<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration No. 33-60982
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 8, 1995)
$200,000,000
TCI COMMUNICATIONS, INC.
REMARKETED RESET NOTES DUE SEPTEMBER 15, 2010
------------------------
The annual interest rate on the Notes to September 15, 1998 is 6.82%. The
annual interest rate on the Notes will be adjusted by the Company on September
15, 1998, and on each September 15 thereafter which corresponds to the beginning
of a Subsequent Interest Period, pursuant to an Interest Rate Formula agreed to
by the Company and the Remarketing Underwriter on the Formula Date for such
Subsequent Interest Period (except as otherwise provided below) or, if the
Company and the Remarketing Underwriter do not so agree, the annual interest
rate will be adjusted to the Alternate Rate. Interest on the Notes is payable
semi-annually on March 15 and September 15 beginning March 15, 1996. See
"Certain Terms of the Notes -- Interest."
If the Company and the Remarketing Underwriter agree on the Interest Rate
Formula with respect to any Subsequent Interest Period, each Note may be
tendered to the Remarketing Underwriter for purchase from the tendering
Noteholder at 100% of its principal amount and remarketing by the Remarketing
Underwriter on September 15, 1998 and on any September 15 thereafter immediately
following the end of a Subsequent Interest Period (the "Tender Date"). Notice of
a beneficial owner's election to tender to the Remarketing Underwriter must be
received by the Remarketing Underwriter during the two Business Day period
ending at 5:00 P.M., New York City time, on the second Business Day following
the relevant Formula Date. The obligation of the Remarketing Underwriter to
purchase tendered Notes from the tendering Noteholders will be subject to
certain conditions and termination events customary in the Company's public
offerings. If the Remarketing Underwriter for any reason does not purchase all
tendered Notes on the relevant Tender Date, (1) all tender notices relating
thereto shall be null and void, (2) the Company shall be entitled to choose a
shorter Subsequent Interest Period (but not less than one year), (3) the annual
interest rate for such Subsequent Interest Period on all of the Notes will be
(a) the greater of the Alternate Rate for such Subsequent Interest Period and
the rate determined pursuant to the Interest Rate Formula for such Subsequent
Interest Period or (b), if the Company chooses a shorter Subsequent Interest
Period, the Alternate Rate for such shorter Subsequent Interest Period and (4)
the Notes will be redeemable at the option of the Company, in whole or in part,
upon at least 10 Business Days prior notice given on the first or second
Business Day following the relevant Tender Date, at a redemption price equal to
100% of the principal amount thereof, together with accrued interest to the
redemption date. No beneficial owner of any Note shall have any rights or claims
against the Company or the Remarketing Underwriter as a result of the
Remarketing Underwriter not purchasing such Notes, except as provided in clause
(3) of the preceding sentence. See "Certain Terms of the Notes -- Tender at
Option of Beneficial Owners."
The Notes are also redeemable, at the option of the Company, on September
15, 1998 and on any September 15 thereafter immediately following the end of a
Subsequent Interest Period, in whole or in part, upon notice thereof given at
any time during the 45 calendar day period ending on the tenth calendar day
prior to the redemption date (provided that notice of any partial redemption
must be given to the Noteholders at least 15 calendar days prior to the
redemption date), at 100% of their principal amount, together with accrued
interest to the redemption date. Unless previously redeemed, the Notes will
mature on September 15, 2010. See "Certain Terms of the Notes -- Redemption of
the Notes."
The Notes will be represented by a single Global Note registered in the name
of the Depository Trust Company (the "Depositary") or its nominee. Beneficial
interests in the Global Note will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. Except as described herein, Notes in definitive form will not be
issued.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR
A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE NOTES OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................................ 100% .35% 99.65%
-----------------------------------------------------------------------------------------------------------------------------
Total................................................... $200,000,000 $700,000 $199,300,000
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from September 13, 1995.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deduction of expenses payable by the Company estimated at $100,000.
------------------------
The Notes are offered by the Underwriter, subject to prior sale, when, as and if
issued to and accepted by the Underwriter, subject to approval of certain legal
matters by counsel for the Underwriter and certain other conditions. The
Underwriter reserves the right to withdraw, cancel, or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Global
Note will be made in book-entry form only through the facilities of the
Depositary on or about September 13, 1995.
------------------------
MERRILL LYNCH & CO.
------------------------
The date of this Prospectus Supplement is September 8, 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
USE OF PROCEEDS
The Company intends to use the net proceeds of the sale of the Notes to
reduce outstanding indebtedness incurred under (i) a reducing revolving credit
facility of a subsidiary of the Company which matures on December 31, 2002 and
which, on September 8, 1995, had $163.6 million outstanding and an interest rate
of 7.3125%, and (ii) the revolving portion of a credit facility of a subsidiary
of the Company which matures on June 30, 2001 and which portion, on September 8,
1995, had $195.5 million outstanding and an interest rate of 7.1250%. The
amounts used to reduce the balances on the foregoing credit facilities will be
repaid to the Company by such subsidiaries through intercompany transactions.
The proceeds from such credit facilities were used by such subsidiaries to
reduce then outstanding indebtedness of such subsidiaries, for working capital
and for general corporate purposes.
Amounts may be subsequently reborrowed under the foregoing credit
facilities and used for any of the purposes specified under "Use of Proceeds" in
the accompanying Prospectus.
CERTAIN TERMS OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (which are a series of "Senior Debt Securities" described in the
accompanying Prospectus) supplements, and to the extent inconsistent therewith
replaces, insofar as such description relates to the Notes, the description of
the general terms and provisions of the Senior Debt Securities set forth in the
Prospectus, to which description reference is hereby made. The statements under
this caption "Certain Terms of the Notes" are subject to the detailed provisions
of the Indenture referred to below, a copy of which is filed as an exhibit to
the Registration Statement of which the Prospectus forms a part, and of the
Remarketing Agreement and the Remarketing Underwriting Agreement referred to
below, the forms of each of which will be filed, pursuant to a Current Report on
Form 8-K, as an exhibit to such Registration Statement. Whenever particular
provisions of the Indenture, the Remarketing Agreement or the Remarketing
Underwriting Agreement, or terms defined therein, are referred to, such
provisions or definitions are incorporated by reference as part of the
statements made and the statements are qualified in their entirety by such
reference. Capitalized terms not defined herein have the meanings ascribed to
them in the accompanying Prospectus and the Indenture.
GENERAL
The Notes will be issued under an Indenture, dated as of August 4, 1993, as
amended and supplemented by a First Supplemental Indenture, dated as of
September 13, 1994 (the "Indenture"), between the Company and The Bank of New
York, as trustee (the "Trustee"), and are a series of Senior Debt Securities
described in the accompanying Prospectus. The Notes will be limited to
$200,000,000 aggregate principal amount and will mature, unless previously
redeemed, on September 15, 2010.
BOOK-ENTRY, DELIVERY AND FORM
Upon issuance, the Notes will be represented by a single Global Note, which
will be deposited with, or on behalf of, the Depositary and will be registered
in the name of the Depositary or a nominee of the Depositary. The Global Note
may not be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor depositary or a nominee of such successor depositary.
So long as the Depositary or its nominee is the registered owner of the
Global Note, the Depositary or its nominee, as the case may be, will be the sole
owner of the Notes represented thereby for all purposes under
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<PAGE> 3
the Indenture and may be treated by the Company or the Trustee as the owner of
the Global Note for all purposes whatsoever. Except as otherwise provided in
this section, owners of beneficial interests in the Global Note will not be
entitled to receive physical delivery of certificated Notes and will not be
considered the owners thereof for any purpose under the Indenture, and the
Global Note shall not be exchangeable or transferable. Accordingly, each
beneficial owner must rely on the procedures of the Depositary and, if such
beneficial owner is not a Participant, on the procedures of the Participant
through which such beneficial owner owns its interest in order to exercise any
rights of an owner under the Global Note or the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in the Global Note.
None of the Company, the Trustee, any Paying Agent or the Registrar will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership in the Global Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Global Note will be exchangeable for certificated Notes of like tenor
and terms and of differing authorized denominations aggregating a like principal
amount, only if the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days of the Company's receipt of notice to such effect or if
the Company, in its sole discretion, at any time determines that the Notes shall
no longer be represented by such Global Note, then in either such event the
Global Note shall be exchanged for Notes in definitive form pursuant to the
Indenture.
The following is based on information furnished by the Depositary:
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. The Depositary holds securities
that its participants ("Participants") deposit with the Depositary. The
Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers (including Merrill Lynch, Pierce,
Fenner & Smith Incorporated), banks, trust companies, clearing corporations
and certain other organizations. The Depositary is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities Dealers,
Inc. Access to the Depositary's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depositary and its Participants are on file with the
Securities and Exchange Commission.
Purchasers of Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for such Notes on
the Depositary's records. The ownership interest of each actual purchaser
of each Note represented by the Global Note ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from the Depositary of their
purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants
through which such Beneficial Owner entered into the transaction. Transfers
of beneficial ownership interests in the Global Note are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificated Notes representing
their beneficial ownership interests in the Global Note, except in the
event that use of the book-entry system for the Global Note is
discontinued.
To facilitate subsequent transfers, the Global Note deposited with, or
on behalf of, the Depositary will be registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of the
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<PAGE> 4
Global Note with the Depositary and the registration thereof in the name of
Cede & Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of the Notes represented by the
Global Note; the Depositary's records reflect only the identity of the
Direct Participants to whose accounts such Notes are credited, which may or
may not be the Beneficial Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, the Depositary's practice is to determine by lot
the amount of the interest of each Direct Participant in the Global Note to
be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Notes. Under its usual procedures, the Depositary mails an
Omnibus Proxy to the Company as soon as possible after the applicable
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose account interests in the Notes
represented by the Global Note are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of the Depositary,
the Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal
and interest to the Depositary is the responsibility of the Company or the
Trustee, disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
A Beneficial Owner shall give notice of any election to have its
beneficial interest in the Notes purchased or tendered, through its
Participant, to the Remarketing Underwriter and shall effect delivery of
such interest in the Notes by causing the Direct Participant to transfer
the Participant's interest in the Global Note representing such Beneficial
Owner's interest in the Notes, on the Depositary's records, to the
Remarketing Underwriter. Any requirement for delivery of Notes will be
deemed satisfied when the ownership rights in the Global Note representing
such interest in the Notes are transferred by Direct Participants on the
Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable
notice to the Company or the Trustee. Under such circumstances, in the
event that a successor securities depository is not obtained, certificated
Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
S-4
<PAGE> 5
INTEREST
The Notes will bear interest from September 13, 1995, payable semi-annually
on March 15 and September 15 of each year commencing March 15, 1996 to the
persons in whose names the Notes are registered at the close of business on the
March 1 and September 1 preceding such March 15 and September 15. The interest
rate per annum applicable during the three-year interest period ending September
15, 1998 (the "Initial Interest Period") will be 6.82%. Each subsequent interest
period (a "Subsequent Interest Period") will be the period of at least one year
and not more than five years, designated by the Company, commencing on a
September 15 (the "Commencement Date") and ending one, two, three, four or five
years subsequent, as the case may be, through and including 2010 (except that no
Subsequent Interest Period may end after September 15, 2010). Unless notice of
redemption of the Notes as a whole has been given, the first Commencement Date
will be September 15, 1998.
The rate of interest per annum that will be applicable during each
Subsequent Interest Period (the "New Interest Rate") will be determined on the
Rate Determination Date (as defined below) with respect to such Subsequent
Interest Period (except as provided in the second succeeding paragraph and under
"Tender at Option of Beneficial Owners" below) by reference to a formula (the
"Interest Rate Formula"). The Interest Rate Formula for each Subsequent Interest
Period will be (1) the rate for the Applicable Treasury Security (as defined
below), plus or minus (2) the Spread (as defined below). The "Applicable
Treasury Security" shall mean direct obligations of the United States (which may
be obligations traded on a when-issued basis only) having the maturity agreed
upon by the Company and the Remarketing Underwriter (as defined under "Tender at
Option of Beneficial Owners" below). The rate for the Applicable Treasury
Security will be the bid side rate displayed at 10:00 A.M., New York City time,
on the relevant Rate Determination Date in the Telerate system (or if the
Telerate system is (a) no longer available on such Rate Determination Date or
(b) in the opinion of the Rate Agent (as defined under "Tender at Option of
Beneficial Owners" below) no longer an appropriate system from which to obtain
such rate, such other nationally recognized quotation system as, in the opinion
of the Rate Agent, is appropriate). If such rate is not so displayed, the rate
for the Applicable Treasury Security shall be, as calculated by the Rate Agent,
the yield to maturity for the Applicable Treasury Security, expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis, and computed by taking the arithmetic mean of the secondary
market bid rates, as of 10:30 A.M., New York City time, on such Rate
Determination Date of three leading United States government securities dealers
selected by the Rate Agent (which may include the Rate Agent or an affiliate
thereof). The "Spread" shall be the number of basis points (a) recommended by
the Remarketing Underwriter so as to result in a rate that, in the opinion of
the Remarketing Underwriter, will enable tendered Notes to be remarketed by the
Remarketing Underwriter at 100% of the principal amount thereof, as described
under "Tender at Option of Beneficial Owners" below, and (b) agreed to by the
Company.
Unless notice of redemption of the Notes as a whole has been given, the
Applicable Treasury Security and the Spread for each Subsequent Interest Period
and the duration of such Subsequent Interest Period will be established by 3:00
P.M., New York City time, on the sixth Business Day prior to the Commencement
Date of such Subsequent Interest Period (the "Formula Date"). The Company will
request, not later than 7 nor more than 15 calendar days prior to any Formula
Date, that the Depository notify its Participants of such Formula Date and of
the procedures that must be followed if any beneficial owner of a Note wishes to
tender such Note as described under "Tender at Option of Beneficial Owners"
below. The "Rate Determination Date" for any Subsequent Interest Period will be
the third Business Day following the Formula Date relating to such Subsequent
Interest Period. The term "Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks in The City of New York are required
or authorized to close or a day on which the New York Stock Exchange is closed
for trading.
