-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hw5vU6ByvKFKAtLuqgYr2KpUmeZSygxTvVf4I1xTOlU8DRWCefOHmB57IctK7Lde r0oFvofmuOK5GB7izb05aw== 0000940180-97-000216.txt : 19970313 0000940180-97-000216.hdr.sgml : 19970313 ACCESSION NUMBER: 0000940180-97-000216 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970310 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970312 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TCI COMMUNICATIONS INC CENTRAL INDEX KEY: 0000096903 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 840588868 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05550 FILM NUMBER: 97555099 BUSINESS ADDRESS: STREET 1: TERRACE TOWER II STREET 2: 5619 DTC PKWY CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3032675500 MAIL ADDRESS: STREET 1: TERRACE TOWER II STREET 2: 5619 DTC PKWY CITY: ENGLEWOOD STATE: CO ZIP: 80111 FORMER COMPANY: FORMER CONFORMED NAME: TELE COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: March 11, 1997 Date of Earliest Event Reported: March 11, 1997 TCI COMMUNICATIONS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware (State or Other Jurisdiction of Incorporation) 0-5550 84-0588868 (Commission File Number) (I.R.S. Employer Identification No.) Terrace Tower II 5619 DTC Parkway Englewood, Colorado 80111-3000 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (303) 267-5500 Item 5. Other Events. ------------ Pursuant to a Registration Statement on Form S-3 (File No. 333-16985) (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), and declared effective by the Commission on January 21, 1997, the Registrant and four Delaware business trusts (the "Business Trusts") registered subordinated debt securities of the Registrant, preferred securities of the Business Trusts, guarantees of such preferred securities by the Registrant and certain back-up undertakings of the Registrant, for delayed or continuous offering to the public pursuant to Rule 415 under the Act, having a maximum aggregate initial offering price of $500 million. The Registrant is filing this Current Report on Form 8-K in order to incorporate by reference into the prospectus, dated January 21, 1997, which forms part of the Registration Statement, the documents filed as exhibits hereto and, where applicable, to qualify certain of such documents under the Trust Indenture Act of 1939, as amended. Item 7. Financial Statements and Exhibits. The following exhibits are being filed with this Form 8-K: 4.1 Form of Third Supplemental Indenture between the Registrant and The Bank of New York, as trustee. 4.2 Form of Amended and Restated Declaration of Trust of TCI Communications Financing III. 4.3 Form of Guarantee Agreement with respect to Capital Securities of TCI Communications Financing III. 25.1 Statement of Eligibility of The Bank of New York, as Trustee for Capital Securities of TCI Communications Financing III, on Form T-1. 25.2 Statement of Eligibility of The Bank of New York, as Trustee for Guarantee of Capital Securities of TCI Communications Financing III, on Form T-1. 2 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: March 11, 1997 TCI COMMUNICATIONS, INC. (Registrant) By: /s/ Stephen M. Brett -------------------------------- Name: Stephen M. Brett Title: Senior Vice President 3 EX-4.1 2 TCI & BONY 3RD SUPP. INDENTURE EXHIBIT 4.1 - -------------------------------------------------------------------------------- TCI COMMUNICATIONS, INC. AND THE BANK OF NEW YORK, Trustee ----------------- THIRD SUPPLEMENTAL INDENTURE TO INDENTURE Dated as of March 14, 1997 ----------------- ____% Subordinated Deferrable Interest Notes due March 31, 2027 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS Section 1.1. Definition of Terms......................2 Section 1.2. Interpretation...........................5 ARTICLE II GENERAL TERMS AND CONDITIONS OF THE NOTES Section 2.1. Designation and Principal Amount.........5 Section 2.2. Maturity.................................5 Section 2.3. Form and Payment.........................5 Section 2.4. Global Note..............................6 Section 2.5. Interest.................................6 ARTICLE III REDEMPTION OF THE NOTES Section 3.1. Tax Event Redemption.....................7 Section 3.2. Optional Redemption by Company...........8 Section 3.3. No Sinking Fund..........................9 ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD Section 4.1. Extension of Interest Payment Period.....9 Section 4.2. Notice of Extension.....................10 ARTICLE V EXPENSES Section 5.1. Payment of Expenses.....................10 ARTICLE VI SUBORDINATION Section 6.1. Agreement to Subordinate................11 Section 6.2. Default on Senior Indebtedness..........12 Section 6.3. Liquidation; Dissolution; Bankruptcy....12 Section 6.4. Subrogation.............................13 Section 6.5. Trustee to Effectuate Subordination.....14 Section 6.6. Notice by the Company...................14 Section 6.7. Rights of the Trustee; Holders of Senior Indebtedness.....................15 Section 6.8. Subordination May Not Be Impaired.......16 Section 6.9. Pari Passu Debt.........................16 ARTICLE VII RESERVED ARTICLE VIII FORM OF NOTE Section 8.1. Form of Note............................16 ARTICLE IX ORIGINAL ISSUE OF NOTES Section 9.1. Original Issue of Notes.................24 ARTICLE X CERTAIN COVENANTS Section 10.1. Limitation on Dividends and Other Payments................................24 Section 10.2. Covenants as to the Trust...............25 ARTICLE XI CERTAIN EVENTS OF DEFAULT Section 11.1. Additional Events of Default............25 Section 11.2. Waiver of Existing Defaults.............25 ARTICLE XII MISCELLANEOUS Section 12.1. Supplemental Indenture Incorporated Into Indenture..........................26 Section 12.2. Trustee Not Responsible for Recitals; Disclaimer..............................26 Section 12.3. Governing Law. .........................26 Section 12.4. Separability............................26 Section 12.5. Counterparts............................26 Section 12.6. Acknowledgment of Rights of Holders of Capital Securities...................26 ii THIS THIRD SUPPLEMENTAL INDENTURE, dated as of March 14, 1997 (this "Third Supplemental Indenture"), between TCI Communications, Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation, not in its individual capacity but solely as trustee (the "Trustee"), under the Indenture dated as of January 29, 1996 between the Company and the Trustee (the "Indenture"). W I T N E S S E T H: WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of the Company's unsecured subordinated Securities, to be issued from time to time in one or more series as might be determined by the Company in accordance with the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered as provided in the Indenture; and WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Securities to be known as its 9.65% Subordinated Deferrable Interest Notes due March 31, 2027 (the "Notes"), the form and substance of such Notes and the terms, provisions and conditions thereof to be as set forth in the Indenture and this Third Supplemental Indenture; and WHEREAS, TCI Communications Financing III, a Delaware statutory business trust (the "Trust"), has offered to the public $300,000,000 aggregate liquidation amount of its 9.65% Capital Securities (the "Capital Securities") and has offered to the Company $9,279,000 aggregate liquidation amount of its Common Securities (the "Common Securities" and, together with the Capital Securities, the "Trust Securities"), such Trust Securities representing undivided beneficial interests in the assets of the Trust, and proposes to invest the proceeds from such offering in $309,279,000 aggregate principal amount of the Notes; and WHEREAS, the Company has requested the Trustee to execute and deliver this Third Supplemental Indenture, and all requirements necessary to make this Third Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this Third Supplemental Indenture has been duly authorized in all respects. NOW THEREFORE, in consideration of the purchase and acceptance of the Notes by the holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Notes and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE I DEFINITIONS Section 1.1. Definition of Terms. Unless the context otherwise requires, (a) a term defined in the Indenture has the same meaning when used in this Third Supplemental Indenture, (b) a term defined anywhere in this Third Supplemental Indenture has the same meaning throughout and (c) the following terms have the meanings given to them in the Declaration (including, without limitation, Annex I thereto): Capital Securities Guarantee Capital Security Certificate Clearing Agency Delaware Trustee Pro Rata Property Trustee Purchase Agreement Regular Trustee Special Event In addition, the following terms have the following respective meanings: "Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to (i) the yield, under the heading which represents the average for the immediately prior week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Remaining Life (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Remaining Life shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the quarterly equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in each case calculated on the third Business Day preceding the redemption date, plus in each case (a) 1.75% if such redemption date occurs on or prior to March 31, 1998, and (b) 1.00% in all other cases. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Remaining Life of the 2 Subordinated Debt Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life of the Subordinated Debt Securities. If no United States Treasury security has a maturity which is within a period from three months before to three months after March 31, 2007, the two most closely corresponding United States Treasury securities shall be used as the Comparable Treasury Issue, and the Adjusted Treasury Rate shall be interpolated or extrapolated on a straight-line basis, rounding to the nearest month using such securities. "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of three Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of five Reference Treasury Dealer Quotations or (ii) if the Trustee obtains fewer than five Reference Treasury Dealer Quotations, the average of all such quotations. "Declaration" means the Amended and Restated Declaration of Trust of TCI Communications Financing III, a Delaware business trust, dated as of March 14, 1997. "Dissolution Event" means that, as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Declaration and the Notes held by the Property Trustee are to be distributed to the holders of the Trust Securities Pro Rata in accordance with the Declaration. "Investment Company Event" means that the Regular Trustees shall have received an opinion from independent counsel experienced in practice under the 1940 Act (as hereinafter defined) to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes effective on or after March 11, 1997. "Maturity Date" means the date on which the Notes mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Additional Interest, if any. "Quotation Agent" means the Reference Treasury Dealer appointed by the Company for this purpose. "Reference Treasury Dealer" means: (i) Lehman Brothers Inc. and its respective successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by the Company. 3 "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date. "Remaining Life" means the period from the redemption date of the Subordinated Debt Securities (which are redeemed prior to March 31, 2007) to and including March 31, 2007. "Senior Indebtedness" means: (i) any payment in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds, notes or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), except for any such indebtedness that is by its terms subordinated to or pari passu with the Notes, as the case may be. For greater certainty, "Senior Indebtedness" includes all indebtedness for money borrowed between or among the Company and its Affiliates, except for such indebtedness that is by its terms subordinated to or pari passu with the Notes, as the case may be. "Tax Event" means that the Regular Trustees shall have received an opinion from independent tax counsel experienced in such matters to the effect that, on or after March __, 1997, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or (b) any amendment to, or change in, an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority, in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation is issued or announced or which action is taken, on or after March __, 1997, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Subordinated Debt Securities, (ii) interest payable to the Trust on the Subordinated Debt Securities is not, or will not be within 90 days of the date thereof, deductible in whole or in part by the Company for United States federal income tax purposes or (iii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties or other governmental charges. 4 Section 1.2. Interpretation. Each definition in this Third Supplemental Indenture includes the singular and the plural, and references to the neuter gender include the masculine and feminine where appropriate. Terms which relate to accounting matters shall be interpreted in accordance with generally accepted accounting principles in effect from time to time. References to any statute mean such statute as amended at the time and include any successor legislation. The word "or" is not exclusive, and the words "herein," "hereof" and "hereunder" refer to this Third Supplemental Indenture as a whole. References to Articles and Sections are to the Articles and Sections of this Third Supplemental Indenture. The headings to the Articles and Sections are for convenience of reference and shall not affect the meaning or interpretation of this Third Supplemental Indenture. ARTICLE II GENERAL TERMS AND CONDITIONS OF THE NOTES Section 2.1. Designation and Principal Amount. There is hereby authorized a series of Securities designated the "9.65% Subordinated Deferrable Interest Notes due March 31, 2027." The aggregate principal amount of Notes which may be authenticated and delivered under the Indenture is limited to $309,279,000 (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections 2.08, 2.09, 2.11, 3.07 or 9.05 of the Indenture and except for any Notes which pursuant to Section 2.04 of the Indenture are deemed not to have been authenticated and delivered pursuant to the Indenture). Section 2.2. Maturity. The Maturity Date will be March 31, 2027. Section 2.3. Form and Payment. Except as provided in Section 2.4, the Notes shall be issued in fully registered certificated form without interest coupons. Principal of and premium, if any, and interest (including Additional Interest, if any) on the Notes issued in certificated form will be payable, the transfer of such Notes will be registrable and such Notes will be exchangeable for Notes bearing identical terms and provisions at the office or agency of the Trustee in New York, New York, provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the security register maintained by the Registrar. Notwithstanding the foregoing, so long as the registered Holder of any Notes is the Property Trustee, the payment of the principal of and premium, if any, and interest (including Additional Interest, if any) on such Notes held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee. Section 2.4. Global Note. In connection with a Dissolution Event: (a) Notes in certificated form may be presented to the Trustee by the Property Trustee in exchange for a global Note in an aggregate principal amount 5 equal to the aggregate principal amount of the Notes so presented, to be registered in the name of The Depository Trust Company ("DTC"), as the initial Clearing Agency for the Notes, or the nominee of DTC, and delivered by the Trustee to DTC for crediting to the accounts of its participants pursuant to the instructions of the Regular Trustees; the Company, upon any such presentation, shall execute a global Note in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this Third Supplemental Indenture; and payments on the Notes issued as a global Note will be made in immediately available funds to DTC (or a successor Clearing Agency); and (b) If any Capital Securities are held in certificated form (i.e., not in book entry form), Notes in certificated form may be presented to the Trustee by the Property Trustee and any Capital Security Certificate which represents Capital Securities (other than Capital Securities held by DTC (or a successor Clearing Agency) or its nominee) ("Non Book-Entry Capital Securities") will be deemed to represent beneficial interests in Notes in certificated form presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Capital Securities until such Capital Security Certificates are presented to the Registrar for transfer or reissuance, at which time such Capital Security Certificates will be canceled and a Note in certificated form, registered in the name of the holder of such Capital Security Certificate or the transferee of the holder of such Capital Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Capital Security Certificate canceled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this Third Supplemental Indenture; and upon issuance of such Notes, Notes in certificated form with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been canceled. Section 2.5. Interest. (a) Each Note will bear interest at the rate of 9.65% per annum (the "Coupon Rate") from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article IV) quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date"), commencing on June 30, 1997, to the Person in whose name such Note or any predecessor Note is registered, at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day next preceding that Interest Payment Date. If pursuant to the provisions of Section 2.08 of the Indenture the Notes are no longer represented by a global Security, the Company may select a regular record date for such interest installment which shall be any date at least fifteen days before an Interest Payment Date. 6 (b) The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Notes is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed will be computed on the basis of the actual number of days elapsed in such a 90-day quarter. (c) If at any time while the Property Trustee is the Holder of any Notes, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company will pay as additional interest ("Additional Interest") on the Notes held by the Property Trustee such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other governmental charges been imposed. ARTICLE III REDEMPTION OF THE NOTES Section 3.1. Tax Event Redemption. Prior to March 31, 2007, if a Tax Event has occurred then, notwithstanding Section 3.2, the Company shall have the right, upon not less than 30 nor more than 60 days notice to the registered Holders of the Notes, to redeem the Notes, in whole but not in part, for cash within 90 days following the occurrence of such Tax Event (the "90 Day Period") at the Tax Event Redemption Price (as defined herein), provided that, if at the time there is available to the Company the opportunity to eliminate, within the 90 Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Company, the Trust or the holders of the Trust Securities, the Company shall pursue such Ministerial Action in lieu of redemption; and provided further, that the Company shall have no right to redeem the Notes while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Declaration. The "Tax Event Redemption Price" shall mean the greater of (i) 100% of the principal amount of the Subordinated Debt Securities or (ii) the sum, as determined by a Quotation Agent, of the present values of the principal amount and premium payable with respect to an optional redemption of the Subordinated Debt Securities on March 31, 2007 pursuant to Section 3.2, together with scheduled payments of interest from the redemption date 7 to and including March 31, 2007, in each case discounted to the redemption date on a quarterly basis (assuming a 360-day year consisting of 30-day months) at the Adjusted Treasury Rate, plus accrued and unpaid interest on the Subordinated Debt Securities to the date fixed for redemption. The Tax Redemption Price shall be paid prior to 12:00 noon, New York City time, on the date of such redemption or at such earlier time as the Company determines and specifies in the notice of redemption, provided the Company shall deposit with the Trustee an amount sufficient to pay the Tax Event Redemption Price by 11:00 a.m., New York City time, on the date such Tax Event Redemption Price is to be paid. In connection with a redemption described in this Section 3.1, the Company shall take all actions necessary to calculate the Tax Event Redemption Price, including without limitation, selecting and notifying the Quotation Agent of such redemption and selecting Reference Treasury Dealers in order to provide Reference Treasury Dealer Quotations to the Trustee. Section 3.2. Optional Redemption by Company. Subject to the provisions of Article Three of the Indenture, the Company shall have the right to redeem the Notes, in whole or in part, from time to time, on or after March 31, 2007, at the following redemption prices (expressed in percentages of principal amount), plus in each case accrued and unpaid interest thereon to the date of such redemption (the "Optional Redemption Price"), if redeemed during the 12-month period beginning March 31 of each year indicated below: Optional -------- Year Redemption Price ---- ---------------- 2007 ................................ 