company's certificate of incorporation);
WHEREAS, Grantee has previously exercised stock appreciation rights granted
to him under the Prior SAR Agreement with respect to six (6) of the ten (10)
shares of Internet Services common stock to which he was entitled;
WHEREAS, Grantee is entering into a Consulting Agreement, dated as of March
8, 1999, with the Company (the "CONSULTING AGREEMENT") pursuant to which Grantee
will become a consultant to the Company; and
WHEREAS, the parties desire to amend the Prior SAR Agreement to adjust for
Grantee's prior exercises of stock appreciation rights thereunder, substitute
for the remaining stock appreciation rights with respect to the common stock of
Internet Services a stock appreciation right with respect to the securities and
other assets held by Internet Services immediately prior to the Merger, provide
for other appropriate adjustments reflecting certain changed circumstances
resulting from the Merger (including, but not limited to, Grantee's becoming a
consultant to the Company pursuant to the Consulting Agreement), and to restate
the Prior SAR Agreement in its entirety in order to reflect such adjustments,
amendments and other changes.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
<PAGE> 2
1. GRANT OF STOCK APPRECIATION RIGHTS; TERM; RELEASE. (a) The Company
hereby grants to Grantee stock appreciation rights ("SARS") with respect four
(4) Share Units on the terms and subject to the conditions set forth herein.
Subject to paragraph 2 and 3(b), the SARs shall be exercisable in whole at any
time and in part from time to time during the period commencing on the date
hereof and expiring at 5:00 p.m., Denver, Colorado time ("CLOSE OF BUSINESS") on
the tenth anniversary of the Determination Date, or such earlier date as the
SARs may be terminated pursuant to paragraph 6 or paragraph 9(a) (the "TERM").
(b) The grant of SARs hereunder shall be deemed to be in substitution
for and replacement of the stock appreciation rights with respect to the shares
of common stock of Internet Services which were previously granted by Internet
Services to Grantee, and the parties acknowledge and agree that such prior stock
appreciation rights grant is hereby terminated and shall cease to be of any
further force and effect. Grantee hereby irrevocably releases Internet Services
and the Company from any and all obligations under the Prior SAR Agreement.
2. CONDITIONS OF EXERCISE; VESTING. (a) Except as otherwise provided in
paragraph 2(b) or in paragraph 9(a), (i) the SARs shall not be exercisable
immediately, (ii) two (2) SARs will vest and become exercisable on February 1,
2000 and (iii) all unexercised SARs will vest and become exercisable on February
1, 2001.
(b) Notwithstanding the foregoing, all then unexercised SARs (the
"REMAINING SARS") shall become immediately exercisable if during the Term (i)
Grantee's employment with the Company Group shall terminate by reason of (x)
termination by the Company Group without Cause, (y) termination by Grantee for
Good Reason or (z) Disability, (ii) Grantee's employment shall terminate
pursuant to provisions of a written agreement, if any, between Grantee and the
applicable member(s) of the Company Group which expressly permits Grantee to
terminate such employment upon the occurrence of specified events (other than
the giving of notice and passage of time) or (iii) Grantee dies while employed
by the Company Group; provided, however, that the parties acknowledge and agree
that (x) termination of Grantee's consulting services other than pursuant to
Section 1(b)(i) of the Consulting Agreement shall be deemed to be a termination
of employment by the Company without Cause for purposes of this Agreement and
(y) this Agreement shall not create any additional or further rights in the
Company with respect to the termination of Grantee's consulting services, other
than the rights specified in the Consulting Agreement. A change of employment is
not a termination of employment within the meaning of this paragraph 2(b),
provided that, after giving effect to such change, Grantee is an employee of, or
becomes or continues to be a consultant to, any member of the Company Group.
3. EXERCISE OF SARS. (a) SARs granted hereunder may be exercised by
delivery to the Company of a written notice (the "EXERCISE NOTICE") specifying
the whole number of SARs being exercised. The date upon which such notice is
validly delivered to the Company shall be deemed to be the date of exercise of
the SARs specified therein (the "EXERCISE DATE"). Upon the valid exercise of
SARs, Grantee shall be entitled to receive from the Company, with respect to
each SAR then being exercised, the excess of (x) the Per Share Unit Value as of
the Exercise Date over (y) the Strike Price (such excess, the "CASH VALUE").
Upon a valid exercise of a SAR and payment in full by the
2
<PAGE> 3
Company of the Cash Value in respect thereof, such SAR shall be deemed canceled
and will cease to be outstanding.
(b) The minimum number of SARs which may be exercised at any time will
be one (1).
(c) If on the Exercise Date @Home is not a Public Company and the value
of the @Home Common Stock is not otherwise established pursuant to Schedule 1,
then, Grantee shall have the right to rescind an exercise of SARs prior to the
Close of Business on the fifteenth (15th) day following the Exercise Date in the
event that (i) Grantee has elected to determine the Per Share Unit Value through
negotiation with the Company, (ii) Grantee and the Company have not agreed upon
a Per Share Unit Value by such date and (iii) Grantee has not made a subsequent
election to require that the Per Share Unit Value be determined by appraisal
pursuant to paragraph 10(c) hereof. In addition, an exercise of SARs shall be
deemed rescinded under the circumstances set forth in paragraph 10(b) hereof. In
the event of any rescission of an exercise of SARs pursuant to this paragraph
3(c), Grantee shall not be permitted to again exercise SARs for a period of
thirty (30) days following the date of such rescission.
(d) In the event the Grantee elects to rescind his exercise of SARs in
accordance herewith, such exercise shall be deemed rescinded ab initio and the
future exercisability and vesting of those SARs whose exercise has been
rescinded shall not be affected by such exercise and subsequent rescission,
except as provided in the last sentence of paragraph 3(c) above.
4. WITHHOLDING FOR TAXES. It shall be a condition precedent to any exercise
of a SAR that Grantee make provision acceptable to the Company for the payment
or withholding of any and all federal, state and local taxes required to be
withheld by the Company to satisfy the tax liability associated with such
exercise, as determined by the Company Board.
5. DELIVERY BY THE COMPANY. (a) Subject to the withholding referred to in
paragraph 4, the Company shall deliver or cause to be delivered to Grantee the
Cash Value of the SARs then being exercised, with such amount being paid, at the
Company's election, in (i) cash, (ii)(x) provided that the Company is then a
Public Company and that the Company's common stock is then listed or traded on
NASDAQ or a national securities exchange and is actively traded, shares of the
Company's common stock (and if more than one series of such common stock is
created with different voting rights, the series with the lower voting rights),
or (y) shares of AT&T Class A Liberty Media Group Common Stock, $1.00 par value
per share, or any successor class or series of AT&T's common stock which is
intended to reflect the business and assets of the Company and which is listed
or traded on NASDAQ or a national securities exchange and is actively traded
("COMPANY COMMON STOCK"), (iii) shares of any class or series of capital stock
of any other Person, provided that shares of the same class and series of
securities being so delivered are then listed or traded on NASDAQ or a national
securities exchange and are actively traded ("OTHER STOCK"), or (iv) any
combination of cash, Company Common Stock and Other Stock, as the Company may
elect. It shall be a condition to the Company's right to deliver shares of
Company Common Stock or Other Stock in satisfaction of its obligations hereunder
that (i) (x) the issuance of such shares to Grantee shall have been
3
<PAGE> 4
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
on Form S-8 (or other appropriate form) and (y) such shares may be immediately
sold in the market by Grantee (either pursuant to Rule 144 or a resale
prospectus ) or (ii) such shares may be sold to Grantee without registration
under the Securities Act and Grantee's immediate resale of such shares is not
prohibited or otherwise restricted by the registration requirements of the
Securities Act. If the Company elects to pay all or any portion of the Cash
Value in shares of Company Common Stock or Other Stock, said shares shall be
valued for such purpose at the most recent Closing Price thereof as of the date
of delivery of such shares to Grantee. The payment of the Cash Value (in cash or
by delivery of Company Common Stock or Other Stock) shall be made (i) if each of
the Subject Companies is a Public Company, on the 10th day following the
Exercise Date and (ii) if each of the Subject Companies is not a Public Company,
on the 10th day following either (x) the date Grantee and the Company mutually
agree as to the Agreed Per Share Unit Value or (y) the receipt by Grantee and
the Company of notice pursuant to paragraph 10(c) of the final determination of
the Appraised Per Share Unit Value (or on such other date as the parties may
agree).
6. EARLY TERMINATION OF SARS. Subject to the provisions of Section 2(b)
hereof, unless otherwise determined by the Company Board in its sole discretion,
the SARs shall terminate prior to the expiration of the ten-year period provided
for in paragraph 1, as follows:
(a) If Grantee's employment with the Company Group terminates other than
(i) by Grantee with Good Reason, (ii) by reason of Grantee's death or
Disability, (iii) with the written consent of the applicable member(s) of
the Company Group, (iv) without such consent if such termination is
pursuant to provisions of a written employment agreement, if any, between
Grantee and the applicable member(s) of the Company Group which expressly
permits Grantee to terminate such employment upon the occurrence of
specified events (other than the giving of notice and passage of time), or
(v) by the Company Group with or without Cause, then the SARs shall
terminate at the Close of Business on the first business day following the
expiration of the 90-day period beginning on the date of termination of
Grantee's employment;
(b) If Grantee dies (i) while employed by the Company Group or (ii)
prior to the expiration of a relevant period of time following termination
of employment during which the SARs remain exercisable as provided in this
paragraph 6, the SARs shall terminate at the Close of Business on the first
business day following the expiration of the one-year period beginning on
the date of death;
(c) If Grantee's employment with the Company Group terminates by reason
of Disability, then the SARs shall terminate at the Close of Business on
the first business day following the expiration of the one-year period
beginning on the date of termination of Grantee's employment;
(d) If Grantee's employment with the Company Group is terminated by the
Company Group for Cause, then the SARs shall terminate immediately upon
such termination of Grantee's employment; and
4
<PAGE> 5
(e) If Grantee terminates his employment with the Company Group (i) with
Good Reason, (ii) with the written consent of the applicable member(s) of
the Company Group or (iii) pursuant to provisions of a written employment
agreement, if any, between Grantee and the applicable member(s) of the
Company Group which expressly permits Grantee to terminate such employment
upon the occurrence of specified events (other than the giving of notice
and passage of time), or if the Company Group terminates Grantee's
employment with the Company Group without Cause, then the Term shall not
terminate prior to the end of the ten-year period provided for in paragraph
1, except as otherwise provided for in paragraph 6(b) or 9(a).
In any event in which the SARs remain exercisable for a period of time
following the date of termination of Grantee's employment as provided above,
such SARs may be exercised during such period of time only to the extent they
were exercisable as provided in paragraph 2 or paragraph 9(a) on such date of
termination of Grantee's employment (after giving effect to any acceleration
provided for in paragraph 2(b)). A change of employment is not a termination of
employment within the meaning of this paragraph 6, provided that, after giving
effect to such change, Grantee is an employee of, or becomes or continues to be
a consultant to, any member of the Company Group. Anything contained herein to
the contrary notwithstanding, the SARs shall in any event terminate upon the
expiration of the ten-year period provided for in paragraph 1, if not
theretofore terminated.
7. NONTRANSFERABILITY OF SARS. During Grantee's lifetime, the SARs are not
and shall not be transferable (voluntarily or involuntarily) other than pursuant
to a Domestic Relations Order and, except as otherwise required pursuant to a
Domestic Relations Order, the SARs shall be exercisable only by Grantee or
Grantee's court appointed legal representative. Grantee may designate a
beneficiary or beneficiaries to whom the SARs shall pass upon Grantee's death
and may change such designation from time to time by filing a written
designation of beneficiary or beneficiaries with the Company on the form annexed
hereto as Exhibit A or such other form as may be prescribed by the Company
Board, provided that no such designation shall be effective unless so filed
prior to the death of Grantee. If no such designation is made or if the
designated beneficiary does not survive Grantee's death, the SARs shall pass by
will or the laws of descent and distribution. Following Grantee's death, the
SARs, if otherwise exercisable, may be exercised by the person to whom the SARs
pass according to the foregoing, and such person shall be deemed to be Grantee
for purposes of any applicable provisions of this Agreement.
8. NO SHAREHOLDER RIGHTS; NO GUARANTEE OF EMPLOYMENT; UNSECURED OBLIGATION.
(a) Grantee shall not be deemed for any purpose to be, or to have any of the
rights of, a stockholder of the Company by virtue of the SARs. The existence of
this Agreement and Grantee's rights hereunder shall not affect in any way the
right or power of the Company or its stockholders to accomplish any corporate
act.
(b) Nothing contained in this Agreement, and no action by the Company or
the Company Board with respect hereto, shall confer or be construed to confer on
Grantee any right to continue in the employ of the Company Group or any member
thereof or interfere in any way with the right of the Company or any employing
member of the Company Group to terminate Grantee's
5
<PAGE> 6
employment at any time, with or without Cause, except as otherwise expressly
provided in any written agreement between the applicable member(s) of the
Company Group and Grantee.
(c) The amount of cash payable at any time by the Company upon the valid
exercise of SARs granted hereunder shall not in any way be reserved or held in
trust by the Company. Grantee shall not have any rights against the Company in
respect of payments of such amount of cash other than as the rights of an
unsecured general creditor of the Company. The amount of cash payable upon the
valid exercise of SARs hereunder shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and shall not in any manner be liable or subject to the debts,
contracts, liabilities, engagements or torts of Grantee or of any designated
beneficiary or personal representative.
9. ACCELERATION; AUTOMATIC EXERCISE. (a) The Company Board may at any time
in its sole discretion determine that the SARs shall become exercisable in full,
without regard to paragraph 2, whether immediately, upon the occurrence of
specified events, or otherwise. Without limiting the generality of the
foregoing, in the event of any Board Change, Control Purchase or Approved
Transaction that occurs with respect to the Company following the date hereof,
the SARs shall become exercisable in full, without regard to paragraph 2,
effective upon the Board Change or Control Purchase or immediately prior to
consummation of the Approved Transaction, as applicable (or at such earlier time
as the Company Board in its sole discretion may determine); provided, however,
that to the extent not theretofore exercised the SARs shall terminate upon the
first to occur of the consummation of the Approved Transaction or the expiration
or early termination of the Term. Notwithstanding the foregoing, the Company
Board may, in its discretion, determine that the SARs will not become
exercisable on an accelerated basis in connection with an Approved Transaction
and/or will not terminate if not exercised prior to consummation of the Approved
Transaction, if the Company Board or the surviving or acquiring corporation, as
the case may be, shall have taken or made effective provision for the taking of
such action as in the opinion of the Company Board is equitable and appropriate
to substitute new stock appreciation rights for the SARs evidenced by this
Agreement (provided that no change in the Subject Companies or Subject
Securities, as in effect immediately prior to such event, is made in connection
with such substitution), or to assume this Agreement and the SARs evidenced
hereby and in order to make such new or assumed stock appreciation rights, as
nearly as may be practicable, equivalent to the SARs evidenced by this Agreement
as then in effect (but before giving effect to any acceleration of the
exercisability hereof unless otherwise determined by the Company Board).
(b) Immediately prior to the termination of the SARs as provided in
paragraph 6 above (other than pursuant to paragraph 6(d)), this paragraph 9, or
the expiration of the Term, all Remaining SARs shall be deemed to have been
exercised by Grantee and Grantee shall be deemed to have taken all actions
required by paragraph 3(a) for a valid exercise of SARs.
10. RESTRICTIONS IMPOSED BY LAW; AGREED PER SHARE UNIT VALUE; APPRAISAL
PROCEDURES. (a) Grantee acknowledges that neither the SARs nor the interests
evidenced thereby have been registered under the Securities Act and that neither
the SARs nor such interests may be transferred in the absence of such
registration or the availability of an exemption therefrom under the
6
<PAGE> 7
Securities Act or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder. Neither the Company nor any other person
shall have any obligation to register the SARs or the interests represented
thereby, or any transfer of the SARs or the interests represented thereby, under
the Securities Act, the Exchange Act or any other state or federal securities
law.
(b) Except as otherwise provided in Schedule 1 hereto, in the event that
the Subject Securities of one or more of the Subject Companies are not Publicly
Traded as of the Exercise Date (each such Subject Company whose Subject
Securities are not Publicly Traded, a "PRIVATE ISSUER"), Grantee shall have the
right to elect that portion of the Per Share Unit Value attributable to the
securities of a Private Issuer (the "PRIVATE SHARES") be determined by appraisal
as provided herein or to seek to negotiate a mutually acceptable Private Share
Value in respect thereof with the Company; provided, that in the event Grantee
and the Company are unable to agree upon all Private Share Values prior to the
Close of Business on the fifteenth (15th) day following the Exercise Date, then
Grantee shall have the further right (subject to the last sentence of paragraph
10(c) below), exercisable by written notice to the Company, to require that any
Private Share Value as to which Grantee and the Company have not agreed be
determined by appraisal as provided herein. In the event that @Home is a Private
Issuer and Grantee and the Company have not agreed upon the Private Share Value
of the @Home securities included in a Share Unit as of the Close of Business on
such fifteenth (15th) day and the Grantee has not delivered notice requiring
appraisal, the Grantee shall be deemed to have rescinded the exercise of SARs
pursuant to paragraph 3 hereof. In the event that either or both of Sportsline
or iVillage is a Private Issuer, Grantee shall have no right to rescind the
exercise of the SARs, and instead shall be deemed to have delivered at the Close
of Business on such fifteenth (15th) day notice requiring appraisal of such
Private Shares. In the event that Grantee elects to seek to negotiate the
Private Share Value with the Company, each party agrees to negotiate in good
faith and use its commercially reasonable efforts to agree upon the Agreed
Private Share Value. The parties acknowledge and agree that in connection with
such negotiations the parties shall give due consideration to the determination
of the Fair Market Value of each Private Issuer (as set forth in the definition
thereof) and the number of shares of Private Issuer Common Stock outstanding
(based upon the principles set forth in paragraph 10(c) hereof).
(c) In the event Grantee elects to require that any Private Share Value
be determined by appraisal, Grantee shall specify in the Exercise Notice or the
subsequent written notice to the Company electing appraisal (or in a written
notice to the Company following a deemed request for appraisal the identity of
the Appraiser selected by Grantee to make the determination of the Fair Market
Value of each Private Issuer (the "FIRST APPRAISER"). Within three (3) business
days following receipt of such notice, the Company shall notify Grantee in
writing as to the identity of the Appraiser selected by the Company (the "SECOND
APPRAISER"). The Appraisers selected pursuant to this paragraph 10(c) shall make
separate determinations of the Fair Market Value of each Private Issuer in
accordance with the provisions of this paragraph 10(c), and Grantee and the
Company shall each be entitled to a single Appraiser in respect of any exercise
of SARs hereunder. The First Appraiser and the Second Appraiser shall each
submit its determination of the Fair Market Value of each Private Issuer to
Grantee and the Company within thirty (30) days of the date of selection of the
Second Appraiser. If the respective determinations of the Fair Market Value of a
Private Issuer by
7
<PAGE> 8
such Appraisers vary by less than 10% of the higher determination, then the Fair
Market Value of such Private Issuer shall be the average of the two
determinations. If such determinations vary by 10% or more of the higher
determination, the two Appraisers shall promptly designate a third Appraiser
(the "THIRD APPRAISER"). Neither Grantee nor the Company shall provide, and the
First Appraiser and Second Appraiser shall be instructed not to provide, any
information to the Third Appraiser as to the determination of the First
Appraiser and Second Appraiser or otherwise influence such Third Appraiser's
determination. The Third Appraiser shall submit its determination of the Fair
Market Value of such Private Issuer to Grantee and the Company within fifteen
(15) days of the date of its selection. The Fair Market Value of such Private
Issuer shall be equal to the average of the two closest of the three
determinations, provided, that, if the difference between the highest and middle
determinations is no more than 105% and no less than 95% of the difference
between the middle and lowest determinations, the Fair Market Value of such
Private Issuer shall be equal to the middle determination. Following the
determination of the Fair Market Value of each such Private Issuer, the
Appraisers whose determinations were used in the calculation of the Fair Market
Value of such Private Issuer shall determine the number of shares of Private
Issuer Common Stock outstanding together with any further appropriate
adjustments to the Fair Market Value of such Private Issuer resulting from such
determination. The number of shares of Private Issuer Common Stock outstanding
with respect to such Private Issuer shall mean a number, as determined by such
Appraisers as of the applicable date, equal to the sum of the number of shares
of Private Issuer Common Stock outstanding with respect to such Private Issuer
and the number of shares of Private Issuer Common Stock issuable by such Private
Issuer upon the conversion, exercise or exchange of those Convertible Securities
the holders of which would derive an economic benefit from the conversion,
exercise of exchange of such Convertible Securities which exceeds the economic
benefits of not converting, exercising or exchanging such Convertible
Securities; provided, however, that shares of @Home Common Stock issuable upon
the exercise of warrants to purchase @Home Common Stock issued by @Home to cable
television operators, which warrants become exercisable only to the extent that
such operator has upgraded its cable system or is distributing the @Home high
speed internet access service over its cable plant and equipment, such warrants
shall be deemed exercised only to the extent that such warrants are exercisable
in accordance with their terms as of the applicable Exercise Date. The
Appraisers shall then calculate the value per share of Private Issuer Common
Stock (the "APPRAISED PRIVATE SHARE VALUE") with respect to each Private Issuer
for which appraisal was required, which shall be the quotient obtained by
dividing the Fair Market Value of such Private Issuer by the number of shares of
Private Issuer Common Stock of such Private Issuer outstanding or deemed
outstanding; provided, that if such Appraisers do not agree on the number of
shares of Private Issuer Common Stock outstanding, each Appraiser whose
determination of the Fair Market Value of such Private Issuer is being used in
the calculation of such Appraised Private Share Value shall determine the
Appraised Private Share Value based upon its determination of the Fair Market
Value of such Private Issuer and the number of shares of Private Issuer Common
Stock of such Private Issuer outstanding, and the Appraised Private Share Value
shall be the average of the quotients so obtained on the basis of the respective
determinations of such firms. The Appraisers shall jointly notify the Company
and Grantee in writing of their final determination of the Appraised Private
Share Value as to each Private Issuer within five (5) days after the
determination of the Fair Market Value of the last of the Private Issuers with
respect to which appraisal is required. Grantee and the Company shall each pay
the fees and expenses of his or its own Appraiser and one-half of the
8
<PAGE> 9
fees and expenses of the Third Appraiser, if any. Grantee acknowledges and
agrees that he shall not be entitled to require an appraisal pursuant to this
Agreement more than once in any 12 month period. In connection with any
appraisal pursuant to this paragraph 10, the Company agrees that it shall use
its commercially reasonable efforts to obtain and (subject to the recipient
agreeing to customary confidentiality restrictions) make available to Grantee
and any Appraiser, such financial and business information concerning such
Private Issuer as is reasonably necessary to assist Grantee or such Appraisers
in determining the Fair Market Value of such Private Issuer.
