<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(3)
REGISTRATION NO. 33-63139
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 17, 1997)
$750,000,000
TCI COMMUNICATIONS, INC.
MEDIUM-TERM NOTES, SERIES C
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
---------------
TCI Communications, Inc. (the "Company") may from time to time offer its
unsecured Medium-Term Notes, Series C (the "Notes"), for an aggregate
principal amount of up to $750,000,000 (or the equivalent thereof denominated
in one or more foreign currencies or currency units), subject to reduction as
a result of the sale of other Debt Securities (other than the Notes) pursuant
to the accompanying Prospectus. Prior to the date of this Prospectus
Supplement, the Company sold Notes pursuant to the Registration Statement of
which this Prospectus Supplement is a part having an aggregate principal
amount of $405 million. The Notes will be offered at varying maturities from
nine months or more from their dates of issue. Unless otherwise set forth in a
Pricing Supplement to this Prospectus Supplement (each, a "Pricing
Supplement"), the Notes may not be redeemed at the option of the Company or
repaid at the option of the holder thereof prior to maturity except in the
case of a Put Event. See "Description of Debt Securities--Senior Debt
Securities--Change of Control" in the accompanying Prospectus. The Notes will
bear interest at fixed rates, which may be zero in the case of certain Notes
issued at a price representing a discount from the principal amount payable at
maturity, or variable rates ("Fixed Rate Notes" and "Floating Rate Notes",
respectively). The interest rate in the case of Fixed Rate Notes, the method
of determining the interest rate in the case of Floating Rate Notes, and the
issue price and stated maturity date of each Note will be established at the
time of issuance of such Note and will be set forth in the applicable Pricing
Supplement. Interest rates, the methods of determining interest rates and
issue prices are subject to change by the Company, but no such change will
affect any Note theretofore issued or as to which an offer to purchase has
been accepted by the Company. Unless otherwise described in the applicable
Pricing Supplement, Notes denominated in U.S. Dollars will be issued in
denominations of $1,000 or any integral multiple of $1,000. If the Notes are
to be denominated in one or more foreign currencies or currency units (each a
"Specified Currency"), then the provisions with respect thereto (including
authorized denominations) will be set forth in the applicable Pricing
Supplement and currency exchange rate information will be set forth in the
applicable Pricing Supplement.
Each Note will be in fully registered form and represented either by a
global certificate registered in the name of a nominee of The Depository Trust
Company ("DTC") or another depositary (DTC or such other depositary, if any,
described in the applicable Pricing Supplement is herein referred to as the
"Depository") (each a "Book-Entry Note"), or a certificate issued in
definitive form ("Certificated Note"), as set forth in the applicable Pricing
Supplement. Beneficial ownership interests in a Book-Entry Note will be shown
on, and the transfer thereof will be effected only through, records maintained
by the Depository's participants. Owners of beneficial interests in Book-Entry
Notes will be entitled to physical delivery of Notes in certificated form
equal in principal amount to their respective beneficial interests only under
the limited circumstances described herein. See "Book-Entry System". Owners of
beneficial interests in Book-Entry Notes will not be considered the holders
thereof.
Unless otherwise described in the applicable Pricing Supplement, interest on
each Fixed Rate Note will accrue from its Original Issue Date (as defined
herein) and will be payable semiannually on each February 15 and August 15 and
at maturity or, if applicable, upon redemption or repayment. The interest rate
on Floating Rate Notes will be calculated by reference to one or more of the
"CD Rate," the "Commercial Paper Rate," the "Federal Funds Rate," the "Prime
Rate," "LIBOR," the "Treasury Rate," the "CMT Rate," or such other interest
rate basis or formula as may be specified in the applicable Pricing
Supplement, and may be adjusted by a "Spread" or "Spread Multiplier," if any,
each as defined herein. Interest on each Floating Rate Note will accrue from
its Original Issue Date and will be payable as set forth therein and in the
applicable Pricing Supplement and at maturity or, if applicable, upon
redemption or repayment.
SEE "RISK FACTORS" ON PAGE S-2 OF THIS PROSPECTUS SUPPLEMENT 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
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............... 100% .125%-.925% 99.875%-99.075%
- - --------------------------------------------------------------------------------------------
Total.................. $750,000,000 $937,500-$6,937,500 $749,062,500-$743,062,500
</TABLE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
(1) Each Note will be sold at 100% of its principal amount except as may be
provided in the applicable Pricing Supplement.
(2) The Company will pay a commission to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, CS First Boston Corporation, Lehman
Brothers, Lehman Brothers Inc. or Salomon Brothers Inc or such other
agents as the Company may select (each an "Agent" and together the
"Agents") in the form of a discount, ranging from .125% to .925% of the
principal amount of the Notes sold through such Agent, depending upon the
Stated Maturity Date (as herein defined) and the rating assigned to such
Notes by nationally recognized securities rating agencies. The Company has
reserved the right to sell Notes directly to investors on its own behalf,
in which case no commission will be payable. The Company may sell Notes to
an Agent, as principal. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage equal to the commission applicable to an agency
sale of a Note with an identical Stated Maturity Date, and may be resold
by such Agent to investors or other purchasers at prevailing market prices
at the time or times of resale, to be determined by the Agent or, if so
agreed, at a fixed public offering price.
(3) Before deduction of expenses payable by the Company estimated to be
$200,000. The Company has agreed to indemnify each Agent against certain
liabilities, including liabilities under the Securities Act of 1933.
---------------
The Notes are being offered on a continuous basis by the Company through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
offers to purchase the Notes. Notes may also be sold to an Agent, as
principal, for resale to investors or other purchasers. The Company reserves
the right to sell Notes directly to investors on its own behalf in those
jurisdictions where it is authorized to do so. Unless otherwise specified in
an applicable Pricing Supplement, the Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes offered
hereby will be sold or that there will be a secondary market for the Notes.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice. The Company or any Agent, if it solicits such offer,
may reject any offer to purchase Notes, in whole or in part. See "Plan of
Distribution."
---------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
SALOMON BROTHERS INC
---------------
The date of this Prospectus Supplement is January 17, 1997.
<PAGE>
RISK FACTORS
The Company incurred net losses of $120 million and $5 million for the years
ended December 31, 1995 and 1993, respectively, and net losses of $260 million
and $50 million for the nine months ended September 30, 1996 and 1995,
respectively. The Company had net earnings of $94 million for the year ended
December 31, 1994. 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) ($2,043 million, $1,801 million and $1,858 million
for the years ended December 31, 1995, 1994 and 1993, respectively, and $1,642
million and $1,541 million for the nine months ended September 30, 1996 and
1995, respectively) has historically been sufficient to cover its interest
expense ($962 million, $777 million and $731 million for the years ended
December 31, 1995, 1994 and 1993, respectively, and $760 million and $713
million for the nine months ended September 30, 1996 and 1995, respectively).
The Company's interest coverage ratios for the years ended December 31, 1995,
1994 and 1993 were 212%, 232% and 254%, respectively, and for each of the nine
month periods ended September 30, 1996 and 1995 were 216%. 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 ($1,263 million, $1,142 million and $1,251
million for the years ended December 31, 1995, 1994 and 1993, respectively,
and $783 million and $854 million for the nine months ended September 30, 1996
and 1995, 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.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Offered Securities"
and "Senior Debt Securities") supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
Debt Securities set forth under the heading "Description of Debt Securities"
in the Prospectus, to which reference is hereby made. The following
description will apply to each Note unless otherwise specified in the
applicable Pricing Supplement. Capitalized terms not defined herein have the
meanings ascribed to them in the accompanying Prospectus.
GENERAL
The Notes are a series of Senior Debt Securities to be issued under the
Indenture, dated as of December 20, 1995 (the "Indenture"), between the
Company and The Bank of New York, as trustee (the "Trustee"), which Indenture
is more fully described in the accompanying Prospectus. Whenever any term
defined in the Indenture or the Notes is referred to, such term is
incorporated by reference as part of the statements made herein and such
statements are qualified in their entirety by such reference.
The Indenture does not limit the aggregate principal amount of Senior Debt
Securities that may be issued thereunder, and provides that Senior Debt
Securities may be issued in one or more series up to the aggregate principal
amount that may be authorized from time to time by the Company. The Notes
constitute a single series of Senior Debt Securities for purposes of the
Indenture, which series is unlimited in aggregate principal amount. As of the
date of this Prospectus Supplement, the Company has authorized the issuance
and sale of
S-2
<PAGE>
up to $750,000,000 (or the equivalent thereof denominated in one or more
foreign currencies or currency units) aggregate principal amount of Notes, and
the aggregate principal amount of Notes that may be offered for sale and sold
pursuant to this Prospectus Supplement and the accompanying Prospectus is
limited to such amount, subject to reduction as a result of the sale after the
date hereof of other Debt Securities (other than the Notes) pursuant to the
accompanying Prospectus. Unless otherwise indicated in the applicable Pricing
Supplement, currency amounts in this Prospectus Supplement, the accompanying
Prospectus and any Pricing Supplement are stated in United States dollars
("$", "U.S.$" or "U.S. Dollars").
The Notes are being offered on a continuous basis and each Note will mature
on a day nine months or more from its date of issue, as selected by the
initial purchaser and agreed to by the Company and as specified in the
applicable Pricing Supplement. Unless otherwise specified in a Note and
described in the applicable Pricing Supplement, a Note may not be redeemed at
the option of the Company or repaid at the option of the holder thereof prior
to its Stated Maturity Date (as defined below) except in the case of a Put
Event. See "Repayment and Redemption" and "Change of Control" below. If so
provided in a Note and described in the applicable Pricing Supplement, the
Stated Maturity Date of a Note may be extended at the option of the Company.
See "Extension of Maturity" below. The Notes will be unsecured and
unsubordinated obligations of the Company, will rank equally and ratably with
other unsecured and unsubordinated indebtedness of the Company and will not be
convertible into common stock of the Company or Tele-Communications, Inc. (the
"Parent").
Unless otherwise specified in such Note and the applicable Pricing
Supplement, the Notes will be denominated in U.S. Dollars and payments of
principal of, premium, if any, and any interest on the Notes will be made in
U.S. Dollars. If any Note is to be denominated other than exclusively in U.S.
Dollars, or if the principal of, premium, if any, or any interest on any Note
is to be payable in one or more currencies (or currency units or in amounts
determined by reference to an index or indices) other than that in which such
Note is denominated, additional information with respect thereto (including
authorized denominations and applicable exchange rate information) will be
provided in the applicable Pricing Supplement. Unless otherwise described in
the applicable Pricing Supplement, Notes denominated in U.S. Dollars will be
issued in denominations of $1,000 or any integral multiple of $1,000.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note in fully registered form without coupons. Except as set
forth under "Book-Entry System," owners of beneficial interests in Book-Entry
Notes will not be entitled to physical delivery of Notes in certificated form.
All references herein to holders will be, with respect to Book-Entry Notes, to
the Depository or its nominee.
Certificated Notes will be exchangeable for Certificated Notes in other
authorized denominations, in an equal aggregate principal amount and otherwise
bearing identical terms and provisions, in accordance with the provisions of
the Indenture. Certificated Notes may be presented for registration of
transfer or for exchange at the office of the Registrar in The City of New
York designated for such purpose (currently the corporate trust department of
the Trustee, 101 Barclay Street, Floor 21 West, New York, New York 10286).
Beneficial interests in Book-Entry Notes may be transferred through a
participating member of the Depository. See "Book-Entry System." No service
charge will be made for any registration of transfer or exchange of any
Certificated Note, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.
Each Note will bear interest at either (i) a fixed rate, which may be zero
in the case of Fixed Rate Notes issued at an Issue Price (as defined below)
representing a discount from the principal amount payable at maturity (a "Zero
Coupon Note"), or (ii) a floating rate determined by reference to an interest
rate basis or combination of interest rate bases (the "Interest Rate Basis" or
"Interest Rate Bases," as applicable) specified in such Floating Rate Note and
described in the applicable Pricing Supplement, which may be adjusted by a
Spread
S-3
<PAGE>
and/or Spread Multiplier (each as defined below), if any. See "Fixed Rate
Notes" and "Floating Rate Notes." Interest rates offered by the Company with
respect to the Notes may differ depending upon, among other things, the
aggregate principal amount of Notes purchased in any single transaction.
Unless otherwise specified in a Note and the applicable Pricing Supplement,
"Business Day" means any day, other than a Saturday or Sunday, that is not a
day on which banking institutions are authorized or required by law,
regulation or executive order to be closed in The City of New York, and with
respect to LIBOR Notes (as defined below), that is also a London Business Day.
"London Business Day" means any day on which dealings in deposits in U.S.
Dollars are transacted in the London interbank market.
"Original Issue Discount Note" means (i) a Note, including any Zero Coupon
Note, that has a stated redemption price at maturity that exceeds its Issue
Price by at least 0.25% of its principal amount multiplied by the number of
full years from the Original Issue Date to the Stated Maturity Date (each as
defined below) for such Note and (ii) any other Note issued with original
issue discount for United States federal income tax purposes as determined
pursuant to Section 1273 of the Internal Revenue Code of 1986, as amended (the
"Code").
The Pricing Supplement relating to each Note will describe the following
terms: (i) the price (which may be expressed as a percentage of the aggregate
principal amount thereof) at which such Note will be issued (the "Issue
Price"); (ii) the date on which such Note will be issued (the "Original Issue
Date"); (iii) the date on which such Note will mature (the "Stated Maturity
Date") and whether the Stated Maturity Date may be extended by the Company,
and if so, the Final Maturity Date (as defined under "Extension of Maturity");
(iv) whether such Note is a Fixed Rate Note or a Floating Rate Note; (v) if
such Note is a Fixed Rate Note, the rate per annum at which such Note will
bear interest, if any, the interest payment date or dates (if different from
those set forth below under "Fixed Rate Notes") and whether such rate may be
changed by the Company prior to the Stated Maturity Date; (vi) if such Note is
a Floating Rate Note, the Interest Rate Basis or Interest Rate Bases, as
applicable, the Initial Interest Rate, the Interest Reset Period, the Interest
Reset Dates, the Interest Payment Period, the Interest Payment Dates, the
Index Maturity, the Maximum Interest Rate, if any, the Minimum Interest Rate,
if any, the Spread, if any, the Spread Multiplier, if any (all as defined
under "Interest Rate" and "Floating Rate Notes" below), and any other terms
relating to the particular method of calculating the interest rate for such
Note, and whether any such Spread and/or Spread Multiplier may be changed by
the Company prior to the Stated Maturity Date; (vii) whether such Note is an
Original Issue Discount Note, and if so, the yield to maturity; (viii) whether
such Note will be issued initially as a Book-Entry Note or a Certificated
Note; (ix) whether such Note may be redeemed at the option of the Company, or
repaid at the option of the holder, prior to the Stated Maturity Date, and, if
so, the provisions relating to such redemption or repayment; and (x) any other
terms of such Note not inconsistent with the provisions of the Indenture.
