<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 15, 1994
Date of Earliest Event Reported: October 12, 1993
TELE-COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
State of Delaware
(State or other jurisdiction of incorporation)
0-5550 84-0588868
(Commission File Number) (I.R.S. Employer Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
<PAGE> 2
ITEM 5. OTHER EVENTS.
On January 31, 1994, Tele-Communications, Inc. ("TCI") announced that
TCI and Liberty Media Corporation ("Liberty") had entered into a definitive
agreement (the "TCI/Liberty Agreement"), dated as of January 27, 1994 to
combine the two companies. As previously announced, the transaction will be
structured as a tax free exchange of Class A and Class B shares of both
companies for like shares of a newly formed holding company, TCI/Liberty
Holding Company ("TCI/Liberty"). TCI shareholders will receive one share of
TCI/Liberty for each of their shares. Liberty shareholders will receive 0.975
of a share of TCI/Liberty for each of their shares. The transaction is subject
to the approval of both sets of shareholders as well as various regulatory
approvals and other customary conditions. It is anticipated the closing of
such transaction will take place during the second quarter of 1994. A copy of
the TCI/Liberty Agreement is included herein as Exhibit 2.1 and is hereby
incorporated by reference into this Item 5, and the foregoing description of
such transaction is qualified in its entirety by reference to such Exhibit.
The letter of intent entered into between TCI and Liberty to combine the two
companies was previously reported in TCI's Current Report on Form 8-K dated
October 26, 1993, and audited financial statements of Liberty for the year ended
December 31, 1992 were included in said filing. Historical financial
information of Liberty for the nine months ended September 30, 1993 and the pro
forma financial information related to the TCI/Liberty Agreement is included
under Item 7 of this Report.
On October 13, 1993, Liberty, TCI and Bell Atlantic Corporation
("BAC") announced that they had entered into a letter of intent (the "BAC
Letter of Intent"), dated as of October 12, 1993, which sets forth the terms
and conditions upon which the parties propose to negotiate a combination of
Liberty and TCI with BAC pursuant to a series of transactions. On February
14, 1994, TCI, Liberty and BAC stated that they continue to work on the
definitive documentation for their previously announced merger. The series of
transactions contemplated by the BAC Letter of Intent are subject to numerous
conditions including the preparation of definitive documentation, the approval
of shareholders as well as various regulatory and governmental consents,
approvals and waivers. A copy of the BAC Letter of Intent is included herein
as Exhibit 2.2 and is hereby incorporated by reference into this Item 5, and
the foregoing description of such document is qualified in its entirety by
reference to such Exhibit.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
Liberty Media Corporation,
Nine months ended September 30, 1993:
Consolidated Balance Sheets,
September 30, 1993 and December 31, 1992 (unaudited)
Consolidated Statements of Operations,
Three months ended September 30, 1993 and 1992 (unaudited)
Nine months ended September 30, 1993 and 1992 (unaudited)
Consolidated Statement of Stockholders' Equity,
Nine months ended September 30, 1993 (unaudited)
Consolidated Statements of Cash Flows,
Nine months ended September 30, 1993 and 1992 (unaudited)
Notes to Consolidated Financial Statements
September 30, 1993 (unaudited)
(continued)
2
<PAGE> 3
(b) Pro Forma Financial Information
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Balance Sheet,
September 30, 1993 (unaudited)
Condensed Pro Forma Statement of Operations,
Nine months ended September 30, 1993 (unaudited)
Condensed Pro Forma Statement of Operations,
Year ended December 31, 1992 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
September 30, 1993 (unaudited)
Liberty Media Corporation and Subsidiaries:
Condensed Pro Forma Balance Sheet,
September 30, 1993 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Nine months ended September 30, 1993 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1992 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
September 30, 1993 (unaudited)
"TCI/Liberty" and Subsidiaries:
Condensed Pro Forma Balance Sheet,
September 30, 1993 (unaudited)
Condensed Pro Forma Statement of Operations,
Nine months ended September 30, 1993 (unaudited)
Condensed Pro Forma Statement of Operations,
Year ended December 31, 1992 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
September 30, 1993 (unaudited)
(c) Exhibits
(2.1) Agreement and Plan of Merger, dated as of January 27,
1994, by and among Tele-Communications, Inc.,
Liberty Media Corporation, TCI/Liberty Holding
Company, TCI Mergeco, Inc. and Liberty Mergeco,
Inc.*
(2.2) Letter of Intent, dated October 12, 1993, among Bell
Atlantic Corporation, Tele-Communications, Inc. and
Liberty Media Corporation.
Incorporated herein by reference to TCI's
Current Report on Form 8-K, dated October 26,
1993.
* The Agreement and Plan of Merger contains indexes
identifying the items, including exhibits and
schedules, annexed thereto. A copy of any omitted
item will be furnished supplementally to the
Commission upon request.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 15, 1994
TELE-COMMUNICATIONS, INC.
(Registrant)
By:/s/ Gary K. Bracken
Gary K. Bracken,
Senior Vice President and
Controller
4
<PAGE> 5
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
Assets September 30, December 31,
- ------ 1993 1992*
------------- ------------
amounts in thousands
<S> <C> <C>
Cash and cash equivalents $ 50,670 96,253
Trade and other receivables 46,341 20,926
Less allowance for doubtful receivables 2,919 2,404
---------- ----------
43,422 18,522
---------- ----------
Inventories, net 105,418 --
Due from Tele-Communications, Inc. ("TCI")
(note 12) -- 4,786
Prepaid expenses 23,596 6,253
Deferred income taxes (note 10) 2,460 2,350
Investments in affiliates, accounted for under the equity
method, and related receivables (note 4) 229,033 197,263
Other investments, at cost, and related receivables (note 5) 214,568 212,993
Investment in TCI common stock (notes 6 and 12) 104,011 104,011
Property and equipment, at cost:
Land 18,971 77
Cable distribution systems 86,357 36,428
Support equipment and buildings 117,496 18,365
Computer and broadcast equipment 51,023 --
---------- ----------
273,847 54,870
Less accumulated depreciation 38,400 19,395
---------- ----------
235,447 35,475
---------- ----------
Franchise costs 141,737 57,217
Less accumulated amortization 4,441 2,336
---------- ----------
137,296 54,881
---------- ----------
Other intangibles 356,704 92,678
Less accumulated amortization 65,644 40,372
---------- ----------
291,060 52,306
Other assets, at cost, net of amortization 7,904 5,172
---------- ----------
$1,444,885 790,265
========== ==========
(continued)
</TABLE>
I-1
<PAGE> 6
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets, continued
(unaudited)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity September 30, December 31,
- ------------------------------------ 1993 1992*
------------- ------------
amounts in thousands
<S> <C> <C>
Accounts payable $ 88,202 9,985
Accrued liabilities 84,437 21,562
Due to TCI (note 12) 4,794 --
Accrued compensation relating to stock
appreciation rights (note 11) 41,799 18,171
Sales returns 12,015 --
Income taxes payable 18,589 808
Debt (notes 8 and 13) 514,725 167,652
Other liabilities 64 3,003
---------- ----------
Total liabilities 764,625 221,181
---------- ----------
Minority interests in equity of consolidated
subsidiaries (note 9) 181,555 10,020
Preferred stocks subject to mandatory redemption
requirements (including accreted dividends) (notes 6 and 13):
Class A Redeemable Convertible Preferred Stock,
$.01 par value. -- 12,720
Class B Redeemable Exchangeable Preferred Stock,
$.01 par value. 129,888 122,056
Class D Redeemable Voting Preferred Stock,
$.01 par value. 22,034 20,485
---------- ----------
151,922 155,261
---------- ----------
Stockholders' equity (notes 11 and 15)
Class C Redeemable Exchangeable Preferred Stock,
$.01 par value. -- 4
Class E, 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock, $.01 par value. 17 16
Class A common stock, $1 par value. 87,514 76,036
Class B common stock, $1 par value. 43,340 43,340
Additional paid-in capital 230,167 288,464
Retained earnings -- 10,443
Note receivable from related party (14,255) (14,500)
---------- ----------
346,783 403,803
---------- ----------
Commitments and contingencies (notes 4, 8 and 15)
$1,444,885 790,265
========== ==========
</TABLE>
*Restated-see notes 7 and 10.
See accompanying notes to consolidated financial statements.
I-2
<PAGE> 7
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months
ended
September 30,
--------------------------------
1993 1992*
-------- -------
amounts in thousands,
except per share data
<S> <C> <C>
Revenue:
Net sales $260,462 --
From TCI (note 12) 11,020 10,971
From other sources 41,601 26,510
-------- --------
313,083 37,481
-------- --------
Cost of sales, operating costs and expenses:
Cost of sales 169,548 --
Operating 46,050 15,387
Selling, general and administrative 75,412 7,150
Charges by TCI (note 12) 3,548 2,357
Compensation relating to stock
appreciation rights (note 11) 4,602 3,177
Depreciation 7,981 766
Amortization 4,640 3,050
-------- --------
311,781 31,887
-------- --------
Operating income 1,302 5,594
Other income (expense):
Interest expense (8,102) (2,934)
Dividend and interest income, primarily
from affiliates 5,500 5,970
Share of earnings of affiliates, net 19,821 12,910
Minority interests in (earnings) losses of
consolidated subsidiaries 304 (1,454)
Other, net 540 (748)
-------- --------
Earnings before income taxes 19,365 19,338
Income tax benefit (expense) (8,204) 505
-------- --------
Net earnings 11,161 19,843
Dividend requirement on preferred stocks (5,732) (10,959)
-------- --------
Net earnings attributable to common shareholders $ 5,429 8,884
======== ========
Primary and fully diluted earnings attributable to common
shareholders per common and common equivalent share $ 0.04 0.07
======== ========
(continued)
</TABLE>
I-3
<PAGE> 8
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations, continued
(unaudited)
<TABLE>
<CAPTION>
Nine months
ended
September 30,
------------------------------------
1993 1992*
---------- -----------
amounts in thousands,
except per share data
<S> <C> <C>
Revenue:
Net sales $ 646,507 --
From TCI (note 12) 33,397 32,510
From other sources 115,936 78,729
--------------- ---------------
795,840 111,239
--------------- ---------------
Cost of sales, operating costs and expenses:
Cost of sales 417,640 --
Operating 125,591 56,526
Selling, general and administrative 187,018 25,402
Charges by TCI (note 12) 8,016 4,800
Compensation relating to stock
appreciation rights (note 11) 23,628 8,566
Depreciation 20,047 2,429
Amortization 13,112 8,527
--------------- ---------------
795,052 106,250
--------------- ---------------
Operating income 788 4,989
Other income (expense):
Interest expense (21,357) (6,164)
Dividend and interest income, primarily
from affiliates 17,168 19,126
Gain on sale of investment 10,613 --
Loss on sale of investment to TCI (note 12) (22,129) --
Share of earnings of affiliates, net 39,092 10,494
Minority interests in (earnings) losses of
consolidated subsidiaries (1,621) 1,680
Provision for impairment of investment (note 12) (8,167) --
Other, net (1,828) (559)
--------------- ---------------
Earnings before income taxes
and extraordinary item 12,559 29,566
Income tax expense (6,769) (2,783)
--------------- ---------------
Earnings before extraordinary item 5,790 26,783
Extraordinary item - loss on early extinguishment
of debt, net of taxes (2,191) --
--------------- ---------------
Net earnings 3,599 26,783
Dividend requirement on preferred stocks (26,131) (30,728)
--------------- ---------------
Net loss attributable to common shareholders $ (22,532) (3,945)
=============== ===============
Loss per common share:
Net loss attributable to common
shareholders before extraordinary item $ (0.15) (0.03)
Extraordinary item, net (0.02) 0.00
--------------- ---------------
Net loss attributable to common shareholders $ (0.17) (0.03)
=============== ===============
</TABLE>
*Restated-see notes 7 and 10.
See accompanying notes to consolidated financial statements.
I-4
<PAGE> 9
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Nine months ended September 30, 1993
(unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common stock
---------------------- -------------------------
Class C Class E Class A Class B
------- ------- ------- -------
amounts in thousands
<S> <C> <C> <C> <C>
Balance at January 1, 1993 $ 4 16 76,036 43,340
Accreted dividends on all classes of
preferred stock -- -- -- --
Accreted dividends on classes of preferred stock
not subject to mandatory redemption requirements -- -- -- --
Cash dividends on preferred stock -- -- -- --
Issuance of Class A common stock upon
conversion of preferred stock (note 12) -- 1 4,406 --
Issuance of Class A common stock for
acquisition (note 7) -- -- 8,000 --
Redemption of preferred stock (note 12) (4) -- -- --
Acquisition and retirement of common
stock (note 12) -- -- (928) --
Recognition of previously reserved interest income
upon consolidation of affiliate (note 7) -- -- -- --
Income tax effect related to recognition of
previously reserved interest income upon
consolidation of affiliate -- -- -- --
Accrued interest on note receivable from
related party -- -- -- --
Prepayment of interest on note receivable
from related party (note 11) -- -- -- --
Net earnings -- -- -- --
----------- ------------ ------------ ------------
Balance at September 30, 1993 $ -- 17 87,514 43,340
=========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Notes
receivable Total
Additional from stock-
paid-in Retained related holders'
capital* earnings* party equity*
-------- --------- -------- -------
amounts in thousands
<S> <C> <C> <C> <C>
Balance at January 1, 1993 288,464 10,443 (14,500) 403,803
Accreted dividends on all classes of
preferred stock (12,089) (14,042) -- (26,131)
Accreted dividends on classes of preferred stock
not subject to mandatory redemption requirements 16,703 -- -- 16,703
Cash dividends on preferred stock (9,743) -- -- (9,743)
Issuance of Class A common stock upon
conversion of preferred stock (note 12) 8,360 -- -- 12,767
Issuance of Class A common stock for
acquisition (note 7) 115,000 -- -- 123,000
Redemption of preferred stock (note 12) (175,787) -- -- (175,791)
Acquisition and retirement of common
stock (note 12) (17,611) -- -- (18,539)
Recognition of previously reserved interest income
upon consolidation of affiliate (note 7) 26,359 -- -- 26,359
Income tax effect related to recognition of
previously reserved interest income upon
consolidation of affiliate (9,489) -- -- (9,489)
Accrued interest on note receivable from
related party -- -- (739) (739)
Prepayment of interest on note receivable
from related party (note 11) -- -- 984 984
Net earnings -- 3,599 -- 3,599
-------- -------- -------- --------
Balance at September 30, 1993 230,167 -- (14,255) 346,783
======== ======== ======== ========
</TABLE>
*Restated-see notes 7 and 10.
See accompanying notes to consolidated financial statements.
I-5
<PAGE> 10
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months
ended
September 30,
----------------------------------
1993 1992*
-------- -------
amounts in thousands
(see note 3)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,599 26,783
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 33,159 10,956
Compensation relating to stock
appreciation rights 23,628 8,566
Compensation arising from issuance of
stock of a subsidiary 5,455 --
Share of earnings of affiliates, net (39,092) (10,494)
Deferred income tax expense (benefit) (9,599) 1,514
Minority interests in earnings (losses) 1,621 (1,680)
Noncash interest and dividends (844) (12,637)
Amortization of debt discount -- 1,591
Gain on sale of investment (10,613) --
Provision for impairment of investment 8,167 --
Loss on sale of investment to TCI 22,129 --
Loss on early exinguishment of debt 3,555 --
Other noncash charges 2,779 --
Changes in operating assets and
liabilities, net of effect of
acquisitions:
Change in receivables (3,526) (3,868)
Change in inventories (2,093) --
Change in due to/from TCI,
other than repayment for
commercial paper 9,580 2,627
Change in prepaid expenses (8,733) (3,469)
Change in payables and
accruals 18,558 (7,540)
-------- -------
Net cash provided from
operating activities 57,730 12,349
-------- -------
(continued)
</TABLE>
I-6
<PAGE> 11
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
(unaudited)
<TABLE>
<CAPTION>
Nine months
ended
September 30,
--------------------------------------------
1993 1992*
--------- --------
amounts in thousands
(see note 3)
<S> <C> <C>
Cash flows from investing activities:
Cash paid for acquisitions $ (264,331) (24,086)
Capital expended for property and
equipment (16,959) (2,164)
Additional investments in and loans
to affiliates and others (34,660) (82,719)
Repayment for commercial paper from TCI -- 22,057
Return of capital from affiliates 4,000 40,888
Collection of loans to affiliates and others 15,190 3,565
Cash received on redemption of
preferred stock investment 112,584 --
Proceeds on sale of investments 21,767 --
Cash resulting from consolidation of a
certain affiliate, net of payment therefor -- 1,269
Other investing activities, net (341) (1,630)
------------- -------------
Net cash used by
investing activities (162,750) (42,820)
------------- -------------
Cash flows from financing activities:
Borrowings of debt 289,695 95,068
Repayments of debt (247,072) (17,962)
Dividends on preferred stocks (9,743) --
Cash paid for redemption of preferred stocks (12,338) --
Purchases and retirements of common stock -- (49,652)
Contributions by minority shareholders
of subsidiary 38,895 2,847
------------- -------------
Net cash provided from
financing activities 59,437 30,301
------------- -------------
Net decrease in cash and
cash equivalents (45,583) (170)
Cash and cash equivalents
at beginning of period 96,253 99,589
------------- -------------
Cash and cash equivalents
at end of period $ 50,670 99,419
============= =============
</TABLE>
*Restated-see notes 7 and 10.
See accompanying notes to consolidated financial statements.
I-7
<PAGE> 12
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1993
(unaudited)
(1) General and Significant Accounting Policies
The accompanying consolidated financial statements include the
accounts of Liberty Media Corporation and those of all majority-owned
subsidiaries ("Liberty" or the "Company"). All significant
intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying interim consolidated financial statements are
unaudited but, in the opinion of management, reflect all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results of
operations for any interim period are not necessarily indicative of
results for the full year. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1992, as amended.
Inventories, consisting of products held for sale, are valued at the
lower of cost or market, cost being determined using the first-in,
first-out method. Cost includes freight, certain warehousing costs
and other allocable overhead. Market is determined on the basis of
replacement cost or net realizable value, giving consideration to
obsolescence and other factors.
Net Sales include merchandise sales and shipping and handling
revenues, and are reduced by incentive discounts and sales returns to
arrive at net sales. The Company's sales policy allows merchandise to
be returned at the customer's discretion, generally up to 30 days
after the date of sale. An allowance for returned merchandise is
provided based upon past experience.
Certain amounts have been reclassified for comparability with the 1993
presentation.
In these notes to the consolidated financial statements, any reference
to TCI in connection with the issuance of the Company's preferred
stock includes subsidiaries of TCI.
(2) Primary and Fully Diluted Earnings (Loss) Per Common and Common
Equivalent Share
Loss per common share for the nine months ended September 30, 1993 and
1992 was computed by dividing net loss attributable to common
shareholders by the weighted average number of common shares
outstanding (130,480,709 and 124,639,573 for the
I-8
<PAGE> 13
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
nine months ended September 30, 1993 and 1992, respectively). Common
stock equivalents were not included in the computation of weighted
average shares outstanding because their inclusion would be
anti-dilutive.
Primary earnings attributable to common shareholders per common and
common equivalent share for the three months ended September 30, 1993
and 1992 was computed by dividing net earnings attributable to common
shareholders by the weighted average number of common and common
equivalent shares outstanding (132,828,042 and 122,344,547 for the
three months ended September 30, 1993 and 1992, respectively).
Fully diluted earnings attributable to common shareholders per common
and common equivalent share for the three months ended September 30,
1993 and 1992 was computed by dividing earnings attributable to common
shareholders by the weighted average number of common and common
equivalent shares outstanding (132,832,190 and 122,511,856 for the
three months ended September 30, 1993 and 1992 respectively).
(3) Supplemental Disclosures to Consolidated Statements of Cash Flows
Cash paid for interest was $17,601,000 and $2,668,000 for the nine
months ended September 30, 1993 and 1992, respectively. Cash paid for
income taxes was $5,970,000 and $3,160,000 for the nine months ended
September 30, 1993 and 1992, respectively.
Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Nine months
ended September 30,
-------------------------
1993 1992
-------- --------
amounts in thousands
<S> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired $ 680,787 31,672
Net liabilities assumed (183,704) (7,586)
Common stock issued for acquisition (123,000) --
Noncash contribution for acquisition (32,673) --
Minority interests in equity of
acquired entities (77,079) --
-------- --------
$ 264,331 24,086
======== ========
</TABLE>
I-9
<PAGE> 14
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<S> <C> <C>
Cash resulting from consolidation of a
certain affiliate, net of payment therefor:
Fair value of assets acquired $ -- (26,186)
Net liabilities assumed -- 27,485
Payment for additional interest -- (30)
-------- --------
Cash acquired $ -- 1,269
======== ========
Liberty Class A common stock issued
upon conversion of preferred stock $ 12,767 --
======== ========
Deferred tax liability recorded as a
reduction to paid-in capital $ 9,489 --
======== ========
Accreted and unpaid preferred
stock dividends $ 24,176 30,728
======== ========
Note issued in exchange for Liberty
Class A common stock $ 18,539 --
======== ========
Notes issued in redemption
of preferred stocks $163,057 --
======== ========
</TABLE>
(4) Investments in Affiliates
Liberty has several investments in affiliates accounted for under the
equity method. Summarized unaudited results of operations for such
affiliates are as follows:
<TABLE>
<CAPTION>
Nine months
ended September 30,
----------------------------
1993 1992
-------- --------
amounts in thousands
<S> <C> <C>
Revenue $ 1,497,886 1,249,328
Operating expenses (1,131,018) (933,634)
Depreciation
and amortization (147,176) (138,008)
------------- -------------
Operating income 219,692 177,686
Interest expense (75,519) (93,817)
Other, net (46,311) (46,032)
------------- -------------
Net earnings $ 97,862 37,837
============= =============
</TABLE>
I-10
<PAGE> 15
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table reflects the net carrying value of the Company's
investments accounted for under the equity method, including related
receivables:
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
----------------- -----------------
amounts in thousands
<S> <C> <C>
QVC Network, Inc. ("QVC") $ 68,782 58,509
Kansas City Cable Partners ("KCCP") 44,098 35,860
US Cable of Lake County ("Lake County") 25,610 25,013
Columbia Associates, L.P. ("Columbia") 7,788 12,975
Lenfest Communications, Inc. ("LCI") 6,402 6,976
Mile Hi Cablevision Associates, Ltd.
("Mile Hi") (see note 7) -- 6,694
The Cable Partnerships of Country Cable Co.
and Knight-Ridder Cablevision, Inc.
((TKR Cable Partners and TKR Cable Company)
(collectively referred to as ("TKR")) 33,859 22,876
Sunshine Network Joint Venture ("Sunshine") 9,325 12,202
American Movie Classics Company ("AMC") (13,170) (22,125)
Sioux Falls Cable Television ("Sioux Falls") (12,066) (13,463)
SportsChannel Chicago Associates ("Sports") 31,592 31,385
Home Team Sports Limited Partnership ("HTS") 11,674 10,958
Other investments 15,139 9,403
-------- --------
$ 229,033 197,263
======== ========
</TABLE>
During 1992, AMC distributed $39 million to the Company. The Company
recorded the amount received as a reduction of its investment in AMC
(see note 14). On October 1, 1993, KCCP made an $80 million
distribution to the Company. Approximately $63 million was applied to
repayment of the note with the remainder recorded as a reduction of
the Company's investment in KCCP.
I-11
<PAGE> 16
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table reflects the Company's share of earnings (losses)
of each of the aforementioned affiliates:
<TABLE>
<CAPTION>
Nine months
ended September 30,
------------------------
1993 1992
-------- --------
amounts in thousands
<S> <C> <C>
QVC $ 12,261 7,732
KCCP 8,238 6,194
Lake County 597 (1,587)
Columbia (5,187) (4,067)
LCI (574) (12,032)
Mile Hi (380) (1,730)
TKR 10,983 6,885
Sunshine (764) (893)
AMC 9,199 6,324
Sioux Falls 1,397 1,800
Sports 4,139 1,906
HTS 715 760
Other (1,532) (798)
-------- ---------
$ 39,092 10,494
======== =========
</TABLE>
The common stock of QVC is publicly traded. At September 30, 1993,
based on the trading price of QVC common stock, the Company's
investment in QVC had a market value of $704,808,000 (which exceeded
its cost by $636,026,000). Certain of the Company's shares are
subject to repurchase by certain third parties (see note 14 and 15).
Affiliated Regional Communications, LTD. ("ARC"), a majority-owned
subsidiary of the Company, owns a 49% interest in Sunshine. Sunshine
provides television sports programming service in Florida. The
Sunshine Joint Venture Agreement provided for an annual guaranteed
distribution to ARC equal to 7.35% of Sunshine's gross revenue,
excluding barter transaction revenue. Sunshine has not paid the
distribution to ARC as it was subordinated to loans and advances made
by ARC. Unpaid guaranteed distributions originally accrued interest
at 10% per annum. 1992 amendments to the Joint Venture Agreement have
discontinued the annual guaranteed distribution to ARC for years
beginning in 1992 and suspended interest on the unpaid guaranteed
distributions from July 1, 1992 until January 1, 1994. Effective
January 1, 1994, the unpaid guaranteed distributions will bear
interest at prime plus 0.875%. Total unpaid guaranteed distributions
were approximately $2,433,000 at December 31, 1992.
I-12
<PAGE> 17
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Certain of the Company's affiliates are general partnerships and any
subsidiary of the Company that is a general partner in a general
partnership is, as such, liable as a matter of partnership law for all
debts of that partnership in the event liabilities of that partnership
were to exceed its assets.
(5) Other Investments
Other investments, accounted for under the cost method, and related
receivables, are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
----------------- -----------------
amounts in thousands
<S> <C> <C>
Limited partnership interest $ 3,647 43,109
Marketable equity securities (a) 21,811 8,841
Convertible debt, accrued interest
and preferred stock investment 45,935 46,459
Note receivable including
accrued interest (b) 133,412 --
Receivable for redemption of
preferred stock investment -- 112,584
Other investments and
related receivables 9,763 2,000
------- -------
$ 214,568 212,993
======= =======
</TABLE>
(a) The marketable equity securities, which are being accounted for
at the lower of cost or market, had an aggregate market value of
$104,489,000 (which exceeded cost by $82,678,000) at September
30, 1993.
(b) In December 1992, Home Shopping Network, Inc. ("HSN"), a cost
investment of the Company at that time and a consolidated
subsidiary of the Company at September 30, 1993 (see note 7),
distributed the capital stock of Silver King Communications, Inc.
("SKC"), formerly a wholly owned subsidiary of HSN, to their
stockholders of record, including Liberty. This transaction was
treated as a stock dividend by HSN. At the time of said
dividend, intercompany indebtedness in an amount of approximately
$135 million owed by SKC to HSN was converted into a secured
long-term senior loan to SKC (a cost investment of the Liberty).
Such loan is evidenced by a promissory note, the terms of which
are governed by a Loan Agreement and the liability evidenced
thereby is secured by substantially all
I-13
<PAGE> 18
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
of SKC's assets, and bears interest on the unpaid principal
amount at 9.5% per annum. The note is payable in equal monthly
installments of principal and interest over fifteen years.
Management of the Company estimates that the market value, calculated
utilizing a cash flow multiple or discounted future cash flow approach
or publicly quoted market prices, of all of the Company's other
investments aggregated $301 million and $338 million at September 30,
1993 and December 31, 1992, respectively, including amounts previously
disclosed for marketable equity securities. No independent external
appraisals were conducted for those assets which were valued utilizing
a multiple of cash flow or discounted future cash flow approach.
(6) Investment in TCI Common Stock
The Company holds 2,988,009 shares of TCI Class A common stock and
3,537,712 shares of TCI Class B common stock. At September 30, 1993
and December 31, 1992, the market value of the Company's investment in
TCI amounted to $164,912,000 and $140,440,000, respectively, based on
its publicly quoted market price.
Certain of the TCI common stock is held in escrow for delivery upon
exchange of the Liberty Class B Redeemable Exchangeable Preferred
Stock. Pending such exchange and provided that the Company is not in
default of its obligations to redeem, exchange or purchase shares of
the Class B Redeemable Exchangeable Preferred Stock, the Company has
the right to vote the TCI common stock held in escrow on all matters
submitted for a vote to the holders of TCI common stock. See also
note 12.
(7) Acquisitions
On February 11, 1993, Liberty acquired 20,000,000 shares of the Class
B Stock of HSN from RMS Limited Partnership ("RMS") for $58 million in
cash and 8,000,000 shares of Liberty Class A common stock. Liberty
had previously acquired shares of common stock of HSN in 1992. Such
common stock acquired in 1992 and the Class B Stock acquired
represented 23.5% of the common equity and 65.6% of the voting
interest of HSN as of the date of acquisition. As a result of the
acquisition of the controlling interest, HSN became a consolidated
subsidiary of the Company for financial reporting purposes.
On June 1, 1993, Liberty completed the purchase of approximately 16
million shares of HSN common stock at a price of $7 per share. The
shares had been tendered pursuant to a tender offer initiated by the
Company in April 1993. As a result of the share purchases, Liberty's
ownership of HSN's common equity increased to approximately 41.5% and
its voting interest increased to approximately 71%.
I-14
<PAGE> 19
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On March 15, 1993, Mile Hi Cable Partners, L.P. ("New Mile Hi")
completed the acquisition of all the general and limited partnership
interests in Mile Hi, the owner of the cable television system serving
Denver, Colorado. New Mile Hi is a limited partnership formed among
Community Cable Television ("CCT") a general partnership owned 50.001%
by the Company and 49.999% by TCI, (78% limited partnership interest),
Daniels Communications, Inc. ("DCI") (1% limited partner) and P & B
Johnson Corp. ("PBJC") (21% general partnership interest), a
corporation controlled by Robert L. Johnson, a member of the Company's
Board of Directors. New Mile Hi is a consolidated subsidiary of the
Company for financial reporting purposes. Liberty's investment in
Mile Hi, which was previously accounted for under the cost method, was
received from TCI in the March 28, 1991 transaction whereby TCI
contributed its interests in certain programming businesses and cable
television systems in exchange for several different classes and
series of preferred stock of Liberty. As a result of the
aforementioned acquisition of Mile Hi, Liberty's investment, results
of operations and stockholders' equity were adjusted retroactively to
reflect Liberty's share of historical losses of Mile Hi adjusted for
the amortization of the excess cost over Liberty's share of Mile Hi's
historical net book value. Upon restatement, the Company's net
earnings was reduced through a charge of approximately $692,000 in the
nine months ended September 30, 1992.
Prior to the acquisition, the Company, through a wholly owned
subsidiary, indirectly owned a 32.175% interest in Mile Hi through its
ownership of a limited partnership interest in Daniels & Associates
Partners Limited ("DAPL"), one of Mile Hi's general partners. DAPL
was liquidated on March 12, 1993, at which time a subsidiary of
Liberty (and partner in DAPL) received a liquidating distribution
consisting of its proportionate interest in DAPL's partnership
interest in Mile Hi, representing the aforementioned 32.175% interest
in Mile Hi. The subsidiary of Liberty also received a note payable
from Mile Hi in the approximate amount of $50 million (including
accrued interest) (the "Mile Hi Note") in novation of a loan
receivable from DAPL in an equal amount. The subsidiary then was
merged into Liberty Cable Partner, Inc. ("LCP") a wholly owned
subsidiary of the Company and a general partner of CCT.
The total value of the acquisition was approximately $180 million. Of
that amount, approximately $70 million was in the form of Mile Hi debt
paid at the closing. Another $50 million was in the form of the Mile
Hi Note, which debt was assumed by New Mile Hi and then by CCT. Of
the remaining $60 million, approximately $40 million was paid in cash
to partners in Mile Hi in exchange for their partnership interests.
The remaining $20 million of interest in Mile Hi was acquired by New
Mile Hi through the contribution by LCP to CCT and by CCT to New Mile
Hi of the 32.175% interest in Mile Hi received in the DAPL liquidation
and by DCI's contribution to New Mile Hi of a 0.4% interest in Mile
Hi.
I-15
<PAGE> 20
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Of the $110 million in cash required by New Mile Hi to complete the
transaction, $105 million was loaned to New Mile Hi by CCT and $5
million was provided by PBJC as a capital contribution to New Mile Hi.
Of the $5 million contributed by PBJC, approximately $4 million was
provided by CCT through loans to Mr. Johnson and trusts for the
benefit of his children. CCT funded its loans to New Mile Hi and the
Johnson interests by drawing down $93 million under its revolving
credit facility and by borrowing $16 million from TCI in the form of a
subordinated note.
The Mile Hi Note was eliminated upon consolidation. An amount
representing the differential between interest expense accrued by Mile
Hi and interest income accrued by the Company has been reflected as an
addition to stockholders' equity. Such interest income had previously
been reserved by the Company.
Amounts were originally allocated to property and equipment and
franchise costs at the date of acquisition based upon estimated fair
values. Certain amounts were reclassified between property and
equipment and franchise costs in the third quarter of 1993 to reflect
the actual fair values determined upon receipt of final appraisal.
The acquisitions of HSN and all the general and limited partnership
interests in Mile Hi were accounted for by the purchase method.
Accordingly, the results of operations of such acquired entities have
been consolidated with those of the Company since their respective
dates of acquisition. On a pro forma basis the Company's revenue
would have been increased by approximately $111,208,000 and
$820,339,000 for the nine months ended September 30, 1993 and 1992,
respectively, had the acquisition occurred prior to January 1, 1992.
Earnings before extraordinary item, on a pro forma basis would have
been decreased by approximately $10,575,000 and $20,793,000 for the
nine months ended September 30, 1993 and 1992, respectively. Net loss
attributable to common shareholders and loss per common share would
have increased by $15,626,000 and $0.12, respectively, for the nine
months ended September 30, 1993 and net loss attributable to common
shareholders and loss per common share would have increased by
$20,839,000 and $0.16, respectively, for the nine months ended
September 30, 1992. The foregoing unaudited pro forma financial
information was based upon historical results of operations adjusted
for acquisition costs and, in the opinion of management, is not
necessarily indicative of the results had the Company operated the
acquired entities since prior to January 1, 1992.
