<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: APRIL 6, 1994
DATE OF EARLIEST EVENT REPORTED: JANUARY 27, 1994
------------------------
TELE-COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
STATE OF DELAWARE
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
0-5550 84-0588868
(Commission File Number) (I.R.S. Employer Identification No.)
5619 DTC PARKWAY
ENGLEWOOD, 80111
COLORADO (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (303) 267-5500
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<PAGE> 2
ITEM 5. OTHER EVENTS.
On January 27, 1994, Tele-Communications, Inc. ("TCI") and Liberty Media
Corporation ("Liberty") entered into a definitive agreement (the "TCI/Liberty
Agreement"), to combine the two companies. The transaction will be structured as
a tax free exchange of Class A and Class B shares of both companies and
preferred stock of Liberty for like shares of a newly formed holding company,
TCI/Liberty Holding Company ("TCI/Liberty"). TCI shareholders will receive one
share of TCI/Liberty for each of their shares. Liberty common shareholders will
receive 0.975 of a share of TCI/Liberty for each of their common shares. The
transaction is subject to the approval of both sets of shareholders as well as
various regulatory approvals and other customary conditions. Subject to timely
receipt of such approvals, it is anticipated the closing of such transaction
will take place during 1994. A copy of the TCI/Liberty Agreement is incorporated
herein as Exhibit 2.1 and Amendment No. 1 thereto is included herein as Exhibit
2.2. The foregoing description of such transaction is qualified in its entirety
by reference to such Exhibits. Historical audited financial information of
Liberty for the year ended December 31, 1993 and the pro forma financial
information related to the TCI/Liberty Agreement is included under Item 7 of
this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
Liberty Media Corporation,
Year ended December 31, 1993:
Independent Auditors' Report
Consolidated Balance Sheets,
December 31, 1993 and 1992
Consolidated Statements of Operations,
Years ended December 31, 1993 and 1992,
Nine months ended December 31, 1991 and
Three months ended March 31, 1991
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1993 and 1992,
Nine months ended December 31, 1991 and
Three months ended March 31, 1991
Consolidated Statements of Cash Flows,
Years ended December 31, 1993 and 1992,
Nine months ended December 31, 1991 and
Three months ended March 31, 1991
Notes to Consolidated Financial Statements
December 31, 1993, 1992 and 1991
(b) Pro Forma Financial Information
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Balance Sheet,
December 31, 1993 (unaudited)
Condensed Pro Forma Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
December 31, 1993 (unaudited)
Liberty Media Corporation and Subsidiaries:
Condensed Pro Forma Balance Sheet,
December 31, 1993 (unaudited)
<PAGE> 3
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
December 31, 1993 (unaudited)
TCI/Liberty and Subsidiaries:
Condensed Pro Forma Balance Sheet,
December 31, 1993 (unaudited)
Condensed Pro Forma Statement of Operation,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
December 31, 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 Mergerco, Inc. and Liberty
Mergerco, Inc.*
Incorporated herein by reference to the Company's Current Report on
Form 8-K dated February 15, 1994.
(2.2) Amendment No 1., dated as of March 30, 1994, to Agreement and Plan
of Merger, dated as of January 27, 1994, by and among
Tele-Communications, Inc., Liberty Media Corporation, TCI/Liberty
Holding Company, TCI Mergerco, Inc. and Liberty Mergerco, Inc.
(3) The Bylaws as Amended and Restated July 19, 1979, with amendments
April 8, 1980, October 29, 1987, December 10, 1993.
(23) Consent of KPMG Peat Marwick.
- ---------------
* 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.
<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: April 6, 1994
TELE-COMMUNICATIONS, INC.
(Registrant)
By: /s/ STEPHEN M. BRETT
------------------------------------
Stephen M. Brett
Senior Vice President and
General Counsel
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Liberty Media Corporation:
We have audited the accompanying consolidated balance sheets of Liberty
Media Corporation and subsidiaries (Successor) as of December 31, 1993 and 1992,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1993 and 1992 and the period from
April 1, 1991 to December 31, 1991 (Successor Periods) and the consolidated
statements of operations, stockholders' equity, and cash flows of Liberty Media
(a combination of certain programming interests and cable television assets of
Tele-Communications, Inc.) (Predecessor) for the period from January 1, 1991 to
March 31, 1991 (Predecessor Period). These consolidated financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned Successor consolidated financial
statements present fairly, in all material respects, the financial position of
Liberty Media Corporation and subsidiaries as of December 31, 1993 and 1992, and
the results of their operations and their cash flows for the Successor Periods,
in conformity with generally accepted accounting principles. Further, in our
opinion, the aforementioned Predecessor consolidated financial statements
present fairly, in all material respects, the results of operations and cash
flows for the Predecessor Period, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
March 28, 1991, Tele-Communications, Inc. (TCI) (the former parent of the
Company) contributed to Liberty Media Corporation its interests in certain cable
television programming businesses and cable television systems in exchange for
several different classes and series of the Company's preferred stock. As a
result, the Company recorded the exchange at TCI's historical cost basis,
therefore the consolidated financial information for the period after the
contribution is presented on a predecessor cost basis.
As discussed in notes 3 and 13 to the consolidated financial statements,
the Companies changed their method of accounting for income taxes in 1993 to
adopt the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
/s/ KPMG PEAT MARWICK
KPMG Peat Marwick
Denver, Colorado
March 18, 1993
<PAGE> 6
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992*
---------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................ $ 91,305 $ 96,253
Trade and other receivables.......................................... 57,458 20,926
Less allowance for doubtful receivables............................ 3,032 2,404
---------- --------
54,426 18,522
---------- --------
Inventories, net..................................................... 112,005 --
Due from Tele-Communications, Inc. ("TCI") (note 16)................. -- 4,786
Prepaid expenses..................................................... 25,210 6,253
Investments in affiliates, accounted for under the equity method, and
related receivables (note 6)....................................... 151,540 239,535
Other investments, at cost, and related receivables (note 7)......... 220,218 212,993
Investment in TCI common stock (note 8).............................. 104,011 104,011
Property and equipment, at cost:
Land............................................................... 21,662 77
Cable distribution systems......................................... 87,437 36,428
Support equipment and buildings.................................... 124,727 18,365
Computer and broadcast equipment................................... 61,820 --
---------- --------
295,646 54,870
Less accumulated depreciation...................................... 39,968 19,395
---------- --------
255,678 35,475
---------- --------
Franchise costs...................................................... 142,789 52,808
Less accumulated amortization...................................... 5,351 1,856
---------- --------
137,438 50,952
---------- --------
Excess cost over acquired net assets................................. 255,842 17,659
Less accumulated amortization...................................... 9,818 480
---------- --------
246,024 17,179
---------- --------
Other intangibles.................................................... 96,873 79,428
Less accumulated amortization...................................... 65,895 40,372
---------- --------
30,978 39,056
---------- --------
Other assets, at cost, net of amortization........................... 7,715 5,172
---------- --------
$1,436,548 $830,187
---------- --------
---------- --------
</TABLE>
- ---------------
* Restated -- see notes 6, 9 and 13.
See accompanying notes to consolidated financial statements.
<PAGE> 7
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
---------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Accounts payable..................................................... $ 99,680 $ 9,985
Accrued liabilities.................................................. 96,566 21,562
Accrued litigation settlements (note 10)............................. 29,000 --
Due to TCI, including accrued interest payable (notes 11 and 16)..... 17,874.... --
Accrued compensation relating to stock appreciation rights (note
15)................................................................ 36,996 18,171
Income taxes payable................................................. 24,624 808
Debt (notes 11 and 17)............................................... 260,180 163,330
Debt to TCI (notes 11 and 17)........................................ 185,918 4,322
Deferred income taxes (note 13)...................................... 1,653 14,974
Other liabilities.................................................... 1,585 3,003
Total liabilities.......................................... 754,076 236,155
---------- --------
Minority interests in equity of consolidated subsidiaries (note
12)................................................................ 174,738 10,020
Preferred stock subject to mandatory redemption requirements
(including accreted dividends) (notes 8, 14 and 17):
Class A Redeemable Convertible Preferred Stock, $.01 par value. ... -- 12,720
Class B Redeemable Exchangeable Preferred Stock, $.01 par
value. ......................................................... 132,652 122,056
Class D Redeemable Voting Preferred Stock, $.01 par value. ........ 22,585 20,485
---------- --------
155,237 155,261
---------- --------
Stockholders' equity (notes 2, 15 and 18):
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. ............................... 87,515 76,036
Class B common stock, $1 par value. ............................... 43,339 43,340
Additional paid-in capital......................................... 236,126 323,855
Retained earnings.................................................. -- --
Note receivable from related party................................. (14,500) (14,500)
---------- --------
Commitments and contingencies (notes 6, 11 and 18)................... 352,497 428,751
---------- --------
$1,436,548 $830,187
---------- --------
---------- --------
</TABLE>
- ---------------
* Restated -- see notes 6, 9 and 13.
See accompanying notes to consolidated financial statements.
<PAGE> 8
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR
COMPANIES
LIBERTY -----------
------------------------------------------ THREE
NINE MONTHS MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992* 1991* 1991*
------------ ------------ ------------ -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Net sales from home shopping services............... $ 942,940 $ -- $ -- $ --
From TCI (note 16).................................. 44,074 42,834 25,191 3,879
From cable and programming services................. 166,242 113,679 60,206 17,529
------------ ------------ ------------ -----------
1,153,256 156,513 85,397 21,408
------------ ------------ ------------ -----------
Cost of sales, operating costs and expenses:
Cost of sales....................................... 611,526 -- -- --
Operating, selling, general and administrative...... 442,142 120,851 68,237 24,958
Charges by TCI (note 16)............................ 10,856 6,573 4,345 495
Compensation relating to stock appreciation rights
(note 15)......................................... 40,366 16,939 1,398 --
Depreciation........................................ 24,958 3,815 2,278 1,246
Amortization........................................ 24,311 11,731 8,354 2,747
------------ ------------ ------------ -----------
1,154,159 159,909 84,612 29,446
------------ ------------ ------------ -----------
Operating income (loss)...................... (903) (3,396) 785 (8,038)
Other income (expense):
Interest expense to TCI (notes 11 and 12)........... (13,039) (271) -- (98)
Other interest expense.............................. (18,041) (7,058) (4,687) (1,685)
Interest income from TCI (note 12).................. 3,788 846 -- --
Dividend and interest income, primarily from
affiliates........................................ 19,761 30,063 25,116 7,849
Premium received upon redemption of preferred stock
investment........................................ -- 8,248 -- --
Share of earnings (losses) of affiliates, net (note
6)................................................ 34,044 17,815 13,955 (2,414)
Gain on sale of investment.......................... 31,972 -- -- --
Loss on transactions with TCI (note 16)............. (30,296) (17,826) -- --
Minority interests in losses of consolidated
subsidiaries...................................... 289 4,734 5,618 3,817
Recognition of deferred gain upon repayment of note
receivable from affiliate......................... -- -- 16,412 --
Litigation settlements (note 10).................... (7,475) -- -- --
Other, net.......................................... (1,592) (328) 83 42
------------ ------------ ------------ -----------
Earnings (loss) before income taxes and
extraordinary item......................... 18,508 32,827 57,282 (527)
Income tax benefit (expense) (note 13)................ (11,522) (10,443) (16,961) 753
------------ ------------ ------------ -----------
Earnings before extraordinary item........... 6,986 22,384 40,321 226
Extraordinary item-loss on early extinguishment of
debt, net of taxes (note 11)........................ (2,191) -- -- --
------------ ------------ ------------ -----------
Net earnings................................. 4,795 22,384 40,321 226
Dividend requirement on preferred stocks (notes 14 and
15)................................................. (31,972) (41,631) (24,499) --
------------ ------------ ------------ -----------
Net earnings (loss) attributable to common
shareholders........................................ $ (27,177) $(19,247) $ 15,822 $ 226
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Earnings (loss) per share:
Net earnings (loss) before extraordinary
item....................................... $ (0.19) $ (0.16) $ 0.13
Extraordinary item, net...................... (0.02) -- --
------------ ------------ ------------
Net earnings (loss) attributable to common
shareholders............................... $ (0.21) $ (0.16) $ 0.13
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- ---------------
* Restated -- see notes 6, 9 and 13.
See accompanying notes to consolidated financial statements.
<PAGE> 9
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTE
RECEIVABLE TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED FROM STOCK-
----------------- ----------------- PAID-IN COMBINED EARNINGS RELATED HOLDERS'
CLASS C CLASS E CLASS A CLASS B CAPITAL* EQUITY (DEFICIT)* PARTY EQUITY*
------- ------- ------- ------- ---------- -------- -------- ---------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANIES:
BALANCE AT JANUARY 1, 1991..... $-- $-- $ -- $ -- $ -- $497,503 $(1,083 ) $ -- $496,420
Change in contributions or
advances from parent......... -- -- -- -- -- 4,255 -- -- 4,225
Net earnings................... -- -- -- -- -- -- 226 -- 226
------- ------- ------- ------- ---------- -------- -------- ---------- --------
BALANCE PRIOR TO
TRANSACTIONS................. $-- $-- $ -- $ -- $ -- $501,758 $ (857 ) $ -- $500,901
------- ------- ------- ------- ---------- -------- -------- ---------- --------
------- ------- ------- ------- ---------- -------- -------- ---------- --------
LIBERTY:
Net effect of Transactions
(note 2)..................... $-- $-- $ 544 $ 171 $ 38,239 $ -- $ -- $ -- $ 38,954
Issuance of common stock upon
exercise of stock options
(note 15).................... -- -- -- 100 25,500 -- -- (25,500) 100
Income tax effect of stock
options deduction............ -- -- -- -- 320 -- -- -- 320
Income tax effect related to
redemption of Class B
Redeemable Exchangeable
Preferred Stock, Series 2.... -- -- -- -- 1,151 -- -- -- 1,151
Partial repayment of note
receivable from related party
(note 15).................... -- -- -- -- -- -- -- 12,195 12,195
Excess of fair value paid for
assets acquired from
affiliate over net book
value, net of
tax (note 16)................ -- -- -- -- -- -- (21,322 ) -- (21,322)
Excess of fair value of assets
sold to an affiliate over net
book value, net of tax (note
16).......................... -- -- -- -- 16,564 -- -- -- 16,564
Accreted dividends on all
classes of preferred stock... -- -- -- -- (5,516) -- (18,983 ) -- (24,499)
Acquisition and retirement of
common stock................. -- -- (2 ) -- (772) -- -- -- (774)
Net earnings................... -- -- -- -- -- -- 40,321 -- 40,321
Retroactive effect of
recapitalization
(note 2)..................... 4 16 10,306 5,151 399,242 -- (16 ) -- 414,703
------- ------- ------- ------- ---------- -------- -------- ---------- --------
BALANCE AT DECEMBER 31, 1991... $ 4 $16 $10,848 $5,422 $474,728 $ -- $ -- $(13,305) $477,713
------- ------- ------- ------- ---------- -------- -------- ---------- --------
</TABLE>
<PAGE> 10
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
NOTE
RECEIVABLE TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL FROM STOCK-
----------------- ----------------- PAID-IN RETAINED RELATED HOLDERS'
CLASS C CLASS E CLASS A CLASS B CAPITAL* EARNINGS* PARTY EQUITY*
------- ------- ------- ------- ---------- -------- ---------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIBERTY (CONTINUED):
BALANCE AT DECEMBER 31, 1991.......... $ 4 $16 $10,848 $5,422 $ 474,728 $ -- $(13,305) $ 477,713
Dividends, including accretion, on all
classes of preferred stock.......... -- -- -- -- (19,247 ) (22,384 ) -- (41,631)
Dividends, including accretion, on all
classes of preferred stock not
subject to mandatory redemption
requirements........................ -- -- -- -- 28,850 -- -- 28,850
Stock split effected in the form of a
dividend (note 2)................... -- -- 28,514 16,252 (44,766 ) -- -- --
Acquisition and retirement of common
stock............................... -- -- (1,348 ) -- (56,022 ) -- -- (57,370)
Accrued interest on note receivable
from related party.................. -- -- -- -- -- -- (1,195) (1,195)
Exchange of Class B common stock for
Class A common stock................ -- -- 4 (4 ) -- -- -- --
Net earnings.......................... -- -- -- -- -- 22,384 -- 22,384
Retroactive effect of stock split
effected in the form of a dividend
(note 2)............................ -- -- 38,018 21,670 (59,688 ) -- -- --
------- ------- ------- ------- ---------- -------- ---------- ---------
BALANCE AT DECEMBER 31, 1992.......... 4 16 76,036 43,340 323,855 -- (14,500) 428,751
Dividends, including accretion, on all
classes of preferred stock.......... -- -- -- -- (27,177 ) (4,795 ) -- (31,972)
Dividends, including accretion, on all
classes of preferred stock not
subject to mandatory redemption
requirements........................ -- -- -- -- 19,229 -- -- 19,229
Cash dividends on Class E preferred
stock............................... -- -- -- -- (9,743 ) -- -- (9,743)
Issuance of Class A common stock and
Class E Preferred Stock upon
conversion of preferred stock (note
16)................................. -- 1 4,406 -- 8,360 -- -- 12,767
Issuance of Class A common stock for
acquisition (note 9)................ -- -- 8,000 -- 115,000 -- -- 123,000
Redemption of preferred stock (note
16)................................. (4) -- -- -- (175,787 ) -- -- (175,791)
Acquisition and retirement of common
stock (note 16)..................... -- -- (928 ) -- (17,611 ) -- -- (18,539)
Exchange of Class B common stock for
Class A common stock................ -- -- 1 (1 ) -- -- -- --
Accrued interest on note receivable
from related party (note 15)........ -- -- -- -- -- -- (984) (984)
Prepayment of interest on note
receivable from related party (note
15)................................. -- -- -- -- -- -- 984 984
Net earnings.......................... -- -- -- -- -- 4,795 -- 4,795
------- ------- ------- ------- ---------- -------- ---------- ---------
BALANCE AT DECEMBER 31, 1993.......... $-- $17 $87,515 $43,339 $ 236,126 $ -- $(14,500) $ 352,497
------- ------- ------- ------- ---------- -------- ---------- ---------
------- ------- ------- ------- ---------- -------- ---------- ---------
</TABLE>
- ---------------
* Restated -- see notes 6, 9 and 13.
See accompanying notes to consolidated financial statements.
<PAGE> 11
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
---------------------------------------- ------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992* 1991* 1991*
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS (SEE NOTES 4 AND 5)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 4,795 $ 22,384 $ 40,321 $ 226
Adjustments to reconcile net earnings to net cash provided
(used) by operating activities:
Depreciation and amortization........................... 49,269 15,546 10,632 3,993
Compensation relating to stock appreciation rights...... 40,366 16,939 1,398 --
Payment of compensation relating to stock appreciation
rights................................................ (21,541) (166) -- --
Share of (earnings) losses of affiliates, net........... (34,044) (17,815) (13,955) 2,414
Loss on transactions with TCI........................... 30,296 17,826 -- --
Premium received upon redemption of preferred stock
investment............................................ -- (8,248) -- --
Deferred income tax (benefit) expense................... (12,206) 7,952 15,181 (650)
Minority interests in losses............................ (289) (4,734) (5,618) (3,817)
Noncash interest and dividends.......................... (4,941) (7,547) (18,446) (6,662)
Gain on sale of investment.............................. (31,972) -- -- --
Litigation settlements.................................. 7,475 -- -- --
Payment of premium received upon redemption of preferred
stock investment...................................... 8,248 -- -- --
Loss on early extinguishment of debt, net of tax........ 2,191 -- -- --
Amortization of debt discount........................... -- 520 1,483 455
Recognition of deferred gain............................ -- -- (16,412) --
Other noncash charges................................... 8,295 -- -- 12
Changes in operating assets and liabilities, net of
effect of acquisitions:
Change in receivables................................... (15,318) (85) (1,647) (1,695)
Change in inventories................................... (7,606) -- -- --
Change in due to/from TCI, other than repayment for
commercial paper...................................... 22,660 (735) (4,051) (150)
Change in prepaid expenses.............................. (10,347) (606) (3,345) (1,487)
Change in payables and accruals......................... 43,810 5,353 11,083 1,832
------------ ------------ ------------ ------------
Net cash provided (used) by operating activities... 79,771 46,584 16,624 (5,529)
------------ ------------ ------------ ------------
</TABLE>
<PAGE> 12
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
------------------------------------------ -------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992* 1991* 1991*
------------ ------------ ------------ -------------
(AMOUNTS IN THOUSANDS (SEE NOTES 4 AND 5)
<S> <C> <C> <C> <C>
Cash flows from investing activities:
Cash paid for acquisitions........................... $ (264,180) $ (57,016) $ -- $ --
Capital expended for property and equipment.......... (25,746) (3,315) (3,353) (845)
Additional investments in and loans to affiliates and
others............................................. (48,155) (113,811) (21,807) (3,368)
Purchase of commercial paper from TCI................ -- -- (22,004) --
Repayment for commercial paper from TCI.............. -- 22,004 -- --
Return of capital from affiliates.................... 84,750 42,295 30,140 725
Collections on loans to affiliates and others........ 20,541 5,440 38,130 1,610
Cash received on redemption of preferred stock
investment......................................... 104,336 -- -- --
Proceeds from disposition of assets.................. 53,228 36,300 20,933 --
Cash resulting from consolidation of a certain
affiliate, net of payment therefor................. -- 1,269 -- --
Other investing activities, net...................... (2,719) (1,336) 567 (1,113)
------------ ------------ ------------ -------------
Net cash provided (used) by investing
activities.................................. (77,675) (68,170) 42,606 (2,991)
------------ ------------ ------------ -------------
Cash flows from financing activities:
Borrowings of debt................................... 291,314 98,066 11 27
Repayments of debt................................... (317,326) (25,220) (9,758) (2,192)
Dividends on preferred stock......................... (9,743) -- -- --
Cash paid for redemption of preferred stock.......... (12,338) -- -- --
Excess of fair value paid for assets acquired from
affiliate over net book value...................... -- -- (33,171) --
Excess of fair value of assets sold to an affiliate
over net book value................................ -- -- 23,333 --
Purchases and retirements of common stock............ -- (57,370) (774) --
Issuance of common stock............................. -- -- 100 --
Contributions or advances from parent................ -- -- -- 8,018
Contributions by minority shareholders of
subsidiaries....................................... 41,049 2,774 3,324 1,893
------------ ------------ ------------ -------------
Net cash provided (used) by financing
activities.................................. (7,044) 18,250 (16,935) 7,746
------------ ------------ ------------ -------------
Net increase (decrease) in cash and cash
equivalents................................. (4,948) (3,336) 42,295 (774)
Cash and cash equivalents at beginning of period..... 96,253 99,589 57,294 8,068
------------ ------------ ------------ -------------
Cash and cash equivalents at end of period........... $ 91,305 $ 96,253 $ 99,589 $ 7,294
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
- ---------------
*Restated -- see notes 6, 9 and 13.
See accompanying notes to consolidated financial statements.
<PAGE> 13
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(1) FORMATION AND RELATED TRANSACTIONS
The accompanying consolidated financial statements include the accounts of
Liberty Media Corporation, those of all majority-owned subsidiaries and entities
for which there is a controlling voting interest ("Liberty" or the "Company").
All significant intercompany accounts and transactions have been eliminated in
consolidation. The Company has made certain significant acquisitions in 1993
(see note 9).
On January 27, 1994, Liberty and TCI entered into a definitive merger
agreement (the "Merger Agreement"). Under the Merger Agreement, the transaction
will be structured as a tax-free exchange of shares of Class A and Class B
common stock of both companies and preferred stock of Liberty for like shares of
a newly formed holding company, TCI/Liberty Holding Company ("TCI/Liberty"). TCI
stockholders will receive one share of TCI/Liberty common stock for each of
their shares. Liberty common stockholders will receive 0.975 of a share of
TCI/Liberty common stock for each of their shares. Holders of Liberty Class E,
6% Cumulative Redeemable Exchangeable Junior Preferred Stock (the "Class E
Preferred Stock") will receive one share of a substantially identical class of
voting preferred stock of TCI/Liberty for each of their shares. The transaction
is subject to the approval of both sets of shareholders as well as various
regulatory approvals and other customary conditions. Subject to timely receipt
of such approvals, which cannot be assured, it is anticipated the closing of
such transaction will take place during 1994.
During February 1991, Liberty, then a newly formed Delaware corporation and
an indirect wholly owned subsidiary of TCI, distributed to certain security
holders of TCI the transferable right (the "Class A Exchange Right") to exchange
shares of TCI Class A common stock for shares of Liberty Class A common stock at
an exchange rate of 160 shares of Liberty Class A common stock, after giving
effect to the Stock Splits as defined in note 2, for every 16 shares of TCI
Class A common stock exchanged, and the transferable right (the "Class B
Exchange Right") to exchange shares of TCI Class B common stock for shares of
Liberty Class B common stock at an exchange rate of 160 shares of Liberty Class
B common stock, after giving effect to the Stock Splits as defined in note 2,
for every 16 shares of TCI Class B common stock exchanged (the "Exchange
Offers").
<PAGE> 14
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Class A Exchange Rights were issued to the holders of shares of TCI
Class A common stock, on the basis of one Class A Exchange Right for every 200
shares of TCI Class A common stock held of record, and to the holders of
certain options and convertible debt securities that are exercisable for or
convertible into TCI Class A common stock on the basis of one Class A Exchange
Right for every 200 shares of TCI Class A common stock issuable on exercise or
conversion of such securities. The Class B Exchange Rights were issued to the
holders of shares of TCI Class B common stock, on the basis of one Class B
Exchange Right for every 200 shares of TCI Class B common stock held of record,
and to the holders of certain options to purchase TCI Class B common stock on
the basis of one Class B Exchange Right for every 200 shares of TCI Class B
stock issuable on exercise of the options.
On March 28, 1991, the Company issued 87,136,960 shares of Liberty Class A
common stock and 27,377,120 shares of Liberty Class B common stock, after
giving effect to the Stock Splits as defined in note 2, in the consummation of
the Exchange Offers in exchange for 8,713,696 shares of TCI Class A common
stock and 2,737,712 shares of TCI Class B common stock (the "Exchange").
Also, on March 28, 1991, various subsidiaries of TCI contributed their
interests in certain cable television programming businesses and cable
television systems to the Company (the "Contribution") and the Company issued
to said subsidiaries of TCI shares of several different classes and series of
the Company's preferred stocks with an aggregate issue price of $624,295,000;
and the one share of Liberty common stock owned by TCI on the date thereof was
redeemed for its par value.
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) BASIS OF PRESENTATION
For financial reporting purposes, the Exchange and the Contribution (the
"Transactions") are deemed to be effective on March 31, 1991. The statements of
operations and cash flows for the years ended December 31, 1993 and 1992 and the
nine months ended December 31, 1991 present the results of operations and cash
flows of the Company after giving effect to the Transactions. The accompanying
statements of operations and cash flows for the three months ended March 31,
1991, representing a combination of certain programming interests and cable
television assets of TCI (referred to herein as the "Predecessor Companies"),
are presented for comparative purposes.
<PAGE> 15
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's accounting basis in each share of TCI common stock acquired
in the Exchange is $16 (the average of the high and low sales price for shares
of both classes of TCI common stock on February 6, 1991, the record date of the
Exchange Offers). The Company's interests in the cable television programming
businesses and cable television systems received in the Contribution were
accounted for utilizing the predecessor cost of TCI. The excess of the aggregate
issue amount of the preferred stock issued to TCI over the restated historical
basis (see notes 6, 9, and 13) in the net assets received in the Contribution is
accounted for by the Company similar to a "preferential dividend" by deducting
such amount from stockholders' equity.
The following table reflects the recapitalization (after giving effect to
the restatements described in notes 6, 9 and 13) resulting from the Transactions
(amounts in thousands):
<TABLE>
<S> <C>
Combined net equity of Predecessor Companies prior to Transactions....... $ 500,901
Liberty common stock issued in the Exchange.............................. 183,223
Redeemable preferred stock issued in connection with the Contribution.... (624,295)
Deferred tax liability for temporary difference arising from difference
in book and tax basis of TCI common stock received in the Exchange..... (31,458)
Cash contributed by TCI.................................................. 10,583
---------
Initial common stockholders' equity of Liberty subsequent to the
Transactions........................................................... $ 38,954
---------
---------
</TABLE>
The subsidiaries of TCI which were contributed to the Company are
separately operated. As such, there were no material expenses incurred by TCI on
behalf of these subsidiaries. Therefore, no allocation of expenses (other than
the allocation of income taxes described in note 13) has been reflected in the
financial statements of the Predecessor Companies.
On March 12, 1992, the shareholders of the Company voted to adopt a plan of
recapitalization (the "Recapitalization") by approving amendments to the
Company's Restated Certificate of Incorporation. The effect of the
Recapitalization has been reflected retroactively to December 31, 1991.
<PAGE> 16
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to the Recapitalization, among other things, each outstanding
share of Liberty's common stock was reclassified and exchanged into 20 shares of
the same class of Liberty common stock and two shares of Class E Preferred
Stock. Subsequently, Liberty effected the following stock splits each in the
form of a stock dividend (together with the Recapitalization, the "Stock
Splits"): (i) On December 3, 1992, each stockholder received three additional
shares for each share they held of record on November 23, 1992; and (ii) on
March 17, 1993 each stockholder received one additional share for each share
they held of record on March 10, 1993. The share amounts throughout the notes to
the consolidated financial statements have been adjusted to give effect to the
Stock Splits.
Certain amounts have been reclassified for comparability with the 1993
presentation.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash equivalents consist of investments which are readily convertible into
cash and have original maturities of three months or less.
Trade and Other Receivables
A sales program with a deferred payment arrangement, "flex-pay," allows
customers to charge their purchase to third party credit cards in installments,
generally over three consecutive months. Flex-pay receivables at December 31,
1993 were $15,547,000.