11. NOTICE. Unless the Company notifies Grantee in writing of a change of
address, any notice or other communication to the Company with respect to this
Agreement shall be in writing and shall be delivered personally or sent by first
class mail, postage prepaid and addressed as follows:
If to the Company:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: General Counsel
Any notice or other communication by the Company to Grantee with respect to this
Agreement shall be in writing and shall be delivered personally, or shall be
sent by first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the date hereof, unless the Company has received
written notification from Grantee of a change of address. Except as otherwise
specifically provided herein, all notices and other communications hereunder,
including without limitation any Exercise Notice, shall be effective when
actually received.
12. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Colorado.
13. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms refer to this Agreement,
including all Exhibits and Schedules, as a whole, unless the context otherwise
requires. The headings of the paragraphs of this Agreement have been included
for convenience of reference only, are not to be considered a part hereof and
shall not modify or restrict any of the terms or provisions hereof. All
decisions of the Company Board upon questions regarding this Agreement shall be
conclusive, so long as such decisions are otherwise made in accordance with this
Agreement.
14. DUPLICATE ORIGINALS. The Company and Grantee may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
15. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between or among the
Company and Grantee, or any of them, with respect to the subject matter hereof.
Each of the Company and Grantee hereby declares
9
<PAGE> 10
and represents that no promise or agreement not herein expressed has been made
and that this Agreement contains the entire agreement between and among the
parties hereto with respect to the SARs and supersedes and makes null and void
any prior agreements between or among the Company and Grantee, or any of them,
regarding the SARs.
16. AMENDMENT. This Agreement may be amended, modified or supplemented by
the Company, without the consent of the Grantee, (i) to cure any ambiguity or to
correct or supplement any provision herein which may be defective or
inconsistent with any other provision herein [or (ii) to make such other changes
as the Company, upon advice of counsel, determines are necessary or advisable
because of the adoption or promulgation of, or change in or of the
interpretation of, any law or governmental rule or regulation, including,
without limitation, any applicable federal or state securities laws]. Except as
provided above, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.
17. DEFINITIONS. As used in this Agreement, the following terms have the
corresponding meanings:
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries Controls, is
Controlled by, or is under common Control with such first Person.
"AGREED PRIVATE SHARE VALUE" means the Fair Market Value of a share of
Private Issuer Common Stock as of the Exercise Date, as agreed by the Company
and Grantee pursuant to paragraph 10(b) hereof; provided, however, that to the
extent the provisions of Schedule 1 are applicable to the valuation of Private
Issuer Common Stock, the parties will be deemed to have mutually agreed upon the
value established in accordance with Schedule 1 as of the Exercise Date.
"APPRAISER" means, as of any date of selection, an investment banking
firm of national reputation that is not affiliated with the Company or Grantee.
"APPROVED TRANSACTION", when used with respect to the Company means any
transaction in which the Company Board (or, if approval of the Company Board is
not required as a matter of law, the stockholders of the Company) shall approve
(i) any consolidation or merger of the Company, or binding share exchange,
pursuant to which shares of common stock of the Company would be changed or
converted into or exchanged for cash, securities or other property, other than
any such transaction in which the common stockholders of the Company immediately
prior to such transaction have the same proportionate ownership of the common
stock of, and voting power with respect to, the surviving corporation
immediately after such transaction, (ii) any merger, consolidation or binding
share exchange to which the Company is a party as a result of which the persons
who are common stockholders of the Company immediately prior thereto have less
than a majority of the combined voting power of the outstanding capital stock of
the Company ordinarily (and apart from the rights accruing under special
circumstances) having the right to vote in the election of directors immediately
following such merger, consolidation or binding share exchange, (iii) the
adoption of any plan or proposal for the liquidation or dissolution of the
Company, or (iv) any sale, lease, exchange
10
<PAGE> 11
or other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company.
"@HOME" means At Home Corporation, a Delaware corporation, and shall
include any successor thereto by merger, consolidation, sale of assets or
similar transaction.
"@HOME COMMON STOCK" means, collectively, the @Home Series A Common
Stock, the @Home Series B Common Stock and the @Home Series K Common Stock.
"@HOME SERIES A COMMON STOCK" means the Series A Common Stock, par
value $.01 per share, of @Home.
"@HOME SERIES B COMMON STOCK" means the Series B Common Stock, par
value $.01 per share, of @Home.
"@HOME SERIES K COMMON STOCK" means the Series K Common Stock, par
value $.01 per share, of @Home.
"BOARD CHANGE" means individuals who at the Effective Time constituted
the entire Company Board cease for any reason to constitute a majority thereof
unless the election, or the nomination for election, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
"CAUSE" has the meaning ascribed thereto in any employment or
consulting agreement between Grantee and the applicable member of the Company
Group, and in the absence of any such employment or consulting agreement shall
include but not be limited to, insubordination, dishonesty, incompetence, moral
turpitude, other misconduct of any kind or the refusal to perform one's duties
and responsibilities for any reason other than illness or incapacity, or
negligence in the performance of any of one's material duties or
responsibilities that continues after written notice from the Company, as
determined in good faith by the Company Board; provided, however, that if such
termination occurs within twelve (12) months after an Approved Transaction,
Control Purchase or Board Change occurs with respect to the Company following
the date hereof, then "CAUSE" shall mean only a felony conviction for fraud,
misappropriation or embezzlement.
"CLOSING PRICE" of a share of any class or series of capital stock on
any day means the last sale price (or, if no last sale price is reported, the
average of the high bid and low asked prices) for a share of such class or
series of capital stock on such day (or, if such day is not a trading day, on
the next preceding trading day) as reported on NASDAQ or, if not reported on
NASDAQ, as quoted by the National Quotation Bureau Incorporated, or if such
class or series of capital stock is listed on an exchange, on the principal
exchange on which the shares are listed. If for any day the Closing Price of a
share of such class or series of capital stock is not determinable by any of the
foregoing means, then the Closing Price for such day shall be determined in good
faith by the Company's Board of Directors on the basis of such quotations and
other considerations as such Board deems appropriate
11
<PAGE> 12
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute or statutes thereto. Reference to any specific
Code section shall include any successor section.
"COMPANY BOARD" means the Board of Directors of the Company.
"COMPANY GROUP" means the Company and its Subsidiaries, collectively,
or the applicable of the Company or a Subsidiary of the Company, as the context
may require.
"CONTROL" (including its correlative meanings "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract,
management agreement or otherwise.
"CONTROL PURCHASE" means any transaction (or series of related
transactions) in which (i) any person (as such term is defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other
than the Company, any Subsidiary of the Company or any employee benefit plan
sponsored by the Company or any Subsidiary of the Company) shall purchase any
common stock of the Company (or securities convertible into common stock of the
Company) for cash, securities or any other consideration pursuant to a tender
offer or exchange offer, without the prior consent of the Company Board, or (ii)
any person (as such term is so defined), corporation or other entity (other than
the Company, any Subsidiary of the Company, any employee benefit plan sponsored
by the Company or any Subsidiary of the Company, or any Controlling Person (as
defined below)) shall become the "beneficial owner" (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from the rights
accruing under special circumstances) having the right to vote in the election
of directors (calculated as provided in Rule 13d-3(d) under the Exchange Act in
the case of rights to acquire the Company's securities), other than in a
transaction (or series of related transactions) approved by the Company Board.
For purposes of this definition, "Controlling Person" means each of (a) the
Chairman of the Board, the President and each of the directors of the Company as
of December 31, 1996, (b) the respective family members, estates and heirs of
(i) Bob Magness and (ii) each of the persons referred to in clause (a) above,
and any trust or other investment vehicle for the primary benefit of any of such
persons or their respective family members or heirs and (c) Kearns-Tribune
Corporation, a Delaware corporation. As used with respect to any person, the
term "family member" means the spouse, siblings and lineal descendants of such
person.
"CONTROLLED AFFILIATE" of any Person shall be any other Person which is
Controlled by such Person.
"CONVERTIBLE SECURITIES" means any or all options, warrants, securities
or rights which are convertible into or exercisable or exchangeable for Private
Issuer Common Stock or which otherwise entitle the holder thereof to subscribe
for, purchase or otherwise acquire Private Issuer
12
<PAGE> 13
Common Stock; provided, that any Private Issuer Common Stock which is
convertible at the option of the holder into another class or series of common
stock of such Private Issuer which is different from such Private Issuer Common
Stock only in that the holder of such other class or series of common stock is
entitled to a lesser number of votes (and other differences related thereto)
shall not be deemed a Convertible Security.
"DETERMINATION DATE" means February 1, 1996.
"DISABILITY" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that (a) can be expected to result in death or (b) has lasted or can be expected
to last for a continuous period of not less than 12 months.
"DOMESTIC RELATIONS ORDER" means a domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute or statutes thereto, and the rules
and regulations promulgated by the Securities and Exchange Commission
thereunder. References to any specific section of the Exchange Act or rule
thereunder shall include any successor section or rule.
"FAIR MARKET VALUE" means, as of the Exercise Date, the fair market
value of a Private Issuer on a going concern (whether as a sale of stock or
assets) or liquidation basis (whichever method would yield the highest
valuation). The Fair Market Value of a Private Issuer on a going concern basis
shall take into account such considerations (including, but not limited to, tax
considerations which are specific to a sale of assets versus a sale of stock) as
would customarily affect the price at which a willing seller would sell and a
willing buyer would buy a comparable business as a going concern in an arm's
length transaction. The Fair Market Value of a Private Issuer on a liquidation
basis shall take into account tax liabilities that would be incurred on
liquidation assuming the most tax efficient and practical plan of liquidation
reasonably available. In determining the Fair Market Value of a Private Issuer,
the parties or the Appraisers shall not assume any premium with respect to the
ownership of a controlling interest or any discount with respect to the
ownership of a minority interest.
"GOOD REASON" means the occurrence of any of the following prior to any
termination of employment by Grantee:
(i) any reduction in Grantee's annual rate of salary (other than a
reduction to which Grantee consents);
(ii) a failure by the Company to continue in effect any employee
benefit plan in which Grantee was participating, or the taking of any
action by the Company that would adversely affect Grantee's participation
in, or materially reduce Grantee's benefits under, any such employee
benefit plan, unless such failure or such taking of
13
<PAGE> 14
any action adversely affects the senior members of the corporate management
of the Company (as applicable) generally;
(iii) the assignment to Grantee of duties and responsibilities that are
materially more oppressive or onerous than those attendant to Grantee's
position on the date hereof;
(iv) the relocation of the office location as assigned to Grantee by
the Company to a location more than 20 miles from Grantee's current
location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time of any
reorganization, merger, consolidation, disposition of all or substantially
all of the assets of the Company or similar transaction effective after the
date hereof, in which the Company is not the surviving person, the
unconditional assumption in writing or by operation of law of the Company's
obligations to Grantee under this Agreement by each direct successor to the
Company in any such transaction.
"iVILLAGE" means iVillage, Inc.
"iVILLAGE COMMON STOCK" means the common stock of iVillage.
"NASDAQ" means the Nasdaq Stock Market.
"OTHER SARS" means the stock appreciation rights relating to the Share
Units granted pursuant to certain Stock Appreciation Right Agreements dated as
of the date hereof among Internet Services, the Company and the grantee named
therein, respectively.
"PER SHARE UNIT VALUE" means the sum of (i) as to each Subject Security
which is Publicly Traded as of the Exercise Date, (x) the Closing Price of each
such Subject Security as of the Exercise Date multiplied by the number of issued
and outstanding shares of such Subject Security included in a Share Unit, plus
(y) as to each Subject Security which is a Convertible Security, an amount equal
to the difference between the Closing Price of the Subject Security into which
such Convertible Security is convertible, exercisable or exchangeable and the
strike price, option exercise price or other consideration payable upon the
conversion, exercise or exchange of such Convertible Security, multiplied by the
number of Subject Securities issuable upon the conversion, exercise or exchange
of such Convertible Security, and (ii) as to each Subject Company which is a
Private Issuer as of the Exercise Date, an amount equal to the Private Share
Value of each applicable Subject Security multiplied by the number shares of
such Subject Security included in a Share Unit.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
14
<PAGE> 15
"PRIVATE ISSUER COMMON STOCK" means the Subject Securities of any
Subject Company which is a Private Issuer.
"PRIVATE SHARE VALUE" means the Agreed Private Share Value or the
Appraised Private Share Value.
"PUBLIC COMPANY" means a person the common equity securities of which
are registered under Section 12(b) or 12(g) of the Exchange Act and which common
equity securities are listed for trading on the New York Stock Exchange or the
NASDAQ National Market.
"PUBLICLY TRADED" means, with respect to any Subject Security, that the
class or series of shares which include the Subject Securities (or any
Convertible Securities which are convertible into or exercisable or exchangeable
for such Subject Securities) are listed or traded on The NASDAQ Stock Market or
other national securities exchange and are actively traded.
"SHARE UNIT" means a unit initially consisting of shares of the Subject
Companies, as specified in Schedule 1 hereto, as such Subject Securities may
hereafter be adjusted in accordance with the provisions of Schedule 1.
"SPORTSLINE" means Sportsline, Inc.
"SPORTSLINE COMMON STOCK" means the common stock of Sportsline.
"STRIKE PRICE" means $29,170 per SAR, plus an interest factor of 6% per
annum on such amount from the Determination Date hereof to the date of exercise
(calculated on the basis of a 365- day year and actual days elapsed).
"SUBJECT COMPANIES" means, collectively, @Home, iVillage and
Sportsline, unless and until such Subject Companies are changed in accordance
with Schedule 1.
"SUBJECT SECURITIES" means, collectively, the @Home Series A Common
Stock, the iVillage Common Stock and the Sportsline Common Stock, unless and
until such Subject Securities are changed in accordance with Schedule 1 hereto.
"SUBSIDIARY", when used with respect to the Company means any present
or future subsidiary (as defined in Section 424(f) of the Code) of the Company
or any business entity in which the Company owns, directly or indirectly, 50% or
more of the voting, capital or profits interests. An entity shall be deemed a
Subsidiary of the Company for purposes of this definition only for such periods
as the requisite ownership or control relationship is maintained.
18 RULES BY COMPANY BOARD. The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Company Board may adopt from time to time hereafter.
15
<PAGE> 16
IN WITNESS WHEREOF, the Company, Internet Services and Grantee have
caused this Agreement to be duly executed and delivered as of the date first
written above.
ATTEST: TELE-COMMUNICATIONS, INC.
By:
- ----------------------------- ---------------------------------------
Assistant Secretary Name:
Title:
TCI INTERNET SERVICES, INC.
By:
---------------------------------------
Name:
Title:
------------------------------------------
Larry E. Romrell
16
<PAGE> 17
Exhibit A to Agreement
dated as of March 8, 1999
TELE-COMMUNICATIONS, INC
STOCK APPRECIATION RIGHT
DESIGNATION OF BENEFICIARY
I, ___________________________________________ (the "GRANTEE"), hereby
declare that upon my death __________________________________________ (the
"BENEFICIARY") of Name
______________________________________________________________________, who is
Street Address City State Zip Code
my _________________________________________________, shall be entitled to the
Relationship to Grantee
stock appreciation rights and all other rights accorded Grantee by the
above-referenced grant agreement (the "AGREEMENT").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to Grantee's will or the laws of
descent and distribution.
All prior designations of beneficiary under the Prior SAR Agreement and
this Agreement are hereby revoked. This Designation of Beneficiary may only be
revoked in writing, signed by Grantee, and filed with Tele-Communications, Inc.
prior to Grantee's death.
- ------------------------------- ------------------------------------
Date Grantee
17
<PAGE> 18
SCHEDULE 1
I. Each Share Unit will initially consist of the following securities:
Subject Security No. of Shares
---------------- -------------
(i) @Home Series A Common Stock 46,460
(ii) Sportsline Common Stock 533.333
(iii) iVillage Common Stock 715.256
II. If after the date hereof any Subject Company pays a dividend or makes a
distribution on its Subject Securities consisting of capital stock or
other securities of such Subject Company or capital stock or other
securities of any other Person ("OTHER SECURITIES"), then each
outstanding Share Unit shall be adjusted to include therein the amount
of Other Securities which a holder of such number of shares of Subject
Securities immediately prior to the record date for such dividend or
distribution would have received as a result of such dividend or
distribution, and such Other Securities shall thereafter become Subject
Securities for purposes of this Agreement and the issuer of such Other
Securities (if not already a Subject Company), shall thereafter be and
become a Subject Company for purposes of this Agreement.
III. The number of shares of each Subject Security in each Share Unit shall
be appropriately adjusted to reflect the effects of any stock split,
reverse split, stock dividend, reclassification or other event
affecting outstanding shares of such Subject Security; provided, that
the number of shares of iVillage Common Stock listed above assumes a 3
for 1 reverse split which is anticipated to occur prior to iVillage's
initial public offering, and such number of shares shall not be further
adjusted in connection with such reverse split, and shall be
appropriately re-adjusted in the event such reverse split does not
occur.
IV. In the event of any dividend or distribution by a Subject Company to
all holders of Subject Securities of any rights, warrants or other
securities, the amount and type of Subject Securities included in a
Share Unit shall be adjusted to include any such rights, warrants or
other securities which a holder of such number of shares of Subject
Securities on the record or effective date for such dividend or
distribution would have been entitled to receive as a result of such
dividend or distribution, and the Subject Securities included in such
Share Unit shall, upon expiration or termination of such rights,
warrants or other securities, be re-adjusted to reflect such subsequent
expiration or termination of such rights, warrants or other securities.
V. In the event any dividend or other distribution is paid or made in cash
or other property (other than securities) on or in respect of a Subject
Security, the amount of such cash or other
18
<PAGE> 19
property receivable in respect of such Subject Security shall be
included in and become part of such Share Unit.
VI. In the event of any merger, consolidation, binding share exchange, sale
of all or substantially all assets or other fundamental corporate
transaction affecting any Subject Company, the applicable Subject
Company and the Subject Securities included in each outstanding Share
Unit will be adjusted following such occurrence by substituting for the
affected Subject Company the successor by merger (or purchaser of
assets) to such Subject Company, and thereafter such Share Unit will
include therein as the Subject Securities of such successor Subject
Company, the securities, cash or other property which a holder of such
number of shares of Subject Securities immediately prior to the
effectiveness of such merger or other transaction would have received
as a result of such merger or other transaction. In the event that
@Home ceases to be a Public Company as a result of any such merger or
other business combination in which the holders of @Home Common Stock
receive securities which are not Publicly Traded, the @Home Common
Stock included in the Share Units shall be deemed to have been sold for
an amount in cash equal to the Closing Price of the @Home Common Stock
immediately prior to the effectiveness of such merger or other
transaction, multiplied by the number of shares of @Home Common Stock
included in such Share Unit, and the securities so received in respect
thereof shall not become Subject Securities; to the extent that a
holder of @Home Common Stock receives cash, Publicly Traded securities
and/or securities which are not Publicly Traded, each share of @Home
Common Stock will be deemed to have been sold for cash at such Closing
Price, and the consideration received appropriately allocated among
such components, with the securities which are not publicly traded
being deemed sold for the cash component attributable thereto, and such
securities shall not become Subject Securities.
In the event that Liberty Media Corporation ("Liberty") sells
(other than in a merger or other transaction affecting all stockholders
of such Subject Company) (a "Liberty Sale") all or a portion of (i) the
2,861 shares of iVillage Common Stock held by it on the date hereof (as
adjusted for the anticipated stock split) or (ii) the 2,133 shares of
Sportsline Common Stock held by it on the date hereof (in each case, as
such amount may be adjusted for stock splits, stock dividends and the
like occurring after the date hereof (other than the iVillage Common
Stock stock split referred to above), then if the proceeds of such sale
consist of: (x) cash, then such cash shall be included in the Share
Unit in respect of the Subject Securities sold; (y) securities which
are Publicly Traded, such securities shall become Subject Securities in
substitution for the Subject Securities so disposed of; and (z)
securities which are not Publicly Traded, then the Subject Securities
so disposed of shall be valued at the Closing Price thereof on the date
immediately prior to such Liberty Sale, and such Subject Securities
shall be deemed to have been sold for an amount of cash equal to the
number of shares sold multiplied by such Closing Price, and the
securities received in such Liberty Sale shall not become Subject
Securities.
19
<PAGE> 20
Any sale of @Home Common Stock by TCI, AT&T or their
respective affiliates (other than Liberty), after the date hereof shall
not result in any adjustment to the Subject Securities.
Any cash, substitute securities or other consideration
received in respect of the Subject Securities shall be allocated pro
rata among the remaining Share Units.
VII. Any cash or other property received (or deemed to be received) in
respect of a Subject Security (whether in connection with a merger or
other fundamental corporate transaction affecting such Subject Company,
upon the sale of iVillage Common Stock or Sportsline Common Stock by
Liberty, as a dividend, interest payment or other distribution on such
Subject Security, or otherwise), shall be and become a part of the
Share Unit. Any cash so received shall accrue interest thereon at the
rate of 6% per annum from the date of payment until the date of payment
of the Cash Value in respect of such Share Unit.
VIII. The adjustments contemplated by this Schedule 1 shall be made (i)
successively whenever any event listed above shall occur and (ii)
without duplication. For a dividend or distribution, the adjustment
shall become effective immediately after the record date for the
dividend or distribution. For a subdivision or combination, the
adjustment shall become effective immediately after the effective date
of the subdivision or combination.
20
<PAGE> 1
EXHIBIT 10.63
AMENDED AND RESTATED STOCK APPRECIATION RIGHT
THIS AMENDED AND RESTATED STOCK APPRECIATION RIGHT AGREEMENT ("AGREEMENT")
is made as of this 8TH DAY OF MARCH, 1999, by and among TCI INTERNET SERVICES,
INC., a Colorado corporation (the "INTERNET SERVICES"), TELE-COMMUNICATIONS,
INC., a Delaware corporation ("TCI"), which term will include any successor
thereto), LIBERTY MEDIA CORPORATION, a Delaware corporation (the "COMPANY"),
which term shall include any corporation whose shares are distributed to the
holders of AT&T Corp. Series A Liberty Media Group Common Stock or AT&T Corp.
Series B Liberty Media Group Common Stock (collectively "AT&T LIBERTY MEDIA
GROUP COMMON STOCK") in connection with a redemption of shares of AT&T Liberty
Media Group Common Stock in accordance with AT&T Corp.'s certificate of
incorporation as it is to be amended in connection with the Merger (as defined
below) and the issuance of AT&T Liberty Media Group Common Stock) and BRUCE W.
RAVENEL ("GRANTEE"). Capitalized terms used herein and not otherwise defined are
defined in paragraph 18 below.