I-16
<PAGE> 21
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Debt
Debt is summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
----------------- -----------------
amounts in thousands
<S> <C> <C>
Note payable to bank (a) $ 6,040 6,257
Note payable to bank (b) 24,486 25,954
Note payable to bank (c) 84,500 25,000
Liability to seller (d) 19,637 19,637
Unsecured note payable (e) 1,090 1,635
Convertible notes payable (f) 12,710 12,121
Note payable to TCI (g) 4,322 4,322
Notes payable to TCI (h) 76,952 --
Notes payable to TCI (i) 104,644 --
Note payable to affiliate (j) 63,167 61,391
Notes payable to bank (k) 110,000 --
Note payable to bank -- 7,000
Other debt, with varying rates
and maturities 7,177 4,335
-------- --------
$514,725 167,652
======== ========
</TABLE>
(a) Payable by Command Cable of Eastern Illinois Limited Partnership
("Command").
This loan is payable in quarterly installments as defined in the
related loan agreement, with a final payment on September 30,
1994. Such loan provides for interest at varying rates which
approximate the prime rate (6% at September 30, 1993). All of
Command's cable television assets are pledged as collateral
under this loan agreement.
(b) Payable by US Cable of Paterson ("Paterson").
This term loan has quarterly principal payments in increasing
amounts through December 31, 1996. In addition to the scheduled
quarterly payments, an annual payment is required based upon the
prior year's excess cash flow, as defined. The loan agreement
also required a $1,000,000 payment to be made during 1992. The
outstanding balance of the loan accrues interest at varying
rates which approximate the prime rate (6% at September 30,
1993). The terms of the agreement include,
I-17
<PAGE> 22
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
in addition to other requirements, the maintenance of certain
financial ratios and limit capital expenditures and lease
payments. The loan is secured and collateralized by the assets
of Paterson, the franchise rights and the assignment of its
various leases and contracts.
Paterson entered into an interest rate swap agreement to reduce
the impact of changes in interest rates on its floating rate
bank loan payable. This agreement effectively fixes a portion
of Paterson's interest rate on $6 million of its floating rate
debt to a fixed rate of 8.25% plus the adjustment based on the
results of a certain financial ratio, as discussed above. The
agreement expires on April 18, 1995. Paterson could be exposed
to credit loss in the event of nonperformance by the other
parties to this agreement. However, Paterson does not
anticipate any such nonperformance.
(c) Payable by CCT.
This revolving line of credit provides for borrowings of up to
$145,000,000 through March 31, 1995. Such facility provides for
mandatory commitment reduction payments through December 31,
1999 and had a weighted average interest rate of 5.4% at
December 31, 1992. The revolving credit facility permits CCT to
borrow from the banks to fund acquisitions of cable television
systems and for other general corporate purposes, subject to
compliance with the restrictive covenants (including ratios of
debt to cash flow and cash flow to interest expense, as defined)
contained in the loan agreement governing the facility.
(d) Payable by ARC.
The liability represents the discounted amount estimated under
the "Earnout Rights" agreement between ARC and a related party
of Astros Programming Services, Inc. The agreement requires
annual payments during a five-year period equal to 86% of the
Earnings Before Depreciation, Interest and Income Taxes
("EBDIT"), as defined, of the "DBS Business," as defined, of ARC
over the base EBDIT. The remaining minimum amount required
under the agreement is $19,637,000 with a maximum payment of
$60,000,000 required if the above calculation yields a greater
amount due. The discount was deferred and amortized over the
life of the agreement using the effective interest method.
Amortization of the discount amounted to $1,591,000 for the nine
months ended September 30, 1992 and was fully amortized as of
December 31, 1992.
I-18
<PAGE> 23
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(e) Payable by LMC Regional Sports, Inc.
This note payable, which bears interest at the prime rate, is
payable in equal quarterly installments through June 30, 1994.
(f) Payable by ARC.
These notes are due December 30, 2000 and bear interest at 10%
per annum. The notes are convertible, at the option of the
holders, into an 11.65% limited partnership interest in ARC.
(g) Payable by LMC Chicago Sports, Inc.
This note payable, which bears interest at the prime rate, is
payable on December 31, 1996 and is secured by the Company's
general partnership interest in Sports.
(h) Payable by Liberty.
This $10,052,000 note payable and $66,900,000 note payable bear
interest at 11.6% per annum. The notes are payable on February
1, 1997, and are secured by the Company's partnership interest
in CCT and in the Mile Hi Note.
(i) Payable by Liberty.
This $18,539,442 note payable and $86,105,000 note payable bear
interest at 6% per annum and are payable on December 3, 1993.
From and after maturity, the unpaid amount of these notes will
bear interest at 10% per annum, payable on demand.
(j) Payable by Liberty Cable of Missouri, Inc.
This note is payable to KCCP by a subsidiary of the Company.
Such subsidiary owns a 50% general partnership interest in KCCP.
The note payable is due on June 30, 2002. Interest on the note
accrues at the same rate or rates that KCCP pays on debt
incurred for the purpose of making the loan and compounds
annually. The note is secured by a pledge of the Company's
interest in KCCP and any distributions received from KCCP must
be applied to repayment of the note (see note 4).
I-19
<PAGE> 24
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(k) Payable by HSN.
These notes payable consist of a $60 million unsecured senior
term loan, $25 million of which matures on each of June 15,
1994 and 1995 and $10 million of which matures on December 15,
1995; and a $50 million unsecured senior term loan, $25 million
of which matures on each of January 31, 1997 and 1998; and a $40
million three-year senior unsecured revolving credit facility.
The revolving credit facility provides for yearly extension
options at the request of HSN and is subject to the approval of
participating banks. At September 30, 1993 $40 million of the
senior revolving credit facility remains available. The
interest rate on borrowings on the senior term loans and
revolving credit facility is tied to the London Interbank
Offering Rate ("LIBOR"), plus an applicable margin which is
subject to adjustment and currently ranges between two and two
and one-eighth percent (2 & 2-1/8%) and is subject to
adjustment. At October 31, 1993, the interest rates were
5.4375% on $30 million, 5.3125% on $30 million and 5.50% on the
remaining $50 million. Restrictions contained in the senior
term loans and revolving credit agreement include, but are not
limited to, limitations on the encumbrance and disposition of
assets and the maintenance of various financial covenants and
ratios.
(9) Promissory Notes
CCT has a note payable to TCI of approximately $57 million, including
accrued interest, due January 1, 2000. The note bears interest at 12%
per annum through December 31, 1992 and 8% per annum thereafter. The
note, net of payments made, is reflected as an addition to minority
interest in the accompanying consolidated financial statements due to
its related party nature. Additionally, CCT has approximately $32
million in notes receivable from TCI due January 1, 2000. The notes
earn interest at 11.6% per annum. These notes are reflected as a
reduction of minority interest in the accompanying consolidated
financial statements as they represent subscription notes receivable.
(10) Income Taxes
Liberty files a consolidated 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 Federal income tax return.
Liberty and such subsidiaries calculate their respective tax
liabilities on a separate return basis which are combined in the
accompanying consolidated financial statements.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 109 ("Statement No. 109"), "Accounting for
Income Taxes." Statement No. 109 requires a change from the deferred
method of accounting for income taxes of
I-20
<PAGE> 25
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
APB Opinion No. 11 to the asset and liability method of accounting for
income taxes. Under the asset and liability method of Statement No.
109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered
or settled. Under Statement No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company adopted Statement No. 109 in 1993 and has applied the
provisions of Statement No. 109 retroactively to January 1, 1986. The
Company restated its financial statements for the years beginning
January 1, 1986 through December 31, 1992. The effect of the
implementation of Statement No. 109 was a net increase to
stockholders' equity and a reduction to deferred taxes payable of
$59,126,000.
New tax legislation was enacted in the third quarter of 1993 which,
among other matters, increased the corporate Federal income tax rate
from 34% to 35%. The company has reflected the tax rate change in its
consolidated statements of operations in accordance with the treatment
prescribed by Statement No. 109.
Certain of the Federal income tax returns of TCI are presently under
examination by the Internal Revenue Service ("IRS") for the years 1978
through 1990. This examination, or any subsequent examinations for
periods up to March 28, 1991, may result in proposed adjustments for
additional income taxes relating to Liberty. If and when future
settlements with the IRS become final and nonappealable and if
adjustments relating to Liberty are required to any consolidated
return year as previously filed, Liberty and TCI have agreed to give
effect to such adjustments as if they had been made a part of the
original calculation of tax liabilities and benefits. Any amount
remaining due or previously overpaid shall be paid or refunded as the
case may be.
(11) Stockholders' Equity
General
Liberty is authorized to issue 300,000,000 Class A shares and
100,000,000 Class B shares. Liberty had 87,513,778 Class A shares and
43,340,320 Class B shares outstanding at September 30, 1993 and
76,036,000 Class A shares and 43,340,320 Class B shares outstanding at
December 31, 1992.
I-21
<PAGE> 26
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Class A common stock has one vote per share and the Class B common
stock has ten votes per share. Each share of Class B common stock is
convertible, at the option of the holder, into one share of Class A
common stock.
On December 3, 1992, Liberty effected a stock split in the form of a
stock dividend whereby each shareholder of record received three
additional shares for each share held and on March 17, 1993, Liberty
effected a stock split in the form of a stock dividend whereby each
shareholder of record received one additional share for each share
held (the "Stock Dividends"). The share amounts throughout the notes
to the consolidated financial statements have been adjusted to give
effect to the Stock Dividends.
Stock Options
The Company has an employment agreement with an officer (who is also a
director). Pursuant to this agreement, such officer was granted an
option to acquire 100,000 shares of Liberty Class B common stock at a
purchase price of $256 per share (reflects actual shares issued). The
employment agreement was amended and the option was exercised with
cash and a $25,500,000 note. This note bears interest at 7.54% per
annum.
The 100,000 shares issued by Liberty upon exercise of this option,
together with all subsequent dividends and distributions thereon,
(collectively, with the 100,000 shares, totaling 16,000,000 Liberty
Class B common stock and 200,000 Class E Preferred Stock at December
31, 1992, the "Option Units"), are subject to repurchase by the
Company under certain circumstances. The Company's repurchase right
terminates as to 20% of the Option Units per year, commencing March
28, 1992, and will terminate as to all of the Option Units in the
event of death, disability or under certain other circumstances.
On October 24, 1992, said officer of the Company entered into a letter
agreement with respect to the timing and method of payment under the
promissory note and the release of the 200,000 shares of Class E
Preferred Stock from the collateral securing the promissory note. A
payment of approximately $984,000 for all interest accruing during
calendar 1993 (after giving effect to a discount at the rate of 7.54%
per annum to reflect the time value of money received prior to the
scheduled payment date) was made in March 1993. After giving effect
to the payment and the terms of the letter agreement, the remaining
principal balance on the note is approximately $14,500,000. The next
scheduled payment will be on October 24, 1994 in the principal amount
of approximately $4,300,000 plus interest accrued from December 31,
1993 to the payment date.
Stock Appreciation Rights
The Company has granted to certain of its officers stock appreciation
rights with respect to 2,240,000 shares of Liberty Class A common
stock. These rights have an adjusted
I-22
<PAGE> 27
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
exercise price of $0.80 per share, become exercisable and vest evenly
over seven years. Stock appreciation rights expire on March 28, 2001.
Estimates of compensation relating to these stock appreciation rights
have been recorded through September 30, 1993, but are subject to
future adjustments based upon market value and, ultimately, on the
final determination of market value when the rights are exercised.
Stock appreciation rights with respect to 14,000 shares have been
exercised as of September 30, 1993. Stock appreciation rights with
respect to 526,000 shares were exercised on October 29, 1993 and on
November 2, 1993 stock appreciation rights with respect to 240,000
shares were exercised. Three officers of the Company were paid a
total of $21,541,200 (the difference between the market price and
exercise price on the dates exercised).
In June 1993, the Company granted an aggregate of 56,000 non-qualified
stock options with stock appreciation rights to certain officers and
key employees under the Company's 1991 Stock Incentive Plan. Each
option is exercisable for one share of Class A common stock at an
exercise price of $19.08. The options vest in five equal annual
installments commencing June 3, 1994 and expire in June 2003.
Estimates of compensation relating to these stock options with stock
appreciation rights have been recorded through September 30, 1993, but
are subject to future adjustments based upon market value and,
ultimately, on the final determination of market value when the rights
are exercised.
(12) Transactions With TCI
Certain subsidiaries of Liberty produce and/or distribute sports and
other programming to cable television operators (including TCI) and
others. Charges to TCI are based upon customary rates charged to
others.
Certain subsidiaries of Liberty purchase, at TCI's cost plus an
administrative fee, certain pay television and other programming
through a subsidiary of TCI. In addition HSN pays a commission to TCI
for merchandise sales to customers who are subscribers of TCI's cable
systems. Aggregate commission and charges to TCI were approximately
$7,868,000 and $2,309,000 for the nine months ended September 30, 1993
and 1992, respectively.
TCI and Liberty are parties to a services agreement pursuant to which
TCI agreed to provide, among other things, certain financial
reporting, tax and other administrative services to the Company. In
addition, the employees of certain of the Company's subsidiaries
remained on the TCI payroll until December 31, 1992. The Company
reimbursed TCI for their salaries and related employment expenses. A
subsidiary of the Company also leases office space and satellite
transponder facilities from TCI. Charges by TCI under such
arrangements amounted to $148,000 and $2,490,000 for the nine months
ended September 30, 1993 and 1992, respectively. As of January 1,
1993, no employees of the Company's subsidiaries remained on the TCI
payroll.
I-23
<PAGE> 28
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On March 26, 1993, Liberty and TCI and certain of their respective
subsidiaries entered into a series of agreements regarding the
repurchase by Liberty of certain shares of its common and preferred
stock from TCI and the purchase by TCI of certain cable television
investments from Liberty and on June 3, 1993, Liberty completed the
transactions contemplated by said agreements. The first such
agreement (the "Recapitalization Agreement") was between Liberty, TCI
Liberty, Inc. ("TCIL") and Tele-Communications of Colorado, Inc.
("TCIC") both of which are wholly owned subsidiaries of TCI. The
Recapitalization Agreement provides for the Company's repurchase of
approximately 928,000 shares of Liberty Class A common stock owned by
TCIL, and repurchase all of the outstanding shares of the Class C
Preferred Stock. Liberty paid an aggregate purchase price for the
Class C Preferred Stock of approximately $175 million and
approximately $19 million for the shares of Class A common stock. The
aggregate price of approximately $194 million was satisfied by
delivery of approximately $12 million in cash and four promissory
notes totaling approximately $182 million (see note 8). The shares of
Class A common stock sold by TCIL are part of those received upon
conversion of the Company's Class A Redeemable Convertible Preferred
Stock into 4,405,678 shares of Liberty Class A common stock and 55,070
shares of Class E Preferred Stock.
In connection with the Recapitalization Agreement, TCIC and LCP
entered into an Option-Put Agreement (the "Option-Put Agreement").
Under the Option-Put Agreement, between September 30, 1993 and
December 31, 1993, LCP will have the right to require TCIC to purchase
LCP's Class B partnership interest in CCT and the Mile Hi Note for an
amount equal to $66,900,000 plus interest on such amount from the date
of the Option-Put Agreement. Between June 30, 1994 and September 30,
1994, TCIC will have the option to purchase LCP's interest in CCT and
the Mile Hi Note for an amount equal to $66,900,000 plus interest on
such amount from the date of the Option-Put Agreement.
Additionally, in January of 1996 TCIC will have the option to
purchase, and in January of 1997 LCP will have the right to require
TCIC to purchase all of LCP's Class A and Class B partnership interest
in CCT and the Mile Hi Note for a purchase price equal to $76,952,000
(less any amount previously paid for interest in CCT and the Mile Hi
Note) plus interest on such amount from the date of the Option-Put
Agreement.
Also on June 3, 1993, Liberty and a subsidiary of TCI entered into the
second such agreement (the "Purchase and Sale Agreement") pursuant to
which a TCI subsidiary purchased from the Company a 16% limited
partnership interest in Intermedia Partners for a purchase price of
approximately $9 million (which resulted in a loss in the Company's
statement of operations of approximately $22 million). Also pursuant
to which TCI has an option to purchase the Company's remaining 6%
interest in Intermedia Partners prior to December 31, 1995 for
approximately $3.6 million plus interest at 8%
I-24
<PAGE> 29
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
per annum (which resulted in a provision for impairment of investment
in the Company's statement of operations of approximately $8 million).
On October 8, 1993, Liberty announced that the Boards of Directors of
TCI and Liberty had entered into a letter of intent (the "TCI/Liberty
Letter of Intent"), dated as of October 7, 1993, to combine the two
companies. The transaction would be structured as a tax-free exchange
of Class A and Class B shares of both companies for like shares of a
to-be formed holding company ("Newco"). TCI shareholders will receive
one share of Newco for each of their shares. Liberty shareholders
will receive 0.975 of a share of Newco for each of their shares. The
transaction is subject to the preparation of definitive documentation,
the approval of both sets of shareholders as well as various
regulatory approvals and other customary conditions.
On October 13, 1993, Liberty, TCI and Bell Atlantic Corporation
("BAC") announced that they had entered into a letter of intent (the
"BAC Letter of Intent"), dated as of October 12, 1993, which sets
forth the terms and conditions upon which the parties propose to
negotiate a combination of Liberty and TCI with BAC pursuant to a
series of transactions.The series of transactions contemplated by the
BAC Letter of Intent are subject to numerous conditions including the
preparation of definitive documentation, the approval of shareholders
as well as various regulatory and governmental consents, approvals and
waivers.
(13) Fair Value of Financial Instruments
Cash and Cash Equivalents, Trade and Other Receivables
Due to/from TCI, Prepaid Expenses, Accounts Payable,
Accrued Liabilities, Sales Returns, and Income Taxes Payable
The carrying amount approximates fair value because of the short
maturity of these instruments.
Debt
The carrying amount approximates fair value.
Preferred Stocks, Subject to Mandatory Redemption Requirements
The fair values of the Company's preferred stocks subject to mandatory
redemption requirements were based on management's estimates. These
estimates were made by reference to the market values of other similar
publicly traded instruments. Neither independent external appraisals
nor dealer quotes were obtained.
I-25
<PAGE> 30
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Interest Rate Swap Agreement
The fair value of the interest rate swap agreement was obtained from a
dealer quote. The value represents the estimated amount the Company
would receive (pay) to terminate the agreement.
The estimated fair value of the Company's financial instruments are
summarized as follows:
<TABLE>
<CAPTION>
September 30, 1993
----------------------------------
Carrying Estimated
amount fair value
---------- --------------
amounts in thousands
<S> <C> <C>
Preferred stocks subject to
mandatory redemption $151,922 169,862
Interest rate swap agreement -- (409)
</TABLE>
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature, involve
uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could
significantly affect the estimates.
(14) Subsequent Events
On September 16, 1993, Liberty announced that one of its subsidiaries
received notice from Rainbow Program Enterprises ("Rainbow") that
Rainbow had elected to purchase Liberty's 50% partnership interest in
AMC under the terms of a buy/sell provision contained in the AMC
partnership agreement. A subsidiary of Liberty had initiated the
buy/sell procedure on August 2, 1993. Liberty expects to receive net
pre tax cash proceeds of approximately $170 million from the sale and
an additional $5 million from a buy-out of Liberty's consulting
agreement with AMC. The $170 million cash proceeds consist of $195
million sales price reduced by Liberty's proportionate share of AMC's
debt. The sale is scheduled to close on November 30, 1993.
I-26
<PAGE> 31
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On July 12, 1993, HSN received a merger proposal from QVC.
Representatives of HSN met with representatives of QVC to discuss the
merger proposal and the terms and conditions of a definitive merger
agreement regarding the merger; however, QVC had not entered into any
agreement, arrangement or understanding with HSN regarding the merger.
On November 5, 1993, HSN and QVC agreed to terminate negotiations on
QVC's merger proposal to HSN.
On November 11, 1993 Liberty and TCI entered into an agreement with
the staff of the Federal Trade Commission ("FTC") which provides that
in the event that QVC is successful in acquiring Paramount
Communications, Inc. ("Paramount"), Liberty and TCI will be required
to divest their interests in QVC within 18 months of the FTC's formal
approval of the agreement. Additionally, while QVC's bid for
Paramount is still ongoing, Liberty and TCI agree to refrain from
voting their QVC shares, other than for the acquisition of Paramount
and the related financing. They also agree to cause all QVC directors
designated by Liberty or TCI to resign and not to participate in the
management or control of QVC. If QVC's bid for Paramount is
terminated, the FTC agreement also terminates. The agreement is
subject to acceptance by the FTC.
Concurrently, Liberty has entered into a separate agreement with QVC
conditioned upon the acceptance of the FTC agreement by the FTC, to
exit all stockholder and voting agreements relating to QVC, with the
option to be reinstated as a party to those agreements in the event
QVC's Paramount bid is terminated. In turn, if its Paramount
acquisition is consummated, QVC has agreed that during the last four
months of the divestiture period, Liberty and TCI may put their shares
to QVC for $60 per share. QVC may satisfy the put in cash or by
compensating Liberty and TCI for any shortfall in the sale of their
shares below $60. Liberty also agreed with QVC that it would not sell
any of its shares for at least six months unless the Paramount
acquisition is terminated.
(15) Commitments and Contingencies
In February of 1991, the Company entered into an agreement with
certain of its stockholders which provides the Company the right upon
the occurrence of a "call triggering event" to require such persons to
sell the shares of Liberty common stock owned by them, and would
provide such persons the right upon the occurrence of a "put
triggering event" to sell their shares of Liberty common stock, in a
registered public offering or to one or more third parties selected by
the Company. A "call triggering event" consists of the issuance or
adoption of a decree by a governmental authority and the determination
by an independent committee of the Board of Directors that divestiture
by any or all of such persons of his or its Liberty common stock is
necessary in order to comply with the decree or is in the best
interest of the Company in light of material restrictions that would
be imposed on the Company's business absent such divestiture.
I-27
<PAGE> 32
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A "put triggering event" consists of the issuance or adoption of a
decree by a governmental authority requiring any or all of such
persons to divest his or its shares of Liberty common stock or TCI
common stock or rendering such person's continued ownership thereof
illegal or subject to fine or penalty or imposing material
restrictions on such person's full rights of ownership of such shares,
provided that one of the essential facts giving rise to such decree or
that renders such decree applicable to such person is the dual
ownership by such person of voting securities of both the Company and
TCI. In each case, the Company would guarantee the sale price for
certain of the shares to be sold. The Company believes that it would
not be required to make any material payments in such event as the
Company anticipates that the aggregate proceeds derived from any sale
of such stock to the public or other third parties would approximate
the guaranteed sales price, before giving effect to any required tax
adjustment. If income taxes are payable by such persons with respect
to such sales, the amount of the adjustment would be approximately
$8.82 per share (assuming an effective tax rate of 36% based on
Federal and state income tax rates in effect on September 30, 1993 and
a sale price of $24-1/2 per share based on the last reported sale
price for the Class A common stock on September 30, 1993.) The
Company believes that the likelihood of the occurrence of a put
triggering event is remote.
The guaranteed sale price for shares of Liberty common stock that
constitute "Covered Shares" (as defined) would be determined on the
basis of the proportionate share that such shares represent of the
fair market value of the Company on a going concern or liquidation
value basis (whichever method yields a higher valuation), subject to
an upward adjustment for taxes. In the aggregate, 41,162,880 shares
of Liberty common stock are currently covered by the agreement.
Liberty leases business offices, has entered into pole rental
agreements and transponder lease agreements, and uses certain
equipment under lease arrangements. In addition, as of September 30,
1993, the Company had long-term sports program rights contracts which
require payments through 1998 aggregating approximately $45,020,000.
The Company has also entered into agreements extending through 2006
with various motion picture studios for nonexclusive licenses to
exhibit certain films. As of September 30, 1993, these agreements
require minimum payments aggregating approximately $84,810,000. Total
payments are anticipated to be significantly higher but are not
currently estimatable because the payments are based on future events
including United States theatrical film rentals.
ARC has guaranteed Sunshine's obligation to make payments (aggregating
approximately $2,280,000 through June 1994) under a certain sports
program rights agreement.
I-28
<PAGE> 33
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company owns shares of QVC common stock and shares of QVC Series C
Preferred Stock (the "Series C Preferred") which are convertible into
shares of QVC common stock, which together represent the beneficial
ownership of approximately 29% of QVC's common equity as of September
30, 1993, assuming for this purpose the conversion of the Series C
Preferred but not the exercise or conversion by any other holder of
warrants or convertible securities of QVC. Certain of such shares are
subject to repurchase by QVC in the event that commitments to carry
its programming are not met. Approximately 40% of the shares which
the Company holds or would hold upon exercise or conversion of
convertible securities, are "unvested" and are subject to such
repurchase rights by QVC. QVC's repurchase rights with respect to QVC
securities held by the Company are exercisable over a period of time,
ending in the year 2004, if certain carriage commitments made by
Satellite Services, Inc. ("SSI"), an indirect wholly owned subsidiary
of TCI, are not met. Under the terms of a certain agreement pursuant
to which the Company acquired from TCI a substantial number of the QVC
securities it now beneficially owns, TCI has agreed to reimburse the
Company in the event QVC exercises its right to repurchase certain of
the "unvested" shares. Such reimbursement will be based on the value
assigned such shares when the Company acquired them from TCI, which is
substantially below the current market price of such shares. Pursuant
to an agreement dated November 11, 1993 between the Company and QVC
(the "QVC Agreement"), in the event QVC acquires control of Paramount
(in which event the Company is required to divest its interest in QVC
under the terms of an agreement with the staff of the FTC), QVC has
agreed to waive any repurchase rights with respect to the Company's
QVC Securities.
The QVC Agreement modifies the provisions of a stockholders' agreement
with Comcast Corporation ("Comcast") and Barry Diller, pursuant to
which, Liberty may have been required to sell approximately 2.5
million shares of QVC common stock to Comcast and approximately
800,000 shares to Mr. Diller. The purchase price under the Comcast
purchase right was $22.00 per share plus an interest component based
on the "prime rate" from December 1, 1992 to the date of purchase, and
under Mr. Diller's purchase right, the purchase price was $30.00 per
share plus an amount equal to 10% plus the rate of inflation per year
from December 9, 1992 to the date of exercise. Under the QVC
Agreement, Comcast has the right to purchase 1,690,041 shares of QVC
common stock from the Company at a purchase price of $18.60 per share
plus interest at the rate of 6% per annum from November 11, 1993 to
the date of purchase, and Mr. Diller has the right to purchase
1,627,934 shares of QVC common stock from the Company at a purchase of
price of $34.072 per share plus interest at the prime rate from the
date Mr. Diller exercises his right to the date of purchase. Comcast
has notified the Company that it intends to exercise its right to
purchase (which is immediately exercisable) on November 16, 1993. Mr.
Diller's right to purchase is exercisable for a 30 day period
commencing in June 1994 and he is required to close his purchase
within 120 days of the exercise date.
I-29
<PAGE> 34
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Certain of the Company's affiliates are general partnerships and any
subsidiary of the Company that is a general partner in a general
partnership is, as such, liable as a matter of partnership law for
all debts of that partnership in the event liabilities of that
partnership were to exceed its assets.
I-30
<PAGE> 35
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Financial Statements
September 30, 1993
(unaudited)
The following unaudited condensed pro forma balance sheet of TCI,
dated as of September 30, 1993, assumes that the proposed merger (the
"TCI/Liberty Merger"), whereby TCI and Liberty will each become wholly-owned
subsidiaries of TCI/Liberty, had occurred as of such date (see note 1).
In addition, the unaudited condensed pro forma statements of
operations of TCI for the nine months ended September 30, 1993 and the year
ended December 31, 1992 assume that the proposed TCI/Liberty Merger had
occurred prior to January 1, 1992.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the TCI/Liberty Merger
had occurred as of January 1, 1992. These condensed pro forma financial
statements, which do not reflect the effects of the proposed merger of BAC, TCI
and Liberty, should be read in conjunction with the condensed unaudited pro
forma financial statements of Liberty and TCI/Liberty included elsewhere herein
and the respective historical financial statements of TCI and Liberty.
II-1
<PAGE> 36
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
September 30, 1993
----------------------------------------
TCI Pro forma
Historical Adjustments(1) Pro forma
---------- -------------- ---------
Assets amounts in millions
- ------
<S> <C> <C> <C>
Cash and receivables $ 216 -- 216
Investment in other affiliates
and Turner Broadcasting System,
Inc., and related receivables 1,550 (156)(2) 1,394
Property and equipment, net of
accumulated depreciation 4,825 -- 4,825
Franchise costs and other assets,
net of amortization 9,608 -- 9,608
-------- ------ ------
$ 16,199 (156) 16,043
======== ====== ======
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals $ 708 -- 708
Debt 10,194 -- 10,194
Deferred income taxes 3,292 -- 3,292
Other liabilities 83 -- 83
-------- ------ ------
Total liabilities 14,277 -- 14,277
-------- ------ ------
Minority interests 288 -- 288
Redeemable preferred stocks 18 (18)(3) --
Common stockholders' equity:
Class A common stock 463 (82)(4) 381
Class B common stock 47 (3)(4) 44
Additional paid-in capital 1,912 (248)(4) 1,664
Cumulative foreign currency
translation adjustment (21) -- (21)
Accumulated deficit (452) -- (452)
Treasury stock, at cost (333) 333 (4) --
Investment in TCI/Liberty -- (156)(2) (138)
18 (3)
-------- ------ ------
1,616 (138) 1,478
-------- ------ ------
$ 16,199 (156) 16,043
======== ====== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
II-2
<PAGE> 37
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30, 1993
----------------------------------------
TCI Pro forma
Historical Adjustments(1) Pro forma
---------- -------------- ---------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Revenue $ 3,104 -- 3,104
Operating, selling, general and
administrative expenses (1,695) -- (1,695)
Depreciation and amortization (659) -- (659)
-------- ------ ------
Operating income 750 -- 750
Interest expense (549) -- (549)
Interest and dividend income 23 -- 23
Share of losses of Liberty 4 (4)(5) --
Share of losses of other
affiliates, net (44) -- (44)
Gain on disposition 49 -- 49
Loss on early extinguishment of debt (17) -- (17)
Other income, net (12) -- (12)
--------- ------ -------
Earnings before income taxes 204 (4) 200
Income tax expense (175) 2 (6) (173)
-------- ------ ------
Net earnings $ 29 (2) 27
Dividend requirement on
redeemable preferred stocks (2) 2 (7) --
-------- ------ ------
Net earnings applicable to
common shareholders $ 27 -- 27
======== ====== ======
Primary earnings per common and
common equivalent share $ .06
========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
II-3
<PAGE> 38
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1992
---------------------------------------
TCI Pro forma
Historical Adjustments(1) Pro forma
---------- -------------- ---------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Revenue $ 3,574 -- 3,574
Operating, selling, general and
administrative expenses (1,946) -- (1,946)
Depreciation and amortization (672) -- (672)
-------- ------ ------
Operating income 956 -- 956
Interest expense (718) -- (718)
Interest and dividend income 69 -- 69
Share of earnings of Liberty 14 (14)(5) --
Share of losses of other
affiliates, net (103) -- (103)
Gain on disposition 9 -- 9
Loss on early extinguishment of debt (67) -- (67)
Other expense, net (29) -- (29)
-------- ------ ------
Earnings before income taxes 131 (14) 117
Income tax expense (150) 6 (6) (144)
-------- ------ ------
Loss from continuing operations $ (19) (8) (27)
======== ====== ======
Dividend requirement on
redeemable preferred stocks $ (15) 15 (7) --
======== ====== ======
Net loss applicable to
common shareholders
from continuing operations $ (34) 7 (27)
======== ====== ======
Loss per common share
from continuing operations $ (.08)
========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
II-4
<PAGE> 39
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Financial Statements
September 30, 1993
(unaudited)
(1) Pursuant to the TCI/Liberty Agreement, the TCI/Liberty Merger will be
structured as a tax free exchange whereby the common and preferred
stock of TCI and Liberty would be exchanged for like shares of
TCI/Liberty. The TCI/Liberty Agreement provides that each share of
TCI's and Liberty's common stock (other than shares of common stock
owned by TCI, Liberty or their respective subsidiaries) would be
converted into one share and 0.975 of a share, respectively, of
TCI/Liberty's common stock. Any shares of TCI common stock or TCI
preferred stock held by subsidiaries of TCI or by Liberty or its
subsidiaries and any shares of Liberty common stock or Liberty
preferred stock held by subsidiaries of Liberty or by TCI or its
subsidiaries shall be converted into shares of a class or series of
TCI/Liberty preferred stock having an equivalent value. As of the
date of this Current Report on Form 8-K, the terms and conditions of
the preferred stock to be issued to TCI, Liberty or their respective
subsidiaries have not been determined. Shares of preferred stock of
TCI or Liberty not owned by TCI, Liberty or their respective
subsidiaries would be converted into shares of a preferred stock of
TCI/Liberty having designations, preferences, rights and
qualifications, limitations and restrictions similar to the shares of
preferred stock being converted.
(2) Represents the conversion of TCI's investment in Liberty common stock
and preferred stock into an investment in TCI/Liberty preferred stock
having an equivalent value. Such amount is reflected as a reduction
of stockholders' equity due to its related party nature. Such
conversion of shares is reflected at the carryover basis of TCI's
investment in Liberty. Because the terms of the TCI/Liberty preferred
stock to be issued to TCI, Liberty or their respective subsidiaries
are not yet known, the condensed unaudited pro forma statements of
operations have not been adjusted to reflect any dividends that might
accrue on the TCI/Liberty stock.
(3) Reflects the elimination of the historical preferred stock of TCI not
owned by TCI, Liberty or their respective subsidiaries. Such
historical preferred stock of TCI will be converted into a like kind
of TCI/Liberty preferred stock.
(4) Reflects the elimination of 82,323,000 and 3,538,000 shares of TCI
Class A and TCI Class B common stock, respectively. Such TCI common
shares are held by TCI, Liberty or their respective subsidiaries and
will be converted into TCI/Liberty preferred stock having an
equivalent value.
(5) Reflects the elimination of TCI's share of Liberty's historical
earnings or losses. See note (2) above.
(6) Reflects the income tax effect of the pro forma adjustments.