Inventories, net
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. The inventory balances
are presented net of a reserve of $25,246,000 at December 31, 1993.
Investments
Investments in which the ownership interest is less than 20% are generally
carried at cost. For those investments in affiliates in which the Company's
voting interest is 20% to 50%, the equity method of accounting is generally
used. Under this method, the investment,
<PAGE> 17
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
originally recorded at cost, is adjusted to recognize the Company's share of net
earnings or losses of the affiliates as they occur rather than as dividends or
other distributions are received, limited to the extent of the Company's
investment in, advances to and guarantees for the investee. The Company's share
of net earnings or losses of affiliates includes the amortization of purchase
adjustments.
Property and Equipment
Property and equipment, including significant improvements, is stated at
cost which includes acquisition costs allocated to tangible assets acquired.
Construction costs, including interest during construction and applicable
overhead, are capitalized. Interest capitalized during the periods presented was
not material.
Depreciation is computed on a straight-line basis using estimated useful
lives of 5 to 15 years for cable distribution systems, 3 to 40 years for support
equipment and buildings and 6 to 13 years for computer and broadcast equipment.
Repairs and maintenance and any gains or losses on disposition of assets in
their entirety are included in operations. However, recognition of gains on
sales of properties to affiliates accounted for under the equity method is
deferred in proportion to the Company's ownership interest in such affiliates.
Franchise Costs
Franchise costs include the difference between the cost of acquiring cable
television systems and amounts assigned to their tangible assets. Such amounts
are generally amortized on a straight-line basis over 40 years. Costs incurred
by Liberty in obtaining franchises are being amortized on a straight-line basis
over the life of the franchise, generally 10 to 20 years.
Excess Cost Over Acquired Net Assets
Excess cost over acquired net assets consists of the difference between the
cost of acquiring programming entities and amounts assigned to their tangible
assets. Such amounts are amortized on a straight-line basis over 30 years.
<PAGE> 18
Other Intangible Assets
Other intangible assets consist of amounts assigned to covenants not to
compete and amounts (in excess of tangible assets) assigned to sports program
rights agreements, affiliate agreements and distribution agreements. The amounts
assigned to these agreements are amortized over the respective lives of the
agreements ranging from 1 to 10 years.
Net Sales
Net Sales include merchandise sales and shipping and handling revenues, and
are reduced by incentive discounts and sales returns to arrive at net sales. The
Company's sales policy allows merchandise to be returned at the customer's
discretion, generally up to 30 days after the date of sale. An allowance for
returned merchandise is provided based upon past experience.
Restated Financial Statements for Implementation of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("Statement No. 109"), "Accounting for Income
Taxes" and has applied the provisions of Statement No. 109 retroactively to
Liberty and the Predecessor Companies to January 1, 1986. The accompanying 1992
and 1991 consolidated financial statements and related notes have been restated
to reflect the implementation of Statement No. 109. See note 13.
PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Loss per common share attributable to common shareholders for the years
ended December 31, 1993 and 1992 was computed by dividing net loss attributable
to common shareholders by the weighted average number of common shares
outstanding (130,574,056 and 123,391,426, respectively). Common stock
equivalents were not included in the computation of weighted average shares
outstanding because their inclusion would be anti-dilutive.
Primary earnings per common and common equivalent share attributable to
common shareholders for the nine months ended December 31, 1991 was computed by
dividing net earnings attributable to common shareholders by the weighted
average number of common and common equivalent shares outstanding of
120,682,737.
<PAGE> 19
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fully diluted earnings per common and common equivalent share attributable
to common shareholders was computed by dividing earnings attributable to common
shareholders by the weighted average number of common and common equivalent
shares outstanding (120,878,097 for the nine months ended December 31, 1991).
Shares issuable upon conversion of the Class A Redeemable Convertible Preferred
Stock (the "Class A Preferred Stock") have not been included in the 1991
computation of weighted average shares outstanding as their inclusion would be
anti-dilutive.
(4) SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS RELATING
TO THE TRANSACTIONS
<TABLE>
<CAPTION>
AMOUNTS IN
THOUSANDS
-------------------
<S> <C>
Cash Prior to the Transactions..................................... $ 7,294
Repayment of amounts due from TCI and cash contributed by TCI.... 50,000
----------
Cash subsequent to the Transactions................................ $57,294
----------
----------
</TABLE>
(5) SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash paid for interest was $20,354,000, $4,373,000, $2,219,000 and
$1,493,000 for the years ended December 31, 1993 and 1992, the nine months ended
December 31, 1991 and the three months ended March 31, 1991, respectively. Cash
paid for income taxes during the years ended December 31, 1993 and 1992 was
$6,621,000 and $3,336,000, respectively. Cash paid for income taxes during the
remaining periods was not material.
<PAGE> 20
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant noncash investing and financing activities:
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
-------------------------------------------- -------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992 1991 1991
------------ ------------ ------------ -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired............ $ 686,200 $ 64,602 $ -- $ --
Net liabilities assumed.................. (197,536) (7,586) -- --
Deferred tax asset recorded upon
acquisition........................... 1,115 -- -- --
Common stock issued for acquisition...... (123,000) -- -- --
Noncash contribution for acquisition..... (32,673) -- -- --
Minority interests in equity of
acquired entities..................... (69,926) -- -- --
------------ ------------ ------------ -------------
$ 264,180 $ 57,016 $ -- $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
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) -- --
------------ ------------ ------------ -------------
$ -- $ 1,269 $ -- $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Liberty Class A common stock issued upon
conversion of preferred stock............ $ 12,767 $ -- $ -- $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Note issued in exchange for Liberty Class A
common stock............................. $ 18,539 $ -- $ -- $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Notes issued in redemption of preferred
stocks................................... $ 163,057 $ -- $ -- $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Accreted and unpaid preferred stock
dividends................................ $ 30,348 $ 41,631 $ 24,499 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Redemption of preferred stock in exchange
for TCI Class A common stock............. $ -- $ -- $ 91,611 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Note received upon exercise of stock
option................................... $ -- $ -- $ 25,500 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Note issued in exchange for investment in
affiliate................................ $ -- $ -- $ 4,322 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
TCI common stock received as partial
repayment of note and interest
receivable............................... $ -- $ -- $ 12,195 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Partial repayment of note receivable with
common stock of an affiliate............. $ -- $ -- $ 18,867 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Deferred tax liability recorded as a
reduction to paid-in capital............. $ -- $ -- $ 5,298 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Deferred tax asset recorded as an increase
to retained earnings..................... $ -- $ -- $ 11,849 $ --
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Transfers of assets (other than in the
Contribution), net of liabilities, from
TCI...................................... $ -- $ -- $ -- $ 3,763
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
<PAGE> 21
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INVESTMENTS IN AFFILIATES
Summarized unaudited financial information for affiliates accounted for
under the equity method, which operate in three related industries (see note 19)
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Combined Financial Position
Property and equipment, net............................ $ 438,958 $ 661,546
Franchise costs, net................................... 678,232 623,904
Investments............................................ 362,748 243,675
Feature film inventory................................. 112,183 60,217
Cable distribution rights.............................. 99,579 116,557
Excess costs, other intangibles and other assets....... 911,794 620,582
------------ ------------
Total assets................................... $2,603,494 $2,326,481
------------ ------------
------------ ------------
Debt................................................... $1,633,207 $1,613,345
Due to Liberty......................................... 4,254 3,848
Feature film rights payable............................ 104,096 38,578
Other liabilities...................................... 506,072 437,249
Owners' equity......................................... 355,865 233,461
------------ ------------
Total liabilities and equity................... $2,603,494 $2,326,481
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
---------------------------------------------- ------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992 1991 1991
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Combined Operations
Revenue.............................. $ 2,131,210 $ 1,834,965 $ 952,889 $ 404,221
Operating expenses................... (1,595,103) (1,383,782) (624,087) (311,599)
Depreciation and amortization........ (199,304) (202,235) (165,212) (47,326)
------------ ------------ ------------ ------------
Operating income............. 336,803 248,948 163,590 45,296
Interest expense..................... (87,544) (120,618) (129,909) (42,296)
Other, net........................... (128,075) (73,174) (28,802) (7,262)
------------ ------------ ------------ ------------
Net earnings (loss).......... $ 121,184 $ 55,156 $ 4,879 $ (4,262)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<PAGE> 22
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reflects the carrying value of the Company's
investments accounted for under the equity method, including related
receivables:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
QVC, Inc. ("QVC").......................................... $ 60,397 $ 58,509
Kansas City Cable Partners ("KCCP")........................ (33,618) 35,860
US Cable of Lake County ("Lake County").................... 25,650 25,013
Columbia Associates, L.P. ("Columbia")..................... 7,720 12,975
Lenfest Communications, Inc. ("Lenfest")................... 16,508 23,217
Mile Hi Cablevision Associates, Ltd. ("Mile Hi") (see note
9)....................................................... -- 32,689
The Cable Partnerships of Country Cable and Knight-Ridder
Cablevision, Inc. (SCI Cable Partners and TKR Cable
Company) (collectively referred to as "TKR")............. 34,270 22,912
Sunshine Network Joint Venture ("Sunshine")................ 9,131 12,202
American Movie Classics Company ("AMC").................... (11,026) (22,125)
Sioux Falls Cable Television ("Sioux Falls")............... (11,675) (13,463)
SportsChannel Chicago Associates ("Sports")................ 32,561 31,385
Home Team Sports Limited Partnership ("HTS")............... 4,610 10,958
Other investments.......................................... 17,012 9,403
------------ ------------
$151,540 $239,535
------------ ------------
------------ ------------
</TABLE>
The common stock of QVC is publicly traded. At December 31, 1993, based on
the trading price of QVC common stock, the Company's investment in QVC had a
market value of $402,543,000 (which exceeded its cost by $342,146,000)
(excluding the effect of the Diller option described below).
<PAGE> 23
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reflects the Company's share of earnings (losses) of
each of the aforementioned affiliates:
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
---------------------------------------------- ------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992 1991 1991
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
QVC..................................... $ 13,978 $ 13,217 $ 6,911 $ (1,260)
KCCP.................................... 10,522 8,805 4,869 1,498
Lake County............................. 637 (1,050) -- --
Columbia................................ (5,256) (10,849) (881) (1,234)
Lenfest................................. (6,710) (8,843) (3,588) (1,197)
Mile Hi................................. (380) (2,337) (1,480) (746)
TKR..................................... 11,358 10,870 5,533 142
Sunshine................................ (957) (1,055) (1,833) (433)
AMC..................................... 11,313 7,839 5,911 1,948
Sioux Falls............................. 1,788 1,532 1,229 598
Sports.................................. 5,859 3,348 -- --
HTS..................................... (7,076) 748 271 (162)
Other................................... (1,032) (4,410) (2,987) (1,568)
------------ ------------ ------------ ------------
$ 34,044 $ 17,815 $ 13,955 $ (2,414)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<PAGE> 24
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 11, 1993, Liberty entered into an agreement with the staff of
the Federal Trade Commission pursuant to which Liberty agreed to divest all of
its equity interests in QVC during an 18 month time period if QVC was successful
in its offer to buy Paramount Communications, Inc. ("Paramount") and not to vote
or otherwise exercise or influence control over QVC until such time as QVC
withdrew its offer for Paramount. Simultaneously, Liberty agreed to withdraw
from a stockholders agreement pursuant to which Liberty and certain other
stockholders exercised control over QVC (the "Stockholders' Agreement"). On
February 15, 1994, QVC terminated its offer for Paramount. Upon termination of
such offer, Liberty has the right to be reinstated as a party to the
Stockholders' Agreement so long as such option is exercised within 90 days after
such termination. However, Liberty has not yet determined if it will rejoin the
control group under the Stockholders' Agreement.
On November 16, 1993, Liberty sold 1,690,041 shares of common stock of QVC
to Comcast Corporation ("Comcast") for aggregate consideration of approximately
$31,461,000. The sale to Comcast reduced Liberty's interest in QVC common stock
(on a fully diluted basis) from 21.6% to 18.5%. Liberty continues to account for
its investment in QVC under the equity method, although it no longer exercises
significant control over such affiliate, pending the determination of whether it
will rejoin the control group under the Stockholders' Agreement. Liberty will
change to the cost method of accounting in the event it elects not to be
reinstated as a party to the Stockholders' Agreement.
Certain of the shares of stock of QVC owned by Liberty are subject to
repurchase by QVC in the event that commitments to carry its programming are not
met. Approximately 46% of the shares which the Company holds or would hold upon
exercise or conversion of convertible securities, are "unvested" and are subject
to such repurchase rights by QVC. QVC's repurchase rights with respect to QVC
securities held by the Company are exercisable over a period of time, ending in
the year 2004, if certain carriage commitments made by Satellite Services, Inc.,
("SSI"), an indirect wholly owned subsidiary of TCI, are not met. Under the
terms of a certain agreement pursuant to which the Company acquired from TCI a
substantial number of the QVC securities it now beneficially owns, TCI has
agreed to reimburse the Company in the event QVC exercises its right to
repurchase certain of the "unvested" shares. Such reimbursement will be based on
the value assigned such shares when the Company acquired them from TCI, which is
substantially below the current market price of such shares. Pursuant to an
agreement with Comcast and Mr. Barry Diller ("Diller"), Liberty may be required
to sell approximately 1.63 million shares of QVC common stock to Diller. The
purchase price under the Diller purchase right is $34.082 per share.
<PAGE> 25
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1992, AMC distributed $39,000,000 to the Company. The Company
recorded the amount received as a reduction of its investment in AMC. 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. 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. On March 9, 1994 Liberty and
Rainbow agreed to a postponement of the closing of the sale until May 31, 1994.
Liberty and Rainbow are continuing their discussions regarding other possible
transactions which, if consummated, may result in the parties amending or
terminating the sale by Liberty of its AMC partnership interest.
On October 1, 1993 KCCP made an $80,000,000 distribution to the Company.
The Company recorded the amount received as a reduction of its investment in
KCCP. Approximately $63,174,000 was used to repay a note payable to KCCP,
including accrued interest.
TKR and Lenfest adopted Statement No. 109 in 1993 and have applied the
provisions of Statement No. 109 on a retroactive basis. Liberty's (and the
Predecessor Companies') investment, results of operations and stockholders'
equity were adjusted retroactively to reflect Liberty's share of the restated
results of operations of TKR and Lenfest. Upon restatement of Liberty's (and the
Predecessor Companies') share of earnings (losses) of Lenfest and TKR, the
Company's net earnings was increased by approximately $4,562,000 for the year
ended December 31, 1992. The Company's net earnings was reduced through a charge
of approximately $1,966,000 and $656,000 for the nine months ended December 31,
1991 and the three months ended March 31, 1991, respectively.
During 1992, the Company increased its investment in Lenfest and adopted
the equity method of accounting for its investment in Lenfest, which was
previously accounted for under the cost method. Accordingly, Liberty's (and the
Predecessor Companies') investment, results of operations and stockholders'
equity were adjusted retroactively to reflect the equity method of accounting.
As of December 31, 1992, the Company reduced the carrying amount of its
investment in Lenfest by $56 million.
Certain of the Company's affiliates are general partnerships and any
subsidiary of the Company that is a general partner in a general partnership is,
as such, liable as a matter of partnership law for all debts (other than
non-recourse debts) of that partnership in the event liabilities of that
partnership were to exceed its assets.
<PAGE> 26
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) OTHER INVESTMENTS
Other investments, accounted for under the cost method, and related
receivables, are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1993
--------- ---------
<S> <C> <C>
Limited partnership interest and related receivables........... $ 3,647 $43,109
Marketable equity securities(a)................................ 25,811 8,841
Convertible debt, accrued interest and preferred stock
investment................................................... 46,457 46,459
Note receivable including accrued interest(b).................. 132,303 --
Receivable for redemption of preferred stock investment........ -- 112,583
Other investments and related receivables...................... 12,000 2,001
--------- ---------
$ 220,218 $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 $111,549,000 and
$55,825,000 (which exceeded cost by $85,738,000 and $46,984,000) at
December 31, 1993 and December 31, 1992, respectively.
(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
December 31, 1993 (see note 9), 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 Company).
<PAGE> 27
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 multiple of cash flow approach or publicly quoted market prices, of
all of the Company's other investments aggregated $406 million and $338 million
at December 31, 1993 and 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 approach.
In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective for fiscal years beginning after December
15, 1993. Under the new rules, debt securities that the Company has both the
positive intent and ability to hold to maturity are carried at amortized cost.
Debt securities that the Company does not have the positive intent and ability
to hold to maturity and all marketable equity securities are classified as
available-for-sale or trading and carried at fair value. Unrealized holding
gains and losses on securities classified as available-for-sale are carried as a
separate component of stockholders' equity. Unrealized holding gains and losses
on securities classified as trading are reported in earnings.
Presently, the Company has no debt securities. Marketable equity securities
are currently reported at the lower of cost or market and net unrealized losses
are reported in earnings. The Company will apply the new rules starting in the
first quarter of 1994. Application of the new rules will result in an estimated
increase of $120,653,000 in stockholders' equity as of January 1, 1994,
representing the recognition of unrealized appreciation, net of taxes, for the
Company's investment in equity securities determined to be available-for-sale
(including its investment in TCI common stock described below), previously
carried at lower of cost or market.
(8) 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 December 31, 1993 and 1992, the
market value of the Company's investment in TCI amounted to $209,785,000 and
$140,440,000, respectively, based on its publicly quoted market price.
<PAGE> 28
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Certain of the TCI common stock is held in escrow for delivery upon
exchange of the Liberty Class B Redeemable Exchangeable Preferred Stock (the
"Class B 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 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.
(9) ACQUISITIONS
On February 11, 1993, Liberty acquired 20,000,000 shares of the Class B
Stock of HSN from RMS Limited Partnership ("RMS") for $58,000,000 in cash and
8,000,000 shares of Liberty Class A common stock. Liberty had previously
acquired shares of common stock of HSN in 1992. Such common stock acquired in
1992 and the Class B Stock acquired represented 23.5% of the common equity and
65.6% of the controlling voting interest of HSN as of the date of acquisition.
As a result of the acquisition of the controlling voting interest, HSN became a
consolidated subsidiary of the Company for financial reporting purposes.
On June 1, 1993, Liberty completed the purchase of approximately 16,000,000
shares of HSN common stock at a price of $7 per share. The shares had been
tendered pursuant to a tender offer initiated by the Company in April 1993.
On March 15, 1993, Mile Hi Cable Partners, L.P. ("New Mile Hi")
completed the acquisition 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 Transactions. As a result of the aforementioned acquisition of Mile Hi,
Liberty's (and the Predecessor Companies') 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. In addition,
Liberty's (and the Predecessor Companies') investment, results of operations
and stockholders' equity were adjusted retroactively to reflect previously
reserved interest income on a loan receivable of approximately $50 million
<PAGE> 29
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(including accrued interest) (the "Mile Hi Note") at the time of consolidation
of New Mile Hi. The Mile Hi Note was eliminated upon consolidation. Upon
restatement of Liberty's share of historical losses of Mile Hi, net of the
restatement of previously reserved interest income on the Mile Hi Note, the
Company's net earnings was increased by approximately $1,397,000, $1,111,000 and
$220,000 for the year ended December 31, 1992, the nine months ended December
31, 1991 and the three months ended March 31, 1991, respectively.
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 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.
Of the $110 million in cash required by New Mile Hi to complete the
transaction, $105 million was loaned to New Mile Hi by CCT and $5 million was
provided by PBJC as a capital contribution to New Mile Hi. Of the $5 million
contributed by PBJC, approximately $4 million was provided by CCT through loans
to Mr. Johnson and trusts for the benefit of his children. CCT funded its loans
to New Mile Hi and the Johnson interests by borrowing $93 million under its
revolving credit facility and by borrowing $16 million from TCI in the form of a
subordinated note.
The acquisitions of HSN and all the general and limited partnership
interests in Mile Hi were accounted for by the purchase method. Accordingly,
the results of operations of
<PAGE> 30
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
$1,106,394,000 for the years ended December 31, 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 $9,378,000
and $25,074,000 for the years ended December 31, 1993 and 1992, respectively.
Net loss attributable to common shareholders and loss per common share would
have increased by $14,429,000 and $0.11, respectively, for the year ended
December 31, 1993. Net loss attributable to common shareholders and loss per
common share would have increased by $24,508,000 and $0.19, respectively for the
year ended December 31, 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.
(10) LITIGATION SETTLEMENTS
The Company has reached agreements in principle to settle certain lawsuits
related to HSN. Under the terms of the settlements, the Company will pay
approximately the following (amounts in thousands):
<TABLE>
<S> <C>
Civil actions pending Court approval in Delaware and Colorado to be paid by
the parent............................................................... $13,000
Civil actions pending Court approval in the United Stated District Court
for the Middle District of Florida to be paid by HSN..................... 8,500
Settlement to Western Hemisphere, Inc. to be paid by HSN................... 4,500
Settlements to be paid by HSN which will be reimbursed by Roy M. Speer,
former chairman of the board of HSN...................................... 3,000
-------
Accrued litigation settlements........................................ $29,000
-------
-------
</TABLE>
<PAGE> 31
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Any attorneys' fees awarded by the Courts to the plaintiffs' attorneys in
such actions will be paid out of the above amounts. The portion of the accrued
litigation settlements to be paid by the parent which will be paid to the class
who sold shares of HSN common stock to Liberty as part of the June 1, 1993
purchase (approximately $5.5 million) (see note 9), was capitalized as
additional acquisition costs. The portion of the accrued litigation settlements
to be paid by HSN were capitalized by the Company as additional acquisition
costs. A receivable amounting to $3 million has been recorded by the Company in
anticipation of reimbursement by Roy M. Speer.
(11) DEBT
Debt is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE DECEMBER 31,
INTEREST RATE AT ---------------------
DECEMBER 31, 1993 1993 1992
----------------- -------- --------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C> <C>
Parent company debt:
Note payable to TCI (a)............................. 11.6% $ 76,952 $ --
Note payable to TCI (b)............................. 6.0% 104,644 --
-------- --------
Debt of subsidiaries:................................. 181,596 --
Note payable to TCI (c)............................. 6.0% 4,322 4,322
-------- --------
Debt due TCI................................ 185,918 4,322
-------- --------
Note payable to bank (d)............................ 7.3% 5,815 6,257
Note payable to bank (e)............................ 4.4% 23,425 25,954
Note payable to bank (f)............................ 4.7% 79,500 25,000
Liability to seller (g)............................. -- 19,637 19,637
Unsecured note payable (h).......................... 6.0% 545 1,635
Convertible note payable (i)........................ 10.0% 13,131 12,121
Notes payable to bank (j)........................... 5.5% 110,000 --
Note payable to affiliate........................... -- -- 61,391
Note payable to bank................................ -- -- 7,000
Other debt, with varying rates and maturities....... 8.9% 8,127 4,335
-------- --------
260,180 163,330
-------- --------
$446,098 $167,652
-------- --------
-------- --------
</TABLE>
<PAGE> 32
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(a) Payable by Liberty.
The notes payable are due on February 1, 1997 and are secured by the
Company's partnership interest in CCT and in the Mile Hi Note.
(b) Payable by Liberty.
These notes payable were amended to extend the due date from December
3, 1993 to the earlier of June 30, 1994 or ten days following termination
of the proposed business combination of TCI and Liberty (see note 16). From
and after maturity, the unpaid amount of these notes will bear interest at
10% per annum, payable on demand.
(c) Payable by LMC Chicago Sports, Inc.
This note is payable on December 31, 1996 and is secured by the
Company's general partnership interest in Sports.
(d) 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. The
quarterly installments consist of a fixed amount per quarter plus
additional principal payments based on a percentage of the previous
quarter's cash flow. The loan agreement contains provisions for the
maintenance of certain financial ratios and other matters. At December 31,
1993, Command did not meet certain provisions of the note and the bank has
the right to declare the loan in default. Command has requested a waiver of
these items from the bank. All of Command's cable television assets are
pledged as collateral under this loan agreement. The Company's investment
in Command has been reduced to zero and therefore a default by Command
under its loan agreement will have no material effect on Liberty.
(e) 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 may be required based upon the prior year's
excess cash flow, as defined. The terms of the agreement include, in
addition to other requirements, compliance
<PAGE> 33
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with certain financial ratios and limitations on capital expenditures
and leases. 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 the interest rate on $6 million of its
floating rate debt to 8.25% plus the adjustment based on the results of a
certain financial ratio, as discussed above. The agreement which had an
expiration date of April 18, 1995 was terminated on December 29, 1993 at a
cost of $403,000 including approximately $60,000 of accrued interest
through the termination date. Such amounts are included in interest expense
in the 1993 consolidated statement of operations.
(f) 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. The revolving
credit facility permits CCT to borrow from the banks to fund acquisitions
of cable television systems and for other general purposes, subject to
compliance with the restrictive covenants (including ratios of debt to cash
flow and cash flow to interest expense) contained in the loan agreement
governing the facility.
(g) Payable by ARC.
The liability represents the discounted amount estimated under an
"Earnout Rights" agreement. The agreement requires annual payments during
a five-year period contingent upon the operations from ARC's "DBS
Business," as defined in the agreement. The annual payments equal 86% of
the Earnings Before Depreciation, Interest and Income Taxes ("EBDIT"), as
defined of the DBS Business over the base EBDIT. The calculated amount
required under the agreement is $20 million. At December 31, 1992, the
estimated liability was revised to the calculated amount under the
agreement. This amount is due on April 30, 1994. ARC has received a
$30,000,000 financing commitment from a bank and intends to use a portion
of that commitment to repay this obligation. The financing commitment is
subject to final documentation, and includes covenants to maintain certain
financial ratios and other restrictions. The discount was being deferred
and amortized over the life of the agreement using the effective interest
method. Amortization of the discount amounted to $520,000, $1,483,000 and
$455,000 for the year ended December 31, 1992,
<PAGE> 34
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the nine months ended December 31, 1991 and the three months ended
March 31, 1991, respectively.
(h) Payable by LMC Regional Sports, Inc.
This note is payable in equal quarterly installments through June 30,
1994.
(i) Payable by ARC.
These notes are due December 30, 2000. The notes are convertible, at
the option of the holders, into an 11.65% limited partnership interest in
ARC.
(j) 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 December 31, 1993, $40 million of the senior
revolving credit facility remains available. 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.
In February and April 1993, HSN drew $140 million under the above
mentioned bank financing agreements. These proceeds, together with
available working capital of HSN, were used to retire $143,252,000
principal amount of the Unsecured 11 3/4% Senior Notes, due October 15,
1996 (the "Senior Notes"), at 104% of the principal amount plus accrued
interest to the redemption date. During August and September of 1993, HSN
repaid $30 million of the outstanding balance on the revolving credit
facility.
In 1993, HSN entered into interest rate exchange agreements with
certain financial institutions to limit its exposure from interest rate
volatility. These agreements have notional principal amounts aggregating
$115 million, of which $25 million, $35 million and $30 million of the
senior term loans, have fixed maximum variable interest rates if the
London Interbank Offering Rate ("LIBOR") exceeds 6% until
<PAGE> 35
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
June 1994, 6% until June 1995 and 7% until October 1995, respectively.
The senior unsecured revolving credit facility has a principal amount of
$25 million with a fixed maximum variable interest rate if LIBOR exceeds
6% until April 1994. The three month LIBOR rate at December 31, 1993 was
3.3125%.
On May 11, 1993, HSN retired the remaining $16,915,000 principal
balance of its Unsecured 5 1/2% Convertible Subordinated Debentures, due
April 22, 2002 (the "Debentures"), at 101.83% of the principal amount plus
accrued interest to the redemption date.
The Company recognized extraordinary losses on the early
extinguishment of the Senior Notes and the Debentures.
Certain of Liberty's subsidiaries are subject to loan agreements that
prohibit or limit the transfer of funds of such subsidiaries to the parent
company in the form of loans, advances or cash dividends.
Subsidiaries of Liberty pay fees, generally 1/4% to 3/8% per annum,
on the average unborrowed portion of the total amount available for
borrowings under their bank credit facilities.
Debt maturities are as follows: 1994 -- $143,454,000; 1995 --
$38,909,000; 1996 -- $21,834,000; 1997 -- $109,941,000 and 1998 --
$67,014,000.
(12) PROMISSORY NOTES
CCT has a note payable to TCI of approximately $58 million, including
accrued interest, due January 1, 2000. The note bears interest at 8% per
annum. 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 $36
million, including accrued interest, in notes receivable from TCI due
January 1, 2000. The notes receivable earn interest at 11.6% per annum.
These notes receivable are reflected as a reduction of minority interest
in the accompanying consolidated financial statements as they represent
subscription notes receivable.
(13) INCOME TAXES
Liberty files a consolidated Federal income tax return with all of its
80% or more owned subsidiaries. Consolidated subsidiaries in which the
Company owns less than 80% each
<PAGE> 36
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
file a separate income tax return. Liberty and such subsidiaries calculate their
respective tax liabilities on a separate return basis which are combined in the
accompanying consolidated financial statements.
The Predecessor Companies were included in the consolidated Federal income
tax return of TCI. Income tax expense for the Predecessor Companies was based on
those items in the consolidated calculation applicable to the Predecessor
Companies. Intercompany tax allocation represented an apportionment of tax
expense or benefit (other than deferred taxes) among subsidiaries of TCI in
relation to their respective amounts of taxable earnings or losses. The
receivable or payable arising from the intercompany tax allocation was recorded
as an increase or decrease in amounts due from TCI. Upon consummation of the
Transactions, TCI repaid such amounts.
In connection with the Transactions, TCI and Liberty entered into a tax
sharing agreement. TCI agreed to reimburse Liberty for the benefit from
investment tax credits and net operating losses generated by Liberty which were
utilized in the consolidated Federal income tax return of TCI. Upon the
consummation of the Transactions, Liberty was no longer included in the
consolidated Federal income tax return of TCI. At that time, all investment tax
credits and net operating losses generated by Liberty, but not previously
utilized by TCI in TCI's consolidated Federal income tax return, became
available for use by Liberty in its own consolidated Federal income tax return.