WHEREAS, Internet Services, TCI and Grantee have previously entered into a
Stock Appreciation Rights Agreement, dated as of December 1, 1996, as amended
(the "PRIOR SAR AGREEMENT");
WHEREAS, as a result of certain corporate restructurings and other
transactions which are occurring in connection with the consummation of the
merger of a wholly owned subsidiary of AT&T Corp. ("AT&T") with and into TCI
(the "MERGER"), TCI Internet Holdings Inc. ("HOLDINGS"), a Subsidiary of
Internet Services, will become a member of the TCI Group (as defined in TCI's
certificate of incorporation) and Grantee will become an employee of the
Company;
WHEREAS, Grantee has previously exercised stock appreciation rights granted
to him under the Prior SAR Agreement with respect to six (6) of the ten (10)
shares of Internet Services common stock to which he was entitled; and
WHEREAS, the parties desire to amend the Prior SAR Agreement to adjust for
Grantee's prior exercises of stock appreciation rights thereunder, substitute
for the remaining stock appreciation rights with respect to the common stock of
Internet Services a stock appreciation right with respect to the securities and
other assets held by Internet Services immediately prior to the Merger, provide
for other appropriate adjustments reflecting certain changed circumstances
resulting from the Merger, and to restate the Prior SAR Agreement in its
entirety in order to reflect such adjustments, amendments and other changes.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
<PAGE> 2
1. GRANT OF STOCK APPRECIATION RIGHTS; TERM; RELEASE. (a) The Company
hereby grants to Grantee stock appreciation rights ("SARS") with respect four
(4) Share Units on the terms and subject to the conditions set forth herein.
Subject to paragraph 2 and 3(b), the SARs shall be exercisable in whole at any
time and in part from time to time during the period commencing on the date
hereof and expiring at 5:00 p.m., Denver, Colorado time ("CLOSE OF BUSINESS"??on
the tenth anniversary of the Determination Date, or such earlier date as the
SARs may be terminated pursuant to paragraph 6 or paragraph 9(a) (the "TERM").
(b) The grant of SARs hereunder shall be deemed to be in substitution
for and replacement of the stock appreciation rights with respect to the shares
of common stock of Internet Services which were previously granted by Internet
Services to Grantee, and the parties acknowledge and agree that such prior stock
appreciation rights grant is hereby terminated and shall cease to be of any
further force and effect. Grantee hereby irrevocably releases Internet Services
and TCI from any and all obligations under the Prior SAR Agreement.
2. CONDITIONS OF EXERCISE; VESTING. (a) Except as otherwise provided in
paragraph 2(b) or in paragraph 9(a), (i) the SARs shall not be exercisable
immediately, (ii) two (2) SARs will vest and become exercisable on February 1,
2000 and (iii) all unexercised SARs will vest and become exercisable on February
1, 2001.
(b) Notwithstanding the foregoing, all then unexercised SARs (the
"REMAINING SARS") shall become immediately exercisable if during the Term (i)
Grantee's employment with the Company Group shall terminate by reason of (x)
termination by the Company Group without Cause, (y) termination by Grantee for
Good Reason or (z) Disability, (ii) Grantee's employment shall terminate
pursuant to provisions of a written agreement, if any, between Grantee and the
applicable member(s) of the Company Group which expressly permits Grantee to
terminate such employment upon the occurrence of specified events (other than
the giving of notice and passage of time) or (iii) Grantee dies while employed
by the Company Group. A change of employment is not a termination of employment
within the meaning of this paragraph 2(b), provided that, after giving effect to
such change, Grantee is an employee of, or becomes or continues to be a
consultant to, any member of the Company Group.
3. EXERCISE OF SARS. (a) SARs granted hereunder may be exercised by
delivery to the Company of a written notice (the "EXERCISE NOTICE") specifying
the whole number of SARs being exercised. The date upon which such notice is
validly delivered to the Company shall be deemed to be the date of exercise of
the SARs specified therein (the "EXERCISE DATE"). Upon the valid exercise of
SARs, Grantee shall be entitled to receive from the Company, with respect to
each SAR then being exercised, the excess of (x) the Per Share Unit Value as of
the Exercise Date over (y) the Strike Price (such excess, the "CASH VALUE").
Upon a valid exercise of a SAR and payment in full by the Company of the Cash
Value in respect thereof, such SAR shall be deemed canceled and will cease to be
outstanding.
(b) The minimum number of SARs which may be exercised at any time will
be one (1).
2
<PAGE> 3
(c) If on the Exercise Date @Home is not a Public Company and the value
of the @Home Common Stock is not otherwise established pursuant to Schedule 1,
then, Grantee shall have the right to rescind an exercise of SARs prior to the
Close of Business on the fifteenth (15th) day following the Exercise Date in the
event that (i) Grantee has elected to determine the Per Share Unit Value through
negotiation with the Company, (ii) Grantee and the Company have not agreed upon
a Per Share Unit Value by such date and (iii) Grantee has not made a subsequent
election to require that the Per Share Unit Value be determined by appraisal
pursuant to paragraph 10(c) hereof. In addition, an exercise of SARs shall be
deemed rescinded under the circumstances set forth in paragraph 10(b) hereof. In
the event of any rescission of an exercise of SARs pursuant to this paragraph
3(c), Grantee shall not be permitted to again exercise SARs for a period of
thirty (30) days following the date of such rescission.
(d) In the event the Grantee elects to rescind his exercise of SARs in
accordance herewith, such exercise shall be deemed rescinded ab initio and the
future exercisability and vesting of those SARs whose exercise has been
rescinded shall not be affected by such exercise and subsequent rescission,
except as provided in the last sentence of paragraph 3(c) above.
4. WITHHOLDING FOR TAXES. It shall be a condition precedent to any exercise
of a SAR that Grantee make provision acceptable to the Company for the payment
or withholding of any and all federal, state and local taxes required to be
withheld by the Company to satisfy the tax liability associated with such
exercise, as determined by the Company Board.
5. DELIVERY BY THE COMPANY. (a) Subject to the withholding referred to in
paragraph 4, the Company shall deliver or cause to be delivered to Grantee the
Cash Value of the SARs then being exercised, with such amount being paid, at the
Company's election, in (i) cash, (ii)(x) provided that the Company is then a
Public Company and that the Company's common stock is then listed or traded on
NASDAQ or a national securities exchange and is actively traded, shares of the
Company's common stock (and if more than one series of such common stock is
created with different voting rights, the series with the lower voting rights),
or (y) shares of AT&T Class A Liberty Media Group Common Stock, $1.00 par value
per share, or any successor class or series of AT&T's common stock which is
intended to reflect the business and assets of the Company and which is listed
or traded on NASDAQ or a national securities exchange and is actively traded
("COMPANY COMMON STOCK"), (iii) shares of any class or series of capital stock
of any other Person, provided that shares of the same class and series of
securities being so delivered are then listed or traded on NASDAQ or a national
securities exchange and are actively traded ("OTHER STOCK"), or (iv) any
combination of cash, Company Common Stock and Other Stock, as the Company may
elect. It shall be a condition to the Company's right to deliver shares of
Company Common Stock or Other Stock in satisfaction of its obligations hereunder
that (i) (x) the issuance of such shares to Grantee shall have been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on Form S-8
(or other appropriate form) and (y) such shares may be immediately sold in the
market by Grantee (either pursuant to Rule 144 or a resale prospectus ) or (ii)
such shares may be sold to Grantee without registration under the Securities Act
and Grantee's immediate resale of such shares is not prohibited or otherwise
restricted by the registration requirements of the Securities Act. If the
Company elects
3
<PAGE> 4
to pay all or any portion of the Cash Value in shares of Company Common Stock or
Other Stock, said shares shall be valued for such purpose at the most recent
Closing Price thereof as of the date of delivery of such shares to Grantee. The
payment of the Cash Value (in cash or by delivery of Company Common Stock or
Other Stock) shall be made (i) if each of the Subject Companies is a Public
Company, on the 10th day following the Exercise Date and (ii) if each of the
Subject Companies is not a Public Company, on the 10th day following either (x)
the date Grantee and the Company mutually agree as to the Agreed Per Share Unit
Value or (y) the receipt by Grantee and the Company of notice pursuant to
paragraph 10(c) of the final determination of the Appraised Per Share Unit Value
(or on such other date as the parties may agree).
6. EARLY TERMINATION OF SARS. Unless otherwise determined by the Company
Board in its sole discretion, the SARs shall terminate prior to the expiration
of the ten-year period provided for in paragraph 1, as follows:
(a) If Grantee's employment with the Company Group terminates other than
(i) by Grantee with Good Reason, (ii) by reason of Grantee's death or
Disability, (iii) with the written consent of the applicable member(s) of
the Company Group, (iv) without such consent if such termination is
pursuant to provisions of a written employment agreement, if any, between
Grantee and the applicable member(s) of the Company Group which expressly
permits Grantee to terminate such employment upon the occurrence of
specified events (other than the giving of notice and passage of time), or
(v) by the Company Group with or without Cause, then the SARs shall
terminate at the Close of Business on the first business day following the
expiration of the 90-day period beginning on the date of termination of
Grantee's employment;
(b) If Grantee dies (i) while employed by the Company Group or (ii)
prior to the expiration of a relevant period of time following termination
of employment during which the SARs remain exercisable as provided in this
paragraph 6, the SARs shall terminate at the Close of Business on the first
business day following the expiration of the one-year period beginning on
the date of death;
(c) If Grantee's employment with the Company Group terminates by reason
of Disability, then the SARs shall terminate at the Close of Business on
the first business day following the expiration of the one-year period
beginning on the date of termination of Grantee's employment;
(d) If Grantee's employment with the Company Group is terminated by the
Company Group for Cause, then the SARs shall terminate immediately upon
such termination of Grantee's employment; and
(e) If Grantee terminates his employment with the Company Group (i) with
Good Reason, (ii) with the written consent of the applicable member(s) of
the Company Group or (iii) pursuant to provisions of a written employment
agreement, if any, between Grantee and the applicable member(s) of the
Company Group which expressly permits Grantee to
4
<PAGE> 5
terminate such employment upon the occurrence of specified events (other
than the giving of notice and passage of time), or if the Company Group
terminates Grantee's employment with the Company Group without Cause, then
the Term shall not terminate prior to the end of the ten-year period
provided for in paragraph 1, except as otherwise provided for in paragraph
6(b) or 9(a).
In any event in which the SARs remain exercisable for a period of time
following the date of termination of Grantee's employment as provided above,
such SARs may be exercised during such period of time only to the extent they
were exercisable as provided in paragraph 2 or paragraph 9(a) on such date of
termination of Grantee's employment (after giving effect to any acceleration
provided for in paragraph 2(b)). A change of employment is not a termination of
employment within the meaning of this paragraph 6, provided that, after giving
effect to such change, Grantee is an employee of, or becomes or continues to be
a consultant to, any member of the Company Group. Anything contained herein to
the contrary notwithstanding, the SARs shall in any event terminate upon the
expiration of the ten-year period provided for in paragraph 1, if not
theretofore terminated.
7. NONTRANSFERABILITY OF SARS. During Grantee's lifetime, the SARs are not
and shall not be transferable (voluntarily or involuntarily) other than pursuant
to a Domestic Relations Order and, except as otherwise required pursuant to a
Domestic Relations Order, the SARs shall be exercisable only by Grantee or
Grantee's court appointed legal representative. Grantee may designate a
beneficiary or beneficiaries to whom the SARs shall pass upon Grantee's death
and may change such designation from time to time by filing a written
designation of beneficiary or beneficiaries with the Company on the form annexed
hereto as Exhibit A or such other form as may be prescribed by the Company
Board, provided that no such designation shall be effective unless so filed
prior to the death of Grantee. If no such designation is made or if the
designated beneficiary does not survive Grantee's death, the SARs shall pass by
will or the laws of descent and distribution. Following Grantee's death, the
SARs, if otherwise exercisable, may be exercised by the person to whom the SARs
pass according to the foregoing, and such person shall be deemed to be Grantee
for purposes of any applicable provisions of this Agreement.
8. NO SHAREHOLDER RIGHTS; NO GUARANTEE OF EMPLOYMENT; UNSECURED OBLIGATION.
(a) Grantee shall not be deemed for any purpose to be, or to have any of the
rights of, a stockholder of the Company by virtue of the SARs. The existence of
this Agreement and Grantee's rights hereunder shall not affect in any way the
right or power of the Company or its stockholders to accomplish any corporate
act.
(b) Nothing contained in this Agreement, and no action by the Company or
the Company Board with respect hereto, shall confer or be construed to confer on
Grantee any right to continue in the employ of the Company Group or any member
thereof or interfere in any way with the right of the Company or any employing
member of the Company Group to terminate Grantee's employment at any time, with
or without Cause, except as otherwise expressly provided in any written
agreement between the applicable member(s) of the Company Group and Grantee.
5
<PAGE> 6
(c) The amount of cash payable at any time by the Company upon the valid
exercise of SARs granted hereunder shall not in any way be reserved or held in
trust by the Company. Grantee shall not have any rights against the Company in
respect of payments of such amount of cash other than as the rights of an
unsecured general creditor of the Company. The amount of cash payable upon the
valid exercise of SARs hereunder shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and shall not in any manner be liable or subject to the debts,
contracts, liabilities, engagements or torts of Grantee or of any designated
beneficiary or personal representative.
9. ACCELERATION; AUTOMATIC EXERCISE. (a) The Company Board may at any time
in its sole discretion determine that the SARs shall become exercisable in full,
without regard to paragraph 2, whether immediately, upon the occurrence of
specified events, or otherwise. Without limiting the generality of the
foregoing, in the event of any Board Change, Control Purchase or Approved
Transaction that occurs with respect to the Company following the effective time
of the Merger and prior to such time as the Company is no longer a Subsidiary of
TCI, the SARs shall become exercisable in full, without regard to paragraph 2,
effective upon the Board Change or Control Purchase or immediately prior to
consummation of the Approved Transaction, as applicable (or at such earlier time
as the Company Board in its sole discretion may determine); provided, however,
that to the extent not theretofore exercised the SARs shall terminate upon the
first to occur of the consummation of the Approved Transaction or the expiration
or early termination of the Term. Notwithstanding the foregoing, the Company
Board may, in its discretion, determine that the SARs will not become
exercisable on an accelerated basis in connection with an Approved Transaction
and/or will not terminate if not exercised prior to consummation of the Approved
Transaction, if the Company Board or the surviving or acquiring corporation, as
the case may be, shall have taken or made effective provision for the taking of
such action as in the opinion of the Company Board is equitable and appropriate
to substitute new stock appreciation rights for the SARs evidenced by this
Agreement (provided that no change in the Subject Companies or Subject
Securities, as in effect immediately prior to such event, is made in connection
with such substitution), or to assume this Agreement and the SARs evidenced
hereby and in order to make such new or assumed stock appreciation rights, as
nearly as may be practicable, equivalent to the SARs evidenced by this Agreement
as then in effect (but before giving effect to any acceleration of the
exercisability hereof unless otherwise determined by the Company Board).
(b) All actions taken by the Company Board with respect to the SARs
pursuant to this paragraph 9 shall be consistent with any actions taken by the
Company Board with respect to the Other SARs.
(c) Immediately prior to the termination of the SARs as provided in
paragraph 6 above (other than pursuant to paragraph 6(d)), this paragraph 9, or
the expiration of the Term, all Remaining SARs shall be deemed to have been
exercised by Grantee and Grantee shall be deemed to have taken all actions
required by paragraph 3(a) for a valid exercise of SARs.
10. RESTRICTIONS IMPOSED BY LAW; AGREED PER SHARE UNIT VALUE; APPRAISAL
PROCEDURES. (a) Grantee acknowledges that neither the SARs nor the interests
evidenced thereby
6
<PAGE> 7
have been registered under the Securities Act and that neither the SARs nor such
interests may be transferred in the absence of such registration or the
availability of an exemption therefrom under the Securities Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Neither the Company nor any other person shall have any obligation to register
the SARs or the interests represented thereby, or any transfer of the SARs or
the interests represented thereby, under the Securities Act, the Exchange Act or
any other state or federal securities law.
(b) Except as otherwise provided in Schedule 1 hereto, in the event that
the Subject Securities of one or more of the Subject Companies are not Publicly
Traded as of the Exercise Date (each such Subject Company whose Subject
Securities are not Publicly Traded, a "PRIVATE ISSUER"), Grantee shall have the
right to elect that portion of the Per Share Unit Value attributable to the
securities of a Private Issuer (the "PRIVATE SHARES") be determined by appraisal
as provided herein or to seek to negotiate a mutually acceptable Private Share
Value in respect thereof with the Company; provided, that in the event Grantee
and the Company are unable to agree upon all Private Share Values prior to the
Close of Business on the fifteenth (15th) day following the Exercise Date, then
Grantee shall have the further right (subject to the last sentence of paragraph
10(c) below), exercisable by written notice to the Company, to require that any
Private Share Value as to which Grantee and the Company have not agreed be
determined by appraisal as provided herein. In the event that @Home is a Private
Issuer and Grantee and the Company have not agreed upon the Private Share Value
of the @Home securities included in a Share Unit as of the Close of Business on
such fifteenth (15th) day and the Grantee has not delivered notice requiring
appraisal, the Grantee shall be deemed to have rescinded the exercise of SARs
pursuant to paragraph 3 hereof. In the event that either or both of Sportsline
or iVillage is a Private Issuer, Grantee shall have no right to rescind the
exercise of the SARs, and instead shall be deemed to have delivered at the Close
of Business on such fifteenth (15th) day notice requiring appraisal of such
Private Shares. In the event that Grantee elects to seek to negotiate the
Private Share Value with the Company, each party agrees to negotiate in good
faith and use its commercially reasonable efforts to agree upon the Agreed
Private Share Value. The parties acknowledge and agree that in connection with
such negotiations the parties shall give due consideration to the determination
of the Fair Market Value of each Private Issuer (as set forth in the definition
thereof) and the number of shares of Private Issuer Common Stock outstanding
(based upon the principles set forth in paragraph 10(c) hereof).
(c) In the event Grantee elects to require that any Private Share Value
be determined by appraisal, Grantee shall specify in the Exercise Notice or the
subsequent written notice to the Company electing appraisal (or in a written
notice to the Company following a deemed request for appraisal the identity of
the Appraiser selected by Grantee to make the determination of the Fair Market
Value of
7
<PAGE> 8
each Private Issuer (the "FIRST APPRAISER"). Within three (3) business days
following receipt of such notice, the Company shall notify Grantee in writing as
to the identity of the Appraiser selected by the Company (the "SECOND
APPRAISER"). The Appraisers selected pursuant to this paragraph 10(c) shall make
separate determinations of the Fair Market Value of each Private Issuer in
accordance with the provisions of this paragraph 10(c), and Grantee and the
Company shall each be entitled to a single Appraiser in respect of any exercise
of SARs hereunder. The First Appraiser and the Second Appraiser shall each
submit its determination of the Fair Market Value of each Private Issuer to
Grantee and the Company within thirty (30) days of the date of selection of the
Second Appraiser. If the respective determinations of the Fair Market Value of a
Private Issuer by such Appraisers vary by less than 10% of the higher
determination, then the Fair Market Value of such Private Issuer shall be the
average of the two determinations. If such determinations vary by 10% or more of
the higher determination, the two Appraisers shall promptly designate a third
Appraiser (the "THIRD APPRAISER"). Neither Grantee nor the Company shall
provide, and the First Appraiser and Second Appraiser shall be instructed not to
provide, any information to the Third Appraiser as to the determination of the
First Appraiser and Second Appraiser or otherwise influence such Third
Appraiser's determination. The Third Appraiser shall submit its determination of
the Fair Market Value of such Private Issuer to Grantee and the Company within
fifteen (15) days of the date of its selection. The Fair Market Value of such
Private Issuer shall be equal to the average of the two closest of the three
determinations, provided, that, if the difference between the highest and middle
determinations is no more than 105% and no less than 95% of the difference
between the middle and lowest determinations, the Fair Market Value of such
Private Issuer shall be equal to the middle determination. Following the
determination of the Fair Market Value of each such Private Issuer, the
Appraisers whose determinations were used in the calculation of the Fair Market
Value of such Private Issuer shall determine the number of shares of Private
Issuer Common Stock outstanding together with any further appropriate
adjustments to the Fair Market Value of such Private Issuer resulting from such
determination. The number of shares of Private Issuer Common Stock outstanding
with respect to such Private Issuer shall mean a number, as determined by such
Appraisers as of the applicable date, equal to the sum of the number of shares
of Private Issuer Common Stock outstanding with respect to such Private Issuer
and the number of shares of Private Issuer Common Stock issuable by such Private
Issuer upon the conversion, exercise or exchange of those Convertible Securities
the holders of which would derive an economic benefit from the conversion,
exercise of exchange of such Convertible Securities which exceeds the economic
benefits of not converting, exercising or exchanging such Convertible
Securities; provided, however, that shares of @Home Common Stock issuable upon
the exercise of warrants to purchase @Home Common Stock issued by @Home to cable
television operators, which warrants become exercisable only to the extent that
such operator has upgraded its cable system or is distributing the @Home high
speed internet access service over its cable plant and equipment, such warrants
shall be deemed exercised only to the extent that such warrants are exercisable
in accordance with their terms as of the applicable Exercise Date. The
Appraisers shall then calculate the value per share of Private Issuer Common
Stock (the "APPRAISED PRIVATE SHARE VALUE") with respect to each Private Issuer
for which appraisal was required, which shall be the quotient obtained by
dividing the Fair Market Value of such Private Issuer by the number of shares of
Private Issuer Common Stock of such Private Issuer outstanding or deemed
outstanding; provided, that if such Appraisers do not agree on the number of
shares of Private Issuer Common Stock outstanding, each Appraiser whose
determination of the Fair Market Value of such Private Issuer is being used in
the calculation of such Appraised Private Share Value shall determine the
Appraised Private Share Value based upon its determination of the Fair Market
Value of such Private Issuer and the number of shares of Private Issuer Common
Stock of such Private Issuer outstanding, and the Appraised Private Share Value
shall be the average of the quotients so obtained on the basis of the respective
determinations of such firms. The Appraisers shall jointly notify the Company
and Grantee in writing of their final determination of the Appraised Private
Share Value as to each Private Issuer within five (5) days after the
determination of the Fair
8
<PAGE> 9
Market Value of the last of the Private Issuers with respect to which appraisal
is required. Grantee and the Company shall each pay the fees and expenses of his
or its own Appraiser and one-half of the fees and expenses of the Third
Appraiser, if any. Grantee acknowledges and agrees that he shall not be entitled
to require an appraisal pursuant to this Agreement more than once in any 12
month period. In connection with any appraisal pursuant to this paragraph 10,
the Company agrees that it shall use its commercially reasonable efforts to
obtain and (subject to the recipient agreeing to customary confidentiality
restrictions) make available to Grantee and any Appraiser, such financial and
business information concerning such Private Issuer as is reasonably necessary
to assist Grantee or such Appraisers in determining the Fair Market Value of
such Private Issuer.
