-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eBJUbq3MGSaLvudNXgDZrdUOWFj+mRNSxNQNbcuvJbWbt+w25wfSMO8S4E0tnTqI DM/TEMMFILklMXmAaOLNbQ== 0000950134-94-000251.txt : 19940331 0000950134-94-000251.hdr.sgml : 19940331 ACCESSION NUMBER: 0000950134-94-000251 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELE COMMUNICATIONS INC CENTRAL INDEX KEY: 0000096903 STANDARD INDUSTRIAL CLASSIFICATION: 4841 IRS NUMBER: 840588868 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-05550 FILM NUMBER: 94518119 BUSINESS ADDRESS: STREET 1: TERRACE TOWER II STREET 2: 5619 DTC PKWY CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3032675500 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ( X ) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1993 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ____ to ____ Commission File No. 0-5550 TELE-COMMUNICATIONS, INC. (Exact name of Registrant as specified in its charter) State of Delaware 84-0588868 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5619 DTC Parkway Englewood, Colorado 80111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 267-5500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class A common stock, par value $1.00 per share Class B common stock, par value $1.00 per share Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. _____ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ________ ________ The aggregate market value of the voting stock held by nonaffiliates of the Registrant, computed by reference to the last sales price of such stock, as of the close of trading on February 1, 1994, was $11,190,678,971. The number of shares outstanding of the Registrant's common stock (net of shares held in treasury), as of February 1, 1994, was: Class A common stock - 402,504,309 shares; and Class B common stock - 47,258,787 shares. 2 TELE-COMMUNICATIONS, INC. 1993 ANNUAL REPORT ON FORM 10-K Table of Contents Page PART I ---- Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . I-15 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . I-16 Item 4. Submission of Matters to a Vote of Security Holders. . . . . I-18 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . II-1 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . II-2 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . II-4 Item 8. Financial Statements and Supplementary Data . . . . . . . . II-12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . II-12 PART III Item 10. Directors and Executive Officers of the Registrant. . . . . III-1 Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . III-4 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . III-11 Item 13. Certain Relationships and Related Transactions. . . . . . . III-16 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . IV-1 3 PART I. Item 1. Business. (a) General Development of Business Tele-Communications, Inc. ("TCI" or the "Company", which terms, as used herein, include its consolidated subsidiaries unless the context indicates otherwise) was incorporated in Delaware on August 20, 1968. The Company and its predecessors have been engaged in the cable television business since the early 1950's. On January 31, 1994, TCI announced that TCI and Liberty Media Corporation ("Liberty") had entered into a definitive agreement (the "TCI/Liberty Agreement"), dated as of January 27, 1994 to combine the two companies. As previously announced, the transaction will be structured as a tax free exchange of Class A and Class B shares of both companies and preferred stock of Liberty for like shares of a newly formed holding company, TCI/Liberty Holding Company ("TCI/Liberty"). TCI shareholders will receive one share of TCI/Liberty for each of their shares. Liberty common shareholders will receive 0.975 of a share of TCI/Liberty for each of their common shares. The transaction is subject to the approval of both sets of shareholders as well as various regulatory approvals and other customary conditions. Subject to timely receipt of such approvals, which cannot be assured, it is anticipated the closing of such transaction will take place during 1994. (b) Financial Information about Industry Segments The Company operates in the cable television industry. The Company sold its motion picture theatre business and certain theatre-related real estate assets in 1992. Amounts related to the motion picture theatre business and certain theatre-related real estate assets are discontinued operations and are set forth separately in the financial statements and related notes included in Part II of this Report. I-1 4 (c) Narrative Description of Business General. Cable television systems receive video, audio and data signals transmitted by nearby television and radio broadcast stations, terrestrial microwave relay services and communications satellites. Such signals are then amplified and distributed by coaxial cable and optical fiber to the premises of customers who pay a fee for the service. In many cases, cable television systems also originate and distribute local programming. Service Charges. The Company reconfigured its service offerings as contemplated by the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"). The Company offers a limited "basic service" (primarily comprised of local broadcast signals and public, educational and governmental access channels) and a broader "expanded" tier (primarily comprised of specialized programming services, in such areas as health, family entertainment, religion, news, weather, public affairs, education, shopping, sports and music). The monthly fee for "basic" generally ranges from $8.00 to $11.00, and the monthly service fee for the "expanded" tier generally ranges from $10.00 to $12.00. The Company offers "premium services" (referred to in the cable television industry as "Pay-TV" or "pay-per-view") to its customers. Such services consist principally of feature films, as well as live and taped sports events, concerts and other programming. The Company offers Pay-TV services for a monthly fee generally ranging from $12.00 to $14.00 per service, except for certain movie or sports services (such as various regional sports networks and certain pay-TV channels) and pay-per-view movies offered separately at $1.00 to $5.00 per month or per movie and certain pay-per- view events offered separately at $10.00 to $40.00 per event. Charges are usually discounted when multiple Pay-TV services are ordered. The Company does not generally require basic subscribers to "buy-through" the "expanded" service to receive a Pay-TV service in its systems. The Company does not charge for additional outlets in a subscriber's home. As further enhancements to their cable services, customers may generally rent converters, with or without a remote control device, for a monthly charge ranging from $0.50 to $3.00 each, as well as purchase a channel guide for a monthly charge ranging from $0.85 to $2.00. Also a nonrecurring installation charge (which is based upon the newly regulated hourly service charges for each individual cable system) of up to $60.00 is usually charged. Monthly fees for basic and Pay-TV services to commercial customers vary widely depending on the nature and type of service. Except under the terms of certain contracts to provide service to commercial accounts, customers are free to discontinue service at any time without penalty. As noted below, the Company's service offerings and rates were affected by rate regulations issued by the Federal Communications Commission ("FCC") in the spring of 1993 and are expected to be further affected by revised regulations in 1994. See Federal Regulation below. I-2 5 Subscriber Data. TCI operates its cable television systems either directly through its regional operating divisions or indirectly through certain subsidiaries or affiliated companies. Basic and Pay-TV customers served by TCI and its consolidated subsidiaries are summarized as follows (amounts in millions):
Basic subscribers at December 31, ---------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Managed through the Company's regional operating divisions (1) 9.8 9.4 6.4 5.1 4.2 TKR Cable II, Inc. and TKR Cable III, Inc. (2) .3 .3 -- -- -- United Artists Entertainment Company ("UAE") (3) -- -- 2.3 2.2 2.0 Other subsidiaries .6 .5 .2 1.2 1.6 ---- ---- ---- ---- ---- 10.7 10.2 8.9 8.5 7.8 ==== ==== ==== ==== ====
Pay TV subscribers at December 31, ---------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Managed through the Company's regional operating divisions (1) 9.5 8.8 6.1 3.3 3.2 TKR Cable II, Inc. and TKR Cable III, Inc. (2) .2 .3 -- -- -- UAE (3) -- -- 2.2 1.8 1.6 Other subsidiaries .6 .5 .1 .7 1.0 ---- ---- ---- ---- ---- 10.3 9.6 8.4 5.8 5.8 ==== ==== ==== ==== ====
(1) In December of 1992, SCI Holdings, Inc. ("SCI") consummated a transaction (the "Split-Off") that resulted in the ownership of its cable television systems being split between its two stockholders, which stockholders were Comcast Corporation and the Company. The Split-Off was effected by the distribution of approximately 50% of the net assets of SCI to three holding companies formed by the Company (the "Holding Companies"). Immediately following the Split-Off, the Company owned a majority of the common stock of the Holding Companies. As such, the Company, which previously accounted for its investment in SCI using the equity method, now consolidates its investment in the Holding Companies. One of the Holding Companies, TKR Cable I, Inc., is managed through the Company's regional operating divisions. (2) Management of the remaining two Holding Companies was assumed by an affiliated company of TCI in December of 1992. (3) Management assumed by the Company's regional operating divisions in January of 1992. This subscriber information does not include any amounts related to cable television systems in which the Company has an investment accounted for by the equity method or cost method. A basic customer may subscribe to one or more Pay-TV services and the number of Pay-TV subscribers reflected represents the total number of such subscriptions to Pay-TV services. TCI, its subsidiaries and affiliates operate cable television systems throughout the continental United States and Hawaii and, through certain joint ventures accounted for under the equity method, have cable television systems and investments in the United Kingdom and other parts of Europe. I-3 6 Programming. Generally, the Company does not currently produce any of the programming for the premium motion picture services or for the specialized basic cable television channels carried by its cable systems, but does hold interests in certain cable programming entities, including Turner Broadcasting System, Inc. (CNN, TBS and TNT), Liberty (Encore and certain regional sports networks), Discovery Communications, Inc. (Discovery Channel and The Learning Channel) and Reiss Media Enterprises, Inc. (Request-TV - a pay-per-view service provider). Additionally, during 1993, Encore QE Programming Corp. ("QEPC"), a wholly-owned subsidiary of Encore Media Corporation ("EMC") entered into a limited partnership agreement with TCI STARZ, Inc. ("TCIS"), a wholly-owned subsidiary of TCI, for the purpose of developing, operating and distributing STARZ!, a first-run premium programming service launched in 1994. QEPC is the general partner and TCIS is the limited partner. Losses are allocated 1% to QEPC and 99% to TCIS. Profits are allocated 1% to QEPC and 99% to TCIS until certain defined criteria are met. Subsequently, profits are allocated 20% to QEPC and 80% to TCIS. TCIS has the option, exercisable at any time and without payment of additional consideration, to convert its limited partnership interest to an 80% general partnership interest with QEPC's partnership interest simultaneously converting to a 20% limited partnership interest. In addition, during specified periods commencing April 1999 and April 2001, respectively, QEPC may require TCIS to purchase, or TCIS may require QEPC to sell, the partnership interest of QEPC in the partnership for a formula-based price. EMC manages the service and has agreed to provide the limited partnership with certain programming under a programming agreement whereby the partnership will pay its pro rata share of the total costs incurred by EMC for such programming. The Company has entered into a joint venture with Time Warner Entertainment Company, L.P. and Sega of America to produce and distribute The Sega Channel, which would provide 50 video games per month to subscribers, of which at least five would be educational in nature. The release pattern of such games would be similar to the film industry, with its traditional cycle of theatrical, pay-per-view, home video and Pay-TV. In the case of The Sega Channel, a minimum number of video games would be available soon after they are released for retail sale, but in limited form. Consumer testing of The Sega Channel will be conducted in 12 test markets beginning in April of 1994. On February, 1994, United Artists European Holdings, Ltd. ("UAEH"), a wholly-owned subsidiary of the Company, merged all of the issued share capital and loan stock of each of the following of its wholly-owned subsidiaries into Flextech p.l.c. ("Flextech"), a United Kingdom cable programming corporation: Bravo Classic Movies Limited, United Artists Limited (Children's Channel), United Artists Investments Limited and United Artists Entertainment Limited (Programming) (collectively, "The European Programming Assets"). In addition to the European Programming Assets, UAEH agreed to make available to Flextech an additional (Sterling Pound) 36.5 million in working capital. The working capital will be provided as needed and will be used to fund Flextech's programming interests through the early stages of their development. Flextech's shares trade publicly on the Unlisted Securities Market of the London Stock Exchange. In the Merger, UAEH received 52,356,707 ordinary shares of Flextech stock, representing an approximate 60% interest in Flextech subsequent to the closing of the Merger. The Company has entered into long-term agreements with certain of its program suppliers in order to obtain favorable rates for programming and to protect the Company from unforeseen future increases in the Company's cost of programming. Local Franchises. Cable television systems generally are constructed and operated under the authority of nonexclusive permits or "franchises" granted by local and/or state governmental authorities. Federal law, including the Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the 1992 Cable Act, limits the power of the franchising authorities to impose certain conditions upon cable television operators as a condition of the granting or renewal of a franchise. I-4 7 Franchises contain varying provisions relating to construction and operation of cable television systems, such as time limitations on commencement and/or completion of construction; quality of service, including (in certain circumstances) requirements as to the number of channels and broad categories of programming offered to subscribers; rate regulation; provision of service to certain institutions; provision of channels for public access and commercial leased-use; and maintenance of insurance and/or indemnity bonds. The Company's franchises also typically provide for periodic payments of fees, generally ranging from 3% to 5% of revenue, to the governmental authority granting the franchise. Franchises usually require the consent of the franchising authority prior to a transfer of the franchise or a transfer or change in ownership or operating control of the franchisee. Subject to applicable law, a franchise may be terminated prior to its expiration date if the cable television operator fails to comply with the material terms and conditions thereof. Under the 1984 Cable Act, if a franchise is lawfully terminated, and if the franchising authority acquires ownership of the cable television system or effects a transfer of ownership to a third party, such acquisition or transfer must be at an equitable price or, in the case of a franchise existing on the effective date of the 1984 Cable Act, at a price determined in accordance with the terms of the franchise, if any. In connection with a renewal of a franchise, the franchising authority may require the cable operator to comply with different and more stringent conditions than those originally imposed, subject to the provisions of the 1984 Cable Act and other applicable Federal, state and local law. The 1984 Cable Act, as supplemented by the renewal provisions of the 1992 Cable Act, establishes an orderly process for franchise renewal which protects cable operators against unfair denials of renewals when the operator's past performance and proposal for future performance meet the standards established by the 1984 Cable Act. The Company believes that its cable television systems generally have been operated in a manner which satisfies such standards and allows for the renewal of such franchises; however, there can be no assurance that the franchises for such systems will be successfully renewed as they expire. Most of the Company's present franchises had initial terms of approximately 10 to 15 years. The duration of the Company's outstanding franchises presently varies from a period of months to an indefinite period of time. Approximately 1,400 of the Company's franchises expire within the next five years. This represents approximately thirty-five percent of the franchises held by the Company and involves approximately 3.8 million basic subscribers. Technological Changes. Cable operators have traditionally used coaxial cable for transmission of television signals to subscribers. Optical fiber is a technologically advanced transmission medium capable of carrying cable television signals via light waves generated by a laser. The Company is installing optical fiber in its cable systems at a rate such that in three years TCI anticipates that it will be serving the majority of its customers with state-of-the-art fiber optic cable systems. The systems, which facilitate digital transmission of television signals as discussed below, will have optical fiber to the neighborhood nodes with coaxial cable distribution downstream from that point. I-5 8 Compressed digital video technology converts as many as ten analog signals (now used to transmit video and voice) into a digital format and compresses such signals (which is accomplished primarily by eliminating the redundancies in television imagery) into the space normally occupied by one analog signal. The digitally compressed signal will be uplinked to a satellite, which will send the signal back down to a cable system's headend to be distributed, via optical fiber and coaxial cable, to the customers home. At the home, a set-top terminal will convert the digital channel back into analog channels that can be viewed on a normal television set. The Company is establishing a national center to uplink, encrypt and authorize the reception of compressed digital television services. The Company intends to begin offering such technology to its cable subscribers as the set-top terminals become available for distribution. The Company is currently negotiating with cable programmers to allow for the Company to digitize, encrypt and authorize their signals although there can be no assurance that the terms will be favorable to the Company. The Company and Microsoft Corporation ("Microsoft") announced that they have agreed in principle to jointly conduct a technology trial and a market trial of various broadband interactive network services using upgraded TCI cable television systems and certain Microsoft computer systems to provide the services. The technology trial, which will be conducted among TCI and Microsoft employees in the greater Seattle area commencing in the fourth quarter of 1994, will test the reliability and scalability of Microsoft's software architecture for interactive broadband networking and its operating system software. The market trial will be conducted with TCI residential cable customers in the Seattle and Denver areas, commencing in 1995, and will test consumer reaction to and interaction with the system and service features. The Company and three other cable operators own Teleport Communications Group, Inc. ("Teleport"). Teleport and its owners currently are negotiating with another cable operator the terms upon which it would acquire an interest in Teleport. Teleport provides local telecommunications services to businesses over fiber optic networks in 18 metropolitan areas throughout the United States, including New York and San Francisco. Competition. Cable television competes for customers in local markets with other providers of entertainment, news and information. The competitors in these markets include broadcast television and radio, newspapers, magazines and other printed material, motion picture theatres, video cassettes and other sources of information and entertainment including directly competitive cable television operations. The passage of the 1992 Cable Act was designed to increase competition in the cable television industry. I-6 9 There are alternative methods of distribution of the same or similar video programming offered by cable television systems. Further, these technologies have been encouraged by Congress and the FCC to offer services in direct competition with existing cable systems. In addition to broadcast television stations, the Company competes in a variety of areas with other service providers that offer Pay-TV and other satellite-delivered programming to subscribers on a direct over-the-air basis. Multi-channel programming services are distributed by communications satellites directly to home satellite dishes ("HSDs"). Cable programmers have developed marketing efforts directed to HSD owners and numerous companies, including a subsidiary of the Company called Netlink USA (one of the larger distributors to HSD owners), make programming packages available to these viewers. The Company estimates that there are currently in excess of 3.5 million HSDs in the United States, most of which are in the 6 to 10 foot range. Medium power and higher power communications satellites ("DBS") using higher frequencies transmit signals that can be received by dish antennas much smaller in size. The Company has an interest in an entity, Primestar Partners, that distributes a multi-channel programming service via a medium power communications satellite to HSDs of approximately 3 feet in size. Such service currently serves an estimated 70,000 HSDs in the United States. Two other service providers plan to offer multi-channel programming services to HSDs in 1994 via a high power communications satellite that will require a dish antenna of only approximately 18 inches. Additionally, such DBS operators have acquired the right to distribute all of the significant cable television services. The Company's application for a license to launch and operate a high power direct broadcast satellite was granted by the FCC in 1992 and the satellite is currently under construction. Competition from both medium and high power DBS services could become substantial as developments in technology continue to increase satellite transmitter power, and decrease the cost and size of equipment needed to receive these transmission. DBS has advantages and disadvantages as an alternative means of distribution of video signals to the home. Among the advantages are that the capital investment (although initially high) for the satellite and uplinking segment of a DBS system is fixed and does not increase with the number of subscribers receiving satellite transmissions; that DBS is not currently subject to local regulation of service and prices or required to pay franchise fees; and that the capital costs for the ground segment of a DBS system (the reception equipment) are directly related to and limited by the number of service subscribers. DBS's disadvantages presently include the inability to tailor the programming package to the interests of different geographic markets, such as providing local news, other local origination services and local broadcast stations; signal reception being subject to line of sight angles; and intermittent interference from atmospheric conditions and terrestrially generated radio frequency noise. The effect of competition from these services cannot be predicted. The Company nonetheless assumes that such competition could be substantial in the near future. I-7 10 The 1984 Cable Act, FCC rules and the 1982 Federal court Consent Decree (which settled the 1974 antitrust suit against AT&T) prohibit telephone companies from providing video programming and other information services directly to subscribers in their telephone service areas (except in limited circumstances in rural areas). In Chesapeake & Potomac Telephone Company of Virginia v. United States, the United States District Court for the Eastern District of Virginia held on August 24, 1993 that the cross-entry prohibition in the 1984 Cable Act is unconstitutional as a violation of the telephone company's First Amendment right to free expression. The Court's decision has been appealed to the United States Court of Appeals for the Fourth Circuit. Since the Court rendered its decision, however, other telephone companies have filed a number of actions in courts throughout the United States, similarly seeking to invalidate the cross-entry prohibition. Certain proposals are also pending before the FCC and Congress which would eliminate or relax these restrictions on telephone companies. If the current cross-entry restrictions are removed or relaxed, the Company could face increased competition from telephone companies which, in most cases, have greater financial resources than the Company. Certain major telephone companies have announced plans to acquire cable television systems or provide video services to the home through fiber optic technology. The FCC authorized the provision of so-called "video-dialtone" services by which independent video programmers may deliver services to the home over telephone-provided circuits, thereby by-passing the local cable system or other video provider. Under the FCC decision, which is now the subject of reconsideration and a federal appellate challenge, such services would require no local franchise agreement or payment to the city or local governmental authority. Although telephone companies providing "video-dialtone" under the existing rules are allowed only a limited financial interest in programming services and must limit their role largely to that of a traditional "common carrier," the current status of these rules is uncertain under the Chesapeake & Potomac Telephone Company decision. Telephone companies have filed numerous applications with the FCC for authorization to construct video-dialtone systems and provide such services. This alternative means of distribution of video services to the consumer's home represents a direct competitive threat to the Company. Another alternative method of distribution is the multi-channel multi-point distribution systems ("MMDS"), which deliver programming services over microwave channels received by subscribers with a special antenna. MMDS systems are less capital intensive, are not required to obtain local franchises or pay franchise fees, and are subject to fewer regulatory requirements than cable television systems. Although there are relatively few MMDS systems in the United States that are currently in operation or under construction, virtually all markets have been licensed or tentatively licensed. The FCC has taken a series of actions intended to facilitate the development of wireless cable systems as alternative means of distributing video programming, including reallocating the use of certain frequencies to these services and expanding the permissible use of certain channels reserved for educational purposes. The FCC's actions enable a single entity to develop an MMDS system with a potential of up to 35 channels, and thus compete more effectively with cable television. Developments in compression technology have significantly increased the number of channels that can be made available from other over-the-air technologies. I-8 11 Within the cable television industry, cable operators may compete with other cable operators or others seeking franchises for competing cable television systems at any time during the terms of existing franchises or upon expiration of such franchises in expectation that the existing franchise will not be renewed. The 1992 Cable Act promotes the granting of competitive franchises. An increasing number of cities are exploring the feasibility of owning their own cable systems in a manner similar to city-provided utility services. Currently one of the Company's franchises is being over built by a city and in another franchise the franchising authority granted a second cable franchise to a competing cable operator. The Company believes that this type of competitive threat may increase in the future. The Company also competes with Master Antenna Television ("MATV") systems and Satellite MATV ("SMATV") systems, which provide multi-channel program services directly to hotel, motel, apartment, condominium and similar multi-unit complexes within a cable television system's franchise area, generally free of any regulation by state and local governmental authorities. In addition to competition for subscribers, the cable television industry competes with broadcast television, radio, the print media and other sources of information and entertainment for advertising revenue. As the cable television industry has developed additional programming, its advertising revenue has increased. Cable operators sell advertising spots primarily to local and regional advertisers. The Company has no basis upon which to estimate the number of cable television companies and other entities with which it competes or may potentially compete. There are a large number of individual and multiple system cable television operators in the United States but, measured by the number of basic subscribers, the Company is the largest provider of cable television services. The full extent to which other media or home delivery services will compete with cable television systems may not be known for some time and there can be no assurance that existing, proposed or as yet undeveloped technologies will not become dominant in the future. Regulation and Legislation. The operation of cable television systems is extensively regulated through a combination of Federal legislation and FCC regulations, by some state governments and by most local government franchising authorities such as municipalities and counties. The regulation of cable television systems at the federal, state and local levels is subject to the political process and has been in constant flux over the past decade. This process continues in the context of legislative proposals for new laws and the adoption or deletion of administrative regulations and policies. Further material changes in the law and regulatory requirements must be anticipated and there can be no assurance that the Company's business will not adversely be affected by future legislation, new regulation or deregulation. I-9 12 Federal Regulation. The 1984 Cable Act established national policy and, in some cases, governing standards regarding the regulation of cable television in the areas of ownership (including the ownership of other media of mass communications), channel usage, franchising, subscriber charges and services, subscriber privacy, equal employment opportunity ("EEO"), technical standards and comprehensive reporting requirements. Among other things, the 1984 Cable Act (a) requires cable television systems with 36 or more "activated" channels to reserve a percentage of such channels for commercial use by unaffiliated third parties; (b) permits franchise authorities to require the cable operator to provide channel capacity, equipment and facilities for public, educational and governmental access; (c) limits the amount of fees required to be paid by the cable operator to franchise authorities to a maximum of 5% of annual gross revenues; and (d) regulates the revocation and renewal of franchises as described above. On October 5, 1992, Congress enacted the 1992 Cable Act. The 1992 Cable Act greatly expands federal and local regulation of the cable television industry. Certain of the more significant areas of regulation imposed by the 1992 Cable Act are discussed below. Rate Regulation. The FCC adopted certain rate regulations required by the 1992 Cable Act and imposed a moratorium on certain rate increases. Such rate regulations became effective on September 1, 1993. The rate increase moratorium, which began on April 5, 1993, continues in effect through May 15, 1994 for franchise areas not subject to regulation. As a result of such actions, the Company's basic and tier service rates and its equipment and installation charges (the "Regulated Services") are now under the jurisdiction of local franchising authorities and the FCC. Basic and tier service rates are evaluated against competitive benchmark rates as published by the FCC, and equipment and installation charges are based on actual costs. Any rates for Regulated Services that exceeded the benchmarks were reduced as required by the new rate regulations. The rate regulations do not apply to the relatively few systems which are subject to "effective competition" or to services offered on an individual service basis, such as premium movie and pay-per-view services. The Company's new rates for Regulated Services, which were implemented September 1, 1993, are subject to review by the FCC if a complaint has been filed or the appropriate local franchising authority if such authority has been certified. On February 22, 1994, the FCC announced that it had adopted revised benchmark rate regulations pursuant to which those cable systems electing not to make a cost-of-service showing will be required to set their rates for Regulated Services at a level equal to the higher of the FCC's revised benchmark rates or the operator's September 30, 1992 rates minus 17 percent. Thus, the revised benchmarks may result in additional rate reductions of up to 7 percent beyond the maximum reductions established under the FCC's initial benchmark regulations. Although the text of the FCC's revised benchmark regulations has not been released, it is currently anticipated that the rules will take effect on or about May 15, 1994. The FCC has indicated that certain systems with relatively low rates for Regulated Services (defined as systems whose rates would be below the benchmark after subtracting 17% from their September 30, 1992 rates), and systems owned by small operators (i.e. operators whose systems serve a total of 