Certain of the Federal income tax returns of TCI are presently under
examination by the Internal Revenue Service ("IRS") including the years 1979
through the date of the Transactions. These examinations 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.
Certain of the Federal income tax returns of a less than 80% owned
subsidiary of Liberty (the "Subsidiary") are presently under examination by the
IRS. During 1993, the IRS completed its examination of the Subsidiary's Federal
income tax returns for its 1989 and 1988 fiscal years, proposing adjustments of
approximately $11 million, not including interest thereon. The adjustments
related primarily to issues currently under protest for the Subsidiary's 1987
and 1986 fiscal years, including the Subsidiary's amortization of acquired FCC
broadcast licenses and related intangible assets and the Subsidiary's
<PAGE> 37
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
deduction of certain royalty payments to a related party. The Subsidiary's
management believes that it has valid positions related to the adjustments and
intends to vigorously defend its interests. The Subsidiary has protested all
proposed adjustments to the Appellate Division of the IRS. Management of the
Subsidiary believes that the ultimate resolution of the matters will not have a
material effect on the results of operations of the Subsidiary.
On February 9, 1994, the IRS announced a comprehensive Settlement
Initiative which broadly addresses intangibles issues currently being contested
by various taxpayers. The intangibles issues currently being protested by the
Subsidiary are subject to this Settlement Initiative. At this time, it is not
certain whether the IRS will make a settlement offer to the Subsidiary, nor
whether the Subsidiary would accept such an offer if made.
The Financial Accounting Standards Board Statement No. 109 requires a
change from the deferred method of accounting for income taxes of APB Opinion
No. 11 to the asset and liability method of accounting for income taxes. Under
the asset and liability method of Statement No. 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or
settled. Under Statement No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company adopted Statement No. 109 in 1993 and has applied the
provisions of Statement No. 109 retroactively to the Predecessor Companies to
January 1, 1986. The Company restated its financial statements for January 1,
1986 through March 28, 1991 for the Predecessor Companies and for March 29, 1991
through December 31, 1992 for Liberty. The effect of the implementation of
Statement No. 109 was a net increase to stockholders' equity and a reduction to
deferred taxes payable of $60,172,000 and $41,802,000 at March 28, 1991 and
December 31, 1992, respectively.
<PAGE> 38
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The financial statements for the years ended December 31, 1992 and 1991
have been restated to comply with the provisions of Statement No. 109. The
following summarizes the impact of applying Statement No. 109 on net earnings
and net earnings (loss) per common share attributable to common shareholders:
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
----------------------------- ------------
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1992 1991 1991
------------ ------------ ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net earnings as previously reported................... $ 13,933 $ 42,331 $ 613
Effect of restatements:
Mile Hi and the Mile Hi Note (note 9)............... 2,329 1,851 367
Lenfest and TKR (note 6)............................ 7,603 (3,276) (1,093)
Statement No. 109................................... (1,481) (585) 339
------------ ------------ ------------
As restated................................. $ 22,384 $ 40,321 $ 226
------------ ------------ ------------
------------ ------------ ------------
Per share amounts as previously reported.............. $ (0.22) $ 0.15
Effect of restatements:
Mile Hi and the Mile Hi Note (note 9)............... 0.02 0.02
Lenfest and TKR (note 6)............................ 0.05 (0.03)
Statement No. 109................................... (0.01) (0.01)
------------ ------------
As restated................................. $ (0.16) $ 0.13
------------ ------------
------------ ------------
</TABLE>
<PAGE> 39
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax benefit (expense) consists of:
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
---------------------------------------------- ------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992 1991 1991
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Current Federal tax expense........... $(19,396) $ (1,253) $ (1,080) --
Current state tax expense............. (4,332) (1,238) (700) (47)
Intercompany tax benefit allocation... -- -- -- --
------------ ------------ ------------ ------------
(23,728) (2,491) (1,780) 103
Deferred Federal tax benefit
(expense)........................... 11,423 (6,759) (12,903) 552
Deferred state tax benefit
(expense)........................... 783 (1,193) (2,278) 98
------------ ------------ ------------ ------------
12,206 (7,952) (15,181) 650
------------ ------------ ------------ ------------
$(11,522) $(10,443) $(16,961) $ 753
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Income tax benefit (expense) differs from the amounts computed by the
Federal income tax rate of 35% in 1993 and 34% in all previous periods as a
result of the following:
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
---------------------------------------------- ------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992 1991 1991
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Computed expected tax benefit
(expense)........................... $ (6,478) $(11,161) $(19,476) $ 179
Dividends excluded for income tax
purposes............................ 182 4,144 2,849 976
Amortization not deductible for income
tax purposes........................ (3,944) (155) (116) (39)
Excess executive compensation......... (689) -- -- --
Minority interest in consolidated
corporate subsidiaries.............. 386 (132) 40 --
State and local income taxes, net of
Federal income tax benefit.......... (2,307) (1,604) (1,965) (8)
Effect of change in anticipated state
tax rate............................ 2,043 -- -- --
Effect of change in Federal tax
rate................................ (707) -- -- --
Other, net............................ (8) (1,535) 1,707 (355)
------------ ------------ ------------ ------------
$(11,522) $(10,443) $(16,961) $ 753
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<PAGE> 40
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of deferred income tax benefit (expense) are as
follows:
<TABLE>
<CAPTION>
PREDECESSOR
LIBERTY COMPANIES
---------------------------------------------- ------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1992 1991 1991
------------ ------------ ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Differences in recognition of earnings
or losses of affiliates for income tax
and financial statement purposes...... $ 3,098 $ (4,679) $(17,067) $ (2,564)
Dividend income, including premium on
redemption, recognized for financial
statement purposes in excess of income
recognized for income tax purposes.... (814) (4,179) (660) (153)
Interest income recognized for income
tax purposes in excess of income
recognized for financial statement
purposes.............................. -- 4,287 2,509 331
Recognition of deferred gain for
financial statement purposes in excess
of gain recognized for income tax
purposes.............................. -- (9,020) (4,413) --
Differences in recognition of
compensation relating to stock
appreciation rights and unearned
compensation arrangements............. 8,517 6,775 560 --
Litigation settlement expenses
recognized
for financial statement purposes in
excess
of amount recognized for income tax
purposes.............................. 2,766 -- -- --
Inventory costing....................... 4,057 -- -- --
Accrued liabilities for financial
statement purposes in excess of amount
recognized for income tax purposes
attributable primarily to home
shopping programming services......... 3,200 -- -- --
Generation (utilization) of net
operating loss, capital loss,
investment tax credit and alternative
minimum tax........................... (8,931) (1,113) 3,584 70
Change in valuation allowance during the
period................................ (134) -- -- --
Differences in depreciation and
amortization for income tax and
financial statement purposes.......... (871) -- 300 2,820
Net benefit realized due to change in
state and Federal income tax rates.... 1,336 -- -- --
Other, net.............................. (18) (23) 6 146
------------ ------------ ------------ ------------
$ 12,206 $ (7,952) $(15,181) $ 650
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<PAGE> 41
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1993 and 1992 are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating and capital loss carryforwards......................... $ 8,833 $ 22,507
Charitable contribution carryforward................................. 910 --
Investment tax credit carryforward................................... 3,422 4,905
Alternative minimum tax carryforward................................. 5,317 2,499
Investments in affiliates, due principally to losses of affiliates
recognized for financial statement purposes in excess of losses
recognized for income tax purposes................................ 44,209 59,819
Inventory costing.................................................... 7,248 --
Provision for returns and allowance.................................. 4,669 --
Provision for uncollectable amounts.................................. 3,193 128
Future deductible amount attributable to accrued stock appreciation
rights and deferred compensation.................................. 15,240 7,269
Future deductible amount related to accrued litigation settlements... 2,766 --
Other future deductible amounts primarily due to non-deductible
accruals.......................................................... 8,672 596
-------- --------
Total gross deferred tax assets................................... 104,479 96,913
-------- --------
Less valuation allowance of deferred tax assets................. 2,017 1,138
-------- --------
Net deferred tax assets...................................... 102,462 95,775
-------- --------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation...................................................... 9,274 1,258
Intangible assets, principally due to differences in amortization.... 6,170 --
Investments in affiliates, due principally to undistributed earnings
of affiliates..................................................... 88,671 109,491
-------- --------
Total gross deferred tax liabilities.............................. 104,115 110,749
-------- --------
Net deferred tax liability................................... $ 1,653 $ 14,974
-------- --------
-------- --------
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1992 was
$1,138,000.
<PAGE> 42
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1993, the Company had net operating and capital loss
carryforwards for income tax purposes aggregating approximately $23,872,000
which, if not utilized to reduce taxable income in future periods, expire as
follows: $8,345,000 in 1997, $15,353,000 in 2004 and $174,000 in 2005.
At December 31, 1993, the Company had remaining available investment tax
credits of approximately $3,422,000 which, if not utilized to offset future
Federal income taxes payable, expire at various dates through 2004.
New tax legislation was enacted in the third quarter of 1993 which, among
other matters, increased the corporate Federal income tax rate from 34% to 35%.
In addition, the Company recognized the benefit of a reduction in its state
income tax rate relating to its receipt of favorable tax rulings from certain
state tax authorities. The Company has reflected the tax rate changes in its
consolidated statements of operations in accordance with the treatment
prescribed by Statement No. 109. Such tax rate changes resulted in a net
decrease of $1,336,000 in income tax expense.
(14) PREFERRED STOCKS SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
CLASS A REDEEMABLE CONVERTIBLE PREFERRED STOCK
The 10,794 shares of Class A Preferred Stock outstanding at December 31,
1992 held by TCI (representing 100% of the issued and outstanding shares at that
time) were converted on January 15, 1993 in accordance to its terms, into
4,405,678 shares of Liberty Class A common stock and 55,070 shares of Liberty
Class E Preferred Stock. Such Class A Preferred Stock was retired and may not be
reissued.
CLASS B REDEEMABLE EXCHANGEABLE PREFERRED STOCK
The Company is authorized to issue up to 106,000 shares of the Class B
Preferred Stock. The aggregate number of shares of such Class B Preferred Stock
that was issued to TCI and outstanding at December 31, 1993 is 105,353 shares
(representing 100% of the issued and outstanding shares). The accretion rate for
the Class B Preferred Stock is 8.5% per annum, compounded semi-annually.
At the option of the Company, the shares of the Class B Preferred Stock are
redeemable at any time, in whole or in part, at a redemption price equal to the
accreted value per share as of the redemption date, payable solely in cash, and
at the option of the Company will also be exchangeable, in whole but not in
part, for shares of a series of Class F Serial
<PAGE> 43
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Stock or of any other class or series of preferred stock of the
Company then authorized to be issued (the "Convertible Exchangeable Preferred
Stock"), the rights, preferences and qualifications of which shall be
substantially similar to those of the Class B Preferred Stock as to ranking,
voting rights, rights of redemption for cash at the option of the Company and
mandatory redemption on March 28, 2006. If the Company elects to issue shares of
Convertible Exchangeable Preferred Stock in exchange for Class B Preferred
Stock, such shares will be convertible, in whole or in part, at the option of
the holder into shares of Liberty Class A common stock, but will not be
exchangeable at such holder's option for TCI common stock. The holder will have
optional redemption rights equivalent to those for the Class B Preferred Stock,
as described below, but the Company will not have the right to satisfy its
redemption obligations with respect thereto through the issuance of additional
shares of Convertible Exchangeable Preferred Stock. The shares of Convertible
Exchangeable Preferred Stock may accrete dividends at a rate different from the
accretion rate then applicable to the shares of Class B Preferred Stock for
which they are exchanged or may provide for the accrual and payment of cash
dividends (which may or may not be cumulative). At the option of the Company, at
any time after March 28, 1995, the shares of Convertible Exchangeable Preferred
Stock will be exchangeable, in whole but not in part, for subordinated notes of
the Company that will be convertible, in whole or in part, at the option of the
holder into shares of Liberty Class A common stock (the "Convertible
Subordinated Notes"). If the shares of Convertible Exchangeable Preferred Stock
that are being exchanged for Convertible Subordinated Notes accrete dividends,
then the Convertible Subordinated Notes will be zero coupon notes, the issue
price of which shall be equal to the liquidation price of the shares of
Convertible Exchangeable Preferred Stock for which they are exchanged as of the
date of such exchange, and the principal amount of which shall be equal to the
liquidation price of such shares of Convertible Exchangeable Preferred Stock at
March 28, 2006. If the shares of Convertible Exchangeable Preferred Stock that
are being exchanged for Convertible Subordinated Notes provide for the accrual
and payment of cash dividends, the principal amount of such Convertible
Subordinated Notes shall be equal to the liquidation price of the shares of
Convertible Exchangeable Preferred Stock for which they are exchanged as of the
date of such exchange, plus (to the extent not already included in such
liquidation price) all accumulated or accrued and unpaid dividends, if any, to
the date of such exchange, and interest will accrue, and be payable
semiannually, on such principal amount at a rate per annum equivalent to the
annual dividend rate for such shares of Convertible Exchangeable Preferred
Stock. The terms of the Convertible Subordinated Notes shall otherwise be
substantially similar to those of the shares of Convertible Exchangeable
Preferred Stock for which they are exchanged, except for such variations as may
be appropriate to reflect the differences between debt securities and equity
securities and except that such Convertible Subordinated Notes will not be
exchangeable for another issue of Convertible Subordinated Notes.
<PAGE> 44
In addition, at any time after March 28, 1995, the shares of Class B
Preferred Stock shall each be exchangeable, at the Company's option, in whole
but not in part, for zero coupon subordinated notes of the Company (the
"Exchangeable Subordinated Notes"). The principal amount of such Exchangeable
Subordinated Notes shall be equal to the accreted value of the shares for which
they are exchanged as of March 28, 2006 (rounded down to the nearest $1,000) and
the issue price of such Exchangeable Subordinated Notes (plus the amount of any
cash adjustment payable in lieu of issuing Notes in other than authorized
denominations) shall be equal to the accreted value of such shares as of the
date of exchange. The terms of the Exchangeable Subordinated Notes shall
otherwise be substantially similar to those of the Class B Preferred Stock for
which they are exchanged, except for such variations as may be appropriate to
reflect the differences between debt securities and equity securities and except
that such Exchangeable Subordinated Notes will be exchangeable at the option of
the Company at any time after issuance thereof for Convertible Subordinated
Notes of the Company, but will not be exchangeable or redeemable for shares of
Convertible Exchangeable Preferred Stock or for another issue of Exchangeable
Subordinated Notes. The rate at which the Exchangeable Subordinated Notes may be
exchanged for shares of TCI common stock at the option of the holder shall be
calculated so that the aggregate principal amount of the Exchangeable
Subordinated Notes issued in exchange for shares of the Class B Preferred Stock
will be exchangeable into the same aggregate number of shares of TCI common
stock as the shares of Class B Preferred Stock for which they were exchanged.
The shares of Class B Preferred Stock are also exchangeable or redeemable
at the option of the holder as described below.
The shares of Class B Preferred Stock, unless previously redeemed, will be
exchangeable at the option of the holder at any time in whole or in part for
shares of TCI common stock. The Company will have the option of delivering
shares of TCI Class A common stock or TCI Class B common stock or any
combination thereof upon such exchange. The exchange rate for the Class B
Preferred Stock is 54.34 shares of TCI common stock for each share of Class B
Preferred Stock, subject to adjustment under certain conditions.
The exchange rights of the shares of Class B Preferred Stock will
expire at the close of business on the business day immediately preceding March
28, 2006 or, in the case of shares of Class B Preferred Stock called for
redemption or exchange, at the close of business on the date specified for such
redemption or exchange, unless in either case the Company defaults in the
payment of the redemption price or the making of the exchange.
<PAGE> 45
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (C0NTINUED)
The Company deposited with an escrow agent all shares of TCI common stock
acquired by the Company in connection with the Exchange. The TCI common stock is
held by the escrow agent for delivery to holders of Class B Preferred Stock upon
exchange. Upon surrender of shares of Class B Preferred Stock for exchange, the
holder thereof shall be entitled to receive the shares of TCI common stock at
the then applicable exchange rate. Any shares of TCI common stock remaining in
escrow after March 28, 2006 will be returned to and become the sole property of
the Company.
The holders of shares of Class B Preferred Stock may, by delivery of a
written notice of demand (a "Demand Notice"), require the Company to redeem all
shares of Class B Preferred Stock covered by such Demand Notice on March 28,
1996 and March 28, 2001 (each such date a "Special Redemption Date"), at a
redemption price (the "Special Redemption Price") equal to the accreted value of
such shares as of such Special Redemption Date.
The Special Redemption Price will be payable by the Company, at its option,
in cash, Liberty Class A common stock, Convertible Exchangeable Preferred Stock,
TCI common stock, the Company's convertible subordinated extension notes due on
March 28, 2006, which are convertible into Liberty Class A common stock (the
"Convertible Extension Notes"), the Company's subordinated extension notes due
on March 28, 2006 (the "Non-Convertible Extension Notes", and together with the
Convertible Extension Notes, the "Extension Notes") or any combination thereof;
provided, however, that if any Convertible Extension Notes are issued as such
payment, Convertible Extension Notes shall constitute no less than 25% of the
Special Redemption Price and if Non-Convertible Extension Notes are issued as
such payment, Non-Convertible Extension Notes shall constitute no less than 25%
of the Special Redemption Price.
Unless all outstanding shares of Class B Preferred Stock to be redeemed or
exchanged are at the time held by TCI, the Company's right to redeem shares of
Class B Preferred Stock through the delivery of Extension Notes or shares of
Liberty Class A common stock, Convertible Exchangeable Preferred Stock or TCI
common stock is subject to the Company satisfying various conditions.
CLASS D REDEEMABLE VOTING PREFERRED STOCK
The Company is authorized to issue up to 18,000 shares of Class D
Redeemable Voting Preferred Stock (the "Class D Preferred Stock"). The aggregate
number of shares of such Class D Preferred Stock issued to TCI and outstanding
at December 31, 1993 is 17,238 shares (representing 100% of the issued and
outstanding shares). The accretion rate for the Class D Preferred Stock is 10%
per annum, compounded semi-annually.
<PAGE> 46
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Class D Preferred Stock is redeemable at the option of the Company at
any time and from time to time on and after March 28, 1996, in whole or in part,
for a redemption price, payable solely in cash, equal to the accreted value per
share of such class as of the redemption date. The Class D Preferred Stock is
subject to a mandatory redemption requirement on March 28, 2006.
Originally, TCI had the exclusive right to elect a number of directors
equal to not less than 20% (rounded upward to the nearest whole number) of the
total number of members of the Company's Board of Directors for so long as all
of the outstanding shares of Class D Preferred Stock are owned by TCI, voting
together as a separate class. On March 26, 1993 in conjunction with the
Recapitalization Agreement described in note 16, the terms of the Class D
Preferred was amended to reduce the number of directors elected by the holders
of the Class D Preferred from 20% of the total number of the Company's Board of
Directors to 11% (which shall include the right to fill any vacancy created by
the death or resignation of any director elected by the holders of Class D
Preferred Stock or by the removal by such holders of any director elected by
them, and to elect such number of additional directors to fill any newly created
directorships as is necessary to maintain such level of representation). In the
event that TCI ceases to own in the aggregate 100% of the outstanding shares of
Class D Preferred Stock, the foregoing special voting rights of such class shall
terminate.
<PAGE> 47
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (C0NTINUED)
The following table reflects the changes in each issue of preferred stock
subject to mandatory redemption requirements from the date of issuance through
December 31, 1993:
<TABLE>
<CAPTION>
TOTAL
PREFERRED
STOCK
SUBJECT TO
MANDATORY
CLASS B CLASS B REDEMPTION
CLASS A SERIES 1 SERIES 2 CLASS C CLASS D REQUIREMENTS
-------- -------- -------- --------- ------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
LIBERTY
Net effect of Transactions (note 2)....... $ 10,794 $105,353 $ 91,611 $ 399,299 $17,238 $ 624,295
Redemption of Class B Preferred Stock..... -- -- (91,611) -- -- (91,611)
Accreted dividends........................ 798 6,954 -- 15,404 1,343 24,499
Retroactive effect of the Recapitalization
(note 2)................................ -- -- -- (414,703) -- (414,703)
-------- -------- -------- --------- ------- ------------
BALANCE AT DECEMBER 31, 1991.............. 11,592 112,307 -- -- 18,581 142,480
Accreted dividends........................ 1,128 9,749 -- -- 1,904 12,781
-------- -------- -------- --------- ------- ------------
BALANCE AT DECEMBER 31, 1992.............. 12,720 122,056 -- -- 20,485 155,261
Accreted dividends........................ 47 10,596 -- -- 2,100 12,743
Conversion of Class A Preferred Stock for
Class A common stock.................... (12,767) -- -- -- -- (12,767)
-------- -------- -------- --------- ------- ------------
BALANCE AT DECEMBER 31, 1993.............. $ -- $132,652 $ -- $ -- $22,585 $ 155,237
-------- -------- -------- --------- ------- ------------
-------- -------- -------- --------- ------- ------------
</TABLE>
<PAGE> 48
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) STOCKHOLDERS' EQUITY
(A) PREFERRED STOCKS NOT SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
CLASS C REDEEMABLE EXCHANGEABLE PREFERRED STOCK
On March 26, 1993, pursuant to the Recapitalization Agreement
described in note 16, the 399,299 shares of Class C Redeemable Exchangeable
Preferred Stock (the "Class C Preferred Stock") held by TCI (representing
100% of the issued and outstanding shares) were repurchased and retired and
may not be reissued.
CLASS E, 6% CUMULATIVE REDEEMABLE EXCHANGEABLE JUNIOR PREFERRED STOCK
The Company is authorized to issue 2,000,000 shares of Class E
Preferred Stock. The aggregate number of shares of such Class E Preferred
Stock issued upon consummation of the Recapitalization approved by the
shareholders on March 12, 1992 was 1,620,026. When issued, the shares had a
liquidation value of $100 per share. Dividends accrue on the Class E
Preferred Stock at the rate of 6% per annum and are payable on March 1 of
each year in cash or, at the option of the Company, in whole or in part, in
shares of its Class A common stock. No interest or additional dividends
will accrue or be payable on accumulated, accrued and unpaid dividends.
The Class E Preferred Stock is redeemable at the option of the Company
at any time or from time to time, in whole or in part, for a redemption
price payable solely in cash equal to the liquidation value of each share
(including any accrued and unpaid dividends). There is no mandatory
redemption requirement.
In addition, the shares of Class E Preferred Stock may, at any time,
at the option of the Company, be exchanged in whole for junior subordinated
notes of the Company (the "Junior Exchange Notes"). The principal amount of
the Junior Exchange Notes shall be equal to the liquidation value of each
share (including accrued and unpaid dividends) on the exchange date.
The Junior Exchange Notes will bear interest, payable annually, at a
rate equal to the prevailing Fifteen Year Treasury Rate (as defined) plus
2.15% and will have a maturity date 15 years from the date of issuance.
<PAGE> 49
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CLASS F SERIAL PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Class F Serial
Preferred Stock (the "Class F Preferred Stock") in one or more series and
to fix and state the designations, powers, preferences, qualifications,
limitations, restrictions and relative rights of the shares of each such
series. At any time that shares of any class or series of the above
described preferred stock (other than the Class F Preferred Stock) are
issued and outstanding, the number of shares of Class F Preferred Stock of
any series that may be issued shall not exceed the difference between five
million (the number of Class F Preferred Stock currently authorized) and
the sum of (i) the number of shares of all classes and series of the
above-described preferred stock (other than the Class F Preferred Stock)
issued and outstanding and (ii) the number of shares of all series of Class
F Preferred Stock issued and outstanding, in each case at the time the
resolution of the Board of Directors authorizing the issuance of shares of
such series of Class F Preferred Stock is adopted.
(B) COMMON STOCK
GENERAL
Liberty is authorized to issue 300,000,000 Class A shares and
100,000,000 Class B shares. Liberty had 87,515,378 Class A shares and
43,338,720 Class B shares outstanding at December 31, 1993, and 76,036,000
Class A shares and 43,340,320 Class B shares outstanding at December 31,
1992.
The Class A common stock has one vote per share and the Class B common
stock has ten votes per share. Each share of Class B common stock is
convertible, at the option of the holder, into one share of Class A common
stock.
STOCK OPTION
The Company has an employment agreement with an officer (who is also a
director). Pursuant to this agreement, such officer was granted an option
to acquire 100,000 shares of Liberty Class B common stock at a purchase
price of $256 per share (reflects actual shares issued). The employment
agreement was amended and the option was exercised with cash and a
$25,500,000 note. This note bears interest at 7.54% per annum. During
October 1991, such officer tendered to the Company in partial payment of
such note 800,000 shares of TCI
<PAGE> 50
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Class B common stock, resulting in a net reduction of $12,195,000 in
the amount payable under the note.
The 100,000 shares issued by Liberty upon exercise of this option,
together with all subsequent dividends and distributions thereon, including
shares issued in the Stock Splits (collectively totaling 16,000,000 Liberty
Class B common stock and 200,000 Class E Preferred Stock at December 31,
1993, the "Option Units"), are subject to repurchase by the Company under
certain circumstances. The Company's repurchase right will terminate as to
20% of the Option Units per year, commencing March 28, 1992, and will
terminate as to all of the Option Units in the event of death, disability
or under certain other circumstances.
On October 24, 1992, said officer of the Company entered into a letter
agreement with respect to the timing and method of payment under the
promissory note and the release of the 200,000 shares of Class E Preferred
Stock from the collateral securing the promissory note. A payment of
approximately $984,000 for all interest accruing during calendar 1993
(after giving effect to a discount at the rate of 7.54% per annum to
reflect the time value of money received prior to the scheduled payment
date) was made in March 1993. After giving effect to the payment and the
terms of the letter agreement, the remaining principal balance on the note
is approximately $14,500,000. The next scheduled payment will be on October
24, 1994 in the principal amount of approximately $4,300,000 plus interest
accrued from December 31, 1993 to the payment date.
STOCK PLAN
The Company has a Stock Incentive Plan (the "Stock Plan") in order to
provide a special incentive to officers and other persons. Under the Stock
Plan, stock options, stock appreciation rights, restricted stock and other
awards valued by reference to, or that are otherwise based on, the value of
Class A common stock may be granted in respect to a maximum of 40,000,000
shares of Class A common stock. Shares to be delivered under the Stock Plan
will be available from authorized but unissued shares of Class A common
stock or from shares of Class A common stock reacquired by the Company.
Shares of Class A common stock that are subject to options or other awards
that terminate or expire unexercised will return to the pool of such shares
available for grant under the Stock Plan.
In June 1993, the Company granted an aggregate of 56,000 non-qualified
stock options with stock appreciation rights to certain officers and key
employees under
<PAGE> 51
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Stock Plan. Each option is exercisable for one share of Class A
common stock at an exercise price of $19.08. The options vest in five
equal annual installments commencing June 3, 1994 and expire in June 2003.
Estimates of compensation relating to these stock options with stock
appreciation rights have been recorded through December 31, 1993, but are
subject to future adjustments based upon market value and, ultimately, on
the final determination of market value when the rights are exercised.
STOCK APPRECIATION RIGHTS
The Company has granted to certain of its officers stock appreciation
rights with respect to 2,240,000 shares of Liberty Class A common stock.
These rights have an adjusted strike price of $0.80 per share, become
exercisable and vest evenly over seven years. Stock appreciation rights
expire on March 28, 2001. Estimates of compensation relating to these stock
appreciation rights have been recorded through December 31, 1993, but are
subject to future adjustment based upon market value and, ultimately, on
the final determination of market value when the rights are exercised. On
December 31, 1992, one of the Company's officers exercised stock
appreciation rights with respect to 14,000 shares. Said officer was paid
$166,425 (the difference between the market price and strike price on the
date exercised). Stock appreciation rights with respect to 526,000 shares
were exercised on October 29, 1993 and on November 2, 1993 stock
appreciation rights with respect to 240,000 shares were exercised resulting
in an aggregate payment of $21,541,200 (the difference between the market
price and exercise price on the dates exercised) to the officers exercising
such rights.
In 1993, the President of HSN received stock appreciation rights with
respect to 984,876 shares of HSN's common stock at an exercise price of
$8.25 per share. These rights vest over a four year period and are
exercisable until February 23, 2003. The stock appreciation rights will
vest upon termination of employment other than for cause and will be
exercisable for up to one year following the termination of employment. In
the event of a change in ownership control of HSN, all unvested stock
appreciation rights will vest immediately prior to the change in control
and shall remain exercisable for a one year period. Stock appreciation
rights not exercised will expire to the extent not exercised. These rights
may be exercised for cash or, so long as HSN is a public company, for
shares of HSN's common stock equal to the excess of the fair market value
of each share of common stock over $8.25 at the exercise date. The stock
appreciation rights also will vest in the event of death or disability.
<PAGE> 52
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Estimated compensation relating to these stock appreciation rights has
been recorded through December 31, 1993, but is subject to future adjustment
based upon market value, and ultimately, on the final determination of market
value when the rights are exercised.
(16) TRANSACTIONS WITH TCI AND OTHER RELATED PARTIES
On December 30, 1991, TCI Liberty, Inc. ("TCIL"), a wholly-owned subsidiary
of TCI, entered into a Commercial Paper Purchase Agreement with Liberty whereby
Liberty could from time to time purchase short-term notes from TCIL of up to an
aggregate amount of $100 million. TCIL borrowed $22,000,000 from Liberty on
December 31, 1991, pursuant to the Commercial Paper Purchase Agreement. The full
amount, including interest, was repaid on January 15, 1992. Interest rates on
the short-term notes were determined by the parties by reference to prevailing
money-market rates. This agreement was terminated on March 23, 1993.