REPAYMENT AND REDEMPTION
If agreed to by the initial purchaser of a Note and the Company, such Note
will be subject to repayment at the option of the holder thereof in accordance
with its terms on each optional repayment date therefor, if any (each an
"Optional Repayment Date"). Optional Repayment Dates, if any, will be fixed at
the time of sale and set forth in the applicable Pricing Supplement and
specified in the applicable Note. If no Optional Repayment Date is so
specified with respect to a Note, such Note will not be repayable at the
option of the holder thereof prior to its Stated Maturity Date. Unless
otherwise specified in the Note and described in the applicable Pricing
Supplement, on an Optional Repayment Date, if any, the related Note will be
repayable in whole or in part (provided that the principal amount of the Note
remaining outstanding after a partial repayment is an authorized denomination)
at the option of the holder thereof at a price equal to 100% of the principal
amount to be repaid, together with accrued and unpaid interest thereon up to,
but excluding, the date of repayment (except as
S-4
<PAGE>
otherwise provided below in the case of an Original Issue Discount Note). In
order for a Note to be repaid upon exercise of such repayment option, the
Paying Agent must receive, not more than 60 nor less than 30 days prior to an
Optional Repayment Date at the office in The City of New York designated for
such purpose (currently the corporate trust department of the Trustee, at 101
Barclay Street, Floor 21 West, New York, New York 10286), either (i) the Note,
with the form entitled "Option to Elect Repayment" included in the Note duly
completed, or (ii) a telegram, telex, facsimile transmission or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States setting forth the name of the holder of the Note, the principal amount
of the Note, the principal amount of the Note to be repaid, the certificate
number or a description of the tenor and terms of the Note, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid with the form entitled "Option to Elect Repayment"
included in the Note duly completed will be received by the Paying Agent not
later than five Business Days after the date of such facsimile transmission or
letter and such Note and form duly completed are received by the Paying Agent
by such fifth Business Day. Exercise of such repayment option by the holder
thereof will be irrevocable with respect to each Note for which such repayment
election is made. No transfer or exchange of any Note (or, in the event that
any Note is to be repaid in part, the portion of the Note to be repaid) will
be permitted after exercise of a repayment option. All questions as to the
validity, eligibility (including time of receipt) and acceptance of any Note
for repayment will be determined by the Company, which determination will be
final, binding and non-appealable.
In the case of a Book-Entry Note, the Depository's nominee will be the
holder of such Note and therefore will be the only entity that can exercise a
right to repayment. In order to ensure that the Depository's nominee will
timely exercise a right to repayment with respect to a beneficial owner's
interest in a Book-Entry Note, such beneficial owner must instruct the broker
or other direct or indirect participant through which it holds an interest in
such Note to notify the Depository of its desire to exercise a right to
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other direct or indirect participant through
which it holds an interest in a Book-Entry Note in order to ascertain the cut-
off time by which such an instruction must be given in order for timely notice
to be delivered to the Depository.
The Notes will not have a sinking fund unless otherwise described in the
applicable Pricing Supplement. If agreed to by the initial purchaser of a Note
and the Company, such Note will be subject to redemption at the option of the
Company in accordance with its terms on and after a date, if any, fixed at the
time of sale and set forth in the applicable Pricing Supplement and specified
in the applicable Note ("Initial Redemption Date"). If no Initial Redemption
Date is so specified with respect to a Note, such Note will not be redeemable
prior to its Stated Maturity Date. Unless otherwise specified in the Note and
described in the applicable Pricing Supplement, on and after the Initial
Redemption Date, if any, the related Note will be redeemable at any time in
whole or from time to time in part (provided that the principal amount of the
Note remaining outstanding after a partial redemption is an authorized
denomination) at the option of the Company at the applicable Redemption Price
(as defined below), together with accrued and unpaid interest on the principal
amount to be redeemed to but excluding the date of redemption, on notice given
by the Company or the Trustee to the holder thereof not more than 60 nor less
than 30 days prior to the date of redemption. Unless otherwise specified in
the Note and described in the applicable Pricing Supplement, and except as
otherwise provided below in the case of an Original Issue Discount Note, the
"Redemption Price" will initially be the Initial Redemption Percentage, if
any, specified in the Note and described in the applicable Pricing Supplement,
of the principal amount of such Note to be redeemed and, if the Initial
Redemption Percentage is greater than 100%, the Redemption Price will decline
at each anniversary of the Initial Redemption Date by the Annual Redemption
Percentage Reduction, if any, specified in the Note and described in the
applicable Pricing Supplement, of the principal amount thereof to be redeemed
until the Redemption Price is 100% of such principal amount. Whenever less
than all of the Notes of the Company at any time outstanding are to be
redeemed, the Company will select the particular Notes to be so redeemed,
provided that if less than all the Notes of the Company with identical terms
at any time outstanding are to be redeemed, the Notes to be so redeemed will
be selected by the Trustee by lot or such method as the Trustee considers fair
and appropriate.
S-5
<PAGE>
Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in a Note and described in the applicable Pricing
Supplement, if a Note is an Original Issue Discount Note, the amount payable
on such Note in the event of redemption at the option of the Company or
repayment at the option of a holder on an Optional Repayment Date prior to its
Stated Maturity Date shall be the Amortized Face Amount (as defined under
"Payment of Principal and Interest" below) of such Note calculated as of the
date of such redemption or the date of such repayment, as the case may be.
REPURCHASE
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may be held or resold or, at
the discretion of the Company, may be surrendered to the Trustee for
cancellation.
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 a Note 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 repurchase
(or if such Notes are Original Issue Discount Notes, 100% of that portion of
the principal amount thereof that would be payable if the maturity thereof
were accelerated pursuant to the Indenture to the date of repurchase). See
"Payment of Principal and Interest" below. Unless otherwise specified in a
Note and described in the applicable Pricing Supplement, a Put Event will
occur if, among other things, there is a Change of Control of the Company or,
for so long as the Company is a Parent Subsidiary, a Change of Control of the
Parent, at any time after the Original Issue Date of a Note and on or prior to
the Stated Maturity Date thereof (or, if the Stated Maturity Date is extended
as described under "Extension of Maturity," the Final Maturity Date). 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 Parent Subsidiaries)
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 Parent's
Chairman of the Board, its President and each director of the Parent as of the
date of the Indenture, 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. As of the date of
this Prospectus Supplement, the Company is a Parent Subsidiary.
The Company's payment obligations with respect to the Notes, including its
obligation to pay the purchase price of a Note the holder of which has elected
to require the Company to repurchase such Note following the occurrence of a
Put Event, are unsecured, unsubordinated obligations of the Company and are
pari passu (equal and ratable) with other unsecured, unsubordinated
indebtedness of the Company. There are other issues of senior indebtedness of
the Company outstanding in addition to the Notes 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 $8.08 billion of the Company's outstanding
indebtedness at September 30, 1996 included 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 Notes. In addition, approximately $4.26 billion
of the outstanding indebtedness of the Company's subsidiaries at September 30,
1996 included provisions
S-6
<PAGE>
that require the applicable subsidiary to repurchase or repay such
indebtedness upon a Change of Control or events similar thereto. See
"Description of Debt Securities" in the accompanying Prospectus. 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 which 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 may 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 which 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 holder of each outstanding Note.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of, premium, if any, and interest, if any, on each Note are
payable by the Company in U.S. Dollars, unless otherwise specified in a Note
and described in the applicable Pricing Supplement.
Principal of, premium, if any, and interest, if any, on any Certificated
Note will be payable when due upon presentation and surrender of such Note at
the office of the Paying Agent in The City of New York designated for such
purpose (currently the corporate trust department of the Trustee, 101 Barclay
Street, Floor 21 West, New York, New York 10286); provided, however, that
payment of interest, other than interest payable on the Stated Maturity Date
or on the date of redemption or repayment if a Note is redeemed or repaid
prior to maturity (such Stated Maturity Date or date of redemption or
repayment with respect to any Note, as the case may be, being collectively
referred to herein as the "Maturity Date" with respect to the amount of
principal and any premium and interest payable on such date) may be made by
mailing a check to the holder at the address of such holder appearing on the
security register for the Notes at the close of business on the applicable
Regular Record Date (as defined below). Notwithstanding the foregoing, a
holder of $10,000,000 or more in aggregate principal amount of Certificated
Notes having the same Interest Payment Dates (as defined below) shall be
entitled to receive such interest payments in U.S. Dollars by wire transfer of
immediately available funds to an account at a bank in The City of New York
(or other bank consented to by the Paying Agent and the Company) designated by
such holder (provided that such bank has appropriate facilities therefor), but
only if appropriate payment instructions in writing have been received by the
Paying Agent not less than 16 calendar days prior to the applicable Interest
Payment Date. Unless otherwise specified in the applicable Pricing Supplement
(and subject to extension as provided under "Extension of Maturity"), payments
of principal of and any premium and interest on Certificated Notes will be
made on the Maturity Date in immediately available funds, provided that the
Certificated Notes to be paid are presented and surrendered to the Paying
Agent as provided above in time for the Paying Agent to make such payments in
such funds in accordance with its normal procedures. Such payments will be
made by wire transfer to an account at a bank in The City of New York (or
other bank consented to by the Paying Agent and the Company) designated by the
holder of the Notes (provided that such bank has appropriate facilities
therefor), provided that wire transfer instructions in writing have been
received by the Paying Agent not less than 16 calendar days prior to such
Maturity Date. Beneficial owners of Book-Entry Notes will be paid in
accordance with the Depository's and its participants' procedures in effect
from time to time. See "Book-Entry System." If required by applicable law or
instructed by the Company or any governmental agency that taxes or other
governmental charges should be withheld, the Paying Agent shall withhold any
such taxes or other governmental charges on any payments made in connection
with any Note.
Unless otherwise specified in a Note and described in the applicable Pricing
Supplement, if the principal of any Original Issue Discount Note is declared
to be, or automatically becomes, due and payable immediately as described in
the accompanying Prospectus under "Description of Debt Securities--Defaults
and Remedies," the amount of principal due and payable with respect to such
Note shall be the Amortized Face Amount of such Note calculated as of the date
of such acceleration of the maturity of such Note. The "Amortized Face Amount"
of an Original Issue Discount Note as of any date for which a calculation is
being made shall be an amount equal to (i) the Issue Price set forth in the
applicable Pricing Supplement plus (ii) the portion of the difference
S-7
<PAGE>
between the Issue Price and the principal amount of such Note that has accrued
at the yield to maturity set forth in the Pricing Supplement (computed in
accordance with generally accepted United States bond yield computation
principles) to the date with respect to which such calculation is being made,
but in no event shall the Amortized Face Amount of an Original Issue Discount
Note exceed its principal amount.
Interest on any Note will be payable on each date specified on which an
installment of interest is due and payable ("Interest Payment Date") and at
the Maturity Date. Unless otherwise indicated in the applicable Pricing
Supplement and specified in the Note, the Interest Payment Dates for Fixed
Rate Notes will be as described below under "Fixed Rate Notes" and the
Interest Payment Dates for Floating Rate Notes will be determined in the
manner described below under "Floating Rate Notes." Unless otherwise indicated
in the applicable Pricing Supplement and specified in the Note, interest
payable and punctually paid or duly provided for on any Interest Payment Date
will be paid to the person in whose name such Note is registered at the close
of business on the Regular Record Date immediately preceding such Interest
Payment Date; provided, however, that unless otherwise specified in such Note
and the applicable Pricing Supplement the first payment of interest on any
Note with an Original Issue Date between a Regular Record Date and the next
succeeding Interest Payment Date or on an Interest Payment Date will be made
on the Interest Payment Date following the next succeeding Regular Record Date
to the registered holder on such next succeeding Regular Record Date;
provided, further, that interest payable at the Maturity Date will be payable
to the person to whom principal shall be payable. "Regular Record Date" means
the date as of which a Note must be registered in a person's name in order for
such person to receive an interest payment on the next succeeding Interest
Payment Date. Unless otherwise indicated in the applicable Pricing Supplement
and specified in the Note, the Regular Record Date for an Interest Payment
Date will be the fifteenth calendar day (whether or not a Business Day)
immediately preceding such Interest Payment Date.
Unless otherwise specified in a Note and described in the applicable Pricing
Supplement, all percentages resulting from any calculations will be rounded,
if necessary, to the nearest one hundred-thousandth of a percentage point
(with five one-millionths of a percentage point being rounded upward), and all
U.S. Dollar amounts used in or resulting from such calculation shall be
rounded to the nearest cent (with one-half cent being rounded upward).
The interest rate on the Notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States
law of general application. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis, with certain exceptions.
This limit may not apply to Notes in which $2,500,000 or more has been
invested.
INTEREST RATE
The applicable Pricing Supplement relating to Fixed Rate Notes will
designate a fixed rate of interest per annum (which may be zero in the event
such Notes are Zero Coupon Notes) payable on such Notes. See "Fixed Rate
Notes" and "Zero Coupon Notes" below.
Each Floating Rate Note will bear interest at a rate determined by reference
to an Interest Rate Basis or two or more interest Rate Bases which may be
adjusted in either case by adding or subtracting a Spread ("Spread" is the
number of basis points (one basis point equals one-hundredth of a percentage
point) specified in a Note and described in the applicable Pricing Supplement
as being applicable to the interest rate for such Floating Rate Note), if any,
or by multiplying by the Spread Multiplier ("Spread Multiplier" is the
percentage specified in a Note and described in the applicable Pricing
Supplement as being applicable to the interest rate for such Floating Rate
Note), if any. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the Interest Rate Basis or
Bases will be calculated. A Floating Rate Note may also have either or both of
the following: (i) a maximum limitation, or ceiling, on the rate of interest
which may accrue during any interest period ("Maximum Interest Rate"); and
(ii) a minimum limitation, or floor, on the rate of interest which may accrue
during any interest period ("Minimum Interest Rate").