15,000 or fewer subscribers) will not be required immediately to reduce their regulated rates by the full 17 percent. However, to the extent that such systems do not reduce regulated rates by the full 17 percent, such lesser rate reductions will be offset against future inflation adjustments pending completion of additional cost studies by the FCC. The FCC's benchmark rate regulations permit cable operators to adjust rates to account for inflation and increases in certain external costs, including increases in programming costs and compulsory copyright fees, to the extent such increases exceed the rate of inflation. However, these increases may be required to be offset by a productivity factor. I-10 13 The revised rules adopted by the FCC on February 22, 1994 also modify the regulation of packaged a-la-carte programming services. The FCC previously had indicated that a-la-carte services (i.e. program services which are available to subscribers on an individual basis rather than as part of a regulated service tier) could be packaged without being regulated under certain conditions. However, the FCC indicated that under its revised rules it will examine such "packaged a la carte" offerings on a case- by-case basis to determine whether they constitute evasions of its rate regulations. The revised benchmark regulations also provide a mechanism for adjusting rates when regulated tiers are affected by channel additions or deletions. The FCC has indicated that cable operators adding or deleting channels on a regulated tier will be required to adjust the per-channel benchmark for that tier based on the number of channels offered after the addition or deletion. The FCC also stated that the additional programming costs resulting from channel additions will be accorded the same external treatment as other program cost increases, and that cable operators will be permitted to recover a mark-up on their programming expenses. On February 22, 1994 the FCC also adopted interim "cost-of-service" rules governing attempts by cable operators to justify higher than benchmark rates based on unusually high costs. The FCC stated that under its interim cost-of-service rules, a cable operator may recover through rates for Regulated Services its normal operating expenses plus an interim rate of return equal to 11.25 percent, which rate may be subject to change in the future. However, the FCC has presumptively excluded from the rate-base acquisition costs above the book value of tangible assets and of allowable intangible assets at the time of acquisition, has declined to prescribe depreciation rates and has suggested that the rules will have limited usefulness for cable operators. The FCC also adopted rules governing transactions between cost-of-service regulated cable operators and their affiliates. The texts of the FCC's revised benchmark and cost-of-service regulations have not been released. In addition, key portions of these regulations are subject to change during the course of ongoing rulemaking proceedings before the FCC. Further, the revised rate regulations have been challenged in court. However, based on the foregoing, the Company believes the new rate regulations will have a material adverse effect on its net earnings. The FCC also announced it intends to adopt an experimental incentive plan which would provide cable operators with incentives to upgrade their systems and offer new services. I-11 14 Regulation of Carriage of Broadcast Stations. The 1992 Cable Act granted broadcasters a choice of "must carry" rights or "retransmission consent" rights. As of October of 1993, cable operators were required to secure permission from broadcasters that elected retransmission consent rights before retransmitting the broadcaster's signals. Established "superstations" were not granted such rights. Local and distant broadcasters can require cable operators to make payments as a condition to carriage of such broadcasters' station on a cable system. The 1992 Cable Act imposed obligations to carry "local" broadcast stations if such stations chose a "must carry" right as distinguished from the "retransmission consent" right described above. The rules adopted by the FCC provided for mandatory carriage by cable systems after September 1, 1993, of all local full-power commercial television broadcast signals (up to one-third of all channels) including the signals of stations carrying home-shopping programming, and, depending on a cable system's channel capacity, all non-commercial local television broadcast signals, or at the option of commercial broadcasters after October 6, 1993, the right to deny such carriage unless the broadcaster consented. Although similar "must carry" regulations adopted by the FCC have been held unconstitutional by federal appellate courts on two prior occasions and the Supreme Court declined review, the "must carry" provisions of the 1992 Cable Act were upheld by a three-judge panel of the United States District Court of Columbia in Turner Broadcasting System, Inc. v. FCC on April 8, 1993. The Supreme Court granted certiorari on September 28, 1993 to review the District Court's decision and oral argument was held on January 12, 1994. It is anticipated a decision will be issued later this year. The Company is currently retransmitting the signals of broadcasters who chose a "must carry" right and the signals of broadcasters electing negotiated "retransmission consent" rights. Ownership Regulations. The 1992 Cable Act required the FCC to (i) promulgate rules and regulations establishing reasonable limits on the number of cable subscribers which may be served by a multiple systems cable operator; (2) prescribe rules and regulations establishing reasonable limits on the number of channels on a cable system that will be allowed to carry programming in which the owner of such cable system has an attributable interest; and (3) consider the necessity and appropriateness of imposing limitations on the degree to which multichannel video programming distributors (including cable operators) may engage in the creation or production of video programming. On September 23, 1993, the FCC adopted regulations establishing a 30 percent limit on the number of homes passed nationwide that a cable operator may reach through cable systems in which it holds an attributable interest (attributable for these purposes if its ownership interest therein is five percent or greater or if there are any common directors) with an increase to 35 percent if the additional cable systems are minority controlled. However, the FCC stayed the effectiveness of its ownership limits pending the appeal of a September 16, 1993 decision by the United States District Court for the District of Columbia which, among other things, found unconstitutional the provision of the 1992 Cable Act requiring the FCC to establish such ownership limits. If the ownership limits are determined on appeal to be constitutional, they may affect the Company's ability to acquire interests in additional cable systems in the future. I-12 15 On September 23, 1993, the FCC also adopted regulations limiting carriage by a cable operator of national programming services in which that operator holds an attributable interest (using the same attribution standards as were adopted for its limits on the number of homes passed nationwide that a cable operator may reach through its cable systems) to 40 percent of the first 75 activated channels on each of the operator's systems. The rules provide for the use of two additional channels or a 45 percent limit whichever is greater, provided that the additional channels carry minority controlled programming services. The regulations also grandfather existing carriage arrangements which exceed the channel limits, but require new channel capacity to be devoted to unaffiliated programming services until the system achieves compliance with the regulations. Channels beyond the first 75 activated channels are not subject to such limitations, and the rules do not apply to local or regional programming services. These rules, which currently are subject to petitions for reconsideration pending before the FCC, may limit carriage of programming services in which the Company or Liberty has an interest on certain systems of cable operators affiliated with the Company. In the same rulemaking, the FCC concluded that additional restrictions on the ability of multichannel distributors to engage in the creation or production of video programming presently are unwarranted. Under the 1992 Cable Act and the FCC's regulations, cable operators may not hold a license for an MMDS nor acquire a SMATV system within the same geographic area in which it provides cable service. Additionally, cable operators are prohibited, subject to certain exceptions, from selling a cable system within 3 years of acquisition or construction of such cable system. Buy-through Prohibition. The 1992 Cable Act prohibits cable systems which have addressable converters or certain other security devices in place from requiring cable subscribers to purchase service tiers above basic as a condition to purchasing premium movie channels or pay-per-view. If cable systems do not have such security devices in place, they are given up to 10 years to comply. The Company has, however, generally complied with the provision in its systems, regardless of addressability. Program Acquisition. On April 2, 1993, the FCC adopted regulations implementing the program access provisions of the 1992 Cable Act. Essentially, these regulations are designed to insure that video programming distributors competing with cable operators have access to cable television programming services at non-discriminatory prices and will limit unfair practices, programming contracts, and discriminatory contract terms (including excessive volume discounts). The rules apply the prohibition against "unfair" practices to all programmers whether vertically integrated or not. If a vertically integrated program supplier is challenged for price discrimination, it must justify the price differential based on several factors. New exclusive contracts involving vertically integrated programmers will be prohibited in most cases unless the FCC first determines the contract serves the public interest. However, existing service contracts executed prior to June 1, 1990 granting exclusive rights will remain in effect. The FCC allowed a transition period until the fall of 1993 to bring other existing programming contracts into compliance with the regulations. Customer Service/Technical Standard. As required by the 1992 Cable Act, the FCC has adopted comprehensive regulations establishing minimum standards for customer service and technical system performance. Franchising authorities are allowed to enforce stricter customer service requirements than the FCC standards. I-13 16 The 1992 Cable Act contains numerous other regulatory provisions which together with the 1984 Cable Act create a comprehensive regulatory framework. Violation by a cable operator of the statutory provisions or the rules and regulations of the FCC can subject the operator to substantial monetary penalties and other significant sanctions such as suspension of licenses and authorizations, issuance of cease and desist orders and imposition of penalties that could be of severe consequence to the conduct of a cable operator's business. Many of the specific obligations imposed on the operation of cable television systems under these laws and regulations are complex, burdensome and increase the Company's costs of doing business. Numerous petitions have been filed with the FCC seeking reconsideration of various aspects of the regulations implementing the Cable Act. Petitions for judicial review of regulations adopted by the FCC, as well as other court challenges to the 1992 Cable Act and the FCC's regulations, also remain pending. The Company is uncertain how the courts and/or FCC will ultimately rule or whether such rulings will materially change any existing rules or statutory requirements. Further, virtually all of these laws and regulations are subject to revision at the discretion of the appropriate governmental authority. The Company has two-way communications stations, microwave relay stations and receive-only earth stations for reception of satellite signals, which are individually licensed by the FCC for a specific term. Such licenses are essential to the conduct of the Company's business and must periodically be renewed by the Company. No assurance can be given that such renewals will be granted by the FCC. Pursuant to lease agreements with local public utilities, the cable facilities in most of the Company's cable television systems are generally attached to utility poles or are in underground ducts controlled by the utility owners. The rates and conditions imposed on the Company for such attachments or occupation of utility space are generally subject to regulation by the FCC or, in some instances, by state agencies, and are subject to change. Copyright Regulations. The Copyright Revision Act of 1976 (the "Copyright Act") provides cable television operators with a compulsory license for retransmission of broadcast television programming without having to negotiate with the stations or individual copyright owners for retransmission consent for the programming. However, see Regulation of Carriage of Broadcast Stations regarding the imposition of retransmission consent for broadcast stations. The availability of the compulsory license is conditioned upon the cable operators' compliance with applicable FCC regulations, certain reporting requirements and payment of appropriate license fees, including interest charges for late payments, pursuant to the schedule of fees established by the Copyright Act and regulations promulgated thereunder. The Copyright Act also empowers the Copyright Office to periodically review and adjust copyright royalty rates based on inflation and/or petitions for adjustments due to modifications of FCC rules. The FCC has recommended to Congress the abolition of the compulsory license for cable television carriage of broadcast signals, a proposal that has received substantial support from members of Congress. Any material change in the existing statutory copyright scheme could significantly increase the costs of programming and could have an adverse effect on the business interests of the Company. I-14 17 State and Local Regulation. Cable television systems are generally licensed or "franchised" by local municipal or county governments and, in some cases, by centralized state authorities with such franchises being given for fixed periods of time subject to extension or renewal largely at the discretion of the issuing authority. The specific terms and conditions of such franchises vary significantly depending on the locality, population, competitive services, and a host of other factors. While this variance takes place even among systems of essentially the same size in the same state, franchises generally are comprehensive in nature and impose requirements on the cable operator relating to all aspects of cable service including franchise fees, technical requirements, channel capacity, consumer service standards, "access" channel and studio facilities, insurance and penalty provisions and the like. Local franchise authorities generally control the sale or transfer of cable systems to third parties and, although the 1992 Cable Act sought to limit such transfer review, the transfer process still affords local governmental officials some power to affect the disposition of the cable property as well as to obtain other concessions from the operator. The franchising process, like the federal regulatory climate, is highly politicized and no assurances can be given that the Company's franchises will be extended or renewed or that other problems will not be engendered at the local level. There appears to be a growing trend for local authorities to impose more stringent requirements on cable operators often increasing the costs of doing business. The 1984 Cable Act grants certain protective procedures in connection with renewal of cable franchises, which procedures were further clarified by the renewal provisions of the 1992 Cable Act. GENERAL Legislative, administrative and/or judicial action may change all or portions of the foregoing statements relating to competition and regulation. The Company has not expended material amounts during the last three fiscal years on research and development activities. There is no one customer or affiliated group of customers to whom sales are made in an amount which exceeds 10% of the Company's consolidated revenue. Compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of material into the environment or otherwise relating to the protection of the environment has had no material effect upon the capital expenditures, results of operations or competitive position of the Company. At December 31, 1993, the Company had approximately 24,000 employees. Of these employees, approximately 500 were located in its corporate headquarters and most of the balance were located at the Company's various facilities in the communities in which the Company owns and/or operates cable television systems. (d) Financial Information about Foreign & Domestic Operations and Export Sales The Company has neither material foreign operations nor export sales. Item 2. Properties. The Company owns its executive offices in a suburb of Denver, Colorado. It leases most of its regional and local operating offices. The Company owns many of its head-end and antenna sites. Its physical cable television properties, which are located throughout the United States, consist of system components, motor vehicles, miscellaneous hardware, spare parts and other components. I-15 18 The Company's cable television facilities are, in the opinion of management, suitable and adequate by industry standards. Physical properties of the Company are not held subject to any major encumbrance. Item 3. Legal Proceedings. There are no material pending legal proceedings to which the Company is a party or to which any of its property is subject, except as follows: Viacom International, Inc. v. Tele-Communications, Inc., Liberty Media Corporation, Satellite Services, Inc., Encore Media Corporation, NetLink USA, Comcast Corporation, and QVC Network, Inc. This suit was filed on September 23, 1993 in the United States District Court for the Southern District of New York, and the complaint was amended on November 9, 1993. The amended complaint alleges that the Company violated the antitrust laws of the United States and the State of New York, violated the 1992 Cable Act, breached an affiliation agreement, and tortiously interfered with the Viacom Inc.-Paramount Communications, Inc. ("Paramount") merger agreement and with plaintiff's prospective business advantage. The amended complaint further alleges that even if plaintiff is ultimately successful in its bid to acquire Paramount, its competitive position will still be diminished because the Company, through Liberty, will have forced plaintiff to expend additional financial resources to consummate the acquisition. Plaintiff is seeking permanent injunctive relief and actual and punitive or treble damages of an undisclosed amount. Plaintiff claims that the Company, along with Liberty, has conspired to use its monopoly power in cable television markets to weaken unaffiliated programmers and deny access to essential facilities necessary for distributing programming to cable television systems. Plaintiff also alleges that the Company has conspired to deny essential technology necessary for distributing programming to owners of home satellite dishes. Plaintiff claims that the Company is engaging in these alleged conspiracies in an attempt to monopolize alleged national markets for non-broadcast television programming and distribution. Based upon the facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Company. Ranlee Communications, Inc. v. United Artists Telecommunications, Inc. and United Artists Communications, Inc. This matter was filed in the United States District Court for the Eastern District of New York in September of 1989. Plaintiff alleges that defendant United Artists Telecommunications, Inc., by and through its parent United Artists Communications, Inc., the predecessor company of UAE (now a wholly-owned subsidiary of TCI), entered into an agreement with plaintiff wherein plaintiff was engaged as a manager to order, install and supervise telephone switching systems throughout the United States, and to order, install and supervise pay telephones in the Greater New York Metropolitan area, and that the defendants did wrongfully and in bad faith terminate the contract. Plaintiff seeks damages in excess of $100 million. Discovery has been completed. The defendants have filed a motion for summary judgement which is pending. Based upon the facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Company. I-16 19 On November 10, 1992, a complaint, captionedThe City of Chicago Heights, Illinois and Walter J. Pietrucha v. Nick Lobue, et. al., was filed in the Circuit Court of Cook County, Illinois. The complaint named numerous defendants including former public officials of the City of Chicago Heights and various companies that entered into contracts with the City during the period from 1976 to 1991, and alleged that such contracts were procured or maintained in violation of Illinois state law through a series of bribes, kickbacks and breaches of fiduciary duties. With respect to the Company, the complaint alleged that an unidentified attorney obtained a 15-year cable television franchise for the City of Chicago Heights on behalf of a subsidiary of the Company in 1981 as a result of bribes and illegal kickbacks made to certain of the public officials named as defendants in the action. Effective December 30, 1993, a settlement agreement was executed which resolved all claims against the Company. Pursuant to that settlement agreement, plaintiffs' claims against the Company were dismissed with prejudice on January 27, 1994. This represents the final resolution of this matter and, accordingly, this case will not be reported in future filings. Tyrone Belgrave, et al., vs. Tele-Communications, Inc., et al. On February 8, 1994, Tyrone Belgrave and 26 other current or former employees of United Cable Television of Baltimore Limited Partnership filed suit in the Circuit Court for Baltimore City against Tele-Communications, Inc., TCI East, Inc., UCTC of Baltimore, Inc., and United Cable Television of Baltimore Limited Partnership. The action alleges, inter alia, false imprisonment, assault, employment defamation, intentional infliction of emotional distress, invasion of privacy, wrongful discharge, and discrimination on the basis of race. The complaint also seeks divestiture of the Baltimore City cable franchise from the Company. Six counts in the complaint each seek compensatory damages of $1,000,000 per plaintiff, and punitive damages of $5,000,000 per plaintiff. Three other counts in the complaint each seek compensatory damages of $1,000,000 per plaintiff and punitive damages of $5,000,000 per plaintiff per defendant. The Company intends to contest the case. Based upon the facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Company. Euan Fannell v. Tele-Communications, Inc., et al. On February 8, 1994, Euan Fannell, the former general manager of UCTC of Baltimore, Inc. filed suit in the Circuit Court for Baltimore City against Tele-Communications, Inc., TCI East, Inc., UCTC of Baltimore, Inc., and United Cable Television of Baltimore Limited Partnership. The suit alleges, inter alia, employment defamation, intentional infliction of emotional distress, invasion of privacy, breach of contract, and discrimination on the basis of race. The complaint also seeks divestiture of the Baltimore City cable franchise of the Company. The plaintiff seeks $10,000,000 in compensatory damages and $50,000,000 in punitive damages with respect to the intentional infliction of emotional distress claim; and $10,000,000 in compensatory damages and $50,000,000 in punitive damages with respect to each of five other counts. The Company intends to contest the case. Based upon the facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Company. I-17 20 Leonie Palumbo, et al. v. Tele-Communications, Inc., et al. On February 8, 1994, Leonie Palumbo, a former employee of TCI East, Inc., filed a class action suit in the United States District Court for the District of Columbia against Tele-Communications, Inc., John Malone, and J.C. Sparkman. The action alleges, on behalf of a class of past, present and future black employees of the Company, and all past, present and future black applicants for employment with the Company, discrimination on the basis of race. The complaint seeks unspecified compensation and punitive damages as well as injunctive relief for these violations. The Company intends to contest the action. Based upon the facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Company. Les Dunnaville v. United Artists Cable, et al. On February 9, 1994, Les Dunnaville and Jay Sharrieff, former employees of United Cable Television of Baltimore Limited Partnership, filed an amended complaint in the Circuit Court for Baltimore City against United Cable Television of Baltimore Limited Partnership, TCI Cablevision of Maryland, Tele-Communications, Inc. and three company employees, Roy Harbert, Tony Peduto, and Richard Bushie (the suit was initially filed on December 3, 1993, but the parties agreed on December 30, 1993 that no responsive pleading would be due pending filing of an amended complaint). The action alleges, inter alia, intentional interference with contract, tortious interference with prospective advantage, defamation, false light, invasion of privacy, intentional infliction of emotional distress, civil conspiracy, violation of Maryland's Fair Employment Practices Law, and respondeat superior with respect to the individual defendants. Six counts in the complaint each seek compensatory damages of $1,000,000 and punitive damages of $1,000,000; the intentional infliction of emotional distress count seeks compensatory damages of $1,000,000 and punitive damages of $2,000,000; and the count which alleges violation of Maryland's Fair Employment Practices Law seeks damages of $500,000. The Company intends to contest the action. Based upon the facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Company. Item 4. Submission of Matters to a Vote of Security Holders. None. I-18 21 PART II. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. Shares of the Company's Class A and Class B common stock are traded in the over-the-counter market on the Nasdaq National Market under the symbols TCOMA and TCOMB, respectively. The following table sets forth the range of high and low sales prices of shares of Class A and Class B common stock for the periods indicated as furnished by Nasdaq. The prices have been rounded up to the nearest eighth, and do not include retail markups, markdowns, or commissions.
Class A Class B -------------- -------------- High Low High Low ---- --- ---- --- 1992: ---- First quarter 18-1/8 15-3/8 17-3/4 15-1/2 Second quarter 20 16-1/8 19-1/2 16-1/4 Third quarter 20-7/8 16-3/4 20-3/4 17 Fourth quarter 22 16-1/2 21-3/4 16-1/2 1993: ---- First quarter 25-1/2 20-3/4 25-1/2 21 Second quarter 24 17-1/2 24 18-3/8 Third quarter 26-3/4 21-5/8 27 22 Fourth quarter 33-1/4 24-7/8 40 25-1/2
As of January 31, 1994, there were 7,663 holders of record of the Company's Class A common stock and 692 holders of record of the Company's Class B common stock (which amounts do not include the number of shareholders whose shares are held of record by brokerage houses but include each brokerage house as one shareholder). The Company has not paid cash dividends on its Class A or Class B common stock and has no present intention of so doing. Payment of cash dividends, if any, in the future will be determined by the Company's Board of Directors in light of the Company's earnings, financial condition and other relevant considerations. Certain loan agreements contain provisions that limit the amount of dividends, other than stock dividends, that the Company may pay (see note 6 to the consolidated financial statements). See also related discussion under the caption Management's Discussion and Analysis of Financial Condition and Results of Operations. II-1 22 Item 6. Selected Financial Data. The following tables present selected information relating to the financial condition and results of operations of the Company for the past five years.
December 31, -------------------------------------------------- 1993 1992 * 1991 * 1990 * 1989 * ------ ------ ------ ------ ------ amounts in millions Summary Balance Sheet Data: - -------------------------- Property and equipment, net $ 4,935 4,562 4,081 4,156 3,692 Franchise costs, net $ 9,197 9,300 8,104 7,348 6,811 Net assets of discontinued operations $ -- -- 242 54 580 Total assets $16,520 16,310 15,166 14,106 13,560 Debt $ 9,900 10,285 9,455 8,922 8,007 Stockholders' equity $ 2,112 1,726 1,570 748 840 Shares outstanding (net of treasury shares): Class A common stock 403 382 370 310 305 Class B common stock 47 48 49 48 48
(continued) II-2 23
Years ended December 31, ------------------------------------------ 1993 1992* 1991 * 1990 * 1989 * ------ ------ ------ ------ ------ amounts in millions, except per share data Summary of - ---------- Operations Data: --------------- Revenue $ 4,153 3,574 3,214 2,940 2,358 Operating income $ 916 864 674 546 455 Earnings (loss) from: Continuing operations $ (7) 7 (78) (191) (262) Discontinued operations -- (15) (19) (63) (3) ------- ------ ------ ------ ------ (7) (8) (97) (254) (265) Dividend requirement on redeemable preferred stocks (2) (15) -- -- -- ------- ----- ------ ------ ------ Net loss attributable to common shareholders $ (9) (23) (97) (254) (265) ======= ====== ====== ====== ====== Loss attributable to common shareholders per common share: Continuing operations $ (.02) (.01) (.22) (.54) (.74) Discontinued operations -- (.04) (.05) (.18) (.01) ------- ------ ------ ------ ------ $ (.02) (.05) (.27) (.72) (.75) ======= ====== ====== ====== ====== Weighted average common shares outstanding 433 424 360 355 353
____________________ *Restated and reclassified - see notes to consolidated financial statements included in Part II of this Report. II-3 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Summary of Operation The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to revenue and the percentage increase or decrease of the dollar amount of such items as compared to the prior period. This summary provides trend data relating to the Company's normal recurring operations. Other items of significance are discussed separately under the captions "Other Income and Expense", "Income Taxes" and "Net Loss" below. Amounts set forth below reflect the Company's motion picture theatre exhibition industry segment as discontinued operations. Additionally, amounts set forth below have been restated to reflect the Company's implementation of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement No. 109").
Relationship to Period to Period Revenue Increase Years ended Years ended December 31, December 31, ------------------------ ----------------- 1993 1992 1991 1992-93 1991-92 ------ ------ ------ ------- ------- Revenue 100.0% 100.0% 100.0% 16.2% 11.2% Operating costs and expenses before depreciation and amortization 56.0 54.4 55.5 19.5% 9.1% Depreciation and amortization 21.9 21.4 23.5 19.2% 1.1% ----- ----- ----- Operating income 22.1% 24.2% 21.0% 6.0% 28.2% ===== ===== =====