11. NOTICE. Unless the Company notifies Grantee in writing of a change of
address, any notice or other communication to the Company with respect to this
Agreement shall be in writing and shall be delivered personally or sent by first
class mail, postage prepaid and addressed as follows:
If to the Company:
Liberty Media Corporation
8101 East Prentice Avenue
Englewood, Colorado 80111
Attention: General Counsel
Any notice or other communication by the Company to Grantee with respect to this
Agreement shall be in writing and shall be delivered personally, or shall be
sent by first class mail, postage prepaid, to Grantee?s address as listed in the
records of the Company on the date hereof, unless the Company has received
written notification from Grantee of a change of address. Except as otherwise
specifically provided herein, all notices and other communications hereunder,
including without limitation any Exercise Notice, shall be effective when
actually received.
12. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Colorado.
13. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein", "hereof", "hereunder" and similar terms refer to this Agreement,
including all Exhibits and Schedules, as a whole, unless the context otherwise
requires. The headings of the paragraphs of this Agreement have been included
for convenience of reference only, are not to be considered a part hereof and
shall not modify or restrict any of the terms or provisions hereof. All
decisions of the Company Board upon questions regarding this Agreement shall be
conclusive, so long as such decisions are otherwise made in accordance with this
Agreement.
14. DUPLICATE ORIGINALS. The Company and Grantee may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
9
<PAGE> 10
15. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between or among the
Company and Grantee, or any of them, with respect to the subject matter hereof.
Each of the Company and Grantee hereby declares and represents that no promise
or agreement not herein expressed has been made and that this Agreement contains
the entire agreement between and among the parties hereto with respect to the
SARs and supersedes and makes null and void any prior agreements between or
among the Company and Grantee, or any of them, regarding the SARs.
16. AMENDMENT. This Agreement may be amended, modified or supplemented by
the Company, without the consent of the Grantee, (i) to cure any ambiguity or to
correct or supplement any provision herein which may be defective or
inconsistent with any other provision herein [or (ii) to make such other changes
as the Company, upon advice of counsel, determines are necessary or advisable
because of the adoption or promulgation of, or change in or of the
interpretation of, any law or governmental rule or regulation, including,
without limitation, any applicable federal or state securities laws]. Except as
provided above, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.
17. DEFINITIONS. As used in this Agreement, the following terms have the
corresponding meanings:
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries Controls, is
Controlled by, or is under common Control with such first Person.
"AGREED PRIVATE SHARE VALUE" means the Fair Market Value of a share of
Private Issuer Common Stock as of the Exercise Date, as agreed by the Company
and Grantee pursuant to paragraph 10(b) hereof; provided, however, that to the
extent the provisions of Schedule 1 are applicable to the valuation of Private
Issuer Common Stock, the parties will be deemed to have mutually agreed upon the
value established in accordance with Schedule 1 as of the Exercise Date.
"APPRAISER" means, as of any date of selection, an investment banking
firm of national reputation that is not affiliated with the Company or Grantee.
"APPROVED TRANSACTION", when used with respect to the Company means any
transaction in which the Company Board (or, if approval of the Company Board is
not required as a matter of law, the stockholders of the Company) shall approve
(i) any consolidation or merger of the Company, or binding share exchange,
pursuant to which shares of common stock of the Company would be changed or
converted into or exchanged for cash, securities or other property, other than
any such transaction in which the common stockholders of the Company immediately
prior to such transaction have the same proportionate ownership of the common
stock of, and voting power with respect to, the surviving corporation
immediately after such transaction, (ii) any merger, consolidation or binding
share exchange to which the Company is a party as a result of which the persons
who are common stockholders of the Company immediately prior thereto have less
than a majority of the combined voting power of the outstanding capital stock of
the Company ordinarily (and apart from
10
<PAGE> 11
the rights accruing under special circumstances) having the right to vote in the
election of directors immediately following such merger, consolidation or
binding share exchange, (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Company, or (iv) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company. Notwithstanding the
foregoing, none of such transactions that occur with respect to the Company
while the Company is a Subsidiary of TCI and that are effected in connection
with a spin off of the Company, redemption of shares of AT&T Liberty Media Group
Common Stock or equivalent transaction after which the Company would cease to be
a Subsidiary of TCI, shall constitute an Approved Transaction.
"@HOME" means At Home Corporation, a Delaware corporation, and shall
include any successor thereto by merger, consolidation, sale of assets or
similar transaction.
"@HOME COMMON STOCK" means, collectively, the @Home Series A Common
Stock, the @Home Series B Common Stock and the @Home Series K Common Stock.
"@HOME SERIES A COMMON STOCK" means the Series A Common Stock, par
value $.01 per share, of @Home.
"@HOME SERIES B COMMON STOCK" means the Series B Common Stock, par
value $.01 per share, of @Home.
"@HOME SERIES K COMMON STOCK" means the Series K Common Stock, par
value $.01 per share, of @Home.
"BOARD CHANGE" means individuals who at the Effective Time constituted
the entire Company Board cease for any reason to constitute a majority thereof
unless the election, or the nomination for election, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
"CAUSE" has the meaning ascribed thereto in any employment or
consulting agreement between Grantee and the applicable member of the Company
Group, and in the absence of any such employment or consulting agreement shall
include but not be limited to, insubordination, dishonesty, incompetence, moral
turpitude, other misconduct of any kind or the refusal to perform one's duties
and responsibilities for any reason other than illness or incapacity, or
negligence in the performance of any of one's material duties or
responsibilities that continues after written notice from the Company, as
determined in good faith by the Company Board; provided, however, that if such
termination occurs within twelve (12) months after (i) an Approved Transaction,
Control Purchase or Board Change occurs (x) with respect to the Company
following the date hereof and prior to the earlier of such time as the Company
ceases to be a Subsidiary of TCI or such time as the Company becomes a Public
Company or (y) with respect to the Company at any time following December 31,
1996 that the Company is no longer a Subsidiary of TCI, or (ii) an Approved
Transaction occurs with respect to the Company at any time after December 31,
1996 and while the Company is a Subsidiary of TCI and after giving effect to
such Approved Transaction the Company will cease to be a
11
<PAGE> 12
Subsidiary of TCI, then "CAUSE" shall mean only a felony conviction for fraud,
misappropriation or embezzlement.
"CLOSING PRICE" of a share of any class or series of capital stock on
any day means the last sale price (or, if no last sale price is reported, the
average of the high bid and low asked prices) for a share of such class or
series of capital stock on such day (or, if such day is not a trading day, on
the next preceding trading day) as reported on NASDAQ or, if not reported on
NASDAQ, as quoted by the National Quotation Bureau Incorporated, or if such
class or series of capital stock is listed on an exchange, on the principal
exchange on which the shares are listed. If for any day the Closing Price of a
share of such class or series of capital stock is not determinable by any of the
foregoing means, then the Closing Price for such day shall be determined in good
faith by the Company's Board of Directors on the basis of such quotations and
other considerations as such Board deems appropriate
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute or statutes thereto. Reference to any specific
Code section shall include any successor section.
"COMPANY BOARD" means the Board of Directors of the Company.
"COMPANY GROUP" means, (i) so long as the Company is a Subsidiary of
TCI, the Company, any Covered Entity (as defined in the amendment to AT&T's
Certificate of Incorporation to be filed in connection with the Merger) and
their respective Subsidiaries, collectively, or the applicable of the Company, a
Covered Entity or a Subsidiary of the Company or a Covered Entity, as the
context may require and, (ii) if the Company is no longer a Subsidiary of TCI,
the Company and its Subsidiaries, collectively, or the applicable of the Company
or a Subsidiary of the Company, as the context may require.
"CONTROL" (including its correlative meanings "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract,
management agreement or otherwise.
"CONTROL PURCHASE" means, at any time at which the Company is not a
Subsidiary of TCI, any transaction (or series of related transactions) in which
(i) any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act), corporation or other entity (other than the Company, any
Subsidiary of the Company or any employee benefit plan sponsored by the Company
or any Subsidiary of the Company) shall purchase any Company Common Stock (or
securities convertible into Company Common Stock) for cash, securities or any
other consideration pursuant to a tender offer or exchange offer, without the
prior consent of the Company Board, or (ii) any person (as such term is so
defined), corporation or other entity (other than the Company, any Subsidiary of
the Company, any employee benefit plan sponsored by the Company or any
Subsidiary of the Company, or any Controlling Person (as defined below)) shall
become the "BENEFICIAL OWNER" (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities
12
<PAGE> 13
of the Company representing 20% or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from the rights
accruing under special circumstances) having the right to vote in the election
of directors (calculated as provided in Rule 13d-3(d) under the Exchange Act in
the case of rights to acquire the Company's securities), other than in a
transaction (or series of related transactions) approved by the Company Board.
For purposes of this definition, "CONTROLLING PERSON" means each of (a) the
Chairman of the Board, the President and each of the directors of the Company
immediately prior to the effective time of the Merger, and (b) the respective
family members, estates and heirs of (i) Bob Magness and (ii) each of the
persons referred to in clause (a) above, and any trust or other investment
vehicle for the primary benefit of any of such persons or their respective
family members or heirs. As used with respect to any person, the term "FAMILY
member" means the spouse, siblings and lineal descendants of such person.
"CONTROLLED AFFILIATE" of any Person shall be any other Person which is
Controlled by such Person.
"CONVERTIBLE SECURITIES" means any or all options, warrants, securities
or rights which are convertible into or exercisable or exchangeable for Private
Issuer Common Stock or which otherwise entitle the holder thereof to subscribe
for, purchase or otherwise acquire Private Issuer Common Stock; provided, that
any Private Issuer Common Stock which is convertible at the option of the holder
into another class or series of common stock of such Private Issuer which is
different from such Private Issuer Common Stock only in that the holder of such
other class or series of common stock is entitled to a lesser number of votes
(and other differences related thereto) shall not be deemed a Convertible
Security.
"DETERMINATION DATE" means February 1, 1996.
"DISABILITY" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that (a) can be expected to result in death or (b) has lasted or can be expected
to last for a continuous period of not less than 12 months.
"DOMESTIC RELATIONS ORDER" means a domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute or statutes thereto, and the rules
and regulations promulgated by the Securities and Exchange Commission
thereunder. References to any specific section of the Exchange Act or rule
thereunder shall include any successor section or rule.
"FAIR MARKET VALUE" means, as of the Exercise Date, the fair market
value of a Private Issuer on a going concern (whether as a sale of stock or
assets) or liquidation basis (whichever method would yield the highest
valuation). The Fair Market Value of a Private Issuer on a going concern basis
shall take into account such considerations (including, but not limited to, tax
considerations which are specific to a sale of assets versus a sale of stock) as
would customarily affect
13
<PAGE> 14
the price at which a willing seller would sell and a willing buyer would buy a
comparable business as a going concern in an arm's length transaction. The Fair
Market Value of a Private Issuer on a liquidation basis shall take into account
tax liabilities that would be incurred on liquidation assuming the most tax
efficient and practical plan of liquidation reasonably available. In determining
the Fair Market Value of a Private Issuer, the parties or the Appraisers shall
not assume any premium with respect to the ownership of a controlling interest
or any discount with respect to the ownership of a minority interest.
"GOOD REASON" means the occurrence of any of the following prior to any
termination of employment by Grantee:
(i) any reduction in Grantee's annual rate of salary (other than a
reduction to which Grantee consents);
(ii) a failure by the Company to continue in effect any employee
benefit plan in which Grantee was participating, or the taking of any
action by the Company that would adversely affect Grantee's participation
in, or materially reduce Grantee's benefits under, any such employee
benefit plan, unless such failure or such taking of any action adversely
affects the senior members of the corporate management of the Company (as
applicable) generally;
(iii) the assignment to Grantee of duties and responsibilities that are
materially more oppressive or onerous than those attendant to Grantee's
position on the date hereof;
(iv) the relocation of the office location as assigned to Grantee by
the Company to a location more than 20 miles from Grantee's current
location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time of any
reorganization, merger, consolidation, disposition of all or substantially
all of the assets of the Company or similar transaction effective after the
date hereof, in which the Company is not the surviving person, the
unconditional assumption in writing or by operation of law of the Company's
obligations to Grantee under this Agreement by each direct successor to the
Company in any such transaction.
"iVILLAGE" means iVillage, Inc.
"iVILLAGE COMMON STOCK" means the common stock of iVillage.
"NASDAQ" means the Nasdaq Stock Market.
14
<PAGE> 15
"OTHER SARS" means the stock appreciation rights relating to the Share
Units granted pursuant to certain Stock Appreciation Right Agreements dated as
of the date hereof among Internet Services, TCI and the grantee named therein,
respectively.
"PER SHARE UNIT VALUE" means the sum of (i) as to each Subject Security
which is Publicly Traded as of the Exercise Date, (x) the Closing Price of each
such Subject Security as of the Exercise Date multiplied by the number of issued
and outstanding shares of such Subject Security included in a Share Unit, plus
(y) as to each Subject Security which is a Convertible Security, an amount equal
to the difference between the Closing Price of the Subject Security into which
such Convertible Security is convertible, exercisable or exchangeable and the
strike price, option exercise price or other consideration payable upon the
conversion, exercise or exchange of such Convertible Security, multiplied by the
number of Subject Securities issuable upon the conversion, exercise or exchange
of such Convertible Security, and (ii) as to each Subject Company which is a
Private Issuer as of the Exercise Date, an amount equal to the Private Share
Value of each applicable Subject Security multiplied by the number shares of
such Subject Security included in a Share Unit.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
"PRIVATE ISSUER COMMON STOCK" means the Subject Securities of any
Subject Company which is a Private Issuer.
"PRIVATE SHARE VALUE" means the Agreed Private Share Value or the
Appraised Private Share Value.
"PUBLIC COMPANY" means a person the common equity securities of which
are registered under Section 12(b) or 12(g) of the Exchange Act and which common
equity securities are listed for trading on the New York Stock Exchange or the
NASDAQ National Market.
"PUBLICLY TRADED" means, with respect to any Subject Security, that the
class or series of shares which include the Subject Securities (or any
Convertible Securities which are convertible into or exercisable or exchangeable
for such Subject Securities) are listed or traded on The NASDAQ Stock Market or
other national securities exchange and are actively traded.
"SHARE UNIT" means a unit initially consisting of shares of the Subject
Companies, as specified in Schedule 1 hereto, as such Subject Securities may
hereafter be adjusted in accordance with the provisions of Schedule 1.
"SPORTSLINE" means Sportsline, Inc.
"SPORTSLINE COMMON STOCK" means the common stock of Sportsline.
15
<PAGE> 16
"STRIKE PRICE" means $29,170 per SAR, plus an interest factor of 6% per
annum on such amount from the Determination Date hereof to the date of exercise
(calculated on the basis of a 365- day year and actual days elapsed).
"SUBJECT COMPANIES" means, collectively, @Home, iVillage and
Sportsline, unless and until such Subject Companies are changed in accordance
with Schedule 1.
"SUBJECT SECURITIES" means, collectively, the @Home Series A Common
Stock, the iVillage Common Stock and the Sportsline Common Stock, unless and
until such Subject Securities are changed in accordance with Schedule 1 hereto.
"SUBSIDIARY", when used with respect to the Company means any present
or future subsidiary (as defined in Section 424(f) of the Code) of the Company
or any business entity in which the Company owns, directly or indirectly, 50% or
more of the voting, capital or profits interests. An entity shall be deemed a
Subsidiary of the Company for purposes of this definition only for such periods
as the requisite ownership or control relationship is maintained.
18 RULES BY COMPANY BOARD. The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Company Board may adopt from time to time hereafter.
16
<PAGE> 17
IN WITNESS WHEREOF, the Company, Internet Services, TCI and
Grantee have caused this Agreement to be duly executed and delivered as of the
date first written above.
ATTEST: LIBERTY MEDIA CORPORATION
By:
- ----------------------------- ---------------------------------------
Assistant Secretary Name:
Title:
TELE-COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
TCI INTERNET SERVICES, INC.
By:
---------------------------------------
Name:
Title:
------------------------------------------
Bruce W. Ravenel
17
<PAGE> 18
Exhibit A to Agreement
dated as of March 8, 1999
LIBERTY MEDIA CORPORATION
STOCK APPRECIATION RIGHT
DESIGNATION OF BENEFICIARY
I, ___________________________________________ (the "GRANTEE"), hereby
declare that upon my death __________________________________________ (the
"BENEFICIARY") of Name
______________________________________________________________________, who is
Street Address City State Zip Code
my _________________________________________________, shall be entitled to the
Relationship to Grantee
stock appreciation rights and all other rights accorded Grantee by the
above-referenced grant agreement (the "AGREEMENT").
It is understood that this Designation of Beneficiary is made pursuant
to the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to Grantee's will or the laws of
descent and distribution.
All prior designations of beneficiary under the Prior SAR Agreement and
this Agreement are hereby revoked. This Designation of Beneficiary may only be
revoked in writing, signed by Grantee, and filed with Liberty Media Corporation
prior to Grantee's death.
- --------------------------- ------------------------------------
Date Grantee
18
<PAGE> 19
SCHEDULE 1
I. Each Share Unit will initially consist of the following securities:
Subject Security No. of Shares
---------------- -------------
(i) @Home Series A Common Stock 46,460
(ii) Sportsline Common Stock 533.333
(iii) iVillage Common Stock 715.256
II. If after the date hereof any Subject Company pays a dividend or makes a
distribution on its Subject Securities consisting of capital stock or
other securities of such Subject Company or capital stock or other
securities of any other Person ("OTHER SECURITIES"), then each
outstanding Share Unit shall be adjusted to include therein the amount
of Other Securities which a holder of such number of shares of Subject
Securities immediately prior to the record date for such dividend or
distribution would have received as a result of such dividend or
distribution, and such Other Securities shall thereafter become Subject
Securities for purposes of this Agreement and the issuer of such Other
Securities (if not already a Subject Company), shall thereafter be and
become a Subject Company for purposes of this Agreement.
III. The number of shares of each Subject Security in each Share Unit shall
be appropriately adjusted to reflect the effects of any stock split,
reverse split, stock dividend, reclassification or other event
affecting outstanding shares of such Subject Security; provided, that
the number of shares of iVillage Common Stock listed above assumes a 3
for 1 reverse split which is anticipated to occur prior to iVillage?s
initial public offering, and such number of shares shall not be further
adjusted in connection with such reverse split, and shall be
appropriately re-adjusted in the event such reverse split does not
occur.
IV. In the event of any dividend or distribution by a Subject Company to
all holders of Subject Securities of any rights, warrants or other
securities, the amount and type of Subject Securities included in a
Share Unit shall be adjusted to include any such rights, warrants or
other securities which a holder of such number of shares of Subject
Securities on the record or effective date for such dividend or
distribution would have been entitled to receive as a result of such
dividend or distribution, and the Subject Securities included in such
Share Unit shall, upon expiration or termination of such rights,
warrants or other securities, be re-adjusted to reflect such subsequent
expiration or termination of such rights, warrants or other securities.
V. In the event any dividend or other distribution is paid or made in cash
or other property (other than securities) on or in respect of a Subject
Security, the amount of such cash or other
19
<PAGE> 20
property receivable in respect of such Subject Security shall be
included in and become part of such Share Unit.
VI. In the event of any merger, consolidation, binding share exchange, sale
of all or substantially all assets or other fundamental corporate
transaction affecting any Subject Company, the applicable Subject
Company and the Subject Securities included in each outstanding Share
Unit will be adjusted following such occurrence by substituting for the
affected Subject Company the successor by merger (or purchaser of
assets) to such Subject Company, and thereafter such Share Unit will
include therein as the Subject Securities of such successor Subject
Company, the securities, cash or other property which a holder of such
number of shares of Subject Securities immediately prior to the
effectiveness of such merger or other transaction would have received
as a result of such merger or other transaction. In the event that
@Home ceases to be a Public Company as a result of any such merger or
other business combination in which the holders of @Home Common Stock
receive securities which are not Publicly Traded, the @Home Common
Stock included in the Share Units shall be deemed to have been sold for
an amount in cash equal to the Closing Price of the @Home Common Stock
immediately prior to the effectiveness of such merger or other
transaction, multiplied by the number of shares of @Home Common Stock
included in such Share Unit, and the securities so received in respect
thereof shall not become Subject Securities; to the extent that a
holder of @Home Common Stock receives cash, Publicly Traded securities
and/or securities which are not Publicly Traded, each share of @Home
Common Stock will be deemed to have been sold for cash at such Closing
Price, and the consideration received appropriately allocated among
such components, with the securities which are not publicly traded
being deemed sold for the cash component attributable thereto, and such
securities shall not become Subject Securities.
In the event that Liberty Media Corporation ("Liberty") sells
(other than in a merger or other transaction affecting all stockholders
of such Subject Company) (a "Liberty Sale") all or a portion of (i) the
2,861 shares of iVillage Common Stock held by it on the date hereof (as
adjusted for the anticipated stock split) or (ii) the 2,133 shares of
Sportsline Common Stock held by it on the date hereof (in each case, as
such amount may be adjusted for stock splits, stock dividends and the
like occurring after the date hereof (other than the iVillage Common
Stock stock split referred to above), then if the proceeds of such sale
consist of: (x) cash, then such cash shall be included in the Share
Unit in respect of the Subject Securities sold; (y) securities which
are Publicly Traded, such securities shall become Subject Securities in
substitution for the Subject Securities so disposed of; and (z)
securities which are not Publicly Traded, then the Subject Securities
so disposed of shall be valued at the Closing Price thereof on the date
immediately prior to such Liberty Sale, and such Subject Securities
shall be deemed to have been sold for an amount of cash equal to the
number of shares sold multiplied by such Closing Price, and the
securities received in such Liberty Sale shall not become Subject
Securities.
20
<PAGE> 21
Any sale of @Home Common Stock by TCI, AT&T or their
respective affiliates (other than Liberty), after the date hereof shall
not result in any adjustment to the Subject Securities.
Any cash, substitute securities or other consideration
received in respect of the Subject Securities shall be allocated pro
rata among the remaining Share Units.
VII. Any cash or other property received (or deemed to be received) in
respect of a Subject Security (whether in connection with a merger or
other fundamental corporate transaction affecting such Subject Company,
upon the sale of iVillage Common Stock or Sportsline Common Stock by
Liberty, as a dividend, interest payment or other distribution on such
Subject Security, or otherwise), shall be and become a part of the
Share Unit. Any cash so received shall accrue interest thereon at the
rate of 6% per annum from the date of payment until the date of payment
of the Cash Value in respect of such Share Unit.
VIII. The adjustments contemplated by this Schedule 1 shall be made (i)
successively whenever any event listed above shall occur and (ii)
without duplication. For a dividend or distribution, the adjustment
shall become effective immediately after the record date for the
dividend or distribution. For a subdivision or combination, the
adjustment shall become effective immediately after the effective date
of the subdivision or combination.