Certain subsidiaries of Liberty produce and/or distribute sports and other
programming to cable television operators (including TCI) and others. Charges to
TCI are based upon customary rates charged to others.
Certain subsidiaries of Liberty purchase, at TCI's cost plus an
administrative fee, certain pay television and other programming through a
subsidiary of TCI. In addition, HSN pays a commission to TCI for merchandise
sales to customers who are subscribers of TCI's cable systems. Aggregate
commissions and charges to TCI were approximately $10,650,000, $3,290,000,
$1,532,000 and $495,000 for the years ended December 31, 1993 and 1992, the nine
months ended December 31, 1991 and the three months ended March 31, 1991,
respectively.
On December 31, 1991, Liberty Program Investments, Inc., a wholly-owned
subsidiary of the Company, purchased certain securities of QVC from TCI for
approximately $28,339,000 in cash. The consideration for the QVC securities was
based upon published prices. At the same time, Liberty Cable, Inc., a wholly-
owned subsidiary of the Company, sold a certain note receivable from American
TeleVenture Corporation ("ATV") to TCI Holdings, Inc. (a wholly-owned subsidiary
of TCI) for $5,523,000 in cash, and LMC Cable AdNet II, a wholly-owned
subsidiary of the Company, sold all of the common stock of Cable Television
Advertising Group, Inc. ("CTAG") to TCI Development Corporation ("TCID"), a
wholly-owned subsidiary of TCI, for $22,667,000 in cash. The only asset held by
CTAG is a 49% general partnership interest in Cable AdNet Partners. The
remaining 51% general partnership interest in Cable AdNet Partners
<PAGE> 53
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
is held by another subsidiary of TCID. The consideration for the ATV note was
determined by reference to its face value, plus accrued interest. The ATV note
bears interest at 2% above the prime rate. The consideration for the stock of
CTAG was determined by reference to the price paid for the 51% general
partnership interest in Cable AdNet Partners, which was acquired by an indirect,
wholly-owned subsidiary of TCI from Cable AdNet, Inc., a subsidiary of Lenfest
on November 25, 1991. At such date, Mr. H. F. Lenfest (a director of the
Company) was President and Chief Executive Officer of Lenfest.
Also, on December 31, 1991, an Exchange Agreement among TCI (and certain of
its subsidiaries) and Liberty (and certain of its subsidiaries) was consummated.
Pursuant to this Exchange Agreement, TCI received 69% of the stock of ATV,
2,024,063 shares of common stock of International Cablecasting Technologies,
Inc., a release from an obligation to reimburse Liberty related to the
repurchase of certain QVC stock, a release of the option with respect to Cencom
Cable Associates, Inc. and a note in the amount of $4,322,000 issued by LMC
Chicago Sports, Inc., a subsidiary of the Company. Liberty received a release
from an obligation to provide two free months of Courtroom Television Network
service, a 0.1% general partnership interest in US Cable of Northern Indiana, a
25% general partnership interest in Sports, an option to acquire an additional
25% general partnership interest in Sports, and $149,000 in cash. In the opinion
of the respective managements of TCI and Liberty, the aggregate values of the
assets exchanged were substantially equivalent. Further, the Exchange Agreement
was approved by the respective Boards of Directors of TCI and Liberty.
The foregoing related party transactions have been recorded based on
historical cost. For acquisitions, the excess of the amount paid by Liberty over
TCI's historical cost has been accounted for by the Company similar to a
"preferential dividend" by deducting such amount from retained earnings. For
dispositions, the excess of the amount paid by TCI over Liberty's historical
cost has been accounted for as an increase in additional paid-in capital.
In January 1992, the Company and TCI formed CCT, a general partnership
created for the purpose of acquiring and operating cable television systems.
The definitive partnership agreement was executed in March 1992. TCI and the
Company each agreed to contribute certain non-cash assets and up to $25 million
in cash as needed to fund mutually acceptable acquisitions. In June 1992, CCT
acquired certain cable television assets in Texas from a third party for
aggregate consideration of $15,175,000. Funds for the acquisition were borrowed
by CCT ratably from its two partners. Pursuant to a Cable Television Management
Agreement, a subsidiary of TCI provides management services
<PAGE> 54
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for cable television systems owned by CCT. The subsidiary receives a fee equal
to 3% of the gross cable television revenue of the partnership.
On December 29, 1992, the Company and TCI, as the sole partners of CCT,
agreed to amend the CCT General Partnership Agreement. Pursuant to the
amendment, the contributions by the Company and TCI of non-cash assets (other
than the contribution by the Company of its partnership interest in Greater
Media of Western Oakland County Limited ("Greater Media")) to CCT by Liberty and
TCI were rescinded, retroactive to the date of contribution. All economic and
tax attributes were allocated entirely to Liberty with respect to all of the
assets contributed by Liberty (other than the partnership interest in Greater
Media, the allocations of which remained unchanged) and entirely to TCI with
respect to the Class C Preferred Stock contributed by TCI, all effective from
and after the date of contribution. TCI contributed to CCT a $10,590,000
promissory note as of the date of the contribution of the originally contributed
assets.
On December 31, 1992, the Company sold a note receivable from an affiliate
to TCI for $36,300,000 in cash. A loss of $17,826,000 was recognized upon the
sale.
On March 26, 1993, Liberty and TCI and certain of their respective
subsidiaries entered into a series of agreements regarding the repurchase by
Liberty of certain shares of its common and preferred stock from TCI and the
purchase by TCI of certain cable television investments from Liberty and on June
3, 1993, Liberty completed the transactions contemplated by said agreements. The
first such agreement (the "Recapitalization Agreement") was between Liberty,
TCIL and Tele-Communications of Colorado, Inc. ("TCIC") both of which are wholly
owned subsidiaries of TCI. The Recapitalization Agreement provided for the
Company's repurchase of 927,900 shares of Liberty Class A common stock owned by
TCIL, and repurchase of all of the outstanding shares of the Class C Preferred
Stock. Liberty paid an aggregate purchase price for the Class C Preferred Stock
of approximately $175 million and approximately $19 million for the shares of
Class A common stock. The aggregate price of approximately $194 million was
satisfied by delivery of approximately $12 million in cash and four promissory
notes totaling approximately $182 million (see note 11). The shares of Class A
common stock sold by TCIL are part of those received upon conversion of the
Class A Preferred Stock into 4,405,678 shares of Liberty Class A common stock
and 55,070 shares of Class E Preferred Stock.
In connection with the Recapitalization Agreement, TCIC and LCP entered
into an Option-Put Agreement (the "Option-Put Agreement") which was amended on
November 30, 1993. Under the amended Option-Put Agreement, between June 30,
1994 and
<PAGE> 55
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
September 28, 1994, and between January 1, 1996 and January 31, 1996, TCIC will
have the option to purchase LCP's interest in CCT and the Mile Hi Note for an
amount equal to $77 million plus interest on such amount from June 3, 1993.
Between April 1, 1995 and June 29, 1995, and between January 1, 1997 and January
31, 1997, LCP will have the right to require TCIC to purchase LCP's interest in
CCT and the Mile Hi Note for an amount equal to $77 million plus interest on
such amount from June 3, 1993.
Also on June 3, 1993, Liberty and a subsidiary of TCI entered into the
second such agreement (the "Purchase and Sale Agreement") pursuant to which a
TCI subsidiary purchased from the Company a 16% limited partnership interest in
Intermedia Partners from LCP and all of LCP's interest in a special allocation
of income and gain of $7 million under the partnership agreement of Intermedia
Partners, for a purchase price of approximately $9 million (which resulted in a
loss in the Company's statement of operations of approximately $22 million).
Also pursuant to which TCI has an option to purchase the Company's remaining 6%
interest in Intermedia Partners prior to December 31, 1995 for approximately
$3.6 million plus interest at 8% per annum from June 3, 1993 (which resulted in
a provision for impairment of investment in the Company's statement of
operations of approximately $8 million). The Company's obligation to sell such
partnership interest and to grant such option were conditioned upon consummation
of the transactions contemplated by the Recapitalization Agreement.
In September 1993, Encore QE Programming Corp. ("QEPC"), a wholly owned
subsidiary of Encore Media Corporation ("Encore"), a 90% owned subsidiary of
Liberty, entered into a limited partnership agreement with TCI Starz, Inc.
("TCIS"), a wholly owned subsidiary of TCI, for the purpose of developing,
operating and distributing STARZ!, a first-run movie premium programming service
launched in 1994. QEPC is the general partner and TCIS is the limited partner.
Losses are allocated 1% to QEPC and 99% to TCIS. Profits are allocated 1% to
QEPC and 99% to TCIS until certain defined criteria are met. Subsequently,
profits are allocated 20% to QEPC and 80% to TCIS. TCIS has the option,
exercisable at any time and without payment of additional consideration, to
convert its limited partnership interest to an 80% general partnership interest
with QEPC's partnership interest simultaneously converting to a 20% limited
partnership interest. In addition, during specified periods commencing April
1999 and April 2001, respectively, QEPC may require TCIS to purchase, or TCIS
may require QEPC to sell, the partnership interest of QEPC in the partnership
for a formula-based price. Encore manages the service and has agreed to provide
the limited partnership with certain programming under a programming agreement
whereby the partnership will pay its pro-rata share of the total costs incurred
by Encore for such programming. Encore will account for its interest in the
partnership under the cost method.
<PAGE> 56
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) 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 AND DEBT DUE TCI
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. The estimated fair value of the Company's preferred stocks subject to
mandatory redemption at December 31, 1993 was $199,366,000.
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.
(18) 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
<PAGE> 57
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. 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.
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. If income taxes
are payable by such persons with respect to such sales, the amount of the
adjustment would be approximately $10.78 per share (assuming an effective tax
rate of 37% based on Federal and state income tax rates in effect on December
31, 1993 and a sale price of $29 1/8 per share based on the last reported sale
price for the Class A common stock on that date). In the aggregate, 41,162,880
shares of Liberty common stock are currently covered by the agreement. The
Company believes that the likelihood of the occurrence of a put triggering event
is remote.
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 ("1992 Cable Act"). In 1993, the FCC
adopted certain rate regulations required by the 1992 Cable Act and imposed a
moratorium on certain rate increases. Such rate regulations became effective on
September 1, 1993. The rate increase moratorium, which began on April 5, 1993,
continues in effect through May 15, 1994. As a result of such actions, the
Company's basic and tier service rates and its equipment and installation
charges (the "Regulated Services") are subject to the jurisdiction of local
franchising authorities and the FCC. Basic and tier service rates are evaluated
against competitive "benchmark" rates as published by the FCC, and equipment
and installation charges are based on actual costs. Any rates for Regulated
Services that
<PAGE> 58
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exceeded the "benchmarks" were reduced as required by the 1993 rate regulations.
The rate regulations do not apply to the relatively few systems which are
subject to "effective competition" or to services offered on an individual
service basis, such as premium movie and pay-per-view services. Subsequent to
September 1, 1993, any cable system charging basic cable rates that exceed the
FCC's benchmark rate may be required to substantiate its rates by demonstrating
its cost of providing basic cable services to subscribers. If, as a result of
this process, a system cannot substantiate its rates, it could be required to
retroactively reduce its rates to the appropriate benchmark and refund the
excess portion of rates received since September 1, 1993.
The Company believes that it has complied with all provisions of the 1992
Cable Act, including its rate setting provisions. However, since the Company's
rates for regulated services are subject to review, the Company may be subject
to a refund liability. The amount of refunds, if any, which could be payable by
the Company in the event that systems' rates are successfully challenged by
franchising authorities is not currently estimable.
The Company has long-term sports program rights contracts which require
payments through 1998. Future payments by year are as follows (amounts in
thousands):
<TABLE>
<S> <C>
1994............................................................... $ 15,345
1995............................................................... 11,503
1996............................................................... 8,580
1997............................................................... 5,926
1998............................................................... 1,300
</TABLE>
Liberty leases business offices, has entered into pole rental agreements
and transponder lease agreements, and uses certain equipment under lease
arrangements. Rental expense under such arrangements amounted to approximately
$22,515,000, $11,607,000, $2,977,000 and $844,000 for the years ended December
31, 1993 and 1992, the nine months ended December 31, 1991 and the three months
ended March 31, 1991, respectively.
<PAGE> 59
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancellable operating leases for
each of the next five years are summarized as follows (amounts in thousands):
<TABLE>
<S> <C>
1994............................................................... $ 22,810
1995............................................................... 20,029
1996............................................................... 19,526
1997............................................................... 19,296
1998............................................................... 14,985
</TABLE>
It is expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will not be less than the
amounts shown for 1994.
The Company is obligated to pay fees for the license to exhibit certain
qualifying films that are released theatrically by various motion picture
studios through December 31, 2006 (the "Film License Obligations"). As of
December 31, 1993, these agreements require minimum payments aggregating
approximately $189 million. The aggregate amount of the Film License Obligations
is not currently estimable because such amount is dependent upon the number of
qualifying films produced by the motion picture studios, the amount of United
States theatrical film rentals for such qualifying films, and certain other
factors. Nevertheless, the Company's aggregate payments under the Film License
Obligations could prove to be significant.
(19) INFORMATION ABOUT LIBERTY S OPERATIONS
Liberty operates primarily in the United States in two industry segments,
cable television systems ("Cable") and production and distribution of cable
television programming services ("Programming"). Home shopping is a programming
service which includes a retail function. Separate amounts have been provided
for home shopping programming services to enhance the reader's understanding of
the Company. Operating income is total revenue less operating costs and expenses
which includes an allocation of corporate general and administrative expenses.
Identifiable assets by industry are those assets used in Liberty's operations in
each industry. Liberty has investments, accounted for under the equity method,
which also operate in the United States in the Cable and Programming industries.
The following is selected information about Liberty's operations for the years
ended December 31, 1993 and 1992, the nine months ended December 31, 1991 and
the three months ended March 31, 1991:
<PAGE> 60
<TABLE>
<CAPTION>
HOME
LIBERTY CORPORATE SHOPPING CABLE PROGRAMMING TOTAL
- ------------------------------------- -------- -------- -------- ----------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Revenue.............................. $ -- $942,940 $ 56,744 $ 153,572 $1,153,256
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Revenue from TCI..................... $ -- $ -- $ -- $ 44,074
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Operating income (loss).............. $(43,327) $ 15,975 $ 9,834 $ 16,615 $ (903)
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Depreciation and amortization........ $ 164 $ 24,029 $ 11,169 $ 13,907 $ 49,269
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Capital expenditures, including
acquisitions....................... $ 426 $ 13,156 $ 8,374 $ 3,520 $ 25,476
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Identifiable assets.................. $142,430 $781,258 $283,552 $ 229,308 $1,436,548
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
YEAR ENDED DECEMBER 31, 1992:
Revenue.............................. $ -- $ -- $ 21,549 $ 134,964 $ 156,513
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Revenue from TCI..................... $ -- $ -- $ -- $ 42,834 $ 42,834
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Operating income (loss).............. $(14,337) $ -- $ 5,617 $ 5,324 $ (3,396)
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Depreciation and amortization........ $ 126 $ -- $ 3,406 $ 12,014 $ 15,546
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Capital expenditures, including
acquisitions....................... $ 37 $ -- $ 10,655 $ 1,826 $ 12,518
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Identifiable assets.................. $199,846 $ 61,536 $355,372 $ 213,433 $ 830,187
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
</TABLE>
<PAGE> 61
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
HOME
LIBERTY CORPORATE SHOPPING CABLE PROGRAMMING TOTAL
- ------------------------------------- -------- -------- -------- ----------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NINE MONTHS ENDED DECEMBER 31, 1991:
Revenue.............................. $ -- $ -- $ 9,479 $ 75,918 $ 85,397
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Revenue from TCI..................... $ -- $ -- $ -- $ 25,191 $ 25,191
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Operating income (loss).............. $ (2,278) $ -- $ 2,273 $ 790 $ 785
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Depreciation and amortization........ $ 89 $ -- $ 1,551 $ 8,992 $ 10,632
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Capital expenditures, including
acquisitions....................... $ 65 $ -- $ 1,202 $ 2,086 $ 3,353
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Identifiable assets.................. $104,658 $ 45,291 $284,432 $ 305,463 $ 739,844
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
PREDECESSOR COMPANIES:
THREE MONTHS ENDED MARCH 31, 1991:
Revenue.............................. $ -- $ -- $ 2,981 $ 18,427 $ 21,408
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Revenue from TCI..................... $ -- $ -- $ -- $ 3,879 $ 3,879
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Operating income (loss).............. $ (3,023) $ -- $ 1,051 $ (6,066) $ (8,038)
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Depreciation and amortization........ $ -- $ -- $ 563 $ 3,430 $ 3,993
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Capital expenditures, including
acquisitions....................... $ -- $ -- $ 196 $ 649 $ 845
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
Identifiable assets.................. $ 1,607 $ 44,801 $286,864 $ 202,349 $ 535,621
-------- -------- -------- ----------- ----------
-------- -------- -------- ----------- ----------
</TABLE>
<PAGE> 62
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(20) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1993:
Revenue............................................. $179,072 $303,685 $313,083 $357,416
Operating income (loss)............................. $ 2,089 $ (2,603) $ 1,302 $ (1,691)
Gain on sale of investment.......................... $ 10,613 $ -- $ -- $ 21,359
Loss on transactions with TCI....................... $ -- $(30,296) $ -- $ --
Extraordinary item, net............................. $ (1,792) $ (399) $ -- $ --
Net earnings (loss)................................. $ 10,454 $(18,016) $ 11,161 $ 1,196
Net earnings (loss) attributable to common
shareholders...................................... $ (441) $(27,520) $ 5,429 $ (4,645)
Primary and fully diluted earnings (loss) per common
and common equivalent share....................... $ 0.00 $ (0.21) $ 0.04 $ (0.04)
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1992:
Revenue............................................. $ 32,733 $ 41,025 $ 37,481 $ 45,274
Operating income (loss)............................. $ (4,344) $ 3,739 $ 5,594 $ (8,385)
Loss on transactions with TCI....................... $ -- $ -- $ -- $(17,826)
Net earnings (loss):
As previously reported............................ $ (1,911) $ 7,993 $ 13,926 $ (6,075)
Adjustment to restate share of earnings (losses)
of Mile Hi, Lenfest, and TKR (see notes 6 and
9)............................................. 1,295 1,355 1,323 1,293
Adjustment to restate interest income on the
Mile Hi Note................................... 915 1,349 1,186 1,216
Adjustment to revise/implement Statement No.
109............................................ (2,675) 3,712 8,448 (10,966)
-------- -------- -------- --------
As adjusted.................................... $ (2,376) $ 14,409 $ 24,883 $(14,532)
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings (loss) attributable to common
shareholders:
As previously reported............................ $(10,807) $ (2,880) $ 2,967 $(16,978)
Adjustment to restate share of earnings (losses)
of Mile Hi, Lenfest, and TKR (see notes 6 and
9)............................................. 1,295 1,355 1,323 1,293
Adjustment to restate interest income on the
Mile Hi Note................................... 915 1,349 1,186 1,216
Adjustment to revise/implement Statement No.
109............................................ (2,675) 3,712 8,448 (10,966)
-------- -------- -------- --------
As adjusted.................................... $(11,272) $ 3,536 $ 13,924 $(25,435)
-------- -------- -------- --------
-------- -------- -------- --------
Primary and fully diluted earnings (loss) per common
and common equivalent share:
As previously reported............................ $ (0.08) $ (0.02) $ 0.02 $ (0.14)
Adjustment to restate share of earnings (losses)
of Mile Hi, Lenfest, and TKR (see notes 6 and
9)............................................. 0.01 0.01 0.01 0.01
Adjustment to restate interest income on the
Mile Hi Note................................... 0.00 0.01 0.01 0.01
Adjustment to revise/implement Statement No.
109............................................ (0.02) 0.03 0.07 (0.08)
-------- -------- -------- --------
As adjusted.................................... $ (0.09) $ 0.03 $ 0.11 $ (0.20)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<PAGE> 64
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1993
(UNAUDITED)
The following unaudited condensed pro forma balance sheet of TCI, dated as
of December 31, 1993, assumes that the proposed merger's (the "Mergers"),
whereby TCI and Liberty will each become a wholly-owned subsidiary of
TCI/Liberty, had occurred as of such date (see note 1).
In addition, the unaudited condensed pro forma statement of operations of
TCI for the year ended December 31, 1993 assumes that the proposed Mergers had
occurred prior to January 1, 1993.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the Mergers
had occurred as of January 1, 1993. These condensed pro forma financial
statements of TCI should be read in conjunction with the condensed unaudited pro
forma financial statements of Liberty and TCI/Liberty and the related notes
thereto included elsewhere herein and the respective historical financial
statements and the related notes thereto of TCI and Liberty.
<PAGE> 65
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-------------------------------------------
TCI PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------- -------------- ---------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Cash and receivables..................................... $ 233 -- 233
Investment in Liberty and related receivables............ 489 (195)(2) 294
Investment in other affiliates and Turner Broadcasting
System, Inc., and related receivables.................. 1,136 -- 1,136
Property and equipment, net of accumulated
depreciation........................................... 4,935 -- 4,935
Franchise costs and other assets, net of amortization.... 9,727 -- 9,727
---------- ------- ---------
$ 16,520 (195) 16,325
---------- ------- ---------
---------- ------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables and accruals.................................... $ 781 -- 781
Debt..................................................... 9,900 -- 9,900
Deferred income taxes.................................... 3,310 -- 3,310
Other liabilities........................................ 114 -- 114
---------- ------- ---------
Total liabilities.............................. 14,105 -- 14,105
---------- ------- ---------
Minority interests....................................... 285 -- 285
Redeemable preferred stocks.............................. 18 (18)(3) --
Common stockholders' equity:
Class A common stock................................... 482 1 (3) 483
Class B common stock................................... 47 -- 47
Additional paid-in capital............................. 2,293 17 (3) 2,310
Cumulative foreign currency translation adjustment..... (29) -- (29)
Accumulated deficit.................................... (348) -- (348)
Treasury stock, at cost................................ (333) 333 (4) --
Investment in TCI/Liberty.............................. -- (195)(2) (528)
(333)(4)
---------- ------- ---------
2,112 (177) 1,935
---------- ------- ---------
$ 16,520 (195) 16,325
---------- ------- ---------
---------- ------- ---------
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 66
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------------
TCI PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------- -------------- ---------
(AMOUNTS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenue.................................................... $ 4,153 -- 4,153
Operating, selling, general and administrative expenses and
compensation relating to stock appreciation rights....... (2,326) -- (2,326)
Depreciation and amortization.............................. (911) -- (911)
---------- --- ---------
Operating income................................. 916 -- 916
Interest expense........................................... (731) -- (731)
Interest and dividend income............................... 34 -- 34
Share of earnings of Liberty............................... 4 (4)(5) --
Share of losses of other affiliates, net................... (76) -- (76)
Gain on dispositions....................................... 42 -- 42
Loss on early extinguishment of debt....................... (17) -- (17)
Other income, net.......................................... (11) -- (11)
---------- --- ---------
Earnings before income taxes..................... 161 (4) 157
Income tax expense......................................... (168) 2(6) (166)
---------- --- ---------
Net loss......................................... (7) (2) (9)
Dividend requirement on redeemable preferred stocks........ (2) 2(7) --
---------- --- ---------
Net loss applicable to common shareholders....... $ (9) -- (9)
---------- --- ---------
---------- --- ---------
Loss per common share...................................... $ (.02)
----------
----------
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 67
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1993
(UNAUDITED)
(1) Pursuant to the TCI/Liberty Agreement, the Mergers will be structured
as a tax free exchange whereby the common stock of TCI and Liberty and
the preferred stock of 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 (including shares held by TCI's or
Liberty's subsidiaries) would be converted into one share and 0.975 of
a share, respectively, of the corresponding class of TCI/ Liberty's
common stock. Any shares of Liberty preferred stock held by
subsidiaries of TCI or its subsidiaries shall be converted into shares
of a class or series of TCI/Liberty preferred stock having an
equivalent value. Shares of preferred stock of Liberty not owned by TCI
or its 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
into an investment in TCI/Liberty common stock and the conversion of
TCI's investment in Liberty 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.
(3) Reflects the conversion of the historical preferred stock of TCI. Such
preferred stock of TCI was converted subsequent to December 31, 1993
into 1,265,004 shares of TCI Class A common stock.
(4) Reflects the reclassification to "Investment in TCI/Liberty" of
79,335,038 shares of TCI Class A common stock held by subsidiaries of
TCI assumed to be replaced with TCI/Liberty common stock of the
corresponding class.
(5) Reflects the elimination of TCI's share of Liberty's historical
earnings. 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 converted into common stock of TCI (see note 3).
<PAGE> 68
LIBERTY MEDIA CORPORATION
CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(UNAUDITED)
The following unaudited condensed pro forma balance sheet of Liberty, as of
December 31, 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 Mergers, whereby
TCI and Liberty will each become wholly-owned subsidiaries of TCI/Liberty, had
occurred as of such date.
In addition, an unaudited condensed pro forma combined statement of
operations of Liberty for the year ended December 31, 1993, is included which
assumes the following had occurred prior to January 1, 1993:
(a) the sale by Liberty of its 50% partnership interest in AMC,
(b) the Recapitalization Agreement, as defined in note 5,
(c) the acquisition of 20 million shares of Class B common stock of Home
Shopping Network, Inc. ("HSN"),
(d) the Tender, as defined in note 6,
(e) the acquisition of all general and limited partnership interests in
Mile Hi Cablevision Associates, Ltd. ("Mile Hi") as described in note
7,
(f) 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
(g) the Mergers.
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, 1993. These condensed pro forma combined
financial statements of Liberty should be read in conjunction with the condensed
unaudited pro forma financial statements and related notes thereto of TCI and
TCI/Liberty included elsewhere herein and the respective historical financial
statements and the related notes thereto of Liberty and TCI.
<PAGE> 69
LIBERTY MEDIA CORPORATION
CONDENSED PRO FORMA BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-------------------------------------------------
LIBERTY PRO FORMA
HISTORICAL ADJUSTMENTS(1)(3) PRO FORMA
---------- ----------------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash, receivables, inventories, prepaids and
other current assets, net..................... $ 282,946 175,000 (2) 457,946
Investment in and advances to affiliates and
others, including investment in TCI........... 475,769 11,026 (2) 382,784
(104,011)(3)
Property and equipment, net of accumulated
depreciation.................................. 255,678 -- 255,678
Franchise costs, intangibles and other assets,
net of amortization........................... 422,155 -- 422,155
---------- ----------------- ----------
$1,436,548 82,015 1,518,563
---------- ----------------- ----------
---------- ----------------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables and accruals........................... $ 286,866 48,119 (2) 334,985
Due to TCI...................................... 203,792 -- 203,792
Debt............................................ 260,180 -- 260,180
Deferred income taxes........................... 1,653 19,572 (2) 21,225
Other liabilities............................... 1,585 -- 1,585
---------- ----------------- ----------
Total liabilities..................... 754,076 67,691 821,767
---------- ----------------- ----------
Minority interests.............................. 174,738 -- 174,738
Preferred stock subject to mandatory
redemption.................................... 155,237 (155,237)(4) --
Common stockholders' equity:
Class E, 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock.......... 17 (17)(4) --
Class A common stock.......................... 87,515 -- 87,515
Class B common stock.......................... 43,339 -- 43,339
Additional paid-in capital.................... 236,126 155,254 (4) 391,380
Retained earnings............................. -- 118,335 (2) 118,335
Note receivable from related party............ (14,500) -- (14,500)
---------- ----------------- ----------
352,497 273,572 626,069
---------- ----------------- ----------
Investment in TCI/Liberty....................... -- (104,011)(3) (104,011)
---------- ----------------- ----------
$1,436,548 82,015 1,518,563
---------- ----------------- ----------
---------- ----------------- ----------
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 70
LIBERTY MEDIA CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-------------------------------------------------------------------------------------------------
PRO FORMA
LIBERTY EFFECT OF HSN MILE HI ADJUSTMENTS PRO FORMA
HISTORICAL RECAPITALIZATION(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........................ $ 1,153,256 $ -- $ 103,640 $ 7,568 $ -- $ 1,264,464
Operating, selling, general and
administrative expenses...... (1,104,890) -- (103,718) (4,989) -- (1,213,597)
Depreciation and
amortization................. (49,269) -- (2,579) (1,479) (5,358)(8) (58,685)
----------- ------ ------------- ------------- ------------ -----------
Operating income
(loss)............... (903) -- (2,657) 1,100 (5,358) (7,818)
Interest expense............... (31,080) -- (2,146) (2,180) (7,702)(9) (40,928)
2,180(10)
Dividend and interest income... 23,549 -- 1,633 6 4,841(11) 30,029
Gain on sale of investment..... 31,972 -- -- -- -- 31,972
Loss on transactions with
TCI.......................... (30,296) -- -- -- -- (30,296)
Share of earnings of
affiliates, net.............. 34,044 -- -- -- 380(12) 23,111
(11,313)(13)
Minority interests............. 289 -- -- -- 57(14) 3,884
170(15)
3,368(16)
Litigation settlements......... (7,475) -- -- -- -- (7,475)
Other, net..................... (1,592) -- (847) -- -- (2,439)
----------- ------ ------------- ------------- ------------ -----------
Earnings (loss) before
income taxes and
extraordinary item... 18,508 -- (4,017) (1,074) (13,377) 40
Income tax expense............. (11,522) -- (1,741) -- 2,245(17) (11,018)
----------- ------ ------------- ------------- ------------ -----------
Earnings (loss) before
extraordinary item... 6,986 -- (5,758) (1,074) (11,132) (10,978)
Extraordinary item-loss on
early extinguishment of debt,
net of taxes................. (2,191) -- (5,051) -- -- (7,242)
----------- ------ ------------- ------------- ------------ -----------
Net earnings (loss).... 4,795 -- (10,809) (1,074) (11,132) (18,220)
Dividend requirement on
redeemable preferred
stocks....................... (31,972) 9,179 -- -- 23,110(19) --
(317)(18)
----------- ------ ------------- ------------- ------------ -----------
Net (earnings) loss
attributable to
common
shareholders......... $ (27,177) $ 9,179 $ (10,809) $(1,074) $ 11,661 $ (18,220)
----------- ------ ------------- ------------- ------------ -----------
----------- ------ ------------- ------------- ------------ -----------
Net loss attributable to common
shareholders before
extraordinary item........... $ (0.19)
Extraordinary item, net........ (0.02)
-----------
Loss per common share.......... $ (0.21)
-----------
-----------
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 71
LIBERTY MEDIA CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 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 current income taxes
payable on the sale. Increase in deferred income taxes represents the
reversal of the temporary difference resulting from basis for income tax
purposes in excess of basis for financial statement purposes. 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 Mergers will be structured as a
tax free exchange whereby the common stock of TCI and Liberty and the
preferred stock of 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 (including shares held by TCI's and Liberty's
subsidiaries) would be converted into one share and 0.975 of a share,
respectively, of the corresponding class of TCI/Liberty's common stock. Any
shares of Liberty preferred stock held by TCI or its subsidiaries shall be
converted into shares of a class or series of TCI/Liberty preferred stock
having an equivalent value. Shares of preferred stock of 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 common stock. 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.