Revenue increased by approximately 16.2% from 1992 to 1993. Such increase was the result of an acquisition in late 1992 (10%), growth in subscriber levels within the Company's cable television systems (4%) and increases in prices charged for cable services (3%), net of a decrease in revenue (1%) due to rate reductions required by rate regulation implemented pursuant to the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"). Revenue increased 11.2% from 1991 to 1992. Approximately 3% to 5% of such increase resulted from growth in subscriber levels within the Company's cable television systems and additional services sold to existing customers and 5% to 7% resulted from increases in prices charged for cable services. In 1994, the Company anticipates that it will experience a decrease in the price charged for those services that are subject to rate regulation under the 1992 Cable Act. See related discussion below. Operating costs and expenses have historically remained relatively constant as a percentage of revenue. However, operating costs and expenses increased in 1993 primarily as a result of an acquisition in late 1992. Additionally, in 1993, the Company incurred certain one-time direct charges relating to the implementation of the new Federal Communications Commission ("FCC") regulations, as further described below. The Company made several separate grants (in 1992 and 1993) of stock options issued in tandem with stock appreciation rights. The Company recorded compensation relating to such stock appreciation rights of $31 million and $1 million in 1993 and 1992, respectively. II-4 25 In 1992, the Company experienced an improvement in its operating costs and expenses due primarily to certain efficiencies and cost savings arising from the integration of the operations and management of United Artists Entertainment Company ("UAE") upon TCI's acquisition in late 1991 of the remaining minority interests in the equity of UAE. Additionally, during 1992, the Company streamlined its operating structure through the consolidation of three of its regional operating divisions into two divisions. In connection with the consolidation of these divisional offices, the Company incurred restructuring charges of approximately $8 million which are reflected in the accompanying consolidated financial statements for the year ended December 31, 1992. The Company cannot determine whether and to what extent increases in the cost of programming will effect its operating costs. Additionally, the Company cannot predict how these increases in the cost of programming will affect its revenue but intends to recover additional costs to the extent allowed by the FCC's rate regulations as described below. Effective April 1, 1993, based upon changes in FCC regulations, the Company revised its estimate of the useful lives of certain distribution equipment to correspond to the Company's anticipated remaining period of ownership of such equipment. The revision resulted in a decrease in net earnings of approximately $12 million (or $.03 per share) for the year ended December 31, 1993. On October 5, 1992, Congress enacted the 1992 Cable Act. In 1993, the FCC adopted certain rate regulations required by the 1992 Cable Act and imposed a moratorium on certain rate increases. Such rate regulations became effective on September 1, 1993. The rate increase moratorium, which began on April 5, 1993, continues in effect through May 15, 1994 for franchise areas not subject to regulation. As a result of such actions, the Company's basic and tier service rates and its equipment and installation charges (the "Regulated Services") are subject to the jurisdiction of local franchising authorities and the FCC. Basic and tier service rates are evaluated against competitive benchmark rates as published by the FCC, and equipment and installation charges are based on actual costs. Any rates for Regulated Services that exceeded the benchmarks were reduced as required by the 1993 rate regulations. The rate regulations do not apply to the relatively few systems which are subject to "effective competition" or to services offered on an individual service basis, such as premium movie and pay-per-view services. The Company's new rates for Regulated Services, which were implemented September 1, 1993, are subject to review by the FCC if a complaint has been filed or the appropriate local franchising authority if such authority has been certified. The Company estimated that, on an annualized basis, implementation of the 1993 rate regulations would result in a reduction to revenue ranging from $140 million to $160 million. The Company experienced a $44 million revenue reduction during the four months ended December 31, 1993 and incurred $21 million in one-time direct expenses in connection with the implementation of the FCC's regulations. II-5 26 On February 22, 1994, the FCC announced that it had adopted revised benchmark rate regulations which will apply to rates and charges for Regulated Services on and after the effective date of these rules. After its initial review of the effect of the FCC further rate reductions, the Company estimated that its revenue could be further decreased by approximately $144 million on an annualized basis. The estimate was based upon the FCC Executive Summary dated February 22, 1994 which stated that those cable television systems electing not to make a cost-of-service showing will be required to set their rates for Regulated Services at a level equal to the higher of the FCC's revised benchmark rates or the operator's September 30, 1992 rates minus 17 percent. Thus, the revised benchmarks may result in additional rate reductions of up to 7 percent beyond the maximum reductions established under the FCC's initial benchmark regulations. Although the text of the FCC's benchmark regulation has not been released, it is currently anticipated that the rules will take effect on or about May 15, 1994. The actual reduction in revenue may differ depending on the terms of the final regulations and the completion of a more detailed analysis of the new rate regulations and the Company's rates and services. The estimated reductions in revenue resulting from the FCC's actions in 1993 and 1994 are prior to any possible mitigating factors (none of which is assured) such as (i) the provision of alternate service offerings (ii) the implementation of rate adjustments to non-regulated services and (iii) the utilization of cost-of-service methodologies, as described below. The FCC's benchmark rate regulations permit cable operators to adjust rates to account for inflation and increases in certain external costs, including increases in programming costs and compulsory copyright fees, to the extent such increases exceed the rate of inflation. However, these increases may be required to be offset by a productivity factor. The revised benchmark regulations also provide a mechanism for adjusting rates when regulated tiers are affected by channel additions or deletions. The FCC has indicated that cable operators adding or deleting channels on a regulated tier will be required to adjust the per-channel benchmark for that tier based on the number of channels offered after the addition or deletion. The FCC also stated that the additional programming costs resulting from channel additions will be accorded the same external treatment as other program cost increases, and that cable operators will be permitted to recover a mark-up on their programming expenses. On February 22, 1994, the FCC also adopted interim "cost-of-service" rules governing attempts by cable operators to justify higher than benchmark rates based on unusually high costs. Under this methodology, cable operators may recover, through the rates they charge for Regulated Service, their normal operating expenses plus an interim rate of return of 11.25%, which rate may be subject to change in the future. Based on the foregoing, the Company believes that the 1993 and 1994 rate regulations will have a material adverse effect on its results of operations. Other Income and Expens The Company's weighted average interest rate on borrowings was 7.2%, 7.6% and 9.0% during 1993, 1992 and 1991, respectively. At December 31, 1993, after considering the net effect of various interest rate hedge and exchange agreements (see note 6 to the consolidated financial statements) aggregating $1,322 million, the Company had $5,123 million (or 52%) of fixed-rate debt with a weighted average interest rate of 9.0% and $4,777 million (or 48%) of variable-rate debt with interest rates approximating the prime rate (6% at December 31, 1993). II-6 27 The Company is a partner in certain joint ventures that are currently operating and constructing cable television and telephone systems in the United Kingdom and other parts of Europe. These joint ventures, which are accounted for under the equity method, have generated losses of which the Company's share in 1993 and 1992 amounted to $47 million and $37 million, respectively, including $3 million and $6 million in 1993 and 1992, respectively, resulting from foreign currency transaction losses. In contrast to the Company's domestic operations, the Company's results of operations in the United Kingdom and Europe will continue to be subject to fluctuations in the applicable foreign currency exchange rates. At December 31, 1993, the Company's stockholders' equity includes a cumulative foreign currency translation loss of $29 million. The Company sold certain investments and other assets for an aggregate net pre-tax gain of $42 million, $9 million and $43 million in 1993, 1992 and 1991, respectively. During 1993, 1992 and 1991, the Company recorded losses of $17 million, $67 million and $7 million, respectively, from early extinguishment of debt during such periods. Included in the 1992 amount was $52 million from the extinguishment of the SCI Holdings, Inc. ("SCI") indebtedness (see note 4 to the consolidated financial statements). There may be additional losses associated with early extinguishments of debt in the future. Interest and dividend income was $34 million, $69 million and $53 million in 1993, 1992 and 1991, respectively. Included in the 1992 and 1991 amounts was $30 million and $26 million, respectively, earned on the preferred stock investment that was repurchased by a subsidiary of SCI in 1992 (see note 4 to the consolidated financial statements). In connection with such repurchase, the Company received a premium amounting to $14 million which has been separately reflected in the accompanying consolidated statement of operations. Income Taxes The Company has adopted Statement No. 109. Statement No. 109 changed the Company's method of accounting for income taxes from the deferred method to the asset and liability method. The Company restated its financial statements for the years beginning January 1, 1986 through December 31, 1992. The effect of the implementation of Statement No. 109 at December 31, 1992 was a $2 million decrease in receivables, $48 million net increase in investments, $178 million net increase in property and equipment, $2,901 million net increase in franchise costs, $2 million increase in other assets, $34 million increase in other liabilities, $2,865 million increase in deferred taxes payable and $228 million decrease in accumulated deficit. Under Statement No. 109, the effect on deferred taxes of a change in tax rates is recognized in the consolidated statement of operations in the period that includes the enactment. New tax legislation was enacted in the third quarter of 1993 which, among other matters, increased the corporate Federal income tax rate from 34% to 35%. The Company has reflected the tax rate change in its consolidated statements of operations in accordance with the treatment prescribed by Statement No. 109. Such tax rate change resulted in an increase of $76 million to the Company's income tax expense and deferred income tax liability. II-7 28 Net Loss The Company's loss (before preferred stock dividends) of $7 million for the year ended December 31, 1993 represented a decrease of $14 million as compared to the Company's earnings from continuing operations of $7 million for the corresponding period of 1992. Such decline was due primarily to an increase in income tax expense arising from the aforementioned tax rate change enacted in the third quarter of 1993, an increase in compensation relating to stock appreciation rights and the reduction of interest and dividend income resulting from the disposition at the end of 1992 of a preferred stock investment, net of an increase in gain on disposition of assets, a reduction in loss from early extinguishment of debt and a reduction in minority interest in earnings of consolidated subsidiaries attributable to the repurchase of certain preferred stock of a consolidated subsidiary. The Company's earnings from continuing operations (before preferred stock dividends) for 1992 of $7 million represented an improvement as compared to the Company's net loss from continuing operations of $78 million for the corresponding period of 1991 due primarily to improved operating results by the Company in its cable television business. Also, the general decline in interest rates had a positive impact on the Company's net results. On March 28, 1991, the Company contributed its interests in certain of its cable television programming businesses and cable television systems to Liberty Media Corporation ("Liberty") in exchange for several different classes and series of preferred stock of Liberty. On that same date, Liberty issued shares of its common stock to TCI shareholders (certain of whom were TCI officers and directors) who tendered shares of TCI Class A and Class B common stock pursuant to an exchange offer (see note 3 to the accompanying consolidated financial statements). Due to the significant economic interest held by TCI through its ownership of Liberty preferred stock and Liberty common stock and other related party considerations, TCI has accounted for its investment in Liberty under the equity method. The Company does not recognize any income relating to dividends, including preferred stock dividends, and the Company has continued to record earnings or losses generated by the interests contributed to Liberty (by recognizing 100% of Liberty's earnings or losses before deducting preferred stock dividends). Consequently, the contribution of such assets to Liberty has had no effect on the net reported results of the Company. For a discussion of the proposed merger of Liberty and TCI, see Liquidity and Capital Resources below. On May 12, 1992, the Company sold its motion picture theatre business and certain theatre-related real estate assets (see note 12 to the accompanying consolidated financial statements). Accordingly, the operations of the Company's motion picture theatre exhibition industry segment have been reclassified and reflected as "discontinued operations" in the accompanying consolidated financial statements. Inflation has not had a significant impact on the Company's results of operations during the three-year period ended December 31, 1993. Recent Accounting Pronouncements In November of 1992, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("Statement No. 112"). As the Company's present accounting policies generally are in conformity with the provisions of Statement No. 112, the Company does not believe that Statement No. 112 will have a material effect on the Company. Statement No. 112 is effective for years beginning after December 31, 1994. II-8 29 In May 1993, the FASB issued Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("Statement No. 114"). As the Company's present accounting policies generally are in conformity with the provisions of Statement No. 114, the Company does not expect that Statement No. 114 will have a material effect on the Company's consolidated financial statements. Statement No. 114 is effective for years beginning after December 15, 1994. In May 1993, the FASB issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective for fiscal years beginning after December 15, 1993. Under the new rules, debt securities that the Company has both the positive intent and ability to hold to maturity are carried at amortized cost. Debt securities that the Company does not have the positive intent and ability to hold to maturity and all marketable equity securities are classified as available-for-sale or trading and carried at fair value. Unrealized holding gains and losses on securities classified as available- for sale are carried as a separate component of shareholders' equity. Unrealized holding gains and losses on securities classified as trading are reported in earnings. The Company holds no material debt securities. Marketable equity securities are currently reported by the Company at the lower of cost or market ("LOCOM") and net unrealized losses are reported in earnings. The Company will apply the new rules starting in the first quarter of 1994. Application of the new rules will result in an estimated increase of approximately $300 million in stockholders' equity as of January 1 1994, representing the recognition of unrealized appreciation, net of taxes, for the Company's investment in equity securities determined to be available-for-sale, previously carried at LOCOM. Liquidity and Capital Resource On January 31, 1994, TCI announced that TCI and Liberty had entered into a definitive agreement (the "TCI/Liberty Agreement"), dated as of January 27, 1994 to combine the two companies. As previously announced, the transaction will be structured as a tax free exchange of Class A and Class B shares of both companies and preferred stock of Liberty for like shares of a newly formed holding company, TCI/Liberty Holding Company ("TCI/Liberty"). TCI shareholders will receive one share of TCI/Liberty for each of their shares. Liberty common shareholders will receive 0.975 of a share of TCI/Liberty for each of their common shares. The transaction is subject to the approval of both sets of shareholders as well as various regulatory approvals and other customary conditions. Subject to timely receipt of such approvals, which cannot be assured, it is anticipated the closing of such transaction will take place during 1994. The Company generally finances acquisitions and capital expenditures through net cash provided by operating and financing activities. Although amounts expended for acquisitions and capital expenditures exceed net cash provided by operating activities, the borrowing capacity resulting from such acquisitions, construction and internal growth has been and is expected to continue to be adequate to fund the shortfall. See the Company's consolidated statements of cash flows included in the accompanying consolidated financial statements. II-9 30 The Company had approximately $1.4 billion in unused lines of credit at December 31, 1993, excluding amounts related to lines of credit which provide availability to support commercial paper. Although the Company was in compliance with the restrictive covenants contained in its credit facilities at said date, additional borrowings under the credit facilities are subject to the Company's continuing compliance with such restrictive covenants (which relate primarily to the maintenance of certain ratios of cash flow to total debt and cash flow to debt service, as defined). Based upon preliminary calculations, the Company believes that the aforementioned 1993 and 1994 rate regulations will not materially impact the availability under its lines of credit or its ability to repay indebtedness as it matures. See note 6 to the accompanying consolidated financial statements for additional information regarding the material terms of the Company's lines of credit. In October of 1992, the Company received full investment grade status by all accredited rating agencies. Such ratings added to the Company's ability to sell publicly greater amounts of fixed-rate debt securities with longer maturities. The increased maturities of the debt securities sold by the Company and the use of the proceeds of such sales to decrease bank borrowings are expected to improve the Company's liquidity due to decreased principal payments required in the next five years. During the year ended December 31, 1993, the Company sold $3 billion of publicly-placed fixed-rate senior notes with interest rates ranging from 4.81% to 9.25% and maturity dates ranging from 1995 to 2023. The proceeds from the sale of these notes were used to repay variable-rate bank debt. On October 28, 1993, the Company called for redemption all of its remaining Liquid Yield OptionTM Notes. In connection with such call for redemption, Notes aggregating $405 million were converted into 18,694,377 shares of Class A common stock and Notes aggregating less than $1 million were redeemed together with accrued interest to the redemption date. Prior to the aforementioned redemption, Notes aggregating $6 million were converted into 259,537 shares of TCI Class A common stock during 1993. One measure of liquidity is commonly referred to as "interest coverage." Interest coverage, which is measured by the ratio of operating income before depreciation, amortization and other non-cash operating expenses ($1,858 million, $1,637 million and $1,430 million in 1993, 1992 and 1991, respectively) to interest expense ($731 million, $718 million and $826 million in 1993, 1992 and 1991, respectively), is determined by reference to the consolidated statements of operations. The Company's interest coverage ratio was 254%, 228% and 173% for 1993, 1992 and 1991, respectively. Management of the Company believes that the foregoing interest coverage ratio is adequate in light of the consistency and nonseasonal nature of its cable television operations and the relative predictability of the Company's interest expense, more than half of which results from fixed rate indebtedness. The Company's improved operating results in 1993 and 1992 and a general decline in interest rates during 1992 led to an improvement in the Company's interest coverage ratio. As security for borrowings under one of its credit facilities, the Company pledged a portion of the common stock it holds of Turner Broadcasting System, Inc. ("TBS") having a value of approximately $643 million at December 31, 1993. Borrowings under this credit facility (which amounted to $250 million at December 31, 1993) are due in August of 1994. On or before such date, the Company expects to repay these borrowings. II-10 31 Approximately thirty-five percent of the franchises held by the Company, involving approximately 3.8 million basic subscribers, expire within five years. There can be no assurance that the franchises for the Company's systems will be renewed as they expire although the Company believes that its cable television systems generally have been operated in a manner which satisfies the standards established by the Cable Communications Policy Act of 1984 for franchise renewal. However, in the event they are renewed, the Company cannot predict the impact of any new or different conditions that might be imposed by the franchising authorities in connection with such renewals. The Company is upgrading and installing optical fiber in its cable systems at a rate such that in three years TCI anticipates that it will be serving the majority of its customers with state-of-the-art fiber optic cable systems. The Company made capital expenditures of $947 million in 1993 and the Company's capital budget for 1994 is $1.2 billion to provide for the continued rebuilding of its cable systems. The Company has suspended $500 million of its 1994 capital spending pending further clarification of the FCC's February 22, 1994 revised benchmark regulations and the FCC's announced intention to adopt an experimental incentive plan which would provide cable operators with incentives to upgrade their systems and offer new services. The Company is obligated to pay fees for the license to exhibit certain qualifying films that are released theatrically by various motion picture studios from January 1, 1993 through December 31, 2002 (the "Film License Obligations"). The aggregate minimum liability under certain of the license agreements is approximately $105 million. The aggregate amount of the Film License Obligations under other license agreements is not currently estimable because such amount is dependent upon the number of qualifying films produced by the motion picture studios, the amount of United States theatrical film rentals for such qualifying films, and certain other factors. Nevertheless, the Company's aggregate payments under the Film License Obligations could prove to be significant. The Company believes that it has complied in all material respects with the provisions of the 1992 Cable Act, including its rate setting provisions. However, the Company's rates for regulated services are subject to review. If, as a result of this process, a system cannot substantiate its rates, it could be required to retroactively reduce its rates to the appropriate benchmark and refund the excess portion of rates received since September 1, 1993. The amount of refunds, if any, which could be payable by the Company in the event that systems' rates are successfully challenged by franchising authorities is not currently estimable. The Company's various partnerships and other affiliates accounted for under the equity method generally fund their acquisitions, required debt repayments and capital expenditures through borrowings under and refinancing of their own credit facilities (which are generally not guaranteed by the Company) and through net cash provided by their own operating activities. Certain subsidiaries' loan agreements contain restrictions regarding transfers of funds to the parent company in the form of loans, advances or cash dividends. The amount of net assets of such subsidiaries exceeds the Company's consolidated net assets. However, net cash provided by operating activities of other subsidiaries which are not restricted from making transfers to the parent company have been and are expected to continue to be sufficient to enable the parent company to meet its cash obligations. II-11 32 Management believes that net cash provided by operating activities, the Company's ability to obtain additional financing (including its available lines of credit and its access to public debt markets as an investment grade debt security issuer) and proceeds from disposition of assets will provide adequate sources of short-term and long-term liquidity in the future. Item 8. Financial Statements and Supplementary Data. The consolidated financial statements of the Company are filed under this Item, beginning on Page II-13. The financial statement schedules required by Regulation S-X are filed under Item 14 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. II-12 33 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Tele-Communications, Inc.: We have audited the accompanying consolidated balance sheets of Tele-Communications, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tele-Communications, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in notes 1 and 10 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." /s/ KPMG PEAT MARWICK KPMG Peat Marwick Denver, Colorado March 21, 1994 II-13 34 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1993 and 1992
Assets 1993 1992* - ------ ------ ------ amounts in millions Cash $ 1 34 Trade and other receivables, net 232 201 Investment in Liberty Media Corporation ("Liberty") (note 3) 489 432 Investment in other affiliates, accounted for under the equity method, and related receivables (note 4) 645 721 Investment in Turner Broadcasting System, Inc. (note 5) 491 491 Property and equipment, at cost: Land 73 71 Distribution systems 6,629 6,075 Support equipment and buildings 818 712 ------- ------ 7,520 6,858 Less accumulated depreciation 2,585 2,296 ------- ------ 4,935 4,562 ------- ------ Franchise costs 10,620 10,467 Less accumulated amortization 1,423 1,167 ------- ------ 9,197 9,300 ------- ------ Other assets, at cost, net of amortization 530 569 ------- ------ $16,520 16,310 ======= ======
*Reclassified and restated - see notes 1, 3 and 10. (continued) II-14 35 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Balance Sheets, continued
Liabilities and Stockholders' Equity 1993 1992* - ------------------------------------ ------ ------ amounts in millions Accounts payable $ 124 99 Accrued interest 157 94 Other accrued expenses 500 465 Debt (note 6) 9,900 10,285 Deferred income taxes (note 10) 3,310 3,164 Other liabilities 114 87 ------- ------ Total liabilities 14,105 14,194 ------- ------ Minority interests in equity of consolidated subsidiaries 285 280 Redeemable preferred stocks (note 7) 18 110 Stockholders' equity (note 8): Preferred stock, $1 par value. Authorized 10,000,000 shares, issued and outstanding 6,201 and 4,778,595 shares of redeemable preferred stocks in 1993 and 1992 -- -- Class A common stock, $1 par value. Authorized 1,000,000,000 shares; issued 481,837,347 shares in 1993 and 461,722,382 shares in 1992 482 462 Class B common stock, $1 par value. Authorized 100,000,000 shares; issued 47,258,787 shares in 1993 and 47,708,677 shares in 1992 47 48 Additional paid-in capital 2,293 1,909 Cumulative foreign currency translation adjustment (29) (19) Accumulated deficit (348) (341) ------- ------ 2,445 2,059 Treasury stock, at cost (79,335,038 shares of Class A common stock) (333) (333) ------- ------ Total stockholders' equity 2,112 1,726 ------- ------ Commitments and contingencies (note 11) $16,520 16,310 ======= ======
*Restated and reclassified - see notes 1, 3 and 10. See accompanying notes to consolidated financial statements. II-15 36 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 1993, 1992 and 1991
1993 1992 * 1991 * ------ ------ ------ amounts in millions, except per share amounts Revenue (note 3) $4,153 3,574 3,214 Operating costs and expenses: Operating (note 3) 1,190 1,028 1,021 Selling, general and administrative (note 4) 1,105 909 763 Compensation relating to stock appreciation rights (note 8) 31 1 -- Restructuring charge -- 8 -- Depreciation 622 512 529 Amortization 289 252 227 ------ ----- ----- 3,237 2,710 2,540 ------ ----- ----- Operating income 916 864 674 Other income (expense): Interest expense (731) (718) (826) Interest and dividend income 34 69 53 Share of earnings of Liberty (note 3) 4 22 40 Share of losses of other affiliates (note 4) (76) (105) (60) Gain on disposition of assets, net 42 9 43 Premium received on redemption of preferred stock investment (note 4) -- 14 -- Loss on early extinguishment of debt (notes 4 and 6) (17) (67) (7) Minority interests in earnings of consolidated subsidiaries, net (5) (41) (24) Other, net (6) (2) (1) ------ ----- ----- (755) (819) (782) ------ ----- ----- Earnings (loss) from continuing operations before income taxes 161 45 (108) Income tax benefit (expense) (note 10) (168) (38) 30 ------ ----- ----- Earnings (loss) from continuing operations (7) 7 (78) Loss from discontinued operations, net of income taxes (note 12) -- (15) (19) ------ ----- ----- Net loss (7) (8) (97) Dividend requirement on redeemable preferred stocks (2) (15) -- ------- ----- ----- Net loss attributable to common shareholders $ (9) (23) (97) ====== ===== ===== Loss attributable to common shareholders per common share (note 1): Continuing operations $ (.02) (.01) (.22) Discontinued operations -- (.04) (.05) ------ ----- ----- $ (.02) (.05) (.27) ====== ===== =====
*Restated and reclassified - see notes 1, 3 and 10. See accompanying notes to consolidated financial statements. II-16 37 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Years ended December 31, 1993, 1992 and 1991
Cumulative foreign Common stock Additional currency Total ------------ paid-in translation Accumulated Treasury stockholders' Class A Class B capital adjustment deficit * stock equity * ------- ------- ---------- ----------- --------- -------- ------------- amounts in millions Balance at January 1, 1991 $ 310 48 626 -- (236) -- 748 Net loss -- -- -- -- (97) -- (97) Issuance of common stock upon conversion of debentures -- -- 4 -- -- -- 4 Issuance of common stock upon exercise of options -- 2 3 -- -- -- 5 Income tax effect of stock option deduction -- -- 7 -- -- -- 7 Retirement of common stock upon redemption of Liberty preferred stock (5) -- (86) -- -- -- (91) Issuance of shares of Class A common stock for an acquisition 1 -- 10 -- -- -- 11 Issuance of common stock upon acquisition of remaining minority interest in UAE 143 -- 1,190 -- -- (333) 1,000 Acquisition and retirement of common stock -- (1) (16) -- -- -- (17) ----- --- ----- ---- ---- ---- ----- Balance at December 31, 1991 449 49 1,738 -- (333) (333) 1,570 Net loss -- -- -- -- (8) -- (8) Conversion of public debentures (note 6) 7 -- 105 -- -- -- 112 Issuance of common stock upon exercise of options 1 -- 13 -- -- -- 14 Issuance of Class A common stock for acquisition and investment 5 -- 93 -- -- -- 98 Dividends on redeemable preferred stocks -- -- (15) -- -- -- (15) Foreign currency translation adjustment -- -- -- (19) -- -- (19) Acquisition and retirement of common stock -- (1) (25) -- -- -- (26) ----- --- ----- ---- ---- ---- ----- Balance at December 31, 1992 462 48 1,909 (19) (341) (333) 1,726 Net loss -- -- -- -- (7) -- (7) Issuance of common stock upon conversion of notes (note 6) 20 -- 383 -- -- -- 403 Issuance of common stock upon exercise of options -- -- 7 -- -- -- 7 Dividends on redeemable preferred stocks -- -- (2) -- -- -- (2) Foreign currency translation adjustment -- -- -- (10) -- -- (10) Acquisition and retirement of common stock -- (1) (4) -- -- -- (5) ----- --- ----- ---- ---- ---- ----- Balance at December 31, 1993 $ 482 47 2,293 (29) (348) (333) 2,112 ===== === ===== ==== ==== ==== =====
*Restated - see notes 1, 3 and 10. See accompanying notes to consolidated financial statements. II-17 38 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1993, 1992 and 1991
1993 1992 * 1991 * ------ ------ ------ amounts in millions (see note 2) Cash flows from operating activities: Net loss $ (7) (8) (97) Adjustments to reconcile net loss to net cash provided by operating activities: Discontinued operations -- 15 19 Restructuring charge -- 8 -- Payment of restructuring charge (8) -- -- Depreciation and amortization 911 764 756 Share of earnings of Liberty (4) (22) (40) Share of losses of other affiliates 76 105 60 Gain on disposition of assets (42) (9) (43) Premium received on preferred stock investment redemption -- (14) -- Payment of premium received on preferred stock investment redemption 14 -- -- Loss on early extinguishment of debt 17 67 7 Compensation relating to stock appreciation rights 31 1 -- Payment for stock appreciation rights -- (80) (45) Minority interests in earnings 5 41 24 Deferred income tax expense (benefit) 139 28 (39) Amortization of debt discount 27 27 16 Noncash interest and dividend income (7) (40) (28) Other noncash charges -- -- (2) Changes in operating assets and liabilities, net of the effect of acquisitions: Change in receivables (32) (3) (36) Change in accrued interest 63 -- (14) Change in other accruals and payables 68 77 45 ------- ----- ----- Net cash provided by operating activities 1,251 957 583 ------- ----- ----- Cash flows from investing activities: Cash paid for acquisitions (158) (1,256) (399) Capital expended for property and equipment (947) (526) (566) Cash proceeds from disposition of assets 149 66 103 Cash proceeds from disposition of discontinued operations -- 220 -- Discontinued operations -- 9 31 Additional investments in and loans to affiliates and others (361) (205) (192) Payment received on preferred stock investment redemption 183 -- -- Return of capital from affiliates 1 1 34 Repayment of loans by affiliates and others 62 32 35 Other investing activities (99) (155) (138) ------- ----- ----- Net cash used in investing activities (1,170) (1,814) (1,092) ------- ----- -----
(continued) II-18 39 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Years ended December 31, 1993, 1992 and 1991
1993 1992 * 1991 * ------ ------ ------ amounts in millions (see note 2) Cash flows from financing activities: Borrowings of debt 6,305 5,354 5,918 Repayments of debt (6,321) (4,435) (5,412) Borrowings of short-term notes to affiliate -- -- 22 Repayment of short-term notes to affiliate -- (22) -- Sales of equity securities of subsidiaries -- -- 9 Preferred stock dividends of subsidiaries (6) (6) (19) Preferred stock dividends (2) (15) -- Repurchase of preferred stock (92) (5) -- Issuances of common stock 6 7 2 Repurchases of common stock (4) (19) (9) ------- ----- ----- Net cash provided (used) by financing activities (114) 859 511 ------- ----- ----- Net increase (decrease) in cash (33) 2 2 Cash at beginning of year 34 32 30 ------- ----- ----- Cash at end of year $ 1 34 32 ======= ===== =====