In the event that the Company and the Remarketing Underwriter do not agree
on the Applicable Treasury Security or the Spread for any Subsequent Interest
Period, the New Interest Rate for such Subsequent Interest Period will be the
Alternate Rate for such Subsequent Interest Period. The "Alternate Rate" for the
Notes for any Subsequent Interest Period will be the percentage set forth below
of the Alternate
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<PAGE> 6
Treasury Rate (as defined below) based on the prevailing rating of the Notes in
effect at the close of business on the Business Day next preceding the Rate
Determination Date for such Subsequent Interest Period:
<TABLE>
<CAPTION>
PREVAILING RATING PERCENTAGE
---------------------------------------------------------- ----------
<S> <C>
Aaa/AAA................................................... 120%
Aa3/AA-................................................... 125%
A3/A-..................................................... 135%
Baa3/BBB-................................................. 150%
Below Baa3/BBB-........................................... 200%
</TABLE>
For purposes of this definition, the "prevailing rating" of the Notes shall be
(i) Aaa/AAA, if the Notes have a rating of Aaa by Moody's Investors Service,
Inc. or its successor ("Moody's") and AAA by Standard & Poor's Ratings Services
(a division of the McGraw Hill Companies, Inc.) or its successor ("S&P") or the
equivalent of such ratings by a substitute rating agency or substitute rating
agencies selected as provided below, (ii) if not Aaa/AAA, then Aa3/AA-, if the
Notes have a rating of Aa3 or better by Moody's and AA- or better by S&P or the
equivalent of such ratings by a substitute rating agency or substitute rating
agencies selected as provided below, (iii) if not Aaa/AAA or Aa3/AA-, then
A3/A-, if the Notes have a rating of A3 or better by Moody's and A- or better by
S&P or the equivalent of such ratings by a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not Aaa/AAA,
Aa3/AA- or A3/A-, then Baa3/BBB-, if the Notes have a rating of Baa3 or better
by Moody's and BBB- or better by S&P or the equivalent of such ratings by a
substitute rating agency or substitute rating agencies selected as provided
below, and (v) if not Aaa/AAA, Aa3/AA-, A3/A- or Baa3/BBB-, then Below
Baa3/BBB-. If Moody's or S&P or both shall not make such a rating available, the
Rate Agent shall select a nationally recognized securities rating agency or two
nationally recognized securities rating agencies to act as substitute rating
agency or substitute rating agencies, as the case may be.
The term "Alternate Treasury Rate" for any Subsequent Interest Period means
the rate for the most recent auction of direct obligations of the United States
having the period to maturity equal to the term of such Subsequent Interest
Period (or if the term of the Subsequent Interest Period is four years, the
average of the rates for such obligations having three years and five years,
respectively, to maturity), as made available in H.15(519) under the heading
"Treasury Constant Maturities" by 3:00 P.M., New York City time, on the Rate
Determination Date for such Subsequent Interest Period. If such rate or rates,
as the case may be, are not so made available by 3:00 P.M., New York City time,
on such Rate Determination Date, the Alternate Treasury Rate shall be, as
calculated by the Rate Agent, the yield to maturity for the most recent auction
of direct obligations of the United States having the period to maturity equal
to the term of such Subsequent Interest Period, expressed as a bond equivalent
on the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis, and computed by taking the arithmetic mean of the secondary market bid
rates, as of 3:30 P.M., New York City time, on such Rate Determination Date of
three leading United States government securities dealers selected by the Rate
Agent (which may include the Rate Agent or an affiliate thereof).
Unless notice of redemption of the Notes as a whole has been given, the
Company will cause a notice to be published on the Business Day following the
Formula Date for each Subsequent Interest Period in the manner described below,
specifying (1) the term of such Subsequent Interest Period, (2) the specific
Interest Rate Formula for such Subsequent Interest Period (including the
Applicable Treasury Security and the Spread) or, if applicable, the Alternate
Rate, and (3) the identity of the Remarketing Underwriter, if applicable. Such
notice will be given by publication in a daily newspaper in the English language
of general circulation in The City of New York, which is expected to be The Wall
Street Journal.
All percentages resulting from any calculation of the New Interest Rate
will rounded, if necessary, to the nearest hundredth of a percentage point, with
five one thousandths of a percentage point rounded upward.
TENDER AT OPTION OF BENEFICIAL OWNERS
In the event the Company and the Remarketing Underwriter agree on the
Applicable Treasury Security and the Spread on the Formula Date with respect to
any Subsequent Interest Period, the Company and the Remarketing Underwriter will
enter into a Remarketing Underwriting Agreement (the "Remarketing
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<PAGE> 7
Underwriting Agreement") on such Formula Date, under which the Remarketing
Underwriter will agree, subject to the terms and conditions set forth therein,
to purchase from Tendering Noteholders on September 15, 1998 and on any
September 15 thereafter (or, if not a Business Day, on the next succeeding
Business Day) immediately following the end of a Subsequent Interest Period (the
"Tender Date") all Notes with respect to which the Remarketing Underwriter
receives a Tender Notice as described below at 100% of the principal amount
thereof (the "Purchase Price"). In such event (except as otherwise provided in
the next succeeding paragraph), each beneficial owner of a Note may, at such
owner's option, upon giving notice as provided below (the "Tender Notice"),
tender such Note for purchase by the Remarketing Underwriter on the Tender Date
at the Purchase Price. The Purchase Price will paid by the Remarketing
Underwriter in accordance with the standard procedures of the Depositary, which
currently provide for payments in next-day funds settled through the New York
Clearing House. Interest accrued on the Notes with respect to the preceding
interest period will be paid in the manner described under "Book-Entry, Delivery
and Form" and "Interest" above. If such beneficial owner has an account at the
Remarketing Underwriter and tenders such Note through such account, such
beneficial owner will not be required to pay any fee or commission to the
Remarketing Underwriter. If such Note is tendered through a broker, dealer,
commercial bank, trust company or other institution, other than the Remarketing
Underwriter, such holder may be required to pay fees or commissions to such
other institution. It is currently anticipated that Notes so purchased by the
Remarketing Underwriter will be remarketed by it.
The Tender Notice must be received by the Remarketing Underwriter during
the period commencing on the Business Day following the Formula Date and ending
at 5:00 P.M., New York City time, on the second Business Day following the
Formula Date (the "Notice Date"). In order to ensure that a Tender Notice is
received on a particular day, the beneficial owner of Notes must direct his
broker or other designated Participant or Indirect Participant to give such
Tender Notice before the broker's cut-off time for accepting instructions for
that day. Different firms may have different cut-off times for accepting
instructions from their customers. Accordingly, beneficial owners should consult
the brokers or other Participants or Indirect Participants through which they
own their interests in the Notes for the cut-off times for such brokers, other
Participants or Indirect Participants. See "Book Entry, Delivery and Form"
above. Except as otherwise provided below, a Tender Notice shall be irrevocable.
If a Tender Notice is not received for any reason by the Remarketing Underwriter
with respect to any Note by 5:00 P.M., New York City time, on the Notice Date
the beneficial owner of such Note shall be deemed to have elected not to tender
such Note for purchase by the Remarketing Underwriter.
The obligation of the Remarketing Underwriter to purchase Notes from
tendering Noteholders will be subject to several conditions precedent set forth
in the Remarketing Underwriting Agreement that are customary in the Company's
public offerings, including a condition that no material adverse change in the
condition of the Company and its subsidiaries, taken as a whole, shall have
occurred since the Formula Date. In addition, the Remarketing Underwriting
Agreement will provide for the termination thereof by the Remarketing
Underwriter upon the occurrence of certain events that are also customary in the
Company's public securities offerings. In the event that, with respect to any
Subsequent Interest Period, the Remarketing Underwriter does not for any reason
purchase on the relevant Tender Date all of the Notes for which a Tender Notice
shall have been given, (1) all such Tender Notices shall be null and void, (2)
none of the Notes for which such Tender Notices shall have been given shall be
purchased by the Remarketing Underwriter on such Tender Date, (3) the Company
shall be entitled within three Business Days of the relevant Tender Date to
choose a shorter Subsequent Interest Period (but not less than one year), which
Subsequent Interest Period shall be deemed to have commenced upon the applicable
Commencement Date, (4) the New Interest Rate for such Subsequent Interest Period
on all of the Notes will be (a) the greater of the Alternate Rate for such
Subsequent Interest Period and the rate determined pursuant to the Interest Rate
Formula for such Subsequent Interest Period or (b) if the Company chooses a
shorter Subsequent Interest Period, the Alternate Rate for such shorter
Subsequent Interest Period and (4) the Notes will be redeemable at the option of
the Company, in whole or in part, upon at least 10 Business Days prior notice
given on the first or second Business Day following the relevant Tender Date in
the manner described under "Redemption of the Notes" below, at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to the redemption date.
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No beneficial owner of any Note shall have any rights or claims under the
Remarketing Underwriting Agreement or against the Company or the Remarketing
Underwriter as a result of the Remarketing Underwriter not purchasing such
Notes, except as provided in clause (3) of the last sentence of the preceding
paragraph. The Company will have no obligation under any circumstance to
repurchase any Notes, except in the case of Notes called for redemption as
described below.
If the Remarketing Underwriter does not purchase all Notes tendered for
purchase on any Tender Date, it will promptly notify the Company and the
Trustee. As soon as practicable after receipt of such notice, the Company will
cause a notice to be published setting forth the term of the Subsequent Interest
Period and the New Interest Rate for such Subsequent Interest Period. Such
notice will be published in a daily newspaper in the English language of general
circulation in The City of New York, which is expected to be The Wall Street
Journal.
The term "Remarketing Underwriter" means the nationally recognized
broker-dealer selected by the Company to act as remarketing underwriter (the
"Remarketing Underwriter"). The term "Rate Agent" means the nationally
recognized broker-dealer selected by the Company as its agent to determine the
New Interest Rate for any Subsequent Interest Period (the "Rate Agent").
Pursuant to a Remarketing Agreement dated as of September 8, 1995 with the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to act as
Remarketing Underwriter and Rate Agent. The Company, in its sole discretion, may
change the Remarketing Underwriter and the Rate Agent for any Subsequent
Interest Period at any time on or prior to 3:00 P.M., New York City time, on the
Formula Date relating thereto.
Each of the Rate Agent and the Remarketing Underwriter, in its individual
or any other capacity, may buy, sell, hold and deal in any of the Notes. Either
of such parties may exercise any vote or join in any action which any beneficial
owner of Notes may be entitled to exercise or take with like effect as if it did
not act in any capacity under the Remarketing Agreement. Either of such parties,
in its individual capacity, either as principal or agent, may also engage in or
have an interest in any financial or other transaction with the Company as
freely as if it did not act in any capacity under the Remarketing Agreement.
REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to September 15, 1998. On that date and
on any September 15 thereafter immediately following the end of a Subsequent
Interest Period, the Notes may be redeemed, at the option of the Company, in
whole or in part, upon notice thereof given at any time during the 45 calendar
day period ending on the tenth calendar day prior to the redemption date
(provided that notice of any partial redemption must be given at least 15
calendar days prior to the redemption date), at a redemption price equal to 100%
of the principal amount thereof, together with accrued interest to such
redemption date. In the event that less than all of the outstanding Notes are to
be redeemed, the Notes to be redeemed shall be selected by such method as the
Company shall deem fair and appropriate. So long as the Global Note is held by
the Depository, the Company will give notice to the Depository, whose nominee is
the record holder of all of the Notes, and the Depository will determine the
principal amount to be redeemed from the account of each Participant. A
Participant may determine to redeem from some beneficial owners (which may
include a Participant holding Notes for its own account) without redeeming from
the accounts of other beneficial owners. The Notes are also subject to
redemption as provided under "Tender at Option of Beneficial Owners" above.
Notice of redemption of the Notes will be given by publication in a daily
newspaper in the English language of general circulation in The City of New
York, which is expected to be The Wall Street Journal.
CHANGE OF CONTROL
As more fully described in the accompanying Prospectus under the caption
"Description of Debt Securities -- Senior Debt Securities -- Change of Control,"
Section 4.02 of the Indenture provides that, if a Put Event occurs, each holder
of Notes will have the right, as provided in, and subject to the terms of, the
Indenture, to require the Company to repurchase all or any portion of such
holder's Notes at a purchase price equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase. A Put Event
will occur if, among other things, there is a Change of Control of the Company
or, for so long as
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the Company is a subsidiary of Tele-Communications, Inc. (the "Parent"), a
Change of Control of the Parent, at any time after the date on which the
Securities are first issued and on or prior to maturity. The applicability of
this covenant is limited. See "Description of Debt Securities -- Senior Debt
Securities -- Change of Control" and "-- Definitions" in the accompanying
Prospectus. Among other things, it would not apply to the acquisition of shares
of the Company's or the Parent's common stock by a Controlling Person or by any
other person if and for so long as the shares of such company's common stock
beneficially owned by the Controlling Persons (and, in the case of the Company,
by the Parent and subsidiaries of the Parent) represent in the aggregate thirty
percent (30%) or more of the combined voting power of all shares of such
company's common stock calculated on a fully diluted basis. The term
"Controlling Person" includes each of the Company's Chairman of the Board, its
President and each director of the Company as of the date the Indenture was
first executed, their respective family members, estates and heirs,
Kearns-Tribune Corporation and the trustee under the Parent's Employee Stock
Purchase Plan or any successor plan or any other employee stock ownership or
other employee benefit plan of the Parent or the Company or any subsidiary of
the Parent or the Company. See "Description of Debt Securities -- Senior Debt
Securities -- Definitions" in the accompanying Prospectus.
The Company's payment obligations with respect to the Securities, including
its obligation to pay the purchase price of a Note that the holder has elected
to require the Company to repurchase following the occurrence of a Put Event,
are unsecured, unsubordinated obligations of the Company and are pari passu
(equally and ratably) with other unsecured, unsubordinated indebtedness of the
Company. There are other issues of senior indebtedness of the Company
outstanding in addition to the Securities that would permit the holders to
require the Company to repurchase or repay such indebtedness upon the occurrence
of a Put Event or events similar thereto and the Company anticipates that it
will continue to issue indebtedness with similar covenants in the future.
Approximately $6.30 billion of the Company's outstanding indebtedness at June
30, 1995 includes provisions that would permit the holders to require the
Company to repurchase or repay such indebtedness upon the occurrence of a Put
Event, a Change of Control or events similar thereto, which obligation of the
Company would rank on a parity with its repurchase obligation with respect to
the Securities. In addition, approximately $2.67 billion of the outstanding
indebtedness of the Company's subsidiaries at June 30, 1995 includes provisions
that require the applicable subsidiary to repurchase or repay such indebtedness
upon a Change of Control or events similar thereto. If a Put Event were to
occur, there can be no assurance that the Company would have sufficient funds to
satisfy its repurchase obligations with respect to the Notes and such other
indebtedness. The failure of the Company to repurchase a Note that the holder
has elected to require it to repurchase following the occurrence of a Put Event
would constitute an Event of Default with respect to the Notes and could cause
the acceleration of the maturity of other indebtedness of the Company after
notice and/or passage of time.
No amendment, supplement or waiver may be made to the Indenture or to the
Notes that would materially adversely affect the rights of any holder of Notes
to require the Company to purchase such Notes upon the occurrence of a Put Event
without the consent of the holders of all of the outstanding Notes.