S-8
<PAGE>
The applicable Pricing Supplement relating to Floating Rate Notes will
designate, and each Floating Rate Note will specify, one or more of the
following Interest Rate Bases as applicable to the relevant Note: (a) the
Commercial Paper Rate, in which case such Note will be a Commercial Paper Rate
Note, (b) the Certificate of Deposit Rate (the "CD Rate"), in which case such
Note will be a CD Rate Note; (c) the Federal Funds Rate, in which case such
Note will be a Federal Funds Rate Note; (d) the Prime Rate, in which case such
Note will be a Prime Rate Note; (e) London Interbank Offered Rate ("LIBOR"),
in which case such Note will be a LIBOR Note; (f) the Treasury Rate, in which
case such Note will be a Treasury Rate Note; (g) the CMT Rate, in which case
such Note will be a CMT Note; or (h) such other interest rate basis or formula
as is set forth in such Pricing Supplement. A Floating Rate Note may bear
interest at a rate determined by reference to two or more Interest Rate Bases
(other than the Treasury Rate) and, if so, the applicable Pricing Supplement
will describe the Interest Rate Bases applicable to such Note.
Interest rates, interest rate formulas and other variable terms of a Note
are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has
been accepted by the Company.
FIXED RATE NOTES
Unless otherwise described in the applicable Pricing Supplement, each Fixed
Rate Note will bear interest (which may be zero in the event such Note is a
Zero Coupon Note) from the Original Issue Date at the rate per annum stated on
the face thereof until the principal thereof is paid or made available for
payment. Unless otherwise specified in the Note and described in the
applicable Pricing Supplement and except as described below under "Extension
of Maturity," interest, to the extent payable, will be payable semiannually on
the "Interest Payment Dates" therefor (which will be on February 15 and August
15 of each year) and on the Maturity Date. Interest will be computed on the
basis of a 360-day year of twelve, 30-day months. Interest payments on a Fixed
Rate Note shall include interest accrued from and including the Original Issue
Date of such Note, or the most recent date to which interest has been paid or
duly provided for, as the case may be, to, but excluding, the related Interest
Payment Date or Maturity Date, as the case may be. If any Interest Payment
Date or Maturity Date for a Fixed Rate Note falls on a day that is not a
Business Day, the related payment of principal, premium, if any, and interest,
if any, will be made on the next succeeding Business Day as if it were made on
the date such payment were due, and no interest will accrue on the amount so
payable for the period from and after such Interest Payment Date or Maturity
Date, as the case may be.
FLOATING RATE NOTES
Each Floating Rate Note will specify and the applicable Pricing Supplement
will describe the Interest Rate Basis or Bases and the Spread and/or Spread
Multiplier, if any, and the Maximum Interest Rate and/or Minimum Interest
Rate, in each case if any, applicable to such Floating Rate Note. In addition,
each Floating Rate Note will specify and the applicable Pricing Supplement
will describe or particularize all applicable variable terms of such Floating
Rate Note. Unless otherwise described in the applicable Pricing Supplement,
each Floating Rate Note will bear interest at the rate or rates per annum
determined in accordance with the interest rate formula so specified therein
and described in the applicable Pricing Supplement from the Original Issue
Date until the principal thereof is paid or made available for payment.
Floating Rate Notes will have daily, weekly, monthly, quarterly, semiannual
or annual resets of the rate of interest (such period applicable to a Note
being the "Interest Reset Period" for such Note, and the first day of each
Interest Reset Period being an "Interest Reset Date"), which will be described
in the applicable Pricing Supplement and specified in the Note. Unless
otherwise so specified, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset daily, each Business Day; in the case of
Floating Rate Notes which reset weekly, Wednesday of each week (with the
exception of weekly reset Treasury Rate Notes which will reset Tuesday of each
week, except as specified below); in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semiannually, the
third
S-9
<PAGE>
Wednesday of the two months specified in such Note and described in the
applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of the month specified in such Note and
described in the applicable Pricing Supplement. If any Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Reset Date will be postponed to the next succeeding day that is
a Business Day, except that in the case of a LIBOR Note, if such Business Day
is in the next succeeding calendar month, such Interest Reset Date shall be
the next preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
Interest Reset Date with respect to such Interest Reset Period will be the
rate determined by reference to the Interest Rate Basis or Bases on the
applicable "Interest Determination Date." The Interest Determination Date with
respect to the Commercial Paper Rate, the CD Rate, the Federal Funds Rate, the
Prime Rate and the CMT Rate will be the second Business Day preceding each
Interest Reset Date for the related Note. The Interest Determination Date with
respect to LIBOR will be the second London Business Day preceding each
Interest Reset Date for the related Note. The Interest Determination Date with
respect to the Treasury Rate, unless otherwise specified in the related
Treasury Rate Note, will be the day of the week in which the related Interest
Reset Date falls on which Treasury Bills (as defined under "Treasury Rate"
below) of the applicable Index Maturity are auctioned. Treasury Bills are
normally sold at auction on Monday of each week unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as a result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Interest Determination Date for the Interest Reset Date occurring
in the next succeeding week. If an auction date falls on any Interest Reset
Date for a Treasury Rate Note, then such Interest Reset Date will instead be
the first Business Day following such auction date. The Interest Determination
Date for a Floating Rate Note the interest rate of which is determined by
reference to two or more Interest Rate Bases will be the first Business Day
which is at least two Business Days prior to the related Interest Reset Date
for such Note on which each Interest Rate Basis shall be determinable. Each
Interest Rate Basis will be determined on the Interest Determination Date, and
the applicable interest rate shall take effect on the related Interest Reset
Date.
Except as set forth above or in the applicable Pricing Supplement, the
interest rate in effect on each day shall be (i) if such day is an Interest
Reset Date, the interest rate determined as of the Interest Determination Date
immediately preceding such Interest Reset Date or (ii) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date.
Interest on each Floating Rate Note will be payable monthly, quarterly,
semiannually or annually (the "Interest Payment Period"). Except as provided
below or in the applicable Pricing Supplement, interest will be payable in the
case of Floating Rate Notes which reset: (i) daily, weekly or monthly, on the
third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year as specified in such Note and the
applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in such Note and the
applicable Pricing Supplement; and (iv) annually, on the third Wednesday of
the month of each year specified in such Note and the applicable Pricing
Supplement (each, an "Interest Payment Date") and, in each case, at maturity.
If any Interest Payment Date for any Floating Rate Note (other than the
Maturity Date of such Note) would otherwise be a day that is not a Business
Day, such Interest Payment Date will be postponed to the next day that is a
Business Day except, in the case of a LIBOR Note, if such Business Day is in
the next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity Date of any Floating Rate
Note falls on a day that is not a Business Day, the related payment of
principal, premium, if any, and interest will be made on the next succeeding
Business Day as if it were made on the date such payment was due, and no
interest will accrue on the amounts so payable for the period from and after
such date.
Interest payments on each Interest Payment Date for Floating Rate Notes will
include accrued interest from and including the Original Issue Date, or the
most recent date to which interest has been paid or duly provided for, as the
case may be, to, but excluding, such Interest Payment Date or the Maturity
Date, as the case may be.
S-10
<PAGE>
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded,
in the case of United States dollars, to the nearest cent, or in the case of a
foreign currency or composite currency, to the nearest unit (with one-half
cent or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount thereof by an accrued interest factor.
Such accrued interest factor will be computed by adding the interest factors
calculated for each day in the period for which accrued interest is being
calculated. The interest factor (expressed as a decimal) for each such day
will be computed by dividing the interest rate in effect for such day by 360,
in the case of Notes having as their Interest Rate Basis the CD Rate,
Commercial Paper Rate, Federal Funds Rate, LIBOR or the Prime Rate, or by the
actual number of days in the year, in the case of Notes having as their
Interest Rate Basis the Treasury Rate or the CMT Rate. The interest rate in
effect on each day will be (a) if such day is an Interest Reset Date, the
interest rate with respect to the Interest Determination Date pertaining to
such Interest Reset Date, or (b) if such day is not an Interest Reset Date,
the interest rate with respect to the Interest Determination Date pertaining
to the next preceding Interest Reset Date, subject in either case to any
Maximum Interest Rate or Minimum Interest Rate limitation and to any
adjustment by a Spread and/or Spread Multiplier; provided, however, that the
interest rate in effect for the period from the Original Issue Date to the
initial Interest Reset Date ("Initial Interest Reset Rate") will be the rate
specified as such in the Floating Rate Note ("Initial Interest Rate").
Unless otherwise specified in a Floating Rate Note and described in the
applicable Pricing Supplement, the Trustee will be the Calculation Agent with
respect to each Floating Rate Note. The Calculation Agent is currently located
at 101 Barclay Street, New York, New York 10286 (telephone number: (212) 815-
5375; facsimile number: (212) 815-5915). Upon request of the holder of any
Floating Rate Note, the Calculation Agent will provide the interest rate then
in effect and, if determined, the interest rate that will become effective on
the next Interest Reset Date with respect to such Floating Rate Note. Any such
calculation by the Calculation Agent shall, absent manifest error, be
conclusive and binding for all purposes.
The "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after
such Interest Determination Date, or, if such day is not a Business Day, the
next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date or Maturity Date, as the case may be.
CD RATE
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, "CD Rate" means, with respect to any Interest
Determination Date relating to a CD Rate Note or any Interest Determination
Date for a Floating Rate Note for which one of the Interest Rate Bases is the
CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable certificates of deposit having the Index Maturity described in the
applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)" or, if
not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such CD Rate Interest Determination Date, the CD Rate will be
the rate on such CD Rate Interest Determination Date for negotiable
certificates of deposit of the Index Maturity described in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 p.m. Quotations for U.S. Government
Securities" or any successor publication of the Federal Reserve Bank of New
York ("Composite Quotations") under the heading "Certificates of Deposit." If
such rate is not yet published in either H.15(519) or Composite Quotations by
3:00 p.m., New York City time, on the Calculation Date pertaining to such CD
Rate Interest Determination Date, then the CD Rate for such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates, as of
S-11
<PAGE>
approximately 10:00 a.m., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers (which, unless otherwise
described in the applicable Pricing Supplement, may include an affiliate of
the Calculation Agent or an Agent) in negotiable U.S. Dollar certificates of
deposit in The City of New York selected by the Calculation Agent, for
negotiable certificates of deposit of major United States money center banks
(in the market for negotiable certificates of deposit) with a remaining
maturity closest to the Index Maturity designated in the Pricing Supplement in
a denomination of U.S. $5,000,000; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate will be the CD Rate determined with respect to the
immediately preceding CD Rate Interest Determination Date or, in the case of
the first CD Rate Interest Determination Date, the Initial Interest Rate.
CD Rate Notes and other Notes are not deposit obligations of a bank and are
not insured by the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER RATE
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, "Commercial Paper Rate" means, with respect to any
Interest Determination Date relating to a Commercial Paper Rate Note or any
Interest Determination Date for a Floating Rate Note for which one of the
Interest Rate Bases is the Commercial Paper Rate (a "Commercial Paper Rate
Interest Determination Date"), the Money Market Yield (as defined below) of
the rate on such date for commercial paper having the Index Maturity described
in the applicable Pricing Supplement as published in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not so published
prior to 3:00 p.m., New York City time, on the Calculation Date pertaining to
such Commercial Paper Rate Interest Determination Date, then the Commercial
Paper Rate will be the Money Market Yield of the rate on such Commercial Paper
Rate Interest Determination Date for commercial paper of the Index Maturity
described in the applicable Pricing Supplement as published in Composite
Quotations under the heading "Commercial Paper." If by 3:00 p.m., New York
City time, on the Calculation Date pertaining to such Commercial Paper Rate
Interest Determination Date such rate is not yet published in either H.15(519)
or Composite Quotations, the Commercial Paper Rate for such Commercial Paper
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be the Money Market Yield of the arithmetic mean of the offered
rates, as of approximately 11:00 a.m., New York City time, on such Commercial
Paper Rate Interest Determination Date, of three leading dealers of commercial
paper (which, unless otherwise described in the applicable Pricing Supplement,
may include an affiliate of the Calculation Agent or an Agent) in The City of
New York selected by the Calculation Agent, for commercial paper having the
Index Maturity described in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA" or its equivalent, from a
nationally recognized securities rating agency; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate will be the Commercial
Paper Rate determined with respect to the immediately preceding Commercial
Paper Rate Interest Determination Date or, in the case of the first Commercial
Paper Rate Interest Determination Date, the Initial Interest Rate.
"Money Market Yield" shall be a yield (expressed as a percentage rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point)
calculated in accordance with the following formula:
D X 360
MONEY MARKET YIELD = -------------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
FEDERAL FUNDS RATE
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Federal Funds Rate Note or
S-12
<PAGE>
any Interest Determination Date for a Floating Rate Note for which one of the
Interest Rate Bases is the Federal Funds Rate (a "Federal Funds Rate Interest
Determination Date"), the rate on such date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)" or, if not so
published by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Federal Funds Rate Interest Determination Date, the Federal Funds Rate
will be the rate on such Federal Funds Rate Interest Determination Date for
Federal Funds as published in Composite Quotations under the heading "Federal
Funds/Effective Rate." If such rate is not yet published in either H.15(519)
or Composite Quotations by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Federal Funds Rate Interest Determination Date, the
Federal Funds Rate for such Federal Funds Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the rates, as of approximately 9:00 a.m., New York City time, on such Federal
Funds Rate Interest Determination Date, for the last transaction in overnight
Federal Funds arranged by three leading brokers of Federal Funds transactions
in The City of New York selected by the Calculation Agent; provided, however,
that if the brokers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Federal Funds Rate will be the
Federal Funds Rate determined with respect to the immediately preceding
Federal Funds Rate Interest Determination Date or, in the case of the first
Federal Funds Rate Interest Determination Date, the Initial Interest Rate.