*Restated and reclassified - see notes 1, 3 and 10. See accompanying notes to consolidated financial statements. II-19 40 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1993, 1992 and 1991 (1) Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Tele-Communications, Inc. and those of all majority-owned subsidiaries ("TCI" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. Restated Financial Statements for Implementation of Statement of Financial Accounting Standards No. 109, "Accounting fo Income Taxes" Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 ("Statement No. 109"), "Accounting for Income Taxes" and has applied the provisions of Statement No. 109 retroactively to January 1, 1986. The accompanying 1992 and 1991 consolidated financial statements and related notes have been restated to reflect the implementation of Statement No. 109. See note 10. Receivable Receivables are reflected net of an allowance for doubtful accounts. Such allowance at December 31, 1993 and 1992 was not material. Investment Investments in which the ownership interest is less than 20% are generally carried at cost. Investments in marketable equity securities are carried at the lower of aggregate cost or market and any declines in value which are other than temporary are reflected as a reduction in the Company's carrying value of such investment. For those investments in affiliates in which the Company's voting interest is 20% to 50%, the equity method of accounting is generally used. Under this method, the investment, originally recorded at cost, is adjusted to recognize the Company's share of the net earnings or losses of the affiliates as they occur rather than as dividends or other distributions are received, limited to the extent of the Company's investment in, advances to and guarantees for the investee. The Company's share of net earnings or losses of affiliates includes the amortization of purchase adjustments. Property and Equipment Property and equipment is stated at cost, including acquisition costs allocated to tangible assets acquired. Construction costs, including interest during construction and applicable overhead, are capitalized. During 1993, 1992 and 1991, interest capitalized was not material. (continued) II-20 41 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Depreciation is computed on a straight-line basis using estimated useful lives of 3 to 15 years for distribution systems and 3 to 40 years for support equipment and buildings. Beginning in April of 1993, based upon changes in FCC regulations, the Company revised its estimate of useful lives of certain distribution equipment to correspond to the Company's anticipated remaining period of ownership of such equipment. This revision resulted in a decrease to net earnings of approximately $12 million ($.03 per share) for the year ended December 31, 1993. Repairs and maintenance are charged to operations, and renewals and additions are capitalized. At the time of ordinary retirements, sales or other dispositions of property, the original cost and cost of removal of such property are charged to accumulated depreciation, and salvage, if any, is credited thereto. Gains or losses are only recognized in connection with the sales of properties in their entirety. However, recognition of gains on sales of properties to affiliates accounted for under the equity method is deferred in proportion to the Company's ownership interest in such affiliates. Franchise Costs Franchise costs include the difference between the cost of acquiring cable television systems and amounts assigned to their tangible assets. Such amounts are generally amortized on a straight-line basis over 40 years. Costs incurred by the Company in obtaining franchises are being amortized on a straight-line basis over the life of the franchise, generally 10 to 20 years. Minority Interests Recognition of minority interests' share of losses of consolidated subsidiaries is limited to the amount of such minority interests' allocable portion of the common equity of those consolidated subsidiaries. Further, the minority interests' share of losses is not recognized if the minority holders of common equity of consolidated subsidiaries have the right to cause the Company to repurchase such holders' common equity. Included in minority interests in equity of consolidated subsidiaries are $50 million and $46 million at December 31, 1993 and 1992, respectively, of preferred stocks (and accumulated dividends thereon) of certain subsidiaries. The current dividend requirements on these preferred stocks aggregate $6 million per annum and such dividend requirements are reflected as minority interests in the accompanying consolidated statements of operations. Foreign Currency Translatio All balance sheet accounts of foreign investments are translated at the current exchange rate as of the end of the accounting period. Statement of operations items are translated at average currency exchange rates. The resulting translation adjustment is recorded as a separate component of stockholders' equity. (continued) II-21 42 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Loss Per Common Shares The loss per common share for 1993, 1992 and 1991 was computed by dividing net loss by the weighted average number of common shares outstanding during such periods (432.6 million, 424.1 million and 359.9 million for 1993, 1992 and 1991, respectively). Common stock equivalents were not included in the computation of weighted average shares outstanding because their inclusion would be anti-dilutive. Reclassification Certain amounts have been reclassified for comparability with the 1993 presentation. (2) Supplemental Disclosures to Consolidated Statements of Cash Flows Cash paid for interest was $641 million, $689 million and $829 million for 1993, 1992 and 1991, respectively. Also, during these years, cash paid for income taxes was not material. Significant noncash investing and financing activities are as follows: Years ended December 31, ------------------------ 1993 1992 1991 ---- ---- ---- amounts in millions Acquisitions: Fair value of assets acquired $ 172 1,231 1,877 Liabilities assumed, net of current assets (7) 21 (12) Deferred tax asset (liability) recorded in acquisitions (7) 7 (337) Minority interests in equity of acquired entities -- -- (3) Value of TCI preferred stock issued in acquisitions -- -- (115) Value of TCI common stock issued in acquisitions -- (3) (1,011) ------ ----- ------ Cash paid for acquisitions $ 158 1,256 399 ====== ===== ====== Value of TCI Class A common stock issued as part of purchase price of equity investment $ -- 95 -- ====== ===== ====== Note received upon disposition of assets $ -- 15 -- ====== ===== ====== Contribution of certain interests to Liberty in exchange for preferred stock (see note 3) $ -- -- 530 ====== ===== ====== Common stock received upon redemption of preferred stock of Liberty (see note 3) $ -- -- 91 ====== ===== ====== (continued) II-22 43 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Years ended December 31, ------------------------ 1993 1992 1991 ---- ---- ---- amounts in millions Receipt of notes receivable upon disposition of Liberty common stock and preferred stock (note 3) $ 182 -- -- ====== ===== ===== Noncash capital contribution to Community Cable Television ("CCT") (note 3) $ 22 -- -- ====== ===== ===== Noncash exchange of equity investment for consolidated subsidiary and equity investment $ 22 -- -- ====== ===== ===== Contribution of assets to an affiliate $ -- -- 108 ====== ===== ===== Effect of foreign currency translation adjustment on book value of foreign equity investments $ 10 19 -- ====== ===== ===== Common stock issued upon conversion of notes (with accrued interest through conversion) $ 403 112 4 ====== ===== ===== Common stock surrendered in lieu of cash upon exercise of stock options $ 1 7 3 ====== ===== ===== Note payable issued for repurchase of common stock $ -- -- 5 ====== ===== ===== Exchange of preferred stock investment for marketable equity securities $ -- -- 156 ====== ===== ===== Deferred tax liability resulting from stock option deduction $ -- -- 7 ====== ===== ===== (3) Investment in Liberty As of January 27, 1994, TCI and Liberty entered into a definitive agreement to combine the two companies. The transaction will be structured as a tax free exchange of Class A and Class B shares of both companies and preferred stock of Liberty for like shares of a newly formed holding company, TCI/Liberty Holding Company ("TCI/Liberty"). TCI shareholders will receive one share of TCI/Liberty for each of their shares. Liberty common shareholders will receive 0.975 of a share of TCI/Liberty for each of their common shares. The transaction is subject to the approval of both sets of shareholders as well as various regulatory approvals and other customary conditions. Subject to timely receipt of such approvals, which cannot be assured, it is anticipated the closing of such transaction will take place during 1994. (continued) II-23 44 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements TCI owns 3,477,778 shares of Liberty Class A common stock (after giving effect to the repurchase by Liberty during the year ended December 31, 1993 of 927,900 shares of Class A common stock) and 55,070 shares of Liberty Class E, 6% Cumulative Redeemable Exchangeable Junior Preferred Stock received in January of 1993 upon conversion of the Liberty Class A Redeemable Convertible Preferred Stock. Such common shares represent less than 5% of the outstanding Class A common stock of Liberty. Of the remaining classes of preferred stock of Liberty held by the Company, one class entitles TCI to elect a number of members of Liberty's board of directors equal to no less than 11% of the total number of directors and another class is exchangeable for TCI common stock. Due to the significant economic interest held by TCI through its ownership of Liberty preferred stock and Liberty common stock and other related party considerations, TCI has accounted for its investment in Liberty under the equity method. Accordingly, the Company has not recognized any income relating to dividends, including preferred stock dividends, and the Company has continued to record the earnings or losses generated by the interests contributed to Liberty (by recognizing 100% of Liberty's earnings or losses before deducting preferred stock dividends). On December 30, 1991, TCI Liberty, Inc. ("TCIL"), a wholly-owned subsidiary of TCI, entered into a Commercial Paper Purchase Agreement with Liberty whereby TCIL could from time to time sell short-term notes to Liberty from TCIL of up to an aggregate amount of $100 million. TCIL borrowed $22 million from Liberty on December 31, 1991, pursuant to the Commercial Paper Purchase Agreement. The full amount, including interest, was repaid on January 15, 1992. Interest rates on the short-term notes were determined by the parties by reference to prevailing money-market rates. This agreement was terminated on March 23, 1993. During 1992, the Company and Liberty formed Community Cable Television ("CCT"), a general partnership created for the purpose of acquiring and operating cable television systems with Tele-Communications of Colorado, Inc. ("TCIC"), an indirect wholly-owned subsidiary of TCI, owning a 49.999% interest and Liberty Cable Partner, Inc. ("LCP"), an indirect wholly-owned subsidiary of Liberty, owning a 50.001% interest. Pursuant to an amendment to the CCT General Partnership Agreement (the "Amendment"), certain non-cash contributions previously made to CCT were rescinded, TCIC contributed to CCT a $10,590,000 promissory note of TCI Development Corporation ("TCID") as of the date of the originally contributed assets, LCP agreed to contribute its equity and debt interests in Daniels & Associates Partners Limited ("DAPL"), a general partner of Mile Hi Cablevision Associates, Ltd. ("Mile Hi"), to CCT immediately prior to the closing of the acquisition of Mile Hi described below which closed on March 15, 1993. TCIC also agreed to contribute, at the time of the contribution by LCP of its DAPL interests, a TCID promissory note in the amount of $66,900,000. (continued) II-24 45 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements On March 12, 1993, the CCT General Partnership Agreement was further amended (the "Second Amendment"). Under the Second Amendment, LCP agreed to contribute its Mile Hi partnership interest but not a loan receivable from Mile Hi in the amount of $50 million (including accrued interest) (the "Mile Hi Note") (both of which it received upon the liquidation of DAPL on March 12, 1993 as described below) to CCT in exchange for 50.001% of a newly created Class B partnership interest in CCT. TCIC agreed to contribute a $21,795,000 promissory note from TCID in exchange for 49.999% of the Class B partnership interests in place of the $66,900,000 note which was to be contributed under the Amendment. On March 15, 1993, each party made its respective contribution required by the Second Amendment. On June 3, 1993, Liberty and TCI completed the transactions contemplated by a recapitalization agreement (the "Recapitalization Agreement"). Pursuant to the Recapitalization Agreement, Liberty repurchased 927,900 shares of Liberty Class A common stock owned by TCI and repurchased all of the outstanding shares of the Liberty Class C Redeemable Exchangeable Preferred Stock. The total purchase price of $194 million was paid through the delivery of cash amounting to $12 million and promissory notes of Liberty in the aggregate principal amount of $182 million. In connection with the Recapitalization Agreement, TCIC and LCP entered into an Option-Put Agreement (the "Option-Put Agreement"), which was amended on November 30, 1993. Under the amended Option-Put Agreement, between June 30, 1994 and September 28, 1994, and between January 1, 1996 and January 31, 1996, TCIC will have the option to purchase all of LCP's interest in CCT and the Mile Hi Note for an amount equal to $77 million plus interest accruing at the rate of 11.6% per annum on such amount from June 3, 1993. Between April 1, 1995 and June 29, 1995, and between January 1, 1997 and January 31, 1997, LCP will have the right to require TCIC to purchase LCP's interest in CCT and the Mile Hi Note for an amount equal to $77 million plus interest on such amount accruing at the rate of 11.6% per annum from June 3, 1993. Under a separate agreement, on June 3, 1993, TCI Holdings, Inc. ("TCIH"), a wholly-owned subsidiary of TCI, purchased a 16% limited partnership interest in Intermedia Partners from LCP and all of LCP's interest in a special allocation of income and gain of $7 million under the partnership agreement of Intermedia Partners for a purchase price of approximately $9 million. TCIH also received an option to purchase LCP's remaining 6.37% limited partnership interest in Intermedia Partners prior to December 31, 1995 for a price equal to $4 million plus interest at 8% per annum from June 3, 1993. (continued) II-25 46 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In September of 1993, Encore QE Programming Corp. ("QEPC"), a wholly-owned subsidiary of Encore Media Corporation ("EMC"), a 90% owned subsidiary of Liberty, entered into a limited partnership agreement with TCI Starz, Inc. ("TCIS"), a wholly- owned subsidiary of TCI, for the purpose of developing, operating and distributing STARZ!, a first-run movie premium programming service launched in 1994. QEPC is the general partner and TCIS is the limited partner. Losses are allocated 1% to QEPC and 99% to TCIS. Profits are allocated 1% to QEPC and 99% to TCIS until certain defined criteria are met. Subsequently, profits are allocated 20% to QEPC and 80% to TCIS. TCIS has the option, exercisable at any time and without payment of additional consideration, to convert its limited partner interest to an 80% general partner interest with QEPC's partnership interest simultaneously converting to a 20% limited partnership interest. In addition, during specific periods commencing April 1999 and April 2001, respectively, QEPC may require TCIS to purchase, or TCIS may require QEPC to sell, the partnership interest of QEPC in the partnership for a formula-based price. EMC is paid a management fee equal to 20% of "managed costs" as defined, in order to manage the service. EMC manages the service and has agreed to provide the limited partnership with certain programming under a programming agreement whereby the partnership will pay its pro rata share of the total costs incurred by EMC for such programming. The Company accounts for the partnership as a consolidated subsidiary. (See note 11). On March 15, 1993, Mile Hi Cable Partners, L.P. ("New Mile Hi") acquired all the general and limited interests in Mile Hi Cablevision Associates, Ltd. ("Mile Hi"), the owner of the cable television system serving Denver, Colorado. New Mile Hi is a limited partnership formed among CCT (78% limited partnership interest), Daniels Cablevision, Inc. ("DCI") (1% limited partner) and P & B Johnson Corp. ("PBJC") (21% general partnership interest), a corporation controlled by Robert L. Johnson, a member of Liberty's board of directors. As a result of the acquisition, New Mile Hi is a consolidated subsidiary of Liberty for financial reporting purposes. Prior to the acquisition, LCP indirectly owned a 32.175% interest in Mile Hi through its ownership of a limited partnership interest in DAPL, one of Mile Hi's general partners. The other partners in Mile Hi were Time Warner Entertainment Company, L.P., various individual investors and Mile Hi Cablevision, Inc., a corporation in which all the other partners in Mile Hi were the shareholders. DAPL was liquidated on March 12, 1993, at which time LCP received a liquidating distribution consisting of its proportionate interest in DAPL's partnership interest in Mile Hi, representing the aforementioned 32.175% interest in Mile Hi. The subsidiary of Liberty also received a note payable from Mile Hi in the approximate amount of $50 million (including accrued interest) (the "Mile Hi Note") in novation of a loan receivable from DAPL in an equal amount. (continued) II-26 47 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The total value of the acquisition was approximately $180 million. Of that amount, approximately $70 million was in the form of Mile Hi debt paid at the closing. Another $50 million was in the form of the Mile Hi Note, which debt was assumed by New Mile Hi and then by CCT. Of the remaining $60 million, approximately $40 million was paid in cash to partners in Mile Hi in exchange for their partnership interests. The remaining $20 million of interest in Mile Hi was acquired by New Mile Hi through the contribution by Liberty's subsidiary to CCT and by CCT to New Mile Hi of the 32.175% interest in Mile Hi received in the DAPL liquidation and by DCI's contribution to New Mile Hi of a 0.4% interest in Mile Hi. Of the estimated $110 million in cash required by New Mile Hi to complete the transaction, $105 million was loaned to New Mile Hi by CCT and $5 million was provided by PBJC as a capital contribution to New Mile Hi. Of the $5 million contributed by PBJC, approximately $4 million was provided by CCT through loans to Mr. Johnson and trusts for the benefit of his children. CCT funded its loans to New Mile Hi and the Johnson interests by drawing down $93 million under its revolving credit facility and by borrowing $16 million from TCIC in the form of a subordinated note. Liberty's investment in Mile Hi, which was previously accounted for under the cost method, was received from TCI in the March 28, 1991 transaction whereby TCI contributed its interests in certain programming businesses and cable television systems in exchange for several different classes and series of preferred stock of Liberty. Liberty adopted Statement No. 109 in 1993 and has applied the provisions of Statement No. 109 retroactively to March 28, 1991. During the year ended December 31, 1992, Liberty increased its economic and voting interest in Lenfest Communications, Inc. ("LCI") to 50% and, accordingly, adopted the equity method of accounting. Liberty's investment in LCI, which was previously accounted for under the cost method, was received from TCI in March of 1991. Additionally, LCI adopted Statement No. 109 in 1993 and has applied its provisions on a retroactive basis. As a result of the aforementioned acquisition of Mile Hi and the implementation of Statement No. 109 by Liberty and LCI, the Company restated the carrying amount of its investment in Liberty preferred stock at December 31, 1992 through an increase of $19 million. Included in the restated balance is the recognition of previously reserved interest income on the Mile Hi Note. These restatements resulted in an increase of $6 million to the Company's results of operations for the year ended December 31, 1992, a decrease of $2 million for the year ended December 31, 1991 and an increase of $7 million for prior years. (continued) II-27 48 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Also, during the year ended December 31, 1992, Liberty increased its economic and voting interest in Columbia Associates, L.P. ("Columbia") to 39.609% and, accordingly, adopted the equity method of accounting. Liberty's investment in Columbia, which was previously accounted for under the cost method, was received from TCI in March of 1991. On December 31, 1992, Liberty sold certain notes receivable of Intermedia Partners to TCI for $36,300,000 in cash. The Company purchases sports and other programming from certain subsidiaries of Liberty. Charges to TCI (which are based upon customary rates charged to others) for such programming were $44 million, $44 million and $25 million for the years ended December 31, 1993 and 1992 and the period from March 29, 1991 through December 31, 1991 respectively. Such amounts are included in operating expenses in the accompanying consolidated statements of operations. Certain subsidiaries of Liberty purchase from TCI, at TCI's cost plus an administrative fee, certain pay television and other programming. In addition, a consolidated subsidiary of Liberty pays a commission to TCI for merchandise sales to customers who are subscribers of TCI's cable systems. Aggregate commission and charges for such programming were $11 million, $3 million and $2 million for the years ended December 31, 1993 and 1992 and the period from March 29, 1991 through December 31, 1991, respectively. Such amounts are recorded in revenue in the accompanying consolidated statements of operations. Summarized unaudited financial information of Liberty as of December 31, 1993 and 1992 and for the years ended December 31, 1993 and 1992 and the period from March 29, 1991 through December 31, 1991 is as follows: December 31, ------------ Consolidated Financial Position 1993 1992 ------------------------------- ---- ---- amounts in millions Cash and cash equivalents $ 91 96 Investment in TCI common stock 104 104 Receivable from TCI -- 5 Other investments and related receivables 372 453 Other assets, net 870 172 ------ ---- Total assets $1,437 830 ====== ==== Debt $ 446 167 Deferred income taxes 2 15 Other liabilities 307 54 Minority interests 175 10 Redeemable preferred stocks 155 155 Stockholders' equity 352 429 ------ ---- Total liabilities and stockholders' equity $1,437 830 ====== ==== (continued) II-28 49 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Consolidated Operations 1993 1992 1991 ----------------------- ---- ---- ---- amounts in millions Revenue $1,153 157 85 Operating expenses (1,105) (144) (74) Depreciation and amortization (49) (16) (10) ------ ----- ---- Operating income (loss) (1) (3) 1 Interest expense (31) (7) (5) Other, net 36 32 44 ------ ---- ---- Net earnings $ 4 22 40 ====== ==== ==== (4) Investments in Other Affiliates Investments in affiliates, other than Liberty (see note 3), accounted for under the equity method, amounted to $567 million and $650 million at December 31, 1993 and 1992, respectively. On December 2, 1992, SCI Holdings, Inc. ("SCI") consummated a transaction (the "Split-Off") that resulted in the ownership of its cable systems being split between its two stockholders, which stockholders were Comcast Corporation ("Comcast") and the Company. Prior to the Split-Off, the Company had an investment in the common stock of SCI and the preferred stock of its wholly-owned subsidiary, Storer Communications, Inc. ("Storer"). The Split-Off, which permitted refinancing of substantially all of the publicly held debt of SCI and the preferred stock of SCI's wholly-owned subsidiary, Storer, was effected by the distribution of approximately 50% of the net assets of SCI to three holding companies formed by the Company (the "Holding Companies"). Prior to the Split-off, the Company contributed its SCI common stock to the Holding Companies in exchange for 100% of such Holding Companies' common stock. The amount of SCI common stock contributed to each of the Holding Companies was based upon the proportionate value of net assets to be received by each of the Holding Companies in the Split-Off. SCI then merged into Storer and the SCI common stock held by the Holding Companies was converted into Storer common stock. (continued) II-29 50 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Also prior to the Split-Off, (i) the Holding Companies incurred long-term debt aggregating approximately $1.1 billion and contributed substantially all of the resulting proceeds to Storer and (ii) a consolidated subsidiary of TCI redeemed approximately $476 million of its debt securities held by Storer with proceeds of its separate financing, and an affiliate of Comcast redeemed approximately $274 million of its debt securities held by Storer. In turn, Storer utilized substantially all of the proceeds of such contributions and redemptions to repurchase its preferred stock and extinguished all of its debt. The Company's share of Storer's loss on early extinguishment of debt was $52 million and such amount is included in loss on early extinguishment of debt in the accompanying consolidated statements of operations. Additionally, the Company received a premium, amounting to $14 million, on the repurchase of the Storer preferred stock. Such amount is reflected separately in the accompanying consolidated financial statements. In the Split-Off, Storer redeemed its common stock held by the Holding Companies in exchange for 100% of the capital stock of certain operating subsidiaries of Storer. Immediately following the Split-Off, the Company owned a majority of the common stock of the Holding Companies and Comcast owned 100% of the common stock of Storer. As such, the Company, which previously accounted for its investment in SCI using the equity method, now consolidates its investment in the Holding Companies. The tangible assets of the Holding Companies were recorded at predecessor cost. In connection with the Company's 1988 acquisition of an equity interest in SCI, a subsidiary of the Company issued certain debt and equity securities to Storer for $650 million. Such debt securities were redeemed and the equity securities were received by one of the Holding Companies in the Split-Off. Interest charges and preferred stock dividend requirements on these debt and equity securities, prior to the Split-Off, aggregated $81 million and $89 million for the period ended December 2, 1992 and the year ended December 31, 1991. The Company's share of losses of SCI, prior to the Split-Off for the period ended December 2, 1992 and the year ended December 31, 1991 amounted to $51 million and $54 million, as adjusted for the effect of interest and dividends accounted for by Storer as capital transactions due to their related party nature. The Company had a management consulting agreement with Storer which provided for the operational management of certain of Storer's cable television systems by TCI. This agreement provided for a management fee based on 3.5% of the revenue of those cable television systems managed by the Company. The Company also entered into a programming service agreement with Storer whereby the Company, for a fee, managed Storer's purchases of programming. The total management fees under the consulting and programming service agreements, prior to the Split-Off, amounted to $7 million in each of the period from January 1 1992 through December 2, 1992 and the year ended December 31, 1991 (which amounts are recorded as a reduction of selling, general and administrative expenses in the accompanying consolidated statements of operations). (continued) II-30 51 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company is a partner in certain joint ventures, accounted for under the equity method, which have operations in the United Kingdom and other parts of Europe. These joint ventures, which are currently operating and constructing cable television and telephone systems, have generated losses to the Company in 1993 and 1992 amounting to $47 million and $37 million, including $3 million and $6 million in 1993 and 1992, respectively, resulting from foreign currency transaction losses. Summarized unaudited financial information for affiliates other than Liberty (including those contributed to Liberty through March 28, 1991), is as follows: December 31, ------------- 1993 1992 ---- ---- Combined Financial Position amounts in millions --------------------------- Property and equipment, net $1,059 757 Franchise costs, net 266 211 Other assets, net 727 467 ------ ------ Total assets $2,052 1,435 ====== ====== Debt $ 593 661 Due to TCI 78 71 Other liabilities 338 185 Owners' equity 1,043 518 ------ ------ Total liabilities and equity $2,052 1,435 ====== ====== Years ended December 31, ------------------------ 1993 1992 1991 ---- ---- ---- Combined Operations amounts in millions ------------------- Revenue $ 713 1,224 1,461 Operating expenses (648) (786) (993) Depreciation and amortization (127) (303) (329) ------ ------ ------ Operating income (loss) (62) 135 139 Interest expense (37) (295) (374) Other, net 98 (234) (47) ----- ------ ------ Net loss $ (1) (394) (282) ====== ====== ====== Certain of the Company's affiliates are general partnerships and any subsidiary of the Company that is a general partner in a general partnership is, as such, liable as a matter of partnership law for all debts (other than non-recourse debts) of that partnership in the event liabilities of that partnership were to exceed its assets. (continued) II-31 52 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (5) Investment in Turner Broadcasting System, Inc. In 1987, the Company and several other cable television operators purchased shares of two classes of preferred stock of Turner Broadcasting System, Inc. ("TBS"). During 1991, TBS made an offer to exchange shares of one class of its preferred stock (and accrued dividends thereon) for shares of TBS common stock and, as a result, the Company received common shares valued at $178 million. Shares of the other class of preferred stock have voting rights and are convertible into shares of TBS common stock. The holders of those preferred shares, as a group, are entitled to elect seven of fifteen members of the board of directors of TBS, and the Company appoints three such representatives. However, voting control over TBS continues to be held by its chairman of the board and chief executive officer (an unrelated third party). The Company's total holdings of TBS common and preferred stocks represent an approximate 12% voting interest for those matters for which preferred and common stock vote as a single class. The Company's investment in TBS common stock had an aggregate market value of $803 million and $628 million (which exceeded cost by $485 million and $310 million) at December 31, 1993 and 1992, respectively. In addition, the Company's investment in TBS preferred stock had an aggregate market value of $954 million and $746 million, based upon the common market value, (which exceeded cost by $781 million and $573 million) at December 31, 1993 and 1992, respectively. In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective for fiscal years beginning after December 15, 1993. Under the new rules, debt securities that the Company has both the positive intent and ability to hold to maturity are carried at amortized cost. Debt securities that the Company does not have the positive intent and ability to hold to maturity and all marketable equity securities are classified as available-for-sale or trading and carried at fair value. Unrealized holding gains and losses on securities classified as available-for sale are carried as a separate component of shareholders' equity. Unrealized holding gains and losses on securities classified as trading are reported in earnings. The Company holds no material debt securities. Marketable equity securities are currently reported by the Company at the lower of cost or market ("LOCOM") and net unrealized losses are reported in earnings. The Company will apply the new rules starting in the first quarter of 1994. Application of the new rules will result in an estimated increase of approximately $300 million in stockholders' equity as of January 1 1994, representing the recognition of unrealized appreciation, net of taxes, for the Company's investment in equity securities determined to be available-for-sale, previously carried at LOCOM. (continued) II-32 53 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) Debt Debt is summarized as follows: Weighted-average December 31, interest rate at ------------- December 31, 1993 1993 1992 ----------------- ---- ---- amounts in millions Parent company debt: Senior notes 8.6% $ 5,052 1,960 Liquid Yield OptioTM Notes (a) -- 386 Bank credit facilities 6.0% 80 500 Commercial paper 4.1% 44 50 Other debt 2 1 ------ ----- 5,178 2,897 Debt of subsidiaries: Bank credit facilities 4.6% 3,264 5,526 Commercial paper -- 12 Notes payable 10.3% 1,321 1,732 Convertible notes (b) 9.5% 47 48 Other debt 90 70 ------ ------ $ 9,900 10,285 ======= ====== (a) These subordinated notes, which were stated net of unamortized discount of $764 million at December 31, 1992, were issued through a public offering. On October 28, 1993, the Company called for redemption all of its remaining Liquid Yield OptionTM Notes. In connection with such call for redemption, Notes aggregating $405 million were converted into 18,694,377 shares of Class A common stock and Notes aggregating less than $1 million were redeemed together with accrued interest to the redemption date. Prior to the aforementioned redemption, Notes aggregating $6 million were converted into 259,537 shares of TCI Class A common stock during 1993. (b) These convertible notes, which are stated net of unamortized discount of $197 million and $201 million on December 31, 1993 and 1992, respectively, mature on December 18, 2021. The notes require (so long as conversion of the notes has not occurred) an annual interest payment through 2003 equal to 1.85% of the face amount of the notes. During the year ended December 31, 1993, certain of these notes were converted into 819,000 shares of Class A common stock. At December 31, 1993, the notes were convertible, at the option of the holders, into an aggregate of 41,060,990 shares of Class A common stock. During the year ended December 31, 1992, TCI called for redemption all of its 7% convertible subordinated debentures. Debentures aggregating $114 million were converted into 6,636,881 shares of Class A common stock and the remaining debentures were redeemed at 104.2% of the principal amount together with accrued interest to the redemption date. (continued) II-33 54 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company's bank credit facilities and various other debt instruments generally contain restrictive covenants which require, among other things, the maintenance of certain earnings, specified cash flow and