Subsequent to the occurrence of a Put Event and for so long as the Global
Note is held by the Depositary, the Company shall give notice to the Depositary,
whose nominee is the record holder of all of the Notes, setting forth details of
the right of each holder of the Notes to require the Company to repurchase such
holder's Notes. A Beneficial Owner will obtain such notice only from its Direct
Participant or Indirect Participant, and will be required to give notice of its
election to cause the Company to repurchase such Beneficial Owners' interest in
the Notes to the Depositary through its Participant.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. The following discussion deals only with Notes held as capital
assets and does not purport to deal with persons in special tax situations, such
as financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, persons holding Notes as a hedge against
currency risks or as a position in a
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"straddle" for tax purposes, or persons whose functional currency is not the
United States dollar. It also does not deal with holders other than original
purchasers (except where otherwise specifically noted). Persons considering the
purchase of the Notes should consult their own tax advisors concerning the
application of United States Federal income tax laws to their particular
situations as well as any consequences of the purchase, ownership and
disposition of the Notes arising under the laws of any other taxing
jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). Under these principles, it is possible that all interest payable
with respect to the Notes at the initial interest rate generally would be
includible in income by a U.S. Holder as ordinary interest when such interest is
accrued or received (in accordance with the U.S. Holder's regular method of tax
accounting). It is also possible that under these principles any amounts payable
on the Notes during any Subsequent Interest Period would be treated as
contingent interest and generally would be includible in income by a U.S. Holder
as ordinary interest on the respective dates that the amount of such interest is
accrued or when such interest is received (in accordance with the U.S. Holder's
regular method of tax accounting). Alternatively, it is possible that under
these principles all interest payable with respect to the Notes would be
includible in income by a U.S. Holder as ordinary interest on the respective
dates that the amount of such interest is accrued (i.e., during each day of the
Interest Period to which such interest relates), regardless of the U.S. Holder's
regular method of tax accounting. Thus, under this approach, a cash method U.S.
Holder would be required to include such interest in income prior to the receipt
thereof.
Under final Treasury regulations (the "OID Regulations") released by the
Internal Revenue Service ("IRS") on January 27, 1994 under the original issue
discount provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), notes that provide for stated interest at one or more variable rates
throughout the term thereof ("Variable Notes"), such as the Notes, are subject
to special rules whereby a Variable Note will qualify as a "variable rate debt
instrument" if (a) its issue price does not exceed the total noncontingent
principal payments due under the Variable Note by more than a specified de
minimis amount and (b) it provides for stated interest, paid or compounded at
least annually, at current values of (i) one or more qualified floating rates,
(ii) a single fixed rate and one or more qualified floating rates, (iii) a
single objective rate, or (iv) a single fixed rate and a single objective rate
that is a qualified inverse floating rate. Under the OID Regulations, the issue
price of each debt instrument in an issue of debt instruments equals the first
price at which a substantial amount of such debt instruments has been sold
(ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers).
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. For this purpose, the rate may measure
contemporaneous variations in borrowing costs for the issuer of the Variable
Note or for issuers in general. Notwithstanding the foregoing, a variable rate
that would otherwise constitute a qualified floating rate but which is subject
to one or more restrictions such as a maximum numerical limitation (i.e., a cap)
or a minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate under the OID
Regulations unless such cap or floor is fixed throughout the term of the
Variable Note.
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If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Variable Note which is unconditionally payable in
cash or property (other than debt instruments of the issuer) at least annually
will constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Variable Note's stated principal amount) in excess of a specified de minimis
amount. Original issue discount on such a Variable Note arising from "true"
discount is allocated to an accrual period using the constant yield method
described above by assuming that the variable rate is a fixed rate equal to (i)
in the case of a qualified floating rate or qualified inverse floating rate, the
value as of the issue date, of the qualified floating rate or qualified inverse
floating rate, or (ii) in the case of an objective rate (other than a qualified
inverse floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition of
an objective rate and would further clarify certain other provisions contained
in the OID Regulations. If ultimately adopted, these amendments to the OID
Regulations would be effective for debt instruments issued 60 days or more after
the date on which such proposed amendments are finalized.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Variable Note were treated as a
contingent payment debt obligation.
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Based upon the foregoing, it is unclear whether the Notes qualify as
"variable rate debt instruments" under the OID Regulations. It is also not
entirely clear how the Notes should be taxed if they do qualify as "variable
rate debt instruments". Nevertheless, under one possible interpretation of the
OID Regulations, it could be argued that the Notes should qualify as "variable
rate debt instruments" and should not be treated as contingent payment debt
obligations. If the Notes qualify as "variable rate debt instruments" under the
OID Regulations, then it could also be argued under one possible interpretation
of the OID Regulations that all payments of interest on such Notes generally
should constitute payments of "qualified stated interest" and should be taxed
accordingly. Under the OID Regulations, payments of qualified stated interest
are taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting). The Company currently intends to treat all
interest payments on the Notes as payments of qualified stated interest in the
absence of a change or clarification in the law, by regulation or otherwise,
requiring a different treatment.
Despite the foregoing, the Notes may not qualify as "variable rate debt
instruments" under the OID Regulations and the Notes may be treated as
contingent payment debt obligations. It is not entirely clear under current law
how the Notes would be taxed if they were treated as contingent payment debt
obligations. As previously discussed, under general principles of current United
States Federal income tax law, it is possible that all interest payable with
respect to the Notes at the initial interest rate generally would be includible
in a U.S. Holder's income as ordinary interest when such interest is accrued or
received. It is also possible under these principles that any amounts payable
with respect to Notes during any Subsequent Interest Period would be treated as
contingent interest and generally would be includible in income by a U.S. Holder
as ordinary interest on the respective dates that the amount of such interest is
accrued or when such interest is received. Alternatively, it is possible that
under these principles all interest payable with respect to the Notes would be
includible in income by a U.S. Holder as ordinary interest on the respective
dates that the amount of such interest is accrued (i.e., during each day of the
Interest Period to which such interest relates), regardless of the U.S. Holder's
regular method of tax accounting. Thus, under this approach, a cash method U.S.
Holder would be required to include such interest in income prior to the receipt
thereof.
Prospective investors in the Notes should also be aware that on December
15, 1994, the Treasury Department issued proposed regulations (the "Proposed
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt obligations. The Proposed Regulations are generally
proposed to be effective for debt obligations issued on or after the date that
is 60 days after the date on which the Proposed Regulations (or successor
regulations thereto) are published as final Treasury regulations in the Federal
Register. Accordingly, due to the proposed prospective effective date of the
Proposed Regulations, if ultimately adopted in their current form, the Proposed
Regulations would not apply to the Notes even if such Notes were treated as
contingent payment debt obligations. There is no assurance that the Proposed
Regulations will be adopted or, if adopted, adopted in their current form.
Furthermore, proposed Treasury Regulations are not binding upon either the IRS
or taxpayers prior to becoming effective or temporary or final regulations. In
general, if ultimately adopted in their current form, the Proposed Regulations
would cause the timing and character of income, gain or loss reported on a
contingent payment debt obligation to substantially differ from the timing and
character of income, gain or loss reported on a contingent payment debt
obligation under general principles of current United States Federal income tax
law (as described above). Due to the uncertainty surrounding the proper
treatment of the Notes, prospective investors in the Notes are advised to
consult their own tax advisors regarding the proper United States Federal income
treatment of the Notes.
As previously noted, in the absence of a change or clarification in the
law, by regulation or otherwise, requiring a different treatment, the Company,
where required, currently intends to file information returns with the IRS
treating all interest payments on the Notes as qualified stated interest
payments.
Disposition of a Note. Under general principles of current United States
Federal income tax law, upon the sale, exchange or retirement of a Note, a U.S.
Holder generally would recognize taxable gain or loss in an amount equal to the
difference, if any, between the amount realized upon the sale, exchange or
retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in its Note. A U.S. Holder's adjusted tax
basis in a Note generally would equal such U.S. Holder's initial investment in
such Note. Any gain or loss realized by a U.S. Holder upon the sale, exchange or
retirement of a
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Note generally would be long-term or short-term capital gain or loss, depending
upon whether the U.S. Holder had held the Note for more than one year. However,
as previously discussed, if a Note were treated as a contingent payment debt
obligation and if the Proposed Regulations were applied to such Note, then the
character of gain or loss realized upon the sale, exchange or retirement of a
Note would differ from the character of gain or loss discussed immediately
above.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest on a Note, unless such
non-U.S. Holder is a direct or indirect 10% or greater shareholder of the
Company, a controlled foreign corporation related to the Company or a bank
receiving interest described in section 881(c)(3)(A) of the Code. To qualify for
the exemption from taxation, the last United States payor in the chain of
payment prior to payment to a non-U.S. Holder (the "Withholding Agent") must
have received in the year in which a payment of interest or principal occurs, or
in either of the two preceding calendar years, a statement that (i) is signed by
the beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the Withholding
Agent of any change in the information on the statement within 30 days of such
change. If a Note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide a
signed statement to the Withholding Agent. However, in such case, the signed
statement must be accompanied by a copy of the IRS Form W-8 or the substitute
form provided by the beneficial owner to the organization or institution. The
Treasury Department is considering implementation of further certification
requirements aimed at determining whether the issuer of a debt obligation is
related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
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Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter") has
agreed, subject to the terms and conditions set forth in the Underwriting
Agreement, to purchase the Notes from the Company.
The Underwriter has advised the Company that it proposes initially to offer
the Notes to the public at the public offering price set forth on the cover page
of this Prospectus Supplement, and to certain dealers at such price less a
concession not in excess of .2% of the principal amount of the Notes. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of .125% of the principal amount of the Notes. After the initial public
offering, the public offering price and such concessions may be changed.
The Underwriter has informed the Company that it intends to make a market
in the Notes, but is under no obligation to do so and such market making may be
terminated at any time.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriter may be
required to make in respect thereof.
VALIDITY OF THE NOTES
Certain legal matters with respect to the Notes offered hereby will be
passed upon for the Company by Baker & Botts, L.L.P., 885 Third Avenue, New
York, New York 10022-4834. Jerome H. Kern, a partner of Baker & Botts, L.L.P.,
is a director of Tele-Communications, Inc. and holds options to purchase shares
of Tele-Communications, Inc.'s Series A TCI Group Class A Common Stock and
Series A Liberty Media Group Common Stock. Certain legal matters in connection
with the offering will be passed upon for the Underwriter by Brown & Wood, One
World Trade Center, New York, New York 10048-0557.
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Pursuant to Rule 424(b)(5)
Registration No. 33-60982
PROSPECTUS
TCI COMMUNICATIONS, INC.
DEBT SECURITIES
------------------------
TCI Communications, Inc. (the "Company") from time to time may offer its
debentures, notes, bonds or other evidences of indebtedness (the "Debt
Securities") for a maximum aggregate initial offering price of $3 billion (or
the equivalent thereof denominated in one or more foreign currencies, foreign
currency units or composite currencies). The Debt Securities may be offered as
separate series in amounts, at prices and on terms to be determined at the time
of sale and to be set forth in supplements to this Prospectus. The Debt
Securities may be issued in registered form without coupons attached
("Registered Debt Securities"), in bearer form with or without coupons attached
("Bearer Debt Securities") and in the form of one or more global securities
("Global Securities"). See "Description of Debt Securities." Bearer Debt
Securities will be offered only to non-United States persons (subject to certain
exceptions) and to branches, located outside the United States, of certain
United States financial institutions. See "Description of Debt
Securities -- Limitations on Issuance of Bearer Debt Securities." The Company
may sell Debt Securities on a negotiated or competitive bid basis to or through
underwriters or dealers designated from time to time, and also may sell Debt
Securities directly to other purchasers or through agents designated from time
to time. See "Plan of Distribution." Prior to the date of this Prospectus, the
Company sold Debt Securities pursuant to the Registration Statement of which
this Prospectus is a part for an aggregate initial offering price of
$2,727,975,000.
Certain terms of the Debt Securities in respect of which this Prospectus is
being delivered, including, where applicable, the specific designation
(including whether senior, senior subordinated or subordinated), aggregate
principal amount, maturity (which may be fixed or extendible), interest rate or
rates (which may be fixed or variable), if any, and time of payment of interest,
if any, authorized denominations, currency or currencies in which principal,
premium, if any, and interest are payable and any specific terms relating to the
adjustment thereof that are in addition to or different from those described
herein, any terms for a sinking fund or for redemption, purchase or exchange at
the option of the Company or the holder (including the form or method of
payment, which may include cash, Debt Securities of another series or other
forms of consideration), any covenants or events of default that are in addition
to or different from those described herein, and any other specific terms of the
Debt Securities, will be set forth in a Prospectus Supplement accompanying this
Prospectus (the "Prospectus Supplement"). Debt Securities may be issued as
Original Issue Discount Securities to be sold at a substantial discount below
their principal amount and, if issued, certain terms thereof will be set forth
in the Prospectus Supplement related thereto. See "Description of Debt
Securities." The Debt Securities in respect of which this Prospectus is being
delivered are hereinafter referred to collectively as the "Offered Securities."
The terms of the offering and sale of the Offered Securities, including, where
applicable, the name or names of any agents, dealers or underwriters to be
utilized in connection with the offer and sale of the Offered Securities, the
principal amount of Debt Securities to be purchased by underwriters, the
purchase price of the Offered Securities and the proceeds to the Company from
such sale, any applicable commissions, discounts or other items constituting
compensation of such agents or underwriters, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers, will
also be set forth in the accompanying Prospectus Supplement. The Company
reserves the sole right to accept and, together with its agents, from time to
time, to reject in whole or in part any proposed purchase of the Offered
Securities to be made directly or through agents. See "Plan of Distribution" for
possible indemnification arrangements for agents, dealers and underwriters.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by the Prospectus Supplement applicable to the Offered
Securities being sold.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Prospectus is September 8, 1995.
<PAGE> 16
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a registration statement on Form S-3
(Registration No. 33-60982) (together with all amendments and exhibits, referred
to as the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Debt Securities. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information pertaining to the Debt Securities and
the Company, reference is made to the Registration Statement. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Reports and
other information filed under the Exchange Act by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549;
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and at 7 World
Trade Center, New York, New York 10048; and copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents filed by the Company with the Commission (Commission File
No. 0-5550): (i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended by Form 10-K/A (Amendment 1), (ii) the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and June
30, 1995 (iii) the Company's Current Reports on Form 8-K dated January 23, 1995,
February 3, 1995, as amended by Form 8-K/A (Amendment No. 1), April 6, 1995,
April 20, 1995, as amended by Form 8-K/A (Amendment No. 1), May 4, 1995, as
amended by Form 8-K/A (Amendment No. 1), July 26, 1995 and August 1, 1995 and
(iv) the financial statements and notes thereto of TeleCable Corporation as of
December 31, 1993 and 1992 and for each of the two years in the period ended
December 31, 1993, included in the Company's Current Report on Form 8-K dated
August 26, 1994. All documents filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof
and prior to the termination of the offering of the securities offered hereby
shall be deemed to be incorporated herein by reference and to be a part hereof
from the respective dates of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated by reference herein, other than certain
exhibits to such documents. Such requests should be addressed to Stephen M.
Brett, Esq., Senior Vice President, TCI Communications, Inc., Terrace Tower II,
5619 DTC Parkway, Englewood, Colorado 80111-3000; telephone (303) 267-5500.
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<PAGE> 17
RISK FACTORS
The following factors, among others, should be considered carefully before
making an investment decision with respect to any Offered Securities.