(7) Reflects the elimination of the preferred stock dividend requirement
on TCI preferred stock assumed to be converted into preferred stock of
TCI/Liberty (see note 3).
II-5
<PAGE> 40
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Financial Statements
September 30, 1993
(unaudited)
The following unaudited condensed pro forma balance sheet of Liberty,
as of September 30, 1993, assumes that the sale by Liberty of the 50%
partnership interest in American Movie Classics Company ("AMC") had occurred as
of such date. Additionally, such balance sheet also assumes that the
TCI/Liberty Merger, whereby TCI and Liberty will each become wholly-owned
subsidiaries of TCI/Liberty, had occurred as of such date.
In addition, unaudited condensed pro forma combined statements of
operations of Liberty for the nine months ended September 30, 1993 and for the
year ended December 31, 1992 are included which assume the following had
occurred prior to January 1, 1992:
(a) the sale by Liberty of its 50% partnership interest in AMC,
(b) the Recapitalization Agreement, as defined in note 5,
(c) the purchase by a subsidiary of TCI of a 16% limited
partnership interest in Intermedia Partners from a subsidiary
of Liberty,
(d) the acquisition of 20 million shares of Class B common stock
of Home Shopping Network, Inc. ("HSN"),
(e) the Tender, as defined in note 6,
(f) the acquisition of all general and limited partnership
interests in Mile Hi Cablevision Associates, Ltd. ("Mile Hi")
as described in note 7,
(g) the conversion of all the outstanding shares (10,974 shares)
of Liberty's Class A Convertible Preferred Stock ("Class A
Preferred Stock") into 4,405,678 shares of Liberty Class A
common stock and 55,070 shares of Class E, 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock ("Class E
Preferred Stock"), and
(h) the TCI/Liberty Merger.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the foregoing events had
actually occurred on January 1, 1992. These pro forma combined financial
statements, which do not reflect the effects of the proposed merger of BAC, TCI
and Liberty, should be read in conjunction with the historical financial
statements of Liberty and the condensed unaudited pro forma financial
statements of TCI and TCI/Liberty included elsewhere herein.
II-6
<PAGE> 41
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
September 30, 1993
------------------------------------------
Liberty Pro forma
Historical Adjustments(1)(3) Pro forma
---------- ----------------- ---------
Assets amounts in thousands
- ------
<S> <C> <C> <C>
Cash, receivables, inventories,
prepaids and other current
assets, net $ 223,106 175,000 (2) 398,106
Deferred income taxes 2,460 -- 2,460
Investment in and advances to
affiliates and others 547,612 13,170 (2) 456,771
(104,011)(3)
Property and equipment, net of
accumulated depreciation 235,447 -- 235,447
Franchise costs, intangibles and
other assets,
net of amortization 436,260 -- 436,260
---------- -------- ---------
$1,444,885 84,159 1,529,044
========== ======== =========
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals $ 249,836 50,000 (2) 299,836
Debt 514,725 -- 514,725
Other liabilities 64 -- 64
---------- -------- ---------
Total liabilities 764,625 50,000 814,625
---------- -------- ---------
Minority interests 181,555 181,555
Preferred stock subject to
mandatory redemption 151,922 (151,922)(4) --
Common stockholders' equity 346,783 138,170 (2) 484,936
(17)(4)
Investment in TCI/Liberty -- (104,011)(3) 47,928
151,939 (4)
---------- -------- ---------
$1,444,885 84,159 1,529,044
========== ======== =========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
II-7
<PAGE> 42
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30, 1993
------------------------------------------------------------------------------------------
Pro forma
Liberty Effect of Recap- HSN Mile Hi Adjustments Pro forma
Historical italization(5) Historical(6) Historical(7) (1)(3)(6)(7) Combined
---------- ---------------- ------------- ------------- -------------- ---------
amounts in thousands
except per share amounts
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 795,840 -- 103,640 7,568 -- 907,048
Operating, selling, general
and administrative expenses (761,893) -- (103,718) (4,989) -- (870,600)
Depreciation and amortization (33,159) -- (2,579) (1,479) (5,358)(8) (42,575)
--------- ----- -------- ------ ------- --------
Operating income (loss) 788 -- (2,657) 1,100 (5,358) (6,127)
Interest expense (21,357) -- (2,146) (2,180) (7,702)(9) (31,205)
2,180 (10)
Dividend and interest income 17,168 -- 1,633 6 3,091 (11) 21,898
Gain on sale of investment 10,613 -- -- -- -- 10,613
Loss on sale of investments
to TCI (22,129) -- -- -- -- (22,129)
Share of earnings of affiliates,
net 39,092 -- -- -- 380 (12) 30,273
(9,199)(13)
Minority interests (1,621) -- -- -- 57 (14) 1,974
170 (15)
3,368 (16)
Provision for impairment
of investment (8,167) -- -- -- -- (8,167)
Other, net (1,828) -- (847) -- -- (2,675)
--------- ----- -------- ------ ------- --------
Earnings (loss) before
income taxes and
extraordinary item 12,559 -- (4,017) (1,074) (13,013) (5,545)
Income tax expense (6,769) -- (1,741) -- 4,942 (17) (3,568)
--------- ----- -------- ------ ------- --------
Earnings (loss) before
extraordinary item 5,790 -- (5,758) (1,074) (8,071) (9,113)
Extraordinary item-loss on
early extinguishment of debt,
net of taxes (2,191) -- (5,051) -- -- (7,242)
--------- ----- -------- ------ ------- --------
Net earnings (loss) 3,599 -- (10,809) (1,074) (8,071) (16,355)
Dividend requirement on
redeemable preferred stocks (26,131) 9,179 -- -- 16,966 (20) --
(14)(18)
--------- ----- -------- ------ ------- --------
Net earnings (loss)
attributable to
common shareholders $ (22,532) 9,179 (10,809) (1,074) 8,881 (16,355)
========= ===== ======== ====== ======= ========
Net loss attributable to
common shareholders before
extraordinary item $ (0.15)
Extraordinary item, net (0.02)
---------
Loss per common share $ (0.17)
=========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
II-8
<PAGE> 43
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1992
------------------------------------------------------------------------------------------
Pro forma
Liberty Effect of Recap- HSN Mile Hi Adjustments Pro forma
Historical italization(5) Historical(6) Historical(7) (1)(3)(6)(7) Combined
---------- ---------------- ------------- ------------- -------------- ---------
amounts in thousands
except per share amounts
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 156,513 -- 1,071,827 34,567 -- 1,262,907
Operating, selling, general
and administrative expenses (144,363) -- (954,425) (23,402) -- (1,122,190)
Depreciation and amortization (15,546) -- (46,623) (7,017) (25,572)(8) (94,758)
--------- ------ --------- ------- ------- ----------
Operating income (loss) (3,396) -- 70,779 4,148 (25,572) 45,959
Interest expense (7,329) -- (21,926) (10,580) (22,039)(9) (51,294)
10,580 (10)
Dividend and interest income 26,243 -- 4,310 -- 117 (19) 30,670
Share of earnings of affiliates,
net 12,549 -- -- -- (7,839)(13) 4,710
Loss on sale (17,826) -- -- -- -- (17,826)
Premium received upon
redemption of preferred
stock investment 8,248 -- -- -- -- 8,248
Minority interests 4,734 -- -- -- 270 (14) (11,603)
1,024 (15)
(17,631)(16)
Other, net (328) -- (1,213) -- -- (1,541)
--------- ------ --------- ------- ------- ----------
Earnings (loss) before
income taxes 22,895 -- 51,950 (6,432) (61,090) 7,323
Income tax expense (8,962) -- (21,812) -- 13,829 (17) (16,945)
--------- ------ --------- ------- ------- ----------
Net earnings (loss) 13,933 -- 30,138 (6,432) (47,261) (9,622)
Dividend requirement on (41,631) 22,122 -- -- 19,839 (20) --
redeemable preferred stocks (330)(18)
--------- ------ --------- ------- ------- ----------
Net earnings (loss)
attributable to
common shareholders $ (27,698) 22,122 30,138 (6,432) (27,752) (9,622)
========= ====== ========= ======= ======= ==========
Loss per common share $ (0.22)
=========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
II-9
<PAGE> 44
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1993
(unaudited)
(1) On September 16, 1993, Liberty announced that one of its subsidiaries
received notice from Rainbow Program Enterprises that Rainbow Program
Enterprises had elected to purchase Liberty's 50% partnership interest
in AMC under the terms of a buy/sell provision contained in the AMC
partnership agreement. A subsidiary of Liberty had initiated the
buy/sell procedure on August 1, 1993. Liberty expects to receive net
pre-tax cash proceeds of approximately $170 million from the sale and
an additional $5 million from a buy-out of Liberty's consulting
agreement with AMC.
(2) Represents assumed cash received from the sale of the 50% partnership
interest in AMC by Liberty, pursuant to the terms of the buy/sell
provision contained in the AMC partnership agreement (see note 1), and
the corresponding increase in investment in affiliates, payables and
accruals, and common stockholders' equity. Such increase in
investment in affiliates is due to a negative balance in Liberty's
carrying value due to distributions in excess of Liberty's basis in
such investment. The increase in payables and accruals represents the
estimated income taxes payable on the sale. The increase in common
stockholders' equity is due to the difference between Liberty's
carrying value of such investment and the purchase price of the same
reduced by the estimated income tax effect. Such gain is not
reflected in the pro forma combined statement of operations due to its
non-recurring nature.
(3) Pursuant to the TCI/Liberty Agreement, the TCI/Liberty Merger will be
structured as a tax free exchange whereby the common and preferred
stock of TCI and Liberty would be exchanged for like shares of
TCI/Liberty. The TCI/Liberty Agreement provides that each share of
TCI's and Liberty's common stock (other than shares of common stock
owned by TCI, Liberty or their respective subsidiaries) would be
converted into one share and 0.975 of a share, respectively, of
TCI/Liberty's common stock. Any shares of TCI common stock or TCI
preferred stock held by subsidiaries of TCI or by Liberty or its
subsidiaries and any shares of Liberty common stock or Liberty
preferred stock held by subsidiaries of Liberty or by TCI or its
subsidiaries shall be converted into shares of a class or series of
TCI/Liberty preferred stock having an equivalent value. (As a result,
3,478,000 shares of Liberty Class A common stock held by a subsidiary
of TCI will be converted into TCI/Liberty preferred stock having an
equivalent value.) As of the date of this Current Report on Form 8-K,
the terms and conditions of the preferred stock to be issued to TCI,
Liberty or their respective subsidiaries have not been determined.
Shares of preferred stock of TCI or Liberty not owned by TCI, Liberty
or their respective subsidiaries would be converted into shares of a
preferred stock of TCI/Liberty having designations, preferences,
rights and qualifications, limitations and restrictions similar to the
shares of preferred stock being converted. Adjustment represents the
conversion of Liberty's investment in TCI common stock into an
investment in TCI/Liberty preferred stock having an equivalent value.
Such amount is reflected as a reduction of stockholders' equity due to
its related party nature. Such conversion of shares is reflected at
the carryover basis of Liberty's investment in TCI. Because the terms
of the TCI/Liberty preferred stock to be issued to TCI, Liberty or
their respective subsidiaries are not yet known, the condensed
unaudited pro forma statements of operations have not been adjusted to
reflect any dividends that may accrue on the TCI/Liberty preferred
stock.
(continued)
II-10
<PAGE> 45
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1993
(unaudited)
(4) Reflects the elimination of the historical preferred stock of Liberty
held by TCI or its subsidiaries. Such historical preferred stock of
Liberty will be converted into TCI/Liberty preferred stock having an
equivalent value. The terms of such TCI/Liberty preferred stock have
not yet been determined. See note 3.
(5) On June 3, 1993, Liberty completed the transaction contemplated by the
Recapitalization Agreement entered into on March 26, 1993 with certain
subsidiaries of TCI (such transaction is included in the Liberty
historical column of the pro forma balance sheet). Pursuant to the
Recapitalization Agreement, Liberty purchased 100% of the outstanding
shares of its Class C Redeemable, Exchangeable Preferred Stock (the
"Class C Preferred Stock") and 927,900 shares of its Class A common
stock. Liberty paid a purchase price of approximately $175 million
for the Class C Preferred stock and approximately $19 million for the
Class A common stock. The aggregate purchase price of approximately
$194 million was satisfied by delivery of $12 million in cash and four
promissory notes totaling $182 million. In the accompanying unaudited
condensed pro forma statements of operations, the preferred stock
dividend requirement on such purchased preferred stock has been
eliminated.
Also on June 3, 1993, Liberty and a subsidiary of TCI entered into the
Purchase and Sale Agreement pursuant to which a TCI subsidiary
purchased from Liberty a 16% limited partnership interest in
Intermedia Partners for a purchase price of approximately $9 million
(such sale is included in the Liberty historical column of the pro
forma balance sheet). Liberty also granted TCI an option to purchase
its remaining 6% interest prior to December 31, 1995 for approximately
$3.6 million plus interest at 8% per annum.
(6) On February 11, 1993, Liberty acquired from RMS Limited Partnership
20,000,000 shares of Class B common stock (the "Class B Stock") of HSN
for an aggregate purchase price of $58 million in cash and 8,000,000
shares of the Class A common stock of Liberty. Additionally, on June
1, 1993, Liberty completed the purchase of approximately 16 million
shares of the common stock ("Common Stock") of HSN at a price of $7.00
per share (the "Tender"). In addition, Liberty had acquired Common
Stock of HSN previous to the acquisition of the Class B Stock. Such
Common Stock combined with the acquired Common Stock in the Tender and
the acquired Class B Stock represents 41.5% of the common equity and
approximately 71% of the voting power of HSN. These purchases are
included in the September 30, 1993 Liberty historical column of the
pro forma balance sheet.
For the purpose of presenting a fiscal year for HSN which is within 93
days of Liberty's, HSN's fiscal year has been brought up to November
30, 1992. This was accomplished by adding the November 30, 1992
quarter-end results to the fiscal year ended August 31, 1992 and
deducting the comparable preceding year quarter-end results.
(continued)
II-11
<PAGE> 46
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1993
(unaudited)
(7) On March 15, 1993, Mile Hi Cable Partners, L.P. ("New Mile Hi")
completed the acquisition (the "Acquisition") of all the general and
limited partnership interests in Mile Hi, the owner of the cable
television system serving Denver, Colorado (such acquisition is
included in the Liberty historical column of the pro forma balance
sheet). New Mile Hi is a limited partnership formed among Community
Cable Television ("CCT") (78% limited partnership interest), Daniels
Communications, Inc. ("DCI") (1% limited partnership interest) and P &
B Johnson Corp. (21% general partnership interest), a corporation
controlled by Robert L. Johnson, a member of the Board of Directors of
Liberty. CCT is a general partnership in which a wholly-owned
subsidiary of Liberty is a 50.001% partner and a wholly- owned
subsidiary of TCI is a 49.999% partner. New Mile Hi is a consolidated
subsidiary of Liberty for financial reporting purposes.
Prior to the Acquisition, Liberty, through a wholly-owned subsidiary,
indirectly owned a 32.175% interest in Mile Hi through its ownership
of a limited partnership interest in Daniels & Associates Partners
Limited ("DAPL"), one of Mile Hi's general partners.
DAPL was liquidated on March 12, 1993, at which time a subsidiary of
Liberty (and partner in DAPL) received a liquidating distribution
consisting of a portion of DAPL's partnership interest in Mile Hi
representing the 32.175% interest in Mile Hi and a loan receivable of
approximately $50 million (the "Mile Hi Note").
Of the estimated $110 million in cash required by New Mile Hi to
complete the transaction, $105 million was loaned to New Mile Hi by
CCT and $5 million was provided by Mr. Johnson's corporation as a
capital contribution to New Mile Hi. Of the $5 million contributed by
Mr. Johnson's corporation, approximately $4 million was provided by
CCT through loans to Mr. Johnson and trusts for the benefit of his
children. CCT funded its loans to New Mile Hi and the Johnson
interests by drawing down $93 million under its revolving credit
facility and by borrowing $16 million from TCI in the form of a
subordinated note.
(8) Depreciation and amortization of the purchase price of Mile Hi and HSN
allocated to its tangible and intangible assets are based upon
weighted average lives of 12-1/2 years for tangible assets, 11 years
for intangible assets and 40 years for franchise costs.
(9) Represents interest on borrowings to finance the cash portion of the
consideration for the acquisition of the partnership interests in Mile
Hi and the interest on the promissory notes delivered to TCI pursuant
to the Recapitalization Agreement (see note 5). Interest on the
borrowings for the Mile Hi acquisition is calculated at the weighted
average rate of 6% in effect for the nine months ended September 30,
1993 and 6.3% in effect for the year ended December 31, 1992.
(10) Reflects the reduction in interest expense arising from the assumed
repayment of Mile Hi debt at January 1, 1992 and the elimination of
the intercompany interest expense recorded by Mile Hi on its debt to
CCT.
(continued)
II-12
<PAGE> 47
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1993
(unaudited)
(11) Represents the increase in interest income on assumed proceeds from
the sale of the partnership interest in AMC, net of the reduction of
interest income on funds used to make payment for the acquisition of
the HSN Class B Stock and the Tender (see note 6). Such amount of
reduced interest income assumes the cash was invested in short-term,
interest-bearing accounts earning interest at 4% per annum for the
nine months ended September 30, 1993.
(12) Elimination of share of losses of Mile Hi through March 15, 1993.
(13) Elimination of share of earnings of AMC.
(14) Represents the interest income on the loan to a minority partner (see
note 7).
(15) Represents the minority partners' 22% interest in the pro forma losses
of Mile Hi adjusted for the effects of the acquisition (see note 7).
(16) Represents the minority shareholders' 58.5% interest in the pro forma
losses of HSN (see note 6).
(17) Estimated income tax effect of the pro forma adjustments.
(18) Represents the preferred stock dividend requirement on the additional
shares of Class E Preferred Stock related to the conversion of all of
the outstanding shares (10,974 shares) of Liberty's Class A Preferred
Stock into 4,405,678 shares of Liberty Class A common stock and 55,070
shares of Class E Preferred Stock.
(19) Represents the increase in interest income on assumed proceeds from
the sale of the partnership interest in AMC net of the reduction of
interest income on funds used to make payment for the acquisition of
the HSN Class B Stock and the Tender (see note 6). Such amount of
reduced interest assumes the cash used was invested in short-term,
interest-bearing accounts earning interest at 4% per annum for the
year ended December 31, 1992.
(20) Reflects the elimination of the preferred stock dividend requirement
on Liberty preferred stock assumed to be converted into preferred
stock of TCI/Liberty. See note 3.
II-13
<PAGE> 48
"TCI/LIBERTY" AND SUBSIDIARIES
Condensed Pro Forma Financial Statements
September 30, 1993
(unaudited)
The following unaudited condensed pro forma balance sheet of TCI/Liberty,
dated as of September 30, 1993, assumes that the proposed TCI/Liberty Merger,
whereby TCI and Liberty will each become wholly-owned subsidiaries of
TCI/Liberty, had occurred as of such date.
In addition, the unaudited condensed pro forma statements of operations
of TCI/Liberty for the nine months ended September 30, 1993 and the year ended
December 31, 1992 assume that the proposed TCI/Liberty Merger had occurred
prior to January 1, 1992.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the TCI/Liberty Merger
had occurred as of January 1, 1992. These condensed pro forma financial
statements, which do not reflect the effects of the proposed merger of BAC, TCI
and Liberty, should be read in conjunction with the condensed unaudited pro
forma financial statements of TCI and Liberty included elsewhere herein and the
respective historical financial statements of TCI and Liberty.
II-14
<PAGE> 49
"TCI/LIBERTY" AND SUBSIDIARIES
Condensed Pro Forma Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
September 30, 1993
-----------------------------------------------------
TCI Liberty Pro forma TCI/Liberty
Pro forma Pro forma adjustments(1) Pro forma
---------- ---------- -------------- ---------
Assets amounts in millions
- ------
<S> <C> <C> <C> <C>
Cash, receivables and other current assets $ 216 398 -- 614
Investment in other affiliates and
Turner Broadcasting System, Inc.,
and related receivables 1,394 457 (197)(2) 1,565
(89)(3)
Property and equipment, net of
accumulated depreciation 4,825 235 -- 5,060
Franchise costs, intangibles and
other assets, net of amortization 9,608 436 -- 10,044
------- ------ ------ ------
$16,043 1,526 (286) 17,283
======= ====== ====== ======
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals $ 708 300 (11)(2) 997
Debt 10,194 514 (186)(2) 10,522
Deferred income taxes 3,292 (2) -- 3,290
Other liabilities 83 -- -- 83
------- ------ ------ ------
Total liabilities 14,277 812 (197) 14,892
------- ------ ------ ------
Minority interests 288 181 (89)(3) 380
Redeemable preferred stock -- -- 18 (4) 18
Stockholders' equity:
Class A common stock 381 84 (2)(5) 463
Class B common stock 44 43 (1)(5) 86
Additional paid-in capital 1,664 234 (108)(4) 1,479
3 (5)
(314)(6)
Cumulative foreign currency
translation adjustment (21) -- -- (21)
Retained earnings (deficit) (452) 138 314 (6) --
Receivable from related party -- (14) -- (14)
Investment in TCI/Liberty (138) 48 90 (4) --
------- ------ ------ ------
1,478 533 (18) 1,993
------- ------ ------ ------
$16,043 1,526 (286) 17,283
======= ====== ====== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
II-15
<PAGE> 50
"TCI/LIBERTY" AND SUBSIDIARIES
Condensed Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30, 1993
---------------------------------------------------
TCI Liberty Pro forma TCI/Liberty
Pro forma Pro forma adjustments(1) Pro forma
--------- --------- -------------- ---------
amounts in millions
<S> <C> <C> <C> <C>
Revenue $ 3,104 907 (41)(7) 3,970
Operating, selling, general and
administrative expenses (1,695) (871) 41 (7) (2,525)
Depreciation and amortization (659) (42) -- (701)
------- ------ ------ ------
Operating income (loss) 750 (6) -- 744
Interest expense (549) (31) 5 (8) (575)
Interest and dividend income 23 22 (5)(8) 40
Share of earnings (losses) of
affiliates, net (44) 30 -- (14)
Gain (loss) on disposition 49 (20) -- 29
Loss on early extinguishment of debt (17) (7) -- (24)
Other expense, net (12) -- -- (12)
------- ------ ------ ------
Earnings (loss) before
income taxes 200 (12) -- 188
Income tax expense (173) (4) -- (177)
------- ------ ------ ------
Net earnings (loss) 27 (16) -- 11
Dividend requirement on
redeemable preferred stocks -- -- (8)(9) (8)
------- ------ ------ ------
Net earnings (loss) attributable
to common shareholders $ 27 (16) (8) 3
======= ====== ====== ======
Primary earnings per common
and common equivalent share $ .01 (10)
======
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
II-16
<PAGE> 51
"TCI/LIBERTY" AND SUBSIDIARIES
Condensed Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1992
--------------------------------------------------
TCI Liberty Pro forma TCI/Liberty
Pro forma Pro forma adjustments(1) Pro forma
--------- --------- -------------- ---------
amounts in millions
<S> <C> <C> <C> <C>
Revenue $ 3,574 1,263 (46)(7) 4,791
Operating, selling, general
and administrative expenses (1,946) (1,122) 46 (7) (3,022)
Depreciation and amortization (672) (95) -- (767)
------- ------ ------ ------
Operating income 956 46 -- 1,002
Interest expense (718) (51) -- (769)
Interest and dividend income 69 31 -- 100
Share of earnings (losses) of
affiliates, net (103) 12 -- (91)
Gain (loss) on disposition 9 (18) -- (9)
Loss on early extinguishment of debt (67) -- -- (67)
Other expense, net (29) (13) -- (42)
------- ------ ------ ------
Earnings before income taxes 117 7 -- 124
Income tax expense (144) (17) -- (161)
------- ------ ------ ------
Loss from continuing operations $ (27) (10) -- (37)
======= ====== ====== ======
Dividend requirement on
redeemable preferred stocks $ -- -- (23)(9) (23)
======= ====== ====== ======
Net loss applicable to
common stockholders
from continuing operations $ (27) (10) (23) (60)
======= ====== ====== ======
Loss per common share from
continuing operations $ (.11)(11)
======
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
II-17
<PAGE> 52
"TCI/LIBERTY" AND SUBSIDIARIES
Notes to Condensed Pro Forma Financial Statements
September 30, 1993
(unaudited)
(1) Pursuant to the TCI/Liberty Agreement, the TCI/Liberty Merger will be
structured as a tax free exchange whereby the common and preferred
stock of TCI and Liberty would be exchanged for like shares of
TCI/Liberty. The TCI/Liberty Agreement provides that each share of
TCI's and Liberty's common stock (other than shares of common stock
owned by TCI, Liberty or their respective subsidiaries) would be
converted into one share and 0.975 of a share, respectively, of
TCI/Liberty's common stock. Any shares of TCI common stock or TCI
preferred stock held by subsidiaries of TCI or by Liberty or its
subsidiaries and any shares of Liberty common stock or Liberty
preferred stock held by subsidiaries of Liberty or by TCI or its
subsidiaries shall be converted into shares of a class or series of
TCI/Liberty preferred stock having an equivalent value. As of the
date of this Current Report on Form 8-K, the terms and conditions of
the preferred stock to be issued to TCI, Liberty or their respective
subsidiaries have not been determined. Shares of preferred stock of
TCI or Liberty not owned by TCI, Liberty or their respective
subsidiaries would be converted into shares of a preferred stock of
TCI/Liberty having designations, preferences, rights and
qualifications, limitations and restrictions similar to the shares of
preferred stock being converted.
(2) Represents the elimination of intercompany indebtedness between TCI
and Liberty.
(3) Represents the elimination of TCI's minority interest in the equity of
a consolidated subsidiary of Liberty.
(4) Reflects the issuance of a like kind of preferred stock of TCI/Liberty
in exchange for TCI preferred stock not owned by TCI, Liberty or their
respective subsidiaries. Additionally, all preferred stock of
TCI/Liberty held by TCI, Liberty or their respective subsidiaries
(reflected in the TCI pro forma financial information and the Liberty
pro forma financial information as "Investment in TCI/Liberty") has
been eliminated in consolidation with TCI/Liberty.
(5) Reflects the net conversion of TCI and Liberty common stock held other
than by TCI, Liberty or their subsidiaries, at the exchange ratios
described in note 1, into like shares of TCI/Liberty.
(6) Reflects the elimination of the combined historical accumulated
deficit of TCI and Liberty.
(7) Represents the elimination of intercompany revenue and operating
expenses between TCI and Liberty arising from the sale of certain
cable television programming to their respective cable television
subscribers.
(8) Represents the elimination of interest on intercompany indebtedness
between TCI and Liberty.
(continued)
II-18
<PAGE> 53
"TCI/LIBERTY" AND SUBSIDIARIES
Notes to Condensed Pro Forma Financial Statements
(9) Represents the preferred stock dividend requirement on preferred stock
of TCI/Liberty other than preferred stock issued to TCI, Liberty or
their respective subsidiaries.
(10) Reflects primary earnings per common and common equivalent share based
upon 550,002,756 weighted average shares. Such amount is calculated
utilizing 431,890,323 weighted average shares of TCI at September 30,
1993 (such amount representing TCI's weighted average shares, disclosed
in their historical financial statements, reduced by 41,060,990 shares
of TCI common stock excluded in the pro forma calculation due to its
anti-dilutive effect) reduced by 6,525,721 shares of TCI common stock
previously held by Liberty and 128,028,988 weighted averages shares
of Liberty at September 30, 1993 (such amount representing Liberty's
weighted average shares, as disclosed in their historical financial
statements, adjusted by Liberty common stock equivalents previously
excluded because they had an anti-dilutive effect, shares of Liberty
common stock issued in the HSN merger and Liberty common stock
repurchased from TCI in 1993, all of which have been adjusted by
0.975 of a share) reduced by 3,390,834 shares of Liberty common stock
(as adjusted by 0.975 of a share) previously held by TCI.
(11) Reflects loss per common share from continuing operations based upon
541,346,130 weighted average shares. Such amount is calculated
utilizing 424,060,747 weighted average shares of TCI at December 31,
1992, as disclosed in their historical financial statements, reduced
by 6,525,721 shares of TCI common stock previously held by Liberty and
127,201,938 weighted averages shares of Liberty at December 31, 1992
(such amount representing Liberty's weighted average shares, as
disclosed in their historical financial statements, adjusted by shares
of Liberty common stock issued in the HSN merger and Liberty common
stock repurchased from TCI in 1993, all of which have been adjusted by
0.975 of a share) reduced by 3,390,834 shares of Liberty common stock
(as adjusted by 0.975 of a share) previously held by TCI.
II-19
<PAGE> 54
EXHIBIT INDEX
Listed below are the exhibits which are filed as part of this report (according
to the number assigned to them in Item 601 of Regulation S-K):
(2.1) Agreement and Plan of Merger, dated as of January 27,
1994, by and among Tele-Communications, Inc., Liberty
Media Corporation, TCI/Liberty Holding Company, TCI
Mergeco, Inc. and Liberty Mergeco, Inc.*
(2.2) Letter of Intent, dated October 12, 1993, among Bell
Atlantic Corporation, Tele-Communications, Inc. and
Liberty Media Corporation.
Incorporated herein by reference to TCI's Current
Report on Form 8-K, dated October 26, 1993.
* The Agreement and Plan of Merger contains indexes
identifying the items, including exhibits and
schedules, annexed thereto. A copy of any omitted
item will be furnished supplementally to the
Commission upon request.
II-20
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TELE-COMMUNICATIONS, INC.
LIBERTY MEDIA CORPORATION,
TCI/LIBERTY HOLDING COMPANY
TCI MERGERCO, INC.
AND
LIBERTY MERGERCO, INC.
AS OF JANUARY 27, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Mergers . . . . . . . . . . . . . . . . . . 1
1.1 The Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------
1.3 Effect of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---------------------
1.4 Certificate of Incorporation and By-laws of TCI/Liberty . . . . . . . . . . . 2
-------------------------------------------------------
1.5 Certificates of Incorporation and By-laws of the Surviving Corporations . . . 3
-----------------------------------------------------------------------
1.6 Directors and Officers of the Surviving Corporations . . . . . . . . . . . . 3
----------------------------------------------------
1.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------
1.8 Definitions of "Subsidiary" and "affiliate" . . . . . . . . . . . . . . . . . 3
-------------------------------------------
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conversion and Exchange of Securities;
Effect of Mergers on TCI and Liberty Stock Plans . . . . . . . . . 4
2.1 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------------------------
2.2 TCI/Liberty Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------
2.3 Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------
2.4 Definition of "fair market value" . . . . . . . . . . . . . . . . . . . . . . 7
---------------------------------
2.5 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-----------------
2.6 Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------
2.7 Stock Options, SARs and Benefit Plans . . . . . . . . . . . . . . . . . . . . 11
-------------------------------------
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Certain Actions . . . . . . . . . . . . . . . . . 15
3.1 TCI Stockholder Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------------------
3.2 Liberty Stockholder Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 15
---------------------------
3.3 Proxy Statement and Registration Statement . . . . . . . . . . . . . . . . . 15
------------------------------------------
3.4 Letters from Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 16
------------------------
3.5 Release of Escrowed TCI Common Stock . . . . . . . . . . . . . . . . . . . . 17
------------------------------------
3.6 Identification of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 17
----------------------------
3.7 State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-----------------------
3.8 Possible Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------------------
3.9 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
------------------
3.10 Quotation on Nasdaq NMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.11 Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
----------------
3.12 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------------
3.13 Directors and Executive Officers of TCI/Liberty at the Effective Time . . . . 20
---------------------------------------------------------------------
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Representations and Warranties of Liberty . . . . . . . . . . 20
4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . 20
------------------------------
4.2 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . 21
---------------------------------------
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------
4.4 Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . 23
--------------------------------
4.5 No Approvals or Notices Required; No Conflict with Instruments . . . . . . . 23
--------------------------------------------------------------
4.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . 26
------------------------------------
4.7 Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . . 26
---------------------------------------
4.8 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------------
4.9 Licenses; Compliance With Regulatory Requirements; Intangible Property . . . 27
----------------------------------------------------------------------
4.10 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------
4.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------
4.12 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . 29
-----------------------------
4.13 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------------
4.14 Recommendation of Liberty Board . . . . . . . . . . . . . . . . . . . . . . . 33
-------------------------------
4.15 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-------------
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Representations and Warranties of TCI . . . . . . . . . . . 33
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------
5.2 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . 34
---------------------------------------
5.3 Capitalization of TCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
---------------------
5.4 TCI Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . 36
------------------------------------
5.5 No Approvals or Notices Required; No Conflict with Instruments . . . . . . . 37
--------------------------------------------------------------
5.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . 38
------------------------------------
5.7 Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . . 38
---------------------------------------
5.8 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-----------------
5.9 Licenses; Compliance with Regulatory Requirements; Intangible Property . . . 40
----------------------------------------------------------------------
5.10 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
------------------
5.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-----------
5.12 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . 41
-----------------------------
5.13 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
----------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.14 Recommendation of TCI Board . . . . . . . . . . . . . . . . . . . . . . . . . 45
---------------------------
5.15 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
-------------
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Representations and Warranties of TCI/Liberty . . . . . . . . . 46
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
------------
6.2 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . 46
---------------------------------------
6.3 Newly Issued Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
-------------------
6.4 Interim Operations of TCI/Liberty . . . . . . . . . . . . . . . . . . . . . . 46
---------------------------------
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Transactions Prior to Closing . . . . . . . . . . . . . 46
7.1 Access to Information Concerning Properties and Records . . . . . . . . . . . 46
-------------------------------------------------------
7.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
---------------
7.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
--------------------
7.4 Conduct of Business by Liberty and TCI Pending the Effective Time . . . . . . 47
-----------------------------------------------------------------
7.5 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
---------------
7.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--------
7.7 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . 51
-------------------------------
7.8 Defense of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
---------------------
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Conditions Precedent . . . . . . . . . . . . . . . . 52
8.1 Conditions Precedent to the Obligations of TCI and Liberty . . . . . . . . . 52
----------------------------------------------------------
8.2 Conditions Precedent to the Obligations of TCI . . . . . . . . . . . . . . . 53
----------------------------------------------
8.3 Conditions Precedent to the Obligations of Liberty . . . . . . . . . . . . . 55
--------------------------------------------------
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Termination . . . . . . . . . . . . . . . . . . 57
9.1 Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . 57
---------------------------
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
---------------------
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Miscellaneous . . . . . . . . . . . . . . . . . 58
10.1 Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . 58
---------------------------------------------------------
10.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
---------------
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-------
10.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
----------------
10.5 Assignment; Binding Effect; Benefit . . . . . . . . . . . . . . . . . . . . . 60
-----------------------------------
10.6 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
---------
10.7 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
-----------------
10.8 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
--------------
10.9 Knowledge as to Equity Affiliates . . . . . . . . . . . . . . . . . . . . . . 62
---------------------------------
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
------------
10.11 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
--------------
10.12 No Remedy in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . 62
----------------------------------
10.13 Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-----------------
</TABLE>
<TABLE>
<S> <C> <C>
Exhibit A - Certificate of Incorporation of TCI/Liberty
Exhibit B - By-laws of TCI/Liberty
Exhibit C - Certificate of Incorporation of TCI Surviving Corporation
Exhibit D - Certificate of Incorporation of Liberty Surviving Corporation
Exhibit E - By-laws of TCI Surviving Corporation
Exhibit F - By-laws of Liberty Surviving Corporation
Exhibit G - Other Employee Benefit Plans
Exhibit H - Rule 145 Affiliates
Exhibit I - Directors and Executive Officers of TCI/Liberty
Annex 1 - Opinion of Counsel to be delivered to TCI
Annex 2 - Opinion of Counsel to be delivered to Liberty
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 27, 1994, by and
among TELE-COMMUNICATIONS, INC., a Delaware corporation ("TCI"), LIBERTY MEDIA
CORPORATION, a Delaware corporation ("Liberty"), TCI/LIBERTY HOLDING COMPANY, a
Delaware corporation jointly owned by TCI and Liberty ("TCI/Liberty"), TCI
MERGERCO, INC., a Delaware corporation and a wholly owned subsidiary of
TCI/Liberty ("TCI Mergerco"), and LIBERTY MERGERCO, INC., a Delaware
corporation and a wholly owned subsidiary of TCI/Liberty ("Liberty Mergerco").