financial ratios (primarily the ratios of cash flow to total debt and cash flow to debt service, as defined), and include certain limitations on indebtedness, investments, guarantees, dispositions, stock repurchases and dividend payments. As security for borrowings under one of its credit facilities, the Company pledged a portion of the common stock (with a quoted market value of approximately $643 million at December 31, 1993) it holds of TBS. In order to provide interest rate protection on a portion of its variable rate indebtedness, the Company has entered into various interest rate exchange agreements pursuant to which it pays fixed interest rates, ranging from 7.7% to 9.9%, on notional amounts of $608 million. The Company has also entered into various other exchange agreements, pursuant to which it pays variable interest rates on notional amounts of $2,275 million. The Company is exposed to credit losses for the periodic settlements of amounts due under these interest rate exchange agreements in the event of nonperformance by the other parties to the agreements. However, the Company does not anticipate nonperformance by the counterparties and, in any event, such amounts were not material at December 31, 1993. The Company has also entered into various interest rate hedge agreements on notional amounts of $345 million which fix the maximum variable interest rates, at rates ranging from 10% to 11%. The term of such agreements is approximately two years. TCI and certain of its subsidiaries are required to maintain unused availability under bank credit facilities to the extent of outstanding commercial paper. Also, TCI and certain of its subsidiaries pay fees, ranging from 1/4% to 1/2% per annum, on the average unborrowed portion of the total amount available for borrowings under bank credit facilities. The fair value of the Company's debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of debt, which has a carrying value of $9,900 million, was $10,572 million at December 31, 1993. The fair value of the interest rate exchange agreements is the estimated amount that the Company would pay or receive to terminate the agreements at December 31, 1993, taking into consideration current interest rates and assuming the current creditworthiness of the counterparties. The Company would receive $13 million at December 31, 1993 upon termination of the agreements. (continued) II-34 55 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Annual maturities of debt for each of the next five years are as follows: Parent Total ------ ----- amounts in millions 1994 $ 69* 927* 1995 212 705 1996 210 993 1997 151 885 1998 349 799 * Includes $44 million of commercial paper. (7) Redeemable Preferred Stocks December 31, ----------------- 1993 1992 ------ ------ amounts in millions 12-7/8% Cumulative Compounding Preferred Stock, Series A; issued and outstanding 4,772,394 shares in 1992 (a) $ -- 92 6-3/4% Convertible Preferred Stock, Series B; issued and outstanding 6,201 shares at December 31, 1992 (b) -- 18 4-1/2% Convertible Preferred Stock, Series C; issued and outstanding 6,201 shares at December 31, 1993 (b) 18 -- ---- ---- $ 18 110 ==== ==== (a) The 12-7/8% Cumulative Compounding Preferred Stock was stated at its redemption value of $19.25 per share. Dividends were cumulative and accrued at 12-7/8% of the redemption value. In October of 1992, the Company acquired and retired 250,000 shares of this preferred stock in the open market for a purchase price of $19.56 per share. All remaining outstanding shares of such preferred stock were redeemed on February 1, 1993 for a redemption price of $19.25 per share plus all unpaid dividends accrued thereon. (continued) II-35 56 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (b) The 4-1/2% Convertible Preferred Stock is stated at its redemption value of $3,000 per share, and each share is convertible into 204 shares of TCI Class A common stock. In 1993, the Company designated this Series C Convertible Preferred Stock with all of the same attributes of the Series B Convertible Preferred Stock except that dividends on each share of the Series C stock accrued on a daily basis at the rate of 4- 1/2% per annum instead of 6-3/4% per annum, and such Series C stock was not subject to optional redemption by the Company until after January 10, 1994. During the year ended December 31, 1993, the shares so designated were exchanged for the existing Series B shares. Subsequent to December 31, 1993, all of the Series C shares were converted into 1,265,004 shares of TCI Class A common stock. (8) Stockholders' Equity Common Stock The Class A common stock has one vote per share and the Class B common stock has ten votes per share. Each share of Class B common stock is convertible, at the option of the holder, into one share of Class A common stock. Employee Benefit Plans The Company has an Employee Stock Purchase Plan ("ESPP") to provide employees an opportunity for ownership in the Company and to create a retirement fund. Terms of the ESPP provide for employees to contribute up to 10% of their compensation to a trust for investment in TCI common stock. The Company, by annual resolution of the Board of Directors, contributes up to 100% of the amount contributed by employees. Certain of the Company's subsidiaries have their own employee benefit plans. Contributions to all plans aggregated $16 million, $13 million and $12 million for 1993, 1992 and 1991, respectively. (continued) II-36 57 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Stock Options Two officers (one of whom is also a director) each held an option to acquire 200,000 shares of Class A common stock at an adjusted purchase price of $10.00 per share. One of such officers received payment of $550,000 from the Company in December of 1991 upon cancellation of a portion of his option covering 100,000 shares. The amount paid was based on the then market value of Class A common stock of $15.50 per share. The same officer received payments of $512,500 and $569,000 from the Company (based on the then market value of Class A common stock of $20.25 and $21.375 per share) in July and December of 1992, respectively, in cancellation of the remainder of his option covering 100,000 shares of TCI Class A common stock. The other officer received payment of $2,276,000 from the Company in December of 1992 upon cancellation of his option covering 200,000 shares of TCI Class A common stock. The amount paid was based on the then market value of Class A common stock of $21.375 per share. The Company had an Incentive Stock Option Plan ("ISOP") which has expired. Options granted under the ISOP (prior to its expiration) have an option price equal to the fair market value on the date of grant, are all currently exercisable and expire five years from the date of grant. Options to purchase 217,008 shares of TCI Class A common stock are outstanding at December 31, 1993, with a price of $17.25 per share. During the years ended December 31, 1993, 1992 and 1991, options to acquire 96,242, 321,406 and 78,642 shares, respectively were exercised at prices ranging from $10.00 to $17.25 per share and options for 25,000, 12,000 and 15,000 shares, respectively, were cancelled. TCI assumed certain stock options previously granted by UAE to certain of its employees. These options, which are currently exercisable, represent the right, as of December 31, 1993, to acquire 167,328 shares of TCI Class A common stock at adjusted purchase prices ranging from $8.83 to $18.63 per share. During the year ended December 31, 1993, no options were exercised or cancelled. No additional options may be granted by UAE. (continued) II-37 58 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company has adopted the 1992 Stock Incentive Plan (the "Plan"). The Plan provides for awards to be made with respect to a maximum of 10 million shares of Class A common stock. Awards may be made as grants of stock options, stock appreciation rights, restricted shares, stock units or any combination thereof. On November 11, 1992, stock options in tandem with stock appreciation rights to purchase 4,020,000 shares of Class A common stock were granted pursuant to the Plan to certain officers and other key employees at a purchase price of $16.75 per share. Such options become exercisable and vest evenly over five years, first became exercisable beginning November 11, 1993 and expire on November 11, 2002. During the year ended December 31, 1993, stock options covering 50,000 shares of Class A common stock were cancelled upon termination of employment. On October 12, 1993, stock options in tandem with stock appreciation rights to purchase 1,355,000 shares of TCI Class A common stock were granted pursuant to the Plan to certain officers and other key employees at a purchase price of $16.75 per share. On November 12, 1993, an additional grant of stock options in tandem with stock appreciation rights to purchase 600,000 shares of TCI Class A common stock were granted to two officers at a purchase price of $16.75 per share. Such options become exercisable and vest evenly over four years, first become exercisable beginning October 12, 1994 and expire on October 12, 2003. Separately from the Plan, an additional grant of stock options in tandem with stock appreciation rights to purchase 2,000,000 shares of TCI Class A common stock at a purchase price of $16.75 per share was made on November 12, 1993 to an individual who thereafter became a director of the Company. Twenty percent of such options vested and became exercisable immediately and the remainder become exercisable evenly over 4 years. The options expire October 12, 1998. Estimates of the compensation relating to these grants have been recorded through December 31, 1993, but are subject to future adjustment based upon market value and, ultimately, on the final determination of market value when the rights are exercised. Two officers (who are also directors) each held an option, expiring December 31, 1991, to acquire 1,200,000 shares of Class B common stock at an adjusted purchase price of $1.10 per share. In June of 1991, one of the aforementioned officers exercised in full his option to acquire 1,200,000 shares of Class B common stock by delivery of 80,000 shares of Class B common stock valued at $16.50 per share and, on the same date, sold 400,000 of such option shares (at a price of $16.50 per share) to TCI for cash and a short-term note. In December of 1991, the other officer exercised his option to purchase 900,000 shares of Class B common stock by delivery of 63,871 shares of Class A common stock valued at $15.50 per share. Such officer agreed to forego exercising the balance of his option to purchase 300,000 shares of Class B common stock in exchange for the payment by the Company of $4,320,000 as compensation to be applied towards federal and state income taxes withheld by the Company for his account. Other The excess of consideration received on debentures converted or options exercised over the par value of the stock issued is credited to additional paid-in capital. (continued) II-38 59 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements At December 31, 1993, there were 50,635,330 Class A shares of TCI common stock reserved for issuance under exercise privileges related to options and convertible debt securities described in this note 8 and in notes 6 and 7. In addition, one share of Class A common stock is reserved for each share of Class B common stock. (9) Transactions with Officers and Directors On December 10, 1992, pursuant to a restricted stock award agreement, an officer, who is also a director, of the Company was transferred the right, title and interest in and to 124.03 shares (having a liquidation value of $4 million) of the 12% Series B cumulative compounding preferred stock of WestMarc Communications, Inc. (a wholly-owned subsidiary of the Company) owned by the Company. Such preferred stock is subject to forfeiture in the event of certain circumstances from the date of grant through February 1, 2002, decreasing by 10% on February 1 of each year. On December 14, 1992, an officer, who is also a director, sold 100,000 shares of Class B common stock to the Company for $2,138,000. (10) Income Taxes TCI files a consolidated Federal income tax return with all of its 80% or more owned subsidiaries. Consolidated subsidiaries in which the Company owns less than 80% each file a separate income tax return. TCI and such subsidiaries calculate their respective tax liabilities on a separate return basis which are combined in the accompanying consolidated financial statements. The Financial Accounting Standards Board Statement No. 109 requires a change from the deferred method of accounting for income taxes of APB Opinion No. 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement No. 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under Statement No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company adopted Statement No. 109 in 1993 and has applied the provisions of Statement No. 109 retroactively to January 1, 1986. The Company restated its financial statements for the years beginning January 1, 1986 through December 31, 1992. The effect of the implementation of Statement No. 109 at December 31, 1992 was a $2 million decrease in receivables, $48 million net increase in investments, $178 million net increase in property and equipment, $2,901 million net increase in franchise costs, $2 million increase in other assets, $34 million increase in other liabilities, $2,865 million increase in deferred taxes payable and $228 million decrease in accumulated deficit. (continued) II-39 60 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The financial statements for the years ended December 31, 1992 and 1991 have been restated to comply with the provisions of Statement No. 109. The following summarizes the impact of applying Statement No. 109 on net loss and loss per common share for the years ended December 31, 1992 and 1991: December 31, -------------------- 1992 1991 ------- -------- amounts in millions Net loss as previously reported $ (34) (103) Effect of restatements: Liberty, including the effects of Mile Hi and LCI (note 3) 6 (2) Statement No. 109 20 8 ------- ------- As restated $ (8) (97) ======= ======= Per share amounts as previously reported $ (.12) (.29) Effect of restatements: Liberty, including the effects of Mile Hi and LCI (note 3) .02 -- Statement No. 109 .05 .02 ------- ------- As restated $ (.05) (.27) ======= ======= Income tax benefit (expense) attributable to income or loss from continuing operations for the years ended December 31, 1993, 1992 and 1991 consists of: Current Deferred Total ------- -------- ------- amounts in millions Year ended December 31, 1993: Federal $ (14) (119) (133) State and local (15) (20) (35) ------- ------- ------- $ (29) (139) (168) ======= ======= ======= Year ended December 31, 1992: Federal $ -- (24) (24) State and local (10) (4) (14) ------- ------- ------- $ (10) (28) (38) ======= ======= ======= Year ended December 31, 1991: Federal $ (2) 33 31 State and local (7) 6 (1) ------- ------- ------- $ (9) 39 30 ======= ======= ======= (continued) II-40 61 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The significant components of deferred income tax benefit (expense) for the years ended December 31, 1993, 1992 and 1991 are as follows: Years ended December 31, ----------------------- 1993 1992 1991 ----- ------ ------ amounts in millions Deferred tax benefit (expense) (exclusive of effects of other components listed below) $ (63) (28) 39 Adjustment to deferred tax assets and liabilities for enacted change in tax rates (76) -- -- ----- ----- ----- $(139) (28) 39 ===== ===== ===== Income tax benefit (expense) attributable to income or loss from continuing operations differs from the amounts computed by applying the Federal income tax rate of 35% in 1993 and 34% in 1992 and 1991 as a result of the following: Years ended December 31, ----------------------- 1993 1992 1991 ----- ------ ------ amounts in millions Computed "expected" tax benefit (expense) $ (56) (15) 37 Adjustment to deferred tax assets and liabilities for enacted change in Federal income tax rate (84) -- -- Dividends excluded for income tax purposes 4 10 13 Amortization not deductible for tax purposes (12) (8) (7) Minority interest in earnings of consolidated subsidiaries (1) (14) (13) Recognition of losses of consolidated partnership (8) -- -- State and local income taxes, net of Federal income tax benefit (23) (9) 1 Other 4 (2) (1) ------ ------ ------ $ (168) (38) 30 ====== ====== ====== (continued) II-41 62 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Note to Consolidated Financial Statements The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1993 and 1992 are presented below: December 31, --------------------- 1993 1992 ------ ------ amounts in millions Deferred tax assets: Net operating loss carryforwards $ 590 665 Less - valuation allowance (90) (88) Investment tax credit carryforwards 140 140 Less - valuation allowance (36) (34) Alternative minimum tax credit carryforwards 19 11 Investments in affiliates, due principally to losses of affiliates recognized for financial statement purposes in excess of losses recognized for income tax purposes 266 321 Future deductible amounts principally due due to non-deductible accruals 27 19 Other 13 5 ------ ------ Net deferred tax assets 929 1,039 ------ ------ Deferred tax liabilities: Property and equipment, principally due to differences in depreciation 1,193 1,136 Franchise costs, principally due to differences in amortization 2,784 2,720 Investment in affiliates, due principally to undistributed earnings of affiliates 256 332 Other 6 15 ------ ------ Total gross deferred tax liabilities 4,239 4,203 ------ ------ Net deferred tax liability $3,310 3,164 ====== ====== The valuation allowance for deferred tax assets as of December 31, 1993 was $126 million. Such balance increased by $4 million from December 31, 1992. Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 1993 will be recorded as reductions of franchise costs. At December 31, 1993, the Company had net operating loss carryforwards for income tax purposes aggregating approximately $1,071 million of which, if not utilized to reduce taxable income in future periods, $8 million expires through 1998, $17 million in 2001, $76 million in 2002, $153 million in 2003, $132 million in 2004, $384 million in 2005 and $301 million in 2006. Certain subsidiaries of the Company had additional net operating loss carryforwards for income tax purposes aggregating approximately $368 million and these net operating losses are subject to certain rules limiting their usage. (continued) II-42 63 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements At December 31, 1993, the Company had remaining available investment tax credits of approximately $85 million which, if not utilized to offset future Federal income taxes payable, expire at various dates through 2005. Certain subsidiaries of the Company had additional investment tax credit carryforwards aggregating approximately $55 million and these investment tax credit carryforwards are subject to certain rules limiting their usage. Certain of the Federal income tax returns of TCI and its subsidiaries which filed separate income tax returns are presently under examination by the Internal Revenue Service ("IRS") for the years 1979 through 1992. In the opinion of management, any additional tax liability, not previously provided for, resulting from these examinations, ultimately determined to be payable, should not have a material adverse effect on the consolidated financial position of the Company. The Company pursued a course of action on certain issues (primarily the deductibility of franchise cost amortization) the IRS had raised and such issues were argued before the United States Tax Court. During 1990, the Company received a favorable decision regarding these issues. The IRS appealed this decision but the Company prevailed in the appeal. The IRS may further appeal the decision to the Supreme Court until March 27, 1994. New tax legislation was enacted in the third quarter of 1993 which, among other matters, increased the corporate Federal income tax rate from 34% to 35%. The Company has reflected the tax rate change in its consolidated statements of operations in accordance with the treatment prescribed by Statement No. 109. Such tax rate change resulted in an increase of $76 million to income tax expense and deferred income tax liability. (11) Commitments and Contingencies On October 5, 1992, Congress enacted the 1992 Cable Act. In 1993, the FCC adopted certain rate regulations required by the 1992 Cable Act and imposed a moratorium on certain rate increases. Such rate regulations became effective on September 1, 1993. The rate increase moratorium, which began on April 5, 1993, continues in effect through May 15, 1994. As a result of such actions, the Company's basic and tier service rates and its equipment and installation charges (the "Regulated Services") are subject to the jurisdiction of local franchising authorities and the FCC. Basic and tier service rates are evaluated against competitive benchmark rates as published by the FCC, and equipment and installation charges are based on actual costs. Any rates for Regulated Services that exceeded the benchmarks were reduced as required by the 1993 rate regulations. The rate regulations do not apply to the relatively few systems which are subject to "effective competition" or to services offered on an individual service basis, such as premium movie and pay-per-view services. Subsequent to September 1, 1993, any cable system charging basic cable rates that exceed the FCC's benchmark rate may be required to substantiate its rates by demonstrating its cost of providing basic cable services to subscribers. If, as a result of this process, a system cannot substantiate its rates, it could be required to retroactively reduce its rates to the appropriate benchmark and refund the excess portion of rates received since September 1, 1993. (continued) II-43 64 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company believes that it has complied in all material respects with the provisions of the 1992 Cable Act, including its rate setting provisions. However, since the Company's rates for regulated services are subject to review, the Company may be subject to a refund liability. The amount of refunds, if any, which could be payable by the Company in the event that systems' rates are successfully challenged by franchising authorities is not currently estimable. In connection with the acquisition from TCI of a 19.9% minority interest in Heritage Communications, Inc. ("Heritage") by Comcast, Comcast has the right, through December 31, 1994, to require TCI to purchase or cause to be purchased from Comcast all shares of Heritage directly or indirectly owned by Comcast for either cash or assets or, at TCI's election, shares of TCI common stock. The purchase price of the shares of Heritage directly or indirectly owned by Comcast will be determined by external appraisal. The Company is obligated to pay fees for the license to exhibit certain qualifying films that are released theatrically by various motion picture studios from January 1, 1993 through December 31, 2002 (the "Film License Obligations"). The aggregate minimum liability under certain of the license agreements is approximately $105 million. The aggregate amount of the Film License Obligations under other license agreements is not currently estimable because such amount is dependent upon the number of qualifying films produced by the motion picture studios, the amount of United States theatrical film rentals for such qualifying films, and certain other factors. Nevertheless, the Company's aggregate payments under the Film License Obligations could prove to be significant. The Company has guaranteed notes payable and other obligations of affiliated and other companies with outstanding balances of approximately $237 million at December 31, 1993. The Company leases business offices, has entered into pole rental agreements and uses certain equipment under lease arrangements. Minimum rental expense under such arrangements, net of sublease rentals, amounted to $59 million, $57 million and $52 million for 1993, 1992 and 1991, respectively. Future minimum lease payments under noncancellable operating leases for each of the next five years are summarized as follows (amounts in millions):
1994 $16 1995 12 1996 9 1997 7 1998 6
It is expected that, in the normal course of business, expiring leases will be renewed or replaced by leases on other properties; thus, it is anticipated that future minimum lease commitments will not be less than the amount shown for 1994. (continued) II-44 65 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (12) Discontinued Operations The Company sold its motion picture theatre business and certain theatre-related real estate assets on May 12, 1992. The selling price (including liabilities assumed) was approximately $680 million. In connection with the disposition, the Company paid $92.5 million for certain preferred stock of the buyer. No gain or loss was recognized in connection with this transaction as the net assets of discontinued operations were reflected at their net realizable value. Operating results for the theatre operations for the period from January 1, 1992 through May 12, 1992 and the year ended December 31, 1991 are reported separately in the consolidated statements of operations under the caption "Loss from discontinued operations" and include:
1992 1991 ------ ------ amounts in millions Revenue $ 211 613 Loss before income taxes $ (16) (18) Income tax benefit (expense) $ 1 (1) Net loss $ (15) (19)
(continued) II-45 66 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (13) Quarterly Financial Information (Unaudited)
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ------- ------- ------- ------- amounts in millions, 1993: except per share amounts - ---- Revenue $1,018 1,042 1,044 1,049 Operating income: As previously reported $ 247 255 248 Adjustment to revise estimate of useful lives of certain distribution equipment -- (6) (6) Adjustment to properly reflect compensation relating to stock appreciation rights -- (3) (6) ----- ---- ----- As adjusted $ 247 246 236 187 ====== ==== ===== ==== Gain (loss) on disposition of assets $ 40 5 4 (7) Income tax benefit (expense): As previously reported $ (38) (21) (116) Adjustment to revise estimate of useful lives of certain distribution equipment -- 3 3 Adjustment to properly reflect compensation relating to stock appreciation rights -- 1 2 Adjustment to income taxes upon revision of Statement No. 109 -- -- (3) ------ ---- ---- As adjusted $ (38) (17) (114) 1 ====== ==== ==== ==== Net earnings (loss): As previously reported $ 53 31 (55) Adjustment to revise estimate of useful lives of certain distribution equipment -- (3) (3) Adjustment to properly reflect compensation relating to stock appreciation rights -- (2) (4) Adjustment to income taxes upon revision of Statement No. 109 -- -- (3) ------ ---- ---- As adjusted $ 53 26 (65) (21) ====== ==== ==== ==== Primary and fully diluted earnings (loss) attributable to common shareholder per common and common equivalent share: As previously reported $ .11 .07 (.13) Adjustment to revise estimate of useful lives of certain distribution equipment -- (.01) Adjustment to properly reflect compensation relating to stock appreciation rights -- -- (.01) Adjustment to income taxes upon revision of Statement No. 109 -- -- -- ------ ---- ---- As adjusted $ .11 (.06) (.14) (.05) ====== ==== ==== ====
(continued) II-46 67 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ------- ------- ------- ------- amounts in millions, 1992: except per share amounts - ---- Revenue $ 856 879 896 943 Operating income: As previously reported $ 197 225 242 226 Adjustment to amortization upon revision of Statement No. 109 (2) (1) -- (23) ----- ---- ---- ---- As adjusted $ 195 224 242 203 ===== ==== ==== ==== Gain (loss) on disposition of assets $ 3 (3) (1) 10 Income tax benefit (expense): As previously reported $ 1 (15) 6 (49) Adjustment to income taxes for the restatement of share of earnings of Liberty (note 3) -- (3) (5) 3 Adjustment to revise/implement Statement No. 109 1 -- -- 23 ----- ---- ---- ---- As adjusted $ 2 (18) 1 (23) ===== ==== ==== ==== Earnings (loss) from continuing operations: As previously reported $ (18) 9 63 (51) Adjustment to restate share of earnings of Liberty (note 3) -- 4 7 (5) Adjustment to amortization, share of earnings of affiliates and income taxes upon revision/implementation of Statement No. 109 (1) (1) -- -- ----- ---- ---- ---- As adjusted $ (19) 12 70 (56) ===== ==== ==== ==== Loss from discontinued operations $ -- (15) -- -- ===== ==== ==== ==== Net earnings (loss): As previously reported $ (18) (6) 63 (51) Adjustment to restate share of earnings of Liberty (note 3) -- 4 7 (5) Adjustment to amortization, share of earnings of affiliates and income taxes upon revision/implementation of Statement No. 109 (1) (1) -- -- ----- ---- ---- ---- As adjusted $ (19) (3) 70 (56) ===== ==== ==== ==== Primary and fully diluted earnings (loss) attributable to common shareholders per common and common equivalent share: Continuing operations: As previously reported $(.05) .01 .13 (.12) Adjustment to restate share of earnings of Liberty (note 3) -- .01 .01 (.01) Adjustment to amortization, share of earnings of affiliates and income taxes upon revision/implementation of Statement No. 109 (.01) -- -- -- ----- ---- ---- ---- As adjusted (.06) .02 .14 (.13) Discontinued operations -- (.03) -- -- ----- ----- ---- ---- $(.06) (.01) .14 (.13) ===== ==== ==== ====
II-47 68 PART III. Item 10. Directors and Executive Officers of the Registrant. The following lists the directors and executive officers of TCI, their birth dates, a description of their business experience and positions held with the Company as of February 1, 1994. Directors are elected to staggered three-year terms with one-third elected annually. The date the present term of office expires for each director is the date of the Annual Meeting of the Company's stockholders held during the year footnoted opposite their names. All officers are appointed for an indefinite term, serving at the pleasure of the Board of Directors.
Name Positions - ---------- --------------------- Bob Magness (2) Chairman of the Board of TCI since 1973 and is Chairman of the Board of a number of the Company's Born June 3, 1924 subsidiaries; also a director of Republic Pictures Corporation, Turner Broadcasting System, Inc. and Liberty Media Corporation ("Liberty"); TCI director since 1968. John C. Malone (3) Chief Executive Officer of TCI since March of 1992 and President of TCI since 1973; is President and a Born March 7, 1941 director of most of the Company's subsidiaries; also a director of Liberty, Turner Broadcasting System, Inc., BET Holdings, Inc., and The Bank of New York; TCI director since 1973. Donne F. Fisher (1) Appointed Executive Vice President of TCI in December of 1991. Was previously Senior Vice President Born May 24, 1938 since 1982 and Treasurer since 1970 of TCI. Vice President, Treasurer and a director of most of the Company's subsidiaries; also a director of General Communication, Inc.; TCI director since 1980. John W. Gallivan (2) Chairman of the Board of Kearns-Tribune Corporation, a newspaper publishing concern; also a director Born June 28, 1915 of Silver King Mining Company; TCI director since 1980. Kim Magness (1) TCI director since 1985; manages family business interests, mostly in ranching and in breeding Born May 17, 1952 Arabian horses, and is Chairman and President of a company developing liners for irrigation canals. Robert A. Naify (3) TCI director since 1987; also President and a director of The Todd-AO Corporation. Born February 17, 1922 Jerome H. Kern (2) Appointed TCI director in December of 1993. Also is Assistant Secretary of TCI. Senior partner with Born June 1, 1937 the law firm of Baker & Botts, L.L.P.. since September of 1992. Prior to joining Baker & Botts, L.L.P.., was senior partner with the Law Offices of Jerome H. Kern from January 1, 1992 to September 1, 1992 and, prior to that, was senior partner with the law firm of Shea & Gould from 1986 through December 31, 1991.
(continued) III-1 69
Name Positions - ------------- ------------------ J. C. Sparkman Appointed TCI Executive Vice President in 1987. Born September 12, 1932 Fred A. Vierra Appointed Executive Vice President of TCI as of December of 1991. Was President, Chief Operating Officer Born November 9, 1931 and a director of United Artists Entertainment Company ("UAE") from May of 1989 through December of 1991. President and Chief Operating Officer of United Cable Television Corporation from 1982 to May of 1989. Brendan R. Clouston Appointed Executive Vice President and Chief Operating Officer of TCI in March of 1992. Previously Senior Born April 28, 1953 Vice President of TCI since December of 1991. From January of 1987 through December of 1991, held various executive positions with UAE and its predecessor, United Artists Communications, Inc. ("UACI"), most recently Executive Vice President and Chief Financial Officer. Gary K. Bracken Controller of the Company since 1969. Appointed Senior Vice President in December of 1991. Was Born July 29, 1939 named Vice President and Principal Accounting Officer in 1982. Stephen M. Brett Appointed TCI Senior Vice President and General Counsel as of December of 1991. Appointed Born September 20, 1940 Secretary of TCI in 1994. From August of 1988 through December of 1991, was Executive Vice President-Legal and Secretary of UAE and its predecessor, UACI. Barry P. Marshall Appointed Chief Operating Officer of TCI Cable Management Corporation, the Company's primary operating Born March 4, 1946 subsidiary, in March of 1992, where he directly oversees all of TCI's regional operating divisions. From 1986 to March of 1992, was Vice President and Chief Operating Officer of the Company's largest regional operating division. Larry E. Romrell Joined a predecessor of TCI in 1961; appointed Senior Vice President of TCI in 1991. From 1972 to the Born December 30, 1939 present, held various executive positions with WestMarc Communications, Inc. ("WestMarc"), and is currently President and Chief Executive Officer of WestMarc, a wholly-owned subsidiary of TCI. Bernard W. Schotters Joined TCI in 1983. Appointed Senior Vice President-Finance and Treasurer in December of 1991. Born November 25, 1944 Was appointed Vice President-Finance in 1984. Robert N. Thomson Joined TCI as Vice President of Government Affairs in January of 1987. Appointed Senior Vice Born December 19, 1943 President-Communications and Policy Planning in 1991.