Losses. Although the Company had net earnings of $92 million for the year
ended December 31, 1994, the Company incurred a net loss of $7 million for the
year ended December 31, 1993 and a net loss of $8 million for the year ended
December 31, 1992. The Company also incurred a net loss of $24 million and had
net earnings of $38 million for the six months ended June 30, 1995 and 1994,
respectively. Notwithstanding the losses it has incurred, the Company has been
able to, and expects to continue to be able to, satisfy its debt service and
other obligations as and when they become due. The Company's operating cash flow
(operating income before depreciation, amortization and other non-cash credits
or charges) ($1,801 million, $1,858 million and $1,637 million for the years
ended December 31, 1994, 1993 and 1992, respectively, and $1,015 million and
$902 million for the six months ended June 30, 1995 and 1994, respectively) has
historically been sufficient to cover its interest expense ($777 million, $731
million and $718 million for the years ended December 31, 1994, 1993 and 1992,
respectively, and $464 million and $363 million for the six months ended June
30, 1995 and 1994, respectively). The Company's interest coverage ratio for the
years ended December 31, 1994, 1993, and 1992 was 232%, 254% and 228%,
respectively, and for the six months ended June 30, 1995 and 1994 was 219% and
248%, respectively. Operating cash flow is a measure of value and borrowing
capacity within the cable television industry and is not intended to be a
substitute for cash flows provided by operating activities, a measure of
performance prepared in accordance with generally accepted accounting
principles, and should not be relied upon as such. Operating cash flow, as
defined, does not take into consideration substantial costs of doing business,
such as interest expense, and should not be considered in isolation to other
measures of performance.
Another measure of liquidity is net cash provided by operating activities
as reflected in the Company's consolidated statements of cash flows. Net cash
provided by operating activities ($1,142 million, $1,251 million and $957
million for the years ended December 31, 1994, 1993 and 1992, respectively, and
$581 million and $613 million for the six months ended June 30, 1995 and 1994,
respectively) reflects net cash from the operations of the Company available for
the Company's liquidity needs after taking into consideration the aforementioned
substantial costs of doing business not reflected in operating cash flow.
Amounts expended by the Company for its investing activities exceed net cash
provided by operating activities.
Ratios of Earnings to Fixed Charges. The ratio of earnings to fixed charges
of the Company was 1.02, 1.22, and 1.22 for the years ended December 31, 1992,
1993 and 1994, respectively, and 1.18 for the six months ended June 30, 1994.
The ratio of earnings to fixed charges was less than 1.00 for the years ended
December 31, 1990 and 1991 and for the six months ended June 30, 1995; thus,
earnings available for fixed charges were inadequate to cover fixed charges for
such periods. The amounts of the coverage deficiencies were $399 million and
$177 million for the years ended December 31, 1990 and 1991, respectively, and
$22 million for the six months ended June 30, 1995. For the ratio calculations,
earnings available for fixed charges consists of earnings (losses) before income
taxes plus fixed charges (minus capitalized interest), distributions from and
(earnings) losses of less than 50%-owned affiliates with debt not guaranteed by
the Company (net of earnings not distributed of less than 50%-owned affiliates),
and minority interest in earnings (losses) of consolidated subsidiaries
(including an amount representing the pretax earnings which would be required to
cover preferred stock dividend requirements of consolidated subsidiaries). Fixed
charges consist of (i) interest (including capitalized interest) on debt,
excluding interest to 50%-owned affiliates, (ii) the Company's proportionate
share of interest of 50%-owned affiliates, (iii) that portion of rental expense
the Company believes to be representative of interest (one-third of rental
expense), (iv) amortization of debt expense, (v) that portion of minority
interests in earnings of consolidated subsidiaries that represents the amount of
pretax earnings that would be required to cover preferred stock dividend
requirements excluding similarly adjusted preferred stock dividend requirements
of consolidated subsidiaries to 50%-owned affiliates, and (vi) the amount
representing the pretax earnings which would be required to cover preferred
stock dividend requirements of 50%-owned affiliates, other than amounts payable
to the Company. The Company has guaranteed the debt of certain less than
50%-owned affiliates and certain other entities in which it has an interest.
Fixed charges of $710,000, $506,000, $2,517,000, $13,833,000, and $12,471,000
relating to such guarantees for the years ended December 31, 1990, 1991, 1992,
1993, and 1994, respectively, and fixed
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<PAGE> 18
charges of $5,927,000 and $6,673,000 relating to such guarantees for the six
months ended June 30, 1994 and 1995, respectively, have not been included in
fixed charges.
THE COMPANY
The Company is a Delaware corporation incorporated in 1968 with executive
offices at Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000;
telephone (303) 267-5500. Unless the context indicates otherwise and except as
used in the discussion under the caption "Description of Debt Securities," the
"Company" means TCI Communications, Inc. and its consolidated subsidiaries.
The Company or its predecessor companies have been principally engaged in
the acquisition, development and operation of cable television systems since the
early 1950's. The Company believes that, measured by the number of basic
subscribers, it is the largest provider of basic cable television services in
the United States. At June 30, 1995, the Company, through its subsidiaries and
affiliates, operated cable television systems throughout the continental United
States and Hawaii.
On August 4, 1994, the Company and Liberty Media Corporation ("Liberty")
each merged (the "Mergers") with separate wholly owned subsidiaries of
TCI/Liberty Holding Company, a new holding company formed by the Company and
Liberty. Under the terms of the respective Mergers, the Company and Liberty were
the surviving corporations. In connection with the Mergers, TCI/Liberty Holding
Company changed its name to Tele-Communications, Inc. and the Company changed
its name to TCI Communications, Inc. As a result of the foregoing, each of the
Company and Liberty is now a wholly owned subsidiary of Tele-Communications,
Inc. The Company remains the sole obligor with respect to all indebtedness
(including Debt Securities) and other obligations of the Company outstanding at
the time the Mergers were consummated and will be the sole obligor with respect
to Debt Securities issued subsequent to the Mergers, and Tele-Communications,
Inc. has not assumed any of such indebtedness or other obligations.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Securities, together with
internally generated funds, may be used to repay, redeem or repurchase
outstanding indebtedness; for general operations, including acquisitions,
capital expenditures and working capital requirements; to repurchase shares of
Tele-Communications, Inc.'s common and preferred stock; or for such other
purposes as may be specified in the Prospectus Supplement. All or a portion of
such proceeds may be advanced to Tele-Communications, Inc. in the form of
dividends or loans and to other affiliates of the Company in the form of loans
or as a contribution to capital. See "Description of Debt Securities."
A description of any indebtedness to be repaid with the proceeds of the
Offered Securities will be set forth in the Prospectus Supplement. The amount of
the Company's future capital expenditures for cable television operations will
be determined by acquisitions of additional cable television systems,
contractual obligations under existing franchises, expansions of existing
systems through rebuilds and upgrades, technological developments and various
other economic factors and market conditions. Specific plans, arrangements or
agreements, written or oral, with respect to any material acquisitions by the
Company by merger or otherwise, or with respect to any material disposition of
assets by the Company, if any, will, to the extent not disclosed in a document
incorporated by reference herein, be disclosed in the Prospectus Supplement.
Pending application of the net proceeds to the foregoing uses, the net
proceeds will be added to working capital and invested in short-term
interest-bearing obligations. Such investments will be subject to fluctuating
interest rates which may be lower than the rates applicable to the Debt
Securities.
The Company may borrow additional funds from time to time from public and
private sources on both a long-term and short-term basis and may sell commercial
paper to fund its future capital and working capital requirements in excess of
internally generated funds. Certain of such borrowings may rank senior in right
of payment to the indebtedness represented by the Debt Securities. See
"Description of Debt Securities."
4
<PAGE> 19
DESCRIPTION OF DEBT SECURITIES
The Company may offer Debt Securities consisting of Senior Debt Securities,
Senior Subordinated Debt Securities or Subordinated Debt Securities, or any
combination of the foregoing, provided that the aggregate initial offering price
of the Debt Securities offered pursuant to the Registration Statement will not
exceed $3 billion (or the equivalent thereof denominated in one or more foreign
currencies, foreign currency units or composite currencies). Prior to the date
of this Prospectus, the Company sold Debt Securities under the Registration
Statement for an aggregate initial offering price of $2,727,975,000.
The Debt Securities will represent unsecured general obligations of the
Company. The Senior Debt Securities will be senior to all subordinated
indebtedness of the Company, and pari passu (equally and ratably) with other
unsecured, unsubordinated indebtedness of the Company. The Senior Subordinated
Debt Securities will be subordinate in right of payment to certain other debt
obligations of the Company, pari passu with certain other senior subordinated
indebtedness of the Company and senior to certain other subordinated
indebtedness of the Company. The Subordinated Debt Securities will be
subordinate in right of payment to certain other debt obligations of the Company
and pari passu with certain other subordinated indebtedness of the Company. At
June 30, 1995, the Company had an aggregate of approximately $7.65 billion of
total Debt (as defined under "Senior Debt Securities -- Definitions") (including
guarantees of indebtedness of others and the unaccreted portion of indebtedness
issued at a discount, but excluding indebtedness to subsidiaries), substantially
all of which would rank on a parity in right of payment with the Senior Debt
Securities. At that date, the Company and its subsidiaries also had an aggregate
of approximately $1.47 million in undrawn lines of credit (excluding amounts
related to lines of credit which provide availability to support commercial
paper).
The Company is a holding company and its assets consist primarily of
investments in its subsidiaries. A substantial portion of the consolidated
liabilities of the Company have been incurred by its subsidiaries. Therefore,
the Company's rights and the rights of its creditors, including holders of Debt
Securities, to participate in the distribution of assets of any subsidiary upon
the latter's liquidation or reorganization will be subject to prior claims of
the subsidiary's creditors, including trade creditors, except to the extent that
the Company may itself be a creditor with recognized claims against the
subsidiary (in which case the claims of the Company would still be subject to
the prior claims of any secured creditor of such subsidiary and of any holder of
indebtedness of such subsidiary that is senior to that held by the Company). At
June 30, 1995, the Company's subsidiaries had total Debt of approximately $4.52
billion (including guarantees of indebtedness of others and the unaccreted
portion of indebtedness issued at a discount, but excluding indebtedness owed to
the Company).
The Debt Securities will be obligations exclusively of the Company. The
Company's ability to service its indebtedness, including the Debt Securities, is
dependent primarily upon the earnings of its subsidiaries and the distribution
or other payment of such earnings to the Company in the form of dividends, loans
or advances, payment or reimbursement for management fees and expenses, and
repayment of loans and advances from the Company. The subsidiaries are separate
and distinct legal entities and have no obligation, contingent or otherwise, to
pay any amounts due pursuant to the Debt Securities or to make any funds
available therefor, whether by dividends, loans or other payments. The payment
of dividends or the making of loans and advances to the Company by its
subsidiaries may be subject to statutory or regulatory restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business considerations. Further, certain of the Company's subsidiaries are
subject to loan agreements that prohibit or limit the transfer of funds by such
subsidiaries to the Company in the form of loans, advances or dividends and
require that such subsidiaries' indebtedness to the Company be subordinate to
the indebtedness under such loan agreements. The amount of net assets of
subsidiaries subject to such restrictions exceeds the Company's consolidated net
assets. Tele-Communications, Inc. is also a separate and distinct legal entity
and it has no obligation, contingent or otherwise, to pay any amounts due
pursuant to the Debt Securities or to make any funds available therefor, whether
by loans or other payments.
The Senior Debt Securities will be issued under an Indenture executed by
the Company and Shawmut Bank Connecticut, National Association, as Trustee,
dated as of July 26, 1993, as amended and supplemented by a First Supplemental
Indenture, dated as of September 13, 1994 (the "SBC Indenture") or under an
Indenture executed by the Company and The Bank of New York, as Trustee, dated as
of August 4, 1993, as
5
<PAGE> 20
amended and supplemented by a First Supplemental Indenture, dated as of
September 13, 1994 (the "BNY Indenture," and together with the SBC Indenture,
the "Senior Indentures"); the Senior Subordinated Debt Securities will be issued
under an Indenture to be executed by the Company and Shawmut Bank, N.A., as
Trustee (the "Senior Subordinated Indenture"); and the Subordinated Debt
Securities will be issued under an Indenture executed by the Company and
Chemical Bank, as Trustee, dated as of April 1, 1991 (the "Subordinated
Indenture"). In this Prospectus, the SBC Indenture, the BNY Indenture, the
Senior Subordinated Indenture and the Subordinated Indenture are sometimes
collectively referred to as the Indentures and individually as an Indenture and
the Trustee under the SBC Indenture, the Trustee under the BNY Indenture, the
Trustee under the Senior Subordinated Indenture and the Trustee under the
Subordinated Indenture are sometimes collectively referred to as the Trustees
and individually as a Trustee. The terms of the Senior Debt Securities, the
Senior Subordinated Debt Securities and the Subordinated Debt Securities include
those stated in the respective Indentures and those made part of the Indentures
by reference to the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), as in effect on the date of the Indentures. The Indentures are
filed as exhibits to the Registration Statement. The Debt Securities are subject
to all such terms and holders of Debt Securities are referred to the respective
Indentures and the Trust Indenture Act for a statement of such terms. See
"Additional Information."
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, all provisions of the Indentures. As used in this section
"Description of Debt Securities," unless the context indicates otherwise, the
term "Company" means TCI Communications, Inc. and does not include any of its
subsidiaries. All other capitalized terms used in this section and not otherwise
defined have the meanings assigned to them in the Indentures.
GENERAL
The Indentures do not limit the amount of Debt Securities which can be
issued thereunder and provide that Debt Securities may be issued in one or more
series, in such form, with such terms and up to the aggregate principal amount
authorized from time to time by the Company. (Sections 2.01 and 2.02 of the
Indentures)
Reference is made to the Prospectus Supplement for the following terms of
the Offered Securities consisting of Debt Securities: (i) the designation
(including whether they are Senior Debt Securities, Senior Subordinated Debt
Securities or Subordinated Debt Securities), aggregate principal amount,
authorized denominations and currency or currencies in which principal, premium,
if any, and interest on the Offered Securities are payable; (ii) whether the
Offered Securities are to be issuable initially in temporary global form and
whether any of the Offered Securities are issuable in permanent global form as
Global Securities; (iii) whether the Offered Securities are to be issuable as
Registered Debt Securities or Bearer Debt Securities or both; (iv) the index or
indices used to determine the amount of payments of principal, premium, if any,
and interest on the Offered Securities; (v) the percentage of their principal
amount at which such Offered Securities will be issued; (vi) the date on which
the Offered Securities will mature (which may be fixed or extendible); (vii) the
rate or rates (which may be fixed or variable) per annum, if any, at which the
Offered Securities will bear interest and the date from which such interest will
accrue; (viii) the times at which any such interest will be payable and with
respect to Registered Debt Securities the record date for the interest payable
on any interest payment date; (ix) any mandatory or optional sinking fund or
analogous provisions; (x) the date or dates, if any, on or after which, or the
circumstances under which, and the price or prices (and form or method of
payment thereof) at which the Offered Securities may be redeemed, purchased or
exchanged at the option of the Company or any holder; (xi) any covenants or
Events of Default that are in addition to or different from those described
herein; and (xii) any other specific terms.