PRIME RATE
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, "Prime Rate" means, with respect to any Interest
Determination Date relating to a Prime Rate Note or any Interest Determination
Date for a Floating Rate Note for which one of the Interest Rate Bases is the
Prime Rate (a "Prime Rate Interest Determination Date"), the rate on such date
for the Prime Rate as published in H.15(519) under the heading "Bank Prime
Loan." In the event that such rate is not so published prior to 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Prime Rate Interest
Determination Date, the Prime Rate will be the arithmetic mean of the rates of
interest publicly announced by each bank that appears on the Reuters Screen
USPRIME1 Page (as defined below) as such bank's prime rate or base lending
rate as in effect for such Prime Rate Interest Determination Date. If fewer
than four such rates appear on the Reuters Screen USPRIME1 Page for such Prime
Rate Interest Determination Date, then the Prime Rate shall be the arithmetic
mean, as calculated by the Calculation Agent, of the prime rates quoted on the
basis of the actual number of days in the year divided by 360 as of the close
of business on such Prime Rate Interest Determination Date by four major money
center banks in The City of New York selected by the Calculation Agent (after
consultation with the Company). If fewer than four quotations are so provided,
the Prime Rate will be calculated by the Calculation Agent (as described
above) on the basis of the prime rates quoted by the major money center banks
so selected and the prime rates quoted in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any state thereof, each
having total equity capital of at least $500 million and being subject to
supervision or examination by a Federal or state authority, selected by the
Calculation Agent (after consultation with the Company) to quote such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Prime Rate will be the Prime Rate determined with respect to the
immediately preceding Prime Rate Interest Determination Date or, in the case
of the first Prime Rate Interest Determination Date, the Initial Interest
Rate.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuter Monitor Money Rates Service (or such other page as
may replace the USPRIME1 page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
LIBOR
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, "LIBOR" will be determined by the Calculation Agent in
accordance with the following provisions:
S-13
<PAGE>
(i) With respect to any Interest Determination Date relating to a LIBOR
Note or any Interest Determination Date for a Floating Rate Note for which
one of the Interest Rate Bases is LIBOR ("LIBOR Interest Determination
Date"), LIBOR will be, as specified in the Note and described in the
applicable Pricing Supplement, either: (a) the arithmetic mean of the
offered rates, as calculated by the Calculation Agent, for deposits in U.S.
Dollars of not less than U.S. $1,000,000 having the Index Maturity
described in the applicable Pricing Supplement, commencing on the second
London Business Day immediately following such LIBOR Interest Determination
Date, which appear on the Reuters Screen LIBO Page (as defined below) as of
approximately 11:00 a.m., London time, on such LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. Dollars of not
less than U.S. $1,000,000 having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, which appears
on the Telerate Page 3750 (as defined below) as of approximately 11:00
a.m., London time, on such LIBOR Interest Determination Date ("LIBOR
Telerate"). "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such other page as
may replace the LIBO page on that service for the purpose of displaying
London interbank offered rates of major banks). "Telerate Page 3750" means
the display designated on page "3750" on the Telerate Service (or such
other page as may replace the 3750 page on that service or such other
service or services as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for U.S.
Dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified
in the Note and applicable Pricing Supplement, LIBOR will be determined as
if LIBOR Telerate had been specified. If fewer than two offered rates
appear on the Reuters Screen LIBO Page, or if no rate appears on the
Telerate Page 3750, as applicable, LIBOR in respect of that LIBOR Interest
Determination Date will be determined as if the parties had specified the
rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page as described
in (i)(a) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(b) above, as applicable, the Calculation Agent shall
request the principal London offices of each of four major reference banks
in the London interbank market selected by the Calculation Agent to provide
the Calculation Agent with a quotation of the rate at which deposits in
U.S. Dollars for the period of the Index Maturity described in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, are offered
by it to prime banks in the London interbank market as of approximately
11:00 a.m., London time, on such LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1,000,000 that
is representative for a single transaction in such market at such time. If
at least two such quotations are provided, LIBOR in respect of such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations
as calculated by the Calculation Agent. If fewer than two quotations are
provided, LIBOR for such LIBOR Interest Determination Date will be the
arithmetic mean (rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point) of the rates quoted as of approximately
11:00 a.m., New York City time, on such LIBOR Interest Determination Date
by three major banks in The City of New York selected by the Calculation
Agent (after consultation with the Company) for loans in U.S. Dollars to
leading European banks, having the Index Maturity described in the
applicable Pricing Supplement commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1,000,000 that
is representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR will
be the LIBOR determined with respect to the immediately preceding LIBOR
Interest Determination Date or, in the case of the first LIBOR Interest
Determination Date, the Initial Interest Rate.
TREASURY RATE
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, "Treasury Rate" means, with respect to any Interest
Determination Date relating to a Treasury Rate Note (a "Treasury
S-14
<PAGE>
Rate Interest Determination Date"), the rate for the most recent auction of
direct obligations of the United States ("Treasury Bills") having the Index
Maturity described in the applicable Pricing Supplement, as such rate is
published in H.15(519) under the heading "U.S. Government Securities--Treasury
Bills--auction average (investment)," or if not so published by 3:00 p.m., New
York City time, on the Calculation Date relating to such Treasury Rate
Interest Determination Date, the Treasury Rate will be the auction average
rate (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the auction of Treasury Bills having the Index Maturity described in the
applicable Pricing Supplement are not published or announced as described
above by 3:00 p.m., New York City time, on such Calculation Date, or if no
such auction is held in a particular week, then the Treasury Rate for such
Treasury Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean (rounded, if necessary, to
the nearest one hundred-thousandth of a percentage point) of the secondary
market bid rates, as of approximately 3:30 p.m., New York City time, on such
Treasury Rate Interest Determination Date, of three leading primary United
States government securities dealers (which, unless otherwise described in the
applicable Pricing Supplement, may include an affiliate of the Calculation
Agent or an Agent) selected by the Calculation Agent (after consultation with
the Company), for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity described in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate will be the Treasury Rate determined with respect to the immediately
preceding Treasury Rate Interest Determination Date or, in the case of the
first Treasury Rate Interest Determination Date, the Initial Interest Rate.
CMT RATE
Unless otherwise specified in such Note and described in the applicable
Pricing Supplement, "CMT Rate" means, with respect to any Interest
Determination Date relating to a CMT Note or any Interest Determination Date
for a Floating Rate Note for which one of the Interest Rate Bases is the CMT
Rate (a "CMT Rate Interest Determination Date"), the rate that appears on the
Designated CMT Telerate Page (as defined below) under the caption
"....Treasury Constant Maturities ... Federal Reserve Board Release
H.15(519)... Monday Approximately 3:45 p.m.," under the column for the
Designated CMT Maturity Index (as defined below) for (i) such CMT Rate
Interest Determination Date, if the Designated CMT Telerate Page is 7055, or
(ii) the week, or the month, as applicable, ended immediately preceding the
week in which such CMT Rate Interest Determination Date occurs, if the
Designated CMT Telerate Page is 7052. In the event such rate is not displayed
on the applicable page by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such CMT Rate Interest Determination Date, the CMT Rate for
such CMT Rate Interest Determination Date will be the treasury constant
maturity rate on such CMT Rate Interest Determination Date for the Designated
CMT Maturity Index as published in H.15(519) under the heading "Treasury
Constant Maturities." If by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such CMT Rate Interest Determination Date such rate is not
published in H.15(519), the CMT Rate for such CMT Rate Interest Determination
Date will be the treasury constant maturity rate for the Designated CMT
Maturity Index (or other United States treasury rate for the Designated CMT
Maturity Index if the treasury constant maturity rate is not published) with
respect to such date as published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury that
the Calculation Agent determines to be comparable to the rate previously
displayed on the Designated CMT Telerate Page or published in H.15(519). If
such rate is not so published by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such CMT Rate Interest Determination Date, then
the CMT Rate for such CMT Rate Interest Determination Date will be calculated
by the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market closing offered side prices as of
approximately 3:30 p.m., New York City time, on such CMT Rate Interest
Determination Date of three leading primary United States government
securities dealers (each, a "Reference Dealer") (which, unless otherwise
described in the Prospectus Supplement, may include an affiliate of the
Calculation Agent or an Agent) in The City of New York selected by the
Calculation Agent (such three Reference Dealers to be selected from a pool of
five Reference Dealers selected by the Calculation Agent (after consultation
with the Company), with the Reference Dealers
S-15
<PAGE>
providing the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest) being eliminated), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an
original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent is unable to obtain three such
Treasury Note quotations, the CMT Rate for such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market offer
side prices as of approximately 3:30 p.m., New York City time, on such CMT
Rate Interest Determination Date of three Reference Dealers in The City of New
York (such three Reference Dealers to be selected from a pool of five
References Dealers selected by the Calculation Agent (after consultation with
the Company), with the Reference Dealers providing the highest quotation (or,
in the event of equality, one of the highest) and the lowest quotation (or, in
the event of equality, one of the lowest) being eliminated) for Treasury Notes
with an original maturity of the number of years that is the next highest to
the Designated CMT Maturity Index and a remaining term to maturity closest to
the Designated CMT Maturity Index and in an amount of at least $100 million.
If at least three (but not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean of the
offer side prices obtained as provided in the preceding sentence and neither
the highest nor the lowest of such quotes will be eliminated; provided
however, that if at least three Reference Dealers selected by the Calculation
Agent (after consultation with the Company), are not quoting as described in
this sentence, the CMT Rate will be the CMT Rate determined with respect to
the immediately preceding CMT Rate Interest Determination Date or, in the case
of the first CMT Rate Interest Determination Date, the Initial Interest Rate.
If two Treasury Notes with an original maturity as described in the second
preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the Calculation Agent will obtain from the
Reference Dealers selected in the manner described quotations for the Treasury
Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement for the
purpose of displaying "Treasury Constant Maturities" as reported in H.15(519)
(or any other page as may replace such page on that service for the purpose of
displaying "Treasury Constant Maturities" as reported in H.15(519)). If no
such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will
be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
ZERO COUPON NOTES
Each Zero Coupon Note will be offered at a substantial discount from its
principal amount at maturity. There will be no periodic payments of interest
with respect to a Zero Coupon Note. The calculation of the accrual of Original
Issue Discount (the difference between the Issue Price and the principal
amount at maturity of a Zero Coupon Note) in the period during which a Zero
Coupon Note remains outstanding will be on a semiannual bond equivalent basis
using a 360-day year composed of twelve 30-day months. Upon maturity, Original
Issue Discount will cease to accrue on a Zero Coupon Note. Each Zero Coupon
Note will set forth, among other things, the Original Issue Date, the Issue
Price, the yield to maturity, and the amount of Original Issue Discount
applicable to such Note. If a bankruptcy proceeding is commenced in respect of
the Company, the claim of the holder of a Zero Coupon Note is, under Title 11
of the United States Code, limited to the Amortized Face Amount of such Zero
Coupon Note calculated as of the date of commencement of the proceeding.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment
S-16
<PAGE>
Dates, the Maturity Date or any other term relating thereto, may be modified
and/or supplemented as specified under "Other/Additional Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof. Such provisions will be described in the applicable Pricing
Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing
Note will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest
due and payable thereon and then to the reduction of the unpaid principal
amount thereof. Further information concerning additional terms and provisions
of Amortizing Notes will be specified in the applicable Pricing Supplement,
including a table setting forth repayment information for such Amortizing
Notes.
EXTENSION OF MATURITY
Each Note will specify and the Pricing Supplement relating to each Note will
describe whether the Company has the option to extend the Stated Maturity Date
of such Note for one or more whole year periods (each an "Extension Period")
up to but not beyond the date (the "Final Maturity Date") specified in such
Note and described in such Pricing Supplement and the basis or formula, if
any, for setting the interest rate or the Spread and/or Spread Multiplier, if
any, as the case may be, applicable to any such Extension Period.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 days prior to the
Stated Maturity Date of such Note in effect prior to the exercise of such
option (the "Original Stated Maturity Date"). No later than 40 days prior to
the Original Stated Maturity Date, the Trustee will mail to the holder of such
Note a notice (the "Extension Notice") relating to such Extension Period, by
first class mail, postage prepaid, setting forth (i) the election of the
Company to extend the Stated Maturity Date of such Note, (ii) the new Stated
Maturity Date, (iii) in the case of a Fixed Rate Note, the interest rate
applicable to the Extension Period or, in the case of a Floating Rate Note,
the Spread and/or Spread Multiplier, if any, applicable to the Extension
Period, (iv) the provisions, if any, for redemption at the option of the
Company during the Extension Period, including the date or dates on which or
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period and (v) in the case of a Note
that is subject to repayment at the option of the Holder hereof, the
provisions, if any, for repayment of this Note at the option of the Holder on
the Original Stated Maturity Date for such Note, the price at which such
repurchase shall occur, and the period within which such Note, with the
"Option to Elect Repayment" form completed, must be surrendered to the Paying
Agent. Upon the mailing by the Trustee of an Extension Notice to the holder of
a Note, the Stated Maturity Date of such Note shall be extended automatically
as set forth in the Extension Notice, and except as modified by the Extension
Notice and as described in the next paragraph, such Note will have the same
terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Original
Stated Maturity Date for a Note, the Company may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, provided for in the Extension
Notice and establish a higher interest rate, in the case of a Fixed Rate Note,
or a higher Spread and/or Spread Multiplier in the case of a Floating Rate
Note, for the Extension Period by mailing or causing the Trustee to mail
notice of such higher interest rate or higher Spread and/or Spread Multiplier,
as the case may be, first class mail, postage prepaid, to the holder of such
Note. Such notice shall be irrevocable. All Notes with identical terms with
respect to which the Stated Maturity Date is extended will bear such higher
interest rate, in the case of a Fixed Rate Note, or higher Spread and/or
Spread Multiplier, as the case may be, in the case of a Floating Rate Note,
for the Extension Period.
S-17
<PAGE>
INDEXED NOTES
If any Note is not to be denominated in U.S. Dollars, certain provisions
with respect thereto will be set forth in an applicable Pricing Supplement
which will specify the currency or currencies, including composite currencies
such as the European Currency Unit ("ECU"), in which the principal, premium,
if any, and interest, if any, with respect to such Note are to be paid, along
with any other terms relating to the non-U.S. Dollar denomination.