104.8250% 2008 ................................ 104.3425 2009 ................................ 103.8600 2010 ................................ 103.3775 2011 ................................ 102.8950 2012 ................................ 102.4125 2013 ................................ 101.9300 2014 ................................ 101.4475 2015 ................................ 100.9650 2016 ................................ 100.4825 2017 and thereafter ................. 100.0000 8 Any redemption pursuant to this Section 3.2 shall be made upon not less than 30 nor more than 60 days notice to the registered Holder of the Notes, at the Optional Redemption Price. If the Notes are only partially redeemed pursuant to this Section 3.2, the Notes will be redeemed pro rata or by lot or by any other method utilized by the Trustee. The Optional Redemption Price shall be paid prior to 12:00 noon, New York City time, on the date of such redemption or at such earlier time as the Company determines and specifies in the notice of redemption, provided the Company shall deposit with the Trustee an amount sufficient to pay the Optional Redemption Price by 11:00 a.m., New York City time, on the date such Optional Redemption Price is to be paid. Section 3.3. No Sinking Fund. The Notes are not entitled to the benefit of any sinking fund. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD Section 4.1. Extension of Interest Payment Period. The Company shall have the right, at any time and from time to time prior to the Maturity Date, to extend the interest payment period of such Notes for up to twenty (20) consecutive quarters (the "Extended Interest Payment Period"). To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest compounded quarterly at the Coupon Rate for each quarter of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Company shall pay all interest accrued and unpaid on the Notes, including any Additional Interest ("Deferred Interest"), which shall be payable to the Holders of the Notes in whose names the Notes are registered in the security register maintained by the Registrar on the first Regular Record Date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed twenty (20) consecutive quarters or extend beyond the Maturity Date. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof. Section 4.2. Notice of Extension. (a) If the Property Trustee is the only registered Holder of the Notes at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to both the Regular Trustees and the Property Trustee of its selection of such Extended Interest Payment Period one Business Day before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities are payable, or (ii) the date the Trust is required to give notice of the record or payment date for such 9 Distributions to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Capital Securities, but in any event at least one Business Day before such record date. (b) If the Property Trustee is not the only Holder of the Notes at the time the Company selects an Extended Interest Payment Period, the Company shall give the Holders of the Notes and the Trustee written notice of its selection of such Extended Interest Payment Period ten (10) Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to Holders of the Notes. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the twenty quarters permitted in the maximum Extended Interest Payment Period permitted under Section 4.1. ARTICLE V EXPENSES Section 5.1. Payment of Expenses. In connection with the offering, sale and issuance of the Notes to the Property Trustee in connection with the sale of the Trust Securities by the Trust, and in connection with the maintenance of the Trust for so long as the Trust Securities are outstanding, the Company shall: (a) pay all costs and expenses relating to the offering, sale and issuance of the Notes, including compensation to the underwriters payable pursuant to the Purchase Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 7.07 of the Indenture; (b) pay all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions to the underwriters payable pursuant to the Purchase Agreement), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), any Clearing Agency for the Capital Securities, duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets), other than obligations of the trust in respect of the Trust Securities; 10 (c) be primarily liable for any indemnification obligations arising with respect to the Declaration; (d) pay any and all taxes, duties, assessments or governmental charges of whatever nature (other than United States withholding taxes attributable to the Trust or its assets) imposed on the Trust or its assets and all liabilities, costs and expenses of the Trust with respect to such taxes, duties, assessments or governmental charges; and (e) pay any and all fees and expenses related to the enforcement by the Property Trustee of the rights of the holders of the Capital Securities. ARTICLE VI SUBORDINATION Section 6.1. Agreement to Subordinate. The Company covenants and agrees, and each holder of Notes issued hereunder by such holder's acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article VI; and each holder of a Note, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, and interest on all Notes issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness, whether outstanding at the date of this Third Supplemental Indenture or thereafter incurred. This Article shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and they and/or each of them may enforce such provisions. No provision of this Article VI shall prevent the occurrence of any default or Event of Default with respect to the Notes. Section 6.2. Default on Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other amount due on any Senior Indebtedness, or in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then, in either case, no payment shall be made by the Company to the Holders of the Notes with respect to the principal (including redemption and sinking fund payments) of, premium, if any, interest on, or any other amount owing in respect of, the Notes. 11 In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder of the Notes when such payment is prohibited by the preceding paragraph of this Section 6.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. Section 6.3. Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment or distribution is made by the Company to the Holders of the Notes on account of the principal of, premium, if any, interest on, or any other amount owing in respect of, the Notes; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Notes or the Trustee would be entitled to receive from the Company, except for the provisions of this Article VI, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Notes or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of Notes or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the Holders of the Notes before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of 12 all Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article VI, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article VI with respect to the Notes to the payment of all Senior Indebtedness that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article Five of the Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 6.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Five of the Indenture. Nothing in Section 6.2 or in this Section 6.3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 of the Indenture. Section 6.4. Subrogation. Subject to the payment in full of all Senior Indebtedness, the rights of the Holders of the Notes shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to such Senior Indebtedness until the principal of, premium, if any, and interest on, and all other amounts owing in respect of, the Notes shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Holders of the Notes or the Trustee would be entitled except for the provisions of this Article VI, and no payment over pursuant to the provisions of this Article VI, to or for the benefit of the holders of such Senior Indebtedness by Holders of the Notes or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Notes be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article VI are and are intended solely for the purposes of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article VI or elsewhere in this Third Supplemental Indenture or the Indenture or in the Notes is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Notes the principal of (and premium, if any) and interest on and all other amounts owing 13 in respect of the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Notes and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under the Indenture, as amended and supplemented by this Third Supplemental Indenture, subject to the rights, if any, under this Article VI of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article VI, the Trustee, subject to the provisions of Section 7.01 of the Indenture, and the Holders of the Notes, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Notes, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article VI. Section 6.5. Trustee to Effectuate Subordination. Each Holder of a Note by such holder's acceptance thereof authorizes and directs the Trustee on such holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article VI and appoints the Trustee as such holder's attorney-in-fact for any and all such purposes. Section 6.6. Notice by the Company. The Company shall give prompt written notice to a Trust Officer of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article VI. Notwithstanding the provisions of this Article VI or any other provision of the Indenture and this Third Supplemental Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article VI unless and until a Trust Officer shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any representative or trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.01 of the Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 6.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Note) then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to 14 apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 7.01 of the Indenture, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a representative or trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a representative or trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article VI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article VI, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 6.7. Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article VI in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article VI, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into the Indenture or this Third Supplemental Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Section 7.01 of the Indenture, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to Holders of Notes, the Company or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article VI or otherwise. Section 6.8. Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of the Indenture or this Third Supplemental Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice 15 to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article VI or the obligations hereunder of the Holders of the Notes to the holders of such Senior Indebtedness, do any one or more the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. Section 6.9. Pari Passu Debt. The payment by the Company of the principal of, premium, if any, and interest on all Notes issued hereunder shall rank pari passu with the payment by the Company of the principal of, premium, if any, and interest on the Company's (i) 8.72% Subordinated Deferrable Interest Notes due January 31, 2045 and (ii) 10% Subordinated Deferrable Interest Notes due May 31, 2045 (each of which are a series of Securities issued under the Indenture). ARTICLE VII [RESERVED] ARTICLE VII FORM OF NOTE Section 8.1. Form of Note. The Notes and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the following forms: (FORM OF FACE OF NOTE) [IF THE NOTE IS TO BE A GLOBAL SECURITY, INSERT: This Note is a global Note within the meaning of the Indenture hereinafter referred to and is registered in the name of a depositary or a nominee of a depositary. Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the depositary to a nominee of the depositary or another nominee of the depositary or by the depositary or any such nominee to a successor depositary or a nominee of such successor depositary. Unless this Note is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede Co., has an interest herein.] 16 No. $ CUSIP No. TCI COMMUNICATIONS, INC. 9.65% SUBORDINATED DEFERRABLE INTEREST NOTE DUE MARCH 31, 2027 TCI COMMUNICATIONS, INC., a Delaware corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ________________ or registered assigns, the principal sum of ________________ Dollars on March 31, 2027, and to pay interest on said principal sum from March 14, 1997, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1997, at the rate of 9.65% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest, compounded quarterly, at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Note is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed will be computed on the basis of the actual number of days elapsed in such 90 day quarter. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment [which shall be the close of business on the Business Day next preceding such Interest Payment Date.] [IF PURSUANT TO THE PROVISIONS OF SECTION 2.08 OF THE INDENTURE THE NOTES ARE NO LONGER REPRESENTED BY A GLOBAL SECURITY -- which shall be [insert date (to be selected by the Company) which is not less than 15 days prior to each Interest Payment Date.]] Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such regular record date, and may be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on a special record date to be fixed by the Company for the payment of such defaulted interest, notice whereof shall be given to the registered Holders of the Notes not less than fifteen (15) days prior to such special record date, or may be paid at any time in any other lawful manner not 17 inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Trustee maintained for that purpose in New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the security register maintained by the Registrar. Notwithstanding the foregoing, so long as the Holder of this Note is the Property Trustee, the payment of the principal of (and premium, if any) and interest on this Note will be made at such place and to such account as may by designated by the Property Trustee. The indebtedness evidenced by this Note is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Note is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Note shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Note are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this instrument to be executed. TCI COMMUNICATIONS, INC. By ------------------------- [Title] Attest: By ------------------------- Name: Title: 18 (FORM OF CERTIFICATE OF AUTHENTICATION) Date: CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By ------------------------- Authorized Signatory (FORM OF REVERSE OF NOTE) This Note is one of a duly authorized series of Securities of the Company designated its "9.65% Subordinated Deferrable Interest Notes due March 31, 2027" (herein sometimes referred to as the "Notes"), issued under and pursuant to an Indenture dated as of January 29, 1996, duly executed and delivered between the Company and The Bank of New York, not in its individual capacity but solely as trustee (the "Trustee"), as supplemented by a Third Supplemental Indenture dated as of March 14, 1997, between the Company and the Trustee (such Indenture as so supplemented, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Notes. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect on the date of the Indenture (the "TIA"). This Note is subject to all such terms and the Holder of this Note is referred to the Indenture and the TIA for a statement of those terms. The Notes are general unsecured obligations of the Company and are limited (except as otherwise provided in the Indenture) to $309,279,000 in aggregate principal amount. Prior to March 31, 2007, upon the occurrence of a Tax Event, this Note may be redeemed, in whole but not in part, by the Company at the Tax Redemption Price which shall be the greater of (i) 100% of the principal amount of the Subordinated Debt Securities or (ii) the sum, as determined by a Quotation Agent, of the present values of the principal amount and premium payable with respect to an optional redemption of the Subordinated Debt Securities on 19 March 31, 2007, together with scheduled payments of interest from the redemption date to and including March 31, 2007, in each case discounted to the redemption date on a quarterly basis (assuming a 360-day year consisting of 30-day months) at the Adjusted Treasury Rate, plus accrued and unpaid interest on the Subordinated Debt Securities to the date fixed for redemption. The Tax Redemption Price shall be paid prior to 12:00 noon, New York City time, on the date of such redemption or at such earlier time as the Company determines. The Company shall also have the right to redeem this Note at the option of the Company, without penalty, in whole or in part at any time on or after March 31, 2007 (an "Optional Redemption"), at the following redemption prices (expressed in percentages of principal amount), plus in each case accrued and unpaid interest thereon to the date of such redemption (the "Optional Redemption Price"), if redeemed during the 12-month period beginning March 31 of the years indicated below: Optional -------- Year Redemption Price ---- ---------------- 2007 ................................ 104.8250% 2008 ................................ 104.3425 2009 ................................ 103.8600 2010 ................................ 103.3775 2011 ................................ 102.8950 2012 ................................ 102.4125 2013 ................................ 101.9300 2014 ................................ 101.4475 2015 ................................ 100.9650 2016 ................................ 100.4825 2017 and thereafter ................. 100.0000 Any Optional Redemption pursuant to this paragraph shall be made upon not less than 30 nor more than 60 days notice to the registered holders of this Note. If the Notes are only partially redeemed by the Company pursuant to an Optional Redemption, the Notes will be redeemed pro rata or by lot or by any other method utilized by the Trustee. If the Notes are only partially redeemed by the Company pursuant to an Optional Redemption, the Notes will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that if at the time of redemption the Notes are registered as a global Note, the depositary shall determine by lot the interest of each of its participants in such global Note to be redeemed. In the event of redemption of this Note in part only, a new Note or Notes of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall 20 become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of a majority in aggregate principal amount of the Securities of each series affected at the time outstanding, as defined in the Indenture, to amend or supplement the Indenture or the Securities of any series (including the Notes) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the Holders of the Securities (including the Notes); provided, however, that no such amendment or supplement shall (i) extend the fixed maturity of any Securities of any series, or reduce the principal amount thereof, or reduce the rate or extend the time for payment of interest thereon, without the consent of the Holder of each Security of such series so affected or (ii) reduce the aforesaid percentage in aggregate principal amount of Securities, the Holders of which are required to consent to any such amendment or supplement, without the consent of the Holders of each Security then outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Securities of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or interest, if any, on any of the Securities of such series. Any such consent or waiver by the registered Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and of any Note issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed. The Company shall have the right at any time during the term of the Notes, and from time to time, to extend the interest payment period of the Notes for up to twenty (20) consecutive quarters (an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Notes to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed twenty (20) consecutive quarters or extend beyond the maturity of the Notes. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and 21 any additional amounts then due, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. As provided in the Indenture and subject to certain limitations therein set forth, this Note is transferable by the registered Holder hereof on the security register of the Company maintained by the Registrar, upon surrender of this Note for registration of transfer at the office or agency of the Trustee in New York, New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any Paying Agent and the Registrar may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Registrar) for the purpose of receiving payment of principal of and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any Paying Agent nor the Registrar shall be affected by any notice to the contrary. No past, present or future director, officer, employee or stockholder, as such, of the Company or the Trustee or any successor of either thereof shall have any liability for any obligations of the Company or the Trustee under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. [The Notes of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof.] [This global Note is exchangeable for Notes in definitive form only under certain limited circumstances set forth in the Indenture. Notes so issued are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof.] As provided in the Indenture and subject to certain limitations therein set forth, Notes so issued are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. This Note shall be governed by the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 22 ARTICLE IX ORIGINAL ISSUE OF NOTES Section 9.1. Original Issue of Notes. Notes in the aggregate principal amount of $309,279,000 may, upon execution of this Third Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes to or upon the written order of the Company, signed by its Chairman, its President, or any Vice President and its Treasurer, an Assistant Treasurer, or Secretary without any further action by the Company. ARTICLE X CERTAIN COVENANTS The following covenants shall apply to the Notes (but not with respect to any other series of Securities), and are in addition to the covenants set forth in Article Four of the Indenture. Section 10.1. Limitation on Dividends and Other Payments. If (i) there shall have occurred any event that constitutes an Event of Default or (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Notes, and (c) the Company shall not make any guarantee payments with respect to the foregoing (other than pursuant to the Capital Securities Guarantee). If the Company shall have given notice of its election to defer payments of interest on the Notes by extending the interest payment period as provided in Article IV and such period, or any extension thereof, shall be continuing, then (i) the Company shall not declare or pay any dividend or, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, (ii) the Company shall not make any payment of interest, principal, premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Notes, and (iii) the Company shall not make any guarantee payments with respect to the foregoing (other than pursuant to the Capital Securities Guarantee). 23 Notwithstanding the foregoing restrictions, nothing in this Section 10.1 shall prevent the Company, in any event, from making dividend, redemption, liquidation or guarantee payments on capital stock, or interest, principal, redemption or guarantee payments on debt securities issued by the Company ranking pari passu with or junior to the Notes, where the payment is made by way of (i) securities (including capital stock) that rank junior to the securities on which such payment is being made or (ii) securities (including capital stock) of Tele-Communications, Inc., a Delaware corporation (or any successor of such corporation). Section 10.2. Covenants as to the Trust. For so long as the Trust Securities remain outstanding, the Company will (i) maintain 100% direct or indirect ownership of the Common Securities; provided, however, that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities, (ii) not cause, as sponsor of the Trust, or permit, as the holder of the Common Securities of the Trust, the termination, dissolution or winding-up of the Trust, except in connection with a distribution of the Notes as provided in the Declaration and in connection with certain mergers, consolidations or amalgamations as permitted by the Declaration, (iii) use its reasonable efforts to cause the Trust (a) to remain a statutory business trust, except in connection with a distribution of Notes to the holders of the Capital Securities in liquidation of the Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (b) to otherwise continue to be treated as a grantor trust for United States federal income tax purposes and (iv) use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an individual beneficial interest in the Notes. ARTICLE XI CERTAIN EVENTS OF DEFAULT Section 11.1. Additional Events of Default. An Event of Default with respect to the Notes shall include those events described in Section 6.01 of the Indenture and, with respect to the Notes only, the occurrence of any of the following events: the voluntary or involuntary dissolution, winding up or termination of the Trust, except in connection with (i) the distribution of Notes to holders of Capital Securities in liquidation or redemption of their interests in the Trust, (ii) the redemption of all of the outstanding Capital Securities, or (iii) certain mergers, consolidations or amalgamations, each as permitted by the provisions of the Declaration. Section 11.2. Waiver of Existing Defaults. Notwithstanding Section 6.04 of the Indenture, the Holders of a majority in aggregate principal amount of the Notes may not waive a Default or an existing Event of Default (i) in the payment of the principal of or accrued interest on the Notes, unless the Company has paid or deposited with the Trustee a sum sufficient to pay all matured installments of interest (with interest on overdue interest at the rate specified in Section 2.5(a)) upon all of the Notes and the principal of the Notes that shall have become due otherwise than by acceleration or (ii) that arise out of a breach by the Company of Section 10.1. 24 Section 6.02 of the Indenture shall, in all other respects and as modified by this Section 11.2, apply to the Notes. ARTICLE XII MISCELLANEOUS Section 12.1. Supplemental Indenture Incorporated Into Indenture. This Third Supplemental Indenture is executed by the Company and the Trustee pursuant to the provisions of Sections 2.01 and 2.02 of the Indenture, and the terms and conditions hereof shall be deemed to be part of the Indenture for all purposes relating to the Notes. The provisions of the Indenture, as modified by this Third Supplemental Indenture, are effective with respect to the Notes, and are not effective with respect to any series of Securities to be issued pursuant to any subsequent supplemental indenture or resolution of the Board of Directors. The Indenture, as supplemented by this Third Supplemental Indenture, is in all respects adopted, ratified and confirmed. Section 12.2. Trustee Not Responsible for Recitals; Disclaimer. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Third Supplemental Indenture. Section 12.3. Governing Law. This Third Supplemental Indenture and each Note shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. Section 12.4. Separability. In case any one or more of the provisions contained in this Third Supplemental Indenture or in the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Third Supplemental Indenture or of the Notes, but this Third Supplemental Indenture and the Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. Section 12.5. Counterparts. This Third Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Section 12.6. Acknowledgment of Rights of Holders of Capital Securities. The Company hereby acknowledges the right of each holder of Capital Securities, upon and during the continuance of an Event of Default under the Declaration that results from the failure of the Company to pay principal of or premium, if any, or interest on the Notes when due, to directly institute proceedings against the Company to obtain payment to such holder of an amount equal to the principal, premium or 25 interest so defaulted on with respect to Notes in a principal amount equal to the aggregate liquidation amount of the Capital Securities owned by such holder. 26 IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, as of the day and year first above written. TCI COMMUNICATIONS, INC. [Seal] By ------------------------------ Name: Title: Attest: ------------------------------ Title: THE BANK OF NEW YORK, as Trustee [Seal] By ------------------------------ Name: Title: Attest: ------------------------------ Title: 27 STATE OF ) COUNTY OF ) ss: On the ___ day of March, 1997 before me personally came ______________, to me known, who, being by me duly sworn, did depose and say that he is the ____________ of TCI COMMUNICATIONS, INC., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. NOTARY PUBLIC [seal] Commission expires STATE OF ) COUNTY OF ) ss: On the ___ day of March, 1997 before me personally came _____________, to me known, who, being by me duly sworn, did depose and say that he is the ____________ of THE BANK OF NEW YORK, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. NOTARY PUBLIC [seal] Commission expires 28 EX-4.2 3 AMENDED & RESTATED DECLARATION OF TRUST EXHIBIT 4.2 ================================================== AMENDED AND RESTATED DECLARATION OF TRUST TCI COMMUNICATIONS FINANCING III Dated as of March __, 1997 ================================================== TABLE OF CONTENTS Page ARTICLE 1 INTERPRETATION AND DEFINITIONS........................1 SECTION 1.1 Definitions.................................1 ARTICLE 2 TRUST INDENTURE ACT...................................7 SECTION 2.1 Trust Indenture Act; Application............7 SECTION 2.2 Lists of Holders of Securities..............8 SECTION 2.3 Reports by the Property Trustee.............8 SECTION 2.4 Periodic Reports to Property Trustee........8 SECTION 2.5 Evidence of Compliance with Conditions Precedent..............................8 SECTION 2.6 Events of Default; Waiver...................9 SECTION 2.7 Event of Default; Notice...................10 ARTICLE 3 ORGANIZATION.........................................11 SECTION 3.1 Name.......................................11 SECTION 3.2 Office.....................................11 SECTION 3.3 Purpose....................................11 SECTION 3.4 Authority..................................11 SECTION 3.5 Title to Property of the Trust.............12 SECTION 3.6 Powers and Duties of the Regular Trustees..12 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees..........................15 SECTION 3.8 Powers and Duties of the Property Trustee..15 SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee..................17 SECTION 3.10 Certain Rights of the Property Trustee.....19 SECTION 3.11 Delaware Trustee...........................21 SECTION 3.12 Execution of Documents.....................21 SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.........................21 SECTION 3.14 Duration of Trust..........................21 SECTION 3.15 Mergers....................................22 ARTICLE 4 SPONSOR..............................................23 SECTION 4.1 Sponsor's Purchase of Common Securities....23 SECTION 4.2 Responsibilities of the Sponsor............23 SECTION 4.3 Expenses...................................24 ARTICLE 5 TRUSTEES.............................................25 SECTION 5.1 Number of Trustees.........................25 SECTION 5.2 Delaware Trustee...........................25 SECTION 5.3 Property Trustee; Eligibility..............25 SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally............26 i SECTION 5.5 Initial Trustees...........................26 SECTION 5.6 Appointment, Removal and Resignation of Trustees..............................27 SECTION 5.7 Vacancies among Trustees...................28 SECTION 5.8 Effect of Vacancies........................28 SECTION 5.9 Meetings...................................29 SECTION 5.10 Delegation of Power........................29 ARTICLE 6 DISTRIBUTIONS........................................30 SECTION 6.1 Distributions..............................30 ARTICLE 7 ISSUANCE OF SECURITIES...............................30 SECTION 7.1 General Provisions Regarding Securities....30 ARTICLE 8 TERMINATION OF TRUST.................................31 SECTION 8.1 Termination of Trust.......................31 ARTICLE 9 TRANSFER OF INTERESTS................................32 SECTION 9.1 Transfer of Securities.....................32 SECTION 9.2 Transfer of Certificates...................32 SECTION 9.3 Deemed Security Holders....................33 SECTION 9.4 Book Entry Interests.......................33 SECTION 9.5 Notices to Clearing Agency.................34 SECTION 9.6 Appointment of Successor Clearing Agency...34 SECTION 9.7 Definitive Capital Security Certificates...34 SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates...................35 ARTICLE 10 LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS..................................35 SECTION 10.1 Liability..................................35 SECTION 10.2 Exculpation................................36 SECTION 10.3 Fiduciary Duty.............................36 SECTION 10.4 Indemnification............................37 SECTION 10.5 Outside Businesses.........................38 ARTICLE 11 ACCOUNTING..........................................38 SECTION 11.1 Fiscal Year................................38 SECTION 11.2 Certain Accounting Matters.................38 SECTION 11.3 Banking....................................39 SECTION 11.4 Withholding................................39 ARTICLE 12 AMENDMENTS AND MEETINGS.............................40 SECTION 12.1 Amendments.................................40 SECTION 12.2 Meetings of the Holders; Action by Written Consent.......................42 ii ARTICLE 13 REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE.....................................43 SECTION 13.1 Representations and Warranties of Property Trustee......................43 SECTION 13.2 Representations and Warranties of Delaware Trustee......................44 ARTICLE 14 MISCELLANEOUS.......................................44 SECTION 14.1 Notices....................................44 SECTION 14.2 Governing Law..............................46 SECTION 14.3 Intention of the Parties...................46 SECTION 14.4 Headings...................................46 SECTION 14.5 Successors and Assigns.....................46 SECTION 14.6 Partial Enforceability.....................46 SECTION 14.7 Counterparts...............................46 ANNEX I TERMS OF SECURITIES.......................I-1 EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE.....A1-1 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE......A2-1 EXHIBIT B SPECIMEN OF SUBORDINATED NOTE.............B-1 EXHIBIT C PURCHASE AGREEMENT........................C-1 iii CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Declaration - ------------------- ----------- 310(a).................................................... 5.3(a) 310(b).................................................... 5.3(c), 5.3(d) 310(c).................................................... Inapplicable 311(a).................................................... 2.2(b) 311(b).................................................... 2.2(b) 311(c).................................................... Inapplicable 312(a).................................................... 2.2(a) 312(b).................................................... 2.2(b) 313....................................................... 2.3 314(a).................................................... 2.4 314(b).................................................... Inapplicable 314(c).................................................... 2.5 314(d).................................................... Inapplicable 314(e).................................................... 1.1, 2.5 314(f).................................................... Inapplicable 315(a).................................................... 3.9(b) 315(c).................................................... 3.9(a) 315(d).................................................... 3.9(b) 316(a).................................................... Annex I 316(c).................................................... 3.6(e) 317(a).................................................... 3.8(d) 317(b).................................................... 3.8(h) - --------------- * This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. iv AMENDED AND RESTATED DECLARATION OF TRUST OF TCI COMMUNICATIONS FINANCING III March __, 1997 DECLARATION OF TRUST ("Declaration"), dated and effective as of March __, 1997, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration. W I T N E S S E T H: ------------------- WHEREAS, the Trustees and the Sponsor established TCI Communications Financing III (the "Trust"), as a business trust under the Delaware Business Trust Act pursuant to a Declaration of Trust dated as of November 21, 1995 (the "Original Declaration") and a Certificate of Trust filed with the Secretary of State of the State of Delaware on November 21, 1995, for the exclusive purposes of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust, investing the proceeds thereof in certain Subordinated Notes of the Subordinated Note Issuer (as defined herein) and engaging in activities necessary or incidental thereto; WHEREAS, as of the date hereof, no interests in the Trust have been issued; and WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration. NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE 1 INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. ----------- Unless the context otherwise requires: (a) capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference in this Declaration to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of --------- the Securities Act or any successor rule thereunder. "Authorized Officer" of a Person means any Person that is authorized ------------------ to bind such Person. "Book Entry Interest" means a beneficial interest in a Global ------------------- Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than a Saturday, a Sunday or any ------------ other day on which banking institutions in New York, New York are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware ------------------ Code, 12 Del. Code (S)3801 et seq., as it may be amended from time to time. ------------ -- --- "Capital Securities Guarantee" means the guarantee agreement, dated as ---------------------------- of March __, 1997, of the Sponsor in respect of the Capital Securities. "Capital Security" has the meaning specified in Section 7.1. ---------------- "Capital Security Beneficial Owner" means, with respect to a Book --------------------------------- Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the 2 Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Capital Security Certificate" means a certificate representing a ---------------------------- Capital Security substantially in the form of Exhibit A-1. "Certificate" means a Common Security Certificate or a Capital ----------- Security Certificate. "Clearing Agency" means an organization registered as a "clearing --------------- agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Capital Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Capital Securities. "Clearing Agency Participant" means a broker, dealer, bank or other --------------------------- financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means March __, 1997. ------------ "Code" means the Internal Revenue Code of 1986 as amended from time to ---- time, or any successor legislation. "Commission" means the Securities and Exchange Commission. ---------- "Common Securities Guarantee" means the guarantee agreement, dated as --------------------------- of March __, 1997, of the Sponsor in respect of the Common Securities. "Common Security" has the meaning specified in Section 7.1. --------------- "Common Security Certificate" means a definitive certificate in fully --------------------------- registered form representing a Common Security substantially in the form of Exhibit A-2. "Covered Person" means: (a) any officer, director, shareholder, -------------- partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Delaware Trustee" has the meaning set forth in Section 5.2. ---------------- "Definitive Capital Security Certificates" has the meaning set forth ---------------------------------------- in Section 9.4. "Direction" by a Person means a written direction signed: --------- 3 (a) if the Person is a natural Person, by that Person; or (b) in any other case, in the name of such Person by one or more Authorized Officers of that Person. "Distribution" means a distribution payable to Holders of Securities ------------ in accordance with Section 6.1. "DTC" means The Depository Trust Company, the initial Clearing Agency. --- "Event of Default" in respect of the Securities means an Event of ---------------- Default (as defined in the Indenture) has occurred and is continuing in respect of the Subordinated Notes. "Exchange Act" means the Securities Exchange Act of 1934, as amended ------------ from time to time, or any successor legislation. "Global Certificate" has the meaning set forth in Section 9.4. ------------------ "Holder" means a Person in whose name a Certificate representing a ------ Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means (a) any Trustee; (b) any Affiliate of any ------------------ Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee; or (d) any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of January 29, 1996, as --------- amended and supplemented by a Third Supplemental Indenture, dated as of March __, 1997 (the "Supplemental Indenture"), among the Subordinated Note Issuer and the Subordinated Note Trustee, and any further indenture supplemental thereto relating to the Subordinated Notes. "Investment Company" means an investment company (as defined in the ------------------ Investment Company Act) that is required to register as such under the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as ---------------------- amended from time to time, or any successor legislation. "Investment Company Event" has the meaning set forth in Annex I ------------------------ hereto. "Legal Action" has the meaning set forth in Section 3.6(g). ------------ "Majority in liquidation amount of the Securities" means, except as ------------------------------------------------ provided in the terms of the Capital Securities and by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital 4 Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Ministerial Action" has the meaning set forth in the terms of the ------------------ Securities as set forth in Annex I. "Officers' Certificate" means, with respect to any Person, a --------------------- certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 3.8(h). ------------ "Person" means a legal person, including any individual, corporation, ------ estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Property Trustee" means the Trustee meeting the eligibility ---------------- requirements set forth in Section 5.3. "Property Trustee Account" has the meaning set forth in Section ------------------------ 3.8(c). "Purchase Agreement" means the Purchase Agreement among the Trust, the ------------------ Subordinated Note Issuer and the underwriters designated by the Regular Trustees with respect to the offer and sale of the Capital Securities. 