If the purchase price of any Offered Securities is denominated in one or
more foreign currencies, foreign currency units or composite currencies, or if
the principal, premium, if any, and interest on any Offered Securities are
payable in one or more foreign currencies, foreign currency units or composite
currencies, the restrictions, elections, general tax considerations, specific
terms and other information with respect to such Offered Securities and such
foreign currency or currencies or foreign currency unit or units or composite
currencies will be set forth in the applicable Prospectus Supplement.
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<PAGE> 21
Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be sold at a substantial discount below their principal
amount ("original issue discount"). The issue price of Offered Securities that
are Original Issue Discount Securities, the amount of the original issue
discount with respect thereto, the manner and rate or rates per annum (which may
be fixed or variable) at which such original issue discount shall accrue, the
yield to maturity represented thereby, the date or dates from or to which or
period or periods during which such original issue discount shall accrue, the
portion of the principal amount of such Offered Securities that will be payable
upon acceleration of the maturity thereof or upon the optional or mandatory
redemption, purchase or exchange thereof, and any other specific terms thereof
will be described in the Prospectus Supplement relating thereto, together with
special federal income tax and other considerations applicable to such Offered
Securities.
SENIOR DEBT SECURITIES
The Senior Indentures contain, among others, the following covenants which
will apply to Offered Securities that are Senior Debt Securities unless
otherwise provided in the Prospectus Supplement for such Offered Securities:
Change of Control. With respect to the Senior Debt Securities of any
series, if both (i) a Change of Control shall occur at any time after the date
on which Senior Debt Securities of such series are first issued and on or prior
to a date to be specified for such series in the related Prospectus Supplement
and (ii) on any date during the period commencing 90 days before and ending 90
days after a public filing has been made with the Commission or other general
public disclosure has been made indicating the occurrence of such Change of
Control, the then current rating of the Senior Debt Securities of such series by
Duff & Phelps Credit Rating Co. or its successor ("D&P") or by Moody's Investors
Service, Inc. or its successor ("Moody's") is downgraded to lower than BBB-, in
the case of D&P (or an equivalent successor rating), or lower than Baa3, in the
case of Moody's (or an equivalent successor rating) and, in the event that such
downgrading shall have occurred during the 90-day period prior to such public
disclosure, the rating assigned to such series of Senior Debt Securities by D&P
or Moody's as of the close of business on the date of such public disclosure
remains lower than BBB- or lower than Baa3, respectively (the occurrence of the
conditions specified in both (i) and (ii) above being a "Put Event"), then each
holder of Senior Debt Securities of such series shall have the right to require
the Company to repurchase all or any portion of such holder's Senior Debt
Securities of such series at a purchase price equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of purchase
(or if the Senior Debt Securities of such series are Original Issue Discount
Securities, 100% of that portion of the principal amount specified in the terms
of that series that would be payable if the maturity thereof were accelerated
pursuant to the Indenture), all as provided in, and subject to the terms of, the
Senior Indentures, as either of such Senior Indentures may be supplemented in
connection with the issuance of Senior Debt Securities of such series
thereunder. Subsequent to the occurrence of a Put Event, the Company will give a
notice to each holder of Senior Debt Securities of such series setting forth,
among other things, details regarding the right of such holder to require the
Company to repurchase such holder's Senior Debt Securities of such series, the
purchase date, and the name and address of the Paying Agent (which for this
purpose will, in the case of Registered Securities, be the Trustee and, in the
case of Bearer Securities, will be a Paying Agent in a place of payment located
outside the United States) to which such Senior Debt Securities are to be
presented and surrendered. The Company will not be obligated, with respect to
the Senior Debt Securities of any series, to purchase such Senior Debt
Securities or give notice to the holders thereof with respect to more than one
Put Event. (Section 4.02 of the Senior Indentures) The obligation of the Company
to purchase Senior Debt Securities put to it pursuant to this covenant will rank
senior to its obligations in respect of the Senior Subordinated Debt Securities
and the Subordinated Debt Securities. The applicability of this covenant is
limited to the circumstances described above and this covenant is not designed
to, and may not, provide rights to the holders of Senior Debt Securities in all
circumstances in which the market value of the Senior Debt Securities held by
them may be adversely affected, whether as the result of the Company's engaging
in a highly leveraged transaction or otherwise.
The Company will comply with any applicable requirements of Rule 14e-1
promulgated under the Exchange Act and any applicable securities laws and
regulations in connection with the performance of its obligations under this
covenant.
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<PAGE> 22
Limitation on Liens. Subject to certain specified exceptions, as long as
any Senior Debt Securities of a series entitled to the benefit of this covenant
are outstanding, the Company will not, and will not permit any Restricted
Subsidiary to, create, incur or assume any Lien on Restricted Property to secure
the payment of Funded Debt of the Company or any Restricted Subsidiary if
immediately after the creation, incurrence or assumption of such Lien, the
aggregate outstanding principal amount of all Funded Debt of the Company and the
Restricted Subsidiaries that is secured by Liens on Restricted Property would
exceed fifteen percent (15%) of the Maximum Funded Debt Amount, unless effective
provision is made whereby the Senior Debt Securities (together with, if the
Company shall so determine, any other Funded Debt ranking equally with the
Senior Debt Securities, whether then existing or thereafter created) are secured
equally and ratably with (or prior to) such Funded Debt (but only for so long as
such Funded Debt is so secured). (Section 4.04 of the Senior Indentures)
Limitation on Restricted Subsidiary Funded Debt. As long as any Senior Debt
Securities of a series entitled to the benefit of this covenant are outstanding,
the Company will not permit any Restricted Subsidiary to incur or assume any
Funded Debt if immediately after the incurrence or assumption of such Funded
Debt, the aggregate outstanding principal amount of all Funded Debt of the
Restricted Subsidiaries would exceed fifteen percent (15%) of the Maximum Funded
Debt Amount. Notwithstanding the foregoing, any Restricted Subsidiary may incur
Funded Debt to extend, renew or replace Funded Debt of such Restricted
Subsidiary, provided that the principal amount of the Funded Debt so incurred
does not exceed the principal amount of the Funded Debt extended, renewed or
replaced thereby immediately prior to such extension, renewal or replacement
plus any premium, accrued and unpaid interest or capitalized interest payable
thereon. (Section 4.05 of the Senior Indentures) The Senior Indentures do not
limit the incurrence of Funded Debt, or any other debt, secured or unsecured, by
the Company, except as described under "Limitation on Liens," or by any
Unrestricted Subsidiary.
Designation of Restricted Subsidiaries. With respect to the Senior Debt
Securities of any series, the Company may designate an Unrestricted Subsidiary
as a Restricted Subsidiary or designate a Restricted Subsidiary as an
Unrestricted Subsidiary at any time, provided that (1) immediately after giving
effect to such designation, the Leverage Ratio of the Restricted Group is not
greater than 8.0:1 and the Company and the Restricted Subsidiaries are in
compliance with the "Limitation on Liens" and "Limitation on Restricted
Subsidiary Funded Debt" covenants, and (2) an Officers' Certificate with respect
to such designation is delivered to the Trustee within 75 days after the end of
the fiscal quarter of the Company in which such designation is made (or, in the
case of a designation made during the last fiscal quarter of the Company's
fiscal year, within 120 days after the end of such fiscal year), which Officers'
Certificate shall state the effective date of such designation. The Company
shall make the initial designation of Restricted Subsidiaries with respect to
the Senior Debt Securities of any series, and deliver the required Officers'
Certificate with respect thereto to the Trustee, on or prior to the date of
initial issuance of Senior Debt Securities of such series. (Section 4.03 of the
Senior Indentures)
Definitions. The following are certain of the terms defined in each of the
Senior Indentures (Section 1.01):
"Change of Control" means the occurrence of either of the following events
(to the extent applicable): (A) the acquisition by any person (other than the
Parent, the Company, any subsidiary of the Parent or the Company, any employee
stock ownership or other employee benefit plan of the Parent or the Company or
of any subsidiary of the Parent or the Company, or any Controlling Person)
during any period of twelve (12) consecutive months of beneficial ownership of
shares of the Common Stock or Class B Stock or both of the Company representing
in the aggregate thirty percent (30%) or more of the combined voting power of
all shares of the Company's Common Stock and Class B Stock, calculated on a
fully diluted basis as of the date immediately prior to the date of such
acquisition (or, if there be more than one acquisition during such twelve-month
period, the date of the last such acquisition); provided, however, that
notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred if and for so long as the shares of the Common Stock and Class B Stock
of the Company beneficially owned by the Parent, the subsidiaries of the Parent
and the Controlling Persons represent in the aggregate 30% or more of the
combined voting power of all shares of the Company's Common Stock and Class B
Stock calculated on a fully diluted basis, or (B) for so long as the Company is
a subsidiary of the Parent, the acquisition by any person (other than the
Parent, any subsidiary of
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the Parent, any employee stock ownership plan or other employee benefit plan of
the Parent or any subsidiary of the Parent, or any Controlling Person) during
any period of twelve (12) consecutive months of beneficial ownership of shares
of the Class A or Class B Common Stock or both of the Parent representing in the
aggregate thirty percent (30%) or more of the combined voting power of all
shares of the Parent's Class A and Class B Common Stock, calculated on a fully
diluted basis as of the date immediately prior to the date of such acquisition
(or, if there be more than one acquisition during such twelve-month period, the
date of the last such acquisition); provided, however, that notwithstanding the
foregoing no Change of Control shall be deemed to have occurred if and for so
long as the shares of the Parent's Class A and Class B Common Stock beneficially
owned by the Controlling Persons represent in the aggregate 30% or more of the
combined voting power of all shares of the Parent's Class A and Class B Common
Stock calculated on a fully diluted basis.
"Company" means TCI Communications, Inc., a Delaware corporation, until a
successor replaces it pursuant to the applicable provisions of the applicable
Indenture and thereafter means the successor.
"Controlling Person" means each of (1) the Chairman of the Board of the
Company as of the date the applicable Indenture was first executed, (2) the
President of the Company as of the date the applicable Indenture was first
executed, (3) each of the directors of the Company as of the date the applicable
Indenture was first executed, (4) the respective family members, estates and
heirs of each of the persons referred to in clauses (1) through (3) above and
any trust or other investment vehicle for the primary benefit of any of such
persons or their respective family members or heirs, (5) Kearns-Tribune
Corporation, a Delaware corporation or any successor thereto by merger or
consolidation and (6) the trustee under the Parent's Employee Stock Purchase
Plan or any successor plan or any other employee stock ownership or other
employee benefit plan of the Parent or the Company or of any subsidiary of the
Parent or the Company. As used with respect to any person, the term "family
member" means the spouse, siblings and lineal descendants of such person. The
trustee under the Parent's Employee Stock Purchase Plan or any successor plan or
any other employee stock ownership or other employee benefit plan of the Parent
or the Company or of any subsidiary of the Parent or the Company shall be deemed
to have beneficial ownership of all shares of common stock of the Parent or the
Company held under the plan, whether or not allocated to or vested in
participants' accounts.
"Debt" of any person means:
(1) any indebtedness of such person (i) for borrowed money or (ii)
evidenced by a note, debenture or similar instrument (including a purchase money
obligation) given in connection with the acquisition of any property or assets,
including securities;
(2) any guarantee by such person of any indebtedness of others described in
the preceding clause (1); and
(3) any amendment, extension, renewal or refunding of any such indebtedness
or guarantee.
"Funded Debt" of any person means, as of the date as of which the amount
thereof is to be determined, without duplication, all indebtedness of such
person for borrowed money and all guaranties by such person of any indebtedness
of others for borrowed money, which by its terms has a final maturity, duration
or payment date more than one year from the date of determination thereof
(including, without limitation, any balance of such indebtedness which was
Funded Debt at the time of its creation maturing within one year from such date
of determination) or which has a final maturity, duration or payment date within
one year from such date of determination but which by its terms may be renewed
or extended at the option of such person for more than one year from such date
of determination, whether or not theretofore renewed or extended. When used with
respect to the Company or any Restricted Subsidiary, the term "Funded Debt"
excludes (1) any indebtedness of the Company or any Restricted Subsidiary to the
Company or another Restricted Subsidiary, (2) any guarantee by the Company or
any Restricted Subsidiary of indebtedness of the Company or another Restricted
Subsidiary, provided that such guarantee is not secured by a Lien on Restricted
Property, and (3) with respect to any series of Senior Debt Securities, any
indebtedness of the Company or any Restricted Subsidiary to any Unrestricted
Subsidiary which indebtedness is subordinated in right of payment to the prior
payment in full of the outstanding Senior Debt Securities of such series on
terms no less favorable to the holders of such Senior Debt Securities than those
contained in Article Ten of the Subordinated Indenture pursuant to which
Subordinated Debt Securities issued by the Company are subordinated to all
Senior Debt of
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<PAGE> 24
the Company (as defined therein), without giving effect to any amendment,
modification or supplement to, or discharge of, the Subordinated Indenture after
the date of the Senior Indenture, and which indebtedness is not secured by a
Lien on Restricted Property. For purposes of determining the outstanding
principal amount of Funded Debt at any date, the amount of indebtedness issued
at a price less than the principal amount thereof shall be equal to the amount
of the liability in respect thereof at such date determined in accordance with
generally accepted accounting principles.
"Leverage Ratio" with respect to the Restricted Group means, as of the date
of and after giving effect to any designation of an Unrestricted Subsidiary as a
Restricted Subsidiary and/or any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary, in each case in accordance with the "Designation of
Restricted Subsidiaries" covenant, the ratio of (1) the aggregate outstanding
principal amount of all Funded Debt of the Restricted Group as of such date to
(2) the product of four times the Restricted Group Cash Flow for the most recent
full fiscal quarter for which financial information is available on such date.
"Lien" means any mortgage, pledge, lien, security interest, or other
similar encumbrance.
"Maximum Funded Debt Amount" means, as of any date of determination
thereof, that amount which is equal to the product of (i) eight and (ii) the
product of (x) the Restricted Group Cash Flow for the most recent full fiscal
quarter for which financial information is available on such date and (y) four.
"Parent" means Tele-Communications, Inc., a Delaware corporation, and any
successor thereof.
"Principal Property" means, as of any date of determination, any property
or assets owned by any Restricted Subsidiary other than (1) any such property
which, in the good faith opinion of the Board of Directors, is not of material
importance to the business conducted by the Company and its Restricted
Subsidiaries taken as a whole and (2) any shares of any class of stock or any
other security of any Unrestricted Subsidiary.
"Restricted Group" means, as of any date of determination, the Company and
the Restricted Subsidiaries as of such date after giving effect to any
designation being made on such date in accordance with the "Designation of
Restricted Subsidiaries" covenant.
"Restricted Group Cash Flow" for any period means the Restricted Group Net
Income (as defined below) for such period, plus (A) the sum (without
duplication) of the aggregate of each of the following items of the Company and
the Restricted Subsidiaries for such period to the extent taken into account as
charges to Restricted Group Net Income for such period: (i) interest expense,
(ii) income tax expense, (iii) depreciation and amortization expense and other
noncash charges, (iv) extraordinary items and (v) after-tax losses on sales of
assets outside of the ordinary course of business not otherwise included in
extraordinary items in accordance with generally accepted accounting principles,
minus (B) the sum (without duplication) of the aggregate of each of the
following items of the Company and the Restricted Subsidiaries for such period
to the extent taken into account as credits to Restricted Group Net Income for
such period: (i) noncash credits, (ii) extraordinary items, and (iii) after-tax
gains on sales of assets outside of the ordinary course of business not
otherwise included in extraordinary items in accordance with generally accepted
accounting principles.