<PAGE> 72
LIBERTY MEDIA CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(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.
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.
(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.
<PAGE> 73
LIBERTY MEDIA CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(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 $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, 30 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 year ended December 31, 1993.
(10) Reflects the reduction in interest expense arising from the assumed
repayment of Mile Hi debt at January 1, 1993 and the elimination of the
intercompany interest expense recorded by Mile Hi on its debt to CCT.
<PAGE> 74
LIBERTY MEDIA CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(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 year ended December 31, 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) 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.
<PAGE> 75
TCI/LIBERTY AND SUBSIDIARIES
CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(UNAUDITED)
The following unaudited condensed pro forma balance sheet of TCI/Liberty,
dated as of December 31, 1993, assumes that the proposed Mergers, 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 statement of operations of
TCI/Liberty for the year ended December 31, 1993 assumes that the proposed
Mergers had occurred prior to January 1, 1993.
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, 1993. These condensed pro forma financial
statements of TCI/Liberty should be read in conjunction with the condensed
unaudited pro forma financial statements of TCI and Liberty and the related
notes thereto included elsewhere herein and the respective historical financial
statements and the related notes thereto of TCI and Liberty.
<PAGE> 76
TCI/LIBERTY AND SUBSIDIARIES
CONDENSED PRO FORMA COMBINED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
----------------------------------------------------
TCI LIBERTY PRO FORMA TCI/LIBERTY
PRO FORMA PRO FORMA ADJUSTMENTS(1) PRO FORMA
--------- --------- -------------- -----------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash, receivables and other current assets.......... $ 233 $ 458 $ -- $ 691
Investment in and advances to Liberty............... 294 -- (204)(2) --
(90)(3)
Investment in other affiliates and Turner
Broadcasting System, Inc., and related
receivables....................................... 1,136 383 -- 1,519
Property and equipment, net of accumulated
depreciation...................................... 4,935 256 -- 5,191
Franchise costs, intangibles and other assets, net
of amortization................................... 9,727 422 -- 10,149
--------- --------- ------- -----------
$16,325 $ 1,519 $ (294) $17,550
--------- --------- ------- -----------
--------- --------- ------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables and accruals............................... $ 781 $ 335 $ -- $ 1,116
Due to TCI.......................................... -- 204 (204)(2) --
Debt................................................ 9,900 260 -- 10,160
Deferred income taxes............................... 3,310 21 (5)(5) 3,326
Other liabilities................................... 114 2 -- 116
--------- --------- ------- -----------
Total liabilities......................... 14,105 822 (209) 14,718
--------- --------- ------- -----------
Minority interests.................................. 285 175 (90)(3) 370
Redeemable preferred stock.......................... -- -- -- (4) --
Stockholders' equity:
Class B 6% Cumulative
Redeemable Exchangeable
Junior Preferred Stock ....................... -- -- -- --
Class A common stock.............................. 483 88 (2)(6) 569
Class B common stock.............................. 47 43 (1)(6) 89
Additional paid-in capital........................ 2,310 391 (121)(4) 2,358
5 (5)
3 (6)
(230)(7)
Cumulative foreign currency translation
adjustment..................................... (29) -- -- (29)
Retained earnings (deficit)....................... (348) 118 230 (7) --
Receivable from related party..................... -- (14) -- (14)
Treasury stock.................................... -- -- (511)(4) (511)
Investment in TCI/Liberty......................... (528) (104) 632 (4) --
--------- --------- ------- -----------
1,935 522 5 2,462
--------- --------- ------- -----------
$16,325 $ 1,519 $ (294) $17,550
--------- --------- ------- -----------
--------- --------- ------- -----------
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 77
TCI/LIBERTY AND SUBSIDIARIES
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
----------------------------------------------------------
TCI LIBERTY PRO FORMA TCI/LIBERTY
PRO FORMA PRO FORMA ADJUSTMENTS(1) PRO FORMA
--------- --------- -------------- -----------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
Revenue..................................... $ 4,153 $ 1,264 $(55)(8) $ 5,362
Operating, selling, general and
administrative expenses and compensation
relating to stock appreciation rights..... (2,326) (1,213) 55(8) (3,484)
Depreciation and amortization............... (911) (59) -- (970)
--------- --------- ------ -----------
Operating income (loss)................... 916 (8) -- 908
Interest expense............................ (731) (41) 9(9) (763)
Interest and dividend income................ 34 30 (9)(9) 55
Share of earnings (losses) of affiliates,
net....................................... (76) 23 -- (53)
Gain on disposition......................... 42 32 -- 74
Loss on transactions with TCI............... -- (30) -- (30)(11)
Loss on early extinguishment of debt........ (17) (7) -- (24)
Other expense, net.......................... (11) (6) -- (17)
--------- --------- ------ -----------
Earnings (loss) before income taxes....... 157 (7) -- 150
Income tax expense.......................... (166) (11) -- (177)
--------- --------- ------ -----------
Net loss.................................. (9) (18) -- (27)
Dividend requirement on redeemable preferred
stocks.................................... -- -- (10)(10) (10)
--------- --------- ------ -----------
Net loss attributable to common
shareholders........................... $ (9) (18) (10) (37)
--------- --------- ------ -----------
--------- --------- ------ -----------
Loss per common share....................... $ (.07)(12)
-----------
-----------
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 78
TCI/LIBERTY AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(UNAUDITED)
(1) Pursuant to the TCI/Liberty Agreement, the Mergers will be structured as a
tax free exchange whereby the common stock of TCI and Liberty and the
preferred stock of 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 (including shares held by TCI's and Liberty's
subsidiaries) would be converted into one share and 0.975 of a share,
respectively, of the corresponding class of TCI/Liberty's common stock. Any
shares of Liberty preferred stock of Liberty not owned by TCI or its
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) Represents the reclassification to treasury stock of shares of TCI/Liberty
held by TCI, Liberty or their respective subsidiaries previously reflected
as "Investment in TCI/Liberty". All preferred stock of TCI/Liberty held by
TCI or its subsidiaries (also reflected in the TCI pro forma financial
information as "Investment in TCI/Liberty") has been eliminated in
consolidation with TCI/Liberty.
(5) Represents the elimination of temporary differences associated with TCI's
and Liberty's investments in TCI/Liberty preferred and common stock.
(6) 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.
(7) Reflects the elimination of the combined historical accumulated deficit of
TCI and Liberty.
(8) 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.
(9) Represents the elimination of interest on intercompany indebtedness between
TCI and Liberty.
(10) Represents the preferred stock dividend requirement on preferred stock of
TCI/Liberty other than preferred stock issued to TCI or its respective
subsidiaries.
<PAGE> 79
TCI/LIBERTY AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(11) Amount not eliminated for pro forma purposes as a reserve for an impairment
would have been required (based upon fair market value of underlying asset)
equal to the loss recognized by Liberty.
(12) Reflects primary earnings per common and common equivalent share based upon
550,232,340 weighted average shares. Such amount is calculated utilizing
432,566,150 weighted average shares of TCI at December 31, 1993 (such
amount representing TCI's weighted average shares, as disclosed in their
historical financial statements) reduced by 6,525,721 shares of TCI common
stock previously held by Liberty and 127,582,745 weighted averages shares
of Liberty at December 31, 1993 (such amount representing Liberty's
weighted average shares, as disclosed in their historical financial
statements, 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.
<PAGE> 80
EXHIBIT INDEX
The following exhibits are filed herewith or incorporated by reference herein
(according to the number assigned to them in Item 601 of Regulation S-K), as
noted:
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
(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.*
Incorporated herein by reference to the
Company's Current Report on
Form 8-K dated February 15, 1994.
(2.2) Amendment No 1., dated as of March
30, 1994, to Agreement and Plan of Merger,
dated as of January 27, 1994, by and among
Tele-Communications, Inc., Liberty Media
Corporation, TCI/Liberty Holding Company,
TCI Mergeco, Inc. and Liberty Mergeco, Inc.
(3) The Bylaws as Amended and Restated
July 19, 1979, with amendments April 8,
1980, October 29, 1987, December 10, 1993.
(23) Consent of KPMG Peat Marwick.
</TABLE>
- ---------------
* 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.
<PAGE> 1
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1, dated as of March 30, 1994 (this "Amendment"), to a
certain Agreement and Plan of Merger, dated as of January 27, 1994 (the "Merger
Agreement"), 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, and Liberty Mergerco, Inc., a
Delaware corporation and a wholly owned subsidiary of TCI/Liberty, is entered
into by and among the parties to the Agreement. All capitalized terms used in
this Amendment which are not otherwise defined herein shall have the meanings
ascribed to such terms in the Merger Agreement.
WHEREAS, subsequent to the execution of the Merger Agreement, all
outstanding shares of the Convertible Preferred Stock, Series C, par value $1.00
per share, of TCI (the "TCI Preferred Stock") were converted in accordance with
their terms into shares of TCI Class A Common Stock, par value $1.00 per share;
WHEREAS, as a result of such conversion, there are no shares of TCI
Preferred Stock outstanding and, therefore, all references in the Merger
Agreement and the Exhibits thereto to the TCI Preferred Stock and to the
TCI/Liberty Class A Preferred being the class of preferred stock of TCI/Liberty
into which the TCI Preferred Stock was to be converted in the Mergers should be
deleted, and the Merger Agreement and the Exhibits thereto should be revised to
redesignate the classes of TCI/Liberty preferred stock into which the
outstanding shares of Liberty Preferred Stock are to be converted in the
Mergers; and
WHEREAS, in connection therewith it is also necessary to amend and restate
in its entirety the form of Amended and Restated Certificate of Incorporation of
TCI/Liberty, which was attached as Exhibit A to the Merger Agreement, to change
the designations of the preferred stock of TCI/Liberty.
NOW, THEREFORE, in consideration of the premises and the respective
agreements set forth herein, the parties hereto agree as follows:
1. The Merger Agreement is hereby amended to delete (x) all references
therein to the TCI Preferred Stock and (y) all references to the
TCI/Liberty Class A Preferred being the class of preferred stock of
TCI/Liberty into which the outstanding shares of TCI Preferred Stock are
to be converted in the Mergers.
2. The Merger Agreement is hereby amended to (x) provide that all shares of
Liberty Class B Preferred and Liberty Class D Preferred shall be
converted into TCI/Liberty Class A Preferred, and (y) to change all
reference in the Merger Agreement to "TCI/Liberty Class B Preferred" to
"TCI/Liberty Class A Preferred."
3. The Merger Agreement is hereby amended to (x) provide that all shares of
Liberty Class E Preferred shall be converted into TCI/Liberty Class B
Preferred, and (y) to change all reference in the Merger Agreement to
"TCI/Liberty Class C Preferred" to "TCI/Liberty Class B Preferred."
4. Exhibit A to the Merger Agreement is hereby amended and restated to read
in its entirety as set forth in Annex I to this Amendment.
5. Except as specifically amended hereby, the terms and provisions of the
Merger Agreement shall remain in full force and effect and are hereby in
all respects ratified and confirmed.
6. This Amendment 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.
7. This Amendment 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.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Merger Agreement as of the date first above written.
<TABLE>
<S> <C>
TELE-COMMUNICATIONS, INC.
Attest: By: /s/ BRENDAN R. CLOUSTON
-----------------------
Its: Executive Vice President
/s/ STEPHEN M. BRETT
- ---------------------------------------------
LIBERTY MEDIA CORPORATION
Attest: By: /s/ PETER R. BARTON
----------------------
Its: President
/s/ ROBERT R. BENNETT
- ---------------------------------------------
TCI/LIBERTY HOLDING COMPANY
Attest: By: /s/ BRENDAN R. CLOUSTON
------------------------
Its: President
/s/ STEPHEN M. BRETT
- ---------------------------------------------
TCI MERGERCO, INC.
Attest: By: /s/ BRENDAN R. CLOUSTON
-----------------------
Its: President
/s/ STEPHEN M. BRETT
- ---------------------------------------------
LIBERTY MERGERCO, INC.
Attest: By: /s/ PETER R. BARTON
------------------------
Its: President
/s/ ROBERT R. BENNETT
- ---------------------------------------------
</TABLE>
2
<PAGE> 3
ANNEX I TO AMENDMENT NO. 1 TO MERGER AGREEMENT
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
TELE-COMMUNICATIONS, INC.
------------------------
TCI/LIBERTY HOLDING COMPANY, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
(1) The name of the Corporation is TCI/Liberty Holding Company. The
original Certificate of Incorporation of the Corporation was filed on
January 24, 1994. The name under which the Corporation was originally
incorporated is TCI/Liberty Holding Company.
(2) This Amended and Restated Certificate of Incorporation restates
and amends the Certificate of Incorporation of the Corporation.
(3) The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Tele-Communications, Inc.
ARTICLE II
REGISTERED OFFICE
The location of the registered office of the Corporation in the State of
Delaware is the office of The Prentice-Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Dover, Kent County, Delaware 19901, and the name
of the registered agent at such address is The Prentice-Hall Corporation System,
Inc.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE IV
AUTHORIZED STOCK
The total number of shares of capital stock which the Corporation shall
have authority to issue is one billion two hundred fifty three million one
hundred eighty one thousand two hundred ninety seven (1,253,175,069) shares, of
which one billion two hundred fifty million (1,250,000,000) shares shall be
common stock ("Common Stock") and three million one hundred eighty one thousand
two hundred ninety seven (3,175,069) shares shall be preferred stock ("Preferred
Stock"). Said shares of Common Stock and Preferred Stock shall be divided into
the following classes:
(a) One billion one hundred million (1,100,000,000) shares of Common Stock
shall be of a class designated as Class A Common Stock with a par value of $1.00
per share;
(b) One hundred fifty million (150,000,000) shares of Common Stock shall be
of a class designated as Class B Common Stock with a par value of $1.00 per
share;
<PAGE> 4
(c) Five hundred thousand (500,000) shares of Preferred Stock shall be of a
class designated as Class A Preferred Stock with a par value of $.01 per share;
(d) One million six hundred seventy five thousand ninety six (1,675,096)
shares of Preferred Stock shall be of a class designated as Class B 6%
Cumulative Redeemable Exchangeable Junior Preferred Stock with a par value of
$.01 per share; and
(e) One million (1,000,000) shares of Preferred Stock shall be of a class
designated as Series Preferred Stock with a par value of $.01 per share.
The description of the Common Stock and the Preferred Stock of the
Corporation, and the relative rights, preferences and limitations thereof, or
the method of fixing and establishing the same, are as hereinafter in this
Article IV set forth:
SECTION A
CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in this Section A
shall have, for all purposes of this Article IV, the meanings herein specified:
"Board of Directors" shall mean the Board of Directors of the Corporation
and, unless the context indicates otherwise, shall also mean, to the extent
permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Corporation with respect to such matter.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, New York, are not required
to be open.
"capital stock" shall mean any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) corporate stock.
"Certificate" shall mean this Amended and Restated Certificate of
Incorporation of the Corporation, as it may from time to time hereafter be
amended or restated.
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or agency or political subdivision thereof, or other entity, whether
acting in an individual, fiduciary or other capacity.
SECTION B
CLASS A PREFERRED STOCK
The Class A Preferred Stock shall have the following preferences,
limitations and relative rights:
1. Certain Definitions. Unless the context otherwise requires, the terms
defined in this paragraph 1 shall have, for all purposes of this Section B, the
meanings herein specified:
"Class A Common Stock" shall mean the Class A Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
A Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class A Common Stock, such capital
stock to which a holder of Class A Common Stock shall be entitled upon the
occurrence of such event.
"Class A Preferred Stock" shall mean the Class A Preferred Stock, par value
$.01 per share, of the Corporation.
2
<PAGE> 5
"Class B Common Stock" shall mean the Class B Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
B Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class B Common Stock, such capital
stock to which a holder of Class B Common Stock shall be entitled upon the
occurrence of such event.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock, par value $.01 per share, of the
Corporation.
"Dividend Payment Date" shall mean, for any Dividend Period, the last day
of such Dividend Period which shall be the first day of March of each year,
commencing with March 1, 1995, or the next succeeding Business Day if any such
day is not a Business Day.
"Dividend Period" shall mean the period from the Issue Date to and
including the first Dividend Payment Date and each annual period between
consecutive Dividend Payment Dates.
"Issue Date" shall mean the date on which shares of Class A Preferred Stock
are first issued.
"Junior Stock" shall mean (i) the Class A Common Stock, (ii) the Class B
Common Stock, (iii) any other class or series of capital stock, whether now
existing or hereafter created, of the Corporation, other than (A) the Class A
Preferred Stock, (B) the Class B Preferred Stock, (C) any class or series of
Parity Stock (except to the extent provided under clause (iv) hereof) and (D)
any Senior Stock, and (iv) any class or series of Parity Stock to the extent
that it ranks junior to the Class A Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation, as the case may be. For purposes
of clause (iv) above, a class or series of Parity Stock shall rank junior to the
Class A Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation if the holders of shares of Class A Preferred Stock shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or series.
"Liquidation Preference" measured per share of the Class A Preferred Stock
as of any date in question (the "Determination Date") shall mean an amount equal
to the sum of (a) the Stated Liquidation Value of such share, plus (b) an amount
equal to all dividends accrued on such share which pursuant to paragraph 2(b) of
this Section B have been added to and remain a part of the Liquidation
Preference as of the Determination Date, plus (c) for purposes of determining
the amounts payable pursuant to paragraph 3 and paragraph 4 of this Section B
and the definition of Redemption Price, an amount equal to all unpaid dividends
accrued on such share during the period from the immediately preceding Dividend
Payment Date (or the Issue Date if the Determination Date is on or prior to the
first Dividend Payment Date) through and including the Determination Date, and,
in the case of clauses (b) and (c) hereof, whether or not such unpaid dividends
have been earned or declared or there are any unrestricted funds of the
Corporation legally available for the payment of dividends. In connection with
the determination of the Liquidation Preference of a share of Class A Preferred
Stock upon redemption or upon liquidation, dissolution or winding up of the
Corporation, the Determination Date shall be the applicable date of redemption
or the date of distribution of amounts payable to stockholders in connection
with any such liquidation, dissolution or winding up.
"Parity Stock" shall mean any class or series of capital stock, whether now
existing or hereafter created, of the Corporation ranking on a parity basis with
the Class A Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation. Capital stock of any class or series shall rank on a
parity as to dividend rights, rights of redemption or rights on liquidation with
the Class A Preferred Stock, whether or not the dividend rates, dividend payment
dates, redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different from those of the Class A Preferred
Stock, if the holders of shares of such class or series shall be entitled to
dividend payments, payments on redemption or payments of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as the case may
be, in proportion to their respective accumulated and accrued and unpaid
dividends, redemption prices or liquidations prices, respectively, without
preference or priority, one over the other, as between the holders of shares of
such class or series and the holders of Class A Preferred Stock. No class or
series of capital stock
3
<PAGE> 6
that ranks junior to the Class A Preferred Stock as to rights on liquidation
shall rank or be deemed to rank on a parity basis with the Class A Preferred
Stock as to dividend rights or rights of redemption, unless the instrument
creating or evidencing such class or series of capital stock otherwise expressly
provides.
"Record Date" for the dividends payable on any Dividend Payment Date means
the fifteenth day of the month preceding the month during which such Dividend
Payment Date shall occur, or if any such day is not a Business Day, then on the
next preceding Business Day, as and if designated by the Board of Directors.
"Redemption Date" as to any share of Class A Preferred Stock shall mean the
date fixed for redemption of such share pursuant to paragraph 4(a) or (b) of
this Section B, provided that no such date will be a Redemption Date unless the
applicable Redemption Price is actually paid in full on such date.
"Redemption Price" as to any share of Class A Preferred Stock which is to
be redeemed on any Redemption Date shall mean the Liquidation Preference thereof
on such Redemption Date.
"Senior Stock" shall mean any class or series of capital stock, whether now
existing or hereafter created, of the Corporation ranking prior to the Class A
Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation. Capital stock of any class or series shall rank prior to the Class
A Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation if the holders of shares of such class or series shall be entitled
to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of Class A
Preferred Stock. No class or series of capital stock that ranks on a parity
basis with or junior to the Class A Preferred Stock as to rights on liquidation
shall rank or be deemed to rank prior to the Class A Preferred Stock as to
dividend rights or rights of redemption, notwithstanding that the dividend rate,
dividend payment dates, sinking fund provisions, if any, or mandatory redemption
provisions thereof are different from those of the Class A Preferred Stock,
unless the instrument creating or evidencing such class or series of capital
stock otherwise expressly provides.
"Special Record Date" has the meaning ascribed to such term in paragraph
2(b) of this Section B.
"Stated Liquidation Value" of a share of Class A Preferred Stock means
[dollar amount to be supplied by CS First Boston in connection with its
valuation of the Class A Preferred Stock].
"Subsidiary" of any Person shall mean (i) a corporation a majority of the
capital stock of which, having voting power under ordinary circumstances to
elect directors, is at the time, directly or indirectly, owned by such Person
and/or one or more Subsidiaries of such Person and (ii) any other Person (other
than a corporation) in which such Person and/or one or more Subsidiaries of such
Person, directly or indirectly, has (x) a majority ownership interest or (y) the
power to elect or direct the election of a majority of the members of the
governing body of such first-named Person.
2. Dividends.
(a) DIVIDEND RIGHTS; DIVIDEND PAYMENT DATES. Subject to the prior
preferences and other rights of any Senior Stock and the provisions of paragraph
5 hereof, the holders of Class A Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of unrestricted funds
legally available therefor, cumulative dividends, in preference to dividends on
any Junior Stock, that shall accrue on each share of Class A Preferred Stock at
the rate of [percentage rate to be supplied by CS First Boston in connection
with its valuation of the Class A Preferred Stock] per annum of the Stated
Liquidation Value of such share from the Issue Date to and including the date on
which the Liquidation Preference of such share is made available (whether on
liquidation, dissolution, or winding up of the Corporation or, in the case of
paragraph 4 of this Section B, upon the applicable Redemption Date). Accrued
dividends on the Class A Preferred Stock will be payable, as provided in
paragraph 2(c) below, annually on each Dividend Payment Date to the holders of
record of the Class A Preferred Stock as of the close of business on the Record
Date for such dividend payment. Dividends shall be fully cumulative and shall
accrue (without interest or compounding) on a daily basis without regard to the
occurrence of a Dividend Payment Date and whether or not such dividends are
declared and whether or not there are any unrestricted funds of the Corporation
legally available for the payment of dividends. The amount of dividends
"accrued" as of the first Dividend Payment Date and as of any
4
<PAGE> 7
date that is not a Dividend Payment Date shall be calculated on the basis of the
foregoing rate per annum for the actual number of days elapsed from the Initial
Accrual Date (in the case of the first Dividend Payment Date and any date prior
to the first Dividend Payment Date) or the last preceding Dividend Payment Date
(in the case of any other date) to and including the date as of which such
determination is to be made, based on a 365-or 366-day year, as the case may be.
(b) SPECIAL RECORD DATE. On each Dividend Payment Date, all dividends that
have accrued on each share of Class A Preferred Stock during the immediately
preceding Dividend Period shall, to the extent not paid as provided in paragraph
2(c) below on such Dividend Payment Date for any reason (whether or not such
unpaid dividends have been earned or declared or there are any unrestricted
funds of the Corporation legally available for the payment of dividends), be
added to the Liquidation Preference of such share and will remain a part thereof
until such dividends are paid as provided in paragraph 2(c) below. No interest
or additional dividends will accrue or be payable with respect to any dividend
payment on the Class A Preferred Stock that may be in arrears or with respect to
that portion of any other payment on the Class A Preferred Stock that is in
arrears which consists of accumulated or accrued and unpaid dividends. Such
accumulated or accrued and unpaid dividends may be declared and paid at any time
(subject to the rights of any Senior Stock and, if applicable, to the concurrent
satisfaction of any dividend arrearages then existing with respect to any Parity
Stock which ranks on a parity basis with the Class A Preferred Stock as to the
payment of dividends) without reference to any regular Dividend Payment Date, to
holders of record as of the close of business on such date, not more than 45
days nor less than 10 days preceding the payment date thereof, as may be fixed
by the Board of Directors (the "Special Record Date"). Notice of each Special
Record Date shall be given, not more than 45 days nor less than 10 days prior
thereto, to the holders of record of the shares of Class A Preferred Stock.
(c) METHOD OF PAYMENT. All dividends payable with respect to the shares of
Class A Preferred Stock shall be declared and paid in cash. All dividends paid
with respect to the shares of Class A Preferred Stock pursuant to this paragraph
2 shall be paid pro rata to all the holders of shares of Class A Preferred Stock
outstanding on the applicable Record Date or Special Record Date, as the case
may be.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which
any Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Class A Preferred Stock shall be entitled to receive from the assets of the
Corporation available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an amount in cash
or property at its fair market value, as determined by the Board of Directors in
good faith, or a combination thereof, per share, equal to the Liquidation
Preference of a share of Class A Preferred Stock as of the date of payment or
distribution, which payment or distribution shall be made pari passu with any
such payment or distribution made to the holders of any Parity Stock ranking on
a parity basis with the Class A Preferred Stock with respect to distributions
upon liquidation, dissolution or winding up of the Corporation. The holders of
Class A Preferred Stock shall be entitled to no other or further distribution of
or participation in any remaining assets of the Corporation after receiving the
Liquidation Preference per share. If, upon distribution of the Corporation's
assets in liquidation, dissolution or winding up, the assets of the Corporation
to be distributed among the holders of the Class A Preferred Stock and to all
holders of any Parity Stock ranking on a parity basis with the Class A Preferred
Stock with respect to distributions upon liquidation, dissolution or winding up
shall be insufficient to permit payment in full to such holders of the
respective preferential amounts to which they are entitled, then the entire
assets of the Corporation to be distributed to holders of the Class A Preferred
Stock and such Parity Stock shall be distributed pro rata to such holders based
upon the aggregate of the full preferential amounts to which the shares of Class
A Preferred Stock and such Parity Stock would otherwise respectively be
entitled. Neither the consolidation or merger of the Corporation with or into
any other corporation or corporations nor the sale, transfer or lease of all or
substantially all of the assets of the Corporation shall itself be deemed to be
a liquidation, dissolution or winding up of the Corporation within the meaning
of this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be given, not less than 20 days prior to the date on which
such liquidation,
5
<PAGE> 8
dissolution or winding up is expected to take place or become effective, to the
holders of record of the shares of Class A Preferred Stock.
4. Redemption.
(a) MANDATORY REDEMPTION. Subject to the rights of any Senior Stock and
the provisions of paragraph 5 of this Section B, the Corporation shall redeem,
out of funds legally available therefor, on the twelfth anniversary of the Issue
Date (or, if such day is not a Business Day, on the first Business Day
thereafter), all shares of Class A Preferred Stock remaining outstanding at the
Redemption Price on the Redemption Date. If the funds of the Corporation legally
available for redemption of shares of the Class A Preferred Stock or Parity
Stock then required to be redeemed are insufficient to redeem the total number
of such shares remaining outstanding, those funds which are legally available
shall, subject to the rights of any Senior Stock and the provisions of paragraph
5, be used to redeem the maximum possible number of shares of Class A Preferred
Stock and Parity Stock. Subject to the rights of any Senior Stock and the
provisions of paragraph 5 hereof, at any time and from time to time thereafter
when additional funds of the Corporation are legally available for such purpose,
such funds shall immediately be used to redeem the shares of Class A Preferred
Stock and Parity Stock which are required to be redeemed that the Corporation
failed to redeem until the balance of such shares has been redeemed. The
selection of shares to be redeemed pursuant to the two immediately preceding
sentences shall be made on a pro rata basis as among the different classes or
series and as among the holders of shares of a particular class or series.
(b) OPTIONAL REDEMPTION. Subject to the rights of any Senior Stock and the
provisions of paragraph 5 of this Section B, the shares of Class A Preferred
Stock may be redeemed, at the option of the Corporation by the action of the
Board of Directors, in whole or from time to time in part, on any Business Day
occurring after the Issue Date, at the Redemption Price on the Redemption Date.
If less than all outstanding shares of Class A Preferred Stock are to be
redeemed on any Redemption Date, the shares of Class A Preferred Stock to be
redeemed shall be chosen by chosen pro rata among all holders of Class A
Preferred Stock. The Corporation shall not be required to register a transfer of
(i) any shares of Class A Preferred Stock for a period of 15 days next preceding
any selection of shares of Class A Preferred Stock to be redeemed or (ii) any
shares of Class A Preferred Stock selected or called for redemption.