_______________________________ (1) Director's term expires in 1994. (2) Director's term expires in 1995. (3) Director's term expires in 1996. (continued) III-2 70 In February of 1994, Paul J. O'Brien, a director of the Company since 1968, passed away. Mr. O'Brien was the publisher of the "Salt Lake Tribune" and Secretary, Treasurer and a director of Kearns-Tribune Corporation, a newspaper publishing concern. Mr. O'Brien was also Secretary of TCI since 1968. There are no family relations, of first cousin or closer, among the above named individuals, by blood, marriage or adoption, except that Bob Magness and Kim Magness are father and son, respectively. During the past five years, none of the above persons have had any involvement in such legal proceedings as would be material to an evaluation of his ability or integrity. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than ten-percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to the Company, or written representations that no Forms 5 were required, the Company believes that, during the year ended December 31, 1993, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were complied with, except that one report, covering diminimus shareholdings, was incorrectly completed by Mr. Barry P. Marshall, Chief Operating Officer of TCI Cable Management Corporation and such filing was subsequently amended. III-3 71 Item 11. Executive Compensation. (a) Summary Compensation Table. The following table shows, for the years ended December 31, 1993, 1992 and 1991 all forms of compensation (other than Other Annual Compensation and All Other Compensation, amounts for which are only reported for the years ended December 31, 1993 and 1992), for the Chief Executive Officer and each of the four most highly compensated executive officers of the Company, whose total annual salary and bonus exceeded $100,000 for the year ended December 31, 1993:
Long-Term Compensation ---------------------- Annual Compensation Awards Payouts ------------------------- ------ ------- Other Annual Restricted Compen- Stock Options/ LTIP All Other sation Award(s) SARs Payouts Compensation Position Year Salary ($) Bonus ($) ($)(4) ($) (#) ($) ($) - -------- ---- ---------- --------- ------ ---------- -------- ------- ------------ John C. Malone 1993 $800,000 (1) --- $ 2,726 --- --- --- $17,500 (7)(8) President and Chief 1992 $490,385 (1) --- $ 2,595 --- 1,000,000(6) --- $17,999 (7)(8) Executive Officer 1991 $450,000 (1) --- --- --- --- Bob Magness 1993 $800,000 --- --- --- --- --- $ 2,500 (8) Chairman of the Board 1992 $488,250 --- $ 2,355 --- 1,000,000(6) --- $ 2,000 (8) 1991 $450,000 --- --- --- --- J. C. Sparkman 1993 $738,000 (2) --- $ 2,823 --- --- --- $15,000 (7) Executive Vice 1992 $431,622 (2) --- $ 2,595 --- 100,000(6) --- $15,286 (7) President 1991 $349,423 --- --- --- Brendan R. Clouston 1993 $519,231 --- $ 263 --- 500,000(5) --- $15,000 (7) Executive Vice 1992 $279,476 --- --- --- 500,000(6) --- $ 8,728 (7) President and 1991 $249,222 --- --- --- --- --- Chief Operating Officer Fred A. Vierra 1993 $623,617 (3) --- $ 263 --- 100,000(5) --- $15,000 (7) Executive Vice 1992 $422,300 (3) --- --- --- 100,000(6) --- $ 8,728 (7) President 1991 $373,961 --- --- --- --- ---
____________________ (1) Includes deferred compensation of $150,000. (2) Includes deferred compensation of $188,000 and $31,333 in 1993 and 1992, respectively. (3) Includes deferred compensation of $250,000 and $41,667 in 1993 and 1992, respectively. (4) Includes amounts reimbursed during the year for the payment of taxes. (5) For additional information regarding this award, see Option/SAR Grants Table below. (continued) III-4 72 (6) On November 11, 1992, pursuant to the Company's 1992 Stock Incentive Plan (the "Plan"), certain executive officers and other key employees were granted 4,020,000 options in tandem with stock appreciation rights to acquire share of TCI Class A common stock at a purchase price of $16.75 per share. Such options vest and become exercisable evenly over 5 years, first became exercisable beginning on November 11, 1993 and expire on November 11, 2002. Notwithstanding the vesting schedule as set forth in the option agreement, the option shares shall become available for purchase if grantee's employment with the Company (a) shall terminate by reason of (i) termination by the Company without cause (ii) termination by grantee for good reason (as defined in the agreement) or (iii) disability, (b) shall terminate pursuant to provisions of a written employment agreement, if any, between the grantee and the Company which expressly permits the grantee to terminate such employment upon occurrence of specified events (other than the giving of notice and passage of time), or (c) if grantee dies while employed by the Company. Further, the option shares will become available for purchase in the event of an Approved Transaction, Board Change or Control Purchase (each as defined in the Plan), unless in the case of an Approved Transaction, the Compensation Committee under the circumstances specified in the Plan determines otherwise. (7) Includes dollar value of annual Company contributions to the TCI Employee Stock Purchase Plan ("ESPP") in which all named executive officers are fully vested. Directors who are not employees of the Company are ineligible to participate in the ESPP. The ESPP, a defined contribution plan, enables participating employees to acquire a proprietary interest in the Company and benefits upon retirement. Under the terms of the ESPP, employees are eligible for participation after one year of service. The ESPP's normal retirement age is 65 years. Participants may contribute up to 10% of their compensation and the Company (by annual resolution of the Board of Directors) may contribute up to 100% of the participants' contributions. The ESPP includes a salary deferral feature in respect of employee contributions. Forfeitures (due to participants' withdrawal prior to full vesting) are used to reduce the Company's otherwise determined contributions. Generally, participants acquire a vested right in TCI contributions as follows:
Years of service Vesting Percentage ---------------- ------------------ Less than 1 0 1-2 20 2-3 30 3-4 45 4-5 60 5-6 80 6 or more 100
Participant contributions are fully vested. Although TCI has not expressed an intent to terminate the ESPP, it may do so at any time. The ESPP provides for full and immediate vesting of all participants rights upon termination. (8) Includes fees paid to directors for attendance at each meeting of the Board of Directors ($500 per meeting). (continued) III-5 73 (b) Option/SAR Grants Table. The following table shows all individual grants of stock options and stock appreciation rights ("SARs") granted to each of the named executive officers during the year ended December 31, 1993:
% of Total Options/ Options/SARs Market SARs Granted Exercise or Price on Grant Date Granted to Employees Base Price Grant Date Expiration Present Value Name (#)(1) in Fiscal Year(1) ($/Sh) ($/Sh)(2) Date ($)(3) - ---- -------- ----------------- ----------- ---------- ---------- ------------- John C. Malone --- --- --- --- --- --- Bob Magness --- --- --- --- --- --- J.C. Sparkman --- --- --- --- --- --- Brendan R. Clouston 500,000 25.6% $16.75 $29.125 October 12, 2003 $8,340,000 Fred A. Vierra 100,000 5.1% $16.75 $29.125 October 12, 2003 $1,668,000
_________________________ (1) On October 12, 1993, pursuant to the Plan, certain executive officers and other key employees were granted 1,355,000 options in tandem with stock appreciation rights to acquire shares of TCI Class A common stock at a purchase price of $16.75 per share. On November 12, 1993, an additional grant of stock options in tandem with stock appreciation rights to purchase an aggregate of 600,000 shares of TCI Class A common stock was made to Messrs. Clouston and Vierra at a purchase price of $16.75 per share. Such options vest evenly over four years, become exercisable beginning on October 12, 1994 and expire on October 12, 2003. Notwithstanding the vesting schedule as set forth in the option agreement, the option shares shall become available for purchase if grantee's employment with the Company (a) shall terminate by reason of (i) termination by the Company without cause (ii) termination by the grantee for good reason (as defined in the agreement) or (iii) disability, (b) shall terminate pursuant to provisions of a written employment agreement, if any, between the grantee and the Company which expressly permits the grantee to terminate such employment upon occurrence of specified events (other than the giving of notice and passage of time), or (c) if grantee dies while employed by the Company. Further, the option shares will become available for purchase in the event of an Approved Transaction, Board Change or Control Purchase (each as defined in the Plan), unless in the case of an Approved Transaction, the Compensation Committee under the circumstances specified in the Plan determines otherwise. (2) Represents the closing market price per share of TCI Class A common stock on November 12, 1993. (3) The values shown are based on the Black-Scholes model and are stated in current annualized dollars on a present value basis. The key assumptions used in the model for purposes of this calculation include the following: (a) a 6.5% discount rate; (b) a volatility factor based upon the Company's historical trading pattern; (c) the 10-year option term; and (d) the closing price of the Company's common stock on March 18, 1994. The actual value an executive may realize will depend upon the extent to which the stock price exceeds the exercise price on the date the option is exercised. Accordingly, the value, if any, realized by an executive will not necessarily be the value determined by the model. III-6 74 (c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table. The following table shows each exercise of stock options and SARs during the year ended December 31, 1993 by each of the named executive officers and the December 31, 1993 year-end value of unexercised options and SARs on an aggregated basis:
Value of Number of Unexercised Unexercised In-the-Money Options/SARs Options/SARs at at December 31, December 31, 1993 (#) 1993 ($) Shares Acquired Value Realized Exercisable/ Exercisable/ Name on Exercise (#) ($) Unexercisable Unexercisable ----- --------------- -------------- ------------- ------------- John C. Malone Exercisable --- --- 200,000 $ 2,700,000 Unexercisable --- --- 800,000 $10,800,000 Bob Magness Exercisable --- --- 200,000 $ 2,700,000 Unexercisable --- --- 800,000 $10,800,000 J.C. Sparkman Exercisable --- --- 20,000 $ 270,000 Unexercisable --- --- 80,000 $ 1,080,000 Brendan R. Clouston Exercisable --- --- 100,000 $ 1,350,000 Unexercisable --- --- 900,000 $12,150,000 Fred A. Vierra Exercisable --- --- 9,714 $ 193,794 Exercisable --- --- 20,000 $ 270,000 Unexercisable --- --- 180,000 $ 2,430,000
(d) Compensation of directors. The standard arrangement by which the Company's directors are compensated for all services (including any amounts payable for committee participation or special assignments) as a director is as follows: each director receives a fee of $500 plus travel expenses for attendance at each meeting of the Board of Directors and each director who is not a full-time employee of TCI receives additional compensation of $30,000 per year. Effective on November 1, 1992, the Company created a deferred compensation plan for all non-employee directors. Each director may elect to defer receipt of all, but not less than all, of the annual compensation (excluding meeting fees and reimbursable expenses) payable to the director for serving on the Company's Board of Directors for each calendar year for which such deferral is elected. An election to defer may be made as to the compensation payable for a single calendar year or period of years. Any compensation deferred shall be credited to the director's account on the last day of the quarter for which compensation has accrued. Such deferred compensation will bear interest from the date credited to the date of payment at a rate of 8% per annum in 1993 and 120% of the applicable federal long-term rate thereafter, compounded annually. (continued) III-7 75 A director may elect payment of deferred compensation to be made at a specified year in the future or upon termination of the director's service as director of the Company. Each director may elect payment in a lump sum, three substantially equal consecutive annual installments or five substantially equal consecutive annual installments. In the event that a director dies prior to payment of all the amounts payable pursuant to the plan, any amounts remaining in the director's deferred compensation account, together with accrued interest thereon, shall be paid to the director's designated beneficiary. Mr. Naify elected to defer his 1993 compensation and elected to defer his 1994 compensation under this plan. There are no other arrangements whereby any of the Company's directors received compensation for services as a director during 1993 in addition to or in lieu of that specified by the aforedescribed standard arrangement. (e) Employment Contracts and Termination of Employment and Change of Control Arrangements. Effective November 1, 1992 the employment agreements between the Company and Mr. Magness and Dr. Malone, as amended, were further amended and restated. The term of each agreement is extended daily so that the remainder of the employment term shall at all times on and prior to the effective date of the termination of employment as provided by each agreement be five years. Dr. Malone's and Mr. Magness' employment agreements provide for annual salaries of $800,000. Additionally, these employment agreements provide for personal use of the Company's aircraft and flight crew, limited to an aggregate value of $35,000 per year. Dr. Malone's employment agreement provides, among other things, for deferral of a portion (40% in 1993 and not in excess of 40% thereafter) of the monthly compensation payable to him. Pursuant to a letter agreement entered into between Dr. Malone and the Company subsequent to the date of his employment agreement, Dr. Malone deferred $150,000 in 1993 in lieu of 40% of his compensation for such year. The deferred amounts will be payable in monthly installments over a 20-year period commencing on the termination of Dr. Malone's employment, together with interest thereon at the rate of 8% per annum compounded annually from the date of deferral to the date of payment. The amendment also provides for the payment of certain benefits, discussed below. Dr. Malone's employment agreement provides that he will devote 80% of his business time to the Company. Mr. Magness' and Dr. Malone's agreements described above also provide that upon termination of such executive's employment by the Company (other than for cause, as defined in the agreement), or if Bob Magness or Dr. Malone elects to terminate the agreement because of a change in control of the Company, all remaining compensation due under the agreement for the balance of the employment term shall be immediately due and payable. Dr. Malone's and Mr. Magness' agreements provide that during their employment with the Company and for a period of two years following the effective date of their termination of employment with the Company, unless termination results from a change in control of the Company, they will not be connected with any entity in any manner, as defined in the agreement, which competes in a material respect with the business of the Company, except that Dr. Malone may serve as Chairman of the Board of Liberty. However, the agreements provide that both executives may own securities of any corporation listed on a national securities exchange or quoted in the Nasdaq System to the extent of an aggregate of 5% of the amount of such securities outstanding, but Dr. Malone and Mr. Magness may own securities of Liberty without regard to the aforementioned percentage limitation. (continued) III-8 76 Dr. Malone's agreement also provides that in the event of termination of his employment with the Company, he will be entitled to receive 240 consecutive monthly payments of $15,000 (increased at the rate of 12% per annum compounded annually from January 1, 1988 to the date payment commences), the first of which will be payable on the first day of the month succeeding the termination of Dr. Malone's employment. In the event of Dr. Malone's death, his beneficiaries will be entitled to receive the foregoing monthly payments. The Company currently owns a whole-life insurance policy on Dr. Malone, the face value of which is sufficient to meet its obligation under the salary continuation arrangement. The premiums payable by the Company on such insurance policy are currently being funded through earnings on the policy. Dr. Malone has no interest in this policy. The Company pays a portion of the annual premiums (equal to the "PS-58" costs) on three whole-life insurance policies of which Dr. Malone is the insured and trusts for the benefit of members of his family are the owners. The Company is the designated beneficiary of the proceeds of such policies less an amount equal to the greater of the cash surrender value thereof at the time of Dr. Malone's death and the amount of the premiums paid by the policy owners. Effective November 1, 1992, the Company entered into an employment agreement with Mr. Sparkman which will expire on December 31, 1997, providing for a salary of $738,000 per year. Mr. Sparkman's employment agreement provides for the deferral of approximately 25.47% of each monthly payment so as to result in the deferral of payment of Mr. Sparkman's salary at the rate of $188,000 per annum. The deferred amounts will be payable in monthly installments over a 120-month period commencing on the later of January 1, 1998 and the termination of Mr. Sparkman's full-time employment with the Company, together with interest thereon at the rate of 8% per annum compounded annually from the date of deferral to the payment date. Additionally, Mr. Sparkman's employment agreement provides for personal use of the Company's aircraft and flight crew, limited to an aggregate value of $35,000 per year. Effective November 1, 1992, the Company entered into an employment agreement with Mr. Vierra which will expire on December 31, 1997, providing for a salary of $650,000 per year. Mr. Vierra's employment agreement provides for the deferral of approximately 38.46% of each monthly payment so as to result in the deferral of payment of Mr. Vierra's salary at the rate of $250,000 per annum. The deferred amounts will be paid in monthly installments over a 240-month period commencing on the later of January 1, 1998 and the termination of Mr. Vierra's full-time employment with the Company, together with interest thereon at the rate of 8% per annum compounded annually from the date of deferral to the payment date. Additionally, Mr. Vierra's employment agreement provides for personal use of the Company's aircraft and flight crew, limited to an aggregate value of $35,000 per year. Messrs. Sparkman's and Vierra's employment agreements each provide that upon termination by the Company without cause, all remaining compensation due under such agreements for the balance of the employment term would become immediately due and payable to such executive. Upon the death of any such executive during the employment term, the Company will pay to such executive's beneficiaries a lump sum in an amount equal to the lesser of (i) the compensation due under such executive's employment agreement for the balance of the employment term and (ii) one year's compensation. In the event of such executive's disability, the Company will continue to pay such executive his annual salary as and when it would have otherwise become due until the first to occur of the end of the employment term or the date of such executive's death. (continued) III-9 77 The Company will pay Mr. Sparkman 240 consecutive monthly payments of $6,250 (increased at the rate of 12% per annum compounded annually from January 1, 1988) commencing upon the termination of his employment. In the event Mr. Sparkman dies prior to the payment of all monthly payments, the remainder of such payments shall be made to Mr. Sparkman's designated beneficiaries. The Company owns a whole-life insurance policy on Mr. Sparkman, the face value of which is sufficient to meet its obligations under this salary continuation arrangement. The premiums payable by the Company on such insurance policy are currently being funded through earnings on the policies. Mr. Sparkman has no interest in this policy. Dr. Malone and Mr. Sparkman each deferred a portion of their monthly compensation under their previous employment agreements. Such deferred compensation (together with interest thereon at the rate of 13% per annum compounded annually from the date of deferral to the date of payment) will continue to be payable under the terms of the previous agreements. The rate at which interest accrues on such previously deferred compensation was established in 1983 pursuant to such earlier agreements. Messrs. Sparkman's and Vierra's agreements provide that during their employment with the Company and for a period of two years following the effective date of their termination of employment with the Company, they will not be connected with any entity in any manner, as defined in the agreement, which competes in a material respect with the business of the Company. However, the agreements provide that such executives may own securities of any corporation listed on a national securities exchange or quoted in the NASDAQ System to the extent of an aggregate of 5% of the amount of such securities outstanding. If such executives terminate employment with the Company prior to the expiration of each respective employment term or if the Company terminates each executive's employment for cause, as defined in the agreements, then the noncompetition clause of the agreements shall apply to the longer of the previously described two year period or the period beginning on the effective date of termination of employment through December 31, 1997. (f) Additional information with respect to Compensation Committee Interlocks and Insider Participation in Compensation Decisions. The members of the Company's compensation committee during 1993 were Messrs. Robert A. Naify and Paul J. O'Brien, both directors of the Company. Mr. O'Brien was also Secretary of the Company. Except as described above, neither Mr. Naify nor Mr. O'Brien are or were officers of the Company or any of its subsidiaries. However, Mr. Naify was the President and Co-Chief Executive Officer of UACI from 1971 to 1986, the year in which TCI acquired a majority interest in UACI. After the acquisition, Mr. Naify resigned, but by the terms of his 1983 employment agreement with UACI, he continued to be entitled to consulting payments of a fixed amount and certain fringe benefits from UACI and its successors through August of 1993. Following the death of Mr. O'Brien in 1994, Mr. Gallivan, a director of the Company, was appointed to fill the vacancy. III-10 78 Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Security ownership of certain beneficial owners. The following table sets forth information with respect to the ownership of shares of the Company's Class A and Class B common stock, as of February 1, 1994, by each person known to the Company to own beneficially more than 5% of either class based on 402,504,309 shares of Class A common stock and 47,258,787 shares of Class B common stock outstanding on that date. Shares issuable upon exercise or conversion of convertible securities are deemed to be outstanding for the purpose of computing the percentage of ownership and overall voting power of persons beneficially owning such convertible securities, but have not been deemed to be outstanding for the purpose of computing the percentage ownership or overall voting power of any other person. So far as is known to the Company, the persons indicated below have sole voting and investment power with respect to the shares indicated as owned by them except as otherwise stated in the notes to the table. The Class A common stock has one vote per share and the Class B common stock has ten votes per share.
Amount and Title Nature of of Name and Address Beneficial Percent Voting Class of Beneficial Owner Ownership of Class Power - ----- ------------------- ---------- -------- ------ Associated Communications Corporation Class A 200 Gateway Towers 12,479,976 3.10% Class B Pittsburgh, Pennsylvania 3,827,208 8.10% 5.80% Bob Magness, Chairman of the Board and a Director Class A 5619 DTC Parkway 4,626,938(1)(2)(3) 1.15% Class B Englewood, Colorado 27,382,076(1)(3) 57.94% 31.78% Kearns-Tribune Corporation Class A 400 Tribune Building 6,157,206(3) 1.53% Class B Salt Lake City, Utah 6,480,000(3) 13.71% 8.11% Robert A. Naify, a Director Class A 172 Golden Gate Avenue 23,638,860(4) 5.56% Class B San Francisco, California -- -- 2.63 % The Equitable Life Assurance Society of the United States Class A 787 Seventh Avenue 23,924,443(5) 5.94% Class B New York, New York -- -- 2.73% The Capital Group, Inc. Class A 333 South Hope Street 30,472,024(6) 7.57% Class B Los Angeles, California -- -- 3.48% Liberty Media Corporation Class A 8101 E. Prentice, Suite 500 2,988,009(7) * Class B Englewood, Colorado 3,537,712(7) 7.49% 4.38%
- -------------------- * Less than one percent. (continued) III-11 79 (1) Bob Magness, as executor of the Estate of Betsy Magness, is the beneficial owner of all shares of TCI Class A and Class B common stock held of record by the Estate of Betsy Magness. The number of shares in the table includes 2,105,332 shares of Class A and 6,346,212 shares of Class B common stock of which Bob Magness is beneficial owner as executor. The number of Class A and Class B shares shown as owned by Bob Magness in the table do not include the numbers of such shares owned by Liberty which are set forth separately. Mr. Magness, together with Dr. Malone, (each a director and executive officer of TCI) represent two out of the six members of Liberty's Board of Directors, and accordingly, each of them may be deemed to share voting and investment power over, and to be the beneficial owner of, the shares of the Company's Class A and Class B common stock owned by Liberty. See the table in Section (b) (Beneficial Ownership by Directors and Executive Officers) below and note 11 thereto. If all of the shares owned by Liberty were included in the numbers of shares owned by Mr. Magness, his percentage ownership of the Company's Class A common stock, Class B common stock and overall voting power would be 1.89%, 65.43% and 36.16%, respectively. (2) Assumes the exercise in full of stock options granted in tandem with stock appreciation rights in November of 1992 to acquire 1,000,000 shares of TCI Class A common stock. Options to acquire 200,000 shares of TCI Class A common stock are currently exercisable. See note 6 to the table in Item 11(a) for additional information. (3) Bob Magness and Kearns-Tribune Corporation ("Kearns") are parties to a buy-sell agreement, entered into in October of 1968, as amended, under which neither party may dispose of their shares without notification of the proposed sale to the other, who may then buy such shares at the offered price, sell all of their shares to the other at the offered price or exchange one of their Class A shares for each Class B share held by the other and purchase any remaining Class B shares at the offered price. There are certain exceptions, including transfers to specified persons or entities, certain public sales of Class A shares and exchanges of Class A shares for Class B shares. (4) Mr. Robert Naify received notes, which are currently convertible into 22,446,926 shares of TCI Class A common stock, as partial consideration for the sale to TCI of the stock owned by him in United Artists Communications, Inc. ("UACI"). Mr. Naify is also a co-trustee, along with Mr. Naify's brother, Marshall, and their sister, of a trust for the benefit of Marshall which holds additional notes convertible into 341,606 shares of TCI Class A common stock. The number of shares in the table assumes the conversion of these notes. (5) The number of shares in the table is based upon a Schedule 13G, dated February 9, 1994, filed by The Equitable Life Assurance Society of the United States which Schedule 13G reflects that said corporation has sole voting power over 15,277,835 shares and shared voting power over 772,431 shares of Class A common stock of the Company. No information is given in respect to voting power over the remaining shares. (6) The number of shares in the table is based upon a Schedule 13G, dated February 11, 1994, filed by The Capital Group, Inc. Certain operating subsidiaries of The Capital Group, Inc. exercised investment discretion over various institutional accounts which held as of December 31, 1993, 30,472,024 shares of TCI Class A common stock. Capital Guardian Trust Company, a bank, and one of such operating companies, exercised investment discretion over 3,892,102 of said shares. Capital Research and Management Company and Capital International, Ltd., registered investment advisors, and Capital International, S.A., another operating subsidiary, had investment discretion with respect to 26,246,100, 150,675 and 183,147 shares, respectively, of the above shares. (continued) III-12 80 (7) Certain of the shares in the table are held pursuant to an escrow agreement which provides, among other things, for delivery of the deposited shares to TCI upon the exercise by TCI of certain exchange rights with respect to one of the classes of Liberty's preferred stock. (b) Security ownership of management. The following table sets forth information with respect to the ownership of shares of the Company's Class A and Class B common stock (other than directors' qualifying shares) as of February 1, 1994 by all directors and each of the named executive officers of the Company, other than those listed in the table in Item 12(a), and by all executive officers and directors of the Company as a group based on 402,504,309 shares of Class A common stock and 47,258,787 shares of Class B common stock outstanding on that date. Shares issuable upon exercise or conversion of convertible securities are deemed to be outstanding for the purpose of computing the percentage ownership and overall voting power of persons beneficially owning such convertible securities, but have not been deemed to be outstanding for the purpose of computing the percentage ownership or overall voting power of any other person. The number of Class A and Class B shares in the table include interests of the named directors or executive officers or of members of the group of directors and executive officers in shares held by the trustee of TCI's ESPP and shares held by the trustee of UAE's Employee Stock Ownership Plan for their respective accounts. So far as is known to the Company, the persons indicated below have sole voting and investment power with respect to the shares indicated as owned by them except as otherwise stated in the notes to the table and except for the shares held by the trustee of TCI's ESPP for the benefit of such person, which shares are voted at the discretion of the trustee.
Name of Amount and Nature Percent Voting Title of Class Beneficial Owner of Beneficial Ownership of Class Power -------------- ---------------- ----------------------- -------- ------ Class A John C. Malone 1,165,065 (2)(10) * Class B 904,800 (3)(10) 1.91% 1.17% Class A Donne F. Fisher 190,659 * Class B 134,880 * * Class A John W. Gallivan 600 (9) * Class B -- -- * Class A Kim Magness -- -- Class B 518,000 1.10% * Class A Jerome H. Kern 2,000,000 (6) * Class B -- -- * Class A Fred A. Vierra 517,180 (5) * Class B -- -- * Class A J.C. Sparkman 235,564 (4) * Class B -- -- * Class A Brendan R. Clouston 1,007,682 (7) * Class B 230 * * Class A All directors and 37,980,979 (1)(2)(4)(5)(6) 8.79% executive officers (7)(8)(9)(10) Class B as a group 32,532,762 (1)(2)(3)(9)(10) 68.84% 40.17% (16 persons) - -------------------------
* Less than one percent. (continued) III-13 81 (1) See notes 1 through 4 to the table in Item 12(a). (2) Assumes the exercise in full of stock options granted in tandem with stock appreciation rights in November of 1992 to acquire 1,000,000 shares of TCI Class A common stock. Options to acquire 200,000 shares of TCI Class A common stock are currently exercisable. See note 6 to the table in Item 11(a) for additional information. (3) The number of Class B shares in the table includes 634,800 shares held by Dr. Malone's wife, Mrs. Leslie Malone, but Dr. Malone has disclaimed any beneficial ownership of such shares. Pursuant to a letter agreement, dated June 17, 1988, Mr. Magness and Kearns each agreed with Dr. Malone that prior to making a disposition of a significant portion of their respective holdings of TCI Class B common stock, he or it would first offer Dr. Malone the opportunity to purchase such shares. See note 3 to the table in Item 12(a). (4) Assumes the exercise in full of stock options granted in tandem with stock appreciation rights in November of 1992 to acquire 100,000 shares of TCI Class A common stock. Options to acquire 20,000 shares of TCI Class A common stock are currently exercisable. See note 6 to the table in Item 11(a) for additional information. (5) Assumes the exercise in full of stock options, granted in August of 1990, to purchase an aggregate of 9,714 shares of TCI Class A common stock at an adjusted price of $10.30 per share. All such options are fully exercisable. Also assumes the exercise in full of stock options granted in tandem with stock appreciation rights in November of 1992 to acquire 100,000 shares of TCI Class A common stock. Options to acquire 20,000 shares of TCI Class A common stock are currently exercisable. See note 6 to the table in Item 11(a) for additional information. Also assumes the exercise in full of stock options granted in tandem with stock appreciation rights in November of 1993 to acquire 100,000 shares of TCI Class A common stock. None of these options are exercisable until October 12, 1994. See note 1 to the table in Item 11(b) for additional information. (6) Assumes the exercise in full of stock options granted in tandem with stock appreciation rights to acquire 2,000,000 shares of TCI Class A common stock. Options to acquire 400,000 shares are currently exercisable. See Item 13(a) for additional discussion. (7) Assumes the exercise in full of stock options granted in tandem with stock appreciation rights in November of 1992 to acquire 500,000 shares of TCI Class A common stock. Options to acquire 100,000 shares of TCI Class A common stock are currently exercisable. See note 6 to the table in Item 11(a) for additional information. Additionally, assumes the exercise in full of stock options granted in tandem with stock appreciation rights in November of 1993 to acquire 500,000 shares of TCI Class A common stock. None of the options are exercisable until October 12, 1994. See note 1 to the table in Item 11(b) for additional information. (continued) III-14 82 (8) Certain executive officers of the Company (5 persons) hold options, which were granted in November of 1989, to purchase an aggregate of 43,000 shares of TCI Class A common stock at a purchase price of $17.25 per share. Certain executive officers and directors (11 persons including Messrs. Magness, Malone, Sparkman, Vierra and Clouston) hold stock options which were granted in tandem with stock appreciation rights in November of 1992, to acquire 3,325,000 shares of TCI Class A common stock at a purchase price of $16.75 per share. Options to acquire 665,000 of such shares are currently exercisable. Additional certain executive officers (8 persons including Messrs. Vierra and Clouston) hold stock options which were granted in tandem with stock appreciation rights in October and November of 1993 and become exercisable (as to 25% of the shares covered thereby) in October of 1994, to acquire 1,225,000 shares of TCI Class A common stock at a purchase price of $16.75 per share. Additionally, Mr. Vierra holds an option to acquire 9,714 shares of Class A common stock as described in note 5 above and Mr. Kern holds an option to acquire 2,000,000 shares of Class A common stock as described in note 6 above. The number of TCI Class A shares in the table assumes the exercise of these options. (9) The number of shares in the table does not include any shares held by Kearns, of which Mr. Gallivan is an officer. (10) The number of Class A and Class B shares shown in the table as owned by the directors and executive officers of the Company as a group include the numbers of such shares owned by Liberty, of which Messrs. Magness and Malone, each a director and an executive officer of the Company, are also directors and of which Dr. Malone is an officer. See the table in Item 12(a) and note 1 thereto. The numbers of Class A and Class B shares shown in the above table as owned by John Malone do not include the shares owned by Liberty although he may be deemed to share voting and investment power over, and to be the beneficial owner of, such shares. If all of the shares of the Company's Class A and Class B common stock owned by Liberty were included in the numbers of shares owned by Dr. Malone, the percentage ownership of the Company's Class A common stock, Class B common stock and voting power of Dr. Malone would 1.03%, 9.40% and 5.54%, respectively. No equity securities in any subsidiary of the Company, other than directors' qualifying shares, are owned by any of the Company's executive officers or directors, except that Mr. Bob Magness, a director and an executive officer of the Company, owns 944 shares of WestMarc Series B cumulative compounding redeemable preferred stock, including 40 shares owned by KGBB, Inc. over which