For purposes of this definition, (1) "Restricted Group Net Income" for any
period means the aggregate of the net income (loss) for such period of the
Company and the Restricted Subsidiaries, determined on a consolidated basis in
accordance with generally accepted accounting principles; provided, however,
that (i) the net income (loss) of any person accounted for by the equity method
of accounting and the net income (loss) of any Unrestricted Subsidiary shall be
excluded, except that the net income of any such person or Unrestricted
Subsidiary shall be included to the extent of the amount of dividends or
distributions paid by such person or Unrestricted Subsidiary to the Company or a
Restricted Subsidiary during such period, and (ii) except as otherwise provided
in clause (2) below, the net income (loss) of any other person acquired by the
Company or any Restricted Subsidiary in a transaction accounted for as a pooling
of interests for any period prior to the date of such acquisition shall be
excluded; and (2) if the Company or any Restricted Subsidiary consummated any
acquisition or disposition of assets during the period for which Restricted
Group Cash Flow is being calculated, or consummated any acquisition or
disposition of assets subsequent to such period and on or prior to the date as
of which the Leverage Ratio or Maximum Funded Debt Amount, as
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<PAGE> 25
applicable, is to be determined, then, in each such case, the Restricted Group
Cash Flow for such period shall be calculated on a pro forma basis as if such
acquisition or disposition had occurred at the beginning of such period.
"Restricted Property" means, as of any date of determination, any Principal
Property and any shares of stock of a Restricted Subsidiary owned by the Company
or a Restricted Subsidiary.
"Restricted Subsidiary" means, as of any date of determination, a
corporation a majority of whose voting stock is owned by the Company and/or one
or more Restricted Subsidiaries, which corporation has been, or is then being,
designated a Restricted Subsidiary in accordance with the "Designation of
Restricted Subsidiaries" covenant, unless and until designated an Unrestricted
Subsidiary in accordance with such covenant.
"Subsidiary" means a corporation a majority of whose voting stock is owned
by the Company and/or one or more Subsidiaries. Voting stock is capital stock
having voting power under ordinary circumstances to elect directors.
"Unrestricted Subsidiary" means, as of any date of determination, any
Subsidiary of the Company that is not a Restricted Subsidiary.
SENIOR SUBORDINATED DEBT SECURITIES
The following provisions will apply to Offered Securities that are Senior
Subordinated Debt Securities unless otherwise provided in the Prospectus
Supplement for such Offered Securities:
Subordination. The indebtedness evidenced by the Senior Subordinated Debt
Securities will be subordinate to the prior payment in full of all Senior Debt
as described below. The Indenture does not limit Senior Debt or any other debt,
secured or unsecured, of the Company or any subsidiary, except as described
under "Limitation on Subordinated Debt Superior to the Senior Subordinated Debt
Securities" below. Upon maturity (by acceleration or otherwise) of any Senior
Debt, payment in full must be made on such Senior Debt (or duly provided for)
before any payment is made on or in respect of the Senior Subordinated Debt
Securities (except payments made in capital stock of the Company or in warrants,
rights or options to purchase or acquire capital stock of the Company, sinking
fund payments made in Senior Subordinated Debt Securities acquired by the
Company before the maturity of such Senior Debt, and payments made through the
exchange of other debt obligations of the Company for such Senior Subordinated
Debt Securities in accordance with the terms of such Senior Subordinated Debt
Securities provided that such debt obligations are subordinated to Senior Debt
at least to the extent that the Senior Subordinated Debt Securities for which
they are exchanged are so subordinated in accordance with the Indenture). During
the continuance of any default in payment of the principal of, premium, if any,
interest on, or other amounts due in respect of, any Senior Debt, no payment may
be made by the Company on, or in respect of, the Senior Subordinated Debt
Securities (except payments made in capital stock of the Company or in warrants,
rights or options to purchase or acquire capital stock of the Company, sinking
fund payments made in Senior Subordinated Debt Securities acquired by the
Company before such default and notice thereof, and payments made through the
exchange of other debt obligations of the Company for such Senior Subordinated
Debt Securities in accordance with the terms of such Senior Subordinated Debt
Securities provided that such debt obligations are subordinated to Senior Debt
at least to the extent that the Senior Subordinated Debt Securities for which
they are exchanged are so subordinated in accordance with the Indenture). Upon
any distribution of assets of the Company in any dissolution, winding up,
liquidation or reorganization of the Company, payment of all amounts due in
respect of the Senior Subordinated Debt Securities will be subordinated, to the
extent and in the manner set forth in the Indenture, to the prior payment in
full of all Senior Debt. Such subordination will not prevent the occurrence of
any Event of Default. (Sections 10.01, 10.02, 10.03 and 10.11 of the Indenture)
The Indenture for the Senior Debt Securities contains a cross-acceleration
provision that would, among other things, permit the acceleration of the
maturity of any outstanding Senior Debt Securities in the event that the
maturity of any outstanding Senior Subordinated Debt Securities or Subordinated
Debt Securities were accelerated. See "Defaults and Remedies" below. The
instruments and agreements pursuant to which all or substantially all of the
Company's Senior Debt has been incurred also contain cross-default or cross-
acceleration provisions.
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Securities Senior to Junior Subordinated Debt. The indebtedness evidenced
by the Senior Subordinated Debt Securities will be superior in right of payment
to all Junior Subordinated Debt as described below. Upon maturity (by
acceleration or otherwise) of the Senior Subordinated Debt Securities of any
series, payment in full must be made thereon, or duly provided for, before any
payment is made on or in respect of any Junior Subordinated Debt (except
payments made in capital stock of the Company or in warrants, rights or options
to purchase or acquire capital stock of the Company, sinking fund payments made
in instruments evidencing Junior Subordinated Debt of the same issue acquired
before the maturity of the Senior Subordinated Debt Securities of such series,
and payments made through the exchange of other debt obligations of the Company
for such Junior Subordinated Debt in accordance with the terms of such Junior
Subordinated Debt provided that such debt obligations are subordinated to the
Senior Subordinated Debt Securities at least to the extent that the Junior
Subordinated Debt for which they are exchanged is so subordinated in accordance
with the Indenture). During the continuance of any default in payment of the
principal of, premium, if any, interest on, or other amounts due in respect of,
the Senior Subordinated Debt Securities of any series, no payment may be made by
the Company on, or in respect of, any Junior Subordinated Debt (except payments
made in capital stock of the Company or in warrants, rights or options to
purchase or acquire capital stock of the Company, sinking fund payments made in
instruments evidencing Junior Subordinated Debt of the same issue acquired
before such default and notice thereof, and payments made through the exchange
of other debt obligations of the Company for such Junior Subordinated Debt in
accordance with the terms of such Junior Subordinated Debt provided that such
debt obligations are subordinated to the Senior Subordinated Debt Securities at
least to the extent that the Junior Subordinated Debt for which they are
exchanged is so subordinated in accordance with the Indenture). Upon any
distribution of assets of the Company in any dissolution, winding up,
liquidation or reorganization of the Company, holders of the Senior Subordinated
Debt Securities will be entitled to receive payment in full of all amounts due
in respect thereof before the holders of any Junior Subordinated Debt are
entitled to receive any payment on account of such Junior Subordinated Debt.
(Section 4.05 of the Indenture)
Limitation on Subordinated Debt Superior to the Senior Subordinated Debt
Securities. As long as any Senior Subordinated Debt Securities remain
outstanding, the Company may not create or incur any Debt which is subordinate
or junior in right of payment to any Senior Debt if such Debt is superior in
right of payment to the Senior Subordinated Debt Securities. (Section 4.06 of
the Indenture)
Definitions. The following are certain of the terms defined in the
Indenture (Sections 4.06 and 10.01):
"Junior Subordinated Debt" means the principal of (premium, if any) and
interest on Debt of the Company created or incurred after the date of the
Indenture which by its terms is subordinate in right of payment to the Senior
Subordinated Debt Securities, including any Subordinated Debt Securities issued
under the Subordinated Indenture.
"Senior Debt" means the principal of (premium, if any) and interest on Debt
of the Company outstanding at any time other than (i) the Senior Subordinated
Debt Securities, (ii) the Company's outstanding 11 1/8% senior subordinated
debentures due October 1, 2003, which shall rank pari passu with the Senior
Subordinated Debt Securities, (iii) any Subordinated Debt Securities issued
under the Subordinated Indenture, and (iv) Debt which by its terms is not
superior in right of payment to the Senior Subordinated Debt Securities.
The definition of "Debt" in the Senior Subordinated Indenture is the same
as that in the Senior Indenture.
Nothing in the Indenture affords holders of Senior Subordinated Debt
Securities protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company.
SUBORDINATED DEBT SECURITIES
The following provisions will apply to Offered Securities that are
Subordinated Debt Securities unless otherwise provided in the Prospectus
Supplement for such Offered Securities:
Subordination. The indebtedness evidenced by the Subordinated Debt
Securities will be subordinate to the prior payment in full of all Senior Debt
as described below. The Indenture does not limit Senior Debt or
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<PAGE> 27
any other debt, secured or unsecured, of the Company or any subsidiary. Upon
maturity (by acceleration or otherwise) of any Senior Debt, payment in full must
be made on such Senior Debt (or duly provided for) before any payment is made on
or in respect of the Subordinated Debt Securities (except payments made in
capital stock of the Company or in warrants, rights or options to purchase or
acquire capital stock of the Company, sinking fund payments made in Subordinated
Debt Securities acquired by the Company before the maturity of such Senior Debt,
and payments made through the exchange of other debt obligations of the Company
for such Subordinated Debt Securities in accordance with the terms of such
Subordinated Debt Securities provided that such debt obligations are
subordinated to Senior Debt at least to the extent that the Subordinated Debt
Securities for which they are exchanged are so subordinated in accordance with
the Indenture). During the continuance of any default in payment of the
principal of, premium, if any, interest on, or other amounts due in respect of,
any Senior Debt, no payment may be made by the Company on, or in respect of, the
Subordinated Debt Securities (except payments made in capital stock of the
Company or in warrants, rights or options to purchase or acquire capital stock
of the Company, sinking fund payments made in Subordinated Debt Securities
acquired by the Company before such default and notice thereof, and payments
made through the exchange of other debt obligations of the Company for such
Subordinated Debt Securities in accordance with the terms of such Subordinated
Debt Securities provided that such debt obligations are subordinated to Senior
Debt at least to the extent that the Subordinated Debt Securities for which they
are exchanged are so subordinated in accordance with the Indenture). Upon any
distribution of assets of the Company in any dissolution, winding up,
liquidation or reorganization of the Company, payment of all amounts due in
respect of the Subordinated Debt Securities will be subordinated, to the extent
and in the manner set forth in the Indenture, to the prior payment in full of
all Senior Debt. Such subordination will not prevent the occurrence of any Event
of Default. (Sections 10.01, 10.02, 10.03 and 10.11 of the Indenture) The
Indenture for the Senior Debt Securities contains a cross-acceleration provision
that would, among other things, permit the acceleration of the maturity of any
outstanding Senior Debt Securities in the event that the maturity of any
outstanding Senior Subordinated Debt Securities or Subordinated Debt Securities
were accelerated. See "Defaults and Remedies" below. The instruments and
agreements pursuant to which all or substantially all of the Company's Senior
Debt has been incurred also contain cross-default or cross-acceleration
provisions.
"Senior Debt" means the principal of (premium, if any) and interest on Debt
of the Company outstanding at any time other than (i) the Subordinated Debt
Securities, and (ii) Debt which by its terms is not superior in right of payment
to the Subordinated Debt Securities. The definition of "Debt" in the
Subordinated Indenture is the same as that in the Senior Indenture.
Nothing in the Indenture affords holders of Subordinated Debt Securities
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company.
DENOMINATIONS AND FORM
Unless otherwise indicated in the Prospectus Supplement, the Offered
Securities will be Registered Debt Securities denominated in U.S. Dollars and
will be issued only in denominations of $1,000 and integral multiples of $1,000.
(Section 2.03 of the SBC, Senior Subordinated and Subordinated Indentures and
Sections 2.01 and 2.03 of the BNY Indenture) Under the BNY Indenture, Debt
Securities of any series may be issuable as Registered Debt Securities, Bearer
Debt Securities (with or without coupons attached) or both, and may be issuable
in whole or in part in the form of one or more Global Securities. In addition,
the BNY Indenture provides that Debt Securities may be denominated or payable in
one or more foreign currencies, foreign currency units or composite currencies.
(Sections 2.01 and 2.02 of the BNY Indenture) Unless otherwise indicated in the
applicable Prospectus Supplement, Bearer Debt Securities denominated in U.S.
Dollars will be issued only in the denomination of $5,000 with coupons attached.
(Sections 2.01 and 2.03 of the BNY Indenture) A Global Security will be issued
in a denomination equal to the aggregate principal amount of outstanding Debt
Securities represented by such Global Security. (Section 2.10 of the BNY
Indenture) The Prospectus Supplement relating to a series of Debt Securities
denominated other than in U.S. Dollars will specify the authorized denominations
thereof.
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During the "restricted period," as defined in Treasury Regulation Section
1.163-5(c)(2)(i)(D)(7), no Bearer Debt Security may be offered or sold (or
resold in connection with its original issuance) in the United States or its
possessions or to a United States person (subject to certain exceptions).
Further, no Bearer Debt Security may be mailed or otherwise delivered to any
location in the United States or its possessions in connection with a sale that
occurred during the restricted period. Offered Securities that are Bearer Debt
Securities will be subject to certification requirements as to the ownership of
such Bearer Debt Security (including beneficial interests in a Global Security
representing such Bearer Debt Security) which will be described in the
applicable Prospectus Supplement. See "Limitations on Issuance of Bearer Debt
Securities."