21
<PAGE> 1
EXHIBIT 10.64
AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of February 19, 1999, by and
among TCI.NET, Inc., a Delaware corporation ("TCI.NET"), TCI Internet Services,
Inc., a Delaware corporation ("Internet") and Tele-Communications, Inc., a
Delaware corporation ("TCI" and, collectively with TCI.NET and Internet, the
"TCI Parties") and Larry E. Romrell ("Employee Stockowner").
WHEREAS, the Employee Stockowner is the grantee of an option (the
"Option") under an Option to Purchase Common Stock Agreement, dated as of
December 1, 1996 (the "Option Agreement"), among the Employee Stockowner,
TCI.NET and TCI, pursuant to which he acquired 4 shares of Common Stock, $1.00
par value per share, of TCI.NET (the "Shares");
WHEREAS, the Employee Stockowner is also party to a Stock Appreciation
Rights Agreement, dated as of December 1, 1996 (the "SAR Agreement"), with
Internet and TCI;
WHEREAS, TCI.NET and Internet are subsidiaries of TCI;
WHEREAS, the parties hereto have reached an agreement regarding the
purchase and sale of the Shares, the cancellation of the Option and the
termination of the Option Agreement, and an amendment to the SAR Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration as set forth herein, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Share Repurchase. The Employee Stockowner hereby sells, and TCI.NET
hereby purchases, all, and not less than all, of the Shares for an aggregate
purchase price of $95,660 (the "Purchase Price"). The Employee Stockowner hereby
acknowledges receipt of a check in the amount of the Purchase Price. TCI.NET
hereby acknowledges receipt of stock certificate number
____________________________________, representing the Shares, endorsed by the
Employee Stockowner in blank.
2. Option Cancellation. The Option is hereby canceled and the Option
Agreement is hereby terminated. The Employee Stockowner hereby acknowledges that
he has no further rights, and TCI.NET has no further obligations, thereunder.
3. SAR Amendment. The SAR Agreement is hereby amended to delete the
requirement outlined in paragraph 3 of the SAR Agreement that the Employee
Stockowner exercise his Option under the Option Agreement in order to exercise
his SARs (as defined in the SAR Agreement).
1
<PAGE> 2
4. Employee Stockowner Representations. The Employee Stockowner hereby
represents and warrants that:
(i) he has the legal capacity to enter into this Agreement and
perform his obligations hereunder;
(ii) this Agreement constitutes his legal, valid and binding
obligation; and
(iii) the Shares represent all shares of common stock that he
currently owns in any TCI Party other than TCI.
5. TCI Party Representations. Each of the TCI Parties hereby represents
and warrants that:
(i) such party has all the requisite corporate power, authority and
legal capacity to enter into this Agreement and perform its
obligations hereunder;
(ii) this Agreement has been duly and validly executed and delivered
by such party; and
(iii) this Agreement constitutes the legal, valid and binding
obligation of such party.
6. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
7. Construction. The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
8. Counterparts. This Agreement may be executed in 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. Applicable Law. This Agreement and the legal relations between the
parties hereto 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.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TCI.NET, INC.
By:
---------------------------------
Name:
Title:
TCI INTERNET SERVICES, INC.
By:
---------------------------------
Name:
Title:
TELE-COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
EMPLOYEE STOCKOWNER
By:
---------------------------------
Name:
3
<PAGE> 1
EXHIBIT 10.65
AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of February 19, 1999, by and
among TCI.NET, Inc., a Delaware corporation ("TCI.NET"), TCI Internet Services,
Inc., a Delaware corporation ("Internet") and Tele-Communications, Inc., a
Delaware corporation ("TCI" and, collectively with TCI.NET and Internet, the
"TCI Parties") and Brendan Clouston ("Employee Stockowner").
WHEREAS, the Employee Stockowner is the grantee of an option (the
"Option") under an Option to Purchase Common Stock Agreement, dated as of
December 1, 1996 (the "Option Agreement"), among the Employee Stockowner,
TCI.NET and TCI, pursuant to which he acquired 10 shares of Common Stock, $1.00
par value per share, of TCI.NET (the "Shares");
WHEREAS, the Employee Stockowner is also party to a Stock Appreciation
Rights Agreement, dated as of December 1, 1996 (the "SAR Agreement"), with
Internet and TCI;
WHEREAS, TCI.NET and Internet are subsidiaries of TCI;
WHEREAS, the parties hereto have reached an agreement regarding the
purchase and sale of the Shares, the cancellation of the Option and the
termination of the Option Agreement, and an amendment to the SAR Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration as set forth herein, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Share Repurchase. The Employee Stockowner hereby sells, and TCI.NET
hereby purchases, all, and not less than all, of the Shares for an aggregate
purchase price of $239,098 (the "Purchase Price"). The Employee Stockowner
hereby acknowledges receipt of a check in the amount of the Purchase Price.
TCI.NET hereby acknowledges receipt of stock certificate number
____________________________________, representing the Shares, endorsed by the
Employee Stockowner in blank.
2. Option Cancellation. The Option is hereby canceled and the Option
Agreement is hereby terminated. The Employee Stockowner hereby acknowledges that
he has no further rights, and TCI.NET has no further obligations, thereunder.
3. SAR Amendment. The SAR Agreement is hereby amended to delete the
requirement outlined in paragraph 3 of the SAR Agreement that the Employee
Stockowner exercise his Option under the Option Agreement in order to exercise
his SARs (as defined in the SAR Agreement).
1
<PAGE> 2
4. Employee Stockowner Representations. The Employee Stockowner hereby
represents and warrants that:
(i) he has the legal capacity to enter into this Agreement and
perform his obligations hereunder;
(ii) this Agreement constitutes his legal, valid and binding
obligation; and
(iii) the Shares represent all shares of common stock that he
currently owns in any TCI Party other than TCI.
5. TCI Party Representations. Each of the TCI Parties hereby represents
and warrants that:
(i) such party has all the requisite corporate power, authority and
legal capacity to enter into this Agreement and perform its
obligations hereunder;
(ii) this Agreement has been duly and validly executed and delivered
by such party; and
(iii) this Agreement constitutes the legal, valid and binding
obligation of such party.
6. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
7. Construction. The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
8. Counterparts. This Agreement may be executed in 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. Applicable Law. This Agreement and the legal relations between the
parties hereto 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.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TCI.NET, INC.
By:
---------------------------------
Name:
Title:
TCI INTERNET SERVICES, INC.
By:
---------------------------------
Name:
Title:
TELE-COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
EMPLOYEE STOCKOWNER
By:
---------------------------------
Name:
3
<PAGE> 1
EXHIBIT 10.66
AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of February 19, 1999, by and
among TCI.NET, Inc., a Delaware corporation ("TCI.NET"), TCI Internet Services,
Inc., a Delaware corporation ("Internet") and Tele-Communications, Inc., a
Delaware corporation ("TCI" and, collectively with TCI.NET and Internet, the
"TCI Parties") and Bruce W. Ravenel ("Employee Stockowner").
WHEREAS, the Employee Stockowner is the grantee of an option (the
"Option") under an Option to Purchase Common Stock Agreement, dated as of
December 1, 1996 (the "Option Agreement"), among the Employee Stockowner,
TCI.NET and TCI, pursuant to which he acquired 4 shares of Common Stock, $1.00
par value per share, of TCI.NET (the "Shares");
WHEREAS, the Employee Stockowner is also party to a Stock Appreciation
Rights Agreement, dated as of December 1, 1996 (the "SAR Agreement"), with
Internet and TCI;
WHEREAS, TCI.NET and Internet are subsidiaries of TCI;
WHEREAS, the parties hereto have reached an agreement regarding the
purchase and sale of the Shares, the cancellation of the Option and the
termination of the Option Agreement, and an amendment to the SAR Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration as set forth herein, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Share Repurchase. The Employee Stockowner hereby sells, and TCI.NET
hereby purchases, all, and not less than all, of the Shares for an aggregate
purchase price of $95,720 (the "Purchase Price"). The Employee Stockowner hereby
acknowledges receipt of a check in the amount of the Purchase Price. TCI.NET
hereby acknowledges receipt of stock certificate number
____________________________________, representing the Shares, endorsed by the
Employee Stockowner in blank.
2. Option Cancellation. The Option is hereby canceled and the Option
Agreement is hereby terminated. The Employee Stockowner hereby acknowledges that
he has no further rights, and TCI.NET has no further obligations, thereunder.
3. SAR Amendment. The SAR Agreement is hereby amended to delete the
requirement outlined in paragraph 3 of the SAR Agreement that the Employee
Stockowner exercise his Option under the Option Agreement in order to exercise
his SARs (as defined in the SAR Agreement).
1
<PAGE> 2
4. Employee Stockowner Representations. The Employee Stockowner hereby
represents and warrants that:
(i) he has the legal capacity to enter into this Agreement and
perform his obligations hereunder;
(ii) this Agreement constitutes his legal, valid and binding
obligation; and
(iii) the Shares represent all shares of common stock that he
currently owns in any TCI Party other than TCI.
5. TCI Party Representations. Each of the TCI Parties hereby represents
and warrants that:
(i) such party has all the requisite corporate power, authority and
legal capacity to enter into this Agreement and perform its
obligations hereunder;
(ii) this Agreement has been duly and validly executed and delivered
by such party; and
(iii) this Agreement constitutes the legal, valid and binding
obligation of such party.
6. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
7. Construction. The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
8. Counterparts. This Agreement may be executed in 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. Applicable Law. This Agreement and the legal relations between the
parties hereto 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.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TCI.NET, INC.
By:
---------------------------------
Name:
Title:
TCI INTERNET SERVICES, INC.
By:
---------------------------------
Name:
Title:
TELE-COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
EMPLOYEE STOCKOWNER
By:
---------------------------------
Name:
3
<PAGE> 1
EXHIBIT 10.67
AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of February 19, 1999, by and
among TCI Wireline, Inc., a Delaware corporation ("Wireline"), TCI Teleport
Holdings, Inc., a Delaware corporation ("Teleport Holdings"), TCI Telephony
Services, Inc., a Delaware corporation ("Telephony") and Tele-Communications,
Inc., a Delaware corporation ("TCI" and, collectively with Wireline, Teleport
Holdings and Telephony, the "TCI Parties") and Brendan Clouston ("Employee
Stockowner").
WHEREAS, the Employee Stockowner is the grantee of an option (the
"Option") under an Amended and Restated Option Agreement, dated as of December
1, 1996 (the "Option Agreement"), among the Employee Stockowner, Wireline and
TCI, pursuant to which he acquired 10 shares of Common Stock, $1.00 par value
per share, of Wireline (the "Shares");
WHEREAS, the Employee Stockowner is also party to a Stock Appreciation
Rights Agreement, dated as of December 1, 1996 (the "CLEC SAR Agreement"), with
Teleport Holdings, TCI and Telephony;
WHEREAS, Teleport Holdings and Wireline are subsidiaries of Telephony
and Telephony is a subsidiary of TCI;
WHEREAS, the parties hereto have reached an agreement regarding the
purchase and sale of the Shares, the cancellation of the Option and the
termination of the Option Agreement, and an amendment to the CLEC SAR Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration as set forth herein, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Share Repurchase. The Employee Stockowner hereby sells, and Wireline
hereby purchases, all, and not less than all, of the Shares for an aggregate
purchase price of $144,518 (the "Purchase Price"). The Employee Stockowner
hereby acknowledges receipt of a check in the amount of the Purchase Price.
Wireline hereby acknowledges receipt of stock certificate number
____________________________________, representing the Shares, endorsed by the
Employee Stockowner in blank.
2. Option Cancellation. The Option is hereby canceled and the Option
Agreement is hereby terminated. The Employee Stockowner hereby acknowledges that
he has no further rights, and Wireline has no further obligations, thereunder.
1
<PAGE> 2
3. SAR Amendment. The CLEC SAR Agreement is hereby amended to delete
the requirement outlined in paragraph 3 of the CLEC SAR Agreement that the
Employee Stockowner exercise his Option under the Option Agreement in order to
exercise his SARs (as defined in the CLEC SAR Agreement).
4. Employee Stockowner Representations. The Employee Stockowner hereby
represents and warrants that:
(i) he has the legal capacity to enter into this Agreement and
perform his obligations hereunder;
(ii) this Agreement constitutes his legal, valid and binding
obligation; and
(iii) the Shares represent all shares of common stock that he
currently owns in any TCI Party other than TCI.
5. TCI Party Representations. Each of the TCI Parties hereby represents
and warrants that:
(i) such party has all the requisite corporate power,
authority and legal capacity to enter into this Agreement and
perform its obligations hereunder;
(ii) this Agreement has been duly and validly executed and
delivered by such party; and
(iii) this Agreement constitutes the legal, valid and binding
obligation of such party.
6. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
7. Construction. The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
8. Counterparts. This Agreement may be executed in 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. Applicable Law. This Agreement and the legal relations between the
parties hereto 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.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TCI WIRELINE, INC.
By:
--------------------------------
Name:
Title:
TCI TELEPORT HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
TCI TELEPHONY SERVICES, INC.
By:
--------------------------------
Name:
Title:
TELE-COMMUNICATIONS, INC.
By:
--------------------------------
Name:
Title:
EMPLOYEE STOCKOWNER
By:
--------------------------------
Name:
3
<PAGE> 1
EXHIBIT 21
A table of the subsidiaries of Tele-Communications, Inc. as of December 31,
1998, is set forth below, indicating as to each the state or the jurisdiction of
incorporation or organization and the names under which such subsidiaries do
business [Trade Names.] Subsidiaries not included in the table are inactive or,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Tele-Communications, Inc. DE
American Cybercast Corporation CA
General Communication, Inc. AL
Interactive Network, Inc. CA
InterMedia Capital Management III, L.P. CA
InterMedia Capital Management IV, L.P. CA
InterMedia Capital Management, L.P. CA
Intermedia Capital Partners IV, L.P. [ICP-IV] CA
InterMedia CM - LP CA
InterMedia Investors, L.P. CA
Intermedia Partners [IP-I] CA
Intermedia Partners III, L.P. [IP-III] CA
Kearns-Tribune Corporation UT KEARNS
Kearns-Tribune Investment UT
Magma Inc TX
MicroUnity Systems Engineering, Inc. CA
Newspaper Agency Corporation UT
Nimitz Paper Company DE
Ponderay Newsprint Mill
STT Video Partners, L.P. [lp] DE
TCI Business Alliance and Technology Co., Inc. CO
TCI Cable Investments, Inc. DE
TCI CH, Inc. CO
TCI CM Holdings, Inc. CO
TCI Communications, Inc. DE TCI CABLEVISION OF DURANGO, INC.
TCI Educational Technologies, Inc. CO
TCI Faroudja, Inc. [inactive] CO
TCI Game Technology Holdings, Inc. CO
TCI GameCo Ventures, Inc. CO
TCI Gilbert Uplink, Inc. CO
TCI ICM I, Inc. DE
TCI ICM III, Inc. DE
</TABLE>
Page 1
<PAGE> 2
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI ICM IV, Inc. DE
TCI ICM VI, Inc. DE
TCI Interactive Media Group, Inc. CO
TCI Magma Holdings, Inc. CO
TCI MicroUnity Holdings, Inc. CO
TCI Music Holdings, Inc. CO
TCI Network Solutions, Inc. CO
TCI Online Services, Inc. CO
TCI Programming Holding Company III DE
TCI Source Services, Inc. CO
TCI Starz, Inc. CO
TCI Technology Management, LLC DE
TCI Telephony Services of California, Inc. CO
TCI Telephony Services of Colorado, Inc. CO
TCI Telephony Services of Connecticut, Inc. CO PEOPLE LINK BY TCI
TCI Telephony Services of Illinois, Inc. CO PEOPLE LINK BY TCI
TCI Telephony Services of Minnesota, Inc. CO
TCI Telephony Services of Oklahoma, Inc. CO
TCI Telephony Services of Texas, Inc. CO PEOPLE LINK BY TCI
TCI Telephony Services of Washington, Inc. CO
TCI Telephony Services of Wisconsin, Inc. CO TCI MEDIA SERVICES
TCI Wireline Holdings, Inc. DE
TCI Wireline, Inc. DE
TCI.NET of California, Inc. CO
TCI.NET of Washington, Inc. CO
TCI.NET, Inc. DE
TCID - WW, Inc. CO
TCID Games, Inc. CO
TCID Virtual I/O, Inc. CO
TEMPO DBS, Inc. CO
UCT Investments [Colorado], Inc. CO
Virtual I/O, Inc. WA
West Coast Portability Services, LLC
Zing Systems, L.P. [lp] DE
</TABLE>
Page 2
<PAGE> 3
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
CABLE
- -----
<S> <C> <C>
TCI Communications, Inc. DE
Parnassos, L.P. DE
Adelphia Communications Corporation
Adlink Cable Advertising, LLC DE ADLINK
Alabama T.V. Cable, Inc. AL
American Cable TV Investors 5, Ltd. [lp] CO AMERICAN CABLE TV OF LOWER DELAWARE
AMERICAN CABLE TV OF ST. MARY'S COUNTY
American Microwave & Communications, Inc. MI
American Movie Classics Investment, Inc. CO
American TeleVenture of Minersville, Inc. CO
Ames Cablevision, Inc. IA TCI OF CENTRAL IOWA
Antares Satellite Corporation CO
Associated Group, Inc. DE
Athena Cablevision Corporation of Knoxville TN
Athena Cablevision of Tennessee and Kentucky, Inc. TN
Athena Realty, Inc. NV
Atlantic American Cablevision, Inc. DE
Atlantic American Cablevision of Florida, Inc. FL TCI CABLEVISION OF PASCO COUNTY
TCI MEDIA SERVICES
Atlantic American Holdings, Inc. FL
Atlantic Cablevision of Florida, Inc. FL
Baton Rouge Cablevision Associates, L.P. [lp] CO
Beatrice Cable TV Company NE TCI CABLE OF BEATRICE
TCI OF KANSAS
Billings Tele-Communications, Inc. OR
Bob Magness, Inc. WY
Brenmor Cable Partners, L.P. CA BRENMOR CABLE PARTNERS, LIMITED PARTNERSHIP
Bresnan Communications Company Limited Partnership [lp] MI
Bresnan Telephone of Michigan, L.L.C. DE
Brigand Pictures, Inc. NY
Broadview Television Company WA
Brookings Cablevision [gp] CO
Brookside Antenna Company OH
</TABLE>
Page 3
<PAGE> 4
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Cable Accounting, Inc. CO
Cable AdNet Partners [gp] DE CABLE ADNET
HUDSON VALLEY CABLE GROUP
TCI MEDIA SERVICES
Cable Advertising Partners CA ADLINK
Cable Network Television, Inc. NV
Cable Shopping Investment, Inc. CO
Cable Television Advertising Group, Inc. WY
Cable Television of Gary, Inc. IN
Cable TV of Marin, Inc. CA
Cable TV Puget Sound, Inc. WA TCI OF WASHINGTON
Cabletime, Inc. CO
Cablevision Associates of Gary Joint Venture [jv] IN
Cablevision IV, Ltd. [Corp] IA
Cablevision VI, Inc. IA TCI CABLEVISION OF THE ROCKIES, INC.
TCI OF THE HEARTLANDS
Cablevision VII, Inc. IA TCI CABLEVISION OF THE ROCKIES, INC.
TCI OF THE HEARTLANDS
TCI OF EASTERN IOWA
TCI MEDIA SERVICES
Cablevision of Arcadia/Sierra Madre, Inc. DE
Cablevision of Arizona Partner, Inc. CO
Cablevision of Baton Rouge, Ltd. [lp] CO
Cablevision of Oklahoma Partner, Inc. CO
Cablevision of Texas Partner, Inc. CO
Cablevision of Utah, Inc. CO
Cablevision Systems Corporation DE
Cablevision V, Inc. IA
Capital Region Cable Advertising Interconnect, L.P. [lp] DE CAPITAL REGION CABLE ADVERTISING NETWORK
CAT Partnership [gp] DE
CATV Facility Co., Inc. CO
CCC-NJFT, Inc. CO
CCC Sub, Inc. CO
Channel 3 Everett, Inc. WA
Channel 64 Acquisition, Inc. DE
Cincinnati Cable Advertising Interconnect, L.P. DE
</TABLE>
Page 4
<PAGE> 5
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Cincinnati Cable Advertising Interconnect, L.P. DE
Clear View Cable Systems, Inc. CA
Clinton Cablevision [gp] IA
Clinton TV Cable Company, Inc. IA
Coconut Creek Cable T.V., Inc. FL TCI OF NORTH BROWARD
Colorado Cablevision Company [lp] CO TCI OF COLORADO
Colorado Terrace Tower II Corporation CO
Com-Cable TV, Inc. DE
Command Cable of Eastern Illinois LP NJ TCI CABLEVISION OF SOUTHERN ILLINOIS
Communication Investment Corporation VA
Communications & Cable of Chicago, Inc. IL CHICAGO CABLE TV
Communications Services, Inc. KS TCI CABLEVISION OF CENTRAL TEXAS
TCI CABLEVISION OF EAST OKLAHOMA
TCI CABLEVISION OF NORTH TEXAS
TCI CABLEVISION OF NORTHEAST TEXAS
TCI CABLEVISION OF OKLAHOMA [CSI], INC.
TCI CABLEVISION OF TEXAS [CSI], INC
TCI COMMUNICATIONS SERVICES, INC.
TCI MEDIA SERVICES
TCI OF ARKANSAS
TCI OF ARKANSAS [CSI], INC.
TCI OF KANSAS [CSI], INC.
TCI OF LOUISIANA
TCI OF LOUISIANA [CSI], INC.
TCI OF SOUTH DAKOTA
Community Cable Television [gp] WY TCI CABLEVISION OF WEST OAKLAND COUNTY
Community Realty, Inc. NV NEVADA COMMUNITY REALTY, INC.
Community Telecable of Bellevue, Inc. WA TCI OF WASHINGTON
Community Telecable of Seattle, Inc. WA
Community Television Systems, Inc. DE TCI CABLEVISION OF SOUTH CENTRAL CONNECTICUT
Connecticut Cable Advertising, L.P. DE
Consumer Entertainment Services, Inc. WY
Contra Costa Cable Co. WA
Corsair Pictures, Inc. DE BRIGAND PICTURES, INC.
Country Cable Co. CO SCI CABLE PARTNERS
Country Cable III, Inc. CO
</TABLE>
Page 5
<PAGE> 6
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Crockett Cable System, Inc. WA
CSI Partner II, Inc. CO
CSI Partner, Inc. CO
CVC Keep Well LLC DE
Daniels Communication Partners Limited Partnership [lp]
Daniels Hauser-Holdings [gp] CO
Davis County Cablevision, Inc. UT
DCP-85, Ltd. [lp] CO
DigiVentures, LLC DE
Direct Broadcast Satellite Services, Inc. DE
Discovery Programming Investment, Inc. CO
District Cablevision Limited Partnership [lp] DC TCI MEDIA SERVICES
District Cablevision, Inc.