(c) NOTICE OF REDEMPTION. Notice of redemption shall be given by or on
behalf of the Corporation, not more than 60 days nor less than 30 days prior to
the Redemption Date, to the holders of record of the shares of Class A Preferred
Stock to be redeemed; but no defect in such notice or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Class A Preferred Stock. In addition to any information required by law or by
the applicable rules of any national securities exchange or national interdealer
quotation system on which the Class A Preferred Stock may be listed or admitted
to trading or quoted, such notice shall set forth the Redemption Price, the
Redemption Date, the number of shares to be redeemed and the place at which the
shares called for redemption will, upon presentation and surrender of the stock
certificates evidencing such shares, be redeemed. In the event that fewer than
the total number of shares of Class A Preferred Stock represented by a
certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(d) DEPOSIT OF REDEMPTION PRICE. If notice of any redemption by the
Corporation pursuant to this paragraph 4 shall have been given as provided in
paragraph 4(c) above, and if on or before the Redemption Date specified in such
notice an amount in cash sufficient to redeem in full on the Redemption Date at
the Redemption Price all shares of Class A Preferred Stock called for redemption
shall have been set apart so as to be available for such purpose and only for
such purpose, then effective as of the close of business on the Redemption Date,
the shares of Class A Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been surrendered for cancellation,
shall no longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all rights with respect to such
shares shall forthwith cease and terminate, except the right of the holders
thereof to receive the Redemption Price of such shares, without interest, upon
the surrender of certificates representing the same.
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(e) STATUS OF REDEEMED SHARES. All shares of Class A Preferred Stock
redeemed, exchanged, purchased or otherwise acquired by the Corporation shall be
retired and shall not be reissued.
5. Limitations on Dividends and Redemptions.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends for all
prior dividend periods on any Parity Stock which by the terms of the instrument
creating or evidencing such Parity Stock is entitled to the payment of such
cumulative dividends prior to the redemption, exchange, purchase or other
acquisition of the Class A Preferred Stock, and until full cumulative dividends
on such Parity Stock for all prior dividend periods are paid, or declared and
the consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, neither the Corporation nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Class A Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 4 hereof, a
sinking fund or otherwise, unless all then outstanding shares of Class A
Preferred Stock, of such Parity Stock and of any other class of series of Parity
Stock that by the terms of the instrument creating or evidencing such Parity
Stock is required to be redeemed under such circumstances are redeemed or
exchanged pursuant to the terms hereof and thereof.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, neither the Corporation nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Class A Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 4 hereof, a
sinking fund or otherwise, unless all then outstanding shares of Class A
Preferred Stock and of any other class or series of Parity Stock that by the
terms of the instrument creating or evidencing such Parity Stock is required to
be redeemed under such circumstances are redeemed or exchanged pursuant to the
terms hereof and thereof.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Class A Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside for such purpose
and no other purpose, the Corporation shall not declare or pay any dividend on
or make any distribution with respect to any Junior Stock or Parity Stock or set
aside any money or assets for any such purpose, except that the Corporation may
declare and pay a dividend on any Parity Stock ranking on a parity basis with
the Class A Preferred Stock with respect to the right to receive dividend
payments, contemporaneously with the declaration and payment of a dividend on
the Class A Preferred Stock, provided that such dividends are declared and paid
pro rata so that the amount of dividends declared and paid per share of the
Class A Preferred Stock and such Parity Stock shall in all cases bear to each
other the same ratio that accumulated and accrued and unpaid dividends per share
on the Class A Preferred Stock and such Parity Stock bear to each other.
If the Corporation shall fail to redeem on any date fixed for redemption or
exchange pursuant to paragraph 4 hereof any shares of Class A Preferred Stock
called for redemption on such date, and until such shares are redeemed in full,
the Corporation shall not redeem or exchange any Parity Stock or Junior Stock or
declare or pay any dividend on or make any distribution with respect to any
Junior Stock, or set aside any money or assets for any such purpose, and neither
the Corporation nor any Subsidiary thereof shall purchase or otherwise acquire
any Class A Preferred Stock, Parity Stock or Junior Stock, or set aside any
money or assets for any such purpose.
Neither the Corporation nor any Subsidiary thereof shall redeem, exchange,
purchase or otherwise acquire any Parity Stock or Junior Stock, or set aside any
money or assets for any such purpose, if after giving
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<PAGE> 10
effect to such redemption, exchange, purchase or other acquisition, the amount
(as determined by the Board of Directors in good faith) that would be available
for distribution to the holders of the Class A Preferred Stock upon liquidation,
dissolution or winding up of the Corporation if such liquidation, dissolution or
winding up were to occur on the date fixed for such redemption, exchange,
purchase or other acquisition of such Parity Stock or Junior Stock would be less
than the aggregate Liquidation Preference as of such date of all shares of Class
A Preferred Stock then outstanding.
Nothing contained in the first, fourth or fifth paragraph of this paragraph
5 shall prevent (i) the payment of dividends on any Junior Stock solely in
shares of Junior Stock or the redemption, purchase or other acquisition of
Junior Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first and fifth
paragraphs hereof) through the application of the proceeds from the sale of,
shares of Junior Stock; or (ii) the payment of dividends on any Parity Stock
solely in shares of Parity Stock and/or Junior Stock or the redemption,
exchange, purchase or other acquisition of Class A Preferred Stock or Parity
Stock solely in exchange for (together with a cash adjustment for fractional
shares, if any), or (but only in the case of the first and fifth paragraphs
hereof) through the application of the proceeds from the sale of, shares of
Parity Stock and/or Junior Stock.
The provisions of the first paragraph of this paragraph 5 are for the sole
benefit of the holders of Class A Preferred Stock and Parity Stock having the
terms described therein and accordingly, at any time when there are no shares of
any such class or series of Parity Stock outstanding or if the holders of each
such class or series of Parity Stock have, by such vote or consent of the
holders thereof as may be provided for in the instrument creating or evidencing
such class or series, waived in whole or in part the benefit of such provisions
(either generally or in the specific instance), then the provisions of the first
paragraph of this paragraph 5 shall not (to the extent waived, in the case of
any partial waiver) restrict the redemption, exchange, purchase or other
acquisition of any shares of Class A Preferred Stock, Parity Stock or Junior
Stock. All other provisions of this paragraph 5 are for the sole benefit of the
holders of Class A Preferred Stock and accordingly, if the holders of shares of
Class A Preferred Stock shall have waived (as provided in paragraph 7 of this
Section B) in whole or in part the benefit of the applicable provisions, either
generally or in the specific instance, such provision shall not (to the extent
of such waiver, in the case of a partial waiver) restrict the redemption,
exchange, purchase or other acquisition of, or declaration, payment or making of
any dividends or distributions on the Class A Preferred Stock, any Parity Stock
or any Junior Stock.
6. Voting.
(a) VOTING RIGHTS. The holders of Class A Preferred Stock shall have no
voting rights whatsoever, except as required by law and except for the voting
rights described in this paragraph 6; provided, however, that the number of
authorized shares of Class A Preferred Stock may be increased or decreased (but
not below the number of shares of Class A Preferred Stock then outstanding) by
the affirmative vote of the holders of at least 66 2/3 of the total voting power
of the then outstanding Voting Securities (as defined in Section C of Article V
of this Certificate), voting together as a single class as provided in Article
IX of this Certificate. Without limiting the generality of the foregoing, no
vote or consent of the holders of Class A Preferred Stock shall be required for
(a) the creation of any indebtedness of any kind of the Corporation, (b) the
creation or designation of any class or series of Senior Stock, Parity Stock or
Junior Stock, or (c) any amendment to this Certificate that would increase the
number of authorized shares of Preferred Stock or the number of authorized
shares of Class A Preferred Stock or that would decrease the number of
authorized shares of Preferred Stock or the number of authorized shares of Class
A Preferred Stock (but not below the number of shares of Preferred Stock or
Class A Preferred Stock, as the case may be, then outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Class A Preferred Stock
shall have the right to vote at any annual or special meeting of stockholders
for the purpose of electing directors. Each share of Class A Preferred Stock
shall have one vote for such purpose, and shall vote as a single class with any
other class or series of capital stock of the Corporation entitled to vote in
any general election of directors.
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7. Waiver.
Any provision of this Section B which, for the benefit of the holders of
Class A Preferred Stock, prohibits, limits or restricts actions by the
Corporation, or imposes obligations on the Corporation, may be waived in whole
or in part, or the application of all or any part of such provision in any
particular circumstance or generally may be waived, in each case with the
consent of the holders of at least a majority of the number of shares of Class A
Preferred Stock then outstanding (or such greater percentage thereof as may be
required by applicable law or any applicable rules of any national securities
exchange or national interdealer quotation system), either in writing or by vote
at an annual meeting or a meeting called for such purpose at which the holders
of Class A Preferred Stock shall vote as a separate class.
8. Method of Giving Notices.
Any notice required or permitted by the provisions of this Section B to be
given to the holders of shares of Class A Preferred Stock shall be deemed duly
given if deposited in the United States mail, first class mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation or supplied by him in writing to the Corporation for the purpose
of such notice.
9. Exclusion of Other Rights.
Except as may otherwise be required by law and except for the equitable
rights and remedies which may otherwise be available to holders of Class A
Preferred Stock, the shares of Class A Preferred Stock shall not have any
designations, preferences, limitations or relative rights other than those
specifically set forth in this Certificate.
10. Heading of Subdivisions.
The headings of the various subdivisions of this Section are for
convenience of reference only and shall not affect the interpretation of any of
the provisions of this Section.
SECTION C
CLASS B 6% CUMULATIVE REDEEMABLE EXCHANGEABLE
JUNIOR PREFERRED STOCK
The Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
shall have the following preferences, limitations and relative rights:
1. Certain Definitions. Unless the context otherwise requires, the terms
defined in this paragraph 1 shall have, for all purposes of this Section C, the
meanings herein specified:
"Average Market Price" as of any Record Date or Special Record Date for a
dividend payment declared by the Board of Directors means the average of the
daily Current Market Prices of the Class A Common Stock for a period of 20
consecutive trading days ending on the tenth trading day prior to such Record
Date or Special Record Date, appropriately adjusted to take into account any
stock dividends on the Class A Common Stock, or any stock splits,
reclassifications or combinations of the Class A Common Stock, during the period
following the first of such 20 trading days and ending on the last full trading
day immediately preceding the Dividend Payment Date or other date fixed for the
payment of dividends to which such Record Date or Special Record Date, as the
case may be, relates.
"Class A Common Stock" shall mean the Class A Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
A Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class A Common Stock, such capital
stock to which a holder of Class A Common Stock shall be entitled upon the
occurrence of such event.
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"Class A Preferred Stock" shall mean the Class A Preferred Stock, par value
$.01 per share, of the Corporation.
"Class B Common Stock" shall mean the Class B Common Stock, par value $1.00
per share, of the Corporation, which term shall include, where appropriate, in
the case of any reclassification, recapitalization or other change in the Class
B Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another Person affecting the Class B Common Stock, such capital
stock to which a holder of Class B Common Stock shall be entitled upon the
occurrence of such event.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock, par value $.01 per share, of the
Corporation.
"Current Market Price" of a share of Class A Common Stock on any day means
the last reported per share sale price (or, if no sale price is reported, the
average of the high and low bid prices) of the Class A Common Stock on such day
on the National Association of Securities Dealers, Inc. Automated Quotation
System or as quoted by the National Quotation Bureau Incorporated, or if the
Class A Common Stock is listed on an exchange, on the principal exchange on
which the Class A Common Stock is listed. In the event that no such quotation is
available for any day, the Board of Directors shall be entitled to determine the
Current Market Price on the basis of such quotations as it considers
appropriate.
"Dividend Payment Date" shall mean, for any Dividend Period, the last day
of such Dividend Period which shall be the first day of March of each year,
commencing with March 1, 1995, or the next succeeding Business Day if any such
day is not a Business Day.
"Dividend Period" shall mean the period from the Initial Accrual Date to
and including the first Dividend Payment Date and each annual period between
consecutive Dividend Payment Dates.
"Form 8-K" shall mean the Corporation's Current Report on Form 8-K, dated
[insert date of Form 8-K] filed by the Corporation with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Initial Accrual Date", when used with respect to the shares of Class B
Preferred Stock, shall mean [insert first day after the last dividend payment
date before the Effective Time under the Class E, 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock of Liberty].
"Issue Date" shall mean the date on which shares of Class B Preferred Stock
are first issued.
"Junior Exchange Notes" shall mean junior subordinated debt securities of
the Corporation of a series to be issued under the Junior Exchange Note
Indenture in exchange for shares of Class B Preferred Stock as contemplated by
paragraphs 4(d) and (f) of this Section C.
"Junior Exchange Note Indenture" shall mean an indenture substantially in
the form annexed as Exhibit A to the Form 8-K, as supplemented by a supplemental
indenture substantially in the form annexed as Exhibit 1 to such form of
indenture, as said indenture and supplemental indenture may be amended or
further supplemented from time to time (subject to any applicable restrictions
of this Certificate) and, unless the context indicates otherwise, shall include
the form and terms of the Junior Exchange Notes established as contemplated
thereunder.
"Junior Stock" shall mean (i) the Class A Common Stock, (ii) the Class B
Common Stock, (iii) any other class or series of capital stock, whether now
existing or hereafter created, of the Corporation, other than (A) the Class B
Preferred Stock, (B) the Class A Preferred Stock, (C) any class or series of
Parity Stock (except to the extent provided under clause (iv) hereof) and (D)
any Senior Stock, and (iv) any class or series of Parity Stock to the extent
that it ranks junior to the Class B Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation, as the case may be. For purposes
of clause (iv) above, a class or series of Parity Stock shall rank junior to the
Class B Preferred Stock as to dividend rights, rights of redemption or rights on
liquidation if the holders of shares of Class B Preferred Stock shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution,
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liquidation or winding up of the Corporation, as the case may be, in preference
or priority to the holders of shares of such class or series.
"Liquidation Preference" measured per share of the Class B Preferred Stock
as of any date in question (the "Determination Date") shall mean an amount equal
to the sum of (a) the Stated Liquidation Value of such share, plus (b) an amount
equal to all dividends accrued on such share which pursuant to paragraph 2(b) of
this Section C have been added to and remain a part of the Liquidation
Preference as of the Determination Date, plus (c) for purposes of determining
the amounts payable pursuant to paragraph 3 and paragraph 4 of this Section C
and the definition of Redemption Price, an amount equal to all unpaid dividends
accrued on such share during the period from the immediately preceding Dividend
Payment Date (or the Initial Accrual Date if the Determination Date is on or
prior to the first Dividend Payment Date) through and including the
Determination Date, and, in the case of clauses (b) and (c) hereof, whether or
not such unpaid dividends have been earned or declared or there are any
unrestricted funds of the Corporation legally available for the payment of
dividends. In connection with the determination of the Liquidation Preference of
a share of Class B Preferred Stock upon redemption or upon liquidation,
dissolution or winding up of the Corporation, the Determination Date shall be
the applicable date of redemption or the date of distribution of amounts payable
to stockholders in connection with any such liquidation, dissolution or winding
up.
"1933 Act" shall mean the Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations promulgated
thereunder.
"Optional Exchange Date" shall mean the date fixed for the exchange of
shares of Class B Preferred Stock pursuant to paragraph 4(d) of this Section C,
provided that such date will not be the Optional Exchange Date unless on or
before such date all conditions to the issuance and delivery of Junior Exchange
Notes upon such exchange contained in paragraph 4(f) of this Section C have been
satisfied.
"Parity Stock" shall mean any class or series of capital stock, whether now
existing or hereafter created, of the Corporation ranking on a parity basis with
the Class B Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation. Capital stock of any class or series shall rank on a
parity as to dividend rights, rights of redemption or rights on liquidation with
the Class B Preferred Stock, whether or not the dividend rates, dividend payment
dates, redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different from those of the Class B Preferred
Stock, if the holders of shares of such class or series shall be entitled to
dividend payments, payments on redemption or payments of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as the case may
be, in proportion to their respective accumulated and accrued and unpaid
dividends, redemption prices or liquidations prices, respectively, without
preference or priority, one over the other, as between the holders of shares of
such class or series and the holders of Class B Preferred Stock. No class or
series of capital stock that ranks junior to the Class B Preferred Stock as to
rights on liquidation shall rank or be deemed to rank on a parity basis with the
Class B Preferred Stock as to dividend rights or rights of redemption, unless
the instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
"Record Date" for the dividends payable on any Dividend Payment Date means
the fifteenth day of the month preceding the month during which such Dividend
Payment Date shall occur, or if any such day is not a Business Day, then on the
next preceding Business Day, as and if designated by the Board of Directors.
"Redemption Agent" has the meaning ascribed to such term in paragraph 4(c)
of this Section C.
"Redemption Date" as to any share of Class B Preferred Stock shall mean the
date fixed for redemption of such share pursuant to paragraph 4(a) of this
Section C, provided that no such date will be a Redemption Date unless the
applicable Redemption Price is actually paid in full on such date or the
consideration sufficient for the payment thereof, and for no other purpose, has
been set apart or deposited in trust as contemplated by paragraph 4(c) of this
Section C.
"Redemption Price" as to any share of Class B Preferred Stock which is to
be redeemed on any Redemption Date shall mean the Liquidation Preference thereof
on such Redemption Date.
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"Senior Stock" shall mean (i) the Class A Preferred Stock and (ii) any
other class or series of capital stock, whether now existing or hereafter
created, of the Corporation ranking prior to the Class B Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation. Capital stock of
any class or series shall rank prior to the Class B Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders of
shares of such class or series shall be entitled to dividend payments, payments
on redemption or payments of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of Class B Preferred Stock. No class or series of
capital stock that ranks on a parity basis with or junior to the Class B
Preferred Stock as to rights on liquidation shall rank or be deemed to rank
prior to the Class B Preferred Stock as to dividend rights or rights of
redemption, notwithstanding that the dividend rate, dividend payment dates,
sinking fund provisions, if any, or mandatory redemption provisions thereof are
different from those of the Class B Preferred Stock, unless the instrument
creating or evidencing such class or series of capital stock otherwise expressly
provides.
"Special Record Date" has the meaning ascribed to such term in paragraph
2(b) of this Section C.
"Stated Liquidation Value" of a share of Class B Preferred Stock means
$100.
"Subsidiary" of any Person shall mean (i) a corporation a majority of the
capital stock of which, having voting power under ordinary circumstances to
elect directors, is at the time, directly or indirectly, owned by such Person
and/or one or more Subsidiaries of such Person and (ii) any other Person (other
than a corporation) in which such Person and/or one or more Subsidiaries of such
Person, directly or indirectly, has (x) a majority ownership interest or (y) the
power to elect or direct the election of a majority of the members of the
governing body of such first-named Person.
"TIA" shall mean the Trust Indenture Act of 1939 (or any successor statute)
as in effect on the date the Junior Exchange Note Indenture is or is required to
be qualified thereunder in accordance with paragraph 4 of this Section C.
2. Dividends.
(a) DIVIDEND RIGHTS; DIVIDEND PAYMENT DATES. Subject to the prior
preferences and other rights of any Senior Stock and the provisions of paragraph
5 hereof, the holders of Class B Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of unrestricted funds
legally available therefor, cumulative dividends, in preference to dividends on
any Junior Stock, that shall accrue on each share of Class B Preferred Stock at
the rate of 6.0% per annum of the Stated Liquidation Value of such share from
the Initial Accrual Date to and including the date on which the Liquidation
Preference of such share is made available (whether on liquidation, dissolution,
or winding up of the Corporation or, in the case of paragraph 4 of this Section
C, upon the applicable Redemption Date or Optional Exchange Date. Accrued
dividends on the Class B Preferred Stock will be payable, as provided in
paragraph 2(c) below, annually on each Dividend Payment Date to the holders of
record of the Class B Preferred Stock as of the close of business on the Record
Date for such dividend payment. Dividends shall be fully cumulative and shall
accrue (without interest or compounding) on a daily basis without regard to the
occurrence of a Dividend Payment Date and whether or not such dividends are
declared and whether or not there are any unrestricted funds of the Corporation
legally available for the payment of dividends. The amount of dividends
"accrued" as of the first Dividend Payment Date and as of any date that is not a
Dividend Payment Date shall be calculated on the basis of the foregoing rate per
annum for the actual number of days elapsed from the Initial Accrual Date (in
the case of the first Dividend Payment Date and any date prior to the first
Dividend Payment Date) or the last preceding Dividend Payment Date (in the case
of any other date) to and including the date as of which such determination is
to be made, based on a 365-or 366-day year, as the case may be.
(b) SPECIAL RECORD DATE. On each Dividend Payment Date, all dividends that
have accrued on each share of Class B Preferred Stock during the immediately
preceding Dividend Period shall, to the extent not paid as provided in paragraph
2(c) below on such Dividend Payment Date for any reason (whether or not such
unpaid dividends have been earned or declared or there are any unrestricted
funds of the Corporation legally available for the payment of dividends), be
added to the Liquidation Preference of such share and will
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remain a part thereof until such dividends are paid as provided in paragraph
2(c) below. No interest or additional dividends will accrue or be payable
(whether in cash, shares of Class A Common Stock or otherwise) with respect to
any dividend payment on the Class B Preferred Stock that may be in arrears or
with respect to that portion of any other payment on the Class B Preferred Stock
that is in arrears which consists of accumulated or accrued and unpaid
dividends. Such accumulated or accrued and unpaid dividends may be declared and
paid at any time (subject to the rights of any Senior Stock and, if applicable,
to the concurrent satisfaction of any dividend arrearages then existing with
respect to any Parity Stock which ranks on a parity basis with the Class B
Preferred Stock as to the payment of dividends) without reference to any regular
Dividend Payment Date, to holders of record as of the close of business on such
date, not more than 45 days nor less than 10 days preceding the payment date
thereof, as may be fixed by the Board of Directors (the "Special Record Date").
Notice of each Special Record Date shall be given, not more than 45 days nor
less than 10 days prior thereto, to the holders of record of the shares of Class
B Preferred Stock.
(c) METHOD OF PAYMENT. All dividends payable with respect to the shares of
Class B Preferred Stock may be declared and paid, in the sole discretion of the
Board of Directors, in cash, through the issuance of shares of Class A Common
Stock or in any combination of the foregoing, provided, however, that if on any
Dividend Payment Date or other date fixed for the payment of dividends declared
by the Board of Directors, the Corporation pursuant to applicable law or
otherwise is prohibited or restricted from paying in cash the full amount of
dividends declared payable to the holders of Class B Preferred Stock on such
date, then the portion of such dividends the payment of which in cash is so
prohibited or restricted (or such greater portion of such dividends as the Board
of Directors may determine) shall be paid through the issuance of shares of
Class A Common Stock. If any dividend payment declared by the Board of Directors
with respect to the shares of Class B Preferred Stock is to be paid in whole or
in part through the issuance of shares of Class A Common Stock, the amount of
such dividend payment to be paid per share of Class B Preferred Stock in shares
of Class A Common Stock (the "Stock Dividend Amount") shall be satisfied and
paid by the delivery to the holders of record of such shares of Class B
Preferred Stock on the Record Date or Special Record Date, as the case may be,
for such dividend payment, of a number of shares of Class A Common Stock
determined by dividing the Stock Dividend Amount by the Average Market Price of
a share of Class A Common Stock as of such Record Date or Special Record Date.
The Corporation shall not be required to issue any fractional share of Class A
Common Stock to which any holder of Class B Preferred Stock may become entitled
pursuant to this paragraph 2(c). The Board of Directors may elect to settle any
final fraction of a share of Class A Common Stock which a holder of one or more
shares of Class B Preferred Stock would otherwise be entitled to receive
pursuant to this paragraph 2(c) by having the Corporation pay to such holder, in
lieu of issuing such fractional share, cash in an amount (rounded upward to the
nearest whole cent) equal to the same fraction of the Average Market Price of a
share of Class A Common Stock as of the Record Date or Special Record Date, as
the case may be, for the dividend payment with respect to which such shares of
Class A Common Stock are being delivered. Such election, if made, shall be made
as to all holders of Class B Preferred Stock who would otherwise be entitled to
receive a fractional share of Class A Common Stock on the Dividend Payment Date
or other date fixed for the payment of such dividend.
All dividends paid with respect to the shares of Class B Preferred Stock
pursuant to this paragraph 2 shall be paid pro rata to all the holders of shares
of Class B Preferred Stock outstanding on the applicable Record Date or Special
Record Date, as the case may be.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which
any Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Class B Preferred Stock shall be entitled to receive from the assets of the
Corporation available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an amount in cash
or property at its fair market value, as determined by the Board of Directors in
good faith, or a combination thereof, per share, equal to the Liquidation
Preference of a share of Class B Preferred Stock as of the date of payment or
distribution, which payment or distribution shall be made pari passu with any
such payment or distribution made to the holders of any Parity Stock ranking on
a parity basis with the
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Class B Preferred Stock with respect to distributions upon liquidation,
dissolution or winding up of the Corporation. The holders of Class B Preferred
Stock shall be entitled to no other or further distribution of or participation
in any remaining assets of the Corporation after receiving the Liquidation
Preference per share. If, upon distribution of the Corporation's assets in
liquidation, dissolution or winding up, the assets of the Corporation to be
distributed among the holders of the Class B Preferred Stock and to all holders
of any Parity Stock ranking on a parity basis with the Class B Preferred Stock
with respect to distributions upon liquidation, dissolution or winding up shall
be insufficient to permit payment in full to such holders of the respective
preferential amounts to which they are entitled, then the entire assets of the
Corporation to be distributed to holders of the Class B Preferred Stock and such
Parity Stock shall be distributed pro rata to such holders based upon the
aggregate of the full preferential amounts to which the shares of Class B
Preferred Stock and such Parity Stock would otherwise respectively be entitled.
Neither the consolidation or merger of the Corporation with or into any other
corporation or corporations nor the sale, transfer or lease of all or
substantially all of the assets of the Corporation shall itself be deemed to be
a liquidation, dissolution or winding up of the Corporation within the meaning
of this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be given, not less than 20 days prior to the date on which
such liquidation, dissolution or winding up is expected to take place or become
effective, to the holders of record of the shares of Class B Preferred Stock.
4. Redemption or Exchange.
(a) OPTIONAL REDEMPTION. Subject to the rights of any Senior Stock and the
provisions of paragraph 5 of this Section C, the shares of Class B Preferred
Stock may be redeemed, at the option of the Corporation by the action of the
Board of Directors, in whole or from time to time in part, on any Business Day
occurring after the Issue Date, at the Redemption Price on the Redemption Date.
If less than all outstanding shares of Class B Preferred Stock are to be
redeemed on any Redemption Date, the shares of Class B Preferred Stock to be
redeemed shall be chosen by lot or by such other method as the Board of
Directors considers fair and appropriate (and which complies with the
requirements, if any, of any national securities exchange or national
interdealer quotation system on which the Class B Preferred Stock may be listed
or admitted to trading or quoted). The Corporation shall not be required to
register a transfer of (i) any shares of Class B Preferred Stock for a period of
15 days next preceding any selection of shares of Class B Preferred Stock to be
redeemed or (ii) any shares of Class B Preferred Stock selected or called for
redemption.
(b) NOTICE OF REDEMPTION. Notice of redemption shall be given by or on
behalf of the Corporation, not more than 60 days nor less than 30 days prior to
the Redemption Date, to the holders of record of the shares of Class B Preferred
Stock to be redeemed; but no defect in such notice or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Class B Preferred Stock. In addition to any information required by law or by
the applicable rules of any national securities exchange or national interdealer
quotation system on which the Class B Preferred Stock may be listed or admitted
to trading or quoted, such notice shall set forth the Redemption Price, the
Redemption Date, the number of shares to be redeemed and the place at which the
shares called for redemption will, upon presentation and surrender of the stock
certificates evidencing such shares, be redeemed, and if the Corporation has
elected to deposit the Redemption Price with a Redemption Agent in accordance
with paragraph 4(c) below, shall state the name and address of the Redemption
Agent and the date on which such deposit was or will be made. In the event that
fewer than the total number of shares of Class B Preferred Stock represented by
a certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(c) DEPOSIT OF REDEMPTION PRICE. If notice of any redemption by the
Corporation pursuant to this paragraph 4 shall have been given as provided in
paragraph 4(b) above, and if on or before the Redemption Date specified in such
notice an amount in cash sufficient to redeem in full on the Redemption Date at
the Redemption Price all shares of Class B Preferred Stock called for redemption
shall have been set apart so as to be available for such purpose and only for
such purpose, then effective as of the close of business on the Redemption Date,
the shares of Class B Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been surrendered for cancellation,
shall no longer be deemed outstanding,
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and the holders thereof shall cease to be stockholders with respect to such
shares and all rights with respect to such shares shall forthwith cease and
terminate, except the right of the holders thereof to receive the Redemption
Price of such shares, without interest, upon the surrender of certificates
representing the same.
At its election, the Corporation on or prior to the Redemption Date (but no
more than 60 days prior to the Redemption Date) may deposit immediately
available funds in an amount equal to the aggregate Redemption Price of the
shares of Class B Preferred Stock called for redemption in trust for the holders
thereof with any bank or trust company organized under the laws of the United
States of America or any state thereof having capital, undivided profits and
surplus aggregating at least $50 million (the "Redemption Agent"), with
irrevocable instructions and authority to the Redemption Agent, on behalf and at
the expense of the Corporation, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the Redemption Date or prior thereto, the Redemption Price of the
shares of Class B Preferred Stock to be redeemed to their respective holders
upon the surrender of the certificates therefor. A deposit made in compliance
with the immediately preceding sentence shall be deemed to constitute full
payment for the shares of Class B Preferred Stock to be redeemed and from and
after the close of business on the date of such deposit (although prior to the
Redemption Date), the shares of Class B Preferred Stock to be redeemed shall no
longer be deemed outstanding and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no rights with respect
to such shares except the right of the holders thereof to receive the Redemption
Price of such shares (calculated through the Redemption Date), without interest,
upon surrender of the certificates therefor. Any interest accrued on the funds
so deposited shall be paid to the Corporation from time to time. Any funds so
deposited with the Redemption Agent which shall remain unclaimed by the holders
of such shares of Class B Preferred Stock at the end of one year after the
Redemption Date shall be returned by the Redemption Agent to the Corporation,
after which repayment the holders of such shares of Class B Preferred Stock
called for redemption shall look only to the Corporation for the payment
thereof, without interest, unless an applicable escheat or abandoned property
law designates another Person.