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
designated currencies (including a composite currency such as the ECU)
relative to an indexed currency or to other price(s) or exchange rate(s)
("Indexed Notes"), in each case as specified in the applicable Pricing
Supplement. In certain cases, Holders of Indexed Notes may receive a principal
payment on the Maturity Date that is greater than or less than the principal
amount of such Indexed Notes depending upon the relative value on the Maturity
Date of the specified indexed item. Information as to the method for
determining the amount of principal, premium, if any, and/or interest, if any,
payable in respect of Indexed Notes, certain historical information with
respect to the specified indexed item and certain additional risks and
material tax considerations associated with an investment in Indexed Notes
will be specified in the applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
The Notes may be issued in whole or in part as Book-Entry Notes represented
by a Global Security (as defined in the accompanying Prospectus) deposited
with, or on behalf of, the Depository and registered in the name of the
Depository or a nominee of the Depository. Unless otherwise specified in the
applicable Pricing Supplement, DTC will be the Depository.
So long as the Depository for a Global Security, or a nominee of the
Depository, is the registered owner of the Global Security, the Depository or
its nominee, as the case may be, will be considered the sole owner or holder
of the Book-Entry Notes represented by such Global Security for all purposes
under the Indenture. Except as provided below, owners of beneficial interests
in Book-Entry Notes represented by a Global Security will not be considered
the owners or holders thereof under the Indenture, will not be entitled to
have Book-Entry Notes represented by such Global Security registered in their
names and will not be entitled to physical delivery of Notes in certificated
form evidencing their respective beneficial interests therein. A Global
Security may not be transferred except as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository or by the Depository or any nominee to a
successor of the Depository of a nominee of such successor.
Payments of principal of and any premium and interest on Book-Entry Notes
represented by a Global Security registered in the name of the Depository or
its nominee will be made to the Depository or its nominee, as the case may be,
as the registered owner of the Global Security. Neither the Company, the
Trustee, any Paying Agent nor the Registrar will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in Book-Entry Notes represented by a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal, premium, if any, or interest, if any, 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
Depository or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in Book-Entry Notes represented
by such Global Security held through such participants will be governed by
standing customer 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.
S-18
<PAGE>
If the Depository 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, the
Company will issue Certificated Notes in exchange for each Book-Entry Note
represented by such Global Security. In addition, the Company may at any time
and in its sole discretion determine not to have the Notes represented by a
Global Security and, in such event, will issue Certificated Notes in exchange
for the Book-Entry Notes represented by such Global Security. In either
instance, an owner of a beneficial interest in a Book-Entry Note will be
entitled to have a Certificated Note or Notes equal in principal amount to
such beneficial interest registered in its name and will be entitled to
physical delivery of such Note or Notes.
DTC has advised the Company and the Agents as follows: DTC is a limited-
purpose trust company organized under the laws of the State of New York, 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. DTC was created to hold securities for persons that have
accounts with DTC ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movements of
securities certificates. DTC's participants include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and/or their representatives)
own DTC. Access to DTC's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by DTC
only through participants.
DTC has also advised the Company and the Agents that, upon the issuance by
the Company of Book-Entry Notes represented by a Global Security, DTC will
credit on its book-entry registration and transfer system the respective
principal amounts of the Book-Entry Notes represented by such Global Security
to the accounts of participants. The accounts to be credited shall be
designated by the applicable Agent or by the Company if such Notes are offered
and sold directly by the Company. Ownership of beneficial interests in Book-
Entry Notes represented by a Global Security registered in the name of DTC or
its nominee will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in Book-Entry Notes
represented by a Global Security registered in the name of DTC or its nominee
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to beneficial
interests of participants), or by participants or persons that may hold
interests through participants (with respect to beneficial interests of
persons other than participants). The laws of some states may 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 Book-Entry Notes.
S-19
<PAGE>
CERTAIN UNITED STATES TAX CONSIDERATIONS
UNITED STATES HOLDERS
The following is a summary of certain United States federal income tax
considerations that may be relevant to a holder of a Note that is a United
States person (as defined in the Code), or that otherwise is subject to United
States federal income taxation on a net income basis in respect of a Note.
This summary is based on laws, regulations, rulings and decisions now in
effect, all of which are subject to change. This summary deals only with
holders that will hold Notes as capital assets and does not address tax
considerations applicable to investors that may be subject to special tax
rules, such as financial institutions, tax-exempt organizations, insurance
companies or dealers in securities or currencies, or persons that will hold
Notes as a position in a "straddle" or as part of a hedging transaction for
tax purposes. This summary does not include a discussion of tax consequences
to holders of any Note in which principal, premium, if any, and interest, if
any, with respect to such Note are to be paid in a Specified Currency or which
is an Indexed Currency Note. Additional United States federal income tax
considerations applicable to particular Notes may be set forth in the
applicable Pricing Supplement.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding and disposing of Notes, including the
application to their particular situation of the tax considerations discussed
below, as well as the application of state, local, foreign or other tax laws.
Payments of Interest. Payments of Qualified Stated Interest (as defined
below) on a Note will be taxable to a holder as ordinary interest income at
the time that such payments are accrued or are received (in accordance with
the holder's method of tax accounting). In general, Qualified Stated Interest
is stated interest which is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually at a single fixed rate.
(For a special rule in the case of Floating Rate Notes, see below.)
Purchase, Sale and Retirement of Notes. A holder's tax-basis in a Note
generally will equal the cost of such Note to such holder, increased by any
amounts includible in income by the holder as original issue discount (and
accrued market discount, if any, if the holder has included such market
discount in income) and reduced by any amortized premium (each as described
below) and any payments other than payments of Qualified Stated Interest made
on such Note.
Upon the sale, exchange or retirement of a Note, a holder generally will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale, exchange or retirement (less any accrued and unpaid
interest, which will be taxable as such) and the holder's tax basis in the
Note.
Except as otherwise discussed below, gain or loss recognized by a holder on
the sale, exchange or retirement of a Note generally will be long-term capital
gain or loss if the holder has held the Note for more than one year at the
time of disposition. Currently, for individuals, long-term capital gain is
subject to a maximum rate of taxation of 28%, as opposed to a maximum rate of
39.6% for ordinary income. The distinction between capital gain or loss and
ordinary income or loss is also important for purposes of the limitations on a
holder's ability to offset capital losses against ordinary income.
Original Issue Discount. Holders of Original Issue Discount Notes generally
will be subject to the special tax accounting rules for original issue
discount obligations provided by the Code and certain Treasury Regulations
issued on January 27, 1994 (the "OID Regulations"). Holders of such Notes
should be aware that, as described in greater detail below, they generally
must include original issue discount in ordinary gross income for United
States federal income tax purposes as it accrues, in advance of the receipt of
cash attributable to that income.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimus amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its
S-20
<PAGE>
maturity from its issue date). The issue price of an issue of Notes equals the
first price at which a substantial amount of such Notes has been sold. The
stated redemption price at maturity of a Note is the sum of all payments
provided by the Note other than payments of Qualified Stated Interest. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then
part or all of the stated interest on the Note would be treated entirely as
original issue discount rather than Qualified Stated Interest.
In general, each holder of an Original Issue Discount Note, whether such
holder uses the cash or the accrual method of tax accounting, will be required
to include in ordinary gross income the sum of the "daily portions" of
original issue discount on that Note for all days during the taxable year on
which the holder owns the Note. The daily portions of original issue discount
on an Original Issue Discount Note are determined by allocating to each day in
any accrual period a ratable portion of the original issue discount allocable
to that accrual period. An accrual period may be any length of time, and the
lengths may vary during the time the Note is outstanding, so long as no
accrual period is greater than one year and provided that each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. In the case of an initial
holder, the amount of original issue discount on an Original Issue Discount
Note allocable to each accrual period is determined by (i) multiplying the
"adjusted issue price" (as defined below) of the Note by the yield to maturity
of the Note (as adjusted for the length of the accrual period) and (ii)
subtracting from that product the amount, if any, of Qualified Stated Interest
allocable to that accrual period.
The "adjusted issue price" of an Original Issue Discount Note at the
beginning of any accrual period will generally be the sum of its issue price
and the amount of original issue discount allocable to all prior accrual
periods, reduced by the amount of all payments other than payments of
Qualified Stated Interest, if any, made with respect to such Note in all prior
accrual periods. As discussed above, in order to determine the amount of
original issue discount allocable to an accrual period, the adjusted issue
price of an Original Issue Discount Note will be multiplied by the Note's
yield to maturity (as adjusted for the length of the accrual period). As a
result of this "constant yield" method of including original issue discount
into income, the amounts so includible in income by a holder, in respect of an
Original Issue Discount Note, are generally lesser in the early years and
greater in the later years than the amounts that would be includible on a
straight-line basis.
In the case of Floating Rate Notes, special rules apply. Such a Note will
qualify as a "variable rate debt instrument" if it (i) has an issue price
which does not exceed the total noncontingent principal payments by more than
an amount equal to the lesser of (a) .015 multiplied by the product of the
total noncontingent principal payments and the number of complete years to the
Floating Rate Note's maturity from its issue date or (b) 15 percent of the
total noncontingent principal payments; (ii) provides for stated interest,
paid or compounded at least annually, at current values of (a) one or more
qualified floating rates, (b) a single fixed rate and one or more qualified
floating rates, (c) a single fixed rate and a single objective rate that is a
qualified inverse floating rate or (d) a single objective rate. A floating
rate is a qualified floating rate if variations in the rate can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds in the currency in which the Floating Rate Note is denominated. A
multiple of a qualified floating rate is generally not a qualified floating
rate, except that a multiple greater than .65 and not more than 1.35 is
permissible (and the product can be decreased or increased by a fixed rate).
An objective rate is a rate (other than a qualified floating rate) that is
determined using a single fixed formula and that is based on objective
financial or economic information (i.e., an objective rate generally includes
a rate that is based on one or more qualified floating rates or on the yield
of actively traded personal property (within the meaning of Section 1092(d)(1)
of the Code), unless the rate is based on information that is within the
control of the issuer (or certain related parties) or that is unique to the
circumstances of the issuer (or certain related parties), such as dividends,
profits, or the value of the issuer's stock). A qualified inverse floating
rate is an objective rate in which (i) the rate is equal to a fixed rate minus
a qualified floating rate and (ii) variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the cost of newly
borrowed funds. The fact that a Floating Rate Note has a
S-21
<PAGE>
Maximum Interest Rate or a Minimum Interest Rate will not affect the
qualification of such Floating Rate Note as a "variable rate debt instrument"
if such Maximum or Minimum Interest Rates are fixed throughout the term of the
debt instruments, or such Maximum or Minimum Interest Rates are not reasonably
expected as of the issue date to cause the yield on the Note to be
significantly more or less than the yield would be without the restriction of
the Maximum or Minimum Interest Rate. The OID Regulations also provide that if
a Floating Rate Note provides for stated interest at a fixed rate for an
initial period of less than one year followed by a variable rate that is
either a qualified floating rate or an objective rate and if the variable rate
on the Floating Rate Note's issue date is intended to approximate the fixed
rate (e.g., the value of the variable rate on the issue date does not differ
from the value of the fixed rate by more than 25 basis points), then the fixed
rate and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be.
If a Floating Rate 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 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
Floating Rate 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 Floating Rate Note is issued at a "true" discount
(i.e., at a price below the Note's stated principal amount) in excess of a
specified de minimis amount. Original issue discount on such a Floating Rate
Note arising from "true" discount is allocated to an accrual period using the
constant yield method described above.
In general, any other Floating Rate Note that qualifies as a "variable rate
debt instrument" will be deemed to 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 Floating Rate
Note. The OID Regulations generally require that such a Floating Rate Note be
treated as 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 Floating Rate 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 Floating Rate Note's issue date. Any
objective rate (other than a qualified inverse floating rate) provided for
under the terms of the Floating Rate Note is converted into a fixed rate that
reflects the yield that is reasonably expected for the Floating Rate Note. In
the case of a Floating Rate 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 Floating Rate 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 Floating Rate Note as of the
Floating Rate 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 Floating Rate Note is
then treated as converted into an "equivalent" fixed rate debt instrument in
the manner described above.
Once the Floating Rate Note is deemed 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 United
States holder of the Floating Rate Note will account for such original issue
discount and qualified stated interest as if the United States 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 Floating Rate
Note during the accrual period.
S-22
<PAGE>
If a Floating Rate Note does not qualify for the above treatment, then the
Note will be an Original Issue Discount Note and the interest on such Note
will be treated as contingent interest. Contingent interest is generally
includible in income over time based on a projected payment schedule and the
issuer's cost of capital for fixed rate debt instruments, and gain or loss
from the sale, exchange or retirement of a Note providing for contingent
interest will generally be treated as ordinary gain or loss. The regulations
governing contingent interest are quite complex, and the application of these
regulations to particular Notes may be set forth in the applicable Pricing
Supplement.
A subsequent holder of an Original Issue Discount Note that does not
purchase the Note at a cost which exceeds its stated redemption price at
maturity, reduced by the amount of any payment made on the Note prior to the
date of purchase other than payments of Qualified Stated Interest, also
generally will be required to include in gross income the daily portions of
original issue discount, calculated as described above. However, if the
subsequent holder acquires the Original Issue Discount Note at a lower yield
to maturity than the yield of the Note for original issue discount purposes
with respect to the initial holder of the Note, the subsequent holder may
reduce its periodic inclusions of original issue discount income to reflect
the lower yield to maturity of the Note.
In general, an individual or other cash method holder of an Original Issue
Discount Note that matures one year or less from the date of its issuance (a
"short-term Original Issue Discount Note") is not required to accrue original
issue discount for United States federal income tax purposes unless an
election is made to do so. United States holders who report income for federal
income tax purposes on the accrual method and certain other holders, including
banks and dealers in securities, are required to include original issue
discount on such short-term Original Issue Discount Notes on a straight-line
basis, unless an election is made to accrue the original issue discount
according to a constant interest method based on daily compounding. In the
case of a holder who is not required, and does not elect, to include original
issue discount in income currently, any gain realized on the sale, exchange or
retirement of the short-term Original Issue Discount Note will be ordinary
income to the extent of the original issue discount accrued on a straight-line
basis (or, if elected, according to a constant interest method based on daily
compounding) through the date of sale, exchange or retirement. In addition,
such non-electing holders which are not subject to the current inclusion
requirement described in this paragraph will be required to defer deductions
for any interest paid on indebtedness incurred or continued to purchase or
carry such short-term Original Issue Discount Notes in an amount not exceeding
the deferred interest income, until such deferred interest income is realized.