WHEREAS, the respective Boards of Directors of TCI and Liberty have
approved, and deem it in the best interests of their respective stockholders to
consummate, the business combination transaction provided for herein, in which
TCI Mergerco would merge with and into TCI (the "TCI Merger"), Liberty Mergerco
would merge with and into Liberty (the "Liberty Merger"; and, together with the
TCI Merger, the "Mergers"), and the surviving corporations of the Mergers would
become wholly-owned subsidiaries of TCI/Liberty;
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Mergers and also to prescribe
certain conditions to the Mergers; and
WHEREAS, for Federal income tax purposes it is intended that each of
the Mergers shall be tax free to the parties and to the stockholders of each of
TCI and Liberty.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Mergers
1.1 The Mergers. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2), (i) TCI Mergerco
shall be merged with and into TCI in accordance with the provisions of the
General Corporation Law of the State of Delaware (the "DGCL"), and the separate
corporate existence of TCI Mergerco shall cease and TCI shall continue as the
surviving corporation (hereinafter sometimes referred to as the "TCI Surviving
Corporation") under the laws of the State of Delaware under the name "TCI
Communications, Inc." and (ii) Liberty Mergerco shall be merged with and into
Liberty in accordance with the provisions of the DGCL, and the separate
corporate existence of Liberty Mergerco shall cease and Liberty shall continue
as the surviving corporation (hereinafter sometimes referred to as the "Liberty
Surviving Corporation") under the laws of the State of Delaware under the name
"Liberty Media Corporation." (TCI and TCI Mergerco are
1
<PAGE> 7
sometimes hereinafter referred to collectively as the "TCI Constituent
Corporations" and Liberty and Liberty Mergerco are sometimes hereinafter
referred to collectively as the "Liberty Constituent Corporations.") The TCI
Surviving Corporation and the Liberty Surviving Corporation are sometimes
hereinafter referred to collectively as the "Surviving Corporations."
1.2 Effective Time. Subject to the terms and provisions of this
Agreement, there shall be filed with the Delaware Secretary of State, as soon
as practicable on or after the Closing Date (as defined in Section 1.7), (i) a
certificate of merger with respect to the TCI Merger (the "TCI Certificate of
Merger"), in such form as is required by, and executed in accordance with, the
applicable provisions of the DGCL and (ii) a certificate of merger with respect
to the Liberty Merger (the "Liberty Certificate of Merger"), in such form as is
required by, and executed in accordance with, the applicable provisions of the
DGCL. The Mergers shall become effective simultaneously at the time of filing
of the TCI Certificate of Merger and the Liberty Certificate of Merger with the
Delaware Secretary of State or at such other time as may be provided in such
certificates of merger. The time at which the Mergers shall become effective
is referred to herein as the "Effective Time."
1.3 Effect of the Mergers. The Mergers shall have the effects set
forth in Sections 259, 260 and 261 of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time (i) all
the properties, rights, privileges, powers and franchises of the TCI
Constituent Corporations shall vest in the TCI Surviving Corporation, and all
debts, liabilities and duties of the TCI Constituent Corporations shall become
the debts, liabilities and duties of the TCI Surviving Corporation and (ii) all
the properties, rights, privileges, powers and franchises of the Liberty
Constituent Corporations shall vest in the Liberty Surviving Corporation, and
all debts, liabilities and duties of the Liberty Constituent Corporations shall
become the debts, liabilities and duties of the Liberty Surviving Corporation.
If, at any time after the Effective Time, either Surviving Corporation
considers or is advised that any deeds, bills of sale, assignments, assurances
or any other actions or things are necessary or desirable to vest, perfect or
confirm of record or otherwise in such Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets of either
TCI or TCI Mergerco, or Liberty or Liberty Mergerco, as the case may be, or
otherwise to carry out the intent and purposes of this Agreement, the officers
and directors of such Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of each of TCI and TCI Mergerco, or Liberty
and Liberty Mergerco, as the case may be, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
each of TCI and TCI Mergerco, or Liberty and Liberty Mergerco, as the case may
be, all such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in such Surviving Corporation or otherwise to
carry out the intent and purposes of this Agreement.
1.4 Certificate of Incorporation and By-laws of TCI/Liberty. From
and after the Effective Time, (a) the Certificate of Incorporation of
TCI/Liberty shall read in its entirety in the form set forth as Exhibit A and
(b) the By-laws of TCI/Liberty shall read in its entirety in the form set forth
as Exhibit B, in each case until thereafter amended as provided by law.
2
<PAGE> 8
1.5 Certificates of Incorporation and By-laws of the Surviving
Corporations.
(a) The Certificate of Incorporation of TCI, as in effect
immediately prior to the Effective Time, shall be amended, by virtue of the TCI
Merger, so as to read in its entirety in the form set forth as Exhibit C
hereto, and as so amended shall, from and after the Effective Time, be the
Certificate of Incorporation of the TCI Surviving Corporation until thereafter
further amended as provided by law. The Certificate of Incorporation of
Liberty, as in effect immediately prior to the Effective Time, shall be
amended, by virtue of the Liberty Merger, so as to read in its entirety in the
form set forth as Exhibit D hereto, and as so amended shall, from and after the
Effective Time, be the Certificate of Incorporation of the Liberty Surviving
Corporation until thereafter further amended as provided by law.
(b) The By-laws of TCI, as in effect immediately prior to
the Effective Time, shall be amended, immediately following the Effective Time,
so as to read in its entirety in the form set forth as Exhibit E hereto, and as
so amended shall be the By-laws of the TCI Surviving Corporation until
thereafter further amended as provided by law. The By-laws of Liberty, as in
effect immediately prior to the Effective Time, shall be amended immediately
following the Effective Time, so as to read in its entirety in the form set
forth as Exhibit F hereto, and as so amended shall be the By-laws of the
Liberty Surviving Corporation until thereafter further amended as provided by
law.
1.6 Directors and Officers of the Surviving Corporations. (a) The
initial directors of TCI Surviving Corporation and Liberty Surviving
Corporation shall be the respective persons that are directors of TCI and
Liberty, respectively, at the Effective Time, and all such directors will
continue to hold office from the Effective Time until their respective
successors are duly elected or appointed and qualify in the manner provided in
the respective Certificates of Incorporation and By-laws of the Surviving
Corporations, or as otherwise provided by applicable law. The initial officers
of TCI Surviving Corporation and Liberty Surviving Corporation shall be the
respective persons that are officers of TCI and Liberty, respectively, at the
Effective Time and all such officers will continue to hold office from the
Effective Time until their respective successors are duly appointed and qualify
in the manner provided in the respective By-laws of the Surviving Corporations,
or as otherwise provided by applicable law.
1.7 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Baker & Botts,
L.L.P., 885 Third Avenue, New York, New York, at 10:00 a.m., local time, on a
date to be selected by the parties, which shall be no later than the second
business day after the day on which the last of the conditions set forth in
Article VIII (other than any such conditions which, by their terms, are not
capable of being satisfied until the Closing Date) is satisfied or, where
permissible, waived, unless another place, date or time is agreed to by TCI and
Liberty (the date on which the Closing takes place being referred to herein as
the "Closing Date").
1.8 Definitions of "Subsidiary" and "affiliate". Subject to the
last sentence of this Section 1.8, as used in this Agreement, (i) a
"Subsidiary" of any party means any corporation
3
<PAGE> 9
or other organization, whether incorporated or unincorporated, of which (x), in
the case of a corporation, securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation are directly or
indirectly owned or controlled by such party, by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries or (y) in
the case of any organization or entity other than a corporation, such party,
one or more of its Subsidiaries, or such party and one or more of its
Subsidiaries (A) owns a majority of the equity interests thereof and (B) has
the power to elect or direct the election of a majority of the members of the
governing body thereof or otherwise has "control" (within the meaning of Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") over such organization or entity; and (ii) except for purposes of Section
3.6, the term "affiliate" has the meaning assigned to such term in Rule 12b-2
under the Exchange Act. For purposes of this Agreement (other than Section
3.6), (A) neither Liberty nor any of its Subsidiaries shall be deemed to be
Subsidiaries or affiliates of TCI or any of TCI's Subsidiaries; (B) neither TCI
nor any of its Subsidiaries (determined after applying the rule in clause (A)
of this sentence) shall be deemed to be affiliates of Liberty or any of
Liberty's Subsidiaries; (C) none of the affiliates (the "Liberty Affiliates")
of Liberty or any of its Subsidiaries (determined after applying the rules in
clauses (A) and (B) of this sentence) shall be deemed to be an affiliate of TCI
or any of TCI's Subsidiaries, unless such Liberty Affiliate would be such an
affiliate if neither TCI nor any of its Subsidiaries (1) owned any capital
stock of Liberty, (2) designated or nominated, or possessed any contractual
right to designate or nominate, any directors of Liberty or any of its
Subsidiaries or (3) otherwise possessed, directly or indirectly, the power to
direct or cause the direction of the management or policies of Liberty or any
of its Subsidiaries; and (D) none of the affiliates ("TCI Affiliates") of TCI
or any of TCI's Subsidiaries (determined after applying the rules in clauses
(A) and (B) of this sentence) shall be deemed to be an affiliate of Liberty or
any of Liberty's Subsidiaries, unless such TCI Affiliate would be such an
affiliate if neither TCI nor any of its Subsidiaries (1) owned any capital
stock of Liberty, (2) designated or nominated, or possessed any contractual
right to designate or nominate, any directors of Liberty or any of its
Subsidiaries or (3) otherwise possessed, directly or indirectly, the power to
direct or cause the direction of the management or policies of Liberty or any
of its Subsidiaries.
ARTICLE II
Conversion and Exchange of Securities;
Effect of Mergers on TCI and Liberty Stock Plans
2.1 Conversion of Securities. At the Effective Time, by virtue of
the Mergers and without any action on the part of any party hereto or the
holder of any of the following securities:
(a) Conversion of TCI Common Stock. Each share of the
Class A Common Stock, par value $1.00 per share, of TCI (the "TCI Class A
Stock") issued and outstanding immediately prior to the Effective Time (other
than shares of TCI Class A Stock to be
4
<PAGE> 10
cancelled pursuant to Section 2.1(f)) shall be converted into the right to
receive one validly issued, fully paid and non-assessable share of the Class A
Common Stock, par value $1.00 per share, of TCI/Liberty (the "TCI/Liberty Class
A Stock") and each share of the Class B Common Stock, par value $1.00 per
share, of TCI (the "TCI Class B Stock," and collectively with the TCI Class A
Stock, the "TCI Common Stock") issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled pursuant to Section 2.1(f))
shall be converted into the right to receive one validly issued, fully paid and
non-assessable share of the Class B Common Stock, par value $1.00 per share, of
TCI/Liberty (the "TCI/Liberty Class B Stock," and collectively with the
TCI/Liberty Class A Stock, the "TCI/Liberty Common Stock"). All such shares of
TCI Common Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of TCI/Liberty Common
Stock to be issued pursuant to this Section 2.1(a) (and any dividends or other
distributions payable pursuant to Section 2.6(g)) with respect thereto upon the
surrender of such certificate in accordance with Section 2.6, without interest.
(b) Conversion of TCI Preferred Stock. Subject to
Section 2.5, each share of the Convertible Preferred Stock, Series C, par value
$1.00 per share, of TCI (the "TCI Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of TCI Preferred
Stock to be cancelled pursuant to Section 2.1(f)) shall be converted into the
right to receive one validly issued, fully paid and non-assessable share of the
Class A Convertible Preferred Stock, par value $1.00 per share, of TCI/Liberty
(the "TCI/Liberty Convertible Preferred"), which shall have the designations,
preferences, rights and qualifications, limitations and restrictions set forth
in Article IV, Section B of Exhibit A hereto. Subject to Section 2.5, all such
shares of TCI Preferred Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares of
TCI/Liberty Convertible Preferred to be issued pursuant to this Section 2.1(b)
(and any dividends or other distributions payable pursuant to Section 2.6(g))
with respect thereto upon the surrender of such certificate in accordance with
Section 2.6, without interest.
(c) Conversion of Liberty Common Stock. Subject to
Section 2.6(f), (i) each share of the Class A Common Stock, par value $1.00 per
share, of Liberty (the "Liberty Class A Stock") issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
pursuant to Section 2.1(f)) shall be converted into the right to receive .975
of a validly issued, fully paid and non-assessable share of the TCI/Liberty
Class A Stock and (ii) each share of the Class B Common Stock, par value $1.00
per share, of Liberty (the "Liberty Class B Stock," and collectively with the
Liberty Class A Stock, the "Liberty Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
pursuant to Section 2.1(f)) shall be converted into the right to receive .975
of a validly issued, fully paid and non-assessable share of the TCI/Liberty
Class B Stock. All such shares of Liberty Common Stock shall no longer be
outstanding and shall automatically be
5
<PAGE> 11
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of TCI/Liberty Common
Stock to be issued pursuant to this Section 2.1(c) (and any dividends or other
distributions and any cash in lieu of a fractional share payable pursuant to
Sections 2.6(g) and 2.6(f)) with respect thereto upon the surrender of such
certificate in accordance with Section 2.6, without interest.
(d) Conversion of Liberty Class B and D Preferred Stock.
Each share of (i) Class B Redeemable Exchangeable Preferred Stock, par value
$.01 per share, of Liberty (the "Liberty Class B Preferred") and (ii) Class D
Redeemable Voting Preferred Stock, par value $.01 per share, of Liberty (the
"Liberty Class D Preferred") issued and outstanding immediately prior to the
Effective Time (other than shares of Liberty Class B Preferred and Liberty
Class D Preferred to be cancelled pursuant to Section 2.1(f)), shall be
converted into the right to receive that number of validly issued, fully paid
and non-assessable shares (and/or fraction of a share) of the Class B Preferred
Stock, par value $.01 per share, of TCI/Liberty ("TCI/Liberty Class B
Preferred") equal to the product of one multiplied by a fraction, the numerator
of which is the fair market value (as defined in Section 2.4) of the share of
Liberty Class B Preferred or Liberty Class D Preferred, as the case may be, to
be converted in accordance with this Section 2.1(d), and the denominator of
which is the fair market value of a share of TCI/Liberty Class B Preferred. All
such shares of Liberty Class B and Class D Preferred shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and the holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the shares
of TCI/Liberty Class B Preferred to be issued pursuant to this Section 2.1(d)
(and any dividends or other distributions payable pursuant to Section 2.6(g))
with respect thereto upon the surrender of such certificate in accordance with
Section 2.6, without interest. The TCI/Liberty Class B Preferred shall have
the designations, preferences, rights and qualifications, limitations and
restrictions set forth in Article IV, Section C of Exhibit A hereto (as
supplemented as contemplated by said Section). No certificates or scrip
representing a fractional share of TCI/Liberty Class B Preferred shall be
issued upon the surrender by any holder of certificates for Liberty Class B
Preferred or Liberty Class D Preferred. In lieu of such a fractional share, the
number of shares of TCI/Liberty Class B Preferred to which a holder shall be
entitled pursuant to this Section 2.1(d) shall be rounded down to the nearest
whole number (after taking into account all shares of Liberty Class B Preferred
and Liberty Class D Preferred owned by such holder).
(e) Conversion of Liberty Class E Preferred Stock. Each
share of the Class E, 6% Cumulative Redeemable Exchangeable Junior Preferred
Stock, par value $.01 per share, of Liberty (the "Liberty Class E Preferred",
and collectively with the Liberty Class B Preferred and Liberty Class D
Preferred, the "Liberty Preferred Stock") issued and outstanding immediately
prior to the Effective Time (other than shares of Liberty Class E Preferred to
be cancelled pursuant to Section 2.1(f)) shall be converted into the right to
receive one validly issued, fully paid and non-assessable share of the Class C,
6% Cumulative Redeemable Exchangeable Junior Preferred Stock, par value $.01
per share, of TCI/Liberty (the "TCI/Liberty Class C Preferred", and
collectively with the TCI/Liberty Class A Preferred and
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the TCI/Liberty Class B Preferred, the "TCI/Liberty Preferred Stock"), which
shall have the designations, preferences, rights and qualifications,
limitations and restrictions set forth in Article IV, Section D of Exhibit A.
All such shares of Liberty Class E Preferred shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares of
TCI/Liberty Class C Preferred to be issued pursuant to this Section 2.1(e) (and
any dividends or other distributions payable pursuant to Section 2.6(g)) with
respect thereto upon the surrender of such certificate in accordance with
Section 2.6, without interest.
(f) Treasury Stock. All shares of TCI Common Stock and
TCI Preferred Stock which are held immediately prior to the Effective Time by
TCI in its treasury, and all shares of Liberty Common Stock and Liberty
Preferred Stock which are held immediately prior to the Effective Time by
Liberty in its treasury, shall be cancelled and retired and shall cease to
exist, and no capital stock of TCI/Liberty or other consideration shall be
delivered with respect thereto.
(g) TCI Mergerco Stock. Each share of common stock, par
value $1.00 per share, of TCI Mergerco issued and outstanding immediately prior
to the Effective Time shall be converted into one share of the common stock,
par value $1.00 per share, of the TCI Surviving Corporation, and each
certificate evidencing ownership of shares of TCI Mergerco common stock shall
from and after the Effective Time evidence ownership of the same number of
shares of common stock of the TCI Surviving Corporation.
(h) Liberty Mergerco Stock. Each share of common stock,
par value $1.00 per share, of Liberty Mergerco issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock, par value $1.00 per share, of the Liberty Surviving Corporation,
and each certificate evidencing ownership of shares of Liberty Mergerco common
stock shall from and after the Effective Time evidence ownership of the same
number of shares of common stock of the Liberty Surviving Corporation.
2.2 TCI/Liberty Stock. Each of TCI Surviving Corporation and
Liberty Surviving Corporation shall, immediately following the Effective Time,
return to TCI/Liberty, without payment of any consideration therefor, any
shares of TCI/Liberty Common Stock held by it immediately prior to the
Effective Time, whereupon such shares shall be cancelled and retired by
TCI/Liberty and resume the status of authorized and unissued shares.
2.3 Transfer Books. At the Effective Time, the stock transfer
books of both TCI and Liberty shall be closed and no transfer of shares of
capital stock of TCI or Liberty shall thereafter be made.
2.4 Definition of "fair market value". For purposes of Section
2.1 and Section 2.6(f), the term "fair market value" means (i) with respect to
a share of either class of Liberty Common Stock, the average of the last
reported sale prices (or, if on any day no sale price is
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reported, the average of the quoted high and low bid prices on such day) of
such a share on the Nasdaq National Market System ("Nasdaq NMS") for the five
full trading days immediately preceding the Closing Date, and (ii) with respect
to a share of Liberty Class B Preferred, Liberty Class D Preferred or
TCI/Liberty Class B Preferred, the value for such share (or the midpoint of any
range of values for such share) in the opinion of CS First Boston Corporation
("CS First Boston") as of the date of their opinion (which shall be dated not
more than five business days prior to the Closing Date).
2.5 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of TCI Preferred Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by any stockholder
who is entitled to appraisal rights pursuant to Section 262 of the DGCL, who,
on a timely basis, makes and perfects a demand for appraisal of such shares in
accordance with all requirements and provisions of Section 262 of the DGCL, and
who does not effectively withdraw or lose the right to such appraisal
(collectively, "Dissenting Shares"), shall not be converted as described in
Section 2.1(b), but shall, from and after the Effective Time, represent only
the right to receive such consideration as may be determined to be due to such
stockholder with respect to such Dissenting Shares pursuant to Section 262 of
the DGCL; provided, however, that Dissenting Shares held by any stockholder
who, after the Effective Time, withdraws his demand for appraisal or loses his
right of appraisal with respect to such shares, in either case pursuant to
Section 262 of the DGCL, shall be deemed to have been converted, as of the
Effective Time, into the right to receive the shares of TCI/Liberty Class A
Preferred specified in Section 2.1(b), without interest.
2.6 Exchange of Shares.
(a) Appointment of Exchange Agent. On or before the
Closing Date, TCI/Liberty shall enter into an agreement approved by TCI and
Liberty (the "Exchange Agent Agreement") with an exchange agent jointly
selected by TCI and Liberty (the "Exchange Agent"), authorizing such Exchange
Agent to act as exchange agent hereunder.
(b) Letter of Transmittal. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented issued and outstanding shares of TCI Common
Stock, TCI Preferred Stock, Liberty Common Stock or Liberty Preferred Stock
(the "Certificates") whose shares were converted into the right to receive
shares of TCI/Liberty Common Stock or TCI/Liberty Preferred Stock pursuant to
Section 2.1: (i) a notice of the effectiveness of the Mergers and (ii) a letter
of transmittal (which shall state that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) with instructions for use in effecting the
surrender and exchange of the Certificates. Such notice, letter of transmittal
and instructions shall contain such provisions and be in such form as TCI and
Liberty may jointly specify.
(c) Exchange Procedure. Promptly following the
surrender, in accordance
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with such instructions, of a Certificate to the Exchange Agent (or such other
agent or agents as may be appointed by the Exchange Agent or TCI/Liberty
pursuant to the Exchange Agent Agreement), together with such letter of
transmittal (duly executed) and any other documents required by such
instructions or letter of transmittal, TCI/Liberty shall, subject to Section
2.6(d), cause to be distributed to the person in whose name such Certificate
shall have been issued (i) a certificate registered in the name of such person
representing the number of whole shares of TCI/Liberty Common Stock or
TCI/Liberty Preferred Stock, as the case may be, into which the shares
previously represented by the surrendered Certificate shall have been converted
at the Effective Time pursuant to Section 2.1 and (ii), in the case of a
Certificate which immediately prior to the Effective Time represented shares of
Liberty Common Stock, payment (which shall be made by check) of any cash
payable in lieu of a fractional share pursuant to Section 2.6(f). Each
Certificate so surrendered shall forthwith be cancelled.
(d) Unregistered Transfers of TCI or Liberty Stock. In
the event of a transfer of ownership of TCI Common Stock, TCI Preferred Stock,
Liberty Common Stock or Liberty Preferred Stock which is not registered in the
transfer records of TCI or Liberty, as the case may be, a certificate
representing the proper number of whole shares of TCI/Liberty Common Stock or
TCI/Liberty Preferred Stock may be issued (and cash in lieu of a fractional
share may be paid) to the transferee if the Certificate representing such TCI
Common Stock, TCI Preferred Stock, Liberty Common Stock or Liberty Preferred
Stock surrendered to the Exchange Agent in accordance with Section 2.6(c) is
properly endorsed for transfer or is accompanied by appropriate and properly
endorsed stock powers (in each case with appropriate signature guarantees) and
is otherwise in proper form to effect such transfer, if the person requesting
such transfer pays to the Exchange Agent any transfer or other taxes payable by
reason of such transfer or establishes to the satisfaction of the Exchange
Agent that such taxes have been paid or are not required to be paid.
(e) Lost, Stolen or Destroyed Certificates. In the event
any Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed satisfactory to TCI/Liberty and complying with any other
reasonable requirements imposed by TCI/Liberty, TCI/Liberty will cause to be
delivered to such person in respect of such lost, stolen or destroyed
Certificate the TCI/Liberty Common Stock or TCI/Liberty Preferred Stock and
other property deliverable in respect thereof as determined in accordance with
this Article II. TCI/Liberty may, in its discretion, require the owner of such
lost, stolen or destroyed Certificate to give TCI/Liberty a bond in such sum as
it may direct as indemnity against any claim that may be made against
TCI/Liberty or the applicable Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(f) No Fractional Shares of TCI/Liberty Common Stock. No
certificates or scrip representing fractional shares of TCI/Liberty Common
Stock shall be issued upon the surrender for exchange of Certificates which
immediately prior to the Effective Time represented shares of Liberty Common
Stock, no stock split or dividend with respect to shares of TCI/Liberty Common
Stock shall relate to any fractional share interest, and no such
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fractional share interest will entitle the owner thereof to vote as, or to any
other rights of, a stockholder of TCI/Liberty. In lieu of such fractional
shares, any holder of Liberty Common Stock who would otherwise be entitled to a
fractional share of TCI/Liberty Class A Stock or TCI/Liberty Class B Stock
(after taking into account all shares of Liberty Class A Stock or Liberty Class
B Stock, as the case may be, owned by such holder), will, upon surrender of his
Certificate to the Exchange Agent in accordance with Section 2.6(c), be
entitled to receive cash in an amount (rounded to the nearest whole cent)
determined by multiplying such fraction by the fair market value of a share of
Liberty Class A Stock or Liberty Class B Stock, as the case may be.
(g) No Dividends Before Surrender of Certificates. No
dividends or other distributions declared or made with respect to TCI/Liberty
Common Stock or TCI/Liberty Preferred Stock shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of TCI/Liberty Common
Stock or TCI/Liberty Preferred Stock represented thereby, until the holder of
record of such Certificate shall surrender such Certificate as provided herein.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of TCI/Liberty Common Stock or TCI/Liberty Preferred
Stock issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions, if any, theretofore
payable by TCI/Liberty with respect to such whole shares of TCI/Liberty Common
Stock or TCI/Liberty Preferred Stock the payment date for which was on or prior
to such surrender, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, if any, with a record date prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of TCI/Liberty Common Stock or TCI/Liberty
Preferred Stock.
(h) No Further Ownership Rights in TCI or Liberty Stock.
All shares of TCI/Liberty Common Stock or TCI/Liberty Preferred Stock issued
and all cash in lieu of fractional shares paid upon the surrender for exchange
of shares of TCI Common Stock, TCI Preferred Stock, Liberty Common Stock or
Liberty Preferred Stock in accordance with the terms hereof shall be deemed to
have been issued and paid in full satisfaction of all rights pertaining to such
shares of TCI Common Stock, TCI Preferred Stock, Liberty Common Stock or
Liberty Preferred Stock (provided, however, that after the Effective Time
TCI/Liberty shall, on behalf of TCI or Liberty, as the case may be, pay as
provided in Section 2.6(g) any dividends or make any other distributions (in
TCI/Liberty capital stock in the case of stock dividends) with a record date
prior to the Effective Time which may have been declared by TCI or Liberty on
such shares of TCI Common Stock, TCI Preferred Stock, Liberty Common Stock or
Liberty Preferred Stock prior to the date hereof or which may be declared after
the date hereof in accordance with the terms of this Agreement and which remain
unpaid at the Effective Time). Subject to Section 2.6(i), if, after the
Effective Time, Certificates are presented to a Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II.
(i) Abandoned Property Laws. Payment or delivery of any
shares of
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TCI/Liberty Common Stock or TCI/Liberty Preferred Stock (as the case may be),
any cash in lieu of fractional shares of TCI/Liberty Common Stock and any
dividends or distributions with respect to TCI/Liberty Common Stock or
TCI/Liberty Preferred Stock shall be subject to applicable abandoned property,
escheat and similar laws and neither TCI/Liberty nor either Surviving
Corporation shall be liable to any holder of shares of TCI Common Stock, TCI
Preferred Stock, Liberty Common Stock, Liberty Preferred Stock, TCI/Liberty
Common Stock or TCI/Liberty Preferred Stock for any such shares, for any
dividends or distributions with respect thereto or for any cash in lieu of
fractional shares which may be delivered to any public official pursuant to any
abandoned property, escheat or similar law.
2.7 Stock Options, SARs and Benefit Plans.
(a) TCI Stock Options and SARS. (i) At the Effective
Time, each outstanding option to purchase shares of TCI Class A Stock (a "TCI
Stock Option") issued by TCI pursuant to the Tele-Communications, Inc. 1992
Stock Incentive Plan (the "1992 TCI SIP") or the Tele-Communications, Inc. 1982
Incentive Stock Option Plan (the "TCI 1982 ISOP", and collectively with the
1992 TCI SIP, the "TCI Incentive Plans") or issued pursuant to a TCI
Predecessor Plan (as defined below) and assumed by TCI, or otherwise issued by
TCI, whether vested or unvested, shall be assumed by TCI/Liberty. Thereafter,
each TCI Stock Option shall be deemed to constitute an option to purchase, on
the same terms and conditions as were applicable under such TCI Stock Option,
that number of shares of TCI/Liberty Class A Stock which is equal to the number
of shares of TCI Class A Stock that were subject to such TCI Stock Option
immediately prior to the Effective Time, at an exercise price per share of
TCI/Liberty Class A Stock equal to the exercise price per share of TCI Class A
Stock subject to such TCI Stock Option immediately prior to the Effective Time.
The assumption hereinabove provided for shall be accomplished in a manner that
shall, in all respects, comply with the requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), with respect to each TCI Stock Option
that is an "incentive stock option" (as defined in Section 422(b) of the Code)
including any requirement that the assumption of such TCI Stock Option by
TCI/Liberty shall not give to the holder any additional benefits that he did
not have prior to such assumption, and TCI/Liberty may make any changes that it
deems necessary or desirable with respect to such assumption in order to
satisfy the requirements of the Code. For purposes of this Agreement, the term
"TCI Predecessor Plans" means (x) the United Artists Entertainment Company 1988
Incentive and Non-Qualified Stock Option Plan, which was terminated on or
before December 2, 1991 and as to which outstanding options were assumed by TCI
pursuant to the Agreement and Plan of Merger, dated as of June 6, 1991, between
United Artists Entertainment Company ("UAE") and TCI (the "1991 Merger
Agreement") and (y) the United Artists Communications, Inc. 1982 Stock Option
Plan and the United Artists Communications, Inc. 1983 Stock Option Plan, which
were each terminated on or before May 25, 1989 and as to which outstanding
options were assumed by UAE pursuant to the Second Amended and Restated
Agreement and Plan of Reorganization and Merger, dated as of March 8, 1988,
among United Artists Communications, Inc., United Cable Television Corporation
and TCI, which options, in turn, were assumed by TCI pursuant to the 1991
Merger Agreement.
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(ii) At the Effective Time, each outstanding stock
appreciation right with respect to shares of TCI Class A Stock (a "TCI SAR")
issued by TCI pursuant to a TCI Incentive Plan or issued pursuant to a TCI
Predecessor Plan and assumed by TCI, or otherwise issued by TCI, whether vested
or unvested, shall be assumed by TCI/Liberty. Thereafter, each TCI SAR shall
be deemed to constitute a stock appreciation right, on the same terms and
conditions as were applicable under such TCI SAR, with respect to that number
of shares of TCI/Liberty Class A Stock which is equal to the number of shares
of TCI Class A Stock that were subject to such TCI SAR immediately prior to the
Effective Time, at an exercise price per stock appreciation right equal to (A)
in the case of a TCI SAR issued in tandem with TCI Stock Options, the exercise
price per share of the related TCI Stock Option assumed by TCI/Liberty as
determined above and (B) in the case of a free standing TCI SAR, the base price
per share of such TCI SAR immediately prior to the Effective Time.
(iii) If the TCI/Liberty SIP (as defined in Section
2.7(e)) is approved (or deemed approved) by stockholders at the TCI
Stockholders Meeting (as defined in Section 3.1) and the Liberty Stockholders
Meeting (as defined in Section 3.2), respectively, the TCI Surviving
Corporation shall use its reasonable best efforts to cause each holder of a TCI
Stock Option or TCI SAR that is assumed by TCI/Liberty to surrender such TCI
Stock Option or TCI SAR, as promptly as practicable after the Effective Time,
to TCI/Liberty in exchange for a stock option or stock appreciation right,
respectively, granted under the TCI/Liberty SIP, which stock option or stock
appreciation right shall contain terms and conditions that are no less
favorable to the holder thereof than those under such assumed TCI Stock Option
or TCI SAR, as the case may be (subject to such changes as may be agreed to by
TCI and Liberty and the holder of such TCI Stock Option or TCI SAR).
(b) Liberty Stock Options and SARS. (i) At the
Effective Time, each outstanding option to purchase shares of Liberty Class A
Stock (a "Liberty Stock Option") issued by Liberty (whether pursuant to the
Liberty Media Corporation 1991 Stock Incentive Plan (the "Liberty SIP") or
otherwise), whether vested or unvested, shall be assumed by TCI/Liberty.