(d) OPTIONAL EXCHANGE FOR JUNIOR EXCHANGE NOTES. Subject to the rights of
any Senior Stock and the provisions of paragraph 5 of this Section C, the shares
of Class B Preferred Stock may be exchanged, out of funds legally available
therefor, at the option of the Corporation by action of the Board of Directors,
in whole but not in part, on any Business Day occurring after the Issue Date,
for Junior Exchange Notes. Each holder of outstanding shares of Class B
Preferred Stock shall be entitled to receive, in exchange for his shares of
Class B Preferred Stock pursuant to this paragraph 4(d), newly issued Junior
Exchange Notes of a series authorized and established for the purpose of such
exchange, the aggregate principal amount of which shall be equal to the
aggregate Liquidation Preference on the Optional Exchange Date of the shares of
Class B Preferred Stock so exchanged by such holder, provided that the Junior
Exchange Notes will be issuable only in principal amounts of $100 or any
integral multiple thereof and an adjustment will be paid by the Corporation, in
cash or by its check, in an amount equal to any excess principal amount
otherwise issuable.
(e) NOTICE OF EXCHANGE. Notice of the Corporation's election to exercise
its optional exchange right pursuant to paragraph 4(d) (an "Optional Exchange
Notice") shall be given by or on behalf of the Corporation, not more than 60
days nor less than 30 days prior to the Optional Exchange Date, to the holders
of record of the shares of Class B Preferred Stock; but no defect in such notice
or in the mailing thereof shall affect the validity of the proceedings for the
exchange of any shares of Class B Preferred Stock. In addition to any
information required by law or by the applicable rules of any national
securities exchange or national interdealer quotation system on which the shares
of Class B Preferred Stock may be listed or admitted to trading or quoted, such
notice shall set forth the Optional Exchange Date, the place at which shares of
Class B Preferred Stock will, upon presentation and surrender of the stock
certificates evidencing such shares, be exchanged for Junior Exchange Notes, and
the material terms (or, as to the rate per annum at which the Junior Exchange
Notes will bear interest, and, if applicable, as to any other of such terms, the
method of determining the same), consistent with the provisions hereof and of
the Junior Exchange Note Indenture, of the series of Junior Exchange Notes to be
issued upon such exchange.
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Upon determination of the rate per annum at which the Junior Exchange Notes
to be issued upon such exchange will bear interest and any other terms of such
Junior Exchange Notes, the method of determining which was set forth in the
Optional Exchange Notice, the Corporation shall promptly give notice of such
determination to the holders of shares of Class B Preferred Stock, which notice
may be given by (or, if required by applicable law, shall be given by)
publication of such determination in a daily newspaper of national circulation.
(f) CONDITIONS TO EXCHANGE FOR JUNIOR EXCHANGE NOTE. Prior to the giving
of an Optional Exchange Notice, the Corporation shall execute and deliver, with
a bank or trust company selected by the Corporation, the Junior Exchange Note
Indenture, substantially in the form annexed to the Form 8-K with only such
changes as (i) are necessary to comply with law, any applicable rules of any
securities exchange or usage, (ii) are requested by the Corporation and which
would make any provisions of the Junior Exchange Note Indenture, or of the
Junior Exchange Notes of the series established thereunder for the purpose of
such exchange, more restrictive to the Corporation or beneficial to the holders
of the Junior Exchange Notes of such series, as determined by the Board of
Directors in good faith, such determination to be conclusive, (iii) are
requested by the Corporation to add to the covenants and agreements of the
Corporation contained in the Junior Exchange Note Indenture or to remove any
right or power therein reserved to or conferred upon the Corporation, (iv) are
requested by the Corporation in the event of any amendment to this Certificate
that effects a change in the terms of the Class B Preferred Stock, to conform
(as nearly as may be taking into account the differences between debt securities
and equity securities) the provisions of the Junior Exchange Note Indenture
(including, without limitation, the provisions relating to the establishment of
the terms of any series of Junior Exchange Notes authorized to be issued
thereunder) to the terms of the Class B Preferred Stock as so changed, (v) are
consented to by the holders of at least a majority of the number of shares of
Class B Preferred Stock then outstanding (or such greater percentage thereof as
may be required by applicable law or any applicable rules of any national
securities exchange or national interdealer quotation system), either in writing
or by vote at a meeting called for that purpose at which the holders of Class B
Preferred Stock shall vote as a separate class, or (vi) would not adversely
affect the rights of the holders of Junior Exchange Notes of such series
issuable thereunder.
Prior to the Optional Exchange Date, the Corporation shall (i) establish in
the manner contemplated by the Junior Exchange Note Indenture the terms of the
series of Junior Exchange Notes to be issued thereunder on the Optional Exchange
Date, and (ii) file at the office of the exchange agent for the Class B
Preferred Stock (or with the books of the Corporation if there is no exchange
agent) an opinion of counsel to the effect that (A) the Junior Exchange Note
Indenture has been duly authorized, executed and delivered by the Corporation,
and constitutes a valid and binding instrument enforceable against the
Corporation in accordance with its terms (subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
and except that the Corporation may be prohibited from making payments on the
Junior Exchange Notes of the series to be issued if and to the extent it would
at the time be prohibited from redeeming capital stock and subject to other
qualifications as are then customarily contained in opinions of counsel
experienced in such matters); (B) that the Junior Exchange Notes of such series
have been duly authorized and, when executed and authenticated in accordance
with the provisions of the Junior Exchange Note Indenture and delivered in
exchange for the shares of Class B Preferred Stock, will constitute valid and
binding obligations of the Corporation entitled to the benefits of the Junior
Exchange Note Indenture (subject as aforesaid); (C) that the issuance and
delivery of the Junior Exchange Notes of such series in exchange for the shares
of Class B Preferred Stock will not violate the laws of the state of
incorporation of the Corporation; and (D) that (x) the Junior Exchange Note
Indenture has been duly qualified under the TIA (or that such qualification is
not necessary) and (y) that the issuance and delivery of the Junior Exchange
Notes of such series in exchange for the shares of Class B Preferred Stock is
exempt from the registration or qualification requirements of the 1933 Act and
applicable state securities laws or, if no such exemption is available, that the
Junior Exchange Notes of such series have been duly registered or qualified for
such exchange under the 1933 Act and such applicable state securities laws.
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(g) METHOD OF EXCHANGE. If an Optional Exchange Notice shall have been
given by the Corporation pursuant to paragraph 4(e) of this Section C, and if
the Corporation shall have satisfied the conditions to such exchange contained
in paragraph 4(f), then effective as of the close of business on the Optional
Exchange Date, the shares of Class B Preferred Stock, notwithstanding that any
certificate therefor shall not have been surrendered for cancellation, shall no
longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all rights with respect to such
shares shall forthwith cease and terminate, except the right of the holders
thereof upon the surrender of certificates evidencing the same to receive the
Junior Exchange Notes exchangeable therefor, and the cash adjustment, if any, in
lieu of Junior Exchange Notes in other than authorized denominations, without
interest.
Before any holder of shares of Class B Preferred Stock called for exchange
shall be entitled to receive the Junior Exchange Notes deliverable in exchange
therefor, such holder shall surrender the certificate or certificates
representing the shares to be exchanged at such place as the Corporation shall
have specified in the Optional Exchange Notice, which certificate or
certificates shall be duly endorsed to the Corporation or in blank (or
accompanied by duly executed instruments to transfer to the Corporation or in
blank) with signatures guaranteed (such endorsements or instruments of transfer
to be in form satisfactory to the Corporation), together with a written notice
to the Corporation, specifying the name or names (with addresses) in which the
Junior Exchange Notes are to be issued. If any transfer is involved in the
issuance or delivery of any Junior Exchange Notes in a name other than that of
the registered holder of the shares of Class B Preferred Stock surrendered for
exchange, such holder shall also deliver to the Corporation a sum sufficient for
all taxes payable in respect of such transfer or evidence satisfactory to the
Corporation that such taxes have been paid. Except as provided in the
immediately preceding sentence, the Corporation shall pay any issue, stamp or
other similar tax in respect of such issuance or delivery.
As soon as practicable after the later of the Optional Exchange Date and
the proper surrender of the certificate(s) for such shares of Class B Preferred
Stock as provided above, the Corporation shall deliver at the place specified in
the Optional Exchange Notice, to the holder of the shares of Class B Preferred
Stock so surrendered, or to his nominee(s) or, subject to compliance with
applicable law, transferee(s), a Junior Exchange Note or Notes (of authorized
denominations) in the principal amount to which he shall be entitled upon such
exchange, together with a check in the amount of any cash adjustment as provided
in paragraph 4(d). The Person in whose name any Junior Exchange Note is issued
upon an exchange pursuant to paragraph 4(d) shall be treated for all purposes as
the holder of record thereof as of the close of business on the Optional
Exchange Date.
(h) STATUS OF REDEEMED SHARES. All shares of Class B Preferred Stock
redeemed, exchanged, purchased or otherwise acquired by the Corporation shall be
retired and shall not be reissued.
5. Limitations on Dividends and Redemptions.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends for all
prior dividend periods on any Parity Stock which by the terms of the instrument
creating or evidencing such Parity Stock is entitled to the payment of such
cumulative dividends prior to the redemption, exchange, purchase or other
acquisition of the Class B Preferred Stock, and until full cumulative dividends
on such Parity Stock for all prior dividend periods are paid, or declared and
the consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, neither the Corporation nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Class B Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 4(a) hereof, a
sinking fund or otherwise, unless all then outstanding shares of Class B
Preferred Stock, of such Parity Stock and of any other class of series of Parity
Stock that by the terms of the instrument creating or evidencing such Parity
Stock is required to be redeemed under such circumstances are redeemed or
exchanged pursuant to the terms hereof and thereof.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class B Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Class B
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Preferred Stock for all Dividend Periods ending on or before the immediately
preceding Dividend Payment Date are paid, or declared and the consideration
sufficient to pay the same in full is set aside so as to be available for such
purpose and no other purpose, neither the Corporation nor any Subsidiary thereof
shall redeem, exchange, purchase or otherwise acquire any shares of Class B
Preferred Stock, Parity Stock or Junior Stock, or set aside any money or assets
for any such purpose, pursuant to paragraph 4 hereof, a sinking fund or
otherwise, unless all then outstanding shares of Class B Preferred Stock and of
any other class or series of Parity Stock that by the terms of the instrument
creating or evidencing such Parity Stock is required to be redeemed under such
circumstances are redeemed or exchanged pursuant to the terms hereof and
thereof.
If at any time the Corporation shall have failed to pay, or declare and set
aside the consideration sufficient to pay, full cumulative dividends on the
Class B Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Class B Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside for such purpose
and no other purpose, the Corporation shall not declare or pay any dividend on
or make any distribution with respect to any Junior Stock or Parity Stock or set
aside any money or assets for any such purpose, except that the Corporation may
declare and pay a dividend on any Parity Stock ranking on a parity basis with
the Class B Preferred Stock with respect to the right to receive dividend
payments, contemporaneously with the declaration and payment of a dividend on
the Class B Preferred Stock, provided that such dividends are declared and paid
pro rata so that the amount of dividends declared and paid per share of the
Class B Preferred Stock and such Parity Stock shall in all cases bear to each
other the same ratio that accumulated and accrued and unpaid dividends per share
on the Class B Preferred Stock and such Parity Stock bear to each other.
If the Corporation shall fail to redeem or exchange on any date fixed for
redemption or exchange pursuant to paragraph 4(a) or 4(d) hereof any shares of
Class B Preferred Stock called for redemption or exchange on such date, and
until such shares are redeemed or exchanged in full, the Corporation shall not
redeem or exchange any Parity Stock or Junior Stock or declare or pay any
dividend on or make any distribution with respect to any Junior Stock, or set
aside any money or assets for any such purpose, and neither the Corporation nor
any Subsidiary thereof shall purchase or otherwise acquire any Class B Preferred
Stock, Parity Stock or Junior Stock, or set aside any money or assets for any
such purpose.
Neither the Corporation nor any Subsidiary thereof shall redeem, exchange,
purchase or otherwise acquire any Parity Stock or Junior Stock, or set aside any
money or assets for any such purpose, if after giving effect to such redemption,
exchange, purchase or other acquisition, the amount (as determined by the Board
of Directors in good faith) that would be available for distribution to the
holders of the Class B Preferred Stock upon liquidation, dissolution or winding
up of the Corporation if such liquidation, dissolution or winding up were to
occur on the date fixed for such redemption, exchange, purchase or other
acquisition of such Parity Stock or Junior Stock would be less than the
aggregate Liquidation Preference as of such date of all shares of Class B
Preferred Stock then outstanding.
Nothing contained in the first, fourth or fifth paragraph of this paragraph
5 shall prevent (i) the payment of dividends on any Junior Stock solely in
shares of Junior Stock or the redemption, purchase or other acquisition of
Junior Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first and fifth
paragraphs hereof) through the application of the proceeds from the sale of,
shares of Junior Stock; or (ii) the payment of dividends on any Parity Stock
solely in shares of Parity Stock and/or Junior Stock or the redemption,
exchange, purchase or other acquisition of Class B Preferred Stock or Parity
Stock solely in exchange for (together with a cash adjustment for fractional
shares, if any), or (but only in the case of the first and fifth paragraphs
hereof) through the application of the proceeds from the sale of, shares of
Parity Stock and/or Junior Stock.
The provisions of the first paragraph of this paragraph 5 are for the sole
benefit of the holders of Class B Preferred Stock and Parity Stock having the
terms described therein and accordingly, at any time when there are no shares of
any such class or series of Parity Stock outstanding or if the holders of each
such class or series of Parity Stock have, by such vote or consent of the
holders thereof as may be provided for in the
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instrument creating or evidencing such class or series, waived in whole or in
part the benefit of such provisions (either generally or in the specific
instance), then the provisions of the first paragraph of this paragraph 5 shall
not (to the extent waived, in the case of any partial waiver) restrict the
redemption, exchange, purchase or other acquisition of any shares of Class B
Preferred Stock, Parity Stock or Junior Stock. All other provisions of this
paragraph 5 are for the sole benefit of the holders of Class B Preferred Stock
and accordingly, if the holders of shares of Class B Preferred Stock shall have
waived (as provided in paragraph 7 of this Section C) in whole or in part the
benefit of the applicable provisions, either generally or in the specific
instance, such provision shall not (to the extent of such waiver, in the case of
a partial waiver) restrict the redemption, exchange, purchase or other
acquisition of, or declaration, payment or making of any dividends or
distributions on the Class B Preferred Stock, any Parity Stock or any Junior
Stock.
6. Voting.
(a) VOTING RIGHTS. The holders of Class B Preferred Stock shall have no
voting rights whatsoever, except as required by law and except for the voting
rights described in this paragraph 6; provided, however, that the number of
authorized shares of Class B Preferred Stock may be increased or decreased (but
not below the number of shares of Class B Preferred Stock then outstanding) by
the affirmative vote of the holders of at least 66 % of the total voting power
of the then outstanding Voting Securities (as defined in Section C of Article V
of this Certificate), voting together as a single class as provided in Article
IX of this Certificate. Without limiting the generality of the foregoing, no
vote or consent of the holders of Class B Preferred Stock shall be required for
(a) the creation of any indebtedness of any kind of the Corporation, (b) the
creation or designation of any class or series of Senior Stock, Parity Stock or
Junior Stock, or (c) any amendment to this Certificate that would increase the
number of authorized shares of Preferred Stock or the number of authorized
shares of Class B Preferred Stock or that would decrease the number of
authorized shares of Preferred Stock or the number of authorized shares of Class
B Preferred Stock (but not below the number of shares of Preferred Stock or
Class B Preferred Stock, as the case may be, then outstanding).
(b) ELECTION OF DIRECTORS. The holders of the Class B Preferred Stock
shall have the right to vote at any annual or special meeting of stockholders
for the purpose of electing directors. Each share of Class B Preferred Stock
shall have one vote for such purpose, and shall vote as a single class with any
other class or series of capital stock of the Corporation entitled to vote in
any general election of directors.
7. Waiver.
Any provision of this Section C which, for the benefit of the holders of
Class B Preferred Stock, prohibits, limits or restricts actions by the
Corporation, or imposes obligations on the Corporation, may be waived in whole
or in part, or the application of all or any part of such provision in any
particular circumstance or generally may be waived, in each case with the
consent of the holders of at least a majority of the number of shares of Class B
Preferred Stock then outstanding (or such greater percentage thereof as may be
required by applicable law or any applicable rules of any national securities
exchange or national interdealer quotation system), either in writing or by vote
at an annual meeting or a meeting called for such purpose at which the holders
of Class B Preferred Stock shall vote as a separate class.
8. Method of Giving Notices.
Any notice required or permitted by the provisions of this Section C to be
given to the holders of shares of Class B Preferred Stock shall be deemed duly
given if deposited in the United States mail, first class mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation or supplied by him in writing to the Corporation for the purpose
of such notice.
9. Exclusion of Other Rights.
Except as may otherwise be required by law and except for the equitable
rights and remedies which may otherwise be available to holders of Class B
Preferred Stock, the shares of Class B Preferred Stock shall not
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have any designations, preferences, limitations or relative rights other than
those specifically set forth in this Certificate.
10. Heading of Subdivisions.
The headings of the various subdivisions of this Section C are for
convenience of reference only and shall not affect the interpretation of any of
the provisions of this Section C.
SECTION D
SERIES PREFERRED STOCK
The Series Preferred Stock may be issued, from time to time, in one or more
series, with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in a resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors. The Board of Directors, in such resolution or resolutions (a copy of
which shall be filed and recorded as required by law), is also expressly
authorized to fix:
(i) the distinctive serial designations and the division of such
shares into series and the number of shares of a particular series, which
may be increased or decreased, but not below the number of shares thereof
then outstanding, by a certificate made, signed, filed and recorded as
required by law;
(ii) the annual dividend rate, if any, for the particular series, and
the date or dates from which dividends on all shares of such series shall
be cumulative, if dividends on stock of the particular series shall be
cumulative;
(iii) the redemption price or prices for the particular series;
(iv) the right, if any, of the holders of a particular series to
convert or exchange such stock into or for other classes of stock or
indebtedness of the Corporation, and the terms and conditions of such
conversion;
(v) the voting rights, if any, of the holders of a particular series;
and
(vi) the obligation, if any, of the Corporation to purchase and retire
and redeem shares of a particular series as a sinking fund or redemption or
purchase account, the terms thereof and the redemption price or prices per
share for such series redeemed pursuant to the sinking fund or redemption
account.
All shares of any one series of the Series Preferred Stock shall be alike
in every particular and all series shall rank equally and be identical in all
respects except insofar as they may vary with respect to the matters which the
Board of Directors is hereby expressly authorized to determine in the resolution
or resolutions providing for the issue of any series of the Series Preferred
Stock.
SECTION E
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Each share of the Class A Common Stock, par value $1.00 per share (the
"Class A Common Stock"), and each share of the Class B Common Stock, par value
$1.00 per share (the "Class B Common Stock"), of the Corporation shall, except
as otherwise provided in this Section F, be identical in all respects and shall
have equal rights and privileges.
1. Voting Rights.
Holders of Class A Common Stock shall be entitled to one vote for each
share of such stock held, and holders of Class B Common Stock shall be entitled
to ten votes for each share of such stock held, on all matters presented to such
stockholders. Except as may otherwise be required by the laws of the State of
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Delaware, the holders of shares of Class A Common Stock and the holders of
shares of Class B Common Stock shall vote with the holders of voting shares of
Preferred Stock, if any, as one class with respect to the election of directors
and with respect to all other matters to be voted on by stockholders of the
Corporation (including, without limitation, any proposed amendment to this
Certificate that would increase the number of authorized shares of Class A
Common Stock, of Class B Common Stock or of any such class or series of voting
Preferred Stock or decrease the number of authorized shares of any such class or
series of stock (but not below the number of shares thereof then outstanding)),
and no separate vote or consent of the holders of shares of Class A Common
Stock, the holders of shares of Class B Common Stock or the holders of voting
shares of Preferred Stock shall be required for the approval of any such matter.
2. Conversion Rights.
Each share of Class B Common Stock shall be convertible, at the option of
the holder thereof, into one share of Class A Common Stock. Any such conversion
may be effected by any holder of Class B Common Stock by surrendering such
holder's certificate or certificates for the Class B Common Stock to be
converted, duly endorsed, at the office of the Corporation or any transfer agent
for the Class B Common Stock, together with a written notice to the Corporation
at such office that such holder elects to convert all or a specified number of
shares of Class B Common Stock represented by such certificate and stating the
name or names in which such holder desires the certificate or certificates for
Class A Common Stock to be issued. If so required by the Corporation, any
certificate for shares surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such shares or the duly authorized representative of such
holder. Promptly thereafter, the Corporation shall issue and deliver to such
holder or such holder's nominee or nominees, a certificate or certificates for
the number of shares of Class A Common Stock to which such holder shall be
entitled as herein provided. Such conversion shall be deemed to have been made
at the close of business on the date of receipt by the Corporation or any such
transfer agent of the certificate or certificates, notice and, if required,
instruments of transfer referred to above, and the person or persons entitled to
receive the Class A Common Stock issuable on such conversion shall be treated
for all purposes as the record holder or holders of such Class A Common Stock on
that date. A number of shares of Class A Common Stock equal to the number of
shares of Class B Common Stock outstanding from time to time shall be set aside
and reserved for issuance upon conversion of shares of Class B Common Stock.
Shares of Class B Common Stock that have been converted hereunder shall remain
treasury shares to be disposed of by resolution of the Board of Directors.
Shares of Class A Common Stock shall not be convertible into shares of Class B
Common Stock.
3. Dividends.
Subject to paragraph 4 of this Section E, whenever a dividend is paid to
the holders of Class A Common Stock, the Corporation also shall pay to the
holders of Class B Common Stock a dividend per share at least equal to the
dividend per share paid to the holders of the Class A Common Stock. Subject to
paragraph 4 of this Section E, whenever a dividend is paid to the holders of
Class B Common Stock, the Corporation shall also pay to the holders of the Class
A Common Stock a dividend per share at least equal to the dividend per share
paid to the holders of the Class B Common Stock. Dividends shall be payable only
as and when declared by the Board of Directors.
4. Share Distributions.
If at any time a distribution on the Class A Common Stock or Class B Common
Stock is to be paid in Class A Common Stock, Class B Common Stock or any other
securities of the Corporation (hereinafter sometimes called a "share
distribution"), such share distribution may be declared and paid only as
follows:
(a) a share distribution consisting of Class A Common Stock to holders
of Class A Common Stock and Class B Common Stock, on an equal per share
basis; or to holders of Class A Common Stock only, but in such event there
shall also be a simultaneous share distribution to holders of Class B
Common Stock consisting of shares of Class B Common Stock on an equal per
share basis;
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(b) a share distribution consisting of Class B Common Stock to holders
of Class B Common Stock and Class A Common Stock, on an equal per share
basis; or to holders of Class B Common Stock only, but in such event there
shall also be a simultaneous share distribution to holders of Class A
Common Stock consisting of shares of Class A Common Stock on an equal per
share basis; and
(c) a share distribution consisting of any other class of securities
of the Corporation other than Common Stock, to the holders of Class A
Common Stock and the holders of Class B Common Stock on an equal per share
basis.
The Corporation shall not reclassify, subdivide or combine one class of its
Common Stock without reclassifying, subdividing or combining the other class of
Common Stock, on an equal per share basis.
5. Liquidation and Mergers.
Subject to the prior payment in full of the preferential amounts to which
any Preferred Stock is entitled, the holders of Class A Common Stock and the
holders of Class B Common Stock shall share equally, on a share for share basis,
in any distribution of the Corporation's assets upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment or provisions for payment of the debts and other liabilities of
the Corporation. Neither the consolidation or merger of the Corporation with or
into any other corporation or corporations nor the sale, transfer or lease of
all or substantially all of the assets of the Corporation shall itself be deemed
to be a liquidation, dissolution or winding up of the Corporation within the
meaning of this paragraph 5.
SECTION F
UNCLAIMED DIVIDENDS
Any and all right, title, interest and claim in or to any dividends
declared by the Corporation, whether in cash, stock or otherwise, which are
unclaimed for a period of four years after the close of business on the payment
date, shall be and be deemed extinguished and abandoned; and such unclaimed
dividends in the possession of the Corporation, its transfer agent or other
agents or depositories, shall at such time become the absolute property of the
Corporation, free and clear of any and all claims of any Persons whatsoever.
ARTICLE V
DIRECTORS
SECTION A
NUMBER OF DIRECTORS
The governing body of the Corporation shall be a Board of Directors.
Subject to any rights of the holders of any class or series of Preferred Stock
to elect additional directors, the number of directors shall not be less than
three (3) and the exact number of directors shall be fixed by the Board of
Directors by resolution. Election of directors need not be by written ballot.
SECTION B
CLASSIFICATION OF THE BOARD
Except as otherwise fixed by or pursuant to the provisions of Article IV
hereof relating to the rights of the holders of any class or series of Preferred
Stock to separately elect additional directors, which additional directors are
not required to be classified pursuant to the terms of such class or series of
Preferred Stock, the Board of Directors of the Corporation shall be divided into
three classes: Class I, Class II and Class III. Each class shall consist, as
nearly as possible, of a number of directors equal to one-third (33 1/3%) of the
then authorized number of members of the Board of Directors. The term of office
of the initial Class I directors
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shall expire at the annual meeting of stockholders in 1995; the term of office
of the initial Class II directors shall expire at the annual meeting of
stockholders in 1996; and the term of office of the initial Class III directors
shall expire at the annual meeting of stockholders in 1997. At each annual
meeting of stockholders of the Corporation the successors of that class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election. The directors of each class will hold
office until their respective successors are elected and qualified.
SECTION C
REMOVAL OF DIRECTORS
Subject to the rights of the holders of any class or series of Preferred
Stock, directors may be removed from office only for cause (as hereinafter
defined), but not without cause, upon the affirmative vote of the holders of at
least 66 2/3% of the total voting power of the then outstanding Voting
Securities (as hereinafter defined), voting together as a single class. Except
as may otherwise be provided by law, "cause" for removal, for purposes of this
Section C, shall exist only if: (i) the director whose removal is proposed has
been convicted of a felony, or has been granted immunity to testify in an action
where another has been convicted of a felony, by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal; (ii)
such director has become mentally incompetent, whether or not so adjudicated,
which mental incompetence directly affects his ability as a director of the
Corporation, as determined by at least 66 2/3% of the members of the Board of
Directors then in office (other than such director); or (iii) such director's
actions or failure to act have been determined by at least 66 2/3% of the
members of the Board of Directors then in office (other than such director) to
be in derogation of the director's duties. The term "Voting Securities" shall
include the Class A Common Stock, the Class B Common Stock and any class or
series of Preferred Stock entitled to vote with the holders of Common Stock
generally upon all matters which may be submitted to a vote of stockholders at
any annual meeting or special meeting thereof.
SECTION D
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Subject to the rights of the holders of any class or series of Preferred
Stock, vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or other cause, and newly created directorships
resulting from any increase in the number of directors on the Board of
Directors, shall be filled by the affirmative vote of a majority of the
remaining directors then in office (even though less than a quorum) or by the
sole remaining director. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the vacancy occurred or to which the new directorship is
apportioned, and until such director's successor shall have been elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director, except as may be
provided in the terms of any class or series of Preferred Stock with respect to
any additional director elected by the holders of such class or series of
Preferred Stock.
SECTION E
LIMITATION ON LIABILITY AND INDEMNIFICATION
1. Limitation On Liability.
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the Corporation shall
not be liable to the Corporation or any of its stockholders for monetary damages
for breach of fiduciary duty as a director. Any repeal or modification of this
paragraph 1 shall be prospective only and shall not adversely affect any
limitation, right or protection of a director of the Corporation existing at the
time of such repeal or modification.
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2. Indemnification.
(a) RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. Such right of
indemnification shall inure whether or not the claim asserted is based on
matters which antedate the adoption of this Section E. The Corporation shall be
required to indemnify a person in connection with a proceeding (or part thereof)
initiated by such person only if the proceeding (or part thereof) was authorized
by the Board of Directors of the Corporation.
(b) PREPAYMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of expenses incurred
by a director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the director or officer to
repay all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this paragraph or
otherwise.
(c) CLAIMS. If a claim for indemnification or payment of expenses under
this paragraph is not paid in full within 60 days after a written claim therefor
has been received by the Corporation, the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification or payment of expenses under
applicable law.
(d) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
paragraph shall not be exclusive of any other rights which such person may or
hereafter acquire under any statute, provision of this Certificate, the Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
(e) OTHER INDEMNIFICATION. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit entity.
3. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of this Section E
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
SECTION F
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than 75% of the members of the Board of Directors
then in office, is hereby expressly authorized and empowered to adopt, amend or
repeal any provision of the Bylaws of this Corporation.
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ARTICLE VI
TERM
The term of existence of this Corporation shall be perpetual.
ARTICLE VII
STOCK NOT ASSESSABLE
The capital stock of this Corporation shall not be assessable. It shall be
issued as fully paid, and the private property of the stockholders shall not be
liable for the debts, obligations or liabilities of this Corporation. This
Certificate shall not be subject to amendment in this respect.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS
SECTION A
ANNUAL AND SPECIAL MEETINGS
Subject to the rights of the holders of any class or series of Preferred
Stock, stockholder action may be taken only at an annual or special meeting.