If any Note is issued with Optional Repayment Dates, the yield and maturity
on the Note will be calculated by assuming that the Note will be repaid on the
first Optional Repayment Date if such repayment would increase the yield on
the Note. If the Note is deemed to be repaid on the first Optional Repayment
Date, but is not in fact repaid on such date, then for purposes of calculating
original issue discount, a new Note will be deemed issued on such date for the
Note's adjusted issue price on such date, and the rules outlined in this and
the previous sentence will apply with respect to al subsequent Optional
Repayment Dates.
If any Note is issued with Redemption Dates, the yield and maturity on such
Note will be calculated by assuming that the Note will be redeemed on the
Initial Redemption Date if such redemption would decrease the yield on the
Note. If the Note is deemed to be redeemed on the Initial Redemption Date, but
is not in fact redeemed on such date, then for purposes of calculating
original issue discount, a new Note will be deemed issued on such date for the
Note's adjusted issue price on such date, and the rules outlined in this and
the previous sentence will apply with respect to all subsequent Redemption
Dates.
If any Note is subject to an Extension Period, then the yield and maturity
on such Note shall be calculated by deeming the Final Maturity Date to be the
Stated Maturity Date of the Note and treating the Original Stated Maturity
Date as being the date on which the Company has a call option on the Note.
Such call option will be deemed to be exercised on the Original Stated
Maturity Date if, and only if, by utilizing the Original Stated Maturity Date
as the Maturity Date and the redemption price on such date as the stated
redemption price at maturity, the yield to maturity of the Note is lower than
it would be if the Note were not redeemed on such date.
S-23
<PAGE>
If the Note is deemed to be repaid on the Original Stated Maturity Date and is
not in fact repaid on such date, then for purposes of calculating original
issue discount a new Note will be deemed issued on the Original Stated
Maturity Date for the Note's adjusted issue price on such date and the rules
outlined in this and the previous sentence will apply with respect to all
subsequent maturity dates. If the deemed call option is not considered to be
exercised, the option to extend shall be presumed to be exercised.
Premium and Market Discount. A holder of a Note that purchases the Note at a
cost greater than the sum of all amounts payable on the Note after the
purchase (other than payments of Qualified Stated Interest) will be considered
to have purchased the Note at a premium and may amortize such premium, using a
constant yield method, over the remaining term of the Note.
If a holder of a Note purchases the Note at a price that produces a yield to
maturity higher than the yield to maturity at which such Note first was
issued, the Note generally will be considered to bear "market discount" in the
hands of such holder. In such case, the gain realized by the holder on the
sale or retirement of the Note generally will be treated as ordinary income to
the extent of the market discount that accrued on the Note while held by such
holder, unless such holder elected to accrue market discount into income
currently. In general terms, market discount on a Note will be treated as
accruing ratably over the term of such Note, or, at the election of the
holder, under a constant yield method. In addition, a portion of the interest
expense incurred or continued to purchase or carry a Note with market discount
may be deferred unless the holder elects to accrue market discount into income
currently.
The OID Regulations provide for an election whereby a holder on the accrual
basis of accounting may choose to treat all stated interest, original issue
discount, and market discount as original issue discount.
Treatment of Certain Interest. The treatment to a holder of income from an
Original Issue Discount Note may be affected by a provision of the Omnibus
Budget Reconciliation Act of 1989. To the extent this provision applies to an
Original Issue Discount Note and the holder of such Note is a corporation,
then solely for purposes of the deduction allowed by the Code to corporations
for dividends received from a domestic corporation, all or a portion of the
original issue discount from such Note may be treated as a dividend to such
holder. For this provision to apply (i) the maturity date of a debt instrument
must be more than 5 years from the date of issue, (ii) the yield to maturity
on such instrument must equal or exceed the sum of (A) the applicable federal
rate in effect under Section 1274(d) of the Code for the calendar month in
which the obligation is issued, plus (B) 5 percentage points, and (iii) such
instrument must have "significant original issue discount." A debt instrument
will be treated as having "significant original issue discount" if (i) the
aggregate amount which would be includible in gross income with respect to
such instrument for periods before the close of any accrual period ending
after the date five years after the date of issue exceeds (ii) the sum of (A)
the aggregate amount of interest to be paid under the instrument before the
close of such accrual period, and (B) the product of the issue price of such
instrument and its yield to maturity. For purposes of applying this provision
to a debt instrument, any payment under the instrument will be assumed to be
made on the last day permitted under such instrument. The specific application
of this provision to an Original Issue Discount Note will depend upon the
terms of such Note.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
(i) payments of principal and interest, including premium or original
issue discount ("Discount") on an Original Issue Discount Note, made by the
Company or any of its paying agents on a Note to any holder that is a
corporation, individual, fiduciary or partnership that is, as to the United
States, a foreign corporation, a nonresident alien individual, a
nonresident fiduciary of a foreign estate or trust, or a foreign
partnership one or more of the members of which is, as to the United
States, a foreign corporation, a nonresident alien individual or a
nonresident fiduciary of a foreign estate or trust (a "United States
Alien") will not be subject to United States withholding tax, provided that
in the case of Discount or interest, (a) the
S-24
<PAGE>
holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote, (b) the holder is not a controlled foreign corporation that is
related to the Company through stock ownership, (c) the holder is not a
bank receiving interest described in Section 881(c)(3) of the Code, and (d)
either (1) the beneficial owner of the Note certifies to the Company or its
agent, under penalties of perjury, that it is not a United States person
(as defined in the Code) and provides its name and address or (2) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "financial institution"), and holds the Note on behalf of the beneficial
owner, certifies to the Company or its agent, under penalties of perjury,
that such a certification from the beneficial owner has been received by it
or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof;
(ii) a holder of a Note who is a United States Alien will not be subject
to United States federal income tax on gain realized on the sale, exchange
or retirement of the Note, unless (a) such gain is derived within the
United States and such holder is an individual who is present in the United
States for 183 days or more during the taxable year in which the gain
occurred or (b) such gain is effectively connected with a United States
trade or business of such holder; and
(iii) a Note held by an individual who at the time of death is not a
citizen or resident of the United States (as defined in the Code) will not
be subject to United States federal estate tax as a result of such
individual's death if the individual does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote and, at the time of the individual's death,
payments with respect to the Note would not have been effectively connected
to the conduct of a trade or business by the individual in the United
States.
If a United States Alien is engaged in a trade or business in the United
States and interest, including Discount, on the Note is effectively connected
with the conduct of such trade or business, the United States Alien, although
exempt from the withholding tax discussed in the preceding paragraph, may be
subject to United States income tax on such interest and Discount in the same
manner as if it were a United States holder. In addition, if such a holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30%
of its effectively connected earnings and profits for the taxable year,
subject to adjustments. For this purpose, interest, including Discount, on a
Note will be included in earnings and profits if such interest and Discount is
effectively connected with the conduct by the United States Alien of a trade
or business in the United States.
Notwithstanding the above, certain contingent interest will be taxable to
non-resident alien individuals and foreign corporations unless such interest
is subject to a treaty exemption. For this purpose, subject to certain
exceptions, interest is deemed to be contingent if the amount of interest is
determined by reference to:
1. any receipts, sales or other cash flow of the issuer or a related
person;
2. any income or profits of the issuer or a related person;
3. any change in value of any property of the issuer or a related person;
or
4. any dividend, partnership distribution or similar payments made by the
issuer or a related person.
A "related person" for this purpose includes not only persons who would be
related under the rules of Section 267(b) and Section 707(b)(1) of the Code,
but also anyone who is a party to any arrangement undertaken for a tax
avoidance purpose. In addition, the Internal Revenue Service (the "IRS") may
designate in regulations other types of contingent interest which will fall
under the scope of this law.
Also, a Note providing only for contingent interest will be considered
situated within the United States for estate tax purposes, and will thus be
included in a decedent's gross estate. If a Note provides for both contingent
and non-contingent interest, an appropriate portion of the value of such an
instrument, as determined in a manner prescribed by the IRS, will be treated
as property within the United States and will thus be included in a decedent's
gross estate. Until regulations are issued to provide guidance as to the
proper method for determining the appropriate portion of such an instrument
that is to be treated as situated in the United States, taxpayers will be
permitted to use any reasonable method for making such determination.
S-25
<PAGE>
The exact scope of the law relating to contingent interest Notes remains to
be determined by regulations. Prospective holders of Notes are urged to
consult their personal tax advisors with respect to the scope of the law.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments of principal (including Discount, if any) of and any premium and
interest on a Note made within the United States by the Company or a Paying
Agent are generally subject to information reporting and possibly to "backup
withholding" at a rate of 31%. Information reporting and "backup withholding"
generally do not apply to payments to certain "exempt recipients" such as
corporations. Also, information reporting and backup withholding do not apply
to payments of principal (including Discount, if any) of and any premium and
interest on a Note made outside the United States by the Company or a Paying
Agent if the certification described in clause (i) (d) under "Non-United
States Holders" is received, provided in each case that the payor does not
have actual knowledge that the holder is a United States person.
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that, if the broker is a United States person, a
controlled foreign corporation for United States tax purposes or a foreign
person 50% or more of whose gross income is from a United States trade or
business, information reporting and possibly backup withholding will apply to
such payments unless such broker has documentary evidence in its files of the
owner's foreign status and has no actual knowledge to the contrary (or the
owner otherwise establishes an exemption from information reporting and backup
withholding). Payment of the proceeds from the sale of a Note to or through
the United States office of a broker is subject to information reporting and
backup withholding unless the holder or beneficial owner certifies as to its
United States Alien status or otherwise establishes an exemption from
information reporting and backup withholding.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS
First Boston Corporation, Lehman Brothers, Lehman Brothers Inc. or Salomon
Brothers Inc (each an "Agent" and together the "Agents"). The Company reserves
the right to sell Notes through agents other than the Agents subject to the
terms of the Distribution Agreement between the Company and the Agents. The
Company will pay the applicable Agent a commission which, depending on the
maturity of the Notes and the rating assigned to the Notes by nationally
recognized statistical rating agencies, will range from .125% to .925% of the
principal amount or, in the case of an Original Issue Discount Note, the Issue
Price of any Note of the Company sold through such Agent. The Company may sell
the Notes to each of the Agents, as principal, at a discount for their own
account or for resale to investors or other purchases at varying prices
related to prevailing market prices at the time of resale, to be determined by
such Agent or, if so agreed, at a fixed public offering price.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in an applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such Agent from the Company. Unless otherwise indicated in an applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased
by such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity, and may be resold by the Agent to investors and other
purchasers from time to time as described above. After the initial public
offering of Notes to be resold to investors and other purchasers, the public
offering price (in the case of a fixed price public offering), concession and
discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and, in its sole discretion, may accept or reject orders
in whole or in part whether placed directly with Company or through an Agent.
Each Agent will have the right, in its discretion reasonably exercised, to
reject any offer to purchase Notes received by it, in whole or in part.
S-26
<PAGE>
Payment of the purchase price of the Notes will be required to be made in
immediately available funds in The City of New York, on the date of
settlement.
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS
First Boston Corporation, Lehman Brothers Inc. and Salomon Brothers Inc and
certain affiliates thereof engage in transactions with and perform services
for the Company and the Parent and certain of their subsidiaries in the
ordinary course of business.
The Company has agreed to indemnify the Agents against, or to contribute to
payments the Agents may be required to make in respect of, certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended. The Agents may be deemed to be underwriters within the meaning of
such Act. The Company has agreed to reimburse the Agents for certain expenses.
The Agents may engage in transactions with or perform services for the Company
in the ordinary course of business.
The Agents may from time to time purchase and sell Notes in the secondary
market, but they are not obligated to do so, and there can be no assurance
that there will be a secondary market for the Notes of the Company or
liquidity in the secondary market if one develops. From time to time, the
Agents may make a market in the Notes.
The Company has reserved the right to sell Notes directly to investors in
those jurisdictions where it is authorized to do so.
S-27
<PAGE>
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 offered as convertible Debt Securities which, unless
previously redeemed or otherwise purchased, will be convertible at any time
during the conversion period specified in a supplement to this Prospectus into
shares of Tele-Communications, Inc.'s Series A TCI Group Common Stock, $1.00
par value per share (the "Series A TCI Group Common Stock"). 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 having an aggregate principal
amount of $2,050 million.
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 and whether
convertible), 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,
initial conversion price or conversion rate and any specific terms relating to
the adjustment thereof that are in addition to or different from those
described herein, the period during which any convertible Debt Securities may
be converted, 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), the terms of any guarantee of any Debt
Securities by Tele-Communications, Inc. (the "Parent"), any covenants or
events of default that are in addition to or different from those described
herein, the designation and qualification (to the extent not already
designated and qualified and described herein) of any trustee with respect to
the Debt Securities, 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 January 17, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company and the Parent have filed with the Securities and Exchange
Commission (the "Commission"), Washington, D.C., a registration statement on
Form S-3 (Registration No. 33-63139) (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, the shares of Series A TCI Group Common Stock that may be issuable
upon conversion of any convertible Debt Securities and the guarantees that may
be issued by the Parent in respect of 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
Company, the Parent, the Debt Securities, the Series A TCI Group Common Stock
and the guarantees of the Parent offered hereby, 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.
Each of the Company and the Parent is subject to the information
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. Such reports and other information filed with the Commission
under the Exchange Act by the Company and/or the Parent 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,
and at the following Regional Offices of the Commission: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a site
on the World Wide Web that contains reports, proxy and information statements
and other information regarding registrants (including the Company and the
Parent) that file electronically with the Commission. The address of the
Commission's Web site is http://www.sec.gov. Reports, proxy statements,
information statements and other information concerning the Company and the
Parent can also be inspected at the Nasdaq Stock Market at 1735 K Street,
N.W., Washington, D.C. 20006.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by the Company
(File No. 0-5550) and by the Parent (File No. 0-20421) and are incorporated
into this Prospectus by reference and made a part hereof:
1. The Annual Report on Form 10-K of the Parent for the year ended
December 31, 1995.