5 "Quorum" means a majority of the Regular Trustees or, if there are ------ only two Regular Trustees, both of them. "Regular Trustee" means any Trustee other than the Property Trustee --------------- and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or ------------- indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any ------------------- vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer in the corporate trust department of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-7" means Rule 3a-7 under the Investment Company Act. --------- "Securities" means the Common Securities and the Capital Securities. ---------- "Securities Act" means the Securities Act of 1933, as amended from -------------- time to time, or any successor legislation. "Securities Guarantees" means the Capital Securities Guarantee and the --------------------- Common Securities Guarantee. "Special Event" has the meaning set forth in Annex I hereto. ------------- "Sponsor" means TCI Communications, Inc., a Delaware corporation, or ------- any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Subordinated Note Issuer" means the Sponsor in its capacity as issuer ------------------------ of the Subordinated Notes. "Subordinated Note Trustee" means The Bank of New York, as trustee ------------------------- under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Subordinated Notes" means the __% Subordinated Deferrable Interest ------------------ Notes Due March 31, 2027 to be issued by the Subordinated Note Issuer under the Indenture and held by the Property Trustee. A specimen certificate representing a Subordinated Note is attached hereto as 6 Exhibit B. The Subordinated Notes will be subordinate and junior in right of payment to certain other indebtedness of the Subordinated Note Issuer as set forth in the Indenture. "Super Majority" has the meaning set forth in Section 2.6(a)(ii). -------------- "Supplemental Indenture" has the meaning ascribed thereto in the ---------------------- definition of "Indenture." "Tax Event" has the meaning set forth in Annex I hereto. --------- "10% in liquidation amount of the Securities" means, except as ------------------------------------------- provided in the terms of the Capital Securities or by the Trust Indenture Act, Holders of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities, voting separately as a class, representing 10% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Treasury Regulations" means the income tax regulations, including -------------------- temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this ------- -------- Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as ------------------- amended to the date hereof. ARTICLE 2 TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. -------------------------------- (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee that is a Trustee for the purposes of the Trust Indenture Act. 7 (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by (S)(S) 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. ------------------------------ (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that neither the ------------- Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request therefor, a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity of Paying Agent (if acting in such capacity); provided that the Property Trustee may destroy any ------------- List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under (S)(S) 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. ------------------------------- Within 60 days after May 15 of each year or at such other time as required under (S) 313(b) of the Trust Indenture Act, the Property Trustee shall provide to the Holders of the Capital Securities such reports as are required by (S) 313 of the Trust Indenture Act, if any, in the form and in the manner provided by (S) 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of (S) 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. ------------------------------------ Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by (S) 314 of the Trust Indenture Act (if any) and the compliance certificate required by (S) 314 of the Trust Indenture Act in the form, in the manner and at the times required by (S) 314 of the Trust Indenture Act. 8 SECTION 2.5 Evidence of Compliance with Conditions Precedent. ------------------------------------------------ Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in (S) 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to (S) 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. ------------------------- (a) The Holders of a Majority in liquidation amount of Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default in respect of the Capital Securities and its consequences, provided that, if the underlying Event of Default under -------- ---- the Indenture: (i) is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in principal amount of the holders of the Subordinated Notes (a "Super Majority") to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Capital Securities outstanding that the relevant Super Majority represents of the aggregate principal amount of the Subordinated Notes outstanding. The foregoing provisions of this Section 2.6(a) shall be in lieu of (S) 316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Capital Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Capital Securities or impair any right consequent thereon. Any waiver by the Holders of the Capital Securities of an Event of Default with respect to the Capital Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Event of ------------- Default under the Indenture: 9 (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Common Securities outstanding that the relevant Super Majority represents of the aggregate principal amount of the Subordinated Notes outstanding; provided further, each Holder of Common Securities will be deemed to have waived - -------- ------- any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Capital Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Capital Securities and only the Holders of the Capital Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Capital Securities constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of (S) 316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7 Event of Default; Notice. ------------------------ (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); 10 provided that, except for a default in the payment of principal of (or premium, - ------------- if any) or interest on any of the Subordinated Notes, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 6.01(a) and 6.01(b) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice. ARTICLE 3 ORGANIZATION SECTION 3.1 Name. ---- The Trust is named "TCI Communications Financing III," as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of the Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. ------ The address of the principal office of the Trust is c/o TCI Communications, Inc., Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000. On ten Business Days written notice to the Holders of the Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. ------- The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities and use the proceeds from such sale to purchase and hold the Subordinated Notes and the Capital Securities Guarantee, and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. 11 SECTION 3.4 Authority. --------- Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. ------------------------------ Except as provided in Section 3.8 with respect to the Subordinated Notes and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Regular Trustees. ----------------------------------------- The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Capital Securities and the Common Securities in accordance with this Declaration; provided, however, that the -------- ------- Trust may issue no more than one series of Capital Securities and no more than one series of Common Securities, and, provided further, that there shall be no -------- ------- interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a one-time, simultaneous issuance of both Capital Securities and Common Securities on the Closing Date; (b) in connection with the issue and sale of the Capital Securities, at the direction of the Sponsor, to: (i) execute and file with the Commission the registration statement on Form S-3 prepared by the Sponsor, including any amendments thereto, pertaining to the Capital Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Capital Securities in any State in which the Sponsor has determined to qualify or register such Capital Securities for sale; 12 (iii) , to the extent the Sponsor deems it advisable, execute and file an application, prepared by the Sponsor, to any national securities exchange or with The Nasdaq Stock Market for listing upon notice of issuance of any Capital Securities; (iv) , to the extent the Sponsor deems it necessary or advisable, execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor, relating to the registration of the Capital Securities under Section 12(b) of the Exchange Act; and (v) execute and enter into the Purchase Agreement providing for the sale of the Capital Securities; (c) to acquire the Subordinated Notes and the Capital Securities Guarantee with the proceeds of the sale of the Capital Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title -------- ------- to the Subordinated Notes to be held of record in the name of the Property Trustee for the benefit of the Holders of the Capital Securities and the Holders of the Common Securities; (d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees -------- ---- shall consult with the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of (S)316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; 13 (j) to give the certificate required by (S) 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Subordinated Note Issuer of its election to defer payments of interest on the Subordinated Notes by extending the interest payment period under the Indenture; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Capital Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company; (ii) causing the Trust to be classified for United States federal income tax purposes as a grantor trust; and (iii) cooperating with the Subordinated Note Issuer to ensure that the Subordinated Notes will be treated as indebtedness of the Subordinated Note Issuer for United States federal income tax purposes, provided that such action does not adversely affect the interests of -------- ---- Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. 14 The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. ---------------------------------------------------- (a) The Trust shall not, and the Trustees (including the Property Trustee) shall not, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Subordinated Notes or the Capital Securities Guarantee, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Subordinated Notes; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) other than as provided in this Declaration, (A) direct the time, method and place of exercising any trust or power conferred upon the Subordinated Note Trustee with respect to the Subordinated Notes, (B) waive any past default that is waivable under Section 6.04 of the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Subordinated Notes shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Subordinated Notes where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such amendment or modification will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will not be classified as a grantor trust. 15 SECTION 3.8 Powers and Duties of the Property Trustee. ----------------------------------------- (a) The legal title to the Subordinated Notes shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Subordinated Notes shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting (and cessation as to the resigning Property Trustee) of title shall be effective whether or not conveyancing documents with regard to the Subordinated Notes have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Subordinated Notes to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Subordinated Notes held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments to the Holders of the Capital Securities and Holders of the Common Securities from the Property Trustee Account in accordance with Section 6.1. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Trustee Account shall be an account that is maintained with a banking institution the rating on whose long-term unsecured indebtedness is at least equal to the rating assigned to the Capital Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Capital Securities and the Common Securities to the extent the Subordinated Notes are redeemed or mature; and (iii) upon notice of distribution issued by the Regular Trustees in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Subordinated Notes to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities. 16 (e) The Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act. (f) The Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6. (g) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Subordinated Notes under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Subordinated Notes subject to the rights of the Holders pursuant to the terms of such Securities. (h) The Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities and any such Paying Agent shall comply with (S) 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee. (i) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. ----------------------------------------------------------- (a) The Property Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 17 (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Subordinated Notes and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar 18 property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration, the Trust Indenture Act and Rule 3a-7; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Subordinated Notes or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for the default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10 Certain Rights of the Property Trustee. -------------------------------------- (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof; 19 (v) the Property Trustee may consult with counsel or other experts of its selection and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of the Sponsor's or its Affiliates' employees; and the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee adequate security and indemnity, which would satisfy a reasonable person in the position of the Property Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders of the Securities which instructions may only be given by the Holders of the same 20 proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. ---------------- Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of (S) 3807 of the Business Trust Act. SECTION 3.12 Execution of Documents. ---------------------- Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act, a majority of or, if there are only two, any Regular Trustee or, if there is only one, such Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.6; provided that, the registration statement referred to in Section 3.6(b)(i), - -------- ---- including any amendments thereto, shall be signed by all of the Regular Trustees. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------ The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. 21 SECTION 3.14 Duration of Trust. ----------------- The Trust, unless terminated pursuant to the provisions of Article 8 hereof, shall have existence for fifty-five (55) years from the Closing Date. SECTION 3.15 Mergers. ------- (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c). (b) The Trust may, with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees and without the consent of the Holders, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided that: -------- ---- (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Capital Securities rank with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) the Subordinated Note Issuer expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee as the Holder of the Subordinated Notes; (iii) , if the Capital Securities or any Successor Securities are at such time listed on any national securities exchange or with The Nasdaq Stock Market, the Capital Securities or any Successor Securities shall be listed or will be listed, upon notification of issuance, on such national securities exchange or with The Nasdaq Stock Market, as the case may be; (iv) such merger, consolidation, amalgamation or replacement does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any 22 dilution of such Holders' interests in the Capital Securities as a result of such merger, consolidation, amalgamation or replacement); (vi) such Successor Entity has a purpose identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Capital Securities Guarantee. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. ARTICLE 4 SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. --------------------------------------- On the Closing Date the Sponsor will purchase all of the Common Securities issued by the Trust, in an amount equal to at least 3% of the capital of the Trust, at the same time as the Capital Securities are sold. SECTION 4.2 Responsibilities of the Sponsor. ------------------------------- In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: 23 (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Capital Securities, including any amendments thereto; (b) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (c) , if the Sponsor deems it advisable to list the Capital Securities on a national securities exchange or with The Nasdaq Stock Market, to prepare for filing by the Trust an application to such national securities exchange or with The Nasdaq Stock Market for listing upon notice of issuance of any Capital Securities; (d) , if the Sponsor deems it necessary or advisable, to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Capital Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Purchase Agreement providing for the sale of the Capital Securities. SECTION 4.3 Expenses. -------- (a) The Sponsor shall be responsible for and shall pay for all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the issuance and sale of the Capital Securities, the fees and expenses (including reasonable counsel fees and expenses) of the Trustees, the costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agent(s), registrar(s), transfer agent(s), duplication, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the disposition of Trust assets). (b) The Sponsor will pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. (c) The Sponsor's obligations under this Section 4.3 shall be for the benefit of, and shall be enforceable by, the Property Trustee and any Person to whom any such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor 24 has received notice hereof. The Property Trustee and any such Creditor may enforce the Sponsor's obligations under this Section 4.3 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that the Property Trustee or any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 4.3. ARTICLE 5 TRUSTEES SECTION 5.1 Number of Trustees. ------------------ The number of Trustees initially shall be five (5), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities, provided that, if the Property Trustee does not also act as Delaware Trustee, - -------- ---- the number of Trustees shall be at least three (3). SECTION 5.2 Delaware Trustee. ---------------- If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that, if the Property Trustee has its principal place of business in - -------- ---- the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. The Delaware Trustee may be an Affiliate of the Property Trustee. SECTION 5.3 Property Trustee; Eligibility. ----------------------------- (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: 25 (i) not be an Affiliate of the Sponsor; (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and (iii) if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7 and to the extent Rule 3a-7 requires a trustee having certain qualifications to hold title to the "eligible assets" of the Trust, the Property Trustee shall possess those qualifications. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of (S) 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in (S) 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of (S) 310(b) of the Trust Indenture Act. (d) The Capital Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in (S) 310(b) of the Trust Indenture Act. SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally. ----------------------------------------------------------------- Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5 Initial Trustees. ---------------- The initial Regular Trustees shall be: Bernard W. Schotters 26 Stephen M. Brett Gary K. Bracken The initial Delaware Trustee shall be: The Bank of New York (Delaware) The initial Property Trustee shall be: The Bank of New York SECTION 5.6 Appointment, Removal and Resignation of Trustees. ------------------------------------------------ (a) Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities or by unanimous written consent. (b)(i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, -------- ------- that: (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective: 27 (A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) if the Trust is deemed not to be an Investment Company solely by reason of Rule 3a-7, until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery of an instrument of resignation or removal, the Property Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. SECTIOIN 5.7 Vacancies among Trustees. ------------------------ If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 Effect of Vacancies. ------------------- The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, 28 regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9 Meetings. -------- If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before such meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee. SECTION 5.10 Delegation of Power. ------------------- (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) The Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. 29 ARTICLE 6 DISTRIBUTIONS SECTION 6.1 Distributions. ------------- Holders shall receive Distributions (as defined herein) in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Capital Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Subordinated Note Issuer makes a payment of interest (including Additional Interest (as defined in the Indenture)), premium and/or principal on the Subordinated Notes held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE 7 ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. --------------------------------------- (a) The Regular Trustees shall on behalf of the Trust issue one class of preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Capital Securities") and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Common Securities.") The Trust shall not issue any securities or other interests in respect of the assets of the Trust other than the Capital Securities and the Common Securities. (b) The Certificates shall be signed on behalf of the Trust by two Regular Trustees. Such signature shall be the manual or facsimile signature of any present or any future Regular Trustee. In case any Regular Trustee of the Trust who shall have signed any of the Certificates shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Certificate, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. 30 (c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. (e) Every Person, by virtue of having become a Holder or a Capital Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. (f) Every Person who becomes a Holder or a Capital Security Beneficial Owner shall be deemed to have agreed to treat the Subordinated Notes as indebtedness for United States federal income tax purposes and the Capital Securities as evidence of an indirect beneficial ownership in the Subordinated Notes. ARTICLE 8 TERMINATION OF TRUST SECTION 8.1 Termination of Trust. -------------------- (a) The Trust shall terminate: (i) upon the bankruptcy of the Holder of the Common Securities or the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Common Securities or the Sponsor; the filing of a certificate of cancellation with respect to the Trust or the revocation of the Holder of the Common Securities or the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Subordinated Notes in accordance with the terms thereof shall have been distributed to the Holders of Securities in exchange for all of the Securities; or 31 (vi) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. (c) The provisions of Section 3.9 and Article 10 shall survive the termination of the Trust. ARTICLE 9 TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. ---------------------- (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration and these Securities shall be null and void. (b) Subject to this Article 9, Capital Securities shall be freely transferable. (c) Subject to this Article 9, (x) the Sponsor may only transfer Common Securities to a Related Party and (y) a Related Party may only transfer Common Securities to the Sponsor or another Related Party; provided that, any -------- ---- such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would no longer be classified for United States federal income tax purposes as a grantor trust; or (ii) the Trust would become an Investment Company or the transferee would become an Investment Company. SECTION 9.2 Transfer of Certificates. ------------------------ The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be 32 accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration and the terms of the Securities represented by such Certificate. SECTION 9.3 Deemed Security Holders. ----------------------- The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4 Book Entry Interests. -------------------- Unless otherwise specified in the terms of the Capital Securities, the Capital Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Capital Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Capital Security Beneficial Owner will receive a definitive Capital Security Certificate representing such Capital Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.7. Unless and until definitive, fully registered Capital Security Certificates (the "Definitive Capital Security Certificates") have been issued to the Capital Security Beneficial Owners pursuant to Section 9.7: (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Capital Securities and the sole holder of the Global Certificates and shall have no obligation to the Capital Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Capital Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements 33 between such Capital Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants. The Clearing Agency will make book entry transfers among the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. -------------------------- Whenever a notice or other communication to the Capital Security Holders is required under this Declaration, unless and until Definitive Capital Security Certificates shall have been issued to the Capital Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all such notices and communications specified herein to be given to the Capital Security Holders to the Clearing Agency, and shall have no notice obligations to the Capital Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency. ---------------------------------------- If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Capital Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to the Capital Securities. SECTION 9.7 Definitive Capital Security Certificates. ---------------------------------------- If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Capital Securities and a successor Clearing Agency is not appointed within 90 days after such election pursuant to Section 9.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Capital Securities, then: (c) Definitive Capital Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to the Capital Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Capital Security Certificates to be delivered to Capital Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, said instructions of the Clearing Agency. The Definitive Capital Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably 34 acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Capital Securities may be listed, or to conform to usage. SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. ------------------------------------------------- If: (a) any mutilated Certificate should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless, then, in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE 10 LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability. --------- (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders, which shall be made solely from assets of the Trust; or (ii) required to pay to the Trust or to any Holder any deficit upon dissolution of the Trust or otherwise. 35 (b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders of the Capital Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2 Exculpation. ----------- (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 10.3 Fiduciary Duty. -------------- (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between any Covered Persons; or 36 (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provide terms that are, fair and reasonable to the Trust or any Holder, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. --------------- (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees and expenses) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding (whether such claim, demand, action, suit or proceeding arises between the parties hereto or results from suits involving third parties) shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt 37 by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). The indemnification shall survive the termination of this Declaration. SECTIONI 10.5 Outside Businesses. ------------------ Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE 11 ACCOUNTING SECTION 11.1 Fiscal Year. ----------- The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. -------------------------- (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents which shall reflect, in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees. 38 (b) The Regular Trustees shall cause to be prepared and delivered to each of the Holders, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss. (c) The Regular Trustees shall cause to be duly prepared and delivered to each Holder, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by such Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. ------- The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in -------- ------- respect of the Subordinated Notes held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that -------- ------- the Property Trustee shall designate the signatories for the Property Trustee Account. SECTION 11.4 Withholding. ----------- The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustee shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to such Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to such Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. 39 ARTICLE 12 AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. ---------- (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by: (i) the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees); (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee. (b) No amendment shall be made, and any purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (iii) to the extent the result of such amendment would be to: (A) cause the trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust; 40 (B) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or (C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act. (c) If the Trust has any Securities outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder of such Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities. (d) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities. (e) Article 4 shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities. (f) The rights of the holders of the Common Securities under Article 5 to increase or decrease the number of, and appoint and remove, Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities. (g) Notwithstanding Section 12.1(c), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; (iv) in the event the Trust is deemed not to be an Investment Company solely by reason of Rule 3a-7, conform to any change in Rule 3a-7 or written change in interpretation or application of Rule 3a-7 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders; and (v) cause the Trust to continue to be classified for purposes of United States federal income taxation as a grantor trust; provided, such -------- amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders. 41 SECTION 12.2 Meetings of the Holders; Action by Written Consent. -------------------------------------------------- (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders calling a meeting shall specify in writing the Security Certificates held by the Holders exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of any class of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of Holders is permitted or required under this Declaration or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of such Holders. Any action that may be taken at a meeting of Holders may be taken without a meeting if a consent in writing setting forth the action so taken is signed by Holders owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written consent submitted to Holders for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder may authorize any Person to act for it by proxy on all matters in which such Holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders were stockholders of a Delaware corporation; 42 (iii) each meeting of Holders shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Capital Securities are then listed or trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE 13 REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. -------------------------------------------------- The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the successor Property Trustee's acceptance of its appointment as Property Trustee, that: (a) the Property Trustee is a banking corporation or association with trust powers, duly organized, validly existing and in good standing under the laws of a state of the United States or of the United States, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) the execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the charter or by-laws of the Property Trustee; and 43 (d) no consent, approval or authorization of, or registration with or notice to, any State or federal banking authority is required for the execution, delivery or performance by the Property Trustee of the Declaration. SECTION 13.2 Representations and Warranties of Delaware Trustee. -------------------------------------------------- The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee, that: (a) the Delaware Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) no consent, approval or authorization of, or registration with or notice to, any State or Federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of the Declaration; and (d) the Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. ARTICLE 14 MISCELLANEOUS SECTION 14.1 Notices. ------- All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: 44 (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders): TCI Communications Financing III c/o TCI Communications, Inc. Terrace Tower II 5619 DTC Parkway Englewood, Colorado 80111-3000 Attention: Stephen M. Brett (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Holders): The Bank of New York (Delaware) 400 White Clay Center, Route 273 Newark, Delaware 19711 Attention: Corporate Trust Department (c) if given to the Property Trustee, at the mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders): The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attention: Corporate Trust Trustee Administration (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Trust): TCI Communications, Inc. Terrace Tower II 5619 DTC Parkway Englewood, Colorado 80111-3000 Attention: Chief Financial Officer (e) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of 45 which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 Governing Law. ------------- This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 14.3 Intention of the Parties. ------------------------ It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. -------- Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns. ---------------------- Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. ---------------------- If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. ------------ This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 46 IN WITNESS WHEREOF, the undersigned has caused this Declaration to be executed as of the day and year first above written. Bernard W. Schotters, as Regular Trustee --------------------------------------------- Stephen M. Brett, as Regular Trustee --------------------------------------------- Gary K. Bracken, as Regular Trustee --------------------------------------------- THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee By: ------------------------------------------ Name: Title: 47 THE BANK OF NEW YORK, as Property Trustee By: ------------------------------------------ Name: Title: TCI COMMUNICATIONS, INC., as Sponsor By: ------------------------------------------ Name: Title: 48 ANNEX I TERMS OF ___% CAPITAL SECURITIES ___% COMMON SECURITIES Further to Section 7.1 of the Declaration of Trust, dated as of March __, 1997 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below): 1. Designation and Amount. ---------------------- (a) Capital Securities. Three Hundred Thousand (300,000) preferred ------------------ securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of Three Hundred Million dollars ($300,000,000) and a liquidation amount with respect to the assets of the Trust of $1,000 per preferred security, are hereby designated for the purposes of identification only as "_____% Capital Securities" (the "Capital Securities"). The Capital Security Certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Capital Securities are listed. (b) Common Securities. Nine Thousand Two-Hundred Seventy-Nine (9,279) ----------------- common securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of Nine Million Two-Hundred Seventy-Nine Thousand dollars ($9,279,000) and a liquidation amount with respect to the assets of the Trust of $1,000 per common security, are hereby designated for the purposes of identification only as "______% Common Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. ------------- (a) Distributions payable on each Security will be fixed at a rate per annum of ______% (the "Coupon Rate") of the liquidation amount of $1,000 per Security, such rate being the rate of interest payable on the Subordinated Notes to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used I-1 herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Subordinated Notes held by the Property Trustee and to the extent the Property Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 90-day quarter. (b) Distributions on the Securities will be cumulative, will accrue from the date of original issuance, and will be payable quarterly in arrears, on March 31, June 30, September 30, and December 31 of each year, commencing on June 30, 1997, except as otherwise described below. The Subordinated Note Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Subordinated Notes for a period not exceeding 20 consecutive quarters (each an "Extension Period"), provided -------- that no Extension Period shall last beyond the date of maturity of the - ---- Subordinated Notes. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Subordinated Note Issuer may further extend such Extension Period; provided that such Extension Period -------- ---- together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or last beyond the date of maturity of the Subordinated Notes. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date for the payment of Distributions after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Subordinated Note Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Capital Securities remain in book-entry only form, the relevant record dates shall be one Business Day prior to the relevant payment dates which payment dates correspond to the interest payment dates on the Subordinated Notes. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Capital Securities will be made as described under the heading "Description of the Capital Securities -- Book-Entry Only Issuance -- The Depository Trust Company" in the Prospectus Supplement dated March __, 1997 (the "Prospectus Supplement"), to the Prospectus, dated January 21, 1997 (the "Base Prospectus," and collectively with the Prospectus Supplement, the "Prospectus"), included in the Registration Statement on Form S-3 of the Sponsor (in its capacity as the Subordinated Note Issuer and the issuer of the Capital Securities Guarantee) and the Trust (Reg. No. 333-16985). The relevant record dates for the Common Securities shall be the same record dates as for the Capital Securities. If the Capital Securities shall not continue to remain in book-entry only form, the relevant record dates for the Capital Securities shall conform to the rules of any securities exchange on which such securities are listed and, if none, shall be selected by the Regular Trustees, which dates shall be at least one I-2 Business Day but less than 60 Business Days before the relevant payment dates, which payment dates correspond to the interest payment dates on the Subordinated Notes. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Subordinated Note Issuer having failed to make a payment under the Subordinated Notes, will cease to be payable to the Person in whose name such Securities are registered on the relevant regular record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture for the making of such payment. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. Liquidation Distribution Upon Dissolution. ----------------------------------------- In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders on the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders after satisfaction of liabilities of creditors an amount equal to the aggregate of the liquidation amount of $1,000 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Subordinated Notes in an aggregate principal amount equal to the aggregate liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. Redemption and Distribution. --------------------------- (a) Upon the repayment of the Subordinated Notes in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or payment shall be simultaneously applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Notes so repaid or redeemed at the Redemption I-3 Price (as defined below) payable in cash. In the case of a redemption of the Subordinated Notes pursuant to Section 3.1 of the Supplemental Indenture, the "Redemption Price" shall be a redemption price equal to the Tax Event Redemption Price (as such term is defined in Section 3.1 of the Supplemental Indenture). In the case of a redemption of the Subordinated Notes pursuant to Section 3.2 of the Supplemental Indenture, the "Redemption Price" shall be a redemption price equal to the Optional Redemption Price (as such term is defined in Section 3.2 of the Supplemental Indenture). Holders will be given not less than 30 nor more than 60 days notice of such redemption. In the case of a redemption of the Subordinated Notes at maturity, the "Redemption Price" shall be $1,000 per Security plus accrued and unpaid Distributions thereon to and including March 31, 2027. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities will be redeemed Pro Rata and the procedure for redeeming Capital Securities will be as described in Section 4(f)(ii) below. (c) If, at any time, a Tax Event or an Investment Company Event (each as defined below, and each a "Special Event") shall occur and be continuing, the Regular Trustees shall, except as otherwise described in this Section 4(c) and unless the Subordinated Note Issuer redeems all of the Subordinated Notes pursuant to Section 3.2 of the Supplemental Indenture, dissolve the Trust and, after satisfaction of creditors, cause Subordinated Notes held by the Property Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on, and having the same record date for payment, as the Securities, to be distributed to the Holders in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90 Day Period"); provided, however, that, if at the time -------- ------- there is available to the Trust the opportunity to eliminate, within the 90 Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Subordinated Note Issuer, the Sponsor or the Holders ("Ministerial Action"), the Trust will pursue such Ministerial Action in lieu of dissolution. In the event of a Tax Event prior to March 31, 2007, the Subordinated Note Issuer shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Subordinated Notes in whole but not in part for cash within 90 days following the occurrence of such Tax Event, and, following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Notes so redeemed shall be redeemed by the Trust at a redemption price equal to the Tax Event Redemption Price; provided, however, that, if at the time there is available to the Trust -------- ------- the opportunity to eliminate, within such 90 day period, the Special Event by taking some Ministerial Action, the Trust or the Subordinated Note Issuer will pursue such Ministerial Action in lieu of redemption. In the event of a Tax Event on or after March 31, 2007, the Subordinated Note Issuer shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Subordinated Notes in whole or in part for cash pursuant to Section 3.2 of the Supplemental Indenture and, following such redemption, Securities shall be redeemed by the Trust in accordance with Section 4(a) above. "Tax Event" means that the Regular Trustees shall have received an opinion from independent tax counsel experienced in such matters to the effect that, on or after the date of the Prospectus Supplement, as a result of (a) any amendment to, or change (including any announced I-4 prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority, in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, on or after the date of the Prospectus Supplement, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Subordinated Notes, (ii) interest payable by the Subordinated Note Issuer to the Trust on the Subordinated Notes is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Subordinated Note Issuer for United States federal income tax purposes, or (iii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges. "Investment Company Event" means that the Regular Trustees shall have received an opinion from independent counsel experienced in practice under the Investment Company Act that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is a more than an insubstantial risk that the Trust is or will be considered an Investment Company which is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of the Prospectus Supplement. On and from the date fixed by the Regular Trustees for any distribution of Subordinated Notes and dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding and (ii) DTC (the "Depository") or its nominee (or any successor Clearing Agency or its nominee), as the record Holder of the Capital Securities, will receive a registered global certificate or certificates representing the Subordinated Notes to be delivered upon such distribution and any certificates representing Securities, except for certificates representing Capital Securities held by the Depository or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent beneficial interests in the Subordinated Notes having an aggregate principal amount equal to the aggregate liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on such Securities until such certificates are surrendered or presented to the Subordinated Note Issuer or its agent for transfer or reissue. (d) The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) If the Subordinated Notes are distributed to holders of the Securities pursuant to the terms of the Indenture and if the Capital Securities are at such time listed on any national securities exchange or with The Nasdaq Stock Market, the Subordinated Note Issuer will use I-5 its best efforts to have the Subordinated Notes listed on such national securities exchange or with the Nasdaq Stock Market as the Capital Securities were listed immediately prior to the distribution of the Subordinated Notes. (f) The following provisions shall apply to any call for redemption of Securities or any distribution of Subordinated Notes to Holders: (i) Notice of any redemption of, or notice of distribution of Subordinated Notes in exchange for, Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Subordinated Notes. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders. Each Redemption/Distribution Notice shall be addressed to each Holder at the address of such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Capital Securities, it being understood that, in respect of Capital Securities registered in the name of and held of record by the Depository or its nominee (or any successor Clearing Agency or its nominee), the distribution of the proceeds of such redemption will be made to each Clearing Agency Participant (or Person on whose behalf such Clearing Agency or nominee holds such securities) in accordance with the procedures applied by such agency or nominee. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Subordinated Notes are redeemed as set out in this Section 4 (which notice will be irrevocable), then (A) while the Capital Securities are in book- entry only form, with respect to the Capital Securities, by 12:00 noon, New York City time, on the redemption date, the Property Trustee will deposit irrevocably with the Depository or its nominee (or successor Clearing Agency or its nominee) immediately available funds sufficient to pay the applicable Redemption Price with respect to the Capital Securities and will give the Depository irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities, provided that -------- the Subordinated Note Issuer has deposited with the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Subordinated Notes prior to such time, and (B) with respect to Capital Securities issued in definitive form and Common Securities, the Property Trustee will pay the relevant Redemption Price to the Holders of such Securities I-6 by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date, provided that the Subordinated Note Issuer has deposited with the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Subordinated Notes, prior to such mailing. If a Redemption/Distribution Notice shall have been given and funds deposited with the Property Trustee on or before the redemption date as required, then immediately prior to the close of business on the redemption date Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid on the redemption date either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accrue from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Capital Securities, the Depository or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Capital Security Certificates have been issued, to the Holders thereof at their addresses appearing on the books and records of the Trust, and (B) in respect of the Common Securities, to the Holder thereof. (v) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), provided the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement. 5. Voting Rights - Capital Securities. ---------------------------------- (a) Except as provided under Sections 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. I-7 (b) Subject to the requirements set forth in this paragraph, the Holders of a Majority in liquidation amount of the Capital Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Subordinated Note Trustee, or exercising any trust or power conferred on the Subordinated Note Trustee with respect to the Subordinated Notes, (ii) waive any past default and its consequences that is waivable under Section 6.04 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Notes shall be due and payable, provided, however, that, where a consent under the -------- ------- Indenture would require the consent or act of the Holders of greater than a majority in principal amount of Subordinated Notes affected thereby (a "Super Majority"), the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation amount of the Capital Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Subordinated Notes outstanding. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Subordinated Note Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Capital Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Capital Securities may institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration without first instituting a legal proceeding against the Property Trustee or any other Person. If an Event of Default occurs that results from the failure of the Subordinated Note Issuer to pay principal of or interest on the Subordinated Notes when due, then during the continuance of such Event of Default each Holder of Capital Securities may directly institute proceedings against the Subordinated Note Issuer to obtain payment to such Holder of an amount equal to the principal or interest so defaulted on with respect to Subordinated Notes in a principal amount equal to the aggregate liquidation amount of the Capital Securities owned by such Holder. No Holder of Capital Securities will be entitled to exercise directly against the Subordinated Note Issuer any other remedy available to the Property Trustee, as the record holder of the Subordinated Notes, unless the Property Trustee first fails to exercise such remedy. Any approval or direction of Holders of Capital Securities may be given at a separate meeting of Holders of Capital Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Capital Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. I-8 No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Subordinated Notes in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. Voting Rights - Common Securities. --------------------------------- (a) Except as provided under Sections 6(b), (c) and 7 or as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article 5 of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.6 of the Declaration and only after all Events of Default with respect to the Capital Securities have been cured, waived, or otherwise eliminated and subject to the requirements of the penultimate sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Subordinated Note Trustee, or exercising any trust or power conferred on the Subordinated Note Trustee with respect to the Subordinated Notes, (ii) waive any past default and its consequences that is waivable under Section 6.04 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Notes shall be due and payable, provided -------- that, where a consent or action under the Indenture would require the consent or - ---- act of the Holders of a Super Majority, the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation amount of the Common Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Subordinated Notes outstanding. Notwithstanding any vote pursuant to this Section 6(c), the Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Subordinated Note Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Common Securities may institute a legal proceeding directly against any Person to enforce the Property Trustee's rights I-9 under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Subordinated Notes in accordance with the Declaration and the terms of the Securities. 7. Amendments to Declaration and Indenture. --------------------------------------- (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than under the circumstances described in Section 8.1 of the Declaration, then the Holders of outstanding Securities will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities, voting together as a single class; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Capital Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities. (b) In the event the consent of the Property Trustee as the holder of the Subordinated Notes is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Subordinated Notes, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require -------- ------- the consent of the holders of a Super Majority, the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority I-10 represents of the aggregate principal amount of the Subordinated Notes outstanding; provided, further, that the Property Trustee shall not take any -------- ------- action in accordance with the directions of the Holders of the Securities under this Section 7(b) unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. 8. Pro Rata. -------- A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Declaration in respect of the Capital Securities has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities pro rata according to the aggregate liquidation amount of Capital Securities held by the relevant Holder relative to the aggregate liquidation amount of all Capital Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Capital Securities, then to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 9. Ranking. ------- The Capital Securities rank pari passu, and payment thereon shall be ---- ----- made Pro Rata, with the Common Securities except that, where an Event of Default occurs and is continuing under the Indenture in respect of the Subordinated Notes held by the Property Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Capital Securities. 10. Agreement of Holders and Capital Security Beneficial Owners. ----------------------------------------------------------- Every Person who becomes a Holder or a Capital Security Beneficial Owner shall be deemed to have agreed to treat the Subordinated Notes as indebtedness for United States federal income tax purposes and the Capital Securities as evidence of an indirect beneficial ownership in the Subordinated Notes. 11. Acceptance of Securities Guarantee and Indenture. ------------------------------------------------ Each Holder of Capital Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Capital Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. I-11 12. No Preemptive Rights. -------------------- The Holders of the Securities shall have no preemptive rights to subscribe for any additional securities. 