REGISTRAR, PAYING AGENT
The Company will maintain an office or agency where Registered Debt
Securities of each series may be presented for registration of transfer or for
exchange ("Registrar") and an office or agency where Debt Securities of each
series may be presented for payment ("Paying Agent"). The Company may have one
or more co-Registrars and one or more additional Paying Agents with respect to
any series of Debt Securities and the Company or any of its subsidiaries may act
as Paying Agent, Registrar or co-Registrar. Unless otherwise indicated in an
applicable Prospectus Supplement, each Trustee will initially act as Paying
Agent and Registrar for each series of Debt Securities issued under its
respective Indenture. The Company may change any Paying Agent, Registrar or
co-Registrar at any time without notice to the holders of Debt Securities,
except as described below with respect to Debt Securities issued under the BNY
Indenture. The Company will promptly notify the Trustee of the name and address
of any such Agent. (Section 2.05 of the Indentures)
The BNY Indenture also provides that if Debt Securities of a series are
issuable as Bearer Debt Securities, the Company will maintain (i) in the Borough
of Manhattan, The City of New York, an office or agency where any Registered
Debt Securities of that series may be presented or surrendered for payment and
for registration of transfer, where Debt Securities of that series may be
surrendered for exchange and where Bearer Debt Securities of that series and
related coupons may be presented or surrendered for payment in the circumstances
described under "Payment" below, and (ii) subject to any laws or regulations
applicable thereto, in a place of payment for Debt Securities of that series
located outside the United States, an office or agency where any Registered Debt
Securities of that series may be surrendered for registration of transfer, where
Debt Securities of that series may be surrendered for exchange and where Debt
Securities of that series and any related coupons may be presented and
surrendered for payment, provided that if the Debt Securities of that series are
listed on The International Stock Exchange of the United Kingdom and the
Republic of Ireland, the Luxembourg Stock Exchange or any other stock exchange
located outside the United States and such stock exchange shall so require, the
Company will maintain a Paying Agent for the Debt Securities of that series in
London, Luxembourg or any other required city located outside the United States,
as the case may be, so long as the Debt Securities of that series are listed on
such exchange. Any Paying Agents outside the United States initially designated
by the Company for the Offered Securities will be named in the applicable
Prospectus Supplement. The Company will promptly notify the Trustee and the
holders of Debt Securities of a series of the location and any change in the
location of any office or agency which it is required to maintain for the Debt
Securities of such series. (Section 4.01 of the BNY Indenture)
TRANSFER AND EXCHANGE
Registered Debt Securities of any series (other than a Global Security,
except as provided under "Global Securities") will be exchangeable at the option
of the holder for other Registered Debt Securities of the same series of any
authorized denominations and of a like aggregate principal amount and tenor.
(Section 2.08 of the Indentures) In addition, if Debt Securities of any series
issued under the BNY Indenture are issuable as both Registered Debt Securities
and Bearer Debt Securities, then, if so provided with respect to the Debt
Securities of such series, at the option of the holder and subject to the terms
of such Indenture, Bearer Debt Securities (with, except as provided below, all
related unmatured coupons and all related matured coupons in default) of such
series will be exchangeable for Registered Debt Securities of the same series of
any authorized denominations and of a like aggregate principal amount and tenor.
Bearer Debt Securities surrendered in exchange for Registered Debt Securities
between a regular record date or, in certain circumstances, a special record
date, for an interest payment and the relevant interest payment date shall be
surrendered without the coupon relating to such interest payment date attached
and interest will not be payable on such interest payment date in respect of
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<PAGE> 29
the Registered Debt Security issued in exchange for such Bearer Debt Security,
but will be payable only to the holder of such coupon in accordance with the
terms of the BNY Indenture. Unless otherwise specified in the applicable
Prospectus Supplement, Bearer Debt Securities will not be issued in exchange for
Registered Debt Securities. (Section 2.08 of the BNY Indenture)
Debt Securities of any series may be surrendered for exchange as provided
above, and Registered Debt Securities of any series (other than a Global
Security, except as provided under "Global Securities") may be surrendered for
registration of transfer, at the office or agency designated by the Company for
such purpose with respect to such series of Debt Securities. Bearer Debt
Securities will be transferable by delivery. (Section 2.14 of the BNY Indenture)
Every Registered Debt Security presented or surrendered for registration of
transfer or for exchange shall be duly endorsed or accompanied by appropriate
transfer documents duly executed. No service charge will be made for any
registration of transfer or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any taxes and other governmental
charges that may be imposed in relation thereto. (Section 2.08 of the
Indentures)
The Company and the Registrar need not transfer or exchange any Debt
Securities selected for redemption or purchase (except, in the case of Debt
Securities to be redeemed or purchased in part, the portion thereof not to be
redeemed or purchased) or any Debt Securities in respect of which a notice
requiring the purchase or redemption thereof by the Company at the option of the
holder thereof has been given and not withdrawn by such holder in accordance
with the terms of such Debt Securities (as described, if applicable, in the
Prospectus Supplement) (except, in the case of Debt Securities to be so
purchased or redeemed in part, the portion thereof not to be so purchased or
redeemed). (Section 2.08 of the Indentures) A Bearer Debt Security so selected
for redemption or purchase or in respect of which a notice requiring the
redemption or purchase thereof by the Company at the option of the holder
thereof has been given and not so withdrawn may however, if so provided with
respect to the Debt Securities of such series, be exchanged for a Registered
Debt Security of that series and like tenor, provided that such Registered Debt
Security is simultaneously surrendered for redemption or purchase, as the case
may be. (Section 2.08 of the BNY Indenture)
The SBC Indenture, the Senior Subordinated Indenture and the Subordinated
Indenture also provide that the Registrar need not transfer or exchange any Debt
Securities of a particular series during a period of 15 days before a selection
of Debt Securities of such series to be redeemed. (Section 2.08 of the SBC, the
Senior Subordinated and the Subordinated Indentures) The BNY Indenture provides
that the Company shall not be required to issue, register the transfer of or
exchange Debt Securities of any series during a period beginning at the opening
of business 15 days before any selection of Debt Securities of that series to be
redeemed and ending at the close of business on (i) if Debt Securities of that
series are issuable only as Registered Debt Securities, the date of the mailing
of the relevant notice of redemption, and (ii) if Debt Securities of that series
are issuable as Bearer Debt Securities, the date of the first publication of the
relevant notice of redemption or, if Debt Securities of that series are also
issuable as Registered Debt Securities and there is no publication, the mailing
of the relevant notice of redemption. (Section 2.08 of the BNY Indenture)
Prior to due presentment of a Registered Debt Security for registration of
transfer, the person in whose name such Registered Debt Security is registered
may be treated as the owner of it for all purposes. (Section 2.14 of the
Indentures) The bearer of any Bearer Debt Security and the bearer of any coupon
appertaining thereto may be treated as the owner of such Bearer Debt Security or
coupon for all purposes. (Section 2.14 of the BNY Indenture)
GLOBAL SECURITIES
The BNY Indenture provides that the Debt Securities of any series
thereunder may be issued in whole or in part in the form of one or more Global
Securities, which Global Securities may be issued in either registered or bearer
form and in either temporary or permanent form. (Sections 2.10 and 2.11 of the
BNY Indenture) Each Global Security will be deposited with and, if it is issued
in registered form, will be registered in the name of the depositary (or a
nominee of the depositary) identified in the applicable Prospectus Supplement.
(Section 2.10 of the BNY Indenture) So long as the depositary for a Global
Security in registered form, or its nominee, is the registered owner of the
Global Security, the depositary or its nominee, as the case may be, will be
considered the sole owner of the Debt Securities represented by such Global
Security for all purposes under the Indenture. (Section 2.14 of the BNY
Indenture) Unless and until it is exchanged in whole or in part for Debt
Securities in definitive form, a Global Security may not be transferred except
as a whole by the depositary for such Global
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Security to a nominee of such depositary or by a nominee of such depositary to
such depositary or another nominee of such depositary or by the depositary or
any nominee to a successor depositary or any nominee of such successor. (Section
2.08 of the BNY Indenture) Unless otherwise specified in the applicable
Prospectus Supplement, if the depositary with respect to any Global Security is
at any time unwilling, unable or ineligible to continue as depositary and a
successor depositary is not appointed by the Company within 90 days of such
time, or if the Company, in its sole discretion, at any time determines that any
series of Debt Securities issued or issuable in the form of a Global Security
shall no longer be represented by such Global Security, then in either such
event the Global Security shall be exchanged for Debt Securities in definitive
form pursuant to the BNY Indenture. Further, if so specified by the Company with
respect to the Debt Securities of a series and described in the applicable
Prospectus Supplement, an owner of a beneficial interest in a Global Security
representing Debt Securities of such series may, on terms acceptable to the
Company and the depositary for such Global Security, receive Debt Securities of
such series in definitive form. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery in
definitive form of Debt Securities in authorized denominations and of like tenor
of the series represented by such Global Security, equal in principal amount to
such beneficial interest, and to have such Debt Securities registered in its
name (if the Debt Securities of such series are issuable as Registered Debt
Securities). (Section 2.08 of the BNY Indenture) See, however, "Limitations on
Issuance of Bearer Debt Securities" below for a discussion of certain
restrictions on the delivery of a Bearer Debt Security in definitive form in
exchange for an interest in a Global Security. Except as described above, unless
otherwise specified in the applicable Prospectus Supplement, owners of
beneficial interests in a Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities of such series in definitive form and will not be considered the
owners or holders thereof under the BNY Indenture.
Any specific terms of the depositary arrangement with respect to a series
of Debt Securities or any part thereof will be described in the applicable
Prospectus Supplement. The Company anticipates that the following provisions
will apply to all depositary arrangements.
Upon the issuance of a Global Security, the depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
participants. Ownership of beneficial interests in a Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the depositary (with respect to beneficial interests of
participants in the depositary), or by participants in the depositary or persons
that may hold interests through such participants (with respect to beneficial
interests of persons other than participants in the depositary). Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that hold interests through participants.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Debt Securities" below, payments of the principal of and any premium and
interest on Debt Securities registered in the name of or held by a depositary or
its nominee will be made to the depositary or its nominee, as the case may be,
as the registered owner or the holder of the Global Security representing such
Debt Securities. None of the Company, the Trustee, any Paying Agent or the
Registrar for such Debt Securities will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests. (Section 2.14 of the BNY Indenture)
The Company expects that the depositary for Debt Securities of a series,
upon receipt of any payment of principal, premium or interest in respect of a
Global Security, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such depositary. The
Company also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such participants. With
respect to a Global Security that represents in whole or in part Debt Securities
of a series that are issuable as Bearer Debt Securities, receipt by owners of
beneficial interests in such Global Security of payments in respect of such
Global Security will be subject to the restrictions discussed under "Limitations
on Issuance of Bearer Debt Securities" below.
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LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Debt Securities (including beneficial interests in a Global Security that
represents Bearer Debt Securities) may not be offered or sold (or resold in
connection with their original issuance) during the "restricted period," as
defined in Treasury Regulation Section 1.163-5(c)(2)(i)(D)(7), in the United
States or its possessions or to United States persons (each as defined below)
other than to (i) a Qualifying Foreign Branch of a United States Financial
Institution (as defined below), (ii) a United States person who acquires and
holds the obligation through the Qualifying Foreign Branch of a United States
Financial Institution, (iii) a United States office of an "exempt distributor,"
as defined in Treasury Regulation Section 1.163-5(c) (2)(i)(D)(5), (iv) the
United States office of an international organization, as defined in Section
7701(a)(18) of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder, or (v) the United States office of a foreign central
bank, as defined in Section 895 of the Code and the regulations thereunder. In
addition, Bearer Debt Securities may not be delivered within the United States
or its possessions in connection with a sale that occurred during the restricted
period. Any underwriters, agents and dealers participating in the offering of
Offered Securities must agree that they will not offer any Bearer Debt
Securities for sale or resale in the United States or its possessions or to
United States persons (other than a person specified in clause (i), (ii), (iii),
(iv) or (v) above) or deliver Bearer Debt Securities within the United States or
its possessions. The term "Qualifying Foreign Branch of a United States
Financial Institution" means a branch located outside the United States of a
United States financial institution (as defined in Treasury Regulation Section
1.165-12(c)(1)(v)) that provides a certificate within a reasonable time (or a
blanket certificate in the year the Debt Security is issued or either of the
preceding two calendar years) stating that it agrees to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Code and the regulations
thereunder. The term "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof
and an estate or trust the income of which is subject to United States federal
income taxation regardless of its source; the term "United States" means the
United States of America (including the States and the District of Columbia),
and the term "possessions" includes, but is not limited to, Puerto Rico, the
U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.
United States federal tax laws and regulations also require that the owner
of an obligation issuable in bearer form or the financial institution (as
defined in the preceding paragraph) or clearing organization through which the
owner directly or indirectly holds such obligation must provide the issuer of
the obligation with a certificate on the earlier of the date of the first actual
payment of interest on the obligation or the date of delivery by the issuer of
the obligation in definitive form stating that on such date the obligation is
owned by (a) a person that is not a United States person, (b) a person described
in clause (i) or (ii) of the preceding paragraph, or (c) a financial institution
for purposes of resale during the restricted period, but not for resale directly
or indirectly to a United States person or to a person within the United States
or its possessions. A certificate described in clause (a) or (b) above may not
be given with respect to an obligation that is owned by a financial institution
for purposes of resale during the restricted period. When the required
certificate is provided by a clearing organization, the certificate must be
based upon statements provided to it by its member organizations. For purposes
of the foregoing, a "temporary global security," as defined in Treasury
Regulation Section 1.163-5(c)(l)(ii)(B), is not considered to be an obligation
in definitive form. In compliance with the foregoing, if the Offered Securities
are of a series of Debt Securities issuable as Bearer Debt Securities, the
delivery thereof (including delivery in exchange for an interest in a Global
Security) and the payment of interest thereon, as applicable, will be subject to
the satisfaction of certification requirements that will be specified by the
Company in accordance with the BNY Indenture in connection with the
establishment of such series and will be described in the applicable Prospectus
Supplement. (Sections 2.02 and 2.04 of the BNY Indenture) The BNY Indenture also
provides that no Bearer Debt Security (including a Global Security that
represents Bearer Debt Securities) will be mailed or otherwise delivered to any
location in the United States or its possessions. (Section 2.04 of the BNY
Indenture)
Bearer Debt Securities and any coupons appertaining thereto will bear a
legend substantially to the following effect: "Any United States person who
holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code." Under Sections 165(j) and 1287(a) of the
Code, holders that are United States
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persons, with certain exceptions, will not be entitled to deduct any loss on
Bearer Debt Securities and must treat as ordinary income any gain realized on
the sale or other disposition (including the receipt of principal) of Bearer
Debt Securities.
PAYMENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Bearer Debt Securities (other
than a Global Security) will be made, subject to any applicable laws and
regulations, at the offices of such Paying Agent or Paying Agents outside the
United States as the Company may designate from time to time, except that, at
the option of the Company (or, if so specified in the applicable Prospectus
Supplement, at the option of the holder), payment of interest may be made by
check (provided the same is not mailed to an address inside the United States)
or by wire transfer to an account located outside the United States maintained
by the payee. (Sections 2.13 and 4.01 of the BNY Indenture) Unless otherwise
indicated in an applicable Prospectus Supplement, payment of interest on Bearer
Debt Securities on any interest payment date will be made only against surrender
of the coupon relating to such interest payment date. (Section 2.13 of the BNY
Indenture) No payment with respect to any Bearer Debt Security will be made at
any office or agency of the Company in the United States or by check mailed to
any address in the United States or by transfer to an account maintained in the
United States. Notwithstanding the foregoing, payments of principal of and any
premium and interest on Bearer Debt Securities denominated and payable in U.S.