Bob Magness is deemed to have shared voting and investment power; Mr. Kim Magness, a director of the Company, owns 29 shares of WestMarc Series B cumulative compounding redeemable preferred stock (excluding his indirect interest in such shares owned by KGBB, Inc.); Dr. Malone, a director and an executive officer of the Company, owns, as trustee for his children, 68 shares of WestMarc Series B cumulative compounding redeemable preferred stock; Mr. Larry Romrell, an officer of the Company, owns 103 shares of WestMarc Series B cumulative compounding redeemable preferred stock and Mr. Jerome Kern, a director of the Company, owns 116 shares of WestMarc Series B cumulative compounding redeemable preferred stock, including 58 shares owned by his wife, Diane D. Kern, over which Mr. Kern is deemed to have beneficial ownership. Mr. Kern has disclaimed any beneficial ownership of such shares owned by Diane D. Kern. Mr. Donne Fisher, a director and executive officer of the Company, pursuant to a Restricted Stock Award Agreement dated December 10, 1992, was transferred the right, title and interest in and to 124.03 shares (having a liquidation value of $4 million) of WestMarc Series B cumulative compounding redeemable preferred stock owned by the Company. Such preferred stock held by Mr. Fisher is subject to forfeiture in the event of certain circumstances from the date of grant through February 1, 2002, decreasing by 10% on February 1 of each year. (continued) III-15 83 (c) Change of control. The Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company except that on January 27, 1994 the Company and Liberty entered into a definitive agreement to combine the two companies as further described in Item 13 below. Item 13. Certain Relationships and Related Transactions. (a) Transactions with management and others. As of January 27, 1994, TCI and Liberty entered into a definitive agreement to combine the two companies. The transaction will be structured as a tax free exchange of Class A and Class B shares of both companies and preferred stock of Liberty for like shares of a newly formed holding company, TCI/Liberty Holding Company ("TCI/Liberty"). TCI shareholders will receive one share of TCI/Liberty for each of their shares. Liberty common shareholders will receive 0.975 of a share of TCI/Liberty for each of their common shares. The transaction is subject to the approval of both sets of shareholders as well as various regulatory approvals and other customary conditions. Subject to timely receipt of such approvals, which cannot be assured, it is anticipated the closing of such transaction will take place during 1994. During 1992, the Company and Liberty formed Community Cable Television ("CCT"), a general partnership created for the purpose of acquiring and operating cable television systems with Tele-Communications of Colorado, Inc. ("TCIC"), an indirect wholly-owned subsidiary of TCI, owning a 49.999% interest and Liberty Cable Partner, Inc. ("LCP"), an indirect wholly-owned subsidiary of Liberty, owning a 50.001% interest. Pursuant to a cable management agreement, a subsidiary of TCI provides management services for cable systems owned by CCT. The subsidiary receives a fee equal to 3% of the gross cable television revenue of CCT. In 1993, CCT paid $1,562,000 under the agreement. Pursuant to an amendment to the CCT General Partnership Agreement (the "Amendment"), certain noncash contributions previously made to CCT were rescinded, TCIC contributed to CCT a $10,590,000 promissory note of TCI Development Corporation ("TCID") as of the date of the originally contributed assets, LCP agreed to contribute its equity and debt interests in Daniels & Associates Partners Limited ("DAPL"), a general partner of Mile Hi Cablevision Associates, Ltd. ("Mile Hi"), to CCT immediately prior to the closing of the acquisition of Mile Hi described below which closed on March 15, 1993, and TCIC agreed to contribute, at the time of the contribution by LCP of its DAPL interests, a TCID promissory note in the amount of $66,900,000. On March 12, 1993, the CCT General Partnership Agreement was further amended (the "Second Amendment"). Under the Second Amendment, LCP agreed to contribute its Mile Hi partnership interest but not a loan receivable from Mile Hi in the amount of $50 million (including accrued interest) (the "Mile Hi Note") (both of which it received upon the liquidation of DAPL on March 12, 1993 as described below) to CCT in exchange for 50.001% of a newly created Class B partnership interest in CCT. TCIC agreed to contribute a $21,795,000 promissory note from TCID in exchange for 49.999% of the Class B partnership interests in place of the $66,900,000 note which was to be contributed under the Amendment. On March 15, 1993, each party made its respective contribution required by the Second Amendment. (continued) III-16 84 On March 26, 1993, TCI Liberty, Inc. ("TCIL"), a wholly-owned subsidiary of TCI, TCIC and Liberty entered into a recapitalization agreement (the "Recapitalization Agreement"). Pursuant to the Recapitalization Agreement, on June 3, 1993, Liberty repurchased 927,900 shares of Liberty's Class A common stock owned by TCIL (sufficient to reduce TCIL's percentage ownership of Liberty's outstanding common stock by at least 20%), and repurchased all of the outstanding shares of Liberty's Class C Redeemable Exchangeable Preferred Stock (the "Class C Preferred Stock") from TCIL. The purchase price per share for the shares of Liberty's Class A common stock of $19.98 was equal to the average of the daily closing prices for the 10 trading days prior to signing of the Recapitalization Agreement and the daily closing prices for the 10 trading days prior to closing. The aggregate purchase price for the Class C Preferred Stock was $175,057,000 plus $337,500 ($22,500 per day from May 19, 1993 to the date of closing of the repurchase). The total purchase price for the shares of Class A common stock and Class C Preferred Stock was to be paid through the delivery of promissory notes of Liberty in the aggregate principal amount of $76,952,000, consisting of a $66,900,000 note and a $10,052,000 note (collectively, the "Liberty Notes"), and the balance in cash. The Liberty Notes, which were issued at the closing, bear interest at the rate of 11.6% per annum, are due on February 1, 1997 and are secured by a pledge of stock of LCP and certain other assets of LCP. However, on June 3, 1993, TCIL, TCIC and Liberty agreed that the balance of the purchase price which was to have been paid in cash would instead be payable by delivery of two promissory notes in the principal amount of $86,105,000 and $18,539,442, which bear interest at the rate of 6% per annum, and were to be due on December 31, 1993 (the "6% Notes"). In consideration for this amendment, Liberty agreed to transfer to TCIC its interest in "TV Guide On Screen." On November 30, 1993, the parties agreed to extend the maturity of the 6% Notes to the earlier of June 30, 1994 or ten days following the termination of the aforementioned proposed business combination of TCI and Liberty. TCIL acquired the shares of Liberty's Class A common stock upon the conversion on January 15, 1993 of all of the outstanding shares (10,794 shares) of Liberty's Class A Redeemable Convertible Preferred Stock into 4,405,678 shares of Liberty's Class A common stock and 55,070 shares of Class E, 6% Cumulative Redeemable Exchangeable Junior Preferred Stock. Pursuant to the Recapitalization Agreement, TCIL, as the holder of Liberty's Class D Redeemable Voting Preferred Stock, gave its consent to an amendment to Liberty's Restated Certification of Incorporation that would reduce the number of Liberty's directors that the holders of such stock have the exclusive right to elect. In connection with the Recapitalization Agreement, TCIC and LCP entered into an Option-Put Agreement (the "Option-Put Agreement"), which was amended on November 30, 1993. Under the amended Option-Put Agreement, between June 30, 1994 and September 28, 1994, and between January 1, 1996 and January 31, 1996, TCIC will have the option to purchase all of LCP's interest in CCT and the Mile Hi Note for an amount equal to $77.0 million plus interest accruing at the rate of 11.6% per annum on such amount from June 3, 1993. Between April 1, 1995 and June 29, 1995, and between January 1, 1997 and January 31, 1997, LCP will have the right to require TCIC to purchase LCP's interest in CCT and the Mile Hi Note for an amount equal to $77.0 million plus interest on such amount accruing at the rate of 11.6% per annum from June 3, 1993. Under a separate agreement, on June 3, 1993, TCI Holdings, Inc. ("TCIH"), a wholly-owned subsidiary of TCI, purchased a 16% limited partnership interest in Intermedia Partners from LCP and all of LCP's interest in a special allocation of income and gain of $7 million under the partnership agreement of Intermedia Partners, for a purchase price of approximately $9 million. TCIH also received an option to purchase LCP's remaining 6.37% limited partnership interest in Intermedia Partners prior to December 31, 1995 for a price equal to approximately $4 million plus interest at 8% per annum from June 3, 1993. (continued) III-17 85 On March 15, 1993, Mile Hi Cable Partners, L.P. ("New Mile Hi") acquired (the "Acquisition") all of the general and limited partnership interests in Mile Hi, the owner of the cable television system serving Denver, Colorado. New Mile Hi is a limited partnership formed among CCT (78% limited partnership interest), Daniels Communications, Inc. ("DCI") (1% limited partnership interest) and P & B Johnson Corp. ("PBJC") (21% general partnership interest), a corporation controlled by Robert L. Johnson, a member of Liberty's board of directors. Prior to the Acquisition, Liberty, through LCP, indirectly owned a 32.175% interest in Mile Hi through its ownership of a limited partnership interest in DAPL, one of Mile Hi's general partners. The other partners in Mile Hi were Time-Warner Entertainment Company, L.P., various individual investors and Mile Hi Cablevision, Inc., a corporation in which all the other partners in Mile Hi were the shareholders. DAPL was liquidated on March 12, 1993, at which time LCP received a liquidating distribution consisting of its proportionate interest in DAPL's partnership interest in Mile Hi, representing the 32.175% interest in Mile Hi. LCP also received the Mile Hi Note in the approximate amount of $50 million (including accrued interest) in novation of a loan receivable from DAPL in an equivalent amount. The total value of the Acquisition was approximately $180 million. Of that amount, approximately $70 million was in the form of Mile Hi debt paid at the closing. Another $50 million was in the form of the Mile Hi Note, which debt was assumed by New Mile Hi and then by CCT. In connection with the foregoing assumption, the Mile Hi Note was restated on March 15, 1993 to reflect its principal amount as approximately $50 million which amount includes the interest that had accrued on the Mile Hi Note to such date. The Mile Hi Note, as restated, bears interest from March 15, 1993 at the rate of 8% per annum and principal and interest thereon is payable on January 1, 2000. Of the remaining $60 million, approximately $40 million was paid in cash to partners in Mile Hi in exchange for their partnership interests. The remaining $20 million of interest in Mile Hi was acquired by New Mile Hi through the contribution by Liberty's subsidiary to CCT and by CCT to New Mile Hi of the 32.175% interest in Mile Hi received in the DAPL liquidation and by DCI's contribution to New Mile Hi of a 0.4% interest in Mile Hi. Of the estimated $110 million in cash required by New Mile Hi to complete the transaction, $105 million was loaned to New Mile Hi by CCT and $5 million was provided by PBJC as a capital contribution to New Mile Hi. Of the $5 million contributed by PBJC, approximately $4 million was provided by CCT through loans to Mr. Johnson and trusts for the benefit of his children. CCT funded its loans to New Mile Hi and the Johnson interests by drawing down $93 million under its revolving credit facility and by borrowing $16 million from TCI in the form of a subordinated note which bears interest at the rate of 8% per annum and is payable in full on January 1, 2000. At June 3, 1993, Liberty and TCI each had approximately $7,800,000 in outstanding loans to CCT. The loans are evidenced by promissory notes, bear interest at the rate of 12% per annum through December 31, 1992 and 8% per annum thereafter, and are due in full on January 1, 2000. On June 3, 1993, CCT prepaid approximately $3,000,000 to Liberty. The remaining indebtedness between CCT and each of Liberty and TCI will remain outstanding and will be repaid in the ordinary course out of cash flow or partnership borrowings, as permitted by the CCT revolving credit facility. Repayments of this indebtedness will be made in equal amounts between TCI and Liberty and prior to repayment of any advances made by TCI in connection with or subsequent to the closing of the Mile Hi Transaction. In the event that Liberty is no longer a partner, any remaining indebtedness outstanding to Liberty at such time will be repaid by CCT. (continued) III-18 86 Satellite Services, Inc. ("SSI"), a wholly-owned subsidiary of TCI, purchases sports and other programming from certain subsidiaries and affiliates of Liberty. Charges to SSI (which are based upon customary rates charged to others) for such programming were $44,074,000 for 1993. Certain subsidiaries and affiliates of Liberty purchase, at TCI's cost plus in some cases an administrative fee of up to 10% of the rates actually charged, certain pay television and other programming through SSI. In addition, a consolidated subsidiary of Liberty pays a commission to TCI for merchandise sales to customers who are subscribers of TCI's cable systems. Aggregate commissions and charges for such programming were $10,650,000 for 1993. TCI and Liberty are parties to a services agreement pursuant to which TCI agreed to provide certain financial reporting, tax and other administrative services to Liberty. A subsidiary of Liberty also leases office space and satellite transponder facilities from TCI. Charges by TCI for such services and leases amounted to $1,407,000 for the year ended December 31, 1993. In September, 1993, Encore QE Programming Corp. ("QEPC"), a wholly-owned subsidiary of Encore Media Corporation ("EMC"), a 90% owned subsidiary of Liberty, entered into a limited partnership agreement with TCI Starz, Inc. ("TCIS"), a wholly-owned subsidiary of TCI, for the purpose of developing, operating and distributing STARZ!, a first-run movie premium programming service launched in 1994. QEPC is the general partner and TCIS is the limited partner. Losses are allocated 1% to QEPC and 99% to TCIS. Profits are allocated 1% to QEPC and 99% to TCIS until certain defined criteria are met. Subsequently, profits are allocated 20% to QEPC and 80% to TCIS. TCIS has the option, exercisable at any time and without payment of additional consideration, to convert its limited partner interest to an 80% general partner interest with QEPC's partnership interest simultaneously converting to a 20% limited partnership interest. In addition, during specific periods commencing April 1999 and April 2001, respectively, QEPC may require TCIS to purchase, or TCIS may require QEPC to sell, the partnership interest of QEPC in the partnership for a formula- based price. EMC is paid a management fee equal to 20% of "managed costs" as defined, in order to manage the service. During 1993, EMC earned approximately $200,000 in management fees. EMC has agreed to provide the limited partnership with certain programming under a programming agreement whereby the partnership will pay its pro rata share of the total costs incurred by EMC for such programming. In December of 1993, this same limited partnership announced its intention to enter into a joint venture (the "BET Venture") with Black Entertainment Television Films, Inc. and Live Ventures, Inc. which would develop, produce and distribute motion pictures targeted primarily to minority audiences. Though no definitive agreement has been reached with respect to the BET Venture, under the proposed structure, each of the parties would own a one-third interest and agree to contribute up to $5 million as a capital contribution. During 1993, Peachtree Cable TV, Inc. ("Peachtree"), a Nevada corporation wholly owned by certain employees of TCI, including Messrs. Thomson, Schotters, Marshall and Bracken (executive officers of TCI), paid $73,553 in management fees to TCI for the operation and management of Peachtree's cable television systems. During 1993, Mr. Vierra, an executive officer of the Company, was a partner in United International Holdings, a Colorado general partnership ("UIH"). An affiliate of the Company and United International Holdings, Inc. ("UIHI"), formerly a subsidiary of UIH, each own a 50% partnership interest in United International investments ("UII"). On December 31, 1993, UIH was liquidated and all of the shares of UIHI owned by UIH were distributed to UIH's partners. After giving effect to the liquidation of UIH, Mr. Vierra's equity interest in UIHI is less than 5%. UII holds, among other assets, an interest in cable television systems in Israel. The Company, through an affiliate, has provided or has agreed to provide certain guarantees for the benefit of the cable systems in Israel, which guarantee obligations total $4,894,000. (continued) III-19 87 The Company loaned to UIHI the sum of $1 million on June 18, 1992, in connection with UII's acquisition of an interest in a MMDS system being developed in Ireland. Such loan is secured by the MMDS system in Ireland and is due June 30, 1999. Subsequent to the closing, the Company also loaned to UII the sum of $975,000 on an unsecured basis. This note, which it was anticipated would be repaid out of the proceeds of the Malta refinancing (described below) matured on December 31, 1992 and has not yet been repaid in full. UIHI has claimed that, due to exchange losses, the note should be restated at a lesser principal amount. The Company has disputed that position, and the issue is currently under negotiation. On March 5, 1993, UII acquired an interest in a cable television system in Malta (the "Malta System") from UIHI and its affiliates. In connection with that acquisition, the Company contributed capital of approximately $2 million to UII for the system in Malta and provided certain guarantees to lenders to the Malta System not to exceed (on a joint and several basis with UIHI) U.S. $5 million. The closing of the UII acquisition and related financing permitted UIHI to repay a bridge loan of $1.5 million which the Company had made to UIHI in 1992. The Company has released its security with respect to that bridge loan. Currently, the Company and UIHI are negotiating with lenders the terms of an additional guarantee requested by them for the Malta System, and the terms of inter-guarantor and inter-shareholder arrangements for reimbursement of any payments under such guarantee. Affiliates of the Company and UIHI have also formed a partnership for the joint management of the interests in Israel and Malta. The Company is a partner in a partnership with a subsidiary of U S WEST, Inc. ("U S WEST"), which partnership is in turn a partner in a partnership, United Communications International ("UCI"), with UIHI. UIHI acquired its partnership interest in UCI from UIH in 1993. UCI's assets consist of cable television systems in Norway, Sweden and Hungary. The systems in Sweden and Norway were originally acquired by UIH or its affiliates from the Company in 1989 and 1990, respectively. The Company and U S WEST contributed funds, through the partnership formed by them in January of 1992, to UCI which in turn advanced funds to NorKabel A/S ("NorKabel"), a Norwegian joint stock company and the holding company for the Norwegian cable interests, to enable NorKabel to repay a Keep Well loan previously made by the Company to NorKabel. UIHI and the Company are continuing to negotiate the amount of post-closing adjustments owed to the Company from the sale of the Swedish interests to UIHI in 1989. On November 12, 1993, the Company granted stock options in tandem with stock appreciation rights to purchase 2,000,000 shares of TCI Class A common stock at a purchase price of $16.75 per share to Jerome H. Kern who, thereafter, became a director of the Company. Twenty percent of such options vested and became exercisable immediately and the remainder become exercisable evenly over 4 years. The options expire October 12, 1998. The Company believes that the foregoing business dealings with management during 1993 were based upon terms no less advantageous to the Company than those which would be available in dealing with unaffiliated persons. (b) Certain business relationships Mr. Jerome H. Kern, a director of TCI, is a partner with the law firm of Baker & Botts, L.L.P., the principal outside counsel for TCI. See also Item 13(a) above. (continued) III-20 88 (c) Indebtedness of management On February 3, 1994, Dr. Malone, an executive officer and director of the Company, borrowed $310,000 from the Company. Such indebtedness bore interest at the Bank of New York prime rate. Dr. Malone repaid such indebtedness, including accrued interest amounting to $1,733, on March 10, 1994. See also Item 13(a) above regarding indebtedness of UIH and Liberty and their respective subsidiaries to the Company. III-21 89 PART IV. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) (1) Financial Statements Included in Part II of this Report: Page No. -------- Independent Auditors' Report II-13 Consolidated Balance Sheets, December 31, 1993 and 1992 II-14 to II-15 Consolidated Statements of Operations, Years ended December 31, 1993, 1992 and 1991 II-16 Consolidated Statements of Stockholders' Equity, Years ended December 31, 1993, 1992 and 1991 II-17 Consolidated Statements of Cash Flows, Years ended December 31, 1993, 1992 and 1991 II-18 to II-19 Notes to Consolidated Financial Statements, December 31, 1993, 1992 and 1991 II-20 to II-47 IV-1 90 (a) (2) Financial Statement Schedules Included in Part IV of this Report: (i) Financial Statement Schedules required to be filed: Page No. -------- Independent Auditors' Report IV-8 Schedule II - Amounts Receivable from Related Parties and Employees Other Than Related Parties, Years ended December 31, 1993, 1992 and 1991 IV-9 Schedule III - Condensed Information as to the Financial Position of the Registrant, December 31, 1993 and 1992; Condensed Information as to the Operations and Cash Flows of the Registrant, Years ended December 31, 1993, 1992 and 1991 IV-10 to IV-12 Schedule V - Property and Equipment, Years ended December 31, 1993, 1992 and 1991 IV-13 Schedule VI - Accumulated Depreciation of Property and Equipment, Years ended December 31, 1993, 1992 and 1991 IV-14 Schedule VII - Guarantees of Securities of Other Issuers, December 31, 1993 IV-15 Schedule VIII - Valuation and Qualifying Accounts, Years ended December 31, 1993, 1992 and 1991 IV-16 Schedule IX - Short-Term Borrowings, Years ended December 31, 1993, 1992 and 1991 IV-17 Schedule X - Supplementary Statement of Operations Information, Years ended December 31, 1993, 1992 and 1991 IV-18 All other schedules have been omitted because they are not required or are not applicable, or the required information is set forth in the applicable financial statements or notes thereto. IV-2 91 (a) (3) Exhibits Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K): 3 - Articles of Incorporation and Bylaws: The Restated Certificate of Incorporation, dated July 19, 1979, as amended on June 12, 1980, June 18, 1981, June 9, 1983, May 20, 1986, June 12, 1987, January 14, 1988, November 4, 1991, December 2, 1991, December 2, 1991, December 27, 1991, April 3, 1992, February 8, 1993, March 19, 1993 and July 23, 1993. The Bylaws as Amended and Restated July 19, 1979, with amendments April 8, 1980 and October 29, 1987. Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, as amended by Form 8 amendment dated June 16, 1988. (Commission File No. 0-5550) 10 - Material Contracts: Tele-Communications, Inc. 1992 Stock Incentive Option Plan.* Incorporated herein by reference to the Company's definitive Proxy Statement, dated May 21, 1992. (Commission File No. 0-5550) Restated and Amended Employment Agreement, dated as of November 1, 1992, between the Company and Bob Magness.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Restated and Amended Employment Agreement, dated as of November 1, 1992, between the Company and John C. Malone.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of November 1, 1992, between Tele- Communications, Inc. and J. C. Sparkman.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of January 1, 1992, between Tele- Communications, Inc. and Donne F. Fisher.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Restricted Stock Award Agreement, made as of December 10, 1992, among Tele-Communications, Inc., Donne F. Fisher and WestMarc Communications, Inc.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. (continued) IV-3 92 Deferred Compensation Plan for Non-Employee Directors, effective on November 1, 1992.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of November 1, 1992 between Tele- Communications, Inc. and Fred A. Vierra.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of September 1, 1983, by and between United Artists Communications, Inc. and Robert A. Naify.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Form 8 amendments dated April 7, 1992, April 14, 1992, October 26, 1992, October 27, 1992 and March 2, 1993. Form of 1992 Non-Qualifed Stock Option and Stock Appreciation Rights Agreement.* Form of 1993 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.* Non-Qualifed Stock Option and Stock Appreciation Rights Agreement, dated as of November 12, 1993, by and between Tele-Communications, Inc. and Jerome H. Kern.* Form of Indemnification Agreement.* Qualified Employee Stock Purchase Plan of Tele-Communications, Inc., as amended.* Incorporated herein by reference to the Tele-Communications, Inc. Registration Statement on Form S-8. (Commission File No. 33-59058) Letter Agreement dated September 16, 1992, among Tele-Communications, Inc., Time Warner Entertainment Company, L.P., Daniels Communications, Inc., Cablevision Equities III and Liberty of Denver, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated September 24, 1992. (Commission File No. 0-19036) Letter of Intent, dated September 16, 1992, among Robert L. Johnson, Tele-Communications, Inc., Liberty of Denver, Inc. and Daniels Communications, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated September 24, 1992. (Commission File No. 0-19036) Community Cable Television General Partnership Agreement, dated as of January 30, 1992, by and between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated January 12, 1993. (Commission File No. 0-19036) (continued) IV-4 93 10- Material Contracts, continued: Amendment to Community Cable Television General Partnership Agreement, dated as of December 29, 1992, by and between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated January 12, 1993. (Commission File No. 0-19036) Second Amendment to Community Cable Television General Partnership Agreement, dated March 12, 1993, between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Agreement to Purchase and Sell Partnership Interests, dated as of January 29, 1993, among Mile Hi Cable Partners, L.P., Mile Hi Cablevision, Inc., Time Warner Entertainment Company, L.P., Daniels & Associates Partners Limited, Daniels Communications, Inc., Cablevision Associates, Ltd., and John Yelenick and Maria Garcia-Berry, as agents for the limited partners. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated March 24, 1993. (Commission File No. 0-19036) Loan and Security Agreement, dated January 28, 1993, among Community Cable Television and Robert L. Johnson, the Paige Johnson Trust and the Brett Johnson Trust. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated March 24, 1993. (Commission File No. 0-19036) Agreement of Limited Partnership, dated as of January 28, 1993 among P & B Johnson Corp., Community Cable Television and Daniels Communications, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated March 24, 1993. (Commission File No. 0-19036) Assignment and Assumption Agreement, dated December 29, 1992, among Liberty Cable Partner, Inc., Community Cable Television and Intermedia Partners. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Assignment and Assumption Agreement, dated December 29, 1992, among Liberty Cable Partner, Inc. Community Cable Television and Robin Cable Systems of Tucson. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Recapitalization Agreement, dated March 26, 1993, among Liberty Media Corporation, TCI Liberty, Inc. and Tele-Communications of Colorado, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) (continued) IV-5 94 10- Material Contracts, continued: Amendment to Recapitalization Agreement, dated June 3, 1993, between Liberty Media Corporation, TCI Liberty and Tele-Communications of Colorado, Inc. $18,539,442 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. $66,900,000 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. $10,052,000 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. $86,105,000 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. Pledge and Security Agreement, dated June 3, 1993, between Liberty Cable Partner, Inc. and Tele-Communications of Colorado, Inc. Stock Pledge and Security Agreement, dated June 3, 1993, between Liberty Capital Corp. and Liberty Cable, Inc., and Tele-Communications of Colorado, Inc. Option-Put Agreement, dated June 3, 1993, between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Assignment and Assumption Agreement, dated June 3, 1993, between Liberty Cable Partner, Inc. and TCI Holdings, Inc. Option Agreement dated June 3, 1993, between TCI Holdings, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated June 24, 1993 (Commission File No. 0-19036). Modification of Promissory Note, dated November 30, 1993, between Liberty Media Corporation and Tele-Communications of Colorado, Inc. Modification of Promissory Note, dated November 30, 1993, between Liberty Media Corporation and TCI Liberty, Inc. Amendment to Option-Put Agreement, dated November 30, 1993, between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1993 (Commission File No. 0-19036). Agreement Regarding Purchase and Sales of Partnership Interest, dated as of March 26, 1993, between Liberty Cable Partners, Inc. and TCI Holdings, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Stock Purchase Agreement, dated as of February 18, 1992, among Tele-Communications, Inc., United Artists Entertainment Company, United Artists Holdings, Inc., United Artists Theatre Holding Company, United Artists Cable Holdings, Inc., Oscar I Corporation and Oscar II Corporation. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated February 28, 1992. (continued) IV-6 95 Amendment Agreement and Supplement, dated as of May 12, 1992, by and among Tele-Communications, Inc., United Artists Entertainment Company, United Artists Holdings, Inc., United Artists Cable Holdings, Inc., United Artists Theatre Holding Company, Oscar I Corporation and Oscar II Corporation. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated May 19, 1992. Distribution Agreement, dated as of December 2, 1992, among Comcast Corporation, Comcast Storer, Inc., SCI Holdings, Inc., Storer Communications, Inc., certain subsidiaries of Storer, Tele-Communications, Inc., TCI Storer, Inc., TKR Storer Limited Partnership, TKR Cable I, Inc., TKR Cable II, Inc. and TKR Cable III, Inc. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated December 7, 1992. Standstill, Indemnification and Contribution Agreement, made as of November 30, 1992, by and among Tele-Communications, Inc., TCI Storer, Inc., TKR Storer Limited Partnership, Knight-Ridder Cablevision, Inc., Country Cable Co., and SCI Cable Partners. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated December 7, 1992. Tax Sharing Agreement, dated as of December 2, 1992, by and among Storer Communications, Inc., TKR Cable I, Inc., TKR Cable II, Inc., TKR Cable III, Inc., Tele-Communications, Inc., Comcast Corporation and certain subsidiaries of Storer. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated December 7, 1992. Agreement and Plan of Merger, dated as of January 27, 1994, by and among Tele-Communications, Inc., Liberty Media Corporation, TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty Mergeco, Inc. Incorporated herein by reference to the Company's Current Report on Form 8-K dated February 15, 1994. 21- Subsidiaries of the Registrant. 23- Consent of KPMG Peat Marwick. *Constitutes management contract or compensatory arrangement. (b) Reports on Form 8-K filed during the quarter ended December 31, 1993: Item Date of Report Reported Financial Statements Filed -------------- -------- -------------------------- October 26, 1993 Item 5 Liberty Media Corporation: Years ended December 31, 1992, nine months ended December 31, 1991, three months ended March 31, 1991 and year ended December 31, 1991 Six months ended June 30, 1993 and 1992 (unaudited) IV-7 96 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Tele-Communications, Inc.: Under date of March 21, 1994, we reported on the consolidated balance sheets of Tele-Communications, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we have also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in notes 1 and 10 to the consolidated financial statements, the Company changed its method of accounting for income taxes. /s/ KPMG PEAT MARWICK KPMG Peat Marwick Denver, Colorado March 21, 1994 IV-8 97 Schedule II TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Amounts Receivable from Related Parties and Employees Other Than Related Parties Years ended December 31, 1993, 1992 and 1991
Balance at Balance beginning at end Name of debtor of year Additions Deductions of year - -------------- ---------- --------- ---------- ------- amounts in millions Year ended December 31, 1993: Russ Skinner $0.2 -- -- 0.2 (1) ==== ==== ==== ==== Year ended December 31, 1992: Russ Skinner $0.2 -- -- 0.2 ==== ==== ===== ==== Year ended December 31, 1991: Russ Skinner $0.2 -- -- 0.2 Arthur Lee -- 0.2 (0.2) -- Ron Rierson 0.1 -- (0.1) -- ---- ---- ---- ---- $0.3 0.2 (0.3) 0.2 ==== ==== ==== ====
(1) This note receivable is due in 2003 or upon sale of certain property and has no stated interest rate. Interest will be based upon appreciation of the underlying property. Note - Amounts include accrued interest on note receivable balances. IV-9 98 Schedule III Page 1 of 3 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Information as to the Financial Position of the Registrant December 31, 1993 and 1992
Assets 1993 1992* - ------ ---- ---- amounts in millions Cash $ 4 79 Investments in and advances to consolidated subsidiaries - eliminated upon consolidation 7,560 4,795 Property and equipment, at cost 40 27 Less accumulated depreciation 16 12 ------ ----- 24 15 ------ ----- Other assets, at cost, net of amortization 44 32 ------ ----- $7,632 4,921 ====== ===== Liabilities and Stockholders' Equity - ------------------------------------ Accrued liabilities $ 324 188 Debt 5,178 2,897 ------ ----- Total liabilities 5,502 3,085 Redeemable preferred stocks 18 110 Stockholders' equity (see detail on page II-15) 2,112 1,726 ------ ----- $7,632 4,921 ====== ===== Guarantee (see Schedule VII) $ 44 ======
*Restated - see notes 1, 3 and 10 to consolidated financial statements. IV-10 99 Schedule III Page 2 of 3 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Information as to the Operations of the Registrant Years ended December 31, 1993, 1992 and 1991
1993 1992* 1991* ---- ---- ---- amounts in millions Management costs reimbursed by subsidiaries $ 98 106 54 ----- ----- ----- Operating expenses (income): Selling, general and administrative 134 99 50 Interest expense 369 226 164 Interest income, principally from consolidated subsidiaries (370) (232) (165) Depreciation and amortization 8 5 3 Gain on disposition of assets (43) (2) -- Loss on early extinguishment of debt -- 10 2 ----- ----- ----- 98 106 54 ----- ----- ----- Earnings from operations before share of losses of consolidated subsidiaries -- -- -- Share of losses of consolidated subsidiaries, including loss from discontinued operations (7) (8) (97) ----- ----- ----- Net loss $ (7) (8) (97) ===== ===== =====
*Restated - see notes 1, 3 and 10 to consolidated financial statements. IV-11 100 Schedule III Page 3 of 3 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Information as to Cash Flows of the Registrant Years ended December 31, 1993, 1992 and 1991
1993 1992 1991 ---- ---- ---- amounts in millions Cash flows from operating activities: Earnings before share of losses of consolidated subsidiaries, including loss from discontinued operations $ -- -- -- Adjustments to reconcile loss to net cash provided by operating activities: Depreciation and amortization 8 5 3 Loss on early extinguishment of debt -- 10 2 Gain on disposition of assets (43) (2) -- Amortization of debt discount 27 26 15 Change in accrued liabilities 136 90 40 ------ ----- ----- Net cash provided by operating activities 128 129 60 ------ ----- ----- Cash flows from investing activities: Reduction in or additional investments in and advances to consolidated subsidiaries, net (2,723) (1,036) (508) Proceeds on disposition of assets 111 12 -- Capital expended for property and equipment and other assets, net (38) (25) (19) ------ ----- ----- Net cash used by investing activities (2,650) (1,049) (527) ------ ----- ----- Cash flows from financing activities: Borrowings of debt 3,274 2,327 1,996 Repayment of debt (735) (1,332) (1,512) Preferred stock dividends (2) (15) -- Repurchase of preferred stock (92) (5) -- Issuances of common stock 6 7 2 Repurchases of common stock (4) (19) (9) ------ ----- ----- Net cash provided by financing activities 2,447 963 477 ------ ----- ----- Increase (decrease) in cash (75) 43 10 Cash at beginning of year 79 36 26 ------ ----- ----- Cash at end of year $ 4 79 36 ====== ===== ===== Supplemental disclosure of cash flow information - Cash paid during the year for interest $ 257 177 142 ====== ===== =====