13. Miscellaneous. ------------- These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee or the Common Securities Guarantee (as may be appropriate) and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. I-12 EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE [IF THE CAPITAL SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT -This Capital Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Capital Security is exchangeable for Capital Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Capital Security (other than a transfer of this Capital Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Capital Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Capital Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Capital Securities CUSIP NO. 87228T AA7 Certificate Evidencing Capital Securities of TCI Communications Financing III ____% Capital Securities (liquidation amount $1,000 per Capital Security) TCI Communications Financing III, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ______________ (the "Holder") is the registered owner of ______________________ capital securities of the Trust having an aggregate liquidation amount of $________ and representing a preferred undivided beneficial interest in the A1-1 assets of the Trust designated the _____% Capital Securities (liquidation amount $1,000 per Capital Security) (the "Capital Securities"). The Capital Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities are set forth in, and this certificate and the Capital Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of the Trust dated as of March __, 1997, as the same may be amended from time to time (the "Declaration") including the designation of the terms of Capital Securities as set forth in Annex I to the Declaration. The Capital Securities and the Common Securities issued by the Trust pursuant to the Declaration represent undivided beneficial interests in the assets of the Trust, including the Subordinated Notes (as defined in the Declaration) issued by TCI Communications, Inc., a Delaware corporation ("TCIC"), to the Trust pursuant to the Indenture referred to in the Declaration. The Holder is entitled to the benefits of the Capital Securities Guarantee Agreement of TCIC dated as of March __, 1997 (the "Guarantee") to the extent provided therein. The Trust will furnish a copy of the Declaration, the Guarantee and the Indenture to the Holder without charge upon written request to the Trust at its principal place of business or registered office. The Holder of this certificate, by accepting this certificate, is deemed to have: (i) agreed to the terms of the Indenture and the Subordinated Notes, including that the Subordinated Notes are subordinate and junior in right to payment to all Senior Indebtedness (as defined in the Indenture) as and to the extent provided in the Indenture; (ii) agreed to the terms of the Guarantee, including that the Guarantee is (x) subordinate and junior in right to payment to all other liabilities of TCIC, including the Subordinated Notes, except those made pari passu or subordinated by their terms, (y) pari passu with the most senior preferred or preference stock now or hereafter issued by TCIC and with any guarantee now or hereafter entered into by TCIC in respect of any preferred or preference stock of any affiliate of TCIC and (z) prior to TCIC's common stock; and (iii) agreed to treat the Subordinated Notes as indebtedness for United States federal income tax purposes and the Capital Securities as evidence of an indirect beneficial ownership the Subordinated Notes. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. A1-2 IN WITNESS WHEREOF, the Regular Trustees of the Trust have executed this certificate for and on behalf of the Trust. Dated: COUNTERSIGNED AND REGISTERED: THE BANK OF NEW YORK (New York, New York) Transfer Agent and Registrar By: -------------------------------- Authorized Signature TCI COMMUNICATIONS FINANCING III By: -------------------------------- Regular Trustee By: -------------------------------- Regular Trustee A1-3 The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM --as tenants in common UNIF GIFT ACT --_______Custodian________ TEN ENT --as tenants by the entireties (Cust) (Minor) JT TEN --as joint tenants with right of Under Uniform Gifts to Minors survivorship and not as tenants Act _____________________ in common (State) Additional abbreviations may also be used though not in the above list. A1-4 _____________________ ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please print or typewrite name(s) and address(es) including postal zip code(s), of assignee(s) and irrevocably appoints of the Capital Securities represented by this Certificate - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- attorney to transfer - ------------------------------------------------------- such Capital Securities on the books of the Trust. The attorney may substitute another to act for him or her. Date: ----------------------- Signature: ------------------ (Sign exactly as your name appears on the other side of this Capital Security Certificate) Signature: ------------------ (Sign exactly as your name appears on the other side of this Capital Security Certificate) *IMPORTANT READ CAREFULLY! The signature(s) to this assignment must correspond with the name(s) as written upon the face of the certificate in every particular without alteration, enlargement or change whatsoever. The signature(s) of the person(s) executing this power must be guaranteed by an eligible guarantor institution which, at the time of issuing the guarantee, is a member of, or a A1-5 participant in the medallion signature guarantee program recognized by the Securities Transfer Association. A1-6 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE Certificate Number Number of Common Securities Certificate Evidencing Common Securities of TCI Communications Financing III ______% Common Securities (liquidation amount $1,000 per Common Security) TCI Communications Financing III, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that _________________ (the "Holder") is the registered owner of __________________________________ common securities of the Trust having an aggregate liquidation amount of $_______________ and representing undivided beneficial interests in the assets of the Trust designated the ______% Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of March __, 1997, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Sponsor is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Subordinated Notes as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Subordinated Notes. A2-1 IN WITNESS WHEREOF, the Regular Trustees of Trust have executed this certificate for and on behalf of the Trust this __ day of March, 1997. TCI COMMUNICATIONS FINANCING III By: -------------------------------- Regular Trustee By: -------------------------------- Regular Trustee A2-2 --------------------- ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------- (Insert assignee's name and social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - ---------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints -------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- agent to transfer this Common Security - ----------------------------------- Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ----------------------- Signature: ------------------ (Sign exactly as your name appears on the other side of this Common Security Certificate) A2-3 EXHIBIT B SPECIMEN OF SUBORDINATED NOTE B-1 EXHIBIT C PURCHASE AGREEMENT C-1 EX-4.3 4 CAPITAL SECURITIES GUARANTEE Exhibit 4.3 ==================================== CAPITAL SECURITIES GUARANTEE AGREEMENT TCI Communications, Inc. Dated as of March 14, 1997 ====================================
TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation..........................1 ------------------------------ ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application........................5 -------------------------------- SECTION 2.2 Lists of Holders of Securities..........................5 ------------------------------ SECTION 2.3 Reports by the Capital Guarantee Trustee................5 ---------------------------------------- SECTION 2.4 Periodic Reports to Capital Guarantee Trustee...........5 --------------------------------------------- SECTION 2.5 Evidence of Compliance with Conditions Precedent........6 ------------------------------------------------ SECTION 2.6 Events of Default; Waiver...............................6 ------------------------- SECTION 2.7 Events of Default; Notice...............................6 ------------------------- SECTION 2.8 Conflicting Interests...................................6 --------------------- ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Capital Guarantee Trustee......7 -------------------------------------------------- SECTION 3.2 Certain Rights of Capital Guarantee Trustee.............8 ------------------------------------------- SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee..10 ----------------------------------------------------- ARTICLE IV CAPITAL GUARANTEE TRUSTEE SECTION 4.1 Capital Guarantee Trustee; Eligibility.................10 -------------------------------------- SECTION 4.2 Appointment, Removal and Resignation ------------------------------------ of Capital Guarantee Trustees..........................11 ----------------------------- ARTICLE V GUARANTEE SECTION 5.1 Guarantee..............................................12 --------- SECTION 5.2 Waiver of Notice and Demand............................12 --------------------------- SECTION 5.3 Obligations Not Affected...............................12 ------------------------
Page ---- SECTION 5.4 Rights of Holders.......................................13 ----------------- SECTION 5.5 Guarantee of Payment....................................14 -------------------- SECTION 5.6 Subrogation.............................................14 ----------- SECTION 5.7 Independent Obligations.................................14 ----------------------- ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions..............................14 -------------------------- SECTION 6.2 Ranking.................................................15 ------- ARTICLE VII TERMINATION SECTION 7.1 Termination.............................................15 ----------- ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation.............................................15 ----------- SECTION 8.2 Indemnification.........................................16 --------------- ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns..................................17 ---------------------- SECTION 9.2 Amendments..............................................17 ---------- SECTION 9.3 Notices.................................................17 ------- SECTION 9.4 Benefit.................................................18 ------- SECTION 9.5 Governing Law...........................................18 ------------- SECTION 9.6 No Recourse Against Certain Persons.....................18 -----------------------------------
ii CAPITAL SECURITIES GUARANTEE AGREEMENT This CAPITAL SECURITIES GUARANTEE AGREEMENT (the "Capital Securities Guarantee"), dated as of March 14, 1997, is executed and delivered by TCI Communications, Inc., a Delaware corporation (the "Guarantor"), and The Bank of New York, a New York banking corporation, as trustee (the "Capital Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of TCI Communications Financing III, a Delaware statutory business trust (the "Issuer"). WITNESSETH: ---------- WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of March 14, 1997, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof capital securities, having an aggregate liquidation amount of $300,000,000 designated the 9.65% Capital Securities (the "Capital Securities"); WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Capital Securities Guarantee, to pay to the Holders of the Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee") with substantially identical terms as this Capital Securities Guarantee for the benefit of the holders of the Common Securities (as defined herein) except that if an Indenture Event of Default (as defined herein) has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders of Capital Securities to receive Guarantee Payments under this Capital Securities Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Capital Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation ------------------------------ In this Capital Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Capital Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Capital Securities Guarantee has the same meaning throughout; (c) all references to "the Capital Securities Guarantee" or "this Capital Securities Guarantee" are to this Capital Securities Guarantee as modified, supplemented or amended from time to time; (d) all references in this Capital Securities Guarantee to Articles and Sections are to Articles and Sections of this Capital Securities Guarantee, unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Capital Securities Guarantee, unless otherwise defined in this Capital Securities Guarantee or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule ---------- 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Business Day" means any day other than a Saturday, a Sunday or any ------------- other day on which banking institutions in New York, New York are authorized or required by law to close. "Capital Guarantee Trustee" means The Bank of New York, until -------------------------- a Successor Capital Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Capital Securities Guarantee and thereafter means each such Successor Capital Guarantee Trustee. "Common Securities" means the securities representing common ----------------- undivided beneficial interests in the assets of the Issuer. "Covered Person" means any Holder or beneficial owner of Capital -------------- Securities. "Event of Default" means a default by the Guarantor on any of ---------------- its payment or other obligations under this Capital Securities Guarantee. "Guarantee Payments" means the following payments or ------------------ distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on 2 such Capital Securities, to the extent the Issuer has funds available therefor, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price"), to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Subordinated Notes to the Holders in exchange for Capital Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Indenture Event of Default has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee are subordinated to the rights of Holders of Capital Securities to receive Guarantee Payments. "Holder" shall mean any holder, as registered on the books and ------ records of the Issuer, of any Capital Securities; provided, however, that, in -------- ------- determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Capital Guarantee Trustee, any ------------------ Affiliate of the Capital Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of the Capital Guarantee Trustee. "Indenture" means the Indenture dated as of January 29, 1996, --------- among the Guarantor and The Bank of New York, as trustee, and the Third Supplemental Indenture thereto pursuant to which certain subordinated debt securities of the Guarantor are to be issued to the Property Trustee (as defined in the Declaration). "Indenture Event of Default" has the same meaning as that -------------------------- given to the term "Event of Default" in the Indenture. "Majority in liquidation amount of the Securities" means, ------------------------------------------------ except as provided by the Trust Indenture Act, a vote by Holder(s) of Capital Securities, voting separately as a class, of more than 50% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Capital Securities outstanding as of the date of determination. "Officers' Certificate" means, with respect to any Person, a --------------------- certificate signed by two Authorized Officers (as defined in the Declaration) of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Capital Securities Guarantee shall include: 3 (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, ------ corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Capital ------------------- Guarantee Trustee, any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the corporate trust department of the Capital Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Subordinated Notes" means the series of subordinated debt ------------------ securities of the Guarantor designated the 9.65% Subordinated Deferrable Interest Notes due March 31, 2027 held by the Property Trustee. "Successor Capital Guarantee Trustee" means a successor ----------------------------------- Capital Guarantee Trustee possessing the qualifications to act as Capital Guarantee Trustee under Section 4.1. "TCI" means Tele-Communications, Inc., a Delaware corporation. --- "Trust Indenture Act" means the Trust Indenture Act of 1939, as ------------------- amended. 4 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application -------------------------------- (a) This Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Capital Securities Guarantee and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Capital Securities Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities ------------------------------ (a) The Guarantor shall provide the Capital Guarantee Trustee with a list, in such form as the Capital Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Capital Securities ("List of Holders") (i) as of January 1 and June 30 of each year, within one Business Day thereafter, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request from the Capital Guarantee Trustee for a List of Holders, which shall be as of a date no more than 14 days before such List of Holders is given to the Capital Guarantee Trustee; provided, that -------- the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Capital Guarantee Trustee by the Guarantor. The Capital Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Capital Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Capital Guarantee Trustee ---------------------------------------- Within 60 days after May 15 of each year, the Capital Guarantee Trustee shall provide to the Holders of the Capital Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Capital Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Capital Guarantee Trustee --------------------------------------------- The Guarantor shall provide to the Capital Guarantee Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by 5 Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent ------------------------------------------------ The Guarantor shall provide to the Capital Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Capital Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver ------------------------- The Holders of a Majority in liquidation amount of Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Capital Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 Events of Default; Notice ------------------------- (a) The Capital Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities, notices of all Events of Default known to the Capital Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided, that the Capital Guarantee -------- Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Capital Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities. (b) The Capital Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Capital Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice, of such Event of Default. SECTION 2.8 Conflicting Interests --------------------- The Declaration shall be deemed to be specifically described in this Capital Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Capital Guarantee Trustee -------------------------------------------------- (a) This Capital Securities Guarantee shall be held by the Capital Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Capital Guarantee Trustee shall not transfer this Capital Securities Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Capital Guarantee Trustee on acceptance by such Successor Capital Guarantee Trustee of its appointment to act as Successor Capital Guarantee Trustee. The right, title and interest of the Capital Guarantee Trustee shall automatically vest in any Successor Capital Guarantee Trustee, and such vesting (and cessation as to the Capital Guarantee Trustee) of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Capital Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Capital Guarantee Trustee shall enforce this Capital Securities Guarantee for the benefit of the Holders of the Capital Securities. (c) The Capital Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Capital Securities Guarantee, and no implied covenants shall be read into this Capital Securities Guarantee against the Capital Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Capital Guarantee Trustee shall exercise such of the rights and powers vested in it by this Capital Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Capital Securities Guarantee shall be construed to relieve the Capital Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Capital Guarantee Trustee shall be determined solely by the express provisions of this Capital Securities Guarantee, and the Capital Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Capital Securities 7 Guarantee, and no implied covenants or obligations shall be read into this Capital Securities Guarantee against the Capital Guarantee Trustee; and (B) in the absence of bad faith on the part of the Capital Guarantee Trustee, the Capital Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Capital Guarantee Trustee and conforming to the requirements of this Capital Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Capital Guarantee Trustee, the Capital Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Capital Securities Guarantee; (ii) the Capital Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Capital Guarantee Trustee, unless it shall be proved that the Capital Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Capital Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Capital Guarantee Trustee, or exercising any trust or power conferred upon the Capital Guarantee Trustee under this Capital Securities Guarantee; and (iv) no provision of this Capital Securities Guarantee shall require the Capital Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Capital Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Capital Securities Guarantee or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of Capital Guarantee Trustee ------------------------------------------- (a) Subject to the provisions of Section 3.1: (i) The Capital Guarantee Trustee may rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. 