2. The Annual Report on Form 10-K of the Company for the year ended
December 31, 1995.
3. The Quarterly Reports on Form 10-Q of the Parent for the quarters
ended March 31, 1996 (as amended by Form 10-Q/A (Amendment No. 1)),
June 30, 1996 and September 30, 1996.
4. The Quarterly Reports on Form 10-Q of the Company for the quarters
ended March 31, 1996 (as amended on Form 10-Q/A (Amendment No. 1)),
June 30, 1996 and September 30, 1996.
5. The Current Reports on Form 8-K of the Parent dated February 9, 1996,
June 19, 1996, July 2, 1996, August 5, 1996, September 3, 1996,
September 11, 1996 and December 17, 1996.
6. The Current Reports on Form 8-K of the Company dated February 9, 1996,
February 14, 1996, May 22, 1996, June 7, 1996, June 19, 1996, July 2,
1996, August 5, 1996, September 3, 1996, September 11, 1996 and
December 17, 1996.
7. The financial statements and notes thereto of Cablevision (a
combination of certain cable television assets of Cablevision S.A.,
Televisora Belgrano S.A., Construred S.A. and Univent's S.A.) as of
December 31, 1994 and 1993, and for each of the years in the three-
year period ended December 31, 1994, which appear in the Current
Report on Form 8-K of the Parent and the Company, dated April 20, 1995
(as amended by Form 8-K/A (Amendment No. 1)).
2
<PAGE>
8. The description of the Series A TCI Group Common Stock included in
Items 3 and 4 of the Parent's registration statement on Form 8-B (as
amended by Form 8-B/A (Amendments No. 1, 2, 3 and 4)) and Item 1 of
the Parent's registration statement on Form 8-A (as amended by Form 8-
A/A (Amendments No. 1 and 2)).
All documents filed by the Company and/or the Parent 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 previous
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 and the Parent will provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon 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 (unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). 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.
3
<PAGE>
THE COMPANY AND THE PARENT
The Company is the largest provider of cable television services in the
United States, based on the number of basic subscribers served by the Company
and its subsidiaries and affiliates at September 30, 1996. At that date, the
Company, through its subsidiaries and affiliates, operated cable television
systems throughout the continental United States and Hawaii. The Parent owns
all of the common stock of the Company.
The Parent, through its subsidiaries (including the Company) and affiliates,
is principally engaged in the construction, acquisition, ownership and
operation of cable television systems and in the provision of satellite-
delivered video entertainment, information and home shopping programming
services to various distribution media, principally cable television systems.
The Parent also has interests in cable and telecommunications operations and
television programming in certain international markets, as well as
investments in companies and joint ventures involved in developing and
providing programming for new television and telecommunications technologies.
The executive offices of the Company and the Parent are located 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 and the
"Parent" means Tele-Communications, Inc. and its consolidated subsidiaries.
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 of the Company; for general operations of the
Company, including acquisitions, capital expenditures and working capital
requirements; or for such other purposes as may be specified in the Prospectus
Supplement. All or a portion of such proceeds may be advanced to the Parent in
the form of dividends or loans and/or to other affiliates of the Company in
the form of loans or as a contribution to capital. See "Description of Debt
Securities."
A brief 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 the Company's 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 any 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 Offered
Securities but only if such Offered Securities are not "Senior Debt
Securities." See "Description of Debt Securities."
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to combined fixed charges and preferred stock
dividends of the Company was 1.21, 1.22, and 1.00 for the years ended December
31, 1994, 1993 and 1992, respectively. The ratio of earnings to combined fixed
charges and preferred stock dividends of the Company was less than 1.00 for
the years ended December 31, 1995 and 1991, and for the nine months ended
September 30, 1996 and 1995; thus, earnings available for combined fixed
charges and preferred stock dividends were inadequate to cover combined fixed
charges and preferred stock dividends for such periods. The amounts of the
coverage deficiencies were $170
4
<PAGE>
million and $177 million for the years ended December 31, 1995 and 1991,
respectively, and $388 million and $63 million for the nine months ended
September 30, 1996 and 1995, respectively. For the ratio calculations,
earnings available for combined fixed charges and preferred stock dividends
consists of earnings (losses) before income taxes plus fixed charges (minus
capitalized interest), distributions from and 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), minority interests in earnings
(losses) of consolidated subsidiaries, the elimination of preferred stock
dividend requirements of consolidated subsidiaries to 50%-owned affiliates,
and preferred stock dividend requirements of 50%-owned affiliates, other than
amounts to the Company. Combined fixed charges and preferred stock dividends
consist of (i) interest (including capitalized interest) on debt, including
interest of less than 50%-owned affiliates with debt guaranteed by the
Company, (ii) the elimination of interest of consolidated subsidiaries to 50%-
owned affiliates, (iii) the Company's proportionate share of interest of 50%-
owned affiliates, (iv) that portion of rental expense the Company believes to
be representative of interest (one-third of rental expense), (v) amortization
of debt expense, (vi) that portion of minority interests in earnings (losses)
of consolidated subsidiaries that represent the amount of pretax earnings that
would be required to cover preferred stock dividend requirements of
consolidated subsidiaries, (vii) that portion of the Company's earnings
(losses) that represent the amount of pretax earnings that would be required
to cover preferred stock dividend requirements of the Company, (viii) the
elimination of preferred stock dividend requirements of consolidated
subsidiaries to 50%-owned affiliates, and (ix) the preferred stock dividend
requirements of 50%-owned affiliates, other than amounts 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 $5
million, $5 million, $14 million, $3 million and $1 million relating to such
guarantees for the years ended December 31, 1995, 1994, 1993, 1992 and 1991,
respectively, and fixed charges of $3 million and $3 million relating to such
guarantees for the nine months ended September 30, 1996 and 1995,
respectively, have not been included in fixed charges.
DESCRIPTION OF DEBT SECURITIES
The Company may offer Debt Securities consisting of Senior Debt Securities,
Senior Subordinated Debt Securities or Subordinated Debt Securities, any of
which Debt Securities may be issued as Convertible 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).
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 September 30, 1996, the Company had an aggregate of approximately
$9.26 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 owed 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 $1.7
billion 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
5
<PAGE>
of such subsidiary that is senior to that held by the Company). At September
30, 1996, the Company's subsidiaries had total Debt of approximately $5.44
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. The Parent 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, except for
any Offered Securities which the Parent has specifically elected to guarantee
as set forth in an applicable Prospectus Supplement. See "--Guarantees of Debt
Securities" below.
The Senior Debt Securities will be issued under an Indenture, dated as of
December 20, 1995, executed by the Company and The Bank of New York, as
Trustee (the "Senior Indenture"); the Senior Subordinated Debt Securities will
be issued under an Indenture to be executed by the Company and a trustee
designated in accordance with the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") (the "Senior Subordinated Indenture"); and the
Subordinated Debt Securities will be issued under an Indenture to be executed
by the Company and a trustee designated in accordance with the Trust Indenture
Act (the "Subordinated Indenture"). In this Prospectus, the Senior 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 Senior 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. In the event that any particular series of Debt Securities are
guaranteed by the Parent, the applicable Indenture will be supplemented by a
supplemental indenture among the Company, as issuer, the Parent, as guarantor,
and the Trustee. Any such supplemental indenture will be filed as an exhibit
to a Current Report on Form 8-K to be filed by the Company and Parent
following the issuance of such series of guaranteed Debt Securities. See "--
Guarantees of Debt Securities" below. 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 in any supplemental
indenture, and those made part of the Indentures by reference to the Trust
Indenture Act, as in effect on the date of the applicable Indenture. The
Indentures (or form thereof, as the case may be) 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)
6
<PAGE>
Reference is made to the Prospectus Supplement for the following terms of
the Offered 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) the initial
conversion price per share or conversion rate at which Offered Securities that
are convertible will be converted into Series A TCI Group Common Stock, any
specific terms relating to the adjustment thereof that are in addition to or
different from those described herein and the period during which such Offered
Securities may be so converted; (xii) the terms of any guarantee by the Parent
of the payment of principal, premium, if any, or interest on the Offered Debt
Securities; (xiii) any covenants or Events of Default that are in addition to
or different from those described herein; and (xiv) any other specific terms.
Reference is made to the Prospectus Supplement with respect to the designation
and qualification of the Trustee under the Senior Subordinated Indenture and
the Subordinated Indenture.
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.
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 Indenture contains, 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 the maturity thereof (or during such other period as may be specified for
such series in the related
7
<PAGE>
Prospectus Supplement) and (ii) on any date which occurs during the period
commencing 90 days before and ending 90 days after the date that 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, two or more
National Rating Agencies shall downgrade their respective ratings of the
Senior Debt Securities of such series from the ratings in effect at the
beginning of such 180-day period (each a "Downgrading Agency") (except that if
a National Rating Agency shall have downgraded its rating of the Senior Debt
Securities of such series during the 90-day period prior to such public
foreclosure disclosure, such National Rating Agency shall not be deemed a
Downgrading Agency if it upgrades its rating of the Senior Debt Securities of
such series, by the close of business on the date of such public disclosure,
to at least the rating (the "Threshold Rating") it had given to the Senior
Debt Securities of such series as of the beginning of such 180-day period and
shall not thereafter downgrade such rating to below the Threshold Rating
during such 180-day period) (the occurrence of the conditions specified in
both (i) and (ii) being a "Put Event") (except that a Put Event shall not be
deemed to have occurred if there are at least two National Rating Agencies
that have ratings of the Senior Debt Securities of such series in effect at
the beginning of such 180-day period that are not Downgrading Agencies), 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 Senior Indenture), all as provided
in, and subject to the terms of, the Senior Indenture, as the Senior Indenture
may be supplemented in connection with the issuance of series of Senior Debt
Securities 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
Indenture) 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.
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
Indenture)
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
8
<PAGE>
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 Indenture) The Senior Indenture does 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 Indenture)
Definitions. The following are certain of the terms defined in the Senior
Indenture (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 or Parent Subsidiary or any Controlling
Person) during any period of twelve (12) consecutive months of beneficial
ownership of shares of the Class A Stock or Class B Stock or both representing
in the aggregate thirty percent (30%) or more of the combined voting power of
all shares of the Class A 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 Class A Stock and Class B
Stock beneficially owned by the Parent, the Parent Subsidiaries (other than
the Company and its Subsidiaries) and the Controlling Persons represent in the
aggregate 30% or more of the combined voting power of all shares of the Class
A Stock and Class B Stock calculated on a fully diluted basis, or (B) for so
long as the Company is a Parent Subsidiary, the acquisition by any person
(other than the Parent, any Parent Subsidiary or any Controlling Person)
during any period of twelve (12) consecutive months of beneficial ownership of
shares of common stock of the Parent representing in the aggregate thirty
percent (30%) or more of the combined voting power of all shares of the
Parent's 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 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 common stock calculated on a fully diluted basis.
"Class A Stock" means the Class A Common Stock, $1.00 par value, of the
Company as it exists on the date of the Senior Indenture and stock of any
other class into which such Class A Common Stock may thereafter have been
changed.
"Class B Stock" means the Class B Common Stock, $1.00 par value, of the
Company as it exists on the date of the Senior Indenture and stock of any
other class into which such Class B Common Stock may thereafter have been
changed.
9
<PAGE>
"Company" means TCI Communications, Inc., a Delaware corporation, until a
successor replaces it pursuant to the applicable provisions of the Senior
Indenture and thereafter means the successor.
"Controlling Person" means each of (1) the Chairman of the Board of the
Parent as of the date of the Senior Indenture, (2) the President of the Parent
as of the date of the Senior Indenture, (3) each of the directors of the
Parent as of the date of the Senior Indenture, (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 or Parent Subsidiary. 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 or Parent Subsidiary
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
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.
10
<PAGE>
"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.
"National Rating Agency" means any of the following nationally recognized
statistical rating organizations (and, in each case, any successor thereto):
Duff & Phelps Credit Rating Co.; Moody's Investors Service, Inc.; Standard &
Poor's Securities, Inc.; and Fitch Investors Service, L.P.
"Parent" means Tele-Communications, Inc., a Delaware corporation, and any
successor thereof.
"Parent Subsidiary" means a corporation, a majority of whose voting stock is
owned by the Parent and/or one or more Parent Subsidiaries. Voting stock is
capital stock having voting power under ordinary circumstances to elect
directors.
"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 deposition 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 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.
11
<PAGE>
"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 Senior Subordinated 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 Senior Subordinated
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 Senior Subordinated 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 Senior Subordinated 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 Senior Subordinated 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.
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
12
<PAGE>
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 Senior
Subordinated 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 Senior Subordinated 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 Senior Subordinated 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 Senior Subordinated Indenture)
Definitions. The following are certain of the terms defined in the Senior
Subordinated 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
Senior Subordinated 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 Senior Subordinated 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 or in the event of a change of control of the Company or
the Parent.
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 Subordinated Indenture does not limit Senior Debt or
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)
13
<PAGE>
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 Subordinated
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 Subordinated
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 Subordinated
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 Subordinated 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 Subordinated 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 or in the event of a change of control of the Company or the Parent.
CONVERTIBLE DEBT SECURITIES
In addition to the provisions described under the applicable of "Senior Debt
Securities", "Senior Subordinated Debt Securities" or "Subordinated Debt
Securities" above, the following provisions will apply to Offered Securities
that are convertible Debt Securities unless otherwise provided in the
Prospectus Supplement for such Offered Securities:
For purposes of the conversion provisions of each Indenture, "Parent Stock"
means the Series A TCI Group Common Stock and any other capital stock into
which the Parent Stock may be changed after the date of such Indenture.