Thereafter, each Liberty Stock Option shall be deemed to constitute an option
to purchase, on the same terms and conditions as were applicable under such
Liberty Stock Option, that number of shares of TCI/Liberty Class A Stock which
is equal to the number of shares of Liberty Class A Stock that were subject to
such Liberty Stock Option immediately prior to the Effective Time multiplied by
.975, rounded up to the nearest whole number after taking into account all
Liberty Stock Options held by the holder of such Liberty Stock Option, at an
exercise price per share of TCI/Liberty Class A Stock equal to the amount
determined by dividing the exercise price per share of Liberty Class A Stock
subject to such Liberty Stock Option immediately prior to the Effective Time by
.975, and rounding the resulting number down to the nearest whole cent. The
assumption hereinabove provided for shall be accomplished in a manner that
shall, in all respects, comply with the requirements of the Code with respect
to each Liberty Stock Option that is an "incentive stock option" (as defined in
Section 422(b) of the Code) including any requirement that the assumption of
such Liberty Stock Option by TCI/Liberty shall not give to the holder any
additional benefits that he did not have prior to such assumption, and
TCI/Liberty may make any changes that it deems necessary
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or desirable with respect to such assumption in order to satisfy the
requirements of the Code.
(ii) At the Effective Time, each outstanding stock
appreciation right with respect to shares of Liberty Class A Stock (a "Liberty
SAR") issued by Liberty pursuant to the Liberty SIP, or otherwise issued by
Liberty, whether vested or unvested, shall be assumed by TCI/Liberty.
Thereafter, each Liberty SAR shall be deemed to constitute a stock appreciation
right, on the same terms and conditions as were applicable under such Liberty
SAR, with respect to that number of shares of TCI/Liberty Class A Stock which
is equal to the number of shares of Liberty Class A Stock that were subject to
such Liberty SAR immediately prior to the Effective Time multiplied by .975,
rounded up to the nearest whole number (after taking into account all stock
appreciation rights owned by a holder), at an exercise price per stock
appreciation right equal to (A) in the case of a Liberty SAR issued in tandem
with Liberty Stock Options, the exercise price per share of the related Liberty
Stock Option assumed by TCI/Liberty as determined above and (B) in the case of
a free standing Liberty SAR, the amount determined by dividing the base price
per share of such Liberty SAR immediately prior to the Effective Time by .975,
and rounding the resulting number down to the nearest whole cent.
(iii) If the TCI/Liberty SIP is approved (or deemed
approved) by stockholders at the TCI Stockholders Meeting and the Liberty
Stockholders Meeting, respectively, the Liberty Surviving Corporation shall use
its reasonable best efforts to cause each holder of a Liberty Stock Option or
Liberty SAR that is assumed by TCI/Liberty to surrender such Liberty Stock
Option or Liberty SAR, as promptly as practicable after the Effective Time, to
TCI/Liberty in exchange for a stock option or stock appreciation right,
respectively, granted under the TCI/Liberty SIP, which stock option or stock
appreciation right shall contain terms and conditions that are no less
favorable to the holder thereof than those under such assumed Liberty Stock
Option or Liberty SAR, as the case may be (subject to such changes as may be
agreed to by TCI and Liberty and the holder of such Liberty Stock Option or
Liberty SAR). Notwithstanding the foregoing, the terms of the TCI/Liberty
stock options and stock appreciation rights issued under the TCI/Liberty SIP
may contain such variations from the terms of any Liberty Stock Options or
Liberty SAR's, respectively, exchanged therefor which were not issued under a
plan complying with Rule 16b-3 under the Exchange Act, as TCI/Liberty may
determine are necessary or desirable for such TCI/Liberty stock options and
stock appreciation rights to comply with Rule 16b-3.
(c) Actions by TCI and Liberty. Each of TCI and Liberty
shall distribute to each holder of a TCI Stock Option or a TCI SAR, or a
Liberty Stock Option or a Liberty SAR, as the case may be, not less than 10
business days prior to the TCI Stockholders Meeting and the Liberty
Stockholders Meeting, respectively, (i) an appropriate notice setting forth
such holder's rights under the related TCI Incentive Plan, TCI Predecessor Plan
or Liberty SIP and/or the agreement between such holder and TCI or Liberty, as
the case may be, evidencing the grant of such TCI Stock Option, TCI SAR,
Liberty Stock Option or Liberty SAR to such holder and (ii) a form of
assumption agreement between such holder and TCI/Liberty (an
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"Assumption Agreement"), containing terms consistent with the provisions
hereof. No holder of a TCI Stock Option, TCI SAR, Liberty Stock Option or
Liberty SAR shall be entitled to receive upon exercise thereof following the
Effective Time TCI/Liberty Class A Stock or any payment from TCI/Liberty in
respect thereof unless such holder shall have executed and delivered an
Assumption Agreement to TCI/Liberty.
(d) Actions by TCI/Liberty. TCI/Liberty shall take all
corporate action necessary to reserve for issuance a sufficient number of
shares of TCI/Liberty Class A Stock for delivery upon exercise of (i) TCI Stock
Options, Liberty Stock Options or Liberty SARS assumed by it pursuant to this
Section 2.7 and the Assumption Agreements or (ii)(x) stock options exchanged
for such TCI Stock Options and Liberty Stock Options and (y) stock appreciation
rights exchanged for such Liberty SARS, in accordance with Sections 2.7(a)(iii)
and 2.7(b)(iii). As soon as practicable after the Effective Time, TCI/Liberty
shall file a registration statement on Form S-3 or Form S-8 (which may be filed
as a post-effective amendment to the Registration Statement (as defined in
Section 3.3)), as the case may be (or any successor forms), or another
appropriate form with respect to the shares of TCI/Liberty Class A Stock
subject to such options and stock appreciation rights, and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements for so long as such options remain outstanding.
(e) TCI/Liberty Stock Incentive Plan. TCI and Liberty
shall cause TCI/Liberty to adopt a stock incentive plan (the "TCI/Liberty SIP")
which satisfies the requirements of Rule 16b-3 under the Exchange Act. Each of
TCI and Liberty shall cause the TCI Liberty SIP to be presented to their
stockholders for approval at the TCI Stockholders Meeting and the Liberty
Stockholders Meeting, respectively. The TCI/Liberty SIP shall contain terms
and provisions that are substantially similar to those contained in the 1992
TCI SIP (with such changes thereto as may be necessary to provide the holders
of stock appreciation rights granted by Liberty in 1991 to obtain substantially
identical TCI/Liberty stock appreciation rights upon any exchange thereof in
accordance with Section 2.7(b)(iii)).
(f) Stock Plans. (i) TCI shall take all actions
necessary to amend the Tele-Communications, Inc. Employee Stock Purchase Plan
(the "TCI ESPP") prior to the Effective Time to provide that the TCI ESPP shall
not purchase any capital stock of TCI or the TCI Surviving Corporation at or
after the Effective Time. As of the Effective Time, the 1992 TCI SIP (except
to the extent that the terms thereof are incorporated by reference in, or
otherwise govern the construction, interpretation or administration of, any TCI
Stock Options or TCI SARs assumed by TCI/Liberty) shall automatically
terminate. TCI and its Subsidiaries shall comply with all requirements
regarding withholding of taxes in connection with the cancellations,
terminations and other actions described in this Section 2.7(f)(i).
(ii) As of the Effective Time, the Liberty SIP
(except to the extent that the terms thereof are incorporated by reference in,
or otherwise govern the construction, interpretation or administration of, any
Liberty Stock Options or Liberty SARs assumed by TCI/Liberty) shall
automatically terminate.
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(g) Other Employment Benefit Plans. The effects of the
Mergers, if any, on the other employee benefit plans and arrangements of TCI
and its Subsidiaries and Liberty and its Subsidiaries shall be as set forth on
Exhibit G attached hereto. TCI and its Subsidiaries and Liberty and its
Subsidiaries shall comply with all requirements regarding withholding of taxes
in connection with any actions and matters described on Exhibit G.
ARTICLE III
Certain Actions
3.1 TCI Stockholder Meeting. Subject to the fiduciary duties of
the Board of Directors of TCI (the "TCI Board") under applicable law (as
determined by the TCI Board in good faith after consultation with and based
upon advice of counsel) (i) TCI and the TCI Board will take all action
necessary in accordance with applicable law and TCI's Restated Certificate of
Incorporation and By-laws to duly call and hold, on a date to be mutually
agreed upon by TCI and Liberty, a meeting of TCI's stockholders (the "TCI
Stockholders Meeting") for the purpose of considering and voting upon (x) this
Agreement (the "Merger Proposal") and (y) the TCI/Liberty SIP and (ii) the TCI
Board will recommend that TCI's stockholders vote in favor of approval and
adoption of the Merger Proposal and approval of the TCI/Liberty SIP, and TCI
will use reasonable efforts to solicit from its stockholders proxies in favor
of approval and adoption of the Merger Proposal and approval of the TCI/Liberty
SIP.
3.2 Liberty Stockholder Meeting. Subject to the fiduciary duties
of the Board of Directors of Liberty (the "Liberty Board") under applicable law
(as determined by the Liberty Board in good faith after consultation with and
based upon advice of counsel), (i) Liberty and the Liberty Board will take all
action necessary in accordance with applicable law and Liberty's Restated
Certificate of Incorporation and By-laws to duly call and hold, on a date to be
mutually agreed upon by Liberty and TCI, a meeting of Liberty's stockholders
(the "Liberty Stockholders Meeting") for the purpose of considering and voting
upon (x) the Merger Proposal and (y) the TCI/Liberty SIP and (ii) the Liberty
Board will recommend that Liberty's stockholders vote in favor of approval and
adoption of the Merger Proposal and approval of the TCI/Liberty SIP, and
Liberty will use reasonable efforts to solicit from its stockholders proxies in
favor of approval and adoption of the Merger Proposal and approval of the
TCI/Liberty SIP.
3.3 Proxy Statement and Registration Statement. TCI and Liberty
shall prepare and file with the Securities and Exchange Commission (the
"Commission") a preliminary joint proxy statement relating to the transactions
contemplated by this Agreement (the "Joint Proxy Statement") as soon as
reasonably practicable, and shall use their respective best efforts to promptly
respond to the comments of the Commission thereon. TCI and Liberty shall
prepare, and shall cause TCI/Liberty to file with the Commission as soon as
practicable after the Commission clears the Joint Proxy Statement, a
registration statement on Form S-4 (or any successor form), which shall include
as a prospectus the Joint Proxy Statement in the form
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cleared for mailing to stockholders by the Commission (the "Joint Proxy
Statement/Prospectus"), with respect to the TCI/Liberty Common Stock and
TCI/Liberty Class C Preferred Stock to be issued in the Mergers and the
TCI/Liberty Class A Stock issuable upon exercise of (i) TCI Stock Options,
Liberty Stock Options and Liberty SARs to be assumed by TCI/Liberty or (ii)
TCI/Liberty stock options and TCI/Liberty stock appreciation rights granted
under the TCI/Liberty SIP and exchanged for TCI Stock Options and Liberty Stock
Options or TCI SARs and Liberty SARs, as the case may be (the "Registration
Statement"). TCI and Liberty shall each use reasonable efforts to cause the
Registration Statement to be declared effective as soon as practicable after
such filing. As promptly as practicable after the Registration Statement is
declared effective by the Commission, each of TCI and Liberty shall mail the
Joint Proxy Statement/Prospectus to its respective stockholders. TCI and
Liberty shall cause TCI/Liberty to take any reasonable actions required to be
taken under applicable state securities or "blue sky" laws in connection with
the issuance of the securities of TCI/Liberty to be covered by the Registration
Statement. Each of TCI and Liberty shall notify the other promptly of the
receipt of any comments of the Commission and of any request by the Commission
for amendments or supplements to the Joint Proxy Statement, the Joint Proxy
Statement/Prospectus or the Registration Statement or for additional
information and shall supply one another with copies of all correspondence with
the Commission with respect to any of the foregoing filings. If at any time
prior to the TCI Stockholders Meeting or the Liberty Stockholders Meeting any
event should occur relating to TCI or any of its Subsidiaries or any of their
respective officers, directors or affiliates which should be described in an
amendment of, or supplement to, the Joint Proxy Statement/Prospectus or the
Registration Statement, TCI shall promptly inform Liberty. If at any time
prior to the Liberty Stockholders Meeting or the TCI Stockholders Meeting any
event should occur relating to Liberty or any of its Subsidiaries or any of
their respective officers, directors or affiliates which should be described in
an amendment of, or supplement to, the Joint Proxy Statement/Prospectus or the
Registration Statement, Liberty shall promptly inform TCI. Whenever any event
occurs which should be described in an amendment of, or a supplement to, the
Joint Proxy Statement/Prospectus or the Registration Statement, TCI and Liberty
shall, upon learning of such event, cooperate with each other to promptly
prepare, file and clear with the Commission and (if required by applicable law)
mail such amendment or supplement to the stockholders of TCI and Liberty.
3.4 Letters from Accountants. TCI will use its reasonable efforts
to cause to be delivered to Liberty a letter of KPMG Peat Marwick, TCI's
independent auditors, dated a date within two business days before the date on
which the Registration Statement becomes effective and addressed to Liberty, in
form reasonably satisfactory to Liberty and customary in scope and substance
for letters delivered by nationally recognized independent auditors in
connection with registration statements similar to the Registration Statement.
Liberty will use its reasonable efforts to cause to be delivered to TCI a
letter of KPMG Peat Marwick, Liberty's independent auditors, dated a date
within two business days before the date on which the Registration Statement
becomes effective and addressed to TCI, in form reasonably satisfactory to TCI
and customary in scope and substance for letters delivered by nationally
recognized independent auditors in connection with registration statements
similar to the Registration Statement.
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3.5 Release of Escrowed TCI Common Stock. Liberty and TCI shall
use their respective reasonable efforts, and shall fully cooperate with each
other, to cause the release to Liberty Surviving Corporation, or any wholly
owned Subsidiary of Liberty Surviving Corporation, immediately after the
Effective Time, of all shares of TCI Common Stock deposited with Chemical Bank,
N.A. (as successor to Manufacturers Hanover Trust Company), as escrow agent,
pursuant to that certain escrow agreement referenced in the terms of the
Liberty Class B Preferred.
3.6 Identification of Affiliates. Each of TCI and Liberty shall
deliver to the other a letter identifying all persons who such party knows are
or such party has reason to believe may be, as of the date of the TCI
Stockholders Meeting and Liberty Stockholders Meeting, its "affiliates" for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"). Each of TCI and Liberty shall use reasonable efforts to
cause each person who is identified as an "affiliate" in the letter referred to
above to deliver to the other party, on or prior to the Closing Date, a written
agreement, in substantially the form annexed hereto as Exhibit H, that such
person will not offer to sell or otherwise dispose of any of the shares of
TCI/Liberty Common Stock or TCI/Liberty Preferred Stock issued to such person
pursuant to the Mergers in violation of the Securities Act and the rules and
regulations thereunder.
3.7 State Takeover Statutes. Liberty will, upon the request of
TCI, take all reasonable steps to (i) exempt the Liberty Merger from the
requirements of any applicable state takeover law and (ii) assist in any
challenge by TCI to the validity or applicability to the Liberty Merger of any
state takeover law. TCI will, upon the request of Liberty, take all reasonable
steps to (x) exempt the TCI Merger from the requirements of any applicable
state takeover law and (y) assist in any challenge by Liberty to the validity
or applicability to the TCI Merger of any state takeover law.
3.8 Possible Restructuring. Each of the parties hereto shall use
its reasonable efforts, and shall consult and fully cooperate with each other,
to cause the transactions contemplated by this Agreement to be completely tax
free for Federal income tax purposes to each of the parties to this Agreement
and to the shareholders of TCI and Liberty (other than in respect of cash paid
in lieu of fractional shares pursuant to Section 2.6(f) or for Dissenting
Shares). Without limiting the generality of the foregoing, and subject to
compliance with any legal requirements, if necessary to obtain an opinion of
counsel to the foregoing effect the parties agree that either (i) TCI shall,
and shall cause its Subsidiaries to, sell to Liberty or one or more
Subsidiaries of Liberty, immediately prior to the TCI Merger, such properties
and assets owned by TCI or such Subsidiaries as may be required to obtain such
opinion (the "Asset Transfer Alternative") or (ii) Liberty shall be merged with
and into TCI, with TCI continuing as the surviving corporation (the
"Alternative Merger"). If the parties cannot mutually agree as to which of the
foregoing alternatives to pursue or as to the valuation of properties and
assets proposed to be sold pursuant to the Asset Transfer Alternative, then the
parties shall pursue the Alternative Merger. Any sale of properties and assets
in connection with the Asset Transfer Alternative shall be for the fair market
value thereof, such value to be determined by mutual agreement of TCI and
Liberty. In the event the Alternative Merger is pursued, the parties
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agree to negotiate in good faith an amendment to this Agreement providing for
(x) the Alternative Merger and (y) each holder of Liberty Common Stock or
Liberty Preferred Stock receiving, in lieu of TCI/Liberty Common Stock or TCI
Liberty Preferred Stock, shares of TCI Common Stock or a new series of TCI
preferred stock, as the case may be, on substantially the same terms (and based
on the same exchange ratios) as provided in Section 2.1. The parties agree
that no further changes shall be made in any such amendment to the terms of
this Agreement, except to the extent that changes are necessitated due to the
structure of the Alternative Merger, in which event any such changes shall not
alter materially the economic benefits of the provisions hereof to the
respective stockholders of TCI or Liberty.
3.9 Reasonable Efforts. Subject to the terms and conditions of
this Agreement and applicable law, each of the parties hereto shall use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
as soon as reasonably practicable, including such actions or things as any
other party hereto may reasonably request in order to cause any of the
conditions to such other party's obligation to consummate such transactions
specified in Article VIII to be fully satisfied. Without limiting the
generality of the foregoing, the parties shall (and shall cause their
respective Subsidiaries, and use their reasonable efforts to cause their
respective affiliates, directors, officers, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide reasonable assistance to each other in (i) the preparation and filing
with the Commission of the Joint Proxy Statement, the Joint Proxy
Statement/Prospectus and the Registration Statement and any necessary
amendments of, or supplements to, any thereof; (ii) seeking to have such Joint
Proxy Statement cleared, and the Registration Statement declared effective, by
the Commission as soon as reasonably practicable after filing with the
Commission; (iii) taking such actions as may reasonably be required under
applicable state securities or "blue sky" laws in connection with the issuance
of the securities covered by the Registration Statement; (iv) obtaining all
necessary consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications or other permission or action by, and giving all
necessary notices to and making all necessary filings with and applications and
submissions to, any Governmental Entity (as defined in Section 4.5(v)) or other
person or entity; (v) filing all Notification and Report Forms required under
the HSR Act (as defined in Section 4.5 (ii)(F)) as a result of the transactions
contemplated by this Agreement and promptly complying with any requests for
additional information and documentary material that may be requested pursuant
to the HSR Act; (vi) lifting any permanent or preliminary injunction or
restraining order or other similar order issued or entered by any court or
Governmental Entity (an "Injunction") of any type referred to in Section
8.1(d); (vii) developing and implementing reasonable tax planning measures for
TCI/Liberty and each of the Surviving Corporations in light of the transactions
contemplated hereby; (viii) providing all such information about such party,
its Subsidiaries and its officers, directors, partners and affiliates and
making all applications and filings as may be necessary or reasonably requested
in connection with any of the foregoing; and (ix) in general, consummating and
making effective the transactions contemplated hereby; provided, however, that
in order to obtain any consent, approval, waiver, license, permit,
authorization, registration, qualification or other
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permission or action or the lifting of any Injunction referred to in clause
(iv) or (vi) of this sentence, (x) no party shall be required to pay any
consideration, to divest itself of any of, or otherwise rearrange the
composition of, its assets or to agree to any conditions or requirements which
are materially adverse or burdensome and (y) without the other party's prior
consent, each of Liberty and TCI shall not, and shall not permit any of its
Subsidiaries or affiliates to, amend, or agree to amend, in any material
respect any License (as defined in Section 4.9) or Contract (as defined in
Section 4.5(iv)). Prior to making any application to or filing with any
Governmental Entity or other person or entity in connection with this
Agreement, each of TCI and Liberty shall provide the other party with drafts
thereof and afford the other party a reasonable opportunity to comment on such
drafts.
3.10 Quotation on Nasdaq NMS. TCI/Liberty shall use its reasonable
best efforts to cause the shares of TCI/Liberty Common Stock and TCI/Liberty
Class C Preferred Stock to be issued in the Mergers and upon exercise of TCI
Stock Options, Liberty Stock Options and Liberty SARs (or TCI/Liberty stock
options or stock appreciation rights exchanged therefor) to be included in the
Nasdaq NMS upon issuance.
3.11 Voting Agreement.
(a) TCI shall, and shall cause each of its Subsidiaries
to, vote all shares of Liberty Common Stock and, if eligible to vote, shares of
Liberty Preferred Stock owned by it, at any meeting of stockholders of Liberty
or in connection with any action taken by written consent of stockholders of
Liberty, (i) in favor of the transactions contemplated by this Agreement
(including, at the Liberty Stockholders Meeting, in favor of the Merger
Proposal and the TCI/Liberty SIP) and (ii), except as otherwise agreed by
Liberty, against any action or agreement that would impede or interfere with
the transactions contemplated by this Agreement.
(b) Liberty shall, and shall cause each of its
Subsidiaries to, vote all shares of TCI Common Stock owned by it at any meeting
of stockholders of TCI or in connection with any action taken by written
consent of stockholders of TCI, (i) in favor of the transactions contemplated
by this Agreement (including, at the TCI Stockholders Meeting, in favor of the
Merger Proposal and the TCI/Liberty SIP) and (ii), except as otherwise agreed
by TCI, against any action or agreement that would impede or interfere with the
transactions contemplated by this Agreement.
3.12 Restrictions on Transfer.
(a) TCI shall not, and shall not permit any of its
Subsidiaries to, prior to the Liberty Merger, sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, or grant any right (including, without
limitation, as to voting) with respect to, any shares of Liberty Common Stock
or Liberty Preferred Stock owned by it; provided, that the foregoing shall not
(i) prevent TCI from transferring any such shares to one or more Subsidiaries
of TCI, or a Subsidiary of TCI from transferring any such shares to TCI and/or
one or more other
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Subsidiaries of TCI or (ii) be violated by any pledge or other hypothecation in
effect on the date of this Agreement.
(b) Liberty shall not, and shall not permit any of its
Subsidiaries to, prior to the TCI Merger, sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, or grant any right (including, without
limitation, as to voting) with respect to, any shares of TCI Common Stock owned
by it; provided, that the foregoing shall not (i) prevent Liberty from
transferring any such shares to one or more Subsidiaries of Liberty, or a
Subsidiary of Liberty from transferring any such shares to Liberty and/or one
or more other Subsidiaries of Liberty or (ii) be violated by any pledge or
other hypothecation in effect on the date of this Agreement or the escrow of
shares of TCI Class A Stock pursuant to the terms of the Liberty Class B
Preferred.
3.13 Directors and Executive Officers of TCI/Liberty at the
Effective Time. TCI and Liberty shall take such action as may be necessary to
cause the directors and executive officers of TCI/Liberty, immediately prior to
the Effective Time, to consist solely of those persons indicated on Exhibit I
hereto.
ARTICLE IV
Representations and Warranties of Liberty
Liberty hereby represents and warrants to each of TCI and TCI/Liberty
as follows:
4.1 Organization and Qualification. Each of Liberty and its
"significant subsidiaries" (as defined in Rule 1-02 of Regulation S-X of the
Rules and Regulations of the Commission) (i) is a corporation or partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, (ii) has all requisite
corporate or partnership power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and (iii)
is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or license
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed or in good standing has not had, either individually or
in the aggregate, a material adverse effect on the business, assets, results of
operations or financial condition of Liberty and its Subsidiaries, taken as a
whole. Each entity in which Liberty, directly or through one or more of its
Subsidiaries, has an investment accounted for by the equity method which is
material to the business, assets, results of operations or financial condition
of Liberty and its Subsidiaries, taken as a whole (the "Liberty Equity
Affiliates"), to the knowledge of Liberty, is a corporation or partnership (A)
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, (B) has all requisite
corporate or partnership power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and (C) is
duly qualified to do business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it, or the nature of its
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activities, makes such qualification necessary, except in each case where such
failure to be so existing and in good standing or to have such power and
authority or to be so qualified to do business and be in good standing has not
had, individually or in the aggregate, a material adverse effect on the
business, assets, results of operations or financial condition of Liberty and
its Subsidiaries, taken as a whole. Liberty has delivered to TCI true and
complete copies of its Restated Certificate of Incorporation and By-laws, as
amended through and in effect on the date hereof.
4.2 Authorization and Validity of Agreement. Liberty has all
requisite corporate power and authority to enter into this Agreement and,
subject to obtaining the approval of its stockholders specified in Section
4.15, to perform its obligations hereunder and consummate the transactions
contemplated hereby. The execution, delivery and performance by Liberty of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the Liberty Board and by all other necessary
corporate action on the part of Liberty, subject, in the case of the
consummation by it of the Liberty Merger, to such approval of Liberty's
stockholders. This Agreement has been duly executed and delivered by Liberty
and is a valid and binding obligation of Liberty, enforceable in accordance
with its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies).
4.3 Capitalization. The authorized capital stock of Liberty
consists of 300 million shares of Liberty Class A Stock, 100 million shares of
Liberty Class B Stock, 11,000 shares of Class A Redeemable Convertible
Preferred Stock ("Liberty Class A Preferred"), 106,000 shares of Liberty Class
B Preferred, 400,000 shares of Class C Redeemable Exchangeable Preferred Stock
("Liberty Class C Preferred"), 18,000 shares of Liberty Class D Preferred, two
million shares of Liberty Class E Preferred and five million shares of Class F
Serial Preferred Stock ("Liberty Class F Preferred"). As of the close of
business on January 18, 1994, (i) 87,513,778 shares of Liberty Class A Stock
were issued and outstanding, 56,000 shares were reserved for issuance upon
exercise of outstanding Liberty Stock Options and no shares were held by
Liberty in its treasury or by any Subsidiary of Liberty; (ii) 43,340,320 shares
of Liberty Class B Stock were issued and outstanding and no shares were issued
and held by Liberty in its treasury or by any Subsidiary of Liberty; (iii) no
shares of Liberty Class A Preferred were issued and outstanding or held by
Liberty in its treasury or by any Subsidiary of Liberty; (iv) 105,353 shares of
Liberty Class B Preferred were issued and outstanding and no shares were held
by Liberty in its treasury or by any Subsidiary of Liberty; (iv) no shares of
Liberty Class C Preferred were issued or outstanding or held by Liberty in its
treasury or by any Subsidiary of Liberty; (v) 17,238 shares of Liberty Class D
Preferred were issued and outstanding and no shares were held by Liberty in its
treasury or by any Subsidiary of Liberty; (vi) 1,675,096 shares of Liberty
Class E Preferred were issued and outstanding and no shares were held by
Liberty in its treasury or by any Subsidiary of Liberty; and (vii) no shares of
Liberty Class F Preferred were issued and outstanding or held by Liberty in its
treasury or by any Subsidiary of Liberty. All issued and outstanding shares of
Liberty Common Stock and Liberty Preferred Stock have been validly issued and
are fully paid and nonassessable, are not
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subject to and have not been issued in violation of any preemptive rights and
have not been issued in violation of any Federal or state securities laws.
There are no issued or outstanding bonds, debentures, notes or other
indebtedness of Liberty or any of its Subsidiaries which have the right to vote
(or which are convertible into other securities having the right to vote) on
any matters on which stockholders may vote ("Voting Debt"). Except as set
forth on Schedule 4.3, there are not as of the date hereof, and will not at any
time to and including the Effective Time be, any outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments or any other
agreements of any character to or by which Liberty or any of its Subsidiaries
is a party or is bound which, directly or indirectly, obligate Liberty or any
of its Subsidiaries to issue, deliver or sell or cause to be issued, delivered
or sold any additional shares of Liberty Common Stock or Liberty Preferred
Stock or any other capital stock, equity interest or Voting Debt of Liberty or
any Subsidiary of Liberty or any securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for any such shares,
interests or Voting Debt or obligating Liberty or any of its Subsidiaries to
grant, extend or enter into any such subscription, option, warrant, call or
right. Since the close of business on January 18, 1994, no shares of capital
stock of Liberty have been issued or have been transferred from Liberty's
treasury. Immediately after the Effective Time, there will be no subscription,
option, warrant, call, right, commitment or agreement which will entitle
(conditionally or unconditionally) any person or entity to purchase or
otherwise acquire, or will obligate (conditionally or unconditionally) the
Liberty Surviving Corporation (as Liberty's successor) or any Subsidiary of the
Liberty Surviving Corporation that was a Subsidiary of Liberty to sell, issue
or deliver, any shares of capital stock, any other equity interest or any
Voting Debt of the Liberty Surviving Corporation or obligating the Liberty
Surviving Corporation or any such Subsidiary to grant, extend or enter into any
such subscription, warrant, call, right, commitment or agreement. Except for
the Liberty SIP and except as set forth on Schedule 4.3 or Schedule 4.12(a),
neither Liberty nor any of its Subsidiaries has adopted, authorized or assumed
any plans, arrangements or practices for the benefit of its officers, employees
or directors which require or permit the issuance, sale, purchase or grant of
any capital stock, other equity interests or Voting Debt of Liberty or any
Subsidiary of Liberty, any other securities convertible into, or exercisable or
exchangeable for, any such stock, interests or Voting Debt or any phantom
shares, phantom equity interests or stock or equity appreciation rights.
Except as set forth on Schedule 4.3, all shares of capital stock of and all
partnership or other equity interests in each Subsidiary of Liberty and in each
Liberty Equity Affiliate owned directly or indirectly by Liberty are owned free
and clear of any lien, security interest, pledge, charge, claim, option, right
to acquire, restriction on transfer, voting restriction or agreement, or any
other restriction or encumbrance of any nature whatsoever (a "Lien") and the
shares of capital stock of each corporate Subsidiary of Liberty are validly
issued, fully paid and nonassessable. Except as set forth on Schedule 4.3,
there are not, and immediately after the Effective Time there will not be, any
outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or other agreements of any character that, directly or indirectly,
(x) call for or relate to the sale, pledge, transfer or other disposition by
Liberty or Liberty Surviving Corporation or any Subsidiary of Liberty or
Liberty Surviving Corporation of any shares of capital stock, any partnership
or other equity interests or any Voting Debt of any Subsidiary of Liberty or
Liberty Surviving Corporation or of any Liberty Equity Affiliate owned directly
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or indirectly by Liberty or Liberty Surviving Corporation or any Subsidiary of
Liberty or Liberty Surviving Corporation, or (y) relate to the voting or
control of such capital stock, partnership or other equity interests or Voting
Debt.
4.4 Reports and Financial Statements. Liberty has heretofore made
available to TCI true and complete copies of all reports, registration
statements, definitive proxy statements and other documents (in each case
together with all amendments thereto) filed by Liberty with the Commission
since June 30, 1991 (such reports, registration statements, definitive proxy
statements and other documents, together with any amendments thereto, are
sometimes collectively referred to as the "Liberty Commission Filings"). The
Liberty Commission Filings constitute all of the documents (other than
preliminary material) that Liberty was required to file with the Commission
since such date. As of their respective dates, each of the Liberty Commission
Filings complied in all material respects with the applicable requirements of
the Securities Act, the Exchange Act and the rules and regulations under each
such Act, and none of the Liberty Commission Filings contained as of such date
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (except
that no representation or warranty is made with respect to any information
regarding TCI included in the Liberty Commission Filings which was furnished by
TCI expressly for use therein). When filed with the Commission, the financial
statements included in the Liberty Commission Filings complied as to form in
all material respects with the applicable rules and regulations of the
Commission and were prepared in accordance with generally accepted accounting
principles (as in effect from time to time) applied on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto), and
such financial statements fairly present the consolidated financial position of
Liberty and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments. Except as and to
the extent reflected or reserved against in the financial statements included
in Liberty's Quarterly Report on Form 10-Q for the quarter ended September 30,
1993 or as disclosed therein and except as set forth on Schedule 4.4, none of
Liberty, any Subsidiary of Liberty or, to the knowledge of Liberty, any Liberty
Equity Affiliate had as of such date any liability or obligation of any kind
required to be reflected on a balance sheet of Liberty and its consolidated
subsidiaries prepared in accordance with the applicable rules and regulations
of the Commission which was material to the business, assets, results of
operations or financial condition of Liberty and its Subsidiaries, taken as a
whole. Since September 30, 1993, except as disclosed in the Liberty Commission
Filings filed with the Commission prior to the date hereof and except as set
forth on Schedule 4.4, none of Liberty, any Subsidiary of Liberty or, to the
knowledge of Liberty, any Liberty Equity Affiliate has incurred any liability
or obligation of any kind which, in any case or in the aggregate, is material
to the business, assets, results of operations or financial condition of
Liberty and its Subsidiaries, taken as a whole.