8 (ii) Any direction or act of the Guarantor contemplated by this Capital Securities Guarantee shall be sufficiently evidenced by a Direction (as defined in the Declaration) or an Officers' Certificate. (iii) Whenever, in the administration of this Capital Securities Guarantee, the Capital Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Capital Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Capital Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or reregistration thereof). (v) The Capital Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Capital Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Capital Securities Guarantee from any court of competent jurisdiction. (vi) The Capital Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Capital Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Capital Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Capital Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Capital Guarantee Trustee; provided that, nothing contained in this -------- Section 3.2(a)(vi) shall be taken to relieve the Capital Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Capital Securities Guarantee. (vii) The Capital Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Capital Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Capital Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, 9 and the Capital Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Capital Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Capital Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Capital Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Capital Securities Guarantee, both of which shall be conclusively evidenced by the Capital Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Capital Securities Guarantee the Capital Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Capital Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions. (b) No provision of this Capital Securities Guarantee shall be deemed to impose any duty or obligation on the Capital Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Capital Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Capital Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee ----------------------------------------------------- The recitals contained in this Capital Securities Guarantee shall be taken as the statements of the Guarantor, and the Capital Guarantee Trustee does not assume any responsibility for their correctness. The Capital Guarantee Trustee makes no representation as to the validity or sufficiency of this Capital Securities Guarantee. ARTICLE IV CAPITAL GUARANTEE TRUSTEE SECTION 4.1 Capital Guarantee Trustee; Eligibility -------------------------------------- (a) There shall at all times be a Capital Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and 10 (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Capital Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Capital Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Capital Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Capital Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Capital Guarantee --------------------------------------------------------- Trustees - -------- (a) Subject to Section 4.2(b), the Capital Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Capital Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Capital Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Capital Guarantee Trustee and delivered to the Guarantor. (c) The Capital Guarantee Trustee appointed to office shall hold office until a Successor Capital Guarantee Trustee shall have been appointed or until its removal or resignation. The Capital Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Capital Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Capital Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Capital Guarantee Trustee and delivered to the Guarantor and the resigning Capital Guarantee Trustee. (d) If no Successor Capital Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of resignation or removal, the Capital Guarantee Trustee resigning or being removed may petition 11 any court of competent jurisdiction for appointment of a Successor Capital Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Capital Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1 Guarantee --------- The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand --------------------------- The Guarantor hereby waives notice of acceptance of this Capital Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected ------------------------ The obligations, covenants, agreements and duties of the Guarantor under this Capital Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relat ing to the Capital Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital Securities (other than an extension of time for payment of Distributions or other sum payable that results from the extension of any interest payment period on the Subordinated Notes permitted by the Indenture); 12 (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Capital Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obliga tions of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders ----------------- (a) The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Capital Guarantee Trustee in respect of this Capital Securities Guarantee or exer cising any trust or power conferred upon the Capital Guarantee Trustee under this Capital Securities Guarantee. (b) If the Capital Guarantee Trustee fails to enforce this Capital Securities Guarantee, any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce its rights under this Capital Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Capital Guarantee Trustee or any other Person. (c) Notwithstanding subsection 5.4(b), any Holder of Capital Securities may directly institute proceedings against the Guarantor to obtain Guarantee Payments in respect of the Capital Securities owned by such Holder, without first waiting to determine if the Capital Guarantee Trustee has enforced this Capital Securities Guarantee or first instituting a legal proceeding against the Issuer, the Capital Guarantee Trustee or any other Person. 13 SECTION 5.5 Guarantee of Payment -------------------- This Capital Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation ----------- The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Capital Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Capital Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Capital Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations ----------------------- The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Capital Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions -------------------------- (a) So long as any Capital Securities remain outstanding, if there shall have occurred an Event of Default or Indenture Event of Default, then (a) the Guarantor shall not declare or pay any dividend on, or make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, and (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor which rank pari passu with or junior to the Subordinated Notes. (b) Notwithstanding subsection 6.1(a) or any other language to the contrary contained in this Capital Securities Guarantee, nothing shall prevent the Guarantor from: (i) de claring or paying any dividend on, or making any distribution with respect to, or redeeming, 14 purchasing, acquiring or making a liquidation payment with respect to, any of its capital stock in or with (x) securities of the Guarantor (including capital stock) that rank junior to such capital stock or (y) securities (including capital stock) of TCI or (ii) paying any interest, principal or premium on, or repaying, repurchasing or redeeming, any debt securities issued by the Guarantor which rank pari passu with or junior to the Subordinated Notes, with (x) securities of the Guarantor (including capital stock) that rank junior to such debt securities or (y) securities (including capital stock) of TCI. SECTION 6.2 Ranking ------- This Capital Securities Guarantee constitutes an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, (ii) pari passu with (x) the most senior preferred or preference stock issued by the Guarantor from time to time and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor and (y) the guarantees of the Guarantor with respect to the 8.72% Subordinated Deferrable Interest Notes due January 31, 2045 and the 10% Subordinated Deferrable Interest Notes due May 31, 2045 of the Guarantor, and (iii) senior to the Guarantor's common stock. ARTICLE VII TERMINATION SECTION 7.1 Termination ----------- This Capital Securities Guarantee shall terminate upon the earliest to occur of (i) the full payment of the Redemption Price of all Capital Securities, (ii) the distribution of Subordinated Notes to the Holder(s) of all of the Capital Securities or (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Capital Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Capital Securities Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation ----------- (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Capital Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Capital Securities Guarantee or by law, except that an Indemnified Person shall be liable for 15 any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omission. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions, the Redemption Price or the Liquidation Distribution to Holders of Capital Securities might properly be paid. (c) The provisions of this Section 8.1 shall survive the termination of this Capital Securities Guarantee. SECTION 8.2 Indemnification --------------- (a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Capital Securities Guarantee and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person in accordance with this Capital Securities Guarantee, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees and expenses) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding (whether such claim, demand, action, suit or proceeding arises between the parties hereto or results from suits involving third parties) shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.2(a). (c) The provisions of this Section 8.2 shall survive the termination of this Capital Securities Guarantee. 16 ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns ---------------------- All guarantees and agreements contained in this Capital Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. SECTION 9.2 Amendments ---------- Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Capital Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Securities apply to the giving of such approval. SECTION 9.3 Notices ------- All notices provided for in this Capital Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Capital Guarantee Trustee, at the Capital Guarantee Trustee's mailing address set forth below (or such other address as the Capital Guarantee Trustee may give notice of to the Holders of the Capital Securities): The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10256 Attention: Corporate Trust Trustee Administration (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities): TCI Communications, Inc. Terrace Tower II 5619 DTC Parkway Englewood, Colorado 80111-3000 Attention: Chief Financial Officer (c) If given to any Holder of Capital Securities, at the address set forth on the books and records of the Issuer. 17 All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit ------- This Capital Securities Guarantee is solely for the benefit of the Holders of the Capital Securities and, subject to Section 3.1(a), is not separately transferable from the Capital Securities. SECTION 9.5 Governing Law ------------- THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. SECTION 9.6 No Recourse Against Certain Persons ----------------------------------- No past, present or future director, officer, employee or stockholder, as such, of the Guarantor or any successor thereof shall have any liability for any obligations of the Guarantor under this Capital Securities Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation and all such liability is hereby waived and released. Such waiver and release are part of the consideration for the issue of this Capital Securities Guarantee and the Capital Securities. 18 THIS CAPITAL SECURITIES GUARANTEE AGREEMENT is executed as of the day and year first above written. TCI COMMUNICATIONS, INC., as Guarantor By: -------------------------- Name: Title: THE BANK OF NEW YORK, as Capital Guarantee Trustee By: --------------------------- Name: Title: 19 EX-25.1 5 FORM OF T-1 COMMUNICATIONS FINANCING Exhibit 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [__] ---------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------------------- TCI COMMUNICATIONS FINANCING III (Exact name of obligor as specified in its charter) Delaware 84-6289177 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Terrace Tower II 5619 DTC Parkway Englewood, Colorado 80111-3000 (Address of principal executive offices) (Zip code) ---------------------- Capital Securities (Title of the indenture securities) ================================================================================ 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 3.) 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a- 29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 25th day of February, 1997. THE BANK OF NEW YORK By: /S/ PAUL J. SCHMALZEL ---------------------------- Name: PAUL J. SCHMALZEL Title: ASSISTANT TREASURER -4- - -------------------------------------------------------------------------------- Exhibit 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business September 30, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin...................... $ 4,404,522 Interest-bearing balances.............. 732,833 Securities: Held-to-maturity securities............ 789,964 Available-for-sale securities.......... 2,005,509 Federal funds sold in domestic offices of the bank: Federal funds sold..................... 3,364,838 Loans and lease financing receivables: Loans and leases, net of unearned income ....................28,728,602 LESS: Allowance for loan and lease losses .................584,525 LESS: Allocated transfer risk reserve...........................429 Loans and leases, net of unearned income, allowance, and reserve....... 28,143,648 Assets held in trading accounts.......... 1,004,242 Premises and fixed assets (including capitalized leases).................... 605,668 Other real estate owned.................. 41,238 Investments in unconsolidated subsidiaries and associated companies.............................. 205,031 Customers' liability to this bank on acceptances outstanding................ 949,154 Intangible assets........................ 490,524 Other assets............................. 1,305,839 ----------- Total assets............................. $44,043,010 =========== LIABILITIES Deposits: In domestic offices.................... $20,441,318 Noninterest-bearing ..........8,158,472 Interest-bearing ............12,282,846 In foreign offices, Edge and Agreement subsidiaries, and IBFs....... 11,710,903 Noninterest-bearing .............46,182 Interest-bearing ............11,664,721 Federal funds purchased in domestic offices of the bank: Federal funds purchased................ 1,565,288 Demand notes issued to the U.S. Treasury............................... 293,186 Trading liabilities...................... 826,856 Other borrowed money: With original maturity of one year or less.............................. 2,103,443 With original maturity of more than one year............................. 20,766 Bank's liability on acceptances executed and outstanding........................ 951,116 Subordinated notes and debentures........ 1,020,400 Other liabilities........................ 1,522,884 ----------- Total liabilities........................ 40,456,160 ----------- EQUITY CAPITAL Common stock............................. 942,284 Surplus.................................. 525,666 Undivided profits and capital reserves............................... 2,129,376 Net unrealized holding gains (losses) on available-for-sale securities............................. ( 2,073) Cumulative foreign currency translation adjustments............................ ( 8,403) ----------- Total equity capital..................... 3,586,850 ----------- Total liabilities and equity capital ............................... $44,043,010 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above- named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot ) Thomas A. Renyi )- Directors Alan R. Griffith ) - -------------------------------------------------------------------------------- EX-25.2 6 FORM T-1 FOR TCI COMMUNICATIONS, INC. Exhibit 25.2 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [__] ---------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------------------- TCI COMMUNICATIONS, INC. (Exact name of obligor as specified in its charter) Delaware 84-0588868 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Terrace Tower II 5619 DTC Parkway Englewood, Colorado 80111-3000 (Address of principal executive offices) (Zip code) ---------------------- Guarantee of Capital Securities of TCI Communications Financing III (Title of the indenture securities) ============================================================================= 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 3.) 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a- 29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 25th day of February, 1997. THE BANK OF NEW YORK By: /s/ PAUL J. SCHMALZEL ------------------------------ Name: PAUL J. SCHMALZEL Title: ASSISTANT TREASURER -4- - -------------------------------------------------------------------------------- Exhibit 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business September 30, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin...................... $ 4,404,522 Interest-bearing balances.............. 732,833 Securities: Held-to-maturity securities............ 789,964 Available-for-sale securities.......... 2,005,509 Federal funds sold in domestic offices of the bank: Federal funds sold..................... 3,364,838 Loans and lease financing receivables: Loans and leases, net of unearned income ....................28,728,602 LESS: Allowance for loan and lease losses .................584,525 LESS: Allocated transfer risk reserve...........................429 Loans and leases, net of unearned income, allowance, and reserve....... 28,143,648 Assets held in trading accounts.......... 1,004,242 Premises and fixed assets (including capitalized leases).................... 605,668 Other real estate owned.................. 41,238 Investments in unconsolidated subsidiaries and associated companies.............................. 205,031 Customers' liability to this bank on acceptances outstanding................ 949,154 Intangible assets........................ 490,524 Other assets............................. 1,305,839 ----------- Total assets............................. $44,043,010 =========== LIABILITIES Deposits: In domestic offices.................... $20,441,318 Noninterest-bearing ..........8,158,472 Interest-bearing ............12,282,846 In foreign offices, Edge and Agreement subsidiaries, and IBFs....... 11,710,903 Noninterest-bearing .............46,182 Interest-bearing ............11,664,721 Federal funds purchased in domestic offices of the bank: Federal funds purchased................ 1,565,288 Demand notes issued to the U.S. Treasury............................... 293,186 Trading liabilities...................... 826,856 Other borrowed money: With original maturity of one year or less.............................. 2,103,443 With original maturity of more than one year............................. 20,766 Bank's liability on acceptances executed and outstanding........................ 951,116 Subordinated notes and debentures........ 1,020,400 Other liabilities........................ 1,522,884 ----------- Total liabilities........................ 40,456,160 ----------- EQUITY CAPITAL Common stock............................. 942,284 Surplus.................................. 525,666 Undivided profits and capital reserves............................... 2,129,376 Net unrealized holding gains (losses) on available-for-sale securities............................. ( 2,073) Cumulative foreign currency translation adjustments............................ ( 8,403) ----------- Total equity capital..................... 3,586,850 ----------- Total liabilities and equity capital ............................... $44,043,010 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above- named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot ) Thomas A. Renyi )- Directors Alan R. Griffith ) - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----