Eastex Microwave, Inc. TX
East Arkansas Cablevision, Inc. AR TCI LAKE AREA
TCI MEDIA SERVICES
TCI OF ARKANSAS
ECP Holdings, Inc. OK
Elbert County Cable Partners, L. P. [lp] CO TCI OF COLORADO
Everett Cablevision, Inc. WA TCI OF WASHINGTON
FAB Communications, Inc. OK
Falcon Communications, L.P. CA
Far-West Communications, Inc. OR TCI OF OREGON
Four Flags Cable TV [jv] MI
Four Flags Cablevision [jv] MI
General Communications and Entertainment Company, Inc. DE
Gill Bay Interconnect, Inc. CA
Greater Birmingham Interconnect [gp] GBI
Guide Investments, Inc. CO
H-C-G Cablevision, Inc. CA
Harbor Communications Joint Venture [jv] WA
Harris County Cable TV, Inc. VA
Hawkeye Communications of Clinton, Inc. IA
Heritage Cable Partners, Inc. IA
Heritage Cablevision Associates, a Limited Partnership [lp] IA TCI OF MICHIANA
TCI OF BEDFORD
</TABLE>
Page 6
<PAGE> 7
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Heritage Cablevision of California, Inc. DE TCI CABLEVISION OF SAN JOSE
Heritage Cablevision of Colorado, Inc. CO TCI CABLEVISION OF SOUTHERN COLORADO, INC.
Heritage Cablevision of Dallas, Inc. IA
Heritage Cablevision of Delaware, Inc. DE BAY CABLEVISION
CABLE OAKLAND
TCI CABLEVISION OF CALIFORNIA
TCI CABLEVISION OF NEW CASTLE COUNTY
TCI MEDIA SERVICES
TCI OF COLORADO
TCI OF FORT COLLINS
Heritage Cablevision of Maine II, Inc. ME
Heritage Cablevision of Massachusetts, Inc. MA TCI CABLEVISION OF ANDOVER
Heritage Cablevision of South East Massachusetts, Inc. MA
Heritage Cablevision of Tennessee, Inc. TN TCI OF COLORADO
Heritage Cablevision of Texas, Inc. IA TCI CABLEVISION OF SOUTH TEXAS
Heritage Cablevision, Inc. IA
Heritage Cablevision, Inc. TX TCI MEDIA SERVICES
TCI OF THE HEARTLANDS
TCI OF CENTRAL IOWA
TCI OF SOUTHERN IOWA
TCI OF NORTHERN IOWA
TCI OF EASTERN IOWA
Heritage Cablevue, Inc. DE TCI CABLEVISION OF NEW ENGLAND
Heritage Communications Products Corp. IA
Heritage Communications, Inc. IA
Heritage Indiana Cablevision II IN Holdings, LLC CO
Heritage Indiana Insgt Holdings, LLC CO
Heritage Investments, Inc. IA
Heritage ROC Holdings Corp. IA
Heritage/Indiana Cablevision II, Inc. CO
Heritage/Indiana Cablevision, Inc. IA
Hillcrest Cablevision Company OH
Home Sports Network, Inc. CO
HSN, Inc. DE
ICP-VI, LP DE
Independence Cable TV Company [jv] MI TCI CABLEVISION OF OAKLAND COUNTY, INC.
</TABLE>
Page 7
<PAGE> 8
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Interactive Network, Inc. CA
InterMedia Cable Investors Corp.
InterMedia Capital Management II, L.P. CA
Intermedia Capital Partners IV, L.P. [ICP-IV] CA
InterMedia Finance III, L.P. CA
Intermedia Partners [IP-I] CA
Intermedia Partners II, L.P. CA
Intermedia Partners III, L.P. [IP-III] CA
Intermedia Partners IV, L.P. CA
InterMedia Partners of Carolina, L.P. CA
InterMedia Partners of Maryland, L.P. CA
InterMedia Partners of Tennessee CA
InterMedia Partners of West Tennessee, L.P. CA
InterMedia Partners Southeast CA
International Telemeter Corporation NV
IP-VI, LP DE
IP Kentucky, LP DE
IPG-VI, LP DE
IR-TCI Partners IV, L. P. [lp] CO
Kansas City Cable Partners [gp] CO AMERICAN CABLEVISION OF KANSAS CITY
Knox Cable T.V., Inc. TN
KTMA-TV, Inc. TX
LaSalle Telecommunications, Inc. IL CHICAGO CABLE TV-IV
LCNI II, Inc. DE
LCNI, Inc. DE
Lenfest Communications, Inc. DE
Liberty - CSI, Inc. CO
Liberty Cable of Missouri, Inc. MO
Liberty Cable Partner, Inc. WY
Liberty Cable, Inc. WY
Liberty Capital Corp. WY
Liberty Command II, Inc. CO
Liberty Command, Inc. CO
Liberty Evangola, Inc. WY
Liberty Holdings, Inc. WY
Liberty Lake II, Inc. CO
</TABLE>
Page 8
<PAGE> 9
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Liberty Lake, Inc. WY
Liberty Michigan, Inc. DE
Liberty MTC, Inc. WY
Liberty of Greenwich, Inc. CO
Liberty of Northern Indiana, Inc. DE
Liberty of Paterson, Inc. NV
Liberty of South Dakota, Inc. CO
Liberty Programming Corporation WY
LMC Cable AdNet II, Inc. WY
LMC Cable AdNet, Inc. PA CABLE ADNET
LMC Lenfest, Inc. CO
LVO Cable Properties, Inc. OK
LVOC Management, Inc. OK
Margate Video Systems, Inc. FL TCI MEDIA SERVICES
TCI OF NORTH BROWARD
Marin Cable Television, Inc. CA
Media Ventures, L.P. DE
Miami Tele-Communications, Inc. FL
Micro-Relay, Inc. MD
Mile Hi Cable Partners, L.P. [lp] CO TCI OF COLORADO
Mississippi Cablevision, Inc. MS TCI OF NORTH MISSISSIPPI
Mountain Cable Network, Inc. NV MOUNTAIN CABLE ADVERTISING
TCI MEDIA SERVICES
Mountain States General Partner Co. CO
Mountain States Limited Partner Co. CO
Mountain States Video [gp] CO
Mountain States Video Communications Co., Inc. CO TCI OF COLORADO
Mountain States Video, Inc. CO TCI OF COLORADO
TCI MEDIA SERVICES
MSV Subsidiary, Inc. CO
Muskegon Cable TV Co. [gp] MI TCI CABLEVISION OF GREATER MICHIGAN, INC.
Narragansett Cablevision Corporation RI
Newport News Cablevision Associates, L.P. [lp] CO
Northern Video, Inc. MN TCI OF CENTRAL MINNESOTA
Northwest Illinois Cable Corporation DE
Northwest Illinois TV Cable Co. DE
</TABLE>
Page 9
<PAGE> 10
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Northwest Illinois TV Cable Company [lp] IL
Ohio Cablevision Network, Inc. IA TCI CABLEVISION OF NORTHWESTERN OHIO
Orlando Cable Advertising Interconnect, L.P. DE
Ottumwa Cablevision, Inc. IA TCI OF SOUTHERN IOWA
Pacific Microwave Joint Venture [jv] CA
Pacific Northwest Interconnect [gp] NY NORTHWEST CABLE ADVERTISING
TV MART
TCI MEDIA SERVICES
Parkland Cablevision, Inc. FL TCI OF NORTH BROWARD
Peak Cablevision, LLC CO
Pennsylvania Educational Communications Systems PA PENNSYLVANIA CABLE NETWORK
Pittsburg Cable TV, Inc. KS TCI OF PITTSBURG
Portland Cable Advertising, L.P. [lp] DE
Preview Magazine Corporation NY
Public Cable Company [gp] ME
Robert Fulk, Ltd. DE
Robin Cable Systems of Sierra Vista, L.P. CA TCI OF SOUTHERN ARIZONA
Robin Cable Systems, L.P. CA PALMETTO CABLEVISION, L.P.
Robin Media Group, Inc. NV
S/D Cable Partners Ltd. [lp] CO TCI CABLEVISION OF PRINCETON, L.P.
TCI CABLEVISION OF ROCK FALLS, L.P.
Saguaro Cable Television Investors Limited Partnership [lp] CO
San Leandro Cable Television, Inc. CA TCI CABLEVISION OF HAYWARD
Santa Fe Cablevison Co. [lp] NM
Santa Fe Cablevision Company NM TCI CABLEVISION OF SANTA FE
TCI MEDIA SERVICES
Satellite Services of Puerto Rico, Inc. DE
Satellite Services, Inc. DE
SCC Programs, Inc. IL
Semaphore Partners [gp] CO
Shelter Resources Corp.
Silver Screen Partners, L.P.
Silver Spur Land and Cattle Co. WY SILVER SPUR RANCH
Sioux Falls Cable Television [gp] SD
Skyview TV, Inc. MT
Sonic Partners [p/s]
</TABLE>
Page 10
<PAGE> 11
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
South Chicago Cable, Inc. IL TCI CHICAGO
CHICAGO CABLE TV-V
South Florida Cable Advertising [gp] FL
Southwest TeleCable, Inc. TX
Southwest Washington Cable, Inc. WA
SSI 2, Inc. NV
St. Louis Tele-Communications, Inc. MO TCI CABLEVISION OF ST. LOUIS
StarNet/CEA II Partners
Sunshine Network, Inc. FL
Tampa Bay Cable Advertising Interconnect, L.P. [lp] DE
TC Systems Partner, Inc. CO
TCA Cable Partners II [gp]
TCC Spectrum, Inc. DE
TCI-UC, INC. DE
TCI Falcon Holdings, LLC DE
TCI Adelphia Holdings, LLC DE
TCI AIT, Inc. CO
TCI American Cable Holdings II, L.P. [lp] CO TCI OF NORTHEAST ILLINOIS, L.P.
TCI American Cable Holdings III, L.P. [lp] CO
TCI American Cable Holdings IV, L.P. [lp] CO
TCI American Cable Holdings, L.P. [lp] CO TCI OF WASHINGTON
TCI Atlantic, Inc. CO
TCI Baton Rouge Ventures, Inc. CO
TCI Bay Interconnect, Inc. CA
TCI Cable Adnet, Inc. CO
TCI Cable Investments, Inc. DE
TCI Cable Management Corporation CO TCI MEDIA SERVICES
TCI Cable Merger Sub No. 1, Inc. DE
TCI Cable Merger Sub No. 2, Inc. DE
TCI Cable Merger Sub No. 3, Inc. DE
TCI Cable Partners of St. Louis, L.P. CO TCI OF ILLINOIS
TCI OF MISSOURI
TCI Cablevision Associates, Inc. DE
TCI Cablevision of Alabama, Inc. AL TCI MEDIA SERVICES
TCI Cablevision of Arizona, Inc. AZ TCI CUSTOMER SATISFACTION CENTER
</TABLE>
Page 11
<PAGE> 12
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI Cablevision of Baker/Zachary, Inc. DE TCI OF LOUISIANA
TCI Cablevision of California, Inc. CA TCI MEDIA SERVICES
TCI Cablevision of Canon City, Ltd. [lp] CO
TCI Cablevision of Colorado, Inc. CO TCI CUSTOMER SATISFACTION CENTER
TCI MEDIA SERVICES
TCI OF COLORADO
TCI Cablevision of Dallas, Inc. TX TCI MEDIA SERVICES
TCI Cablevision of Florida, Inc. FL TCI MEDIA SERVICES
TCI OF COLORADO
TCI SOUTHEAST - SOUTH REGION
TCI Cablevision of Georgia, Inc. GA TCI MEDIA SERVICES
TCI OF LOUISIANA
TCI Cablevision of Great Falls, Inc. DE
TCI Cablevision of Idaho, Inc. ID TCI CUSTOMER SATISFACTION CENTER
TCI MEDIA SERVICES
TCI Cablevision of Kentucky, Inc. KY
TCI Cablevision of Kiowa, Inc. CO
TCI Cablevision of Leesville, Inc. DE
TCI Cablevision of Maryland, Inc. MD TCI MEDIA SERVICES
TCI Cablevision of Massachusetts, Inc. MA
TCI Cablevision of Michigan, Inc. MI TCI NORTH CENTRAL REGION
TCI Cablevision of Minnesota, Inc. MN TCI OF MINNESOTA
TCI Cablevision of Missouri, Inc. MO TCI MEDIA SERVICES
TCI Cablevision of Montana, Inc. MT TCI MEDIA SERVICES
TCI Cablevision of Nebraska, Inc. NE TCI MEDIA SERVICES
TCI Cablevision of Nevada, Inc. NV TCI MEDIA SERVICES
TCI Cablevision of New Hampshire, Inc. NH
TCI Cablevision of New Mexico, Inc. NM TCI MEDIA SERVICES
TCI Cablevision of North Central Kentucky, Inc. KY
TCI Cablevision of Ohio, Inc. OH TCI MEDIA SERVICES
TCI Cablevision of Oklahoma, Inc. OK
TCI Cablevision of Oregon, Inc. OR TCI MEDIA SERVICES
TCI OF OREGON
TCI Cablevision of Pasco County [gp] FL TCI MEDIA SERVICES
TCI Cablevision of Pinellas County, Inc. FL
TCI Cablevision of Sierra Vista II, Inc. CO
</TABLE>
Page 12
<PAGE> 13
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI Cablevision of Sierra Vista, Inc. CO
TCI Cablevision of South Dakota, Inc. SD TCI MEDIA SERVICES
TCI Cablevision of Texas, Inc. TX TCI MEDIA SERVICES
TCI Cablevision of Twin Cities, Inc. WA TCI OF WASHINGTON
TCI Cablevision of Utah, Inc. UT TCI MEDIA SERVICES
TCI Cablevision of Vermont, Inc. DE TCI OF WASHINGTON
TCI Cablevision of Washington, Inc. WA TCI MEDIA SERVICES
TCI OF WASHINGTON
TV MART
TCI Cablevision of Wisconsin, Inc. WI
TCI Cablevision of Wyoming, Inc. WY TCI MEDIA SERVICES
TCI Cablevision St. Bernard, Inc. LA
TCI California Holdings, LLC CO
TCI Central, Inc. DE
TCI Challenger, Inc. CO
TCI Communications Financing I DE
TCI Communications Financing II DE
TCI Communications Financing III DE
TCI Communications Financing IV DE
TCI Communications Financing V DE
TCI Communications Financing VI DE
TCI Communications Merger Sub No. 1, Inc. DE
TCI Communications Merger Sub No. 2, Inc. DE
TCI Communications Merger Sub No. 3, Inc. DE
TCI CSC II, Inc. NY TCI CABLE OF BROOKHAVEN
TCI CSC III, Inc. CO
TCI CSC IV, Inc. CO
TCI CSC IX, Inc. CO
TCI CSC V, Inc. CO
TCI CSC VI, Inc. CO
TCI CSC VII, Inc. CO
TCI CSC VIII, Inc. CO
TCI CSC X, Inc. CO
TCI CSC XI, Inc. CO
TCI Development Corporation CO
</TABLE>
Page 13
<PAGE> 14
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI Digital TV, Inc. CO
TCI East, Inc. DE
TCI Falcon Holdings, LLC DE
TCI FCLP Alabama, LLC DE
TCI FCLP California, LLC DE
TCI FCLP Missouri, LLC DE
TCI FCLP Northern California, LLC DE
TCI FCLP Northwest, LLC DE
TCI FCLP Oregon, LLC DE
TCI FCLP Redding, LLC DE
TCI FCLP Washington, Inc. WA TCI OF WASHINGTON
TCI FCLP Wenatchee, LLC DE
TCI Fleet Services, Inc. CO
TCI Great Lakes, Inc. DE
TCI Hits At Home, Inc. CO
TCI Hits, Inc. CO
TCI Holdings II, Inc. CO
TCI Holdings, Inc. CO
TCI Il - Holdings II, Inc. CO
TCI IL - Holdings, Inc. CO
TCI Illinois Holdings, L.P. AZ TCI MEDIA SERVICES
TUCSON CABLEVISION
TCI Investments, Inc. CO
TCI IP, Inc. DE
TCI IP-1, Inc. CO
TCI IP-VI, LLC DE
TCI IT Holdings, Inc. CO
TCI K-1, Inc. CO
TCI Liberty, Inc. DE
TCI Materials Management, Inc. CO
TCI Microwave, Inc. DE
TCI New York Holdings, Inc. CO
TCI News, Inc. CO
TCI News-Damn Right, Inc. CO
TCI News-Presidential, Inc. CO
TCI North Central, Inc. DE
</TABLE>
Page 14
<PAGE> 15
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI Northeast, Inc. DE
TCI Northwest, Inc. CO
TCI of Arkansas, Inc. AR
TCI of Arlington, Inc. TX
TCI of Beckley, Inc. WV TCI MEDIA SERVICES
TCI of Bloomington/Normal, Inc. VA
TCI of Cleveland, Inc. TN TCI MEDIA SERVICES
TCI of Columbus, Inc. GA TCI MEDIA SERVICES
TCI of Connecticut, Inc. CT
TCI of Council Bluffs, Inc. IA
TCI of D.C., Inc. DC
TCI of Dayton, Inc. DE
TCI of Decatur, Inc. AL TCI MEDIA SERVICES
TCI of Delaware, Inc. DE
TCI of East San Fernando Valley, Ltd. [lp] CO
TCI of Greensburg [gp] CO
TCI of Greenville, Inc. SC TCI MEDIA SERVICES
TCI of Hawaii, Inc. CO TCI
TCI of Houston, Inc. CO TCI MEDIA SERVICES
TCI of Illinois, Inc. IL TCI CABLEVISION OF DUBUQUE, INC.
TCI MEDIA SERVICES
TCI of Indiana Holdings, LLC CO
TCI of Indiana, Inc. IN TCI MEDIA SERVICES
TCI MIDWEST REGION
TCI of Indiana Insgt Holdings, LLC CO
TCI of Iowa, Inc. IA TCI CABLEVISION OF DUBUQUE, INC.
TCI MEDIA SERVICES
TCI SOUTHEAST - NORTHWEST REGION
TCI of Kansas Partner, Inc. CO
TCI of Kokomo, Inc. CO
TCI of Lee County, Inc. AL
TCI of Lexington, Inc. KY TCI MEDIA SERVICES
TCI of Maine, Inc. ME
TCI of Mississippi, Inc. MS
TCI of New Jersey, Inc. NV
</TABLE>
Page 15
<PAGE> 16
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI of New York, Inc. NY TCI MEDIA SERVIES
TCI NORTHEAST REGION
TCI OF BUFFALO
TCI of North Broward, Inc. FL
TCI of North Central Kentucky, Inc. KY
TCI of North Dakota, Inc. ND
TCI of Northern California, Inc. CA
TCI of Northern New Jersey, Inc. WA TCI CABLEVISION OF CENTRAL COLORADO
TCI CABLEVISION OF NORTHEASTERN OREGON
TCI CABLEVISION OF THE TREASURE COAST
TCI MEDIA SERVICES
TCI OF NORTHERN NEW JERSEY
TCI OF OREGON
TCI OF WASHINGTON
TCI of Overland Park, Inc. KS
TCI of Pennsylvania, Inc. PA TCI EAST REGION
TCI MEDIA SERVICES
TCI OF CALIFORNIA
TCI of Piedmont, Inc. SC
TCI of Plano, Inc. TX
TCI of Princeton, Inc. WV TCI MEDIA SERVICES
TCI of Racine, Inc. WI TCI MEDIA SERVICES
TCI of Radcliff, Inc. KY
TCI of Rhode Island, Inc. RI
TCI of Richardson, Inc. TX
TCI of Roanoke Rapids, Inc. VA
TCI of Selma, Inc. AL
TCI of South Carolina, Inc. SC
TCI of Southern Maine, Inc. ME
TCI of Southern Minnesota, Inc. DE TCI MEDIA SERVICES
TCI OF SOUTHERN MINNESOTA
TCI of Southern Washington [gp] WA TCI OF WASHINGTON
TCI of Spartanburg, Inc. SC
TCI of Springfiled, Inc. MO TCI MEDIA SERVICES
TCI of Tacoma, Inc. DE TCI OF WASHINGTON
TCI of Tennessee, Inc. TN
</TABLE>
Page 16
<PAGE> 17
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI of the Blufflands, Inc. DE TCI CABLE OF LA CROSSE
TCI MEDIA SERVICES
TCI OF SOUTHERN MINNESOTA
TCI of Tualatin Valley, Inc. OR TCI OF OREGON
TCI of Virginia, Inc. VA TCI MEDIA SERVICES
TCI of Watertown, Inc. IA
TCI of West Virginia, Inc. WV TCI MEDIA SERVICES
TCI of Wytheville, Inc. VA
TCI Ohio Holdings, Inc. CO
TCI Oscar I, Inc. CO
TCI Pacific Communications, Inc DE TCI MEDIA SERVICES
TCI Pacific Microwave, Inc. CO PACIFIC MICROWAVE
TCI Pacific, Inc. DE
TCI PCS Holdings, Inc. DE
TCI Pennsylvania Holdings, Inc. CO
TCI Private Ventures, Inc. CO
TCI Realty Investments Company DE
TCI Southeast Divisional Headquarters, Inc. AL
TCI Southeast, Inc. DE
TCI Sports, Inc. NV
TCI Sports [gp] UT
TCI STS, Inc. CO
TCI STS-MTVI, Inc. TX
TCI Telecom, Inc. DE
TCI Texas Cable Holdings LLC CO
TCI Texas Cable, Inc. CO
TCI TKR Cable I, Inc. DE
TCI TKR Cable II, Inc. DE
TCI TKR of Alabama, Inc. DE TCI MEDIA SERVICES
TCI OF ALABAMA
TCI TKR of Central Florida, Inc. FL TCI MEDIA SERVICES
TCI OF CENTRAL FLORIDA
TCI TKR of Dallas, Inc. DE
TCI TKR of Florida, Inc. DE
TCI TKR of Georgia, Inc. DE TCI MEDIA SERVICES
TCI OF GEORGIA
</TABLE>
Page 17
<PAGE> 18
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI TKR of Hollywood, Inc. DE TCI OF HOLLYWOOD
TCI TKR of Houston, Inc. TX TCI CABLEVISION OF HOUSTON
TCI TKR of Jefferson County, Inc. KY TKR CABLE OF GREATER LOUISVILLE, INC.