(Section 1.01 of the Indentures)
Conversion. The holder of any convertible Debt Security will have the right,
exercisable at any time up to and including the maturity date thereof (or such
shorter period as may be specified for any series of convertible Debt
Securities in the Prospectus Supplement relating thereto), unless previously
redeemed or otherwise purchased, to convert such Debt Security at the
principal amount thereof (or, if such Debt Security is an Original Issue
Discount Security, such portion of the principal amount thereof as is
specified in the terms of such Debt Security) into shares of Parent Stock at
the conversion price or conversion rate set forth in the Prospectus
Supplement, subject to adjustment as described below. The holder of a
convertible Debt Security may convert a portion thereof if the portion to be
converted and the remaining portion of such Debt Security are in
14
<PAGE>
denominations issuable for that series of Debt Securities. (Section 10.01 of
the Senior Indenture and Section 11.01 of the Senior Subordinated and
Subordinated Indentures) In the case of Debt Securities called for redemption,
conversion rights will expire at the close of business on such day on or prior
to the redemption date as may be specified in the Prospectus Supplement.
The conversion price or conversion rate of the convertible Debt Securities,
or the securities or other property to be received on conversion, is subject
to adjustment upon the occurrence of certain events, including (i) the payment
of a dividend or the making of a distribution in shares of Parent Stock to
holders of Parent Stock or the payment of a dividend or the making of a
distribution to holders of Parent Stock payable in shares of the Parent's
capital stock other than Parent Stock; (ii) the subdivision, combination or
reclassification of outstanding shares of Parent Stock; (iii) the issuance to
all holders of Parent Stock of rights or warrants entitling them (for a period
not exceeding 45 days or such other period as may be specified in the
Prospectus Supplement) to purchase shares of Parent Stock (or, unless
otherwise provided in the Prospectus Supplement, securities (other than the
convertible Debt Securities and shares of Tele-Communications, Inc. Series B
TCI Group Common Stock) convertible into Parent Stock) at a price per share
(or, in the case of such convertible securities, having a conversion price per
share after adding thereto an allocable portion of the exercise price of the
right or warrant to purchase such convertible securities) less than the
Average Market Price on the Determination Date (each as defined in the
Indentures) per share of such Parent Stock; (iv) the distribution to all
holders of Parent Stock of evidences of indebtedness or assets (excluding cash
dividends or distributions unless otherwise provided in the Prospectus
Supplement) or certain rights or warrants (other than those referred to
above); and (v) certain mergers, consolidations or sales of assets. In the
case of any such dividend or distribution on the Parent Stock of shares of
capital stock, subdivision, combination or reclassification, the holder of
each outstanding convertible Debt Security will have the right to convert such
Debt Security into the kind and amount of securities which he would have owned
immediately after such event if he had converted such Debt Security
immediately before the record date for or effective date of, as the case may
be, such event. In the case of any such merger, consolidation or sale of
assets, the holder of each outstanding convertible Debt Security will have the
right to convert such Debt Security into the kind and amount of securities,
cash or other assets receivable upon such merger, consolidation or sale by a
holder of the number of shares of Parent Stock into which such Debt Security
could have been converted immediately before the effective date of such
transaction (assuming such holder of Parent Stock failed to exercise any
rights of election and received per share of Parent Stock the kind and amount
of securities, cash or other assets received per share by a plurality of the
non-electing shares.) In the case of any such issuance of rights or warrants
which expire within 45 days (or such other period as may be specified in the
Prospectus Supplement) after the record date for the determination of
stockholders entitled to receive the rights or warrants, or any such
distribution of evidences of indebtedness or assets or other rights or
warrants, the conversion price or conversion rate will be adjusted pursuant to
formulas contained in the Indentures. However, no adjustment to the conversion
price or conversion rate need be made if the holders may participate in the
transaction or in certain other cases.
In addition to the foregoing adjustments, the Company will be permitted to
make such reductions in the conversion price or increases in the conversion
rate as it considers to be advisable. Unless otherwise provided in the
Prospectus Supplement, the Company is not required to make adjustments in the
conversion price or conversion rate of less than 1% of the initial conversion
price or conversion rate, as the case may be, but any adjustment that would
otherwise be required to be made will be taken into account in the computation
of any subsequent adjustment. No adjustment is required in respect of the
issuance of Parent Stock under any dividend or interest reinvestment plan of
the Parent. Fractional shares of Parent Stock will not be issued upon
conversion, but, in lieu thereof, the Company will pay a cash adjustment. No
payment or adjustment will be made upon any conversion on account of any
interest (or, in the case of Original Issue Discount Securities, original
issue discount) accrued on the convertible Debt Securities surrendered for
conversion or on account of any dividends on the Parent Stock issued upon
conversion. Convertible Debt Securities surrendered for conversion between the
record date for an interest payment, if any, and the interest payment date
(except convertible Debt Securities called for redemption on a redemption date
during such period) may be required to be accompanied by payment of an amount
equal to the interest thereon which the registered holder is to receive.
(Article Ten of the Senior Indenture and Article Eleven of the Senior
Subordinated and Subordinated Indentures)
15
<PAGE>
GUARANTEES OF DEBT SECURITIES
The Parent may, at its option, unconditionally guarantee to the holders of
Offered Securities the full and prompt payment of principal, premium, if any,
and interest on such Offered Securities when and as the same shall become due
and payable, whether at maturity, upon redemption or otherwise. The terms of
any such guarantee (a "Guarantee") will be set forth in a supplement to the
applicable Indenture. Any such Guarantee will be an unsecured obligation of
the Parent. Any right of payment of the holders of Senior Debt Securities
under a Guarantee will be prior to any right of payment of the holders of
Senior Subordinated Debt Securities and Subordinated Debt Securities under a
Guarantee, and any right of payment of the holders of Senior Subordinated Debt
Securities under a Guarantee will be prior to any right of payment of the
holders of Subordinated Debt Securities under a Guarantee.
If a Guarantee is issued by the Parent with respect to any Offered
Securities, reference is made to the Prospectus Supplement for such Offered
Securities for a description of the specific terms of such Guarantee,
including events of default relating thereto and, where applicable,
subordination provisions of such Guarantee and covenants of the Parent. Unless
otherwise specified in the applicable Prospectus Supplement, Offered
Securities will not be guaranteed by the Parent.
DENOMINATION 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 Senior Subordinated and Subordinated Indentures
and Sections 2.01 and 2.03 of the Senior Indenture) Under the Senior
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 Senior 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 Senior
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
Senior 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 Senior Indenture and Section 2.15
of the Senior Subordinated and the Subordinated Indentures) The Prospectus
Supplement relating to a series of Debt Securities denominated other than in
U.S. Dollars will specify the authorized denominations thereof.
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, CONVERSION 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"), an office or agency where Debt Securities of each
series may be presented for payment ("Paying Agent") and an office or agency
where Debt Securities of each series that is convertible may be presented for
conversion ("Conversion Agent"). The Company may have one or more co-
Registrars, one or more additional Paying Agents and one or more additional
Conversion 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 or Conversion Agent. Unless otherwise indicated in an applicable
Prospectus Supplement, each Trustee will initially act as Paying Agent and
Registrar for each series of Debt Securities
16
<PAGE>
issued under its respective Indenture and as Conversion Agent for any series
that is convertible. The Company may change any Paying Agent, Registrar or co-
Registrar or Conversion Agent at any time without notice to the holders of
Debt Securities, except as described below with respect to Debt Securities
issued under the Senior Indenture. The Company will promptly notify the
Trustee of the name and address of any such Agent. (Section 2.05 of the
Indentures)
The Senior 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 Senior 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 Senior Debt Securities of such
series. (Section 4.01 of the Senior 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 Indenture) In addition, if Debt Securities of any
series issued under the Senior 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 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 Senior 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 Senior 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 Senior
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
17
<PAGE>
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 Senior
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 Senior
Subordinated and the Subordinated Indentures) The Senior 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 Senior 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 Senior Indenture)
GLOBAL SECURITIES
The Indentures provide 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 registered form (or, in the case of
Senior Debt Securities, bearer form) and in either temporary or permanent
form. (Sections 2.10 and 2.11 of the Senior Indenture and Sections 2.11 and
2.15 of the Senior Subordinated and Subordinated Indentures) 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
Senior Indenture and Section 2.15 of the Senior Subordinated and Subordinated
Indentures) 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 Indentures) 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 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 Indentures) 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
18
<PAGE>
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 applicable 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
Indentures) 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 applicable 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 interest 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 the 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 Indentures)
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.
19
<PAGE>
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 Regulations 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)(1)(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
Senior 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 Senior Indenture) The Senior 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 Senior 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
20
<PAGE>
Revenue Code." Under Sections 165(j) and 1287(a) of the Code, holders that are
United States 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 Senior 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 Senior 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 Senior 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 Senior 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)
21
<PAGE>
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
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 Indenture 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 Senior Indenture; 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 Indenture provides 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 Senior Indenture 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 Indenture) 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
22
<PAGE>
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 Indenture and Section 4.03 of
the Senior Subordinated and Subordinated Indentures)
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 Indenture 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 Senior
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 2.01 of the Indentures)
THE TRUSTEES
The Trustee under the Senior Indenture is The Bank of New York. The Bank of
New York acts as depositary 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 the Parent's common stock and for the Parent's
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.
Information with respect to the Trustees under the Senior Subordinated
Indenture and the Subordinated Indenture shall be provided in the applicable
Prospectus Supplement.
Any Trustee 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 (or form thereof, as the case may be) are exhibits to the
Registration Statement. Anyone who receives this Prospectus may obtain copies
of the Indentures (or form thereof, as the case may be) without charge by
writing to Stephen M. Brett, Esq., Senior Vice President of the Company, at
the address set forth under "The Company and the Parent." 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.
23
<PAGE>
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 any or all bids. 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.
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 Prospectus
Supplement and the Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.
24
<PAGE>
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
The legality of the Debt Securities, the Series A TCI Group Common Stock and
the Guarantees, if any, offered hereby will be passed upon for the Company and
the Parent by Baker & Botts, L.L.P., 599 Lexington Avenue, New York, New York
10022. Jerome H. Kern, special counsel to Baker & Botts, L.L.P., is a director
of Tele-Communications, Inc. and holds options to purchase shares of Series A
TCI Group Common Stock and Series A Liberty Media Group Common Stock. Another
partner of Baker & Botts, L.L.P. holds restricted shares of Tele-
Communications, Inc. Series A Liberty Media Group Common Stock.
EXPERTS
The consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1995, and all related
financial statement schedules, which appear in the December 31, 1995 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein in reliance upon the reports, dated March 18, 1996, of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated balance sheets of TCI Communications, Inc. and subsidiaries
as of December 31, 1995 and 1994, 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, 1995, and all related financial
statement schedules, which appear in the December 31, 1995 Annual Report on
Form 10-K of TCI Communications, Inc., have been incorporated by reference
herein in reliance upon the reports, dated March 18, 1996, of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The combined balance sheets of TCI Group as of December 31, 1995 and 1994,
and the related combined statements of operations, equity, and cash flows for
each of the years in the three-year period ended December 31, 1995, which
appear in the December 31, 1995 Annual Report on Form 10-K of Tele-
Communications, Inc., have been incorporated by reference herein in reliance
upon the report, dated March 18, 1996, of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the combined financial statements refers to the
effects of not consolidating TCI Group's interest in Liberty Media Group for
the periods subsequent to the mergers of TCI Communications, Inc. and Liberty
Media Corporation on August 4, 1994.
The combined balance sheets of Liberty Media Group as of December 31, 1995
and 1994, and the related combined statements of operations, equity, and cash
flows for each of the years in the three-year period ended December 31, 1995,
which appear in the December 31, 1995 Annual Report on Form 10-K of Tele-
Communications, Inc., have been incorporated by reference herein in reliance
upon the report, dated March 18,
25
<PAGE>
1996, of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The statements of operations, stockholders' equity, and cash flows of
Liberty Media Corporation and subsidiaries for the year ended December 31,
1993, which appear in the December 31, 1995 Annual Report on Form 10-K of
Tele-Communications, Inc., have been incorporated by reference herein in
reliance upon the report, dated March 18, 1994, of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1993 financial
statements refers to a change in method of accounting for income taxes.
The consolidated balance sheet of TeleWest plc and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
operations and cash flows for each of the years in the three year period ended
December 31, 1995, which appear in the December 31, 1995 Annual Report on Form
10-K of Tele-Communications, Inc., have been incorporated by reference herein
in reliance upon the report, dated March 6, 1996, of KPMG Audit plc,
independent chartered accountants, incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
The combined balance sheets of Cablevision (a combination of certain cable
television assets of Cablevision S.A., Televisora Belgrano S.A., Construred
S.A. and Univent's S.A.) as of December 31, 1994 and 1993, and the related
combined statements of operations and deficit and cash flows for each of the
years in the three-year period ended December 31, 1994, which appear in the
Current Report on Form 8-K of Tele-Communications, Inc. dated April 20, 1995,
as amended, have been incorporated by reference herein in reliance upon the
report, dated March 24, 1995, of KPMG Finsterbusch Pickenhayn Sibille,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of VII Cable which appear in TCI's Current
Report on Form 8-K dated June 19, 1996, have been incorporated by reference
herein in reliance on the report dated February 14, 1996 of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
26
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY PRICING SUPPLEMENT IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY PRICING
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT. THIS PRO-
SPECTUS SUPPLEMENT, THE PROSPECTUS AND ANY PRICING SUPPLEMENT DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION BY ANYONE IN ANY STATE 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. NEITHER THE DELIVERY OF THIS PROSPECTUS SUP-
PLEMENT, THE PROSPECTUS OR ANY PRICING SUPPLEMENT NOR ANY SALE MADE HEREUNDER
OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE IN-
FORMATION HEREIN OR IN THE PROSPECTUS OR ANY PRICING SUPPLEMENT IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors............................................................... S-2
Description of Notes....................................................... S-2
Book-Entry System.......................................................... S-18
Certain United States Tax Considerations................................... S-20
Plan of Distribution....................................................... S-26
PROSPECTUS
Available Information...................................................... 2
Incorporation of Documents by Reference.................................... 2
The Company and the Parent................................................. 4
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 4
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 24
Legal Matters.............................................................. 25
Experts.................................................................... 25
</TABLE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
TCI COMMUNICATIONS, INC.
$750,000,000
MEDIUM-TERM NOTES, SERIES C
DUE NINE MONTHS OR
MORE FROM DATE OF ISSUE
----------------------
PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
SALOMON BROTHERS INC
JANUARY 17, 1997
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