4.5 No Approvals or Notices Required; No Conflict with
Instruments. Except as set forth on Schedule 4.5, the execution and delivery by
Liberty of this Agreement do not, and the
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performance by Liberty of its obligations hereunder and the consummation of the
transactions contemplated hereby will not:
(i) assuming approval of the Merger Proposal by Liberty's
stockholders as contemplated by Section 4.15, conflict with or violate
the Restated Certificate of Incorporation or By-laws of Liberty or the
charter or bylaws of any corporate Subsidiary of Liberty or the
partnership agreement of any partnership Subsidiary of Liberty;
(ii) require any consent, approval, order or authorization
of or other action by any Governmental Entity (as defined in clause
(v) of this Section 4.5) (a "Government Consent") or any registration,
qualification, declaration or filing with or notice to any
Governmental Entity (a "Governmental Filing"), in each case on the
part of or with respect to Liberty, any Subsidiary of Liberty or, to
the knowledge of Liberty, any Liberty Equity Affiliate, the absence or
omission of which would, either individually or in the aggregate, have
a material adverse effect on the transactions contemplated hereby or
on the business, assets, results of operations or financial condition
of Liberty and its Subsidiaries, taken as a whole, or the Liberty
Surviving Corporation and its Subsidiaries, taken as a whole, except
for (A) the filing with the Commission of the Joint Proxy Statement
and the Registration Statement and such reports under Sections 13(a)
and 16(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (B) the
filing of the Liberty Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which Liberty is qualified to
do business, (C) such Government Consents and Governmental Filings
(the "FCC Approvals") as may be required under the Communications Act
of 1934, as amended (the "Communications Act"), (D) such Government
Consents and Governmental Filings (the "Local Approvals") with
foreign, state and local governmental authorities (including foreign,
state and local authorities granting franchises to operate cable
systems) as may be required with respect to the Licenses (as defined
in Section 4.9) held by Liberty, any of its Subsidiaries or, to the
knowledge of Liberty, any of the Liberty Equity Affiliates or as may
otherwise be required under laws applicable to the conduct of the
businesses of Liberty and its Subsidiaries in the ordinary course, (E)
the Governmental Filings to be made on the part of or with respect to
TCI referred to in clauses (ii)(A) and (ii)(B) of Section 5.5, as
applicable, and such Government Consents and Governmental Filings as
may be required in connection with the issuance of TCI/Liberty stock
as contemplated hereby pursuant to state securities and blue sky laws;
and (F) the Governmental Filings required pursuant to the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act");
(iii) require, on the part of Liberty, any Subsidiary of
Liberty, or, to the knowledge of Liberty, any Liberty Equity
Affiliate, any consent by or approval of (a "Contract Consent") or
notice to (a "Contract Notice") any other person or entity
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<PAGE> 30
(other than a Governmental Entity), whether under any License or other
Contract (as defined in clause (iv) of this Section 4.5) or otherwise,
the absence or omission of which would, either individually or in the
aggregate, have a material adverse effect on the transactions
contemplated hereby or on the business, assets, results of operations
or financial condition of Liberty and its Subsidiaries, taken as a
whole, or the Liberty Surviving Corporation and its Subsidiaries,
taken as a whole;
(iv) assuming that the Contract Consents and Contract
Notices described on Schedule 4.5 are obtained and given and that any
Government Consents and Governmental Filings required under any
Licenses (as defined in Section 4.9) are obtained or made, conflict
with, result in any violation or breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the
loss of any material benefit under or the creation of a Lien or other
encumbrance on any assets pursuant to (any such conflict, violation,
breach, default, right of termination, cancellation or acceleration,
loss or creation, a "Violation") any Contract (which term shall mean
and include any note, bond, indenture, mortgage, deed of trust, lease,
franchise, permit, authorization, license, contract, instrument,
employee benefit plan or practice, or other agreement, obligation,
commitment or concession of any nature) to which Liberty, any
Subsidiary of Liberty or, to the knowledge of Liberty, any Liberty
Equity Affiliate is a party, by which Liberty, any Subsidiary of
Liberty or, to the knowledge of Liberty, any Liberty Equity Affiliate
or any of their respective assets or properties is bound or affected
or pursuant to which Liberty, any Subsidiary of Liberty or, to the
knowledge of Liberty, any Liberty Equity Affiliate is entitled to any
rights or benefits (including the Licenses), except for such
Violations which would not, either individually or in the aggregate,
have a material adverse effect on the transactions contemplated hereby
or on the business, assets, results of operations or financial
condition of Liberty and its Subsidiaries, taken as a whole, or the
Liberty Surviving Corporation and its Subsidiaries, taken as a whole;
or
(v) assuming that the Merger Proposal is approved by
Liberty's stockholders and assuming that the Government Consents and
Governmental Filings specified in clause (ii) of this Section 4.5 are
obtained, made and given, result in a Violation of, under or pursuant
to any law, rule, regulation, order, judgment or decree applicable to
Liberty, any Subsidiary of Liberty or, to the knowledge of Liberty,
any Liberty Equity Affiliate or by which any of their respective
properties or assets are bound or affected, except for such Violations
which would not, either individually or in the aggregate, have a
material adverse effect on the transactions contemplated hereby or on
the business, assets, results of operations or financial condition of
Liberty and its Subsidiaries, taken as a whole, or the Liberty
Surviving Corporation and its Subsidiaries, taken as a whole. As used
herein, the term "Governmental Entity" means and includes any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign.
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<PAGE> 31
4.6 Absence of Certain Changes or Events. Except as otherwise
disclosed in the Liberty Commission Filings filed with the Commission prior to
the date hereof or as set forth on Schedule 4.6, during the period commencing
on October 1, 1993 and ending on the date of this Agreement, (i) there has not
been any material adverse change in, and no event has occurred and no condition
exists which, individually or together with other events or conditions, has had
a material adverse effect on, the business, assets, results of operations or
financial condition of Liberty and its Subsidiaries, taken as a whole
(excluding events or conditions generally affecting the cable television or
cable programming industries in the United States or affecting general business
or economic conditions in the United States) and (ii) neither Liberty nor any
of its Subsidiaries has taken any action which, if taken after the date of this
Agreement without the consent of TCI, would violate Section 7.4 hereof.
4.7 Registration Statement; Proxy Statement. None of the
information supplied or to be supplied by Liberty or any of its affiliates,
directors, officers, employees, agents or representatives in writing
specifically for inclusion or incorporation by reference in, and which is
included or incorporated by reference in, (i) the Registration Statement or any
amendment or supplement thereto filed or to be filed by TCI/Liberty with the
Commission under the Securities Act, (ii) the Joint Proxy Statement/Prospectus
or (iii) any other documents filed or to be filed with the Commission or any
other Governmental Entity in connection with the transactions contemplated
hereby, will, at the respective times such documents are filed, and, in the
case of the Registration Statement or any amendment or supplement thereto, when
the same becomes effective, at the time of the TCI Stockholders Meeting or the
Liberty Stockholders Meeting or any other meeting of Liberty's stockholders or
TCI's stockholders to be held in connection with the Mergers or at the
Effective Time, and, in the case of the Joint Proxy Statement/Prospectus or any
amendment or supplement thereto, at the time of mailing of the Joint Proxy
Statement/Prospectus to Liberty's stockholders and TCI's stockholders or at the
time of the Liberty Stockholders Meeting or the TCI Stockholders Meeting or any
other meeting of Liberty's stockholders or TCI's stockholders to be held in
connection with the Mergers, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Liberty
Stockholders Meeting or the TCI Stockholders Meeting. For this purpose, any
such information included or incorporated by reference in any such document
will be deemed to have been so supplied in writing specifically for inclusion
or incorporation therein if such document was available for review by Liberty a
reasonable time before such document was filed (but the foregoing shall not be
the exclusive manner in which it may be established that such information was
so supplied). The Registration Statement and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
applicable provisions of the Securities Act, the Exchange Act and the
respective rules and regulations under each such Act.
4.8 Legal Proceedings. Except as set forth in the Liberty
Commission Filings filed with the Commission prior to the date hereof or as set
forth on Schedule 4.8, (i) there is no suit, action or proceeding pending or,
to the knowledge of Liberty, any investigation pending
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<PAGE> 32
or any suit, action, proceeding or investigation threatened, against, involving
or affecting Liberty, any Subsidiary of Liberty or, to the knowledge of
Liberty, any Liberty Equity Affiliate or any of its or their properties or
rights (excluding suits, actions, proceedings or investigations generally
affecting the cable television or cable programming industries in a particular
state or in the United States and to which neither Liberty nor any Subsidiary
of Liberty is a party), which, if adversely determined, is, insofar as Liberty
can reasonably foresee, reasonably likely to have, either individually or in
the aggregate, a material adverse effect on the business, assets, results of
operations or financial condition of Liberty and its Subsidiaries, taken as a
whole; (ii) there is no judgment, decree, Injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator applicable to Liberty, any Subsidiary of Liberty or, to the
knowledge of Liberty, any Liberty Equity Affiliate having, or which, insofar as
Liberty can reasonably foresee, is reasonably likely to have, either
individually or in the aggregate, any such effect; and (iii) to the knowledge
of Liberty, there is no action, suit, proceeding or investigation pending or
threatened against Liberty which seeks to restrain, enjoin or delay the
consummation of either Merger or any of the other transactions contemplated
hereby or which seeks damages in connection therewith, and no Injunction of any
type referred to in Section 8.1(d) has been entered or issued. The term
"order" as used in the immediately preceding sentence shall not be deemed to
include any Licenses.
4.9 Licenses; Compliance With Regulatory Requirements; Intangible
Property. Liberty, its Subsidiaries and, to the knowledge of Liberty, the
Liberty Equity Affiliates, hold all licenses, franchises, ordinances,
authorizations, permits, certificates, variances, exemptions, orders and
approvals, domestic or foreign (collectively, the "Licenses") which are
material to the operation of the businesses of Liberty and its Subsidiaries,
taken as a whole. Each of Liberty, its Subsidiaries and, to the knowledge of
Liberty, the Liberty Equity Affiliates is in compliance with, and has conducted
its business so as to comply with, the terms of their respective Licenses and
with all applicable laws, rules, regulations, ordinances and codes, domestic or
foreign, including laws, rules, regulations, ordinances and codes relating to
the protection of the environment, except where the failure so to comply has
not had, either individually or in the aggregate, a material adverse effect on
the business, assets, results of operations or financial condition of Liberty
and its Subsidiaries, taken as a whole. Without limiting the generality of the
foregoing, Liberty, its Subsidiaries and, to the knowledge of Liberty, the
Liberty Equity Affiliates, (i) have all Licenses (the "FCC Licenses") issued by
the Federal Communications Commission (the "FCC") and all Licenses of foreign,
state and local governmental authorities (the "Franchises") required for the
operation of the cable television systems and related facilities (the "CATV
Systems") being operated on the date hereof by Liberty, any of its Subsidiaries
or, to the knowledge of Liberty, any of the Liberty Equity Affiliates, (ii)
have duly and currently filed all reports and other information required to be
filed by the FCC or any other Governmental Entity in connection with such FCC
Licenses and Franchises and (iii) are not in violation of any of such FCC
Licenses or Franchises, other than the lack of FCC Licenses or Franchises,
delays in filing reports or possible violations which have not had and, insofar
as can reasonably be foreseen, in the future will not have a material adverse
effect on the business, assets, results of operations or financial condition of
Liberty and its Subsidiaries, taken as a whole. Except as Liberty shall have
previously advised TCI in
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<PAGE> 33
writing, Liberty and its Subsidiaries own or have adequate rights to use all
patents, trademarks, trade names, service marks, trade secrets, copyrights and
other proprietary intellectual property rights as are material in connection
with the businesses of Liberty and its Subsidiaries, taken as a whole.
4.10 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other person or entity is or will be entitled, by reason
of any agreement, act or statement by Liberty or any of its Subsidiaries,
directors, officers, employees or affiliates, to any financial advisory,
broker's, finder's or similar fee or commission, to reimbursement of expenses
or to indemnification or contribution in connection with any of the
transactions contemplated by this Agreement, except Merrill Lynch & Co
("Merrill Lynch"), whose fees and expenses and claims for indemnification and
contribution will be paid by Liberty in accordance with Liberty's agreement
with such firm (a copy of which has provided to TCI prior to the date hereof),
and Liberty agrees to indemnify and hold TCI and TCI/Liberty harmless from and
against any and all claims, liabilities or obligations with respect to any such
fees, commissions, expenses or claims for indemnification or contribution
asserted by any person on the basis of any act or statement made or alleged to
have been made by Liberty or any of its Subsidiaries, directors, officers,
employees or affiliates.
4.11 Tax Matters. Except as set forth on Schedule 4.11, to the
knowledge of Liberty (i) there has been duly filed by or on behalf of Liberty
and each of its Subsidiaries (and each of their respective predecessors (except
that no representation or warranty is made as to TCI or any of its
Subsidiaries)), or filing extensions from the appropriate Federal, state,
foreign and local Governmental Entities have been obtained with respect to, all
material Federal, state, foreign and local tax returns and reports required to
be filed on or prior to the date hereof, (ii) payment in full or adequate
provision for the payment of all taxes required to be paid in respect of the
periods covered by such tax returns and reports has been made (except in
respect of state, local and foreign taxes which are in the aggregate immaterial
in amount) and (iii) a reserve which Liberty reasonably believes to be adequate
has been set up for the payment of all such taxes anticipated to be payable in
respect of periods through the date hereof. None of the Federal income tax
returns required to be filed by or on behalf of Liberty and each of its
Subsidiaries consolidated in such returns (and their respective predecessors
(except that no representation or warranty is made as to TCI or any of its
Subsidiaries)) under the Code or any predecessor statute (the "Liberty
Consolidated Returns") are currently under examination by the Internal Revenue
Service ("IRS"). There have not been any deficiencies or assessments asserted
in writing by the IRS with respect to the Liberty Consolidated Returns. Except
as set forth on Schedule 4.11, neither Liberty nor any of its Subsidiaries (nor
any of their respective predecessors (except that no representation or warranty
is made as to TCI or any of its Subsidiaries)) has, with regard to any assets
or property held, acquired or to be acquired by Liberty or any of its
Subsidiaries, filed a consent pursuant to Section 341(f) of the Code or any
predecessor statute. For the purpose of this Agreement, the term "tax"
(including, with correlative meaning, the terms "taxes" and "taxable") shall
include all Federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise and
other taxes, duties or assessments of any nature whatsoever, together
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<PAGE> 34
with all interest, penalties and additions imposed with respect to such
amounts.
4.12 Employee Benefit Plans; ERISA.
(a) Schedule 4.12(a) contains a true and complete list of
each bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance or termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to at any time since January 1,
1993 by Liberty or by any trade or business, whether or not incorporated (a
"Liberty ERISA Affiliate"), that together with Liberty would be deemed a
"single employer" within the meaning of Section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), for the benefit of any
employee or former employee of Liberty or any Liberty ERISA Affiliate including
any such type of plan established, maintained or contributed to under the laws
of any foreign country (the "Liberty Plans"). Schedule 4.12(a) identifies each
Liberty Plan that is an "employee benefit plan," as defined in Section 3(3) of
ERISA. Liberty has heretofore delivered to TCI true and complete copies of
each Liberty Plan and, if the Liberty Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding document.
(b) Except as set forth in Schedule 4.12(b), (i) no
Liberty Plan is subject to Title IV of ERISA or Section 412 of the Code and
(ii) neither Liberty nor any Liberty ERISA Affiliate made, or was required to
make, contributions to any employee benefit plan subject to Title IV of ERISA
during the five year period ending on the Effective Time.
(c) Concerning each Liberty Plan that is or has been
subject to the funding requirements of Title I, Subtitle B, Part 3 of ERISA,
the funding method used in connection with such Liberty Plan is, and at all
times has been, acceptable under ERISA, each of the actuarial assumptions
employed in connection with determining the funding of each such Liberty Plan
is, and at all times has been, reasonable and satisfies the requirements of
Section 412(c)(3) of the Code and Section 302(c)(3) of ERISA, and Schedule
4.12(c) sets forth, as of the date hereof, (A) the actuarially determined
present value of all benefit liabilities within the meaning of Section
4001(a)(16) of ERISA ("Liberty Benefit Liabilities") determined on an ongoing
plan basis, employing in making such determination the same actuarial
assumptions as were used in determining plan fundings for the most recently
completed plan year unless any such assumption is not reasonable, in which
event such assumption has been changed to a reasonable assumption, (B) the
actuarially determined present value of all Liberty Benefit Liabilities under
each such Liberty Plan employing in such determination the same actuarial
assumptions, except turnover assumptions, as were used in determining funding
for such plan for the most recently completed plan year unless any such
assumption is not reasonable, in which event such assumption has been changed
to a reasonable assumption, (C) the fair market value of the assets held to
fund each such Liberty Plan, (D) the funding method used in connection with
each such Liberty Plan and (E) identification of the amount and related plan
with respect to which there is or has been any "accumulated funding
deficiency," as defined
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in Section 302(a)(2) of ERISA. Schedule 4.12(c) sets forth a reasonable good
faith estimate of material changes between January 1, 1993 and the date hereof
in the value of benefits or plan assets described in the preceding clause (A),
(B) or (C); Schedule 4.12(c) sets forth the information described in said
clauses (A), (B), (C) and (D) as of the date hereof, including a separate
statement of liabilities attributable to unpredictable contingent event
benefits within the meaning of Section 412(l)(7)(B)(ii) of the Code and Section
302(d)(7)(B)(ii) of ERISA. The sum of the amount of unfunded Liberty Benefit
Liabilities under all Liberty Plans (excluding each such plan with an amount of
unfunded Liberty Benefit Liabilities of zero or less) is not more than
$1,000,000; all contributions required by Section 515 of ERISA to be made by
Liberty or any Liberty ERISA Affiliate to Liberty Plans have been timely made;
with respect to any such Liberty Plan and concerning each Liberty Plan which is
in whole or in part an "individual account plan" (as defined in Section 3(34)
of ERISA), there is set forth in Schedule 4.12(c) (A) the amount of any
liability of Liberty or any Liberty ERISA Affiliate for contributions due or to
become due with respect to each such Liberty Plan for periods up to the date
hereof, and the date any such amounts were paid and (B) the amount of any
contribution accrued or paid or expected to be accrued or paid with respect to
such Liberty Plan for the plan year in which the Effective Time occurs; with
respect to any such Liberty Plan no such plan has been terminated or subject to
a "spin-off" or "spin-off termination" or partial termination and no assets of
any such Liberty Plan have been used or employed in a manner so as to subject
them to an excise tax imposed under Section 4980 of the Code; each such Liberty
Plan permits termination thereof, and distribution of any assets in excess of
those required to pay Liberty Benefit Liabilities may be distributed to or for
the benefit of Liberty or any Liberty ERISA Affiliate, and Section 4044(d) of
ERISA would not prevent such reversion; and with respect to any such Liberty
Plan, any reduction in benefits was preceded by an adequate and appropriate
notice to the parties described in and as required by Section 204(h) of ERISA.
There are no former employees or participants who are entitled to earn
additional pension benefits by reason of "grow in" or other rights with respect
to service or time periods after such employees have been terminated from
employment with Liberty, or any Liberty ERISA Affiliates.
(d) Neither Liberty nor any Liberty ERISA Affiliate has
engaged in any transaction described under Section 4069 of ERISA nor can any
claim, encumbrance or other lien be imposed on Liberty, any Liberty ERISA
Affiliates or assets of any of the foregoing under Section 4068 of ERISA.
(e) Each Liberty Plan that utilizes a funding vehicle
described in Section 501(c)(9) of the Code or is subject to the provisions of
Section 505 of the Code has been the subject of a notification by the IRS that
such funding vehicle qualifies for tax-exempt status under Section 501(c)(9) of
the Code and/or such Liberty Plan complies with Section 505 of the Code, unless
the IRS does not as a matter of policy issue such notification with respect to
that particular type of plan. Each such Liberty Plan satisfies, where
appropriate, the requirements of Sections 501(c)(9) and 505 of the Code.
(f) Schedule 4.12(f) contains a list of, and Liberty has
delivered to TCI true
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and complete copies of, all other material personnel policy, stock option plan,
collective bargaining agreement, bonus, incentive award, vacation pay,
severance pay, consulting agreement or any other employee benefit plan,
agreement, arrangement or understanding which Liberty or any Liberty ERISA
Affiliate maintains, or to which Liberty or any Liberty ERISA Affiliate
contributes, is required to contribute or has contributed since January 1,
1993, and which is not required under paragraph (a) or (b) above to be listed
in Schedule 4.12(a) or (b), respectively (including, without limitation, with
respect to any plans which are unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, assets and any
other matters which relate to the obligations of Liberty or any Liberty ERISA
Affiliate).
(g) Liberty and each Liberty ERISA Affiliate have
complied in all material respects with all requirements for premium payments,
including any interest and penalty charges for late payment, due the Pension
Benefit Guaranty Corporation ("PBGC") with respect to each Liberty Plan and
each separate plan year for which any premiums are required. Except as set
forth in Schedule 4.12(g), and except for transactions required by this
Agreement, from the period commencing January 1, 1987 through the Effective
Time there has been no "reportable event" (as defined in Section 4043(b) of
ERISA and the regulations promulgated by the PBGC thereunder) with respect to
any Liberty Plan subject to Title IV of ERISA for which notice to the PBGC has
not, by rule or regulation, been waived. There is not any unsatisfied material
liability to the PBGC which has been incurred by Liberty or any Liberty ERISA
Affiliate on account of any Liberty Plan subject to Title IV of ERISA. From
the period commencing January 1, 1987 through the Effective Time, no filing has
been or will be made by Liberty or any Liberty ERISA Affiliate with the PBGC to
terminate, nor has any proceeding been commenced by the PBGC to terminate, any
Liberty Plan subject to Title IV of ERISA which was maintained, or wholly or
partially funded, by Liberty or any Liberty ERISA Affiliate. Neither Liberty
nor any Liberty Equity Affiliate (i) has ceased operations at a facility so as
to become subject to the provisions of Section 4062(e) of ERISA, (ii) has
withdrawn from any Liberty Plan with respect to which it is a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA,
(iii) has ceased contributions on or before the Effective Time to any Liberty
Plan subject to Section 4064(a) of ERISA to which Liberty or any Liberty ERISA
Affiliate has made contributions during the five calendar years prior to the
Effective Time, or (iv) has incurred a complete or partial withdrawal from any
Liberty Plan that is a multiemployer plan (as defined in either Section 3(37)
or Section 4001(a)(3) of ERISA (a "Multiemployer Plan")) so as to incur
withdrawal liability as defined in Section 4201 of ERISA (without regard to any
subsequent reduction or waiver of such liability under Section 4207 or 4208 of
ERISA). No employee pension benefit plan which is a Multiemployer Plan to
which Liberty or any Liberty ERISA Affiliate contributes is in "reorganization"
(as defined in Section 4241 of ERISA) or "insolvent" (as defined in Section
4245 of ERISA). There is not now, nor can there ever be, any liability under
Section 4064 of ERISA to Liberty or any Liberty ERISA Affiliate by reason of
participation in any Liberty Plan by Liberty or any Liberty ERISA Affiliate on
or prior to the Effective Time. There has been no amendment to any Liberty
Plan that would require the furnishing of security under Section 401(a)(29) of
the Code. There has been no event or circumstance and there can be no
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event or circumstance which has or may result in any liability being asserted
by any Liberty Plan, the PBGC or any other person or entity under Title IV of
ERISA against Liberty or any Liberty ERISA Affiliate or against TCI/Liberty
(assuming consummation of the Mergers). Neither Liberty nor any Liberty ERISA
Affiliate has any liability to any Liberty Plan for contributions under Section
412(m) of the Code or Section 302(e) of ERISA, nor has any claim, encumbrance
or other lien been imposed under Section 412(n) of the Code or Section 302(f)
of ERISA nor is there any liability for excise taxes imposed under Section 4971
of the Code, and all liabilities arising under Section 412(c)(11) of the Code
with respect to contributions to any Liberty Plan have been set forth in
Schedule 4.12(g). Copies of any notices to the PBGC under Section 412(n) of
the Code or Section 302(f) of ERISA with respect to any Liberty Plan have been
delivered to TCI; and copies of notices required to be given to participants
under Section 101(d) of ERISA with respect to any Liberty Plan have previously
been delivered to TCI.
(h) True and complete copies of each plan, agreement,
arrangement or understanding referred to in Schedule 4.12(g), the most recent
determination letter issued by the IRS with respect to each Liberty Plan,
annual reports on Form 5500 required to be filed with any Governmental Entity
for each Liberty Plan which is an employee pension benefit plan for the three
most recent plan years and all actuarial reports for the last two plan years of
each Liberty Plan, other than an "individual account plan," have heretofore
been delivered by Liberty to TCI.
(i) Except as set forth in Schedule 4.12(i), neither
Liberty nor any Liberty ERISA Affiliate is a party to or bound by the terms of
any collective bargaining agreement. Liberty and each Liberty ERISA Affiliate
is in compliance in all material respects with all applicable laws respecting
the employment and employment practices, terms and conditions of employment and
wage and hours of its employees and is not engaged in any unfair labor
practice. To the knowledge of Liberty, all of the employees of Liberty and the
Liberty ERISA Affiliates who work in the United States are lawfully authorized
to work in the United States according to federal immigration laws. There is
no labor strike or labor disturbance pending or, to the knowledge of Liberty
threatened against Liberty or any Liberty ERISA Affiliate, and during the past
five years neither Liberty nor any Liberty ERISA Affiliate has experienced a
work stoppage.
(j) Each Liberty Plan has been operated and administered
in all material respects in accordance with its terms and applicable law,
including, but not limited to, Section 406 of ERISA and Section 4975 of the
Code.
(k) Each Liberty Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code.
(l) Except as set forth in Schedule 4.12(l), no Liberty
Plan provides benefits, including without limitation death or medical benefits,
with respect to current or former
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employees of Liberty or any Liberty ERISA Affiliate beyond their retirement or
other termination of service (other than (i) coverage mandated by applicable
law and (ii) death benefits or retirement benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA).
(m) Except as set forth in Schedule 4.12(m), there are no
material pending, threatened or anticipated claims by or on behalf of any
Liberty Plan, by any employee or beneficiary covered under an such Liberty
Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
4.13 Fairness Opinion. On January 24, 1994, Liberty received a
written opinion of Merrill Lynch, to the effect that, as of such date, the
respective exchange ratios in the Liberty Merger and the TCI Merger, taken
together, are fair to the holders of the shares of Liberty Common Stock (other
than TCI or its affiliates) from a financial point of view.
4.14 Recommendation of Liberty Board. The Liberty Board at a
meeting duly called and held on January 24, 1994, and acting on the unanimous
recommendation of a special committee of outside directors, has, by resolutions
adopted by at least 75% of the members of the entire Liberty Board, (i)
determined that the Merger Proposal is fair to, and in the best interests of,
the stockholders of Liberty (other than TCI and its Subsidiaries), (ii)
approved this Agreement and the transactions contemplated hereby and (iii)
recommended that the stockholders of Liberty approve and adopt the Merger
Proposal.
4.15 Vote Required. The only vote of stockholders of Liberty
required under the DGCL and Liberty's Restated Certificate of Incorporation and
By-laws in order to approve and adopt the Merger Proposal is the affirmative
vote of the holders of (i) a majority of the aggregate voting power of the
issued and outstanding shares of Liberty Class A Stock and Liberty Class B
Stock voting together as a single class, (ii) at least 66-2/3% of the number of
shares of Liberty Class B Preferred voting as a separate class and (iii) at
least 66-2/3% of the number of shares of Liberty Class D Preferred voting as a
separate class, and no vote or approval of or other action by the holders of
any other class of the Liberty Preferred Stock is required.
ARTICLE V
Representations and Warranties of TCI
TCI hereby represents and warrants to each of Liberty and TCI/Liberty
as follows:
5.1 Organization. Each of TCI and TCI's "significant
subsidiaries" (as defined in Rule 1-02 of Regulation S-X, but excluding Liberty
and its Subsidiaries) (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, (ii)
has all requisite corporate power and authority to own, lease and operate its
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properties and to carry on its business as now being conducted and (iii) is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or license
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed or in good standing has not had, either individually or
in the aggregate, a material adverse effect on the business, assets, results of
operations or financial condition of TCI and its Subsidiaries, taken as a
whole. Each entity (excluding Liberty and its Subsidiaries) in which TCI,
directly or through one or more of its Subsidiaries, has an investment
accounted for by the equity method which is material to the business, assets,
results of operations or financial condition of TCI and its Subsidiaries, taken
as a whole (the "TCI Equity Affiliates"), to the knowledge of TCI, is a
corporation or partnership (A) duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, (B) has all requisite corporate or partnership power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and (C) is duly qualified to do business and is in
good standing in each jurisdiction in which the properties owned, leased or
operated by it, or the nature of its activities, makes such qualification
necessary, except in each case where such failure to be so existing and in good
standing or to have such power and authority or to be so qualified to do
business and be in good standing has not had, individually or in the aggregate,
a material adverse effect on the business, assets, results of operations or
financial condition of TCI and its Subsidiaries, taken as a whole. TCI has
delivered to Liberty true and complete copies of its Restated Certificate of
Incorporation and By-laws, as amended through and in effect on the date hereof.
5.2 Authorization and Validity of Agreement. TCI has all
requisite corporate power and authority to enter into this Agreement and,
subject to obtaining the approval of its stockholders specified in Section
5.15, perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by TCI of this
Agreement and the consummation by TCI of the transactions contemplated hereby
have been duly authorized by the TCI Board and by all other necessary corporate
action on its part, subject, in the case of consummation by it of the TCI
Merger, to such approval of TCI's stockholders. This Agreement has been duly
executed and delivered by TCI and is a valid and binding obligation of TCI,
enforceable in accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
5.3 Capitalization of TCI. The authorized capital stock of TCI
consists of one billion shares of TCI Class A Stock, 100 million shares of TCI
Class B Stock and ten million shares of "blank-check" preferred stock, of which
6,201 shares have been designated "Convertible Preferred Stock Series C"
pursuant to Section 151(g) of the DGCL. As of the close of business on
December 31, 1993, (i) 481,836,852 shares of TCI Class A Stock were issued and
outstanding, 8,321,186 shares were reserved for issuance upon exercise of TCI
Stock Options, 1,265,004 shares were reserved for issuance upon conversion of
the TCI Preferred Stock, 41,060,990 shares were reserved for issuance upon
conversion of outstanding
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convertible debt securities and 79,335,038 shares were held by TCI in its
treasury or by its Subsidiaries; (ii) 47,258,787 shares of TCI Class B Stock
were issued and outstanding and no shares were held by TCI in its treasury or
by any Subsidiary; and (iii) 6,201 shares of TCI Preferred Stock were issued
and outstanding and no shares were held by TCI in its treasury or by its
Subsidiaries. All issued and outstanding shares of TCI Common Stock and TCI
Preferred Stock have been validly issued and are fully paid and nonassessable,
are not subject to and have not been issued in violation of any preemptive
rights and have not been issued in violation of any Federal or state securities
laws. TCI has no issued or outstanding Voting Debt. Except as set forth on
Schedule 5.3, there are not, as of the date hereof, and will not at any time to
and including the Effective Time be, any outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments or any other
agreement of any character to or by which TCI or any of its Subsidiaries is a
party or is bound which, directly or indirectly, obligate TCI or any of its
Subsidiaries to issue, deliver or sell or cause to be issued, delivered or sold
any additional shares of TCI Class A Stock, TCI Class B Stock, TCI Preferred
Stock or any other capital stock, equity interest or Voting Debt of TCI or any
Subsidiary of TCI or any other securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for any such shares,
interests or Voting Debt or obligating TCI or any of its Subsidiaries to grant,
extend or enter into any such subscription, option, warrant, call or right.
Except as set forth on Schedule 5.3, since the close of business on December
31, 1993, no shares of capital stock of TCI have been issued or have been
transferred from TCI's treasury. Immediately after the Effective Time, there
will be no subscription, option, warrant, call, right, commitment or agreement
which will entitle (conditionally or unconditionally) any person or entity to
purchase or otherwise acquire, or will obligate (conditionally or
unconditionally) the TCI Surviving Corporation (as TCI's successor) or any
Subsidiary of the TCI Surviving Corporation that was a Subsidiary of TCI to
sell, issue or deliver, any shares of capital stock, any other equity interest
or any Voting Debt of the TCI Surviving Corporation or obligating the TCI
Surviving Corporation or any such Subsidiary to grant, extend or enter into any
such subscription, warrant, call, right, commitment or agreement. Except for
the TCI Incentive Plans and except as set forth on Schedule 5.3 or Schedule
5.12(a), neither TCI nor any of its Subsidiaries has adopted, authorized or
assumed any plans, arrangements or practices for the benefit of its officers,
employees or directors which require or permit the issuance, sale, purchase or
grant of any capital stock, other equity interests or Voting Debt of TCI or any
Subsidiary of TCI, any other securities convertible into, or exercisable or
exchangeable for, any such stock, interests or Voting Debt or any phantom
shares, phantom equity interests or stock or equity appreciation rights.
Except as set forth on Schedule 5.3, all shares of capital stock of and all
partnership or other equity interests in each Subsidiary of TCI and in each TCI
Equity Affiliate owned directly or indirectly by TCI are owned free and clear
of any Lien and the shares of capital stock of each corporate Subsidiary of TCI
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 5.3, there are not, and immediately after the Effective Time there
will not be, any outstanding or authorized subscriptions, options, warrants,
calls, rights, commitments or other agreements of any character that, directly
or indirectly, (x) call for or relate to the sale, pledge, transfer or other
disposition by TCI or TCI Surviving Corporation or any Subsidiary of TCI or TCI
Surviving Corporation of any shares of capital stock, any partnership or other
equity interests or any Voting Debt of any Subsidiary
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of TCI or TCI Surviving Corporation or of any TCI Equity Affiliate owned
directly or indirectly by TCI or TCI Surviving Corporation or any Subsidiary of
TCI or TCI Surviving Corporation, or (y) relate to the voting or control of
such capital stock, partnership or other equity interests or Voting Debt.
5.4 TCI Reports and Financial Statements. TCI has heretofore made
available to Liberty true and complete copies of all reports, registration
statements, definitive proxy statements and other documents (in each case
together with all amendments thereto) filed by TCI with the Commission since
January 1, 1991 (such reports, registration statements, definitive proxy
statements and other documents, together with any amendments thereto, are
sometimes collectively referred to as the "TCI Commission Filings"). The TCI
Commission Filings constitute all of the documents (other than preliminary
material) that TCI was required to file with the Commission since such date.