TCI TKR of Metro Dade, Inc. DE
TCI TKR of South Dade, Inc. FL TCI OF SOUTH DADE
TCI TKR of South Florida, Inc. DE TCI MEDIA SERVICES
TCI TKR of Southeast Texas, Inc. DE
TCI TKR of the Gulf Plains, Inc. DE TCI OF THE GULF PLAINS
TCI TKR of The Metroplex, Inc. TX TCI CABLEVISION OF METROPLEX
TCI TKR of Wyoming, Inc. WY
TCI TKR, INC. DE
TCI TVC, Inc. CA
TCI UA I, Inc. CO
TCI UA, Inc. DE
TCI VCI, Inc. CA
TCI Ventures Five, Inc. CO
TCI Ventures Four, Inc. CO
TCI Ventures, Inc. CO
TCI Washington Associates, L.P. DE
TCI West, Inc. DE
TCI/CA Acquisition Sub Corp. CO
TCI/CI Merger Sub Corp. DE
TCID-Commercial Music, Inc. CO
TCID-ICP III, Inc. CO
TCID-IP IV, Inc. CO
TCID-IP V, Inc. CO
TCID Data Transport, Inc. CO
TCID Networks, Inc. DE
TCID of Carson, Inc. CA
TCID of Chicago, Inc. IL
TCID of Florida, Inc. FL TCI CABLEVISION OF PASCO COUNTY
TCI MEDIA SERVICES
TCID of Michigan, Inc. NV
TCID of South Chicago, Inc. IL
TCID Partners II, Inc. CO
TCID Partners, Inc. CO
</TABLE>
Page 18
<PAGE> 19
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCID X*PRESS, Inc. CO
TCIP, Inc. CO
TCS Partner, Inc. CO
Tele-Communications of Colorado, Inc. CO TCI COLORADO COMMUNITY CABLE TELEVISION, INC.
Tele-Communications of South Suburbia, Inc. IL
Tele-Vue Systems, Inc. WA TCI OF WASHINGTON
TCI OF HOUSTON
Telecommunications Cable Systems, Inc. LA TCI MEDIA SERVICES
TCI OF LOUISIANA
TCI SOUTHEAST - SOUTHWEST REGION
Telenois, Inc. IL
Televents Group Joint Venture [gp] CO TCI OF CENTRAL IOWA
TCI OF EASTERN IOWA
TCI OF THE HEARTLANDS
Televents Group, Inc. NV
Televents of Colorado, Inc. CO
Televents of East County, Inc. WY TCI CABLEVISION OF EAST COUNTY
Televents of Florida, Inc. WY
Televents of Powder River, Inc. WY
Televents of San Joaquin, Inc. WY TCI CABLEVISION OF SAN JOAQUIN
Televents of Wyoming, Inc. WY
Televents, Inc. NV TCI CABLEVISION OF CONTRA COSTA COUNTY
Televester, Inc. DE
Television Cable Service, Inc. TX
Television Signal Corporation CA
TEMPO Cable, Inc. OK TCI CABLEVISION OF CENTRAL OKLAHOMA, INC.
TCI CABLEVISION OF NOCONA
TCI CABLEVISION OF OKLAHOMA (TEMPO), INC.
TCI CABLEVISION OF TEXAS (TEMPO), INC.
TCI OF ARKANSAS (TEMPO), INC.
TEMPO Development Corporation OK
Tempo Partner, Inc. CO
TEMPO Television, Inc. OK
Texas Cable Partners, L.P. DE
The Cable Television Network of New Jersey, Inc. NJ
The Chicago Cable Interconnect [gp] IL GCCI
</TABLE>
Page 19
<PAGE> 20
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
The Detroit Cable Interconnect L.P. DE THE DETROIT CABLE INTERCONNECT LIMITED PARTNERSHIP
The Greater Philadelphia Cable Advertising Interconnect[gp] PA PCA
PHILADELPHIA CABLE ADVERTISING
Time Warner Inc. DE
TKR Cable Company of Wildwood, Inc. DE
Trans-Muskingum, Incorporated WV
Tribune-United Cable of Oakland County [jv] MI TCI CABLEVISION OF OAKLAND COUNTY, INC.
Tribune Company Cable of Michigan, Inc. DE TRIBUNE/UNITED CABLE OF OAKLAND COUNTY
Tulsa Cable Television, Inc. OK TCI CABLEVISION OF TULSA
TCI MEDIA SERVICES
Tulsa Partner, Inc. CO
UA-Columbia Alpine Tower, Inc. NJ
UA-Columbia Cablevision of Massachusetts, Inc. MA TCI CABLEVISION OF NORTH ATTLEBORO/TAUNTON
UA-Columbia Cablevision of New Jersey, Inc. NJ
UA Think, Inc. CO
UACC Midwest Insgt Holdings, LLC CO
UACC Midwest, Inc. DE TCI OF SOUTH MISSISSIPPI
TCI CABLEVISION OF DECATUR
TCI CABLEVISION OF CENTRAL ILLINOIS
TCI OF CENTRAL INDIANA
TCI OF EVANSVILLE
TCI CABLEVISION OF WEST MICHIGAN
TCI CABLEVISION OF MERCED COUNTY
TCI CABLEVISION OF SANTA CRUZ COUNTY
TCI CABLEVISION OF TRACY
TCI CABLEVISION OF VACAVILLE
TCI CABLEVISION OF WALNUT CREEK
TCI CABLEVISION OF NORTHSHORE
UAII Merger Corp. DE
UAII Sub No. 24, Inc. DE
UATC Merger Corp. NY
UCT Aircraft, Inc. CO
UCT Video, Inc. CO
UCTC LP Company DE
UCTC of Baltimore, Inc. DE
UCTC of Los Angeles County, Inc. DE TCI CABLEVISION OF LOS ANGELES COUNTY
</TABLE>
Page 20
<PAGE> 21
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
United Advertising Network, Inc. CO
United Artists Broadcast Properties, Inc. DE
United Artists Cable Holdings, Inc. CO
United Artists Cablesystems Corporation DE
United Artists Entertainment Company DE
United Artists Holdings, Inc. DE
United Artists Investments, Inc. CO
United Artists K-1 Investments, Inc. CO
United Artists Operator Services Corporation CO
United Artists Payphone Corporation CO
United Artists Preferred Investment, Inc. CO
United Artists Republic Investments, Inc. CO
United Artists Satellite, Inc. CO
United Artists TeleCommunications, Inc. DE
United Cable Ad-Link, Inc. CO
United Cable Advertising, Inc. CO
United Cable Investment of Baltimore, Inc. MD
United Cable Productions, Inc. CO
United Cable Realty Co. of California, Inc. CO
United Cable Shopping Channel, Inc. CO
United Cable T.V. of Oakland County, Inc. MI TCI CABLEVISION OF OAKLAND COUNTY, INC.
United Cable Television Acquisition Corporation CO TCI OF COLORADO
United Cable Television Corp. of Eastern Connecticut CT TCI CABLEVISION OF CENTRAL CONNECTICUT
United Cable Television Corporation DE TCI CABLE OF THE MIDLANDS
TCI CABLEVISION OF HAYWARD
TCI CABLEVISION OF TREASURE VALLEY
TCI MEDIA SERVICES
United Cable Television Corporation of Michigan MI TCI CABLEVISION OF WOODHAVEN, INC.
United Cable Television Corporation of Northern Illinois IL TCI CABLEVISION OF NORTHERN ILLINOIS
United Cable Television Financing Corporation CO
United Cable Television Investments, Ltd.[corp] CO
United Cable Television of Alameda, Inc. CA UCT OF ALAMEDA, INC.
TCI CABLEVISION OF ALAMEDA
United Cable Television of Baldwin Park, Inc. CO TCI CABLEVISION OF LOS ANGELES COUNTY
United Cable Television of Baltimore Limited Partnership [lp] CO TCI COMMUNICATIONS OF BALTIMORE
TCI MEDIA SERVICES
</TABLE>
Page 21
<PAGE> 22
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
United Cable Television of Bossier City, Inc. DE TCI MEDIA SERVICES
TCI OF LOUISIANA
United Cable Television of California, Inc. CA TCI CABLEVISION OF CUPERTINO/LOS ALTOS
TCI CABLEVISION OF DAVIS
United Cable Television of Chaska, Inc. CO
United Cable Television of Colorado, Inc. CO TCI OF COLORADO
United Cable Television of Cupertino, Inc. CA TCI CABLEVISION OF CUPERTINO/LOS ALTOS
United Cable Television of Eastern Shore, Inc. DE TCI CABLEVISION OF EASTERN SHORE
TCI MEDIA SERVICES
United Cable Television of Hillsborough, Inc. CO TCI CABLEVISION OF HAYWARD
United Cable Television of Illinois Valley, Inc. IL TCI CABLEVISION OF ILLINOIS VALLEY
United Cable Television of Los Angeles, Inc. CA TCI CABLEVISION OF LOS ANGELES COUNTY
United Cable Television of Mid-Michigan, Inc. DE TCI CABLEVISION OF MID-MICHIGAN, INC.
United Cable Television of Northern Indiana, Inc. DE TCI OF NORTHERN INDIANA
United Cable Television of Oakland County, Ltd. [lp] CO
United Cable Television of Pico Rivera, Inc. CO
United Cable Television of Santa Cruz, Inc. CO TCI CABLEVISION OF SANTA CRUZ COUNTY
United Cable Television of Sarpy County, Inc. NE
United Cable Television of Scottsdale, Inc. AZ TCI CABLE OF SCOTTSDALE
United Cable Television of Southern Illinois, Inc. DE TCI CABLEVISION OF SOUTHERN ILLINOIS
United Cable Television of Western Colorado, Inc. CO TCI CABLEVISION OF WESTERN COLORADO, INC.
TCI MEDIA SERVICES
United Cable Television Real Estate Corporation CO
United Cable Television Services Corporation OK TCI CABLEVISION OF CENTRAL CONNECTICUT
TCI MEDIA SERVICES
United Cable Television Services of Colorado, Inc. CO
United Cable Video Investment, Inc. CO
United Carphone Corporation CO
United CATV, Inc. MD TCI CABLEVISION OF ANNAPOLIS
TCI CABLEVISION OF THE ROCKIES
TCI MEDIA SERVICES
United Community Antenna System, Inc. WA TCI OF WASHINGTON
United Corporate Communications Company CO
United Entertainment Corporation CO
United Hockey, Inc. CO
</TABLE>
Page 22
<PAGE> 23
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
United Microwave Corporation DE
United of Oakland, Inc. DE TCI CABLEVISION OF OAKLAND COUNTY, INC.
TRIBUNE/UNITED CABLE OF OAKLAND COUNTY
United Paging Corporation CO
United Tribune Paging Corporation CO
United's Home Video Centers, Inc. CO
Universal Telecom, Inc. MD
Upper Valley Telecable Company, Inc. ID TCI CABLEVISION OF IDAHO (UVTC), INC.
TCI MEDIA SERVICES
US Cable of Coastal - Texas, L.P.
US Cable of Lake County, Limited Partnership [lp] NJ TCI OF NORTHEAST ILLINOIS, L.P.
UTI Purchase Company CO
Vacationland Cablevision, Inc. WI TCI OF SOUTH CENTRAL WISCONSIN
Vista Television, Inc. WA TCI OF WASHINGTON
Volusia Cable County Advertising Interconnect, L.P. DE
W.A.V., Inc. CA
Waltham Tele-Communications [gp] MA TCI CABLEVISION OF WALTHAM
Waltham Tele-Communications, Inc. CO
Wasatch Community T.V., Incorporated UT
Wentronics Partner, Inc. CO
Wentronics, Inc. NM TCI CABLEVISION OF WESTERN COLORADO, INC.
TCI CABLEVISION OF CASPER
TCI CABLEVISION OF GALLUP
TCI CABLEVISION OF MOAB
TCI MEDIA SERVICES
Western Community TV, Inc. MT
Western New York Cable Advertising L.P. [lp] NY
Western Satellite 2, Inc. CO
WestMarc Cable Group, Inc. DE
WestMarc Cable Holding, Inc. DE TCI MEDIA SERVICES
TCI OF CENTRAL MINNESOTA
TCI OF NORTHERN IOWA
TCI OF NORTHERN MINNESOTA
TCI OF THE VALLEY
WestMarc Communications of Minnesota, Inc. DE TCI OF CENTRAL MINNESOTA
TCI OF SOUTHERN MINNESOTA
</TABLE>
Page 23
<PAGE> 24
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
WestMarc Communications, Inc. NV
WestMarc Development II, Inc. CO
WestMarc Development III, Inc. CO
WestMarc Development IV, Inc. CO
WestMarc Development Joint Venture[gp] CO TCI CABLEVISION OF GREATER MICHIGAN, INC.
TCI CABLEVISION OF NORTHWESTERN CONNECTICUT
TCI CABLEVISION OF CAPE COD
TCI CABLEVISION OF NANTUCKET
TCI OF IDAHO
TCI MEDIA SERVICES
TCI TWIN STATE CABLE TV
TCI/TWIN VALLEY CABLE
TCI CABLE OF VERMONT
WestMarc Development, Inc. CO TCI CABLEVISION OF GREATER MICHIGAN, INC.
TCI MEDIA SERVICES
WestMarc Realty, Inc. CO
</TABLE>
Page 24
<PAGE> 25
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
INTERNATIONAL
- -------------
<S> <C> <C>
Tele-Communications International, Inc. [d/b/a TINTA] DE TINTA
TCI SQUARED, INC.
Action Stations [2000] Ltd. UK
Action Stations [Lakeside] Ltd. UK
Admi, Inc. DE
Antena Comunitaria TV Cosquin S.A. ARG
Asia Business News Channel, Japan
Aster City Cable Sp. z o.o. POL
Australis Media Limited AUS
Avon Cable Investments Limited UK
Avon Cable Joint Venture UK
Avon Cable Limited Partnership CO
BIP Management [Poland], L.L.C.
Birmingham Cable Corporation UK
Birmingham Cable Ltd. UK
Birmingham Live Limited UK
Bravo Classic Movies Ltd. UK
Bresnan [Polska] Sp. z o.o.
Bresnan Communications Poland LLC DE
Bresnan International Partners [Poland], L.P. DE
C3W [Management] Ltd. UK
C3W Limited UK
Cable Alarms Ltd. UK
Cable Camden Limited UK
Cable Canada Television S.A.
Cable Communication Koganei/Kobubunji JPN
Cable Communications [Central Lancashire], Ltd. UK
Cable Communications [Hyde & Wynn] Ltd UK
Cable Communications [Liverpool], Ltd. UK
Cable Communications [St. Helens & Knowsley], Ltd. UK
Cable Communications [Wigan], Ltd. UK
Cable Communications Limited UK
Cable Communications South East Shrewsbury Ltd UK
</TABLE>
Page 25
<PAGE> 26
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Cable Communications Southeast Staffordshire Ltd UK
Cable Communications Telecomm, Ltd. UK
Cable Enfield Limited UK
Cable Guide Limited UK
Cable Hackney and Islington Limited UK
Cable Haringey Limited UK
Cable Imagen Casilda S.A. ARG
Cable Internet Ltd. UK
Cable London Plc UK
Cable North [Forth District] Ltd. UK
Cable Programme Partners-1 Limited Partnership DE
Cable Programme Partners [1] Ltd. UK
Cable Soft Network JPN
Cable Station Kita-Kyushu JPN
Cable Telecom Ltd. UK
Cable Television Nerima JPN
Cablephone Ltd. UK
Cablevision 21 JPN
Cablevision S.A. ARG
Canal Jimmy SA FRA
Capital City Cablevision Ltd. SC
Caribbean Services Company, Inc. CO
Cathay Television and Communication Company CO
CATV Yokosuka JPN
Century 21 Cable Communications Ltd. UK
Cine Cinemas Cable SA FRA
Cine Classics BV NTH
Cine Classics CV HOL
City Cablevision Fuchu JPN
Construred, S.A. ARG
Continental Shelf 16 Ltd. UK
Cordillera Communicaciones Holding Limitada CHL
Cordillera Communicaciones Limitada CHL
Cork Communications Ltd. IRE
Cotswolds Cable Limited Partnership CO
Crystal Palace Radio Limited UK
</TABLE>
Page 26
<PAGE> 27
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Crystalvision Productions Limited UK
Culross Investments Ltd. IRE
Datanet S.A.
Discovery [UK] Ltd. UK
Discovery Japan
Dominicana, Inc. DE
DTH Techco Partners [gp] DE
Dundee Cable and Satellite Ltd. UK
Edinburgh Cable Limited Partnership CO
Edinburgh Cablevision Ltd. SC
Enequis S.A.
Enlaces S.A.
Estuaries Cable Limited Partnership CO
European Business Network Ltd. UK
European Business News Ltd. UK
Fiber-Tel TCI2 S.A. ARG
Fintelco S.A.
Fleximedia Ltd. UK
Flextech-Flexinvest Ltd. UK
Flextech [1992] plc. UK FLEXTECH (1992)
Flextech [Kindernet Investment] Ltd UK
Flextech 1992 plc. UK
Flextech Business News Ltd. UK
Flextech Children's Channel Ltd. UK
Flextech Communications Ltd UK
Flextech Distribution Ltd. UK
Flextech Family Channel Ltd. UK
Flextech Home Shopping Limited HSN DIRECT
</TABLE>
Page 27
<PAGE> 28
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Flextech Media Holdings Ltd. UK
Flextech plc UK
Flextech Rights Limited
Flextech Television Limited UK
Flextech Video Games Limited UK
Florida Home Shopping Limited HSN DIRECT
Fox Sports International Distribution Ltd. CAY
Fox Sports Americas - U.S., L.P. DE
Fox Sports Australia [jv] AUS
Fox Sports Australia Limited CAY
Fox Sports International Distribution Ltd. CAY
Fox Sports International Equity, LLC DE
Fox Sports Latin America Limited CAY
Fox Sports U.S. Distribution L.P. DE
Fox Sports World LLC DE
Fox Sports World Middle East, LLC DE
Fox Sports World, LLC DE
Fukuoka Cable Network JPN
General Cable plc
Hieronymous Ltd. SC
HIT Entertainment plc UK
Holland Visions BV
Horizon Communications Ltd. IRE
Horizon T.V. Distribution Ltd. IRE
HSN Direct International Limited HSN DIRECT
HSN Direct Joint Venture FL HSN DIRECT
HTV
Independent Wireless Cable Ltd. IRE
Innova, S. de R.L.
Integra Cable S.A.
International Sports Programming Partners [gp] DE
Invisions Holding BV
ISP Transponder L.P. DE
J-COM Internet Co. JPN
J-Sports Co., Ltd. JPN
Jupiter JPN
</TABLE>
Page 28
<PAGE> 29
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Jupiter Golf Network Co., Ltd.
Jupiter Gunma JPN
Jupiter Hokusetsu JPN
Jupiter Ibaraki JPN
Jupiter Internet Co. JPN
Jupiter Kansai JPN
Jupiter Katsushika JPN
Jupiter Kawachi JPN
Jupiter Programming Co., Ltd. JPN
Jupiter Rinkuu JPN
Jupiter Shimonoseki JPN
Jupiter Telecommunications Co., Ltd. JPN
Jupiter Wakayama JPN
Katowicka Telewizja Kablowa S.A. POL KTK
Kenniv Securities IRE
Kindernet CV
Kindernet NV
Kindernet SA
Kindernet UK Ltd
Kingdom Cablevision Ltd. UK
Kisarazu Cable TV JPN
L - TCI Associates [gp]
Liberty Sports Australia Pty. Ltd. AUS
Liberty Sports International, B.V. NTH
Liberty/TINTA Australia, Inc. DE
Liberty/TINTA Distribution, Inc. DE
Liberty/TINTA LLC DE
Liberty/TINTA Middle East LLC DE
Liberty/TINTA Sport Equity LLC DE
Liberty/TINTA Transponder, L.L.C. DE
Liberty/TINTA U.S. Deportiva LLC DE
Liberty/TINTA World LLC DE
Live TV Limited UK
LNT International Sports Programming Partners Australia [gp] DE
London Interconnect Ltd UK
London South Cable Partnership CO
</TABLE>
Page 29
<PAGE> 30
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
London South Joint Venture UK
Maidstone Broadcasting UK
Maidstone Studios Limited
Metropolis-Intercom S.A. CHL
Microwave Distribution Systems Ltd. IRE
Middlesex Cable Limited UK
Midlands Cable Communications, Ltd. UK
Multithematiques SA FRA MTT
MYHI, L.L.C. DE
Net Sat Servicos Ltda BRZ
Network 21 Ltd. UK
New Century TV Holdings Ltd. UK
North London Channel Ltd. UK
North West Cable Communications, Ltd. UK
Osaka Cable Television JPN
Other subsidiaries
Perth Cable Television Ltd. UK
Planete Cable SA FRA
Playboy TV UK/Benelux Ltd. UK
Pramer S.C.A. ARG
Premier Sports Australia Pty. Ltd. AUS
Premium Movie Partnership AUS
Preview Investments BV
Princes Holdings Ltd. IRE
Proainvest S.A.
Regionaina Telewizja Kablowa Autocom sp z o.o. POL
SBC Cable Communications [Blackpool] Ltd. UK
SBC CableComms Unlimited Company [LLC] UK
SCA S.A.
Scotcable [Cumbernauld] Ltd. UK
Scotcable [Dumbarton] Ltd. UK
Scotcable [Motherwell] Ltd. UK
Sell-a-Vision [jv] UK
Sierras de Mazan S.A.
Sky Latin America Partners [gp] DE
Sky Multi-Country Partners [gp] DE
</TABLE>
Page 30
<PAGE> 31
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Southwestern Bell International Holdings, Ltd. UK
Southwestern Bell Telecom [Europe] Ltd. UK
Starstream Ltd. UK
STV
Suginami Cable Television JPN
Supporthaven plc UK
T.V. Sports Ltd. IRE
Takarazuka/Kawanishi JPN
Take Four BV
Tayside Cable Systems Ltd. UK
TCI-Australia, Inc. CO
TCI Argentina, Inc. CO
TCI Cable Holding Company I DE
TCI Cable Programme Partners, Inc. CO
TCI Cablevision of Puerto Rico, Inc. DE
TCI Cathay TV, Inc. CO
TCI Chile, Inc, CO
TCI Communicaciones de Chile Limitada CHL
TCI DTH Mexico, Inc.
TCI Holdings [Chile], Inc. DE
TCI International Brasil, LTDA. BRZ
TCI International DTH Service, Inc.
TCI International Investments Ltd. UK
TCI International Partners [Chile], L.P. DE
TCI International Partnership Holdings, Inc. CO
TCI Japan, Inc. CO
TCI Movies Australia Pty. Limited AUS
TCI Multicountry DTH, Inc. CO
TCI Poland, Inc. CO
TCI South America, SRL ARG
TCI Tele-Communications Ireland Limited
TCI Tokyo, Ltd. JPN
TCI/US West Cable Communications Group CO
Teledifusora Olacarria S.A.
Telefonia Polska Zachod Sp. z o.o. POL
Telesat Cordoba S.A.