Dollars will be made at the office of the Company's Paying Agent in the Borough
of Manhattan, The City of New York, if (but only if) payment of the full amount
thereof in U.S. Dollars at all offices or agencies outside the United States is
illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 4.01 of the BNY Indenture)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Debt Securities
(other than a Global Security) will be made at the office of such Paying Agent
or Paying Agents as the Company may designate from time to time, except that at
the option of the Company payment of any interest may be made by check mailed to
the address of the person entitled thereto as such address shall appear in the
security register or, if so specified with respect to the Registered Debt
Securities of any series issued under the BNY Indenture, by wire transfer to an
account designated by such person. Payment of any installment of interest on
Registered Debt Securities will be made to the person in whose name such
Registered Debt Security is registered at the close of business on the regular
record date (or, in the case of defaulted interest, special record date) for
such interest payment. (Section 2.13 of the Indentures)
All moneys paid by the Company to a Paying Agent for the payment of
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will be repaid to the Company and the holder
of such Debt Security or any coupon appertaining thereto will thereafter look
only to the Company for payment thereof unless an applicable abandoned property
law designates another person. (Section 8.03 of the Indentures)
AMENDMENT, SUPPLEMENT, WAIVER
Subject to certain exceptions, the Indentures or the Debt Securities may be
amended or supplemented, and any past default or compliance with any provision
may be waived, insofar as the Debt Securities of any series are concerned, with
the consent of the holders of a majority in aggregate principal amount of the
outstanding Debt Securities of such series. (Sections 6.04 and 9.02 of the
Indentures) Without the consent of any holder of Debt Securities, the Company
and the Trustee may amend or supplement the Indentures or the Debt Securities to
cure any ambiguity, defect or inconsistency, to permit or facilitate the
issuance of Debt Securities in bearer form or to provide for uncertificated Debt
Securities in global form in addition to certificated Debt Securities (so long
as any "registration-required obligation," within the meaning of Section
163(f)(2) of the Code, is in registered form for purposes of the Code) or to
make certain other specified changes or any change that does not materially
adversely affect the rights of any holder of Debt Securities. (Section 9.01 of
the Indentures)
SUCCESSOR CORPORATION
The Company may not consolidate with or merge into, or transfer its
properties and assets substantially as an entirety to, another corporation
unless (i) the successor corporation, which shall be a corporation organized
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under the laws of the United States or a State thereof, assumes by supplemental
indenture all the obligations of the Company under the Debt Securities and the
Indentures, and (ii) after giving effect to such transaction, no Event of
Default shall have occurred and be continuing. Thereafter, unless otherwise
specified in the Prospectus Supplement, all such obligations of the Company
terminate. (Section 5.01 of the Indentures)
DEFAULTS AND REMEDIES
An Event of Default with respect to Debt Securities of any series is: (i)
default for 30 days in payment of any interest on the Debt Securities of that
series; (ii) default in payment of principal, premium or any other amount (other
than interest) due in respect of the Debt Securities of that series at maturity,
upon redemption (including default in the making of any mandatory sinking fund
payment), upon purchase by the Company at the option of the holder or otherwise;
(iii) failure by the Company for 30 days after receipt of written notice as
provided in the Indentures to comply with any of its other agreements in the
Indentures (other than agreements expressly included in the Indentures solely
for the benefit of a series of Debt Securities other than that series or
expressly made inapplicable to the Debt Securities of such series) or the Debt
Securities of that series; (iv) (for purposes of the Senior Indentures only)
acceleration of the maturity of any Debt of the Company (including Senior Debt
Securities of any other series) if the aggregate principal amount (or, if
applicable, issue price plus accrued original issue discount) of the Debt the
maturity of which has been accelerated exceeds five percent (5%) of the
aggregate principal amount of the Company's Funded Debt then outstanding and
such Debt is not paid, or such acceleration is not rescinded or annulled or such
acceleration is not contested by appropriate proceedings and all consequences
thereof that would have a material adverse effect on the Company stayed, within
30 days after receipt of written notice as provided in the SBC Indenture or the
BNY Indenture, as applicable; provided, however, that if, after the expiration
of such 30-day period, the event of default that resulted in the acceleration of
the maturity of such Debt of the Company is remedied or cured by the Company or
waived by the holders of such Debt in any authorized manner or otherwise ceases
to exist, then the Event of Default described in this clause (iv) resulting from
such acceleration will be deemed cured and not continuing; and (v) certain
events of bankruptcy or insolvency. (Section 6.01 of the Indentures) If an Event
of Default occurs with respect to the Debt Securities of any series and is
continuing, the Trustee or the holders of at least 25% in aggregate principal
amount of the Debt Securities of that series may declare to be due and payable
immediately (i) the principal amount of that series (or, if the Debt Securities
of that series are Original Issue Discount Securities, that portion of the
principal amount specified in the terms of that series) and (ii) accrued
interest, if any, thereon. The Indentures provide for automatic acceleration of
the maturity of such amounts upon the occurrence of certain events of bankruptcy
or insolvency. (Section 6.02 of the Indentures) The Senior Indentures provide
that a declaration of acceleration of the maturity of the Senior Debt Securities
of any series as a result of an Event of Default described in clause (iv) above
will be automatically annulled if (x) the acceleration of the Debt that is the
subject of such Event of Default is declared void ab initio as a result of the
Company's contest thereof or (y) the declaration of acceleration of such Debt is
rescinded or annulled in any manner authorized by the instrument evidencing or
creating such Debt within 90 days of the declaration of acceleration of the
Senior Debt Securities of such series and, in the case of clause (y), the
annulment of the declaration of acceleration under the SBC Indenture or the BNY
Indenture, as applicable, would not conflict with any judgment or decree, and,
in the case of either clause (x) or (y), all other existing Events of Default
(other than the non-payment of amounts that have become due with respect to such
Senior Debt Securities solely by such acceleration) with respect to Senior Debt
Securities of that series have been cured or waived. (Section 6.02 of the Senior
Indentures) Holders of Debt Securities may not enforce the Indentures or the
Debt Securities except as provided in the Indentures. (Section 6.06 of the
Indentures) The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Debt Securities. (Section 7.01 of the Indentures)
Subject to certain limitations, holders of a majority in aggregate principal
amount of the Debt Securities of any series may direct the Trustee in its
exercise of any trust or power with respect to the Debt Securities of that
series. (Section 6.05 of the Indentures) The Trustee may withhold from holders
of Debt Securities notice of any continuing default (except a default in payment
of principal, premium, if any, interest or other amounts due) if it determines
that withholding notice is in their interest. (Section 7.05 of the Indentures)
The Company is required to file periodic reports with the Trustee as to the
absence of default. (Section 4.07 of the Senior Indentures and Section 4.03 of
the Senior Subordinated and Subordinated Indentures)
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NO PERSONAL LIABILITY
No past, present or future director, officer, employee or stockholder, as
such, of the Company or any successor thereof shall have any liability for any
obligations of the Company under the Debt Securities or the Indentures or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of Debt Securities by accepting a Debt Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Debt Securities. (Section 11.11 of the Senior
Indentures and Section 12.11 of the Senior Subordinated and Subordinated
Indentures)
SATISFACTION AND DISCHARGE
The Company's obligations under the Debt Securities of any series and the
applicable Indenture with respect to such series (except for the obligation to
pay the principal of and premium and interest, if any, on the Debt Securities of
such series and certain other specified obligations) will be satisfied and
discharged in accordance with the provisions of the Indenture if either (i) all
Debt Securities of such series and coupons, if any, appertaining thereto
previously authenticated and delivered (other than destroyed, lost or
wrongfully-taken Debt Securities or coupons which have been replaced or paid,
Debt Securities or coupons for whose payment money has theretofore been held in
trust and, after remaining unclaimed for two years, has been repaid to the
Company, and certain coupons appertaining to Bearer Securities surrendered for
exchange, redemption or purchase) have been delivered to the Trustee for
cancellation or (ii) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations (or, in the case of the BNY Indenture,
Government Obligations) sufficient to pay the principal of and premium and
interest, if any, on all Debt Securities of such series and coupons, if any,
appertaining thereto not theretofore cancelled or delivered to the Trustee for
cancellation (other than Debt Securities and coupons referred to in the
parenthetical in clause (i) above) to maturity or redemption, as the case may
be. (Section 8.01 of the Indentures)
THE TRUSTEES
The Bank of New York acts as depository for funds of, makes loans to, and
performs other services for the Company and certain of its affiliates in the
normal course of business and acts as trustee with respect to certain
outstanding senior indebtedness of the Company. The Bank of New York serves as
transfer agent and registrar for each series of Tele-Communications, Inc.'s
common stock and for its Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock. John C. Malone, a director of the Company, is a director of The
Bank of New York.
Shawmut Bank Connecticut, National Association (formerly known as The
Connecticut National Bank) has loaned funds to a subsidiary of the Company, acts
as trustee with respect to certain outstanding indebtedness of a subsidiary of
the Company and acts as trustee with respect to certain outstanding senior
indebtedness of the Company. Shawmut Bank, N.A. is an affiliate of Shawmut Bank
Connecticut, National Association and acts as trustee with respect to the
Company's outstanding 11 1/8% senior subordinated debentures due October 1,
2003. Shawmut Bank Connecticut, National Association or Shawmut Bank, N.A. may
loan money or perform other services for the Company or its subsidiaries in the
future.
Chemical Bank has loaned funds to certain subsidiaries of the Company and
performs other services for the Company and certain of its subsidiaries in the
normal course of business.
Each of the Trustees in its individual or any other capacity may become the
owner or pledgee of Debt Securities and may otherwise deal with the Company or
its Affiliates with the same rights it would have if it were not the Trustee
provided it complies with the terms of the Indenture. (Section 7.03 of the
Indentures)
ADDITIONAL INFORMATION
The Indentures are exhibits to the Registration Statement. Anyone who
receives this Prospectus may obtain copies of the Indentures without charge by
writing to Stephen M. Brett, Esq., Senior Vice President of the Company, at the
address set forth under "The Company." The foregoing summaries of certain
provisions of the Indentures do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Indentures, including the definitions of certain terms. Wherever particular
provisions or defined terms of the Indentures are referred to, such provisions
or defined terms are incorporated herein by reference.
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PLAN OF DISTRIBUTION
The Company may sell the Offered Securities on a negotiated or competitive
bid basis to or through underwriters or dealers, and also may sell the Offered
Securities directly to other purchasers or through agents.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
If Offered Securities are offered on a competitive bid basis, the Company
will receive bids by telephone or otherwise prior to a designated time. Each bid
will be required to be made for all Offered Securities and the Company will
reserve the right to reject all bids. In the case of Debt Securities offered
alone or with Warrants, if any bid is accepted, the Company will accept the
qualified bid which in its sole and final determination will result in the
lowest annual cost of money to it for the Offered Securities. No underwriter
will be entitled to submit or participate as a bidder in more than one bid.
If an underwriter or underwriters are utilized in the sale, the Company
will execute an underwriting agreement with such underwriters and the names of
the underwriters and the terms of the transaction will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales of
the Offered Securities. Unless otherwise indicated in the Prospectus Supplement,
the obligations of any underwriters to purchase the Offered Securities will be
subject to certain conditions precedent and the underwriters will be obligated
to purchase all of the Offered Securities if any are purchased. Such
underwriters may include Bear, Stearns & Co. Inc., Citicorp Securities Markets,
Inc., CS First Boston Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Furman & Selz, Goldman, Sachs & Co., Lehman Brothers Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated,
Oppenheimer & Co., Inc., PaineWebber Incorporated, Salomon Brothers Inc or Smith
Barney Inc., or may be a group of underwriters represented by firms including
one or more of such firms.
If a dealer is utilized in the sale, the Company will sell the Offered
Securities to the dealer as principal. The dealer may then resell the Offered
Securities to the public at varying prices to be determined by such dealer at
the time of resale.
Offers to purchase Offered Securities may be solicited by the Company or
agents designated by the Company from time to time. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
Each underwriter, dealer and agent participating in the distribution of any
Offered Securities which are issuable in bearer form will agree that it will
not, directly or indirectly, offer any Offered Securities in bearer form for
sale or resale in the United States or its possessions or to United States
persons (subject to certain exceptions) or deliver any Offered Securities in
bearer form within the United States or its possessions. See "Description of
Debt Securities -- Limitations on Issuance of Bearer Debt Securities."
In connection with the sale of the Offered Securities, underwriters,
dealers and agents may receive compensation in the form of discounts,
concessions or commissions from the Company or from purchasers of the Offered
Securities for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of the Offered Securities may be deemed to
be underwriters as that term is defined in the Securities Act, and any discounts
or commissions received by them from the Company and any profits on the resale
of the Offered Securities by them may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such person who may be deemed to be an
underwriter will be identified and any such compensation received from the
Company will be described in the Prospectus Supplement.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain specified institutions to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future.
Institutions with whom such contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and other institutions but
shall in all cases be subject to the approval of the Company. Such contracts
will be subject only to those conditions set forth in the
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Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, underwriters and dealers may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the agents, underwriters or dealers may be
required to make in respect thereof. Agents, underwriters and dealers may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The anticipated place and time of delivery for the Offered Securities will
be set forth in the Prospectus Supplement.
LEGAL MATTERS
Certain legal matters with respect to the Debt Securities offered hereby
will be passed upon for the Company by Baker & Botts, L.L.P., 885 Third Avenue,
New York, New York 10022-4834. Jerome H. Kern, a partner of Baker & Botts,
L.L.P. is a director of Tele-Communications, Inc. Mr. Kern holds options to
purchase shares of Tele-Communications, Inc. Series A TCI Group Common Stock and
Series A Liberty Media Group Common Stock.
EXPERTS
The consolidated balance sheets of TCI Communications, Inc. (formerly
Tele-Communications, Inc.) and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of operations, stockholder's(s') equity,
and cash flows for each of the years in the three year period ended December 31,
1994, and the related financial statement schedules, which appear in TCI
Communications, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1994, as amended, have been incorporated by reference herein in reliance
upon the reports, dated March 27, 1995, of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in auditing and accounting. The reports of
KPMG Peat Marwick LLP covering the December 31, 1994 consolidated financial
statements refer to the adoption of Statement of Financial Standards No. 115,
"Accounting for Investments in Certain Debt and Equity Securities," in 1994.
The financial statements of TeleCable Corporation as of December 31, 1993
and 1992 and for each of the two years in the period ended December 31, 1993
incorporated in this Prospectus by reference to the Company's Current Report on
Form 8-K dated August 26, 1994, have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
22
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Use of Proceeds....................... S-2
Certain Terms of the Notes............ S-2
Certain United States Federal Income
Tax Considerations.................. S-9
Underwriting.......................... S-14
Validity of the Notes................. S-14
PROSPECTUS
Available Information................. 2
Incorporation of Documents by
Reference........................... 2
Risk Factors.......................... 3
The Company........................... 4
Use of Proceeds....................... 4
Description of Debt Securities........ 5
Plan of Distribution.................. 21
Legal Matters......................... 22
Experts............................... 22
</TABLE>
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$200,000,000
TCI COMMUNICATIONS, INC.
REMARKETED RESET NOTES
DUE SEPTEMBER 15, 2010
----------------------
PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
SEPTEMBER 8, 1995
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