Except as otherwise provided in the terms of any class or series of Preferred
Stock or unless otherwise prescribed by law or by another provision of this
Certificate, special meetings of the stockholders of the Corporation, for any
purpose or purposes, shall be called by the Secretary of the Corporation (i)
upon the written request of the holders of not less than 66 2/3% of the total
voting power of the outstanding Voting Securities (as defined in Section C of
Article V of this Certificate) or (ii) at the request of at least 75% of the
members of the Board of Directors then in office.
SECTION B
ANNUAL AND SPECIAL MEETINGS
Except as otherwise provided in the terms of any class or series of
Preferred Stock, no action required to be taken or which may be taken at any
annual meeting or special meeting of stockholders may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
is specifically denied.
ARTICLE IX
ACTIONS REQUIRING SUPERMAJORITY STOCKHOLDER VOTE
Subject to the rights of the holders of any class or series of Preferred
Stock, the affirmative vote of the holders of at least 66 2/3% of the total
voting power of the then outstanding Voting Securities (as defined in Section C
of Article V of this Certificate), voting together as a single class at a
meeting specifically called for such purpose, shall be required in order for the
Corporation to take any action to authorize:
(a) the amendment, alteration or repeal of any provision of this
Certificate or the addition or insertion of other provisions herein;
(b) the adoption, amendment or repeal of any provision of the Bylaws
of the Corporation; provided, however, that this clause (b) shall not apply
to, and no vote of the stockholders of the Corporation shall be required to
authorize, the adoption, amendment or repeal of any provision of the Bylaws
of the Corporation by the Board of Directors in accordance with the power
conferred upon it pursuant to Section F of Article V of this Certificate;
(c) the merger or consolidation of this Corporation with or into any
other corporation; provided, however, that this clause (c) shall not apply
to any merger or consolidation (i) as to which the laws of the
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State of Delaware, as then in effect, do not require the consent of this
Corporation's stockholders, or (ii) which at least 75% of the members of
the Board of Directors then in office have approved;
(d) the sale, lease or exchange of all, or substantially all, of the
property and assets of the Corporation; or
(e) the dissolution of the Corporation.
All rights at any time conferred upon the stockholders of the Corporation
pursuant to this Certificate are granted subject to the provisions of this
Article IX.
IN WITNESS WHEREOF, the undersigned has signed this Amended and Restated
Certificate of Incorporation this day of , 1994.
<TABLE>
<S> <C>
TCI/LIBERTY HOLDING COMPANY
By:
_________________________
, President
ATTEST:
- ---------------------------------------------
</TABLE>
26
<PAGE> 1
EXHIBIT 3
BYLAWS OF
TELE-COMMUNICATIONS, INC.
(A DELAWARE CORPORATION)
------------------------
AS AMENDED AND RESTATED JULY 19, 1979
WITH AMENDMENTS APRIL 8, 1980, OCTOBER 29, 1987,
DECEMBER 10, 1993
------------------------
ARTICLE I
OFFICES
The Company shall maintain a registered office in the State of Delaware as
required by law. The Company may also have offices in such other places, either
within or without the State of Delaware, as the Board of Directors may from time
to time designate or as the business of the Company may require.
ARTICLE II
SEAL
The seal of the Company shall have inscribed thereon the name of the
Company, the State of its incorporation and the words "Corporate Seal". The seal
may be used by causing it, or a facsimile thereof, to be impressed or affixed or
reproduced or otherwise.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the Stockholders of the Company
shall be held at such place either within or without the State of Delaware as
may from time to time be designated by the Board of Directors and stated in the
Notice of Meeting.
Section 2. Annual Meeting of Stockholders.
(a) The Annual Meeting of the Stockholders of the Company shall be held on
the fourth Thursday of June each year at the hour of 2:00 p.m., or at such other
time and place, within or without the State of Delaware, as shall be designated
by the Board of Directors and stated in the Notice of Meeting. The purpose of
the Meeting shall be the election of Directors and the transaction of such other
business as properly may be brought before the Meeting.
(b) If the election of Directors shall not be held on the day here
designated for any Annual Meeting, or at any adjournment of such Meeting, the
Board of Directors shall call a Special Meeting of the Stockholders as soon as
conveniently possible thereafter. At such Meeting the election of Directors
shall take place, and such election and any other business transacted thereat
shall have the same force and effect as at an Annual Meeting duly called and
held.
Section 3. Special Stockholders' Meetings. Special Stockholders' Meetings
shall be called on the written request of the holders of shares of stock
represented by not less than two-thirds (66 2/3%) of the votes attributable to
the Company's Class A Common, Class B Common and Preferred Stock as a class,
representing the "Voting Power" of the shares entitled to vote of the issued and
outstanding shares of the Company, and may be called at the request of
three-quarter (75%) of the Directors. Such request shall state the purposes of
the proposed Meeting. For such Meetings, notices shall be given in the same
manner as notices of the Annual Meeting, except they shall be signed by the
persons calling the Meeting. No Special
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Stockholders' Meetings shall consider any business except that which is
designated in general terms in the Notice of the Meeting. Any Meeting to amend
the Certificate of Incorporation shall describe generally the proposed
amendment.
Section 4. Notices of Meetings. Notices of both Special and Annual
Stockholders' Meetings shall be given in writing and shall be signed (originally
or by facsimile) by the Secretary or other persons calling the Meeting. Such
Notices shall be given personally or sent by mail to each Stockholder at his
last known address as shown on the books of the Company not less than ten nor
more than sixty days before the said Meeting. Except where otherwise required by
law or these Bylaws, notice need not be given of any adjourned Meeting of the
Stockholders.
Section 5. Quorum. Except as otherwise provided by statute or the
Certificate of Incorporation, at any Meeting of the Stockholders, a majority in
voting power of the issued and outstanding stock of the Company shall constitute
a quorum; said stock may be present in person or by proxy. If the holders of the
number of votes necessary to constitute a quorum shall fail to attend the
Meeting at the time and place fixed in the Notice of the Meeting, the Meeting
shall be continued from time to time without other notice (no such adjournment
or adjournments shall exceed 60 days), until the holders of the number of votes
requisite to constitute a quorum shall attend. At such adjourned Meeting at
which a quorum shall be present, any business may be transacted at the Meeting
as originally notified.
Section 6. Voting. At each meeting of stockholders, every Stockholder
having the right to vote shall be entitled to vote, either in person or by
proxy, the number of votes as provided for in or pursuant to the Certificate of
Incorporation for each share of stock registered in his name on the books of the
Company on the date of the last closing of the books against transfers of stock,
or the record date fixed for the determination of Stockholders entitled to vote
at such Meeting, or if the books are not closed, or if there be no record date
fixed, then on the date of such Meeting. When a quorum is present at any
Meeting, the affirmative vote of a majority of the votes represented by the
issued and outstanding shares entitled to vote (Voting Power), present in person
or represented by proxy shall decide any matter brought before such Meeting,
unless the question is one upon which, by express provision of the Delaware
statutes or of the Certificate of Incorporation, a different vote is required,
in which case such express provision shall govern and control the decision of
such question. Except as may be determined by the Board of Directors of the
Company with respect to the Preferred Stock, and except as otherwise may be
required by law, the holders of the Class A Common Stock and the holders of the
Class B Common Stock shall vote with the holders of voting shares of the
Preferred Stock, if any, as one class for the election of Directors and for all
other purposes. At all elections for members of the Board of Directors of the
Company, each holder of stock certified to vote shall be entitled to as many
votes as shall equal the number of votes which he would be entitled to cast for
the election of Directors with respect to the votes represented by his shares of
stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single Director or may distribute them among the
number to be voted for, or for any two or more of them as he may see fit.
Section 7. Record Date.
(a) In order to determine the holders of record of the Company's stock who
are entitled to notice of Meetings, to vote at a Meeting or adjournment thereof,
and to receive payment of any dividend, or to make a determination of the
Stockholders of record for any proper purpose, the Board of Directors of the
Company may fix a date as the record date for such determination of
Stockholders. Such date shall be no more than 60 days prior to the date of the
action which requires such determination, nor, in the case of a Stockholders'
Meeting, shall it be less than ten days in advance of such Meeting. A
determination of Stockholders of record entitled to notice of or to vote at any
Meeting shall apply to any adjournment of such Meeting, except that the Board of
Directors may fix a new record date for any adjourned Meeting.
(b) No proxy shall be valid and voted on after the Meeting of the
Stockholders, or any adjournment thereof, to which it applies. Every proxy shall
be revocable at the pleasure of the Stockholder executing it, except in those
cases where an irrevocable proxy is duly executed and permitted by law.
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<PAGE> 3
Section 8. Presiding Officer; Order of Business; Conduct of Meeting.
(a) Meetings of the Stockholders shall be presided over by the Chairman of
the Board of Directors, or if he is not present, by the Vice Chairman or
President, or if neither the Vice Chairman of the Board nor the President is
present, by a Vice President. The Secretary of the Company, or, in his absence,
an Assistant Secretary, shall act as secretary of every Meeting, but in the
absence of the Secretary or Assistant Secretary, the chairman of the Meeting may
choose any person present to act as secretary of the Meeting.
(b) Subject to the provisions of this Section, Meetings of Stockholders
shall generally follow accepted rules of parliamentary procedure.
1. Except when overruled by a majority of the votes represented by the
votes held by Stockholders present, the Chairman of the Meeting shall have
absolute authority over matters of procedure and to state the rules under
which the voting shall be conducted.
2. If disorder shall arise which prevents continuation of the
legitimate business of the Meeting, the Chairman may quit the chair and
announce the adjournment of the Meeting; and upon his so doing, the Meeting
is immediately adjourned.
3. The Chairman may ask or require that anyone not a bona fide
Shareholder or proxy leave the Meeting.
4. A resolution or motion shall be considered for a vote only if
proposed by a Shareholder or duly authorized proxy, and seconded by an
individual, who is a Shareholder or duly authorized proxy, other than the
individual who proposed the resolution on motion.
(c) The following order of business shall be observed at all Annual
Stockholders' meetings insofar as is practicable:
1. Calling the roll.
2. Reading, correcting and approving minutes of a previous Meeting,
unless the same be waived.
3. Special business stated in the Notice of Meeting.
4. Election of directors.
5. New business.
At any Special Meeting of Stockholders, the business transacted shall be
confined to the objects and purposes described in the Notice of the Meeting.
When such objectives include the amendment of the Certificate of Incorporation,
both Notices of Annual and Special Meetings wherein such questions are
considered shall describe with reasonable certainty the proposed amendment.
Section 9. Proxies. A Stockholder may vote his shares through a proxy or
attorney in fact appointed by a written instrument signed by the Stockholder and
delivered to the Secretary of the Meeting.
Section 10. Voting List.
(a) A complete list of the Stockholders of the Company entitled to vote at
the ensuing Meeting, arranged in alphabetical order, and showing the address of
and number and class of shares owned by each stockholder shall be prepared by
the Secretary or other officer of the Transfer Agent of the Company having
charge of the Stock Transfer Books.
(b) The original Stock Transfer Books shall be prima facie evidence as to
who are the Stockholders entitled to examine such list or to vote at any Meeting
of the Stockholders.
(c) Failure to comply with the requirements of this section shall not
affect the validity of any action taken at such Meeting of the Stockholders.
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<PAGE> 4
ARTICLE IV
BOARD OF DIRECTORS
Section 1. General Authority. The property, business and affairs of the
Company shall be managed and controlled by its Board of Directors, which may
exercise all such powers of the Company and do all such lawful acts and things
as are not by statute or the Certificate of Incorporation or these Bylaws
directed or required to be exercised or done by the Stockholders.
Section 2. Number and Term of Office. The governing body of this Company
shall be a Board of Directors. The Directors need not be Stockholders and need
not be residents of Delaware. The number of Directors shall be not less than six
(6) nor more than twelve (12), and each Director shall be of legal age. The
number of the Board of Directors shall be fixed as eight (8). Such Directors
shall be divided into three classes: Class I, Class II and Class III. Each Class
shall consist, as nearly as possible, of one-third of the whole number of the
Board of Directors. Class I Directors elected at the 1979 Annual Meeting of
Stockholders shall initially serve until the next Annual Meeting following their
election; Class II Directors elected at the 1979 Annual Meeting of Stockholders
shall initially serve until the second Annual Meeting following their election;
Class III Directors shall be elected to serve until the third Annual Meeting of
Stockholders following their election; and, in the case of each Class, the
Directors shall serve until their respective successors are duly elected and
shall qualify. At each Annual Meeting of Stockholders after 1979, the Directors
chosen to succeed those whose terms shall have expired shall be elected to hold
office for a term to expire at the third succeeding Annual Meeting of
Stockholders after their election, and until their respective successors are
elected and qualified. If the number of Directors is changed, any increase or
decrease shall be apportioned among the Classes so as to maintain all Classes as
equal in number as possible, and any additional Director elected to any Class
shall hold office for a term which shall coincide with the terms of the other
Directors in such Class.
Section 3. Elections. Other than as provided in Section 2 of this Article
IV, the Directors of the Company shall be elected at the Annual Meeting of
Stockholders or at a Special Meeting of Stockholders called for that purpose.
Any vacancy occurring in the Board of Directors caused by death, resignation,
removal or otherwise, and any newly created directorship resulting from an
increase in the number of Directors, may be filled by the Directors then in
office although such Directors are less than a quorum or by the sole remaining
Director. Each Director chosen to fill a vacancy or a newly created directorship
shall hold office until the next election of the Class for which such Director
shall have been chosen, and until his successor shall be duly elected and shall
qualify.
Section 4. Executive Committee. By the affirmative vote of three-quarters
of the Directors, the Board of Directors may designate an Executive Committee,
all of whose members shall be Directors, to manage and operate the affairs of
the Company or particular properties or enterprises of the Company. Subject to
the limitations provided by the Delaware Statutes or the Certificate of
Incorporation, such Committee shall exercise all powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation including, but not limited to, the power and authority to authorize
the issuance of common stock not to exceed such number of shares as shall be
specifically authorized from time to time by the Board of Directors in respect
of a particular transaction. Such Committee shall keep minutes of its meetings
and report to the Board of Directors not less often than quarterly on its
activities and shall be responsible to the Board for the conduct of the
enterprises and affairs entrusted to it.
Section 5. Other Committees. The Board of Directors may by resolution
establish committees other than an Executive Committee and shall specify with
particularity the powers and duties of any such committee. Subject to
limitations provided by the Delaware Statutes or the Certificate of
Incorporation, any such committee shall exercise all powers and authority
specifically granted to it by the Board of Directors which powers may include
the authority to authorize the issuance of stock not to exceed such number of
shares as shall be specifically authorized from time to time by the Board of
Directors in respect to a particular transaction. Such committees shall serve at
the pleasure of the Board; keep minutes of their meetings; and have such names
as the Board by resolution may determine and shall be responsible to the Board
for the conduct of the enterprises and affairs entrusted to them.
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Section 6. Indemnification. The Company shall indemnify members of the
Board of Directors and officers of the Company and their respective heirs,
personal representatives and successors in interest for or on account of any
action performed on behalf of the Company, to the extent provided by the
Delaware Corporation statutes and by the Company's Certificate of Incorporation
as now or hereafter in effect.
Section 7. Place of Meetings. The Directors may hold their meetings in
such place or places as the Board of Directors may from time to time by
resolution determine.
Section 8. Board Meetings.
(a) Meetings (Regular or Special) of the Board of Directors shall be held
not less often than four times a year. A Regular Meeting shall follow the Annual
Meeting of the Stockholders as promptly as is practicable for the purpose of
organization, the election and appointment of officers and the transaction of
other business. Notice of each Regular Meeting shall be furnished in writing to
each member of the Board of Directors not less than five days in advance of said
meeting. No notice need be given of the Meeting following the Stockholders'
Meeting.
(b) At each Regular or Special Meeting of the Board, the presence or
participation of a majority of the full number of Directors then in office
(including both those elected and appointed) shall constitute a quorum for the
transaction of business, and the vote of a majority of the Directors voting at
any Meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically required by law, the
Certificate of Incorporation or these Bylaws.
Section 9. Special Meetings. Special Meetings of the Board of Directors
may be called by the Chairman of the Board or the President and shall be called
by the Secretary on the written request of a majority of the Directors of the
Company. Unless waived, Notices of the Meetings shall state with reasonable
certainty the nature and purposes thereof, together with the proposed agenda.
Notices of Meetings of which notices are required shall be given personally, or
by telegram or telephone, confirmed in writing, and shall be given not less than
two days in advance of said Meeting.
Section 10. Action Without a Meeting. Any action that may be taken at a
Meeting of the Directors or a Committee may be taken without a Meeting if a
consent in writing describing the action so taken shall be signed by all of the
Directors or Committee entitled to vote with respect to the subject matter
thereof, and filed with the Minutes of the proceedings of the Board of
Directors.
Section 11. Order of Business. At Meetings of the Board of Directors,
business shall be transacted in such order as the Board may by resolution
determine. At all Meetings of the Board of Directors, the Chairman of the Board,
or in his absence the Vice Chairman, or in his absence, the President, shall
preside.
Section 12. Directors' Compensation. Directors shall receive such
compensation for attendance at any Meetings of the Board and any expenses
incidental to the performance of their duties as the Board shall determine by
resolution. Such compensation may be in addition to any compensation received by
the members of the Board in any other capacity.
Section 13. Minutes. The Board of Directors shall keep written minutes of
its meetings. In the event the Secretary of the Company is not a member of the
Board of Directors, the Board shall prescribe by a resolution the officer or
other person who shall be charged with the responsibility of keeping and
maintaining such Minutes.
Section 14. Notice and Waiver of Notice
(a) Notice to Directors shall be in writing and may be delivered personally
or by mail or telegram at their residences or usual places of business.
(b) Members of the Board of Directors may waive in writing any requirements
of notice of any Special or Regular Meeting of the Board or a Committee of the
board, provided, nevertheless, that a waiver must be executed by each of the
members.
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Section 15. Dividends. Subject always to the provisions of the laws of
Delaware and the Certificate of Incorporation, the Board of Directors shall have
full power to determine whether any, and if so what part, of the funds legally
available for the payment of dividends shall be declared in dividends and paid
to the stockholders of the Company. The Board of Directors may fix a sum which
may be set aside or reserved over and above the paid-in capital of the Company
for working capital or as a reserve for any proper purpose, and from time to
time may increase, diminish and vary such funds in the Board's absolute judgment
and discretion. Dividends upon the shares of stock of the Company, subject
always to the mentioned provisions, may be declared by the Board of Directors at
any Regular or Special Meeting, payable in cash, property or shares of the
Company's stock.
ARTICLE V
OFFICERS
Section 1. Number and Tenure. The Board of Directors shall elect from its
own number, at its first Meeting after each Annual Meeting of Stockholders, a
Chairman of the Board, a Vice Chairman and a President. The Board may also elect
such Vice Presidents as in the opinion of the Board the business of the Company
requires, a Treasurer and a Secretary, any of whom may or may not be Directors.
The Board may also elect, from time to time, such other or additional officers
as in its opinion are desirable for the conduct of the business of the Company.
The officers of the Corporations shall hold office until the first Meeting of
the Board of Directors following the Annual Meeting of Stockholders next
following their respective election; but any officer shall be subject to
removal, with or without cause, as provided by law or these Bylaws.
Section 2. Discretion. In its discretion, the Board of Directors, by the
vote of a majority of the whole Board, may leave any office unfilled for any
such period as it may fix by resolution. Any office or agent of the Company may
be removed at any time by the affirmative vote of three-quarters (75%) of the
whole Board of Directors.
Section 3. Chairman of the Board. The Chairman of the Board shall be a
Director and, when present, shall preside at all Meetings of the Board of
Directors. He shall be a member of all standing Committees and Chairman of the
Executive Committee. He shall perform such other duties as may be prescribed
from time to time by the Board of Directors or by the Bylaws. He shall have the
powers of the President and power to delegate any of the Chairman's powers, on a
temporary or permanent basis, to the Vice Chairman or the President.
Section 4. Vice Chairman. The Vice Chairman shall have all of the powers
and may perform all of the administrative and other duties of the Chairman of
the Board in the event of the absence or disability of the Chairman. He shall
perform such other duties as may be prescribed from time to time by the Board of
Directors.
Section 5. President. The President shall be the chief executive officer
of the Company. He shall be a member of the Board of Directors. He shall
exercise such duties as customarily pertain to the office of President and shall
have general and active supervision over the property, business and affairs of
the Company and over its several officers. He may appoint and terminate the
appointment or election of officers, agents, or employees other than those
appointed or elected by the Board of Directors. He may sign, execute and
deliver, in the name of the Company, powers of attorney, contracts, bonds and
other obligations which implement policies established by the Board, and shall
perform such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws.
Section 6. Vice Presidents. Vice Presidents shall have such powers and
perform such duties as may be assigned to them by the Chairman of the Board, the
Vice Chairman, President, Executive Committee or Board of Directors. In the
absence or disability of the Chairman of the Board and the President, the Vice
Chairman or any Vice President designated by the Board shall perform the duties
and exercise the powers of the President. A Vice President may sign and execute
contracts and other obligations pertaining to the regular course of his duties
which implement policies established by the Board, and shall perform such other
duties as may be prescribed from time to time by the Board of Directors or the
Bylaws.
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Section 7. Treasurer. The Treasurer shall be the chief financial officer
of the Company. Unless the Board otherwise declares by resolution, the Treasurer
shall have general custody of all the funds and securities of the Company and
have general supervision of the collection and disbursement of fund of the
Company. He shall endorse for collection on behalf of the Company checks, notes
and other obligations, and shall deposit the same to the credit of the Company
in such bank or banks or depository as the Board of Directors may designate. He
may sign, with the Chairman of the Board, President, or such other person or
persons as may be designated for the purpose by the Board of Directors, all
bills of exchange or promissory notes of the Company. He shall enter or cause to
be entered regularly in the books of the Company a full and accurate account of
all moneys received and paid by him on account of the Company; shall at all
reasonable times exhibit his books and accounts to any directors of the Company
upon application at the office of the Company during business hours; and,
whenever required by the Board of Directors or the President, shall render a
statement of his accounts. He shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws. He may
be required to give bond for the faithful performance of his duties in such sum
and with such surety as shall be approved by the Board of Directors. The Board
may authorize one or more accounting firms to perform any act or discharge any
responsibility of the Treasurer. Any Assistant Treasurer shall, in the absence
or disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section 8. Secretary. The Secretary shall keep the Minutes of all
Meetings of the Stockholders and of the Board of Directors, and to the extent
ordered by the Board of Directors, the Chairman of the Board or the President,
may keep the Minutes of Meetings of all Committees. He shall cause notice to be
given of Meetings of Stockholders, of the Board of Directors, and of any
Committee appointed by the Board. He shall have custody of the corporate seal,
Minutes and records relating to the conduct and acts of the Stockholders and
Board of Directors, which shall, at all reasonable times, be open to the
examination of any Director. The Secretary or any Assistant Secretary may
certify the record of proceedings of the Meetings of the Stockholders or of the
Board of Directors, of resolutions adopted at such Meetings, may sign or attest
certificates, statements or reports required to be filed with governmental
bodies or officials; may sign acknowledgments of instruments; may give Notices
of Meetings; and shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section 9. The Controller. The Controller shall be the chief accounting
officer of the Company. He shall cause regular audits of the books and records
of the Company to be made. He shall perform such other duties and exercise such
other powers as the Board of Directors may from time to time prescribe.
Section 10. Bank Accounts. In addition to such bank accounts as may be
authorized in the usual manner by resolution of the Board of Directors, the
Treasurer, with approval of the Chairman of the Board or the President may
authorize such bank accounts to be opened or maintained in the name and on
behalf of the Company as he may deem necessary or appropriate, provided payments
from such bank accounts are to be made upon and according to the check of the
Company, which may be signed jointly or singly by either the manual or facsimile
signature or signatures of such officers or bonded employees of the Company as
shall be specified in the written instructions of the Treasurer or Assistant
Treasurer of the Company with the approval of the Chairman of the Board or the
President of the Company.
Section 11. Vacancies. In case any office shall become vacant, the Board
of Directors shall have power to fill such vacancies. In case of the absence or
disability of any officer, the Board of Directors may delegate the powers or
duties of any officer to another officer in the Company, or to a Director.
Section 12. Proxies. Unless otherwise directed by the Board of Directors,
the Chairman of the Board, Vice Chairman or President, or their designees shall
have full power and authority on behalf of the Company to attend and to vote
upon all matters and resolutions at any Meeting of Stockholders of any
corporation in which this Company may hold stock, and may exercise on behalf of
this Company any and all of the rights and powers incident to the ownership of
such stock at any such Meeting, whether Regular or Special, and at all
adjournments thereof, and shall have power and authority to execute and deliver
proxies and consents on
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behalf of this Company in connection with the exercise by this Company of the
rights and powers incident to the ownership of such stock, with full power of
substitution or revocation.
Section 13. Dual Offices. Any person may hold more than one office,
however the President shall not hold any other office except that of Chairman of
the Board.
Section 14. Salaries. The salaries of all Executive officers of the
Company shall be fixed by the Board of Directors. No officer shall be ineligible
to receive such salary by reason of the fact that he is also a Director of the
Company and receiving compensation therefor.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form.
(a) The interest of each Stockholder of the Company shall be evidenced by
certificates for shares of stock, certifying the Class and number of shares
represented thereby and in such form, not inconsistent with the Certificate of
Incorporation, as the Board of Directors may from time to time prescribe.
(b) The certificates of stock shall be signed by the Chairman of the Board
of Directors or the President and by the Secretary or the Treasurer, and sealed
with the seal of the Company. Such seal may be a facsimile, engraved or printed.
Where any certificate is manually signed by a transfer agent or by a registrar,
the signatures of any officers upon such certificate may be facsimiles, engraved
or printed. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon any certificate shall have ceased
to be such before the certificate is issued, it may be issued by the Company
with the same effect as if such officer, transfer agent or registrar had not
ceased to be such at the time of its issue.
Section 2. Transfers.
(a) Transfers of shares of the capital stock of the Company shall be made
only on the books of the Company by the registered owner thereof, or by his duly
authorized attorney, with a transfer agent appointed as elsewhere provided in
the Bylaws, and on surrender of the certificate or certificates for such shares
properly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and with all taxes thereon paid.
(b) The person in whose name shares of stock stand on the books of the
Company shall be deemed by the Company to be the owner thereof for all purposes,
and the Company shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
Section 3. Lost or Destroyed Certificates. The Board shall have the power
to direct new stock certificates to be issued to any Stockholder in place of any
certificates theretofore issued by the Company, when such Stockholder proves to
the satisfaction of the Board that a stock certificate is lost or destroyed, or
upon the posting of an indemnity bond by the owner of such lost or destroyed
certificates, or his legal representative, in such amount as the Board shall
deem appropriate, to hold the Company harmless from any loss or claim arising
out of or in connection with the issuance of a duplicate certificate, unless
such requirement be dispensed with the Board, in its discretion, in any instance
or instances.
Section 4. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates for shares to bear the manual or facsimile signature or
signatures of any of them.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Company shall commence on
the first day of January of each year, commencing with the year of its
incorporation.
Section 2. Books and Records. A certified copy of the Certificate of
Incorporation and the Bylaws of this Company shall be deposited in the name of
the Company in such bank or banks or trust company or other institutions as the
Board of Directors shall designate by resolution. All checks or demands for the
payment of money and all notes and other instruments of a negotiable nature
shall be signed by the persons designated by appropriate resolution of the Board
of Directors or these Bylaws.
Section 3. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Company, and such authority may be
general or confined to specific instances.
Section 4. Loans. No loans shall be contracted on behalf of the Company
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Board of Directors; and such authority may be general or
confined to specific instances.
Section 5. Saving Clause. In the event any provision of these Bylaws is
inconsistent with the Certificate of Incorporation of this Company or the
corporate laws of the State of Delaware, such provision shall be invalid to the
extent only of such conflict, and such conflict, and such conflict shall not
affect the validity of all other provision of these Bylaws.
ARTICLE VIII
AMENDMENTS
Section 1. Amendments. These Bylaws may be adopted, repealed, altered or
amended only by unanimous written consent action of all Directors or by the
affirmative votes of three-quarters (75%) of the members of the Board of
Directors acting at a Regular or Special Meeting called by written notice, which
written notice includes notice of proposed action to amend the Bylaws, or by the
affirmative vote of two-thirds (66 2/3%) of the votes represented by the issued
and outstanding shares of the Company entitled to vote at a Meeting called for
such purposes.
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statement (No.
33-59058) on Form S-8 of Tele-Communications, Inc. Employee Stock Purchase Plan;
Registration Statement (No. 2-87938) on Form S-8 of Tele-Communications, Inc.
1982 Incentive Stock Option Plan; Registration Statement (No. 33-44532) on Form
S-8 of United Artists Theatre Circuit, Inc. Employee Stock Purchase Plan;
Registration Statements (Nos. 2-96706, 2-99512, 33-12385, 33-51104, 33-58198 and
33-60982) on Form S-3; the Post-Effective Amendment No. 1 to Form S-4
Registration Statement (No. 33-43009) on Form S-8 Registration Statement of
Tele-Communications, Inc. of our reports dated March 18, 1994, relating to the
consolidated balance sheets of Liberty Media Corporation and subsidiaries
(Successor) as of December 31, 1993 and 1992, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1993 and 1992, and the period from April 1, 1991 to December
31, 1991 (Successor Periods) and the consolidated statements of operations,
stockholders' equity and cash flows of "Liberty Media" (a combination of certain
programming interests and cable television assets of Tele-Communications, Inc.)
(Predecessor) for the period from January 1, 1991 to March 31, 1991 (Predecessor
Period), and the related financial statement schedules, which reports appear in
the April 4, 1994 Current Report on Form 8-K of Tele-Communications, Inc.
Our reports refer to a change in the method of accounting for income taxes.
/s/ KPMG PEAT MARWICK
KPMG Peat Marwick
Denver, Colorado
April 4, 1994