As of their respective dates, each of the TCI Commission Filings complied in
all material respects with the applicable requirements of the Securities Act,
the Exchange Act and the rules and regulations under each such Act, and none of
the TCI Commission Filings contained as of such date any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (except that no representation or
warranty is made with respect to any information regarding Liberty included in
the TCI Commission Filings which was furnished by Liberty expressly for use
therein). When filed with the Commission, the financial statements included in
the TCI Commission Filings complied as to form in all material respects with
the applicable rules and regulations of the Commission and were prepared in
accordance with generally accepted accounting principles (as in effect from
time to time) applied on a consistent basis (except as may be indicated therein
or in the notes or schedules thereto), and such financial statements fairly
present the consolidated financial position of TCI and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments. Except as and to the extent reflected or
reserved against in the
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financial statements included in TCI's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 or as disclosed therein and except as set
forth on Schedule 5.4, none of TCI, any of TCI's Subsidiaries or, to the
knowledge of TCI, any TCI Equity Affiliate had as of such date any liability or
obligation of any kind required to be reflected on a balance sheet of TCI and
its consolidated Subsidiaries prepared in accordance with the applicable rules
and regulations of the Commission which was material to the business, assets,
results of operations or financial condition of TCI and its Subsidiaries, taken
as a whole. Since September 30, 1993, except as disclosed in the TCI
Commission Filings filed with the Commission prior to the date hereof and
except as set forth on Schedule 5.4, none of TCI, any of TCI's Subsidiaries or,
to the knowledge of TCI, any TCI Equity Affiliate has incurred any liability or
obligation of any kind which, in any case or in the aggregate, is material to
the business, assets, results of operations or financial condition of TCI and
its Subsidiaries, taken as a whole.
5.5 No Approvals or Notices Required; No Conflict with
Instruments. Except as set forth on Schedule 5.5, the execution and delivery
by TCI of this Agreement do not, and the performance by TCI of its obligations
hereunder and the consummation of the transactions contemplated hereby will
not:
(i) assuming approval of the Merger Proposal by TCI's
stockholders as contemplated by Section 5.15, conflict with or violate
the Restated Certificate of Incorporation or By-laws of TCI or any
corporate Subsidiary of TCI or the partnership agreement or any
partnership Subsidiary or TCI;
(ii) require any Government Consent or Governmental
Filing, in each case on the part of or with respect to TCI, any
Subsidiary of TCI or, to the knowledge of TCI, any TCI Equity
Affiliate, the absence or omission of which would, either individually
or in the aggregate, have a material adverse effect on the
transactions contemplated hereby or on the business, assets, results
of operations or financial condition of TCI and its Subsidiaries,
taken as a whole, or the TCI Surviving Corporation and its
Subsidiaries, taken as a whole, except for (A) the filing with the
Commission of the Joint Proxy Statement, the Registration Statement,
and such reports and other documents, if any, under Sections 12(g),
13(a), 13(d) and 16(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated
hereby, (B) the filing of the TCI Certificate of Merger with the
Secretary of State of the State of Delaware, and appropriate documents
with the relevant authorities of other states in which TCI is
qualified to do business, (C) the FCC Approvals and the Local
Approvals, (D) such Government Consents and Governmental Filings as
may be required in connection with the issuance of TCI/Liberty stock
as contemplated hereby pursuant to state securities and blue sky laws,
(E) the Governmental Filings to be made on the part of or with respect
to Liberty referred to in clauses (ii)(A) and (B) of Section 4.5 and
(F) the Governmental Filings required pursuant to the pre-merger
notification requirements of the HSR Act;
(iii) require, on the part of TCI, any Subsidiary of TCI
or, to the knowledge
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of TCI, any TCI Equity Affiliate, any Contract Consent or Contract
Notice, the absence or omission of which would, either individually or
in the aggregate, have a material adverse effect on the transactions
contemplated hereby or on the business, assets, results of operations
or financial condition of TCI and its Subsidiaries, taken as a whole,
or the TCI Surviving Corporation and its Subsidiaries, taken as a
whole;
(iv) assuming that the Contract Consents and Contract
Notices described on Schedule 5.5 are obtained and given and that any
Government Consents and Governmental Filings required under any
Licenses are obtained or made, result in any Violation of any Contract
to which TCI, any Subsidiary of TCI or, to the knowledge of TCI, any
TCI Equity Affiliate is a party, by which TCI, any Subsidiary of TCI
or, to the knowledge of TCI, any TCI Equity Affiliate or any of their
respective assets or properties is bound or affected or pursuant to
which TCI, any Subsidiary of TCI or, to the knowledge of TCI, any TCI
Equity Affiliate is entitled to any rights or benefits, except for
such Violations which would not, either individually or in the
aggregate, have a material adverse effect on the transactions
contemplated hereby or on the business, assets, results of operations
or financial condition of TCI and its Subsidiaries, taken as a whole,
or the TCI Surviving Corporation and its Subsidiaries, taken as a
whole; or
(v) assuming that the Merger Proposal is approved by
TCI's stockholders and assuming that the Government Consents and
Governmental Filings specified in clause (ii) of this Section 5.5 are
obtained, made and given, result in a Violation of, under or pursuant
to any law, rule, regulation, order, judgment or decree applicable to
TCI, any Subsidiary of TCI or, to the knowledge of TCI, any TCI Equity
Affiliate or by which any of their respective properties or assets are
bound or affected, except for such Violations which would not, either
individually or in the aggregate, have a material adverse effect on
the transactions contemplated hereby or on the business, assets,
results of operations or financial condition of TCI and its
Subsidiaries, taken as a whole, or the TCI Surviving Corporation and
its Subsidiaries, taken as a whole.
5.6 Absence of Certain Changes or Events. Except as otherwise
disclosed in the TCI Commission Filings filed with the Commission prior to the
date hereof or as set forth on Schedule 5.6, during the period commencing on
October 1, 1993 and ending on the date of this Agreement, (i) there has not
been any material adverse change in, and no event has occurred and no condition
exists which, individually or together with other events or conditions, has had
a material adverse effect on, the business, assets, results of operations or
financial condition of TCI and its Subsidiaries, taken as a whole (excluding
events or conditions generally affecting the cable television or cable
programming industries in the United States or affecting general business or
economic conditions in the United States) and (ii) neither TCI nor any of its
Subsidiaries has taken any action which, if taken after the date of this
Agreement without the consent of Liberty, would violate Section 7.4 hereof.
5.7 Registration Statement; Proxy Statement. None of the
information supplied or
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to be supplied by TCI or any of its affiliates, directors, officers, employees,
agents or representatives in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in, (i) the Registration Statement or any amendment or supplement
thereto, (ii) the Joint Proxy Statement/Prospectus or (iii) any other documents
filed or to be filed with the Commission or any other Governmental Entity in
connection with the transactions contemplated hereby, will, at the respective
times such documents are filed, and, in the case of the Registration Statement
or any amendment or supplement thereto, when the same becomes effective, at the
time of the TCI Stockholders Meeting or the Liberty Stockholders Meeting or any
other meeting of TCI's stockholders or Liberty's stockholders to be held in
connection with the Mergers or at the Effective Time, and, in the case of the
Joint Proxy Statement/Prospectus or any amendment or supplement thereto, at the
time of mailing of the Joint Proxy Statement/Prospectus to TCI's and Liberty's
stockholders or at the time of the TCI Stockholders Meeting or the Liberty
Stockholders Meeting, or any other meeting of TCI's stockholders or Liberty's
stockholders to be held in connection with the Mergers, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading or necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Liberty Stockholders Meeting or the TCI Stockholders Meeting. For this
purpose, any such information included or incorporated by reference in any such
document will be deemed to have been so supplied in writing specifically for
inclusion or incorporation therein if such document was available for review by
TCI a reasonable time before such document was filed (but the foregoing shall
not be the exclusive manner in which it may be established that such
information was so supplied). The Registration Statement and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the
respective rules and regulations under each such Act.
5.8 Legal Proceedings. Except as set forth in the TCI Commission
Filings filed with the Commission prior to the date hereof or as set forth on
Schedule 5.8, (i) there is no suit, action or proceeding pending or, to the
knowledge of TCI, any investigation pending or any suit, action, proceeding or
investigation threatened, against, involving or affecting TCI, any Subsidiary
of TCI or, to the knowledge of TCI, any TCI Equity Affiliate or any of its or
their properties or rights (excluding suits, actions, proceedings or
investigations generally affecting the cable television industry in a
particular state or in the United States and to which neither TCI nor any
Subsidiary of TCI is a party), which, if adversely determined, is, insofar as
TCI can reasonably foresee, reasonably likely to have, either individually or
in the aggregate, a material adverse effect on the business, assets, results of
operations or financial condition of TCI and its Subsidiaries, taken as a
whole; (ii) there is no judgment, decree, Injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator applicable to TCI, any Subsidiary of TCI or, to the knowledge of
TCI, any TCI Equity Affiliate having, or which, insofar as TCI can reasonably
foresee, is reasonably likely to have, either individually or in the aggregate,
any such effect; and (iii) to the knowledge of TCI, there is no action, suit,
proceeding or investigation pending or threatened against TCI which seeks to
restrain, enjoin or delay the consummation of either Merger or any of the other
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transactions contemplated hereby or which seeks damages in connection
therewith, and no Injunction of any type referred to in Section 8.1(d) has been
entered or issued. The term "order" as used in the immediately preceding
sentence shall not be deemed to include any Licenses.
5.9 Licenses; Compliance with Regulatory Requirements; Intangible
Property. TCI, its Subsidiaries and, to the knowledge of TCI, the TCI Equity
Affiliates hold all Licenses which are material to the operation of the
businesses of TCI and its Subsidiaries, taken as a whole. Each of TCI, its
Subsidiaries and, to the knowledge of TCI, the TCI Equity Affiliates is in
compliance with, and has conducted its business so as to comply with, the terms
of their respective Licenses and with all applicable laws, rules, regulations,
ordinances and codes, domestic or foreign, including laws, rules, regulations,
ordinances and codes relating to the protection of the environment, except
where the failure so to comply has not had, either individually or in the
aggregate, a material adverse effect on the business, assets, results of
operations or financial condition of TCI and its Subsidiaries, taken as a
whole. Without limiting the generality of the foregoing, TCI, its Subsidiaries
and, to the knowledge of TCI, the TCI Equity Affiliates (i) have all FCC
Licenses and Franchises required for the operation of the CATV Systems being
operated on the date hereof by TCI, any of its Subsidiaries, or, to the
knowledge of TCI, any TCI Equity Affiliate, (ii) have duly and currently filed
all reports and other information required to be filed by the FCC or any other
Governmental Entity in connection with such FCC Licenses and Franchises and
(iii) are not in violation of any of such FCC Licenses or Franchises, other
than the lack of FCC Licenses or Franchises, delays in filing reports or
possible violations which have not had and, insofar as can reasonably be
foreseen, in the future will not have a material adverse effect on the
business, assets, results of operations or financial condition of TCI and its
Subsidiaries, taken as a whole. TCI and its Subsidiaries own or have adequate
rights to use all patents, trademarks, trade names, service marks, trade
secrets, copyrights and other proprietary intellectual property rights as are
material in connection with the businesses of TCI and its Subsidiaries, taken
as a whole.
5.10 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other person or entity is or will be entitled, by reason
of any agreement, act or statement by TCI or any of its Subsidiaries,
directors, officers, employees or affiliates, to any financial advisory,
broker's, finder's or similar fee or commission, to reimbursement of expenses
or to indemnification or contribution in connection with any of the
transactions contemplated by this Agreement, except CS First Boston, whose fees
and expenses and claims for indemnification and contribution will be paid by
TCI in accordance with TCI's agreement with such firm (a copy of which has been
(or following its execution by TCI will promptly be) provided to Liberty), and
TCI agrees to indemnify and hold Liberty and TCI/Liberty harmless from and
against any and all claims, liabilities or obligations with respect to any such
fees, commissions, expenses or claims for indemnification or contribution
asserted by any person on the basis of any act or statement made or alleged to
have been made by TCI or any of its Subsidiaries, directors, officers,
employees or affiliates.
5.11 Tax Matters. Except as set forth on Schedule 5.11, to the
knowledge of TCI,
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(i) there has been duly filed by or on behalf of TCI and each of its
Subsidiaries (and each of their respective predecessors (except that no
representation or warranty is made as to Liberty or any of its Subsidiaries)),
or filing extensions from the appropriate Federal, state, foreign and local
Governmental Entities have been obtained with respect to, all material Federal,
state, foreign and local tax returns and reports required to be filed on or
prior to the date hereof, (ii) payment in full or adequate provision for the
payment of all taxes required to be paid in respect of the periods covered by
such tax returns and reports has been made (except in respect of state, local
and foreign taxes which are in the aggregate immaterial in amount) and (iii) a
reserve which TCI reasonably believes to be adequate has been set up for the
payment of all such taxes anticipated to be payable in respect of periods
through the date hereof. Except as set forth on Schedule 5.11, none of the
Federal income tax returns required to be filed by or on behalf of TCI and each
of its Subsidiaries consolidated in such returns (and their respective
predecessors (except that no representation or warranty is made as to Liberty
or any of its Subsidiaries)) under the Code or any predecessor statute (the
"TCI Consolidated Returns") are currently under examination by the IRS. There
have not been any deficiencies or assessments asserted in writing by the IRS
with respect to the TCI Consolidated Returns. Except as set forth on Schedule
5.11, neither TCI nor any of its Subsidiaries (nor any of their respective
predecessors (except that no representation or warranty is made as to Liberty
or any of its Subsidiaries)) has, with regard to any assets or property held,
acquired or to be acquired by TCI or any of its Subsidiaries, filed a consent
pursuant to Section 341(f) of the Code or any predecessor statute.
5.12 Employee Benefit Plans; ERISA.
(a) Schedule 5.12(a) contains a true and complete list of
each bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance or termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to at any time since January 1,
1993 by TCI or by any trade or business, whether or not incorporated (a "TCI
ERISA Affiliate"), that together with TCI would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), for the benefit of any employee or former
employee of TCI or any TCI ERISA Affiliate including any such type of plan
established, maintained or contributed to under the laws of any foreign country
(the "TCI Plans"). Schedule 5.12(a) identifies each TCI Plan that is an
"employee benefit plan," as defined in Section 3(3) of ERISA. TCI has
heretofore delivered to Liberty true and complete copies of each TCI Plan and,
if the TCI Plan is funded through a trust or any third party funding vehicle, a
copy of the trust or other funding document.
(b) Except as set forth in Schedule 5.12(b), (i) no TCI
Plan is subject to Title IV of ERISA or Section 412 of the Code and (ii)
neither TCI nor any TCI ERISA Affiliate made, or was required to make,
contributions to any employee benefit plan subject to Title IV of ERISA during
the five year period ending on the Effective Time.
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(c) Concerning each TCI Plan that is or has been subject
to the funding requirements of Title I, Subtitle B, Part 3 of ERISA, the
funding method used in connection with such TCI Plan is, and at all times has
been, acceptable under ERISA, each of the actuarial assumptions employed in
connection with determining the funding of each such TCI Plan is, and at all
times has been, reasonable and satisfies the requirements of Section 412(c)(3)
of the Code and Section 302(c)(3) of ERISA, and Schedule 5.12(c) sets forth, as
of the date hereof, (A) the actuarially determined present value of all benefit
liabilities within the meaning of Section 4001(a)(16) of ERISA ("TCI Benefit
Liabilities") determined on an ongoing plan basis, employing in making such
determination the same actuarial assumptions as were used in determining plan
fundings for the most recently completed plan year unless any such assumption
is not reasonable, in which event such assumption has been changed to a
reasonable assumption, (B) the actuarially determined present value of all TCI
Benefit Liabilities under each such TCI Plan employing in such determination
the same actuarial assumptions, except turnover assumptions, as were used in
determining funding for such plan for the most recently completed plan year
unless any such assumption is not reasonable, in which event such assumption
has been changed to a reasonable assumption, (C) the fair market value of the
assets held to fund each such TCI Plan, (D) the funding method used in
connection with each such TCI Plan and (E) identification of the amount and
related plan with respect to which there is or has been any "accumulated
funding deficiency," as defined in Section 302(a)(2) of ERISA. Schedule
5.12(c) sets forth a reasonable good faith estimate of material changes between
January 1, 1993 and the date hereof in the value of benefits or plan assets
described in the preceding clause (A), (B) or (C); Schedule 5.12(c) sets forth
the information described in said clauses (A), (B), (C) and (D) as of the date
hereof, including a separate statement of liabilities attributable to
unpredictable contingent event benefits within the meaning of Section
412(l)(7)(B)(ii) of the Code and Section 302(d)(7)(B)(ii) of ERISA. The sum of
the amount of unfunded TCI Benefit Liabilities under all TCI Plans (excluding
each such plan with an amount of unfunded Benefit Liabilities of zero or less)
is not more than $1,000,000; all contributions required by Section 515 of ERISA
to be made by TCI or any TCI ERISA Affiliate to TCI Plans have been timely
made; with respect to any such TCI Plan and concerning each TCI Plan which is
in whole or in part an "individual account plan" (as defined in Section 3(34)
of ERISA), there is set forth in Schedule 5.12(c) (A) the amount of any
liability of TCI or any TCI ERISA Affiliate for contributions due or to become
due with respect to each such TCI Plan for periods up to the date hereof, and
the date any such amounts were paid and (B) the amount of any contribution
accrued or paid or expected to be accrued or paid with respect to such TCI Plan
for the plan year in which the Effective Time occurs; with respect to any such
TCI Plan no such plan has been terminated or subject to a "spin-off" or
"spin-off termination" or partial termination and no assets of any such TCI
Plan have been used or employed in a manner so as to subject them to an excise
tax imposed under Section 4980 of the Code; each such TCI Plan permits
termination thereof, and distribution of any assets in excess of those required
to pay TCI Benefit Liabilities may be distributed to or for the benefit of TCI
or any TCI ERISA Affiliate, and Section 4044(d) of ERISA would not prevent such
reversion; and with respect to any such TCI Plan, any reduction in benefits was
preceded by an adequate and appropriate notice to the parties described in and
as required by
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Section 204(h) of ERISA. There are no former employees or participants who are
entitled to earn additional pension benefits by reason of "grow in" or other
rights with respect to service or time periods after such employees have been
terminated from employment with TCI, or any TCI ERISA Affiliates.
(d) Neither TCI nor any TCI ERISA Affiliate has engaged
in any transaction described under Section 4069 of ERISA nor can any claim,
encumbrance or other lien be imposed on TCI, any TCI ERISA Affiliates or assets
of any of the foregoing under Section 4068 of ERISA.
(e) Each TCI Plan that utilizes a funding vehicle
described in Section 501(c)(9) of the Code or is subject to the provisions of
Section 505 of the Code has been the subject of a notification by the IRS that
such funding vehicle qualifies for tax-exempt status under Section 501(c)(9) of
the Code and/or such TCI Plan complies with Section 505 of the Code, unless the
IRS does not as a matter of policy issue such notification with respect to that
particular type of plan. Each such TCI Plan satisfies, where appropriate, the
requirements of Sections 501(c)(9) and 505 of the Code.
(f) Schedule 5.12(f) contains a list of, and TCI has
delivered to Liberty true and complete copies of, all other material personnel
policy, stock option plan, collective bargaining agreement, bonus, incentive
award, vacation pay, severance pay, consulting agreement or any other employee
benefit plan, agreement, arrangement or understanding which TCI or any TCI
ERISA Affiliate maintains, or to which TCI or any TCI ERISA Affiliate
contributes, is required to contribute or has contributed since January 1,
1993, and which is not required under paragraph (a) or (b) above to be listed
in Schedule 5.12(a) or (b), respectively (including, without limitation, with
respect to any plans which are unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, assets and any
other matters which relate to the obligations of TCI or any TCI ERISA
Affiliate).
(g) TCI and each TCI ERISA Affiliate have complied in all
material respects with all requirements for premium payments, including any
interest and penalty charges for late payment, due the Pension Benefit Guaranty
Corporation ("PBGC") with respect to each TCI Plan and each separate plan year
for which any premiums are required. Except as set forth in Schedule 5.12(g),
and except for transactions required by this Agreement, from the period
commencing January 1, 1987 through the Effective Time there has been no
"reportable event" (as defined in Section 4043(b) of ERISA and the regulations
promulgated by the PBGC thereunder) with respect to any TCI Plan subject to
Title IV of ERISA for which notice to the PBGC has not, by rule or regulation,
been waived. There is not any unsatisfied material liability to the PBGC which
has been incurred by TCI or any TCI ERISA Affiliate on account of any TCI Plan
subject to Title IV of ERISA. From the period commencing January 1, 1987
through the Effective Time, no filing has been or will be made by TCI or any
TCI ERISA Affiliate with the PBGC to terminate, nor has any proceeding been
commenced by the PBGC to terminate, any TCI Plan subject to Title IV of ERISA
which was maintained, or wholly or partially funded, by TCI or any TCI ERISA
Affiliate. Neither TCI nor any TCI Equity
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Affiliate (i) has ceased operations at a facility so as to become subject to
the provisions of Section 4062(e) of ERISA, (ii) has withdrawn from any TCI
Plan with respect to which it is a substantial employer so as to become subject
to the provisions of Section 4063 of ERISA, (iii) has ceased contributions on
or before the Effective Time to any TCI Plan subject to Section 4064(a) of
ERISA to which TCI or any TCI ERISA Affiliate has made contributions during the
five calendar years prior to the Effective Time, or (iv) has incurred a
complete or partial withdrawal from any TCI Plan that is a multiemployer plan
(as defined in either Section 3(37) or Section 4001(a)(3) of ERISA (a
"Multiemployer Plan")) so as to incur withdrawal liability as defined in
Section 4201 of ERISA (without regard to any subsequent reduction or waiver of
such liability under Section 4207 or 4208 of ERISA). No employee pension
benefit which is a Multiemployer Plan to which TCI or any TCI ERISA Affiliate
contributes is in "reorganization" (as defined in Section 4241 of ERISA) or
"insolvent" (as defined in Section 4245 of ERISA). There is not now, nor can
there ever be, any liability under Section 4064 of ERISA to TCI or any TCI
ERISA Affiliate by reason of participation in any TCI Plan by TCI or any TCI
ERISA Affiliate on or prior to the Effective Time. There has been no amendment
to any TCI Plan that would require the furnishing of security under Section
401(a)(29) of the Code. There has been no event or circumstance and there can
be no event or circumstance which has or may result in any liability being
asserted by any TCI Plan, the PBGC or any other person or entity under Title IV
of ERISA against TCI or any TCI ERISA Affiliate or against TCI/Liberty
(assuming consummation of the Mergers). Neither TCI nor any TCI ERISA
Affiliate has any liability to any TCI Plan for contributions under Section
412(m) of the Code or Section 302(e) of ERISA, nor has any claim, encumbrance
or other lien been imposed under Section 412(n) of the Code or Section 302(f)
of ERISA nor is there any liability for excise taxes imposed under Section 4971
of the Code, and all liabilities arising under Section 412(c)(11) of the Code
with respect to contributions to any TCI Plan have been set forth in Schedule
5.12(g). Copies of any notices to the PBGC under Section 412(n) of the Code or
Section 302(f) of ERISA with respect to any TCI Plan have been delivered to
Liberty; and copies of notices required to be given to participants under
Section 101(d) of ERISA with respect to any TCI Plan have previously been
delivered to Liberty.
(h) True and complete copies of each plan, agreement,
arrangement or understanding referred to in Schedule 5.12(g), the most recent
determination letter issued by the IRS with respect to each TCI Plan, annual
reports on Form 5500 required to be filed with any Governmental Entity for each
TCI Plan which is an employee pension benefit plan for the three most recent
plan years and all actuarial reports for the last two plan years of each TCI
Plan, other than an "individual account plan," have heretofore been delivered
by TCI to Liberty.
(i) Except as set forth in Schedule 5.12(i), neither TCI
nor any TCI ERISA Affiliate is a party to or bound by the terms of any
collective bargaining agreement. TCI and each TCI ERISA Affiliate is in
compliance in all material respects with all applicable laws respecting the
employment and employment practices, terms and conditions of employment and
wage and hours of its employees and is not engaged in any unfair labor
practice. To the knowledge of TCI, all of the employees of TCI and the TCI
ERISA Affiliates who work in the
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United States are lawfully authorized to work in the United States according to
federal immigration laws. There is no labor strike or labor disturbance
pending or, to the knowledge of TCI threatened against TCI or any TCI ERISA
Affiliate, and during the past five years neither TCI nor any TCI ERISA
Affiliate has experienced a work stoppage.
(j) Each TCI Plan has been operated and administered in
all material respects in accordance with its terms and applicable law,
including, but not limited to, Section 406 of ERISA and Section 4975 of the
Code.
(k) Each TCI Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code.
(l) Except as set forth in Schedule 5.12(l), no TCI Plan
provides benefits, including without limitation death or medical benefits, with
respect to current or former employees of TCI or any TCI ERISA Affiliate beyond
their retirement or other termination of service (other than (i) coverage
mandated by applicable law and (ii) death benefits or retirement benefits under
any "employee pension plan," as that term is defined in Section 3(2) of ERISA).
(m) Except as set forth in Schedule 5.12(m), there are no
material pending, threatened or anticipated claims by or on behalf of any TCI
Plan, by any employee or beneficiary covered under an such TCI Plan, or
otherwise involving any such TCI Plan (other than routine claims for benefits).
5.13 Fairness Opinion. On January 24, 1994, TCI received an oral
opinion of CS First Boston to the effect that, as of such date, the
consideration to be received by the holders of TCI Common Stock (other than
Liberty and its affiliates) in the TCI Merger is fair, from a financial point
of view, to such stockholders.
5.14 Recommendation of TCI Board. The TCI Board at a meeting duly
called and held on January 24, 1994, has, by resolutions adopted by at least
75% of the members of the entire TCI Board, (i) determined that the Merger
Proposal is fair to, and in the best interests of, the stockholders of TCI
(other than Liberty and its Subsidiaries), (ii) approved this Agreement and the
transactions contemplated hereby and (iii) recommended that the stockholders of
TCI approve and adopt the Merger Proposal.
5.15 Vote Required. The only vote of stockholders of TCI required
under the DGCL and TCI's Restated Certificate of Incorporation and By-laws in
order to approve and adopt this Agreement and the terms contemplated hereby is
the affirmative vote of the holders of a majority of the aggregate voting power
of the issued and outstanding shares of TCI Class A Stock and TCI Class B Stock
voting together as a single class.
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ARTICLE VI
Representations and Warranties of TCI/Liberty
TCI/Liberty hereby represents and warrants to each of TCI and Liberty
as follows:
6.1 Organization. Each of TCI/Liberty, TCI Mergerco and Liberty
Mergerco is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation.
6.2 Authorization and Validity of Agreement. Each of TCI/Liberty,
TCI Mergerco and Liberty Mergerco has all requisite corporate power and
authority to enter into this Agreement and perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution,
delivery and performance by each of TCI/Liberty, TCI Mergerco and Liberty
Mergerco of this Agreement and the consummation by each of TCI/Liberty, TCI
Mergerco and Liberty Mergerco of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on its part. This Agreement
has been duly executed and delivered by each of TCI/Liberty, TCI Mergerco and
Liberty Mergerco and is a valid and binding obligation of each of TCI/Liberty,
TCI Mergerco and Liberty Mergerco, enforceable in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
6.3 Newly Issued Shares. The shares of TCI/Liberty Common Stock
and TCI/Liberty Preferred Stock to be issued and delivered by TCI/Liberty
pursuant to Section 2.1 will be, when the Mergers have become effective and
such shares are issued and delivered as provided in Section 2.1 and as
described in the Registration Statement, duly authorized, validly issued, fully
paid and nonassessable.
6.4 Interim Operations of TCI/Liberty. Prior to the Effective
Time, TCI/Liberty, TCI Mergerco and Liberty Mergerco will engage in no business
activities, will have no subsidiaries (other than, in the case of TCI/Liberty,
TCI Mergerco and Liberty Mergerco) and will conduct their respective operations
only as contemplated hereby.
ARTICLE VII
Transactions Prior to Closing
7.1 Access to Information Concerning Properties and Records. Upon
reasonable notice, each of TCI and Liberty shall (and shall cause each of its
Subsidiaries, and use its reasonable efforts to cause its other affiliates, to)
afford to the officers, employees, counsel, accountants and other authorized
representatives of the other full access during normal business hours to all
its properties, personnel, books and records and furnish promptly to such
persons
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such information concerning its business, properties, personnel and affairs as
such persons shall from time to time reasonably request.
7.2 Confidentiality. Each party shall, and shall use its
reasonable efforts to cause its officers, employees and authorized
representatives to, (i) hold in confidence all confidential information
obtained by it or them from any other party or any of such other party's
officers, employees or authorized representatives pursuant to this Agreement
(unless such information is or becomes publicly available or readily
ascertainable from public or published information or trade sources through no
wrongful act of such first party) and (ii) use all such data and information
solely for the purpose of consummating the transactions contemplated hereby,
except, in either case, as may be otherwise required by law or legal process or
as may be necessary or appropriate in connection with the enforcement of, or
any litigation concerning, this Agreement. In the event this Agreement is
terminated, each party shall promptly return, if so requested by any other
party, all nonpublic documents obtained from such other party in connection
with the transactions contemplated hereby and any copies thereof which may have
been made by such first party and shall use its reasonable efforts to cause its
officers, employees and authorized representatives to whom such documents were
furnished promptly to return such documents and any copies thereof any of them
may have made. The foregoing provisions shall not apply (A) to TCI with
respect to any information or reports relating to Liberty which are not
obtained by TCI, its officers, employees or authorized representatives through
TCI's due diligence investigation conducted by TCI's officers, employees and
authorized representatives exclusively in connection with the transactions
contemplated hereby or (B) to Liberty with respect to any information or
reports relating to TCI which are not obtained by Liberty, its officers,
employees or authorized representatives through Liberty's due diligence
investigation conducted by Liberty's officers, employees and authorized
representatives exclusively in connection with the transactions contemplated
hereby.
7.3 Public Announcements. Neither TCI nor Liberty shall, nor
shall either TCI or Liberty permit any of its Subsidiaries to (and each such
party shall use its reasonable efforts to cause its affiliates, directors,
officers, employees, agents and representatives not to), issue any press
release, make any public announcement or furnish any written statement to its
employees or stockholders generally concerning the transactions contemplated by
this Agreement without the consent of the other party (which consent shall not
be unreasonably withheld), except to the extent required by applicable law or
the applicable requirements of the National Association of Securities Dealers,
Inc. with respect to issuers whose securities are quoted on NASDAQ NMS (and in
either such case such party shall, to the extent consistent with timely
compliance with such requirement, consult with the other party prior to making
the required release, announcement or statement).
7.4 Conduct of Business by Liberty and TCI Pending the Effective
Time. Each of Liberty and TCI shall, and, with respect to paragraphs (b)
through (g) below, shall cause each of its Subsidiaries to, except as
permitted, required or specifically contemplated by this Agreement or consented
to or approved in writing by the other party (which consent or approval shall
not be unreasonably withheld) and except as set forth in Schedule 7.4, during
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the period commencing on the date hereof and ending at the Effective Time:
(a) not (i) make any change or amendments in its charter
or by-laws; (ii) issue, grant, sell or deliver any shares of its capital stock
or other securities, or any securities convertible into, or options, warrants
or rights of any kind to subscribe to or acquire, any shares of its capital
stock or other securities, other than (x) in the case of Liberty, issuances of
Liberty Class A Stock (A) upon exercise of Liberty Stock Options outstanding on
the date of and disclosed pursuant to this Agreement in accordance with their
existing terms and (B) on conversion of shares of Liberty Class B Stock at the
option of the holders thereof in accordance with the existing terms of
Liberty's Restated Certificate of Incorporation and (y) in the case of TCI,
issuances of TCI Class A Stock (A) upon exercise of TCI Stock Options
outstanding on the date of and disclosed pursuant to this Agreement in
accordance with their existing terms and (B) on conversion of shares of TCI
Class B Stock and TCI Preferred Stock at the option of the holders thereof in
accordance with the existing terms of TCI's Restated Certificate of
Incorporation; (iii) split, combine or reclassify the outstanding shares of its
capital stock or issue any capital stock or other securities in exchange for
any such shares; (iv) redeem, purchase, or otherwise acquire, directly or
indirectly, (x) in the case of Liberty, any shares of capital stock or any
other securities of Liberty, other than as required by existing agreements with
minority investors in any of Liberty's Subsidiaries and (y) in the case of TCI,
any shares of capital stock or any other securities of TCI, other than as
required by existing agreements with minority investors in any of TCI's
Subsidiaries; (v) amend or modify any outstanding options, warrants or rights
to acquire, or securities convertible into, shares of its capital stock or
other securities, amend or modify any outstanding stock appreciation rights or
restricted stock awards or grant, adopt or authorize any stock or equity
appreciation rights, restricted stock or equity, stock or equity purchase,
stock or equity bonus or similar plan, arrangement or agreement; (vi) make any
other changes in its capital structure; (vii) declare, set aside, pay or make
any dividend or other distribution or payment (whether in cash, property or
securities) with respect to its capital stock or other securities, except for
(x) in the case of Liberty, regular annual dividends on the Liberty Class E
Preferred (which may be paid in cash or, at the option of Liberty, shares of
Liberty Class A Stock) as provided by the existing terms of such Liberty Class
E Preferred and (y) in the case of TCI, regular quarterly cash dividends on the
TCI Preferred Stock as provided by the existing terms of the TCI Preferred
Stock; (viii) sell or pledge any stock, equity or partnership interest owned by
it, except for dispositions permitted by this Section 7.4; or (ix) enter into
or assume any contract, agreement, obligation, commitment or arrangement with
respect to any of the foregoing;
(b) not (i) establish, amend or modify any employee
benefit plan of any kind referred to in Section 4.12(a) or 5.12(a), as the case
may be, except in the ordinary course of business consistent with past practice
or to the extent required by any applicable law or the existing terms of such
employee benefit plan or the provisions of this Agreement; (ii) other than as
contemplated or otherwise permitted by this Agreement and other than in
connection with normal cash management practices conducted in the ordinary and
usual course of their business and consistent with past practice, make any
advance or loan to or engage in any transaction with any director, officer,
partner or affiliate not required by the terms of an
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existing Contract; or (iii) enter into or assume any contract, agreement,
obligation, commitment or arrangement with respect to any of the foregoing;
(c) not acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, except for (i) in the case of TCI and its Subsidiaries, any
single acquisition or related series of acquisitions in which the aggregate
purchase price is less than $500,000,000, and (ii) in the case of Liberty and
its Subsidiaries, any single acquisition or related series of acquisitions in
which the aggregate purchase price is less than $250,000,000;
(d) not sell, lease or encumber or otherwise dispose of,
or agree to sell, lease, encumber or otherwise dispose of, any of its assets,
except for (i) in the case of TCI and its Subsidiaries, any single disposition
or related series of dispositions in which the aggregate fair market value of
the assets disposed of does not exceed $500,000,000, and (ii) in the case of
Liberty and its Subsidiaries, any single disposition or related series of
dispositions in which the aggregate fair market value of the assets disposed of
does not exceed $250,000,000;
(e) not incur (which shall not be deemed to include
entering into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements) any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities or guarantee any debt
securities of others other than (i) in the ordinary course of business
consistent with past practice and (ii) as may be necessary in connection with
acquisitions permitted by this Section 7.4; provided, however, that the
foregoing shall not prohibit (x) any renewal, extension, amendment or
refinancing of existing indebtedness (provided there is no increase in the
interest rate or the principal amount of such indebtedness) and (y) the
incurrence of any new indebtedness, or the amendment or refinancing of any
existing indebtedness (whether or not permitted by the preceding clause (x)),
if such indebtedness would be prepayable in full at the Effective Time without
material restrictions (other than customary prepayment penalties and premiums
that, in the case of any refinancing, are no greater that those contained in
the indebtedness being refinanced));
(f) conduct its business only in, and not take any action
except in, the ordinary and usual course of its business and consistent with
past practices, and use reasonable efforts, in the ordinary and usual course of
business and consistent with past practices, to preserve intact its business
organization, to preserve its Licenses in full force and effect, to keep
available the services of its present officers and key employees, and to
preserve the good will of those having business relationships with it;
provided, however, that the provisions of this subsection (f) shall not
prohibit any action permitted to be taken pursuant to any other subsection of
this Section 7.4, and shall not prohibit any Subsidiary of TCI or Liberty from
taking any of the actions set forth in Section 7.4(a); and
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(g) not take any action that would or is reasonably
likely to result in any of the conditions set forth in Article VIII not being
met as of the Closing Date.