</TABLE>
Page 31
<PAGE> 32
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Television Chigasaki
Television Mobiles CV
Television por Cable Jesus Maria S.A.
Televisora La Plata S.A.
TeleWest [Motherwell] Ltd. UK
Telewest [Worchester] Ltd. UK
TeleWest Communications [Internet] Ltd. UK
TeleWest Communications Cable Limited UK
TeleWest Communications Group Ltd. UK
TeleWest Communications Networks Ltd. UK
Telewest Communications plc UK
TeleWest Holdings Ltd. UK
TeleWest Parliamentary Holdings Limited UK
TeleWest Scotland Holdings Ltd. UK
TeleWest Share Trust Limited UK
TeleWest Southport Ltd. UK
TeleWest Trustees Ltd. UK
Telford Telecommunications, Ltd. UK
Telso Communications Limited
The Business TV Corporation Limited UK
The Cable Corporation UK
The Cable Equipment Store Ltd. UK
The Parliamentary Channel Limited UK
The Shop Channel
Theseus No. 1 Limited UK
Theseus No. 2 Limited UK
TINTA Cable Management, Inc. CO
TINTA Latin Programming Ltd. CAY
TINTA Sports Programming, Inc. DE
Torneos y Competencias S.A. ARG
Tscuchiura Cable Television JPN
Tvision Rosario S.A.
TVS Pension Fund Trustees Limited
TVS Television Limited TVS TELEVISION LIMITED
THE FAMILY CHANNEL STUDIOS LIMITED
TW Holdings, L.L.C. CO
</TABLE>
Page 32
<PAGE> 33
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Tyneside Cable Limited Partnership CO
UA-France, Inc.
UA-UII Management, Inc. CO
UA-UII, Inc. CO
UA European Theatres, Inc. CO
UII-Ireland Limited Liability Company UT
UII-Ireland, Ltd. [gp] CO
UK Gold Television Ltd. UK
UK Living Ltd. UK
Ultravision Teledifusora Rio III S.A.
United Artists [Learning Channel] Ltd. UK
United Artists Cable Television International Holdings, Inc. CO
United Artists Cable Television International Ltd.
United Artists Cable Television UK Holdings, Inc.
United Artists Communications [Avon] Limited UK
United Artists Communications [Cotswold] Venture UK
United Artists Communications [Cotswolds] Ltd. UK
United Artists Communications [London South] Limited UK
United Artists Communications [London South] Ltd. UK
United Artists Communications [Nominees] Limited UK
United Artists Communications [North East] Limited UK
United Artists Communications [North East] Partnership UK
United Artists Communications [Scotland] Ltd. SC
United Artists Communications [Scotland] Venture UK
United Artists Communications [South East] Ltd UK
United Artists Communications [South East] Partnership UK
United Artists Communications [South Thames Estuary] Ltd UK
United Artists Communications [Tyneside] Ltd. UK
United Artists European Broadcasting Ltd. UK
United Artists European Holdings Limited UK
United Artists International, Inc. CO
United Artists Investments Ltd. UK
United Artists Programming-Europe, Inc.
United Artists Programming International, Inc. CO
United Artists, B.V. NTH
United Cable [London South] Limited Partnership CO
</TABLE>
Page 33
<PAGE> 34
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
United Cable and Microwave Ltd. IRE
Univent's S.A. ARG
Urawa Cable TV Network
VCC S.A.
Venado Vision S.A.
Video Canal de Compras S.A.
Videopole FRA
Visionair Television BV
Westward Cables Ltd. IRE
Westward Horizon Ltd. IRE
Windsor Alarms Ltd. UK
Windsor Television Limited UK
Wire TV Limited UK
PROGRAMMING
- -----------
Liberty Media Corporation DE
A-1 TV, Inc. CO
ACTV, Inc. DE
Affiliated Regional Communications, Ltd. CO
American Sports Classic, LLC
Americana Television Productions LLC CO
Animal Planet, L.P. DE
ARC Holding, Ltd. TX HOME SPORTS ENTERTAINMENT
PRIME SPORTS SOUTHWEST
Ascent Arena Company, LLC CO
Asian Television Advertising, LLC
Asian Television and Communications International LLC CO
Bay TV Joint Venture CA
BB Fit Holdings, LLC
BDTV II Inc. DE
BDTV III Inc. DE
BDTV Inc. DE
BET Film Productions [JV] DE
BET Film Productions [jv] DE
</TABLE>
Page 34
<PAGE> 35
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
BET Holdings, Inc. DE
BET Movies/STARZ!3, LLC DE
Body by Jake Enterprises, LLC
Communication Capital Corp DE COLORADO COMMUNICATION CAPITAL CORP.
Courtroom Television Network LLC NY
CTV Sports Net CAN
Cutthroat Productions LP CA
CVN, Inc. CA
Discovery Communications, Inc. MD
DMX, LLC DE
Dry Creek Productions LLC CO
E! Entertainment Television, Inc. DE
Encore Asia Management Limited [dormant company] HKG
Encore Asia, Inc. CO
Encore Australia Management Pty. Limited AUS
Encore Australia Management, Inc. DE
Encore ICCP Investments LLC CO
Encore ICCP, Inc. CO EMC ENTERTAINMENT INTERNATIONAL, INC.
Encore International Newco, Inc. CO
Encore International, Inc. CO
Encore Media Corporation CO ENCORE
Encore Media Group LLC CO
Encore QE Programming Corp. CO
Fit TV Holdings, LLC
Fox Kids Worldwide, Inc. DE
Fox Sports Ad Sales Holdings, LLC
Fox Sports Detroit LLC
Fox Sports National Holdings, LLC DE
Fox Sports Net Baseball LLC
Fox Sports Net, LLC DE
Fox Sports RRP Holdings, LLC
Fox/Liberty Bay Area LLC DE
Fox/Liberty Chicago LLC DE
Fox/Liberty Network Sales, Inc. DE
Fox/Liberty Networks, LLC DE
Fox/Liberty SportsCom, LLC
</TABLE>
Page 35
<PAGE> 36
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Foxwatch Productions, Inc. DE FOXWATCH PRODUCTIONS, INC.
FX Networks, LLC DE FX
Galactic/Tempo Superaudio
Home Shopping Network, Inc. DE
Home Team Sports Limited Partnership DE
HSN, Inc. DE
ICCP, Inc. CO
International Cable Channels Partnership, Ltd. [lp] CO
Intro Production Management Corporation CO
J-Sports Co., Ltd. JAP
Kaleidoscope Interactive, LLC TX
Kaleidoscope Network, Inc. TX KALEIDOSCOPE TELEVISION
KBL Sports Network, Inc. CO KBL ENTERTAINMENT NETWORK
LBTW I, Inc. CO
LBTW II, Inc. CO
LBTW III, Inc. CO
Liberty ATCL, Inc. CO
Liberty Bay, Inc. CO
Liberty Broadcasting, Inc. OR
Liberty Central Services, Inc. DE
Liberty CHC, Inc. CO
Liberty Club, Inc. CO
Liberty CNBC, Inc. CO
Liberty Court II, Inc. CO
Liberty Court, Inc. WY
Liberty Creative Corporation CO
Liberty Denver Arena LLC DE
Liberty Distribution, Inc. CO
Liberty DMX, Inc. CO
Liberty fX, Inc. DE
Liberty HSN LLC Holdings, Inc. DE
Liberty HSN, Inc. CO
Liberty IATV Events, Inc. DE
Liberty IFE, Inc. CO
Liberty MLP, Inc. CO
Liberty MovieCo, Inc. CO
</TABLE>
Page 36
<PAGE> 37
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Liberty Newco International, Inc. DE
Liberty NSPP, Inc. DE
Liberty PL, Inc. DE
Liberty Productions, Inc. CO
Liberty Program Supply, Inc. WY
Liberty Programming Development Corporation WY
Liberty QVC, Inc. CO
Liberty Spanish Group, L.L.C. CO
Liberty Spanish Holdings, Inc. CO
Liberty Sports Distribution, Inc. DE
Liberty Sports Holding, Inc. DE
Liberty Sports ILH, Inc. CO
Liberty Sports Member, Inc. DE
Liberty Sports Sales, Inc. CO
Liberty Sports, Inc. CO
Liberty SportSouth, Inc. GA
Liberty Starz, Inc. CO
Liberty Telemundo Network, Inc. CO
Liberty Telemundo Stations, Inc. CO
Liberty TW, Inc. CO
Liberty UK Radio, Inc. CO
Liberty VC, Inc. CO
Liberty VJN, Inc. CO
Liberty Women's Sports League, Inc. CO
Liberty YCTV, Inc. CO
Liberty/Fox Ad Sales, LLC DE
Liberty/Fox ARC L.P. DE
Liberty/Fox ARC L.P. DE
Liberty/Fox Arizona LLC DE
Liberty/Fox Canada LLC DE
Liberty/Fox Chicago LLC DE
Liberty/Fox Distribution L.P. DE
Liberty/Fox KBL L.P. DE
Liberty/Fox Network Programming, LLC DE
Liberty/Fox Northwest L.P. DE
Liberty/Fox Southeast LLC DE
</TABLE>
Page 37
<PAGE> 38
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Liberty/Fox Sports Financing LLC DE
Liberty/Fox Sunshine LLC DE
Liberty/Fox Upper Midwest L.P. DE
Liberty/Fox Utah LLC DE
Liberty/Fox Utah LLC DE
Liberty/Fox West LLC DE
Liberty/TINTA LLC DE
LMC Animal Planet, Inc. CO
LMC Arizona Sports, Inc. DE
LMC Bay Area Sports, Inc. CO BASN
BAY AREA SPORTS NETWORK
PACIFIC SPORTS NETWORK
PSN
LMC BET, Inc. CO
LMC Canada, Inc. CAN
LMC Capital LLC DE
LMC Chicago Sports, Inc. WY
LMC Classics, Inc. NV
LMC Cutthroat Island, Inc. CO
LMC Discovery, Inc. CO
LMC E!, Inc. CO
LMC Encore, Inc. CO
LMC Entertainment, Inc. NV
LMC Finco, Inc. DE
LMC IATV Events, LLC DE
LMC Information Services, Inc. NV X*PRESS INFORMATION SERVICES
LMC International, Inc. CO
LMC Music, Inc. CO
LMC Netlink Corporation CO
LMC Network Programming, Inc. DE
LMC Newco U.S., Inc. DE
LMC Northwest Cable Sports, Inc. CO NCS
NORTHWEST CABLE SPORTS
PSN
PRIME SPORTS NORTHWEST
LMC Prime Sports Northwest, Inc. CO
</TABLE>
Page 38
<PAGE> 39
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
LMC Regional Sports, Inc. CO
LMC Republic Pictures, Inc. CO
LMC Request, Inc. CO
LMC SatCom, Inc. GA
LMC Sillerman, Inc. CO
LMC Silver King, Inc. CO
LMC Southeast Sports, Inc. CO
LMC Sunshine, Inc. CO
LMC Upper Midwest Sports, Inc. CO
LMC USA I, Inc. DE
LMC USA II, Inc. DE
LMC USA III, Inc. DE
LMC USA IV, Inc. DE
LMC USA V, Inc. DE
LMC USA VI, Inc. DE
LMC Utah Sports, Inc. I CO
LMC West Sports, Inc. DE
LQ I, Inc. CO
LQ II, Inc. CO
LSI Deportiva, Inc. CO
LSI Facilities, Inc. CO
LSI Nostalgic Sports, Inc. CO
LSI Showcase, Inc. CO
LTWX I, Inc. CO
LTWX II, Inc. CO
LTWX III, Inc. CO
LTWX IV, Inc. CO
LTWX V, Inc. CO
MacNeil/Lehrer Productions [gp] NY
Madison Square Garden L.P.
MediaView LLC CO MEDIAVIEW LLC
Metro Channel L.L.C.
MGM Gold Networks [Asia] BV NTH
MGM Gold Networks Asia, LLC DE
Mid-Atlantic Sports Network L.L.C.
Mountain Mobile TV Limited Liability Company NV MOUNTAIN MOBILE TELEVIISON
</TABLE>
Page 39
<PAGE> 40
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
National Advertising Partners
National PSNA Holdings I, LLC
National PSNA Holdings II, LLC
National Sports Partners NY
Netlink USA [gp] CO
New LMC ARC, Inc. DE
New LMC Bay Area, Inc. DE
New LMC Canada, Inc. DE
New LMC Chicago, Inc. DE
New LMC KBL, Inc. DE
New LMC Northwest, Inc. DE
New LMC Southeast, Inc. DE
New LMC Sunshine, Inc. DE
New LMC Upper Midwest Sports, Inc. DE
New LMC Utah Sports, Inc. DE
Odyssey Holdings, L.L.C. DE
Odyssey Productions, Ltd. DE
Paradigm Music Entertainment Company DE
PPVN Holding Company DE VIEWERS CHOICE
priceline.com Incorporated PRICELINE.COM INCORPORATED
Prime Network Limited Liability Company WY
Prime Philadelphia Sports Limited Liability Company WY
Prime Sports Channel Network
Prime Sports Channel Networks Associates PRIME NETWORK
NEWSPORT
Prime Sports Events, Inc. CO LIBERTY PRIME SPORTS EVENTS, INC.
FAN FAIR
PRIME SPORTS FAN FAIR
Prime Sports Merchandising, Inc. CO
Prime Sports Network-Upper Midwest [gp] MN
Prime Sports Network-Upper Midwest [jv] MN
Prime Sports Northwest Network [gp] DE
Prime Ticket Networks, L.P. CA
Professional Sports Services, LLC DE
Project Discovery, Inc. DE
Purple Demon, Inc. DE BIG DEAL
</TABLE>
Page 40
<PAGE> 41
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
QVC Investment, Inc. CO
QVC, Inc. DE
Rainbow Garden Corp.
RecoveryNet Interactive LLC DE
Reel Streets Productions LLC NY
Regional Programming Partners [gp] NY
Reiss Media Enterprises, Inc. DE
Request Holdings, Inc. DE
Rocky Mountain Prime Sports Network [jv] CO
Rocky Mountain Sports and Lifestyle Channel, Inc. DE
Royal Communications, Inc. CO
RTV Associates, L.P. [lp] DE
Sillerman Communications Management Corporation NY
Sonic.Net, Inc. NY
Southern Satellite Systems, Inc. GA
Sports Channel Bay Area Associates [gp] NY
Sports Channel Chicago Associates [gp] NY
Sports Channel Cincinnati Associates
Sports Channel Florida Associates
Sports Channel Garden Corp.
Sports Channel New England
Sports Channel Ohio Associates
Sports Channel Prism Associates NY
Sports Channel Ventures, Inc.
Sports Holding, Inc. TX
SportsChannel Chicago Associates [gp] NY
SportsChannel Pacific Associates [gp] NY
SportsChannel Prism Associates [gp] NY SPORTSCHANNEL
SportSouth Holdings, LLC
SportSouth Network, Ltd.
Starz Movies LLC CO
Sunshine Network [jv] FL
Sunshine Network of Florida, Ltd. FL
Sunshine Network, Inc. FL
Supersound [lp] DE
Superstar/Netlink Group LLC DE SUPERSTAR
</TABLE>
Page 41
<PAGE> 42
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI Digital Health Group, Inc. CO
TCI Music, Inc. DE
TCI Online Health KI Holdings, Inc. CO
TCI Online Health RN Holdings, Inc. CO
TCI Prime Sports, Inc. CO
TCI/Fox Funding Partnership [jv] NY
Telemundo Holdings, Inc. DE
Telemundo Network Group LLC DE
Telluride Cablevision, Inc. DE
Tempo Sound, Inc. OK
The Box Argentina, S.A. ARG
The Box Holland, B.V. NTH
The Box Italy, S.R.L. ITL
The Box Worldwide, Inc. FL
The Box Worldwide-Europe, B.V. NTH
The Box Worldwide-Latin America, Inc. BVI
The Box Worldwide-USA, Inc. DE
Time Warner Inc. DE
United Video Satellite Group, Inc. DE
Upper Midwest Cable Partners [gp] MN
USA Networks, Inc. DE
Video Jukebox Network Europe, Ltd. UK
Vision Group Incorporated CO
VJN LTPV Corp. DE
VJN Management Services, Inc. BVI
Westlink, Inc. CO
X*PRESS Electronic Services, Ltd. CO
X*PRESS Information Services, Ltd. CO
</TABLE>
Page 42
<PAGE> 43
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
VENTURES GROUP
- --------------
<S> <C> <C>
TCI Ventures Group, LLC DE
Academic Systems Corporation CA
Antec Corporation
At Home Corporation DE
AT&T Corp. NY
CareerTrack, Inc. CO
CSG Systems International, Inc.
Digital Direct, Inc. CO TCI TELEPHONY, INC.
ETC Ingenius Holdings, Inc. DE
ETC NSCI Holdings, Inc. DE
ETC w/tci, Inc. DE
General Instrument Corporation
Headend In The Sky, Inc. CO
Ingenius [jv] CO
InterZine Productions, Inc. DE INTERZINE PRODUCTIONS, INC.
INtessera Inc. CO INTESSERA, INC.
INTESSERA TECHNOLOGIES GROUP
ISS Group, Inc.
iVillage, Inc.
Kitty Hawk Capital Limited Partnership, II NC
KPCB Java Fund [lp]
Materials Handling Services, Inc. CO WESTERN COMMUNICATIONS MATERIALS HANDLING, INC.
MCNS Holdings, L.P. DE[NY]
National Digital Television Center, Inc. CO
National School Conference Institute, Inc. AZ
NDTC-YCTV, Inc. CO
NDTC Technology, Inc. CO
New Enterprise Associates IV, Limited Partnership DE
RL Ingenius, Inc. CO
SportsLine USA, Inc. DE
Sprint PCS
TCI-TVGOS, Inc. CO
TCI Academic Systems Holdings, Inc. CO
TCI CT Holdings, Inc. DE
</TABLE>
Page 43
<PAGE> 44
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
TCI CTrack Asset Corp. CO
TCI ETC Holdings, Inc. DE
TCI Interactive, Inc. CO
TCI Internet Holdings, Inc. CO
TCI Internet Services, Inc. CO
TCI INZ Sports Holdings, Inc. CO
TCI ITV Financial Services, Inc. CO
TCI Java, Inc. CO
TCI Lightspan Holdings, Inc. CO
TCI LL, Inc. CO
TCI MCNS Holdings, Inc. CO
TCI National Digital Television Center - Hong Kong, Inc. DE
TCI Netscape Holdings, Inc. CO
TCI NJFT, Inc. CO
TCI Online Sports Holdings, Inc. CO
TCI Online Village Holdings, Inc. CO
TCI SMTRK of Texas, Inc. CO
TCI SMTRK, LLC DE
TCI Spectrum Investment, Inc. CO
TCI Telephony Holdings, Inc. DE
TCI Telephony Services, Inc. DE
TCI Teleport Holdings, Inc. CO
TCI Teleport, Inc. CO
TCI TSX, Inc. CO
TCI UVSG, Inc. CO
TCI Venture Investments, LLC DE
TCI Ventures Group-Airplanes, Inc. CO
TCI Ventures Group-Financing, Inc. CO
TCI Ventures Management, Inc. CO
TCI Wireless Holdings, Inc. DE
TCIVG-GIC. Inc. CO
TeleCable KCFN Holding Corp. VA
The Lightspan Partnership, Inc.
United Video Satellite Group, Inc. DE
Venture First II L. P. DE
Western Information Systems, Inc. CO WIS
</TABLE>
Page 44
<PAGE> 45
<TABLE>
<CAPTION>
STATE
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION TRADE NAMES
- ---------- --------------- -----------
<S> <C> <C>
Western Tele-Communications, Inc. CO
Western Tele-Communications, Inc./Retail Sales Group CO PEOPLE LINK BY TCI
WTCI of Montana, Inc. CO
</TABLE>
Page 45
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Tele-Communications, Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56271, 33-57177, 33-57399, 33-63139, 33-64127, 33-65311, 33-65493,
333-00265, 333-00835, 333-06723, 333-07615, 333-27039, 333-29849, 333-40131,
333-41435, 333-44745, 333-56635, 333-70999 and 333-71199) on Form S-3, the
Registration Statement (No. 333-64297) on Form S-4, and the Registration
Statements (Nos. 33-44543, 33-54263, 33-60839, 33-60843, 33-64827, 33-64829,
33-64831, 33-65485, 33-65487, 333-06177, 333-06179, 333-16025, 333-16027,
333-40141, 333-42917 and 333-58083) on Form S-8 of Tele-Communications, Inc. of
our reports dated March 9, 1999, relating to the consolidated balance sheets
of Tele-Communications, Inc. and subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of operations and comprehensive
earnings, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998, and all related schedules, which
reports appear in the December 31, 1998 Annual Report on Form 10-K, of
Tele-Communications, Inc.
KPMG LLP
Denver, Colorado
March 15, 1999
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56271, 33-57177, 33-57399, 33-63139, 33-64127, 33-65311, 33-65493,
333-00265, 333-00835, 333-06723, 333-07615, 333-27039, 333-29849, 333-40131,
333-41435, 333-44745, 333-56635, 333-70999 and 333-71199) on Form S-3, the
Registration Statement No. 333-64297 on Form S-4, and the Registration
Statements (Nos. 33-44543, 33-54263, 33-60839, 33-60843, 33-64827, 33-64829,
33-64831, 33-65485, 33-65487, 333-06177, 333-06179, 333-16025, 333-16027,
333-40141, 333-42917 and 333-58083) on Form S-8 of Tele-Communications, Inc. of
our report dated February 2, 1999 on the consolidated financial statements of
Sprint Spectrum Holding Company, L. P. and subsidiaries for each of the three
years in the period ended December 31, 1998 appearing in the Annual Report on
Form 10-K of Tele-Communications, Inc. for the year ended December 31, 1998.
Deloitte & Touche LLP
Kansas City, Missouri
March 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCLUDED IN TELE-COMMUNICATIONS, INC.'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. PRIMARY AND DILUTED EARNINGS PER SHARE
REPRESENT EARNINGS PER SHARE OF THE COMPANY'S TCI GROUP STOCK. SEE THE COMPANY'S
CONSOLIDATED STATEMENTS OF OPERATIONS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 419
<SECURITIES> 0
<RECEIVABLES> 593
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,939
<DEPRECIATION> 4,786
<TOTAL-ASSETS> 41,851
<CURRENT-LIABILITIES> 0
<BONDS> 14,052
300
0
<COMMON> 1,511
<OTHER-SE> 9,357
<TOTAL-LIABILITY-AND-EQUITY> 41,851
<SALES> 0
<TOTAL-REVENUES> 7,351
<CGS> 0
<TOTAL-COSTS> 2,997
<OTHER-EXPENSES> 1,735
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,061
<INCOME-PRETAX> 3,538
<INCOME-TAX> 1,595
<INCOME-CONTINUING> 1,943
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,943
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.49)
</TABLE>