7.5 No Solicitation. Subject to the fiduciary duties of its
directors under applicable law, each of Liberty and TCI will not, directly or
indirectly, through any officer, director, employee, agent or representative or
otherwise (i) solicit or initiate the submission of proposals or offers from
any other person or entity relating to any Takeover Proposal (as defined
below); (ii) cooperate with, or furnish or cause to be furnished any non-public
information concerning its business, properties or assets or the business,
properties or assets of any of its Subsidiaries to, any other person or entity
in connection with any Takeover Proposal; (iii) negotiate with any other person
or entity with respect to any Takeover Proposal; or (iv) enter into any
agreement or understanding with any other person or entity with the intent to
effect any Takeover Proposal. Each of Liberty and TCI will immediately give
written notice to the other of the details of any Takeover Proposal of which it
is currently or becomes aware. Notwithstanding the foregoing, nothing
contained in this Section 7.5 shall prohibit Liberty or TCI or their respective
Boards of Directors, to the extent required by their fiduciary duties under
applicable law, from (i) providing information to, or participating in
discussions or negotiations with, any person or entity that makes an
unsolicited inquiry with respect to such party if the Board of Directors of
such party reasonably believes such person or entity may propose a Takeover
Proposal on terms that are superior, from a financial point of view, to the
terms of the Mergers for the stockholders of such party (a "Superior Takeover
Proposal") or (ii) entering into an agreement with respect to a Superior
Takeover Proposal after receipt by the other party of written notice of (A) the
material terms of such Superior Takeover Proposal and (B) the identity of the
person making such proposal. As used in this Section, "Takeover Proposal"
means, with respect to Liberty or TCI, any proposal, other than as contemplated
by this Agreement, for a merger, consolidation, reorganization, other business
combination or recapitalization involving such party, for the acquisition of a
25% or greater interest in the equity or in any class or series of capital
stock of such party, for the acquisition of the right to cast 25% or more of
the votes on any matter with respect to such party or for the acquisition of
assets of such party or its Subsidiaries (or both) constituting 40% or more of
the consolidated assets of such party or which generate 40% or more of the
consolidated revenues of such party or the effect of which may be to prohibit,
restrict or delay the consummation of the transactions contemplated by this
Agreement. Nothing contained herein shall be construed to prohibit either
Liberty or TCI or the Liberty Board or the TCI Board, respectively, from making
any disclosure to its stockholders which, in the judgment of such board as
advised by its counsel, may be required by applicable law in connection with
any such proposal or offer. This Section 7.5 shall not apply to the Takeover
Proposal of Bell Atlantic Corporation ("Bell Atlantic") set forth in that
certain letter of intent dated October 12, 1993, as the same may be modified or
amended with the consent of Liberty and TCI (such consent to be deemed granted
if (x) Liberty and TCI execute an amendment to such letter of intent, (y)
Liberty and TCI execute a definitive merger agreement with Bell Atlantic with
respect to a Takeover Proposal or (z) neither Liberty nor TCI has issued a
press release to the effect that negotiations with Bell Atlantic concerning its
Takeover Proposal have been terminated).
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7.6 Expenses. Whether or not the Mergers are consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense, except that the costs and expenses incurred in connection with
mailing and/or printing of the Joint Proxy Statement, the Joint Proxy
Statement/Prospectus and the Registration Statement (and any amendment of or
supplement thereto) shall be borne 80% by TCI and 20% by Liberty.
Notwithstanding the foregoing, but subject to Sections 10.12 and 10.13, if this
Agreement is terminated by TCI or Liberty (the "non-breaching party") as a
result of a material willful breach by the other party (the "breaching party")
of its covenants or agreements contained herein or the representations and
warranties made by it herein, the breaching party shall reimburse the
non-breaching party for all out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this Agreement. Such payment
shall be made against receipt of documentation in reasonable detail supporting
the amount of such costs and expenses. Any payment required to be made by the
breaching party hereunder shall be made within five business days of the
termination of this Agreement by delivery to the non-breaching party of a
certified or bank cashier's check payable in next-day funds.
7.7 Notification of Certain Matters. Between the date hereof and
the Effective Time, each party will give prompt notice in writing to the other
parties of: (i) any information that indicates that any of its representations
or warranties contained herein was not true and correct as of the date hereof
or will not be true and correct at and as of the Effective Time with the same
force and effect as if made at and as of the Effective Time (except for changes
permitted or contemplated by this Agreement), (ii) the occurrence of any event
which will result, or has a reasonable prospect of resulting, in the failure of
any condition specified in Article VIII hereof to be satisfied, (iii) any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement or that such transactions otherwise may violate
the rights of or confer remedies upon such third party and (iv) any notice of,
or other communication relating to, any litigation referred to in Section 7.8
or any order or judgment entered or rendered therein.
7.8 Defense of Litigation. Each of TCI and Liberty agrees to
vigorously defend against all actions, suits or proceedings in which such party
is named as a defendant which seek to enjoin, restrain or prohibit the
transactions contemplated hereby or seek damages with respect to such
transactions. Neither TCI nor Liberty shall settle any such action, suit or
proceeding or fail to perfect on a timely basis any right to appeal any
judgment rendered or order entered against such party therein without the
consent of the other party (which consent shall not be withheld unreasonably).
Each of TCI and Liberty further agrees to use its reasonable efforts to cause
each of its affiliates, directors and officers to vigorously defend any action,
suit or proceeding in which such affiliate, director or officer is named as a
defendant and which seeks any such relief to comply with this Section to the
same extent as if such person were a party hereto.
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ARTICLE VIII
Conditions Precedent
8.1 Conditions Precedent to the Obligations of TCI and Liberty.
The respective obligations of TCI and Liberty to consummate the transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing Date of each of the following conditions:
(a) Approval of Stockholders. The Merger Proposal shall
have been approved and adopted by the requisite vote (i) of the stockholders of
TCI under the DGCL and TCI's Restated Certificate of Incorporation and By-laws
and (ii) of the stockholders of Liberty under the DGCL and Liberty's Restated
Certificate of Incorporation and By-laws.
(b) HSR Act. All applicable waiting periods under the
HSR Act shall have expired or been terminated without receipt of any objections
or commencement of litigation or threat thereof by the appropriate governmental
enforcement agency to restrain the transactions contemplated hereby.
(c) Registration. The Registration Statement (as amended
or supplemented) shall have become effective under the Securities Act and shall
not be subject to any stop order, and no action, suit, proceeding or
investigation seeking a stop order or to suspend the effectiveness of the
Registration Statement shall have been initiated and be continuing or shall
have been threatened and be unresolved. TCI/Liberty shall have received all
state securities law or blue sky permits and authorizations necessary to carry
out the transactions contemplated hereby, such permits and authorizations shall
be in full force and effect and no action, suit, proceeding or investigation
seeking to revoke or suspend the effectiveness of any such permit or
authorization shall have been initiated and be continuing or shall have been
threatened and be unresolved.
(d) Absence of Injunctions. No permanent or preliminary
Injunction or restraining order or other order by any court or other
Governmental Entity of competent jurisdiction or other legal restraint or
prohibition preventing consummation of the transactions contemplated hereby as
provided herein shall be in effect.
(e) No Adverse Enactments. There shall not have been any
action taken, or any statute, rule, regulation, order, judgment or decree
enacted, promulgated, entered, issued or enforced by any foreign or United
States federal, state or local Governmental Entity, and there shall be no
action, suit or proceeding pending which (i) makes the transactions
contemplated by this Agreement illegal or imposes or may impose material
damages or penalties in connection therewith, (ii) requires divestiture of a
material portion of the business of TCI and its Subsidiaries, taken as a whole,
or Liberty and its Subsidiaries, taken as a whole, (iii) would, as of or after
the Effective Time and assuming consummation of the Mergers, impose material
limitations on the ability of TCI/Liberty effectively to exercise full rights
of
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ownership of shares of capital stock of either Surviving Corporation (including
the right to vote such shares on all matters properly presented to the
stockholders of such Surviving Corporation) or (iv) would so materially
adversely impact the economic or business benefits of the consummation of
either or both Mergers as to render such consummation inadvisable.
(f) Receipt of Licenses, Permits and Consents. Other
than the filing of the TCI Certificate of Merger and the Liberty Certificate of
Merger with the Delaware Secretary of State and filings due after the Effective
Time, all Local Approvals, all FCC Approvals and all other Government Consents
as are required in connection with the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect, all Governmental Filings as are required in connection with the
consummation of such transactions shall have been made, and all waiting
periods, if any, applicable to the consummation of such transactions imposed by
any Governmental Entity shall have expired, other than those which, if not
obtained, in force or effect, made or expired (as the case may be) would not,
either individually or in the aggregate, have a material adverse effect on (i)
the transactions contemplated hereby or (ii) the business, assets, results of
operations, financial condition or prospects of TCI and its Subsidiaries, taken
as a whole, Liberty and its Subsidiaries, taken as a whole, or, as of or after
the Effective Time and assuming consummation of the Mergers, TCI/Liberty and
its Subsidiaries, taken as a whole. For purposes hereof, the failure to obtain
Local Approvals relating to Franchises for the operation of CATV Systems
serving, in the aggregate, (x) in the case of Liberty, 150,000 or fewer of the
subscribers to the basic cable television services offered by Liberty or its
Subsidiaries, or (y), in the case of TCI, 400,000 or fewer of the subscribers
to the basic cable television services offered by TCI or its Subsidiaries shall
be deemed not to have any such material adverse effect.
(g) Tax Opinion. Each of TCI and Liberty shall have
received, prior to the effective date of the Registration Statement, the
opinion of Baker & Botts, L.L.P., in form and substance reasonably satisfactory
to each of TCI and Liberty, to the effect that the Mergers will be completely
tax free for Federal income tax purposes to each party to this Agreement and to
the respective stockholders of TCI and Liberty (other than in respect of any
cash paid in lieu of fractional shares or for Dissenting Shares), which opinion
shall not have been withdrawn prior to the Effective Time.
(h) NMS Listing. The shares of TCI/Liberty Common Stock
issuable to stockholders of TCI and Liberty in accordance with Article II shall
have been authorized for listing on the Nasdaq NMS upon official notice of
issuance.
8.2 Conditions Precedent to the Obligations of TCI. The
obligation of TCI to consummate the transactions contemplated by this Agreement
is also subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, unless waived by TCI:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Liberty contained in this Agreement shall, if
specifically qualified by materiality, be true and correct and, if not so
qualified, be true and correct in all material respects in each
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<PAGE> 59
case as of the date of this Agreement and (except to the extent such
representations and warranties speak as of a specified earlier date) on and as
of the Closing Date, with the same force and effect as though made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
(b) Performance of Agreements. Liberty shall have
performed in all material respects all obligations and agreements, and complied
in all material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
(c) Officer's Certificates. TCI shall have received such
certificates of Liberty, dated the Closing Date, signed by executive officers
of Liberty to evidence satisfaction of the conditions set forth in Sections
8.1(a), 8.1(d), 8.1(e), 8.1(f) and 8.2(g) (insofar as each relates to Liberty)
and in Sections 8.2(a) and 8.2(b) as may be reasonably requested by TCI.
(d) Opinion of Counsel. TCI shall have received a
favorable opinion from Liberty's General Counsel, John M. Draper, Esq., dated
the Closing Date, substantially to the effect set forth in Annex 1. In
rendering such opinion, such counsel may rely as to factual matters upon
certificates or other documents furnished by officers of Liberty and by
government officials, and upon such other documents and data as such counsel
deems appropriate as a basis for the opinion. Such counsel may specify the
jurisdiction or jurisdictions in which he is admitted to practice, that he is
not admitted to practice in any other jurisdiction or expert in the law of any
other jurisdiction and that, to the extent the foregoing opinion concerns the
laws of any other jurisdiction or pertains to matters beyond the scope of such
counsel's expertise, such counsel may rely upon the opinion of counsel admitted
to practice in such other jurisdiction. Any opinion relied upon by such
counsel shall be delivered together with the opinion of such counsel, which
shall state that such counsel believes that reliance thereon is justified.
(e) Fairness Opinion. TCI shall have received a written
opinion of CS First Boston, dated within five days of the date of the Joint
Proxy Statement/Prospectus, to the effect that, as of the date of such opinion,
the consideration to be received by the holders of TCI Common Stock (other than
Liberty and its affiliates) in the TCI Merger is fair to such stockholders,
from a financial point of view. Such opinion shall have been included in the
Joint Proxy Statement/Prospectus mailed to TCI stockholders in connection with
the TCI Stockholders Meeting, and shall not have been withdrawn prior to the
Effective Time.
(f) Proceedings Satisfactory. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
hereby or incidental hereto and all other related legal matters shall have been
reasonably satisfactory to and approved by counsel for TCI, and such counsel
shall have been furnished with such certified copies of such corporate actions
and proceedings and such other instruments and documents as such counsel shall
have reasonably requested.
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(g) Contract Consents and Notices. All Contract Consents
and Contract Notices which are referred to in Section 4.5 or 5.5 or otherwise
required in connection with the consummation of the transactions contemplated
hereby and which, if not obtained or given, would have, individually or in the
aggregate, in the reasonable judgment of TCI, a material adverse effect on (i)
the transactions contemplated hereby or (ii) the business, assets, results of
operations, financial condition or prospects of TCI and its Subsidiaries, taken
as a whole, Liberty and its Subsidiaries, taken as a whole, or, as of or after
the Effective Time and assuming consummation of the Mergers, TCI/Liberty and
its Subsidiaries, taken as a whole, shall have been obtained and given.
(h) No Material Adverse Change. Since the date hereof
nothing shall have occurred, which, individually or in the aggregate, has had
or, in the reasonable judgment of TCI, is reasonably likely to have, a material
adverse effect on the business, assets, results of operations, financial
condition or prospects of Liberty and its Subsidiaries, taken as a whole or, as
of or after the Effective Time and assuming consummation of the Mergers,
TCI/Liberty and its Subsidiaries, taken as a whole (including any potential
change or event disclosed on any Schedule which, subsequent to the date hereof,
actually occurs), excluding, in all cases, events or conditions generally
affecting the cable television or cable programming industry or affecting
general business or economic conditions.
8.3 Conditions Precedent to the Obligations of Liberty. The
obligation of Liberty to consummate the transactions contemplated by this
Agreement is also subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, unless waived by Liberty:
(a) Accuracy of Representations and Warranties. All
representations and warranties of TCI contained herein shall, if specifically
qualified by materiality, be true and correct and, if not so qualified, be true
and correct in all material respects in each case as of the date of this
Agreement and (except to the extent such representations and warranties speak
as of a specified earlier date) on and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
(b) Performance of Agreements. TCI shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
(c) Officer's Certificates. Liberty shall have received
such certificates of TCI, dated the Closing Date, signed by executive officers
of TCI to evidence satisfaction of the conditions set forth in Sections 8.1(a),
8.1(d), 8.1(e), 8.1(f) and 8.3(g) (insofar as each relates to TCI) and in
Sections 8.3(a) and 8.3(b) as may be reasonably requested by Liberty.
(d) Opinion of Counsel. Liberty shall have received a
favorable opinion from
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Sherman & Howard L.L.C, dated the Closing Date, substantially to the effect set
forth in Annex 2. In rendering such opinion, such counsel may rely as to
factual matters upon certificates or other documents furnished by officers of
TCI and by government officials, and upon such other documents and data as such
counsel deems appropriate as a basis for the opinion. Such counsel may specify
the jurisdiction or jurisdictions in which the members thereof are admitted to
practice, that they are not admitted to practice in any other jurisdiction or
experts in the law of any other jurisdiction and that, to the extent the
foregoing opinion concerns the laws of any other jurisdiction or pertains to
matters beyond the scope of such counsel's engagement, such counsel may rely
upon the opinion of counsel admitted to practice in such other jurisdiction.
Any opinion relied upon by such counsel shall be delivered together with the
opinion of such counsel, which shall state that such counsel believes that
reliance thereon is justified.
(e) Fairness Opinion. Liberty shall have received a
written opinion of Merrill Lynch, dated within five days of the date of the
Joint Proxy Statement/Prospectus, to the effect that, as of the date of such
opinion, the exchange ratios in the Liberty Merger and the TCI Merger, taken
together, are fair to the holders of shares of Liberty Common Stock (other than
TCI and its affiliates) from a financial point of view. Such opinion shall
have been included in the Joint Proxy Statement/Prospectus mailed to Liberty
stockholders in connection with the Liberty Stockholders Meeting, and shall not
have been withdrawn prior to the Effective Time.
(f) Proceedings Satisfactory. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
hereby or incidental hereto and all other related legal matters shall have been
reasonably satisfactory to and approved by counsel for Liberty, and such
counsel shall have been furnished with such certified copies of such corporate
actions and proceedings and such other instruments and documents as it shall
have reasonably requested.
(g) Contract Consents and Notices. All Contract Consents
and Contract Notices which are referred to in Section 4.5 or 5.5 or otherwise
required in connection with the consummation of the transactions contemplated
hereby and which, if not obtained or given, would have, individually or in the
aggregate, in the reasonable judgment of Liberty, a material adverse effect on
(i) the transactions contemplated hereby or (ii) the business, assets, results
of operations, financial condition or prospects of TCI and its Subsidiaries,
taken as a whole, Liberty and its Subsidiaries, taken as a whole, or, as of or
after the Effective Time and assuming consummation of the Mergers, TCI/Liberty
and its Subsidiaries, taken as a whole, shall have been obtained and given.
(h) No Material Adverse Change. Since the date hereof
nothing shall have occurred which, individually or in the aggregate, has had
or, in the reasonable judgment of Liberty, is reasonably likely to have, a
material adverse effect on the business, assets, results of operations,
financial condition or prospects of TCI and its Subsidiaries, taken as a whole,
or as of or after the Effective Time and assuming consummation of the Mergers,
TCI/Liberty
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and its Subsidiaries, taken as a whole (including any potential change or event
disclosed on any Schedule which, subsequent to the date hereof, actually
occurs), excluding, in all cases, events or conditions generally affecting the
cable television or cable programming industry or affecting general business or
economic conditions.
ARTICLE IX
Termination
9.1 Termination and Abandonment. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Effective Time, whether before or after approval of the matters presented
in connection with the Mergers by the stockholders of TCI or Liberty: (i) by
mutual consent of TCI and Liberty; or (ii) by either TCI or Liberty: (A) if
the Mergers shall not have been consummated before September 30, 1994, provided
that the right to terminate this Agreement pursuant to this clause (ii)(A)
shall not be available to any party whose failure to perform any of its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time has resulted in the failure of the Mergers to be consummated
before such date, (B) if there has been a material breach by the other party of
any of its representations, warranties, covenants or agreements contained in
this Agreement and such breach shall not have been cured within five business
days after written notice thereof shall have been received by the party alleged
to be in breach, (C) if any court of competent jurisdiction or other competent
governmental authority shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise prohibiting
either Merger and such order, decree, ruling or other action shall have become
final and nonappealable or (D) if the approval of the Merger Proposal by the
stockholders of TCI or Liberty shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at a duly held meeting of
stockholders or at any adjournment thereof and if the terminating party has
complied with its obligations under Section 3.1 or 3.2 (as the case may be);
(iii) by TCI: (A) if the Liberty Board shall have withdrawn or modified in any
manner adverse to TCI its recommendation to the Liberty stockholders referred
to in Section 4.14 or (B) if the TCI Board (x) withdraws or modifies in a
manner adverse to Liberty its recommendation referred to in Section 5.14 if at
such time there exists a Superior Takeover Proposal with respect to TCI or (y)
recommends to TCI's stockholders approval or acceptance of such Superior
Takeover Proposal, in each case only if the TCI Board, after consultation and
based upon the advice of outside counsel (who may be such party's regularly
engaged outside counsel) determines in good faith that such action is necessary
for the TCI Board to comply with its fiduciary duties to TCI stockholders under
applicable law; or (iv) by Liberty: (A) if the TCI Board shall have withdrawn
or modified in any manner adverse to Liberty its recommendation to the TCI
Stockholders referred to in Section 5.14 or (B) if the Liberty Board (x)
withdraws or modifies in a manner adverse to TCI its recommendation referred to
in Section 4.14 if at such time there exists a Superior Takeover Proposal with
respect to Liberty or (y) recommends to Liberty's stockholders approval or
acceptance of such Superior Takeover Proposal, in each case only if the Liberty
Board, after
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consultation and based upon the advice of outside counsel (who may be such
party's regularly engaged outside counsel) determines in good faith that such
action is necessary for the Liberty Board to comply with its fiduciary duties
to Liberty stockholders under applicable law.
9.2 Effect of Termination. In the event of any termination of
this Agreement by TCI or Liberty pursuant to Section 9.1, this Agreement
forthwith shall become void, and there shall be no liability or obligation on
the part of any party hereto except (i) as provided in Sections 4.10, 5.10, 7.2
and 7.6, which shall survive such termination and (ii) subject to Sections
10.12 and 10.13, to the extent such termination results from the willful breach
by TCI or Liberty of any of its representations, warranties, covenants or
agreements contained in this Agreement.
ARTICLE X
Miscellaneous
10.1 Nonsurvival of Representations, Warranties and Agreements.
The respective representations and warranties of the parties contained herein
or in any certificate or other instrument delivered prior to or at the Closing
shall not be deemed waived or otherwise affected by any investigation made by
any party hereto. None of the representations, warranties, covenants or
agreements contained in this Agreement or in any certificate or other
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for (i) the agreements contained in Article II, Sections 4.10,
5.10 and 7.6 and in this Article X, and (ii) the agreements of the "affiliates"
of TCI and Liberty delivered pursuant to Section 3.6.
10.2 Indemnification.
(a) Post-Merger Indemnification of TCI and Liberty
Directors and Officers. After the Effective Time, TCI/Liberty shall indemnify
and hold harmless each person who was, at any time prior to the Effective Time,
a director, officer, employee or agent of TCI or Liberty (individually an
"Indemnified Party" and, collectively, the "Indemnified Parties") against (i)
all losses, claims, damages, costs, expenses (including fees and expenses of
counsel properly retained by an Indemnified Party under this Section 10.2)
(promptly as statements therefor are received), liabilities or judgments or
amounts that are paid in settlement with the approval of TCI/Liberty (which
approval shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person was at any time
prior to the Effective Time a director, officer, employee or agent of TCI or
Liberty, whether pertaining to any matter existing or occurring at or prior to
the Effective Time and whether asserted or claimed prior to, at or after the
Effective Time ("Indemnified Liabilities") and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby (and
TCI/Liberty shall pay expenses in advance of the final disposition of any such
action, suit, proceeding or investigation to each
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Indemnified Party (including fees and expenses of counsel properly retained by
an Indemnified Party under this Section 10.2), promptly as statements therefor
are received, to the full extent permitted by law upon receipt of the
undertaking contemplated by Section 145(e) of the DGCL), in each case to the
full extent that (x) a corporation is permitted under Delaware law to indemnify
or advance expenses to its own directors, officers, employees or agents, as the
case may be, (y) such Indemnified Party would have been entitled to be
indemnified (A) by TCI, if such Indemnified Party was a director, officer,
employee or agent of TCI, with respect to the Indemnified Liabilities in
question under TCI's Restated Certificate of Incorporation and By-Laws as in
effect on January 1, 1994 and under any indemnification agreement with TCI in a
form disclosed to TCI/Liberty prior to the date hereof and (B) by Liberty, if
such Indemnified Party was a director, officer, employee or agent of Liberty,
with respect to the Indemnified Liabilities in question under Liberty's
Restated Certificate of Incorporation and By-laws as in effect on January 1,
1994 and under any indemnification agreement with Liberty in a form disclosed
to TCI/Liberty prior to the date hereof and (z) such indemnification otherwise
is permitted by applicable law. In the event any such claim, action, suit,
proceeding or investigation is asserted or commenced against any Indemnified
Party (whether before or after the Effective Time), TCI/Liberty will be
entitled to participate and, to the extent that it may wish, to assume the
defense thereof, except that if TCI/Liberty also is a subject of such claim,
action, suit, proceeding or investigation and there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the position of TCI/Liberty and the position of such Indemnified Party, or if
TCI/Liberty shall fail to assume responsibility for such defense, such
Indemnified Party may, subject to Section 10.2(b), retain counsel who will
represent such Indemnified Party, and TCI/Liberty shall pay all reasonable fees
and expenses of such counsel promptly as statements therefor are received;
provided that such Indemnified Party shall vigorously defend (or, if the
defense is assumed by TCI/Liberty, use his best efforts to assist in the
vigorous defense of) any such matter; provided, further, that TCI/Liberty shall
not be liable for any settlement effected without its written consent, which
consent, however, shall not be unreasonably withheld; and provided, further,
that TCI/Liberty shall not have any obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
after exhaustion of all avenues of appeal, that such Indemnified Party is not
entitled to indemnification hereunder.
(b) Procedures. Any Indemnified Party wishing to claim
indemnification or advancement of expenses under Section 10.2(a), upon learning
of any such claim, action, suit, proceeding or investigation, shall promptly
notify TCI/Liberty (provided that the failure so to notify TCI/Liberty shall
not relieve TCI/Liberty from any liability which it may have under this Section
10.2, except to the extent such failure materially prejudices TCI/Liberty) and
shall deliver to TCI/Liberty an undertaking to repay any amounts advanced
pursuant thereto when and if a court of competent jurisdiction shall ultimately
determine, after exhaustion of all avenues of appeal, that such Indemnified
Party is not entitled to indemnification hereunder. In no event may the
Indemnified Parties retain more than one lead law firm and one local counsel to
represent them with respect to any such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the position of any two or more Indemnified Parties in which case
the Indemnified Parties may (unless the
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defense of such matter has been assumed by TCI/Liberty as provided herein)
retain, at the expense of TCI/Liberty, such number of additional counsel as are
necessary to eliminate all conflicts of the type referred to above.
(c) Survival. This Section 10.2 shall survive the
consummation of the Mergers. The provisions of this Section are intended to be
for the benefit of and shall be enforceable by each of the Indemnified Parties
and his heirs and legal representatives.
10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by
telegram or confirmed telex or telecopier, as follows:
(a) if to TCI or TCI/Liberty, to:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attn: General Counsel
(b) if to Liberty, to:
Liberty Media Corporation
8101 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
Attn: General Counsel
or to such other person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof, except that any notice of
a change of address shall be effective only upon actual receipt thereof.
10.4 Entire Agreement. This Agreement (including the Exhibits,
Annexes, Schedules and other documents referred to herein) constitutes the
entire agreement between the parties and supersedes all prior agreements and
understandings, oral and written, between the parties with respect to the
subject matter hereof.
10.5 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, benefits or obligations hereunder may be assigned by any
party (whether by operation of law (other than pursuant to the Mergers) or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns. Nothing in this Agreement, expressed or implied, is intended to
confer on any person
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other than the parties or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
other than rights conferred upon Indemnified Parties under Section 10.2 and
upon stockholders, directors, officers, affiliates, agents and representatives
of the parties under Section 10.13.
10.6 Amendment. This Agreement may be amended by the parties, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of any matters presented in connection with the
Mergers by the stockholders of TCI or Liberty, but, after any such approval by
the stockholders of TCI and Liberty, no amendment shall be made which by law
requires further approval by such stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
10.7 Extension; Waiver. At any time prior to the Effective Time,
TCI or Liberty, by action taken or authorized by such party's Board of
Directors, may, to the extent legally allowed, (i) extend the time specified
herein for the performance of any of the obligations of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto, (iii) waive
compliance by the other party with any of the agreements or covenants of such
other party contained herein or (iv) waive any condition to such waiving
party's obligation to consummate the transactions contemplated hereby or to any
of such waiving party's other obligations hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such party. Any such
extension or waiver by any party shall be binding on such party but not on the
other party entitled to the benefits of the provision of this Agreement
affected unless such other party also has agreed to such extension or waiver.
No such waiver shall constitute a waiver of, or estoppel with respect to, any
subsequent or other breach or failure to strictly comply with the provisions of
this Agreement. The failure of any party to insist on strict compliance with
this Agreement or to assert any of its rights or remedies hereunder or with
respect hereto shall not constitute a waiver of such rights or remedies.
Whenever this Agreement requires or permits consent or approval by any party,
such consent or approval shall be effective if given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 10.7.
10.8 Interpretation. When a reference is made in this Agreement to
Sections, Articles, Exhibits, Annexes or Schedules, such reference shall be to
a Section, Article, Exhibit, Annex or Schedule (as the case may be) of this
Agreement unless otherwise indicated. When a reference is made in this
Agreement to a "party" or "parties", such reference shall be to a party or
parties to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such
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information is to be made available. The use of any gender herein shall be
deemed to be or include the other genders and the use of the singular herein
shall be deemed to be or include the plural (and vice versa), wherever
appropriate. The use of the words "hereof", "herein", "hereunder" and words of
similar import shall refer to this entire Agreement, and not to any particular
article, section, subsection, clause, paragraph or other subdivision of this
Agreement, unless the context clearly indicates otherwise.
10.9 Knowledge as to Equity Affiliates. Whenever any
representation and warranty is made herein (i) "to the knowledge of Liberty,"
or words of similar intent or effect, with respect to any Liberty Equity
Affiliates, such representation and warranty shall be deemed to be made to the
knowledge of the senior management (vice presidents and higher officers) of
Liberty, without investigation and (ii) "to the knowledge of TCI," or words of
similar intent or effect, with respect to any TCI Equity Affiliates, such
representation and warranty shall be deemed to be made to the knowledge of the
senior management (senior vice presidents and higher officers) of TCI, without
investigation.
10.10 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.
10.11 Applicable Law. This Agreement and the legal relations
between the parties shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the conflict of laws rules
thereof.
10.12 No Remedy in Certain Circumstances. Each party agrees that,
should any court or other competent governmental authority hold any provision
of this Agreement or part hereof to be null, void or unenforceable, or order
any party to take any action inconsistent herewith or not to take any action
required herein, the other parties shall not be entitled to specific
performance of such provision or part hereof or to any other remedy, including
but not limited to money damages, for breach thereof or of any other provision
of this Agreement or part hereof as a result of such holding or order.
10.13 Limited Liability. Notwithstanding any other provision of
this Agreement, no stockholder, director, officer, affiliate, agent or
representative of any party (other than TCI and Liberty as stockholders of
TCI/Liberty and TCI/Liberty as the sole stockholder of each of TCI Mergerco and
Liberty Mergerco) shall have any liability in respect of or relating to the
covenants, obligations, representations or warranties of such party hereunder
or in respect of any certificate delivered with respect thereto and, to the
fullest extent legally permissible, each party, for itself and its
stockholders, directors, officers and affiliates, waives and agrees not to seek
to assert or enforce any such liability which any such person otherwise might
have pursuant to applicable law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Merger as of the date first above written.
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TELE-COMMUNICATIONS, INC.
Attest:
By: /s/ Stephen M. Brett
______________________________
/s/ Mary S. Willis Its: Senior Vice President
_______________________________
Mary S. Willis
LIBERTY MEDIA CORPORATION
Attest:
By: /s/ Peter R. Barton
______________________________
/s/ Robert R. Bennett Its: President
_______________________________
Robert R. Bennett
TCI/LIBERTY HOLDING COMPANY
Attest:
By: /s/ Stephen M. Brett
______________________________
/s/ Mary S. Willis Its: Vice President
_______________________________
Mary S. Willis
TCI MERGERCO, INC.
Attest:
By: /s/ Stephen M. Brett
______________________________
/s/ Mary S. Willis Its: Vice President
_______________________________
Mary S. Willis
LIBERTY MERGERCO, INC.
Attest:
By: /s/ Peter R. Barton
______________________________
/s/ Robert R. Bennett Its: President
_______________________________
Robert R. Bennett
63
<PAGE> 69
DISCLOSURE SCHEDULE
TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TELE-COMMUNICATIONS, INC.,
LIBERTY MEDIA CORPORATION
TCI/LIBERTY HOLDING COMPANY, INC.,
TCI MERGERCO, INC.
AND
LIBERTY MERGERCO, INC.
INDEX
-----
<TABLE>
<S> <C> <C>
Section 5.3 Capitalization of TCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5.4 TCI Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . 48
Section 5.5 No Approvals or Notices Required; No Conflict with Instruments . . . . . . . . 49
Section 5.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . 51
Section 5.8 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.12 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.4 Conduct of Business by Liberty and TCI Pending the Effective Time . . . . . . 72
</TABLE>
<PAGE> 70
The Exhibits and Schedules to this agreement have been excluded as they contain
information that is not necessary in order to understand the terms of the
agreement.