See also note 2 to the consolidated financial statements. IV-12 101 Schedule V TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Property and Equipment Years ended December 31, 1993, 1992 and 1991
Balance at Retire- Balance beginning Additions ments at end Classification of year* at cost* or sales* Other of year* - -------------- ------- ------- -------- ----- ------- amounts in millions Year ended December 31, 1993: Land $ 71 1 (1) 2 73 Distribution systems 6,075 899 (323) (22) 6,629 Support equipment and buildings 712 120 (29) 15 818 ------ ------ ------ ---- ------ $6,858 1,020 (353) (5) 7,520 ====== ====== ====== ==== ====== Year ended: December 31, 1992: Land $ 59 10 (2) 4 71 Distribution systems 5,191 1,075 (151) (40) 6,075 Support equipment and buildings 598 123 (33) 24 712 ------ ------ ------ ---- ------ $5,848 1,208 (186) (12) 6,858 ====== ====== ====== ==== ====== Year ended December 31, 1991: Land $ 66 1 (8) -- 59 Distribution systems 4,976 551 (336) -- 5,191 Support equipment and buildings 528 118 (48) -- 598 ------ ------ ------ ---- ------ $5,570 670 (392) -- 5,848 ====== ====== ====== ==== ======
*Restated and Reclassified - see notes 1 and 10 to consolidated financial statements. Note - Columns which would have been answered "none" have been omitted. IV-13 102 Schedule VI TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Accumulated Depreciation of Property and Equipment Years ended December 31, 1993, 1992 and 1991
Additions Balance at charged Balance beginning to profit Retire- at end Description of year* and loss* ments* Other* of year* - ----------- ---------- --------- ------- ------ -------- amounts in millions Year ended December 31, 1993: Distribution systems $1,993 544 (315) -- 2,222 Support equipment and buildings 303 78 (18) -- 363 ------ ------ ------ ----- ------ $2,296 622 (333) -- 2,585 ====== ====== ====== ===== ====== Year ended December 31, 1992: Distribution systems $1,536 445 (142) 154 1,993 Support equipment and buildings 231 67 (22) 27 303 ------ ------ ------ ----- ------ $1,767 512 (164) 181** 2,296 ====== ====== ====== ===== ====== Year ended December 31, 1991: Distribution systems $1,230 467 (155) (6) 1,536 Support equipment and buildings 184 62 (19) 4 231 ------ ------ ------ ----- ------ $1,414 529 (174) (2) 1,767 ====== ====== ====== ===== ======
*Restated and Reclassified - see notes 1 and 10 to consolidated financial statements. **Amount represents the historical accumulated depreciation of the Storer assets received by the Holding Companies in the Split-Off (see note 4 to the consolidated financial statements). IV-14 103 Schedule VII TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Guarantees of Securities of Other Issuers December 31, 1993
Title of issue Name of issuer of securities of each class Total amount Nature guaranteed by person for of securities guaranteed and of which statement is filed guaranteed outstanding guarantee - ---------------------------- -------------- -------------- --------- amounts in millions Parent company guarantee: ARP Partnership General $ 1 Letter of liabilities credit TCG Partners General 9 Letter of liabilities credit Reiss Media Enterprises, Inc. Bank loan 3 Funding commitment London South Cable Bank loan Principal and Partnership and Avon interest Cable Limited Partnership 31 ---- $ 44 ==== Subsidiaries' guarantees: Tempo Satellite, Inc. Construction $125 Payment of liability obligations Robin Media Group, Inc. Bank loan 30 Principal and interest Interactive Network, Inc. Bank loan 2 Principal and interest UA-Israel, Inc. Bank loan 5 Principal and and general interest liabilities and payment obligations UA-Malta, Inc. Bank loan 5 Principal and and general interest liabilities and payment obligations Tevel Israel International General Letter of Communications, Ltd. liabilities 1 credit E! Entertainment Building Lease Television, Inc. lease 1 guarantee United Artists Properties I Bank loan 12 Principal and interest United Artists Properties II Bank loan 12 Principal and ---- interest $193 ====
Note - Columns which would have been answered "none" have been omitted. IV-15 104 Schedule VIII TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended December 31, 1993, 1992 and 1991
Additions Deductions --------- ---------- Balance at Charged to Write-offs Balance beginning profit net of at end Description of year* and loss* recoveries* of year* - ----------- ---------- ---------- ---------- ------- amounts in millions Year ended December 31, 1993: Allowance for doubtful receivables - trade $15 58 (54) 19 === === === === Year ended December 31, 1992: Allowance for doubtful receivables - trade $16 45 (46) 15 === === === === Year ended December 31, 1991: Allowance for doubtful receivables - trade $11 46 (41) 16 === === === ===
*Reclassified - see note 1 to consolidated financial statements. IV-16 105 Schedule IX TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Short-Term Borrowings Years ended December 31, 1993, 1992 and 1991
End of Year During the year ---------------------- ------------------------------------ Category of Weighted Weighted aggregate average Maximum Average average short-term Amount interest amount amount interest borrowing Outstanding rate outstanding outstanding rate - ---------- ----------- -------- ----------- ----------- -------- amounts in millions, except percentage amounts Year ended December 31, 1993 - Commercial paper $ 44 3.94% $ 306 $128 3.75% ==== ==== ====== ==== ==== Year ended December 31, 1992 - Commercial paper $ 62 3.70% $ 266 $171 4.55% ==== ==== ====== ==== ==== Year ended December 31, 1991 - Commercial paper $ 47 5.70% $ 188 110 6.31% ==== ==== ====== ==== ====
IV-17 106 Schedule X TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Supplementary Statement of Operations Information Years ended December 31, 1993, 1992 and 1991
Charged to expense ---------------------- 1993 1992* 1991* ---- ---- ---- amounts in millions Maintenance and repairs $ 45 43 37 ==== ==== ==== Amortization: Franchise costs $258 230 207 Other 31 22 20 ---- ---- ---- $289 252 227 ==== ==== ==== Taxes, other than payroll and income $203 170 97 ==== ==== ==== Royalties - Copyright fees $ 43 40 28 ==== ==== ==== Advertising costs $ 20 21 36 ==== ==== ====
*Restated and Reclassified - see notes 1 and 10 to consolidated financial statements. IV-18 107 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TELE-COMMUNICATIONS, INC. By /s/ JOHN C. MALONE ------------------------------- John C. Malone President and Chief Executive Officer Dated: March 25, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- /s/ BOB MAGNESS Chairman of the Board March 25, 1994 - --------------------------- and Director Bob Magness /s/ JOHN C. MALONE President, Chief Executive March 25, 1994 - --------------------------- Officer and Director John C. Malone /s/ KIM MAGNESS Director March 25, 1994 - --------------------------- Kim Magness /s/ D. F. FISHER Executive Vice President March 25, 1994 - --------------------------- and Director D. F. Fisher (Principal Financial Officer) /s/ GARY K. BRACKEN Senior Vice President March 25, 1994 - --------------------------- and Controller Gary K. Bracken (Principal Accounting Officer)
IV-19 108 EXHIBIT INDEX Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K): 3 - Articles of Incorporation and Bylaws: The Restated Certificate of Incorporation, dated July 19, 1979, as amended on June 12, 1980, June 18, 1981, June 9, 1983, May 20, 1986, June 12, 1987, January 14, 1988, November 4, 1991, December 2, 1991, December 2, 1991, December 27, 1991, April 3, 1992, February 8, 1993, March 19, 1993 and July 23, 1993. The Bylaws as Amended and Restated July 19, 1979, with amendments April 8, 1980 and October 29, 1987. Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, as amended by Form 8 amendment dated June 16, 1988. (Commission File No. 0-5550) 10 - Material Contracts: Tele-Communications, Inc. 1992 Stock Incentive Option Plan.* Incorporated herein by reference to the Company's definitive Proxy Statement, dated May 21, 1992. (Commission File No. 0-5550) Restated and Amended Employment Agreement, dated as of November 1, 1992, between the Company and Bob Magness.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Restated and Amended Employment Agreement, dated as of November 1, 1992, between the Company and John C. Malone.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of November 1, 1992, between Tele-Communications, Inc. and J. C. Sparkman.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of January 1, 1992, between Tele-Communications, Inc. and Donne F. Fisher.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Restricted Stock Award Agreement, made as of December 10, 1992, among Tele-Communications, Inc., Donne F. Fisher and WestMarc Communications, Inc.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. 109 Deferred Compensation Plan for Non-Employee Directors, effective on November 1, 1992.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of November 1, 1992 between Tele-Communications, Inc. and Fred A. Vierra.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, as amended by Form 10-K/A (amendment #1) for the year ended December 31, 1992. Employment Agreement, dated as of September 1, 1983, by and between United Artists Communications, Inc. and Robert A. Naify.* Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Form 8 amendments dated April 7, 1992, April 14, 1992, October 26, 1992, October 27, 1992 and March 2, 1993. Form of 1992 Non-Qualifed Stock Option and Stock Appreciation Rights Agreement.* Form of 1993 Non-Qualified Stock Option and Stock Appreciation Rights Agreement.* Non-Qualifed Stock Option and Stock Appreciation Rights Agreement, dated as of November 12, 1993, by and between Tele-Communications, Inc. and Jerome H. Kern.* Form of Indemnification Agreement.* Qualified Employee Stock Purchase Plan of Tele-Communications, Inc., as amended.* Incorporated herein by reference to the Tele-Communications, Inc. Registration Statement on Form S-8. (Commission File No. 33-59058) Letter Agreement dated September 16, 1992, among Tele-Communications, Inc., Time Warner Entertainment Company, L.P., Daniels Communications, Inc., Cablevision Equities III and Liberty of Denver, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated September 24, 1992. (Commission File No. 0-19036) Letter of Intent, dated September 16, 1992, among Robert L. Johnson, Tele-Communications, Inc., Liberty of Denver, Inc. and Daniels Communications, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated September 24, 1992. (Commission File No. 0-19036) Community Cable Television General Partnership Agreement, dated as of January 30, 1992, by and between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated January 12, 1993. (Commission File No. 0-19036) 110 10- Material Contracts, continued: Amendment to Community Cable Television General Partnership Agreement, dated as of December 29, 1992, by and between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated January 12, 1993. (Commission File No. 0-19036) Second Amendment to Community Cable Television General Partnership Agreement, dated March 12, 1993, between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Agreement to Purchase and Sell Partnership Interests, dated as of January 29, 1993, among Mile Hi Cable Partners, L.P., Mile Hi Cablevision, Inc., Time Warner Entertainment Company, L.P., Daniels & Associates Partners Limited, Daniels Communications, Inc., Cablevision Associates, Ltd., and John Yelenick and Maria Garcia-Berry, as agents for the limited partners. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated March 24, 1993. (Commission File No. 0-19036) Loan and Security Agreement, dated January 28, 1993, among Community Cable Television and Robert L. Johnson, the Paige Johnson Trust and the Brett Johnson Trust. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated March 24, 1993. (Commission File No. 0-19036) Agreement of Limited Partnership, dated as of January 28, 1993 among P & B Johnson Corp., Community Cable Television and Daniels Communications, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated March 24, 1993. (Commission File No. 0-19036) Assignment and Assumption Agreement, dated December 29, 1992, among Liberty Cable Partner, Inc., Community Cable Television and Intermedia Partners. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Assignment and Assumption Agreement, dated December 29, 1992, among Liberty Cable Partner, Inc. Community Cable Television and Robin Cable Systems of Tucson. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Recapitalization Agreement, dated March 26, 1993, among Liberty Media Corporation, TCI Liberty, Inc. and Tele-Communications of Colorado, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) 111 10- Material Contracts, continued: Amendment to Recapitalization Agreement, dated June 3, 1993, between Liberty Media Corporation, TCI Liberty and Tele-Communications of Colorado, Inc. $18,539,442 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. $66,900,000 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. $10,052,000 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. $86,105,000 Promissory Note, dated June 3, 1993, from Liberty Media Corporation to Tele-Communications of Colorado, Inc. Pledge and Security Agreement, dated June 3, 1993, between Liberty Cable Partner, Inc. and Tele-Communications of Colorado, Inc. Stock Pledge and Security Agreement, dated June 3, 1993, between Liberty Capital Corp. and Liberty Cable, Inc., and Tele-Communications of Colorado, Inc. Option-Put Agreement, dated June 3, 1993, between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Assignment and Assumption Agreement, dated June 3, 1993, between Liberty Cable Partner, Inc. and TCI Holdings, Inc. Option Agreement dated June 3, 1993, between TCI Holdings, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Current Report on Form 8-K, dated June 24, 1993 (Commission File No. 0-19036). Modification of Promissory Note, dated November 30, 1993, between Liberty Media Corporation and Tele-Communications of Colorado, Inc. Modification of Promissory Note, dated November 30, 1993, between Liberty Media Corporation and TCI Liberty, Inc. Amendment to Option-Put Agreement, dated November 30, 1993, between Tele-Communications of Colorado, Inc. and Liberty Cable Partner, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1993 (Commission File No. 0-19036). Agreement Regarding Purchase and Sales of Partnership Interest, dated as of March 26, 1993, between Liberty Cable Partners, Inc. and TCI Holdings, Inc. Incorporated herein by reference to Liberty Media Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (Commission File No. 0-19036) Stock Purchase Agreement, dated as of February 18, 1992, among Tele-Communications, Inc., United Artists Entertainment Company, United Artists Holdings, Inc., United Artists Theatre Holding Company, United Artists Cable Holdings, Inc., Oscar I Corporation and Oscar II Corporation. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated February 28, 1992. 112 Amendment Agreement and Supplement, dated as of May 12, 1992, by and among Tele-Communications, Inc., United Artists Entertainment Company, United Artists Holdings, Inc., United Artists Cable Holdings, Inc., United Artists Theatre Holding Company, Oscar I Corporation and Oscar II Corporation. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated May 19, 1992. Distribution Agreement, dated as of December 2, 1992, among Comcast Corporation, Comcast Storer, Inc., SCI Holdings, Inc., Storer Communications, Inc., certain subsidiaries of Storer, Tele-Communications, Inc., TCI Storer, Inc., TKR Storer Limited Partnership, TKR Cable I, Inc., TKR Cable II, Inc. and TKR Cable III, Inc. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated December 7, 1992. Standstill, Indemnification and Contribution Agreement, made as of November 30, 1992, by and among Tele-Communications, Inc., TCI Storer, Inc., TKR Storer Limited Partnership, Knight-Ridder Cablevision, Inc., Country Cable Co., and SCI Cable Partners. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated December 7, 1992. Tax Sharing Agreement, dated as of December 2, 1992, by and among Storer Communications, Inc., TKR Cable I, Inc., TKR Cable II, Inc., TKR Cable III, Inc., Tele-Communications, Inc., Comcast Corporation and certain subsidiaries of Storer. Incorporated herein by reference to the Tele-Communications, Inc. Current Report on Form 8-K, dated December 7, 1992. Agreement and Plan of Merger, dated as of January 27, 1994, by and among Tele-Communications, Inc., Liberty Media Corporation, TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty Mergeco, Inc. Incorporated herein by reference to the Company's Current Report on Form 8-K dated February 15, 1994. 21- Subsidiaries of the Registrant. 23- Consent of KPMG Peat Marwick. *Constitutes management contract or compensatory arrangement. EX-3 2 CERTIFICATION OF INCORPORATION 1 EXHIBIT 3 {LOGO} STATE OF DELAWARE Office of SECRETARY OF STATE I, Glenn C. Kenton Secretary of State of the State of Delaware, do hereby certify that the above and foregoing is a true and correct copy of Restated Certificate of Incorporation of the "TELE-COMMUNICATIONS, INC.", as received and filed in this office the nineteenth day of July A.D. 1979, at 1 o'clock P.M. In Testimony Whereof, I have hereunto set my hand and official seal at Dover this nineteenth day of July in the year of our Lord one thousand nine hundred and seventy-nine. {SEAL} RECEIVED FOR RECORD JUL 19 1979 LEO J. DUGAN, Jr., Recorder /s/ GLENN C. KENTON Glenn C. Kenton, Secretary of State 2 RESTATED CERTIFICATE OF INCORPORATION OF TELE-COMMUNICATIONS, INC. TELE-COMMUNICATIONS, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is TELECOMMUNICATIONS, INC., and was incorporated under the name American Tele-Communications, Inc. The date of filing its original Certificate of Incorporation with the Secretary of State was August 20, 1968. 2. This Restated Certificate of Incorporation restates and integrates and further amends the Certificate of Incorporation of this corporation. 3. The text of the Certificate of Incorporation as amended or supplemented heretofore is further amended hereby to read as herein set forth in full: ARTICLE I. The name of the corporation shall be TELE-COMMUNICATIONS, INC. ARTICLE II. The location of the registered office of the corporation in the State of Delaware is the office of The Corporation Trust Company, 100 W. 10th Street, Wilmington, County of New Castle, Delaware 19899, and the name of the registered agent at such address is The Corporation Trust Company. 3 ARTICLE III. The nature of the business and purposes to be conducted or promoted are: FIRST: To own and operate a radio common carrier service and to transmit by radio signals, television signals and other intelligence; to own and hold licenses issued by the Federal Communications Commission and all other government agencies appropriate to the conducting of such common carrier radio service; and to engage in the business of transmission of intelligence by wire, cable, microwave facilities, and by such other means as may be practicable in accordance with the nature of the art. SECOND: To own, operate, and deal in community antenna systems, cable television systems, and all devices, master antenna, cable and distribution systems whereby radio signals, television signals, and other intelligence are transmitted, communicated or relayed from one point to another by means of cable, satellites, microwave facilities, and by such other means as may be practicable in accordance with the nature of the art. THIRD: To own, lease, operate, acquire, and deal generally in television stations, radio stations, theatres, electrical and mechanical equipment or mechanisms or devices used for the conveying or disseminating or broadcasting of radio or television signals, and to own and operate microwave and transmitting equipment and devices, and cable and wire facilities for the transmitting of television and radio signals. FOURTH: To acquire, own, hold, and operate under licenses, privileges and franchises from the government of any 2 4 state, municipality or nation or any agency or instrumentality thereof. FIFTH: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV. FIRST: The total number of shares of stock which the corporation shall have authority to issue is twenty-one million (21,000,000) shares divided into the following classes: (a) Ten million (10,000,000) shares of Class A Common Stock with a par value of One Dollar ($1.00) per share (said shares constituting the Common Stock of the corporation heretofore authorized and being hereby designated as Class A Common Stock); (b) Ten million (10,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share; and (c) One million (1,000,000) shares of Preferred Stock having a par value of One Dollar ($1.00) per share. SECOND: Each share of Class A Common Stock shall be identical in all respects with the Class B Common Stock, except that each holder of Class A Common Stock shall be entitled to one (1) vote for each share of such stock held and each holder of Class B Common Stock shall be entitled to ten (10) votes for each share of such stock held. THIRD: The Board of Directors is authorized, sub- 3 5 ject to limitations prescribed by law and to the provisions of this Article, to provide for the issuance of Preferred Stock from time to time in one or more series with such distinctive serial designations, rights, preferences and limitations of the shares of each such series as the Board of Directors shall establish, by filing a statement pursuant to the Delaware Corporation Law. The authority of the Board of Directors with respect to each series shall, to the extent allowed by such Law, include the authority to establish and fix the following: (a) The number of shares initially constituting the series and the distinctive designation of that series; (b) The extent, if any, to which the series shall have voting rights, whether none, full, fractional or otherwise limited, subject, however, to the limitation that at the time of the creation of any particular series of Preferred Stock, the voting rights, if any, of that particular series of Preferred Stock, plus the total voting rights then authorized for all other Preferred Stock, shall not exceed five percent (5%) of the voting rights of all Common Stock issued and outstanding at that time; (c) Whether entitled to receive dividends (which may be cumulative or noncumulative) at such rate or rates, on such conditions, and at such times and payable in preference to, or in such relation to, the dividends payable 4 6 on any other class or classes or any other series of the same or any other class or classes of stock of the corporation; (d) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, or upon any distribution of its assets; (e) Whether the shares shall have conversion privileges and, if so, the terms and conditions of such conversion privileges, including provision, if any, for adjustment of the conversion rate and for payment of additional amounts by holders of Preferred Stock of that series upon exercise of such conversion privileges; (f) Whether or not the shares of that series shall be redeemable, and, if so, the price at and the terms and conditions upon which such shares shall be redeemable, and whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; and (g) Such other preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof. Notwithstanding the fixing of the number of shares constituting a particular series upon the issuance thereof, 5 7 the Board of Directors may at any time thereafter authorize the issuance of additional shares of the same series or may reduce the number of shares constituting such series. The Board of Directors is expressly authorized to vary the provisions relating to the foregoing matters between the various series of Preferred Stock, but in all other respects the shares of each series shall be of equal rank with each other, regardless of series. All Preferred Stock of any one series shall be identical in all respects, except as to the dates from which dividends shall be cumulative, if such dividends are provided. FOURTH: Except as may be determined by the Board of Directors of the corporation pursuant to paragraph THIRD of this Article IV with respect to the Preferred Stock, and except as otherwise may be required by law, the holders of the Class A Common Stock and the holders of the Class B Common Stock shall vote with the holders of voting shares of the Preferred Stock, if any, as one class for the election of directors and for all other purposes. At all elections of members of the Board of Directors of the corporation, each holder of stock certified to vote shall be entitled to as many votes as shall equal the number of votes which (except for the within provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to the votes represented by his shares of stock multiplied by the number of directors to be elected by him, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit. FIFTH: Any and all right, title, interest, and 6 8 claim in or to any dividends declared by the corporation, whether in cash, stock or otherwise, which are unclaimed by the stockholder entitled thereto for a period of six years after the close of business on the payment date, shall be and be deemed to be extinguished and abandoned; and such unclaimed dividends in the possession of the corporation, its transfer agents or other agents or depositories, shall at such time become the absolute property of the corporation, free and clear of any and all claims of any persons whatsoever. ARTICLE V. FIRST: The governing body of this corporation shall be a Board of Directors. The number of directors shall be not less than six (6) nor more than twelve (12) and shall be fixed by the By-laws, and each director shall be of legal age. The Board of Directors shall have full power, direction, management, and control over the affairs of the corporation, subject, however, to the limitations provided in these Articles and the law of the State of Delaware. SECOND: The Board of Directors of the corporation shall be divided into three classes: Class I, Class II, and Class III. Each Class shall consist, as nearly as possible, of one-third of the whole number of the Board of Directors. Class I directors elected at the 1979 annual meeting of stockholders shall initially serve until the next annual meeting following their election; Class II directors elected at the 1979 annual meeting of stockholders shall initially serve until the second annual meeting following their election; Class III directors elected at the 1979 meeting of stockholders shall be elected to serve until the third annual 7 9 meeting following their election; and, in the case of each Class, the directors shall serve until their respective successors are duly elected and shall qualify. At each annual meeting of stockholders after the initial election of directors according to Classes, the directors chosen to succeed those whose terms shall have expired shall be elected to hold office for a term to expire at the third succeeding annual meeting of stockholders after their election, and until their respective successors are elected and qualified. If the number of directors is changed, any increase or decrease shall be apportioned among the Classes so as to maintain all Classes as equal in number as possible, and any additional director elected to any Class shall hold office for a term which shall coincide with the terms of the other directors in such Class. Any vacancy occurring in the Board of Directors caused by death, resignation, removal or otherwise, and any newly created directorship resulting from an increase in the number of directors, may be filled by the directors then in office, although such directors are less than a quorum, or by the sole remaining director. Each director chosen to fill a vacancy or a newly created directorship shall hold office until the next election of the Class for which such director shall have been chosen, and until his successor shall be duly elected and shall qualify. THIRD: The Board of Directors shall have the power to establish an executive committee to manage and operate the affairs of the corporation, if in the judgment of the Board the appointment of such committee is necessary or desirable to achieve the corporate purposes. Any such committee shall report to the Board of Directors not less often than quarterly on its activities and shall be responsible to the Board for 8 10 the conduct of the enterprises and affairs entrusted to it. FOURTH: This corporation shall indemnify to the full extent permitted by, and in the manner permissible under, the laws of the State of Delaware, any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of this corporation or served any other enterprise as a director or officer at the request of this corporation and such right of indemnification shall also be applicable to the executors, administrators and other similar legal representative of any such director or officer. The foregoing provisions of this paragraph FOURTH shall be deemed to be a contract between this corporation and each director and officer who serves in such capacity at any time while this paragraph FOURTH is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. The foregoing rights of indemnification shall not be deemed exclusive of any other rights to which any director or officer or his legal representative may be entitled apart from the provisions this paragraph FOURTH. FIFTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered to adopt, amend or repeal any provision of the By-laws of this corporation, provided, however, that no such action shall be taken without the affirmative vote of at least three-quarters (75%) of the members of the Board of Directors. 9 11 ARTICLE VI. The term of existence of this corporation shall be perpetual. ARTICLE VII. The capital stock of this corporation shall not be assessable. It shall be issued as fully paid, and the private property of the stockholders shall not be liable for the debts, obligations or liabilities of this corporation. The Certificate of Incorporation shall not be subject to amendment in this respect. ARTICLE VIII. The affirmative vote of at least two-thirds (66-2/3%) of the votes represented by the outstanding shares of this corporation's Class A Common Stock, Class B Common Stock and (except as may be determined by the Board of Directors pursuant to paragraph THIRD of Article IV and as limited therein) Preferred Stock, entitled to vote at elections of directors and voting as one class, shall be required in order for the corporation to take any action, at a meeting specifically called for the purpose of taking of such action, to authorize: (a) The amendment, alteration or repeal of any provision of this Restated Certificate of Incorporation or the addition or insertion or other provisions therein; (b) The adoption, amendment or repeal of any provision of the By-laws of the corporation; 12 (c) The merger or consolidation of this corporation with or into any other corporation, provided, however, that this clause (c) shall not apply to any merger or consolidation (i) as to which the laws of Delaware, as then in effect, do not require the consent of this corporation's shareholders, or (ii) which three-quarters (75%) of the Board of Directors have approved; (d) The sale, lease or exchange of all, or substantially all, of the property and assets of the corporation; (e) The dissolution of the corporation; or (f) The removal of a director of the corporation. All rights at any time conferred upon the stockholders of the corporation pursuant to this Certificate of Incorporation are granted subject to the provisions of this Article VIII. 4. This Restated Certificate of Incorporation was duly adopted by vote of the stockholders in accordance with Sections 242 and 245 of the General Corporation law of the State of Delaware. 5. The capital of TELE-COMMUNICATIONS, INC. will not be reduced under or by reason of this Restated Certificate of Incorporation. IN WITNESS WHEREOF, said TELE-COMMUNICATIONS, INC. 13 has caused this certificate to be signed by John C. Malone, its President, and attested by Paul J. O'Brien, its Secretary, this 19th day of July, 1979. TELE-COMMUNICATIONS, INC. {SEAL} By: /s/ JOHN C. MALONE John C. Malone, President ATTEST: By: /s/ PAUL J. O'BRIEN Paul J. O'Brien, Secretary STATE OF COLORADO ) )ss County of Arapahoe ) BE IT REMEMBERED that on this 19th day of July, 1979, personally came before me, a Notary Public in and for the County and State aforesaid, John C. Malone, President of Tele-Communications, Inc., a corporation of the State of Delaware, and he duly executed said Certificate before me and acknowledged the said Certificate to be his act and deed and the act and deed of said Corporation and the facts stated therein are true; and that the seal affixed to said Certificate and attested by the Secretary. of said Corporation is the common or corporate seal of said Corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. {SEAL} /s/ MARTHA FOUSE NOTARY PUBLIC My Commission Expires June 6, 1983 14 {LOGO} STATE OF DELAWARE Office of SECRETARY OF STATE I, Glenn C. Kenton Secretary of State of the State of Delaware, do hereby certify that the above and foregoing is a true and correct copy of Certificate of Amendment of the "TELE-COMMUNICATIONS, INC.", as received and filed in this office the twelfth day of June, A.D. 1980, at 12:45 o'clock P.M. In Testimony Whereof, I have hereunto set my hand and official seal at Dover this twelfth day of June in the year of our Lord one thousand nine hundred and eighty. {SEAL} RECEIVED FOR RECORD JUN 12 1980 LEO J. DUGAN, Jr., Recorder /s/ GLENN C. KENTON Glenn C. Kenton, Secretary of State 15 CERTIFICATE OF AMENDMENT of CERTIFICATE OF INCORPORATION of TELE-COMMUNICATIONS, INC. TELE-COMMUNICATIONS, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. At a meeting of the Board of Directors of TELE-COMMUNICATIONS, INC. lawfully convened, a resolution was unanimously adopted setting forth a proposed amendment to the Certificate of Incorporation of said Corporation, declaring said amendment to be advisable and directing that the amendment proposed be considered at the next Annual Meeting of Stockholders. The resolution is as follows: RESOLVED, that the First paragraph of Article IV of the restated Certificate of Incorporation of the Corporation is amended by changing said paragraph in its entirety so as to read as follows: "FIRST: The total number of shares of stock which the corporation shall have authority to issue is thirty-one million (31,000,000) shares divided into the following classes: "(a). Twenty million (20,000,000) shares of Class A Common Stock with a par value of One Dollar ($I.00) per share; and . "(b). Ten million (10,000,000) shares of Class B Common Stock with a par value of One Dollar ($l.00) per share; and "(c). One million (1,000,000) shares of Preferred Stock having a par value of One Dollar ($1.00) per share." 2. Thereafter, pursuant to resolution of its Board of Directors, the Annual Meeting of Stockholders of said Corporation was, on proper notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, duly called and held on June 12, 1980, at which Meeting the necessary number of Stockholders required by the Certificate of Incorporation of the Corporation and as required by statute cast their votes, to wit, the affirmative vote of the holders of at least two-thirds (66-2/3%) of the outstanding shares of the Corporation's Class A Common Stock and Class B Common Stock voting as one class, in favor of the foregoing amendment. 16 3. Said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of Delaware as amended. 4. The capital of said Corporation will not be reduced under or by reason of said amendment. WITNESS WHEREOF, said TELE-COMMUNICATIONS, INC. has caused its corporate seal to be hereunto affixed and this certificate to be signed by John C. Malone, its President, and attested by John M. Draper, its Assistant Secretary, on this 12th day of June, 1980. TELE-COMMUNICATIONS, INC. By: /s/ JOHN C. MALONE John C. Malone President {SEAL} ATTEST: By: /s/ JOHN M. DRAPER John M. Draper Assistant Secretary 17 {LOGO} STATE OF DELAWARE Office of SECRETARY OF STATE I, GLENN C. Kenton Secretary of State of the State of Delaware, do hereby certify that the above and foregoing is a true and correct copy of Certificate of Amendment of the "TELE-COMMUNICATIONS, INC.", as received and filed in this office the eighteenth day of June, A.D. 1981 at 9 o'clock A.M. In Testimony Whereof, I have hereunto set my hand and official seal at Dover this eighteenth day of June in the year of our Lord one thousand nine hundred and eighty-one. {SEAL} RECEIVED FOR RECORD JUL 17 1981 LEO J. DUGAN, Jr., Recorder /s/ GLENN C. KENTON Glenn C. Kenton, Secretary of State 18 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TELE-COMMUNICATIONS, INC. Tele-Communications, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. At a meeting of the Board of Directors of Tele-Communications, Inc. lawfully convened, a resolution was unanimously adopted setting forth a proposed amendment to the Certificate of Incorporation of said Corporation, declaring the advisability of said amendment and directing that the amendment be considered at the next Annual Meeting of Stockholders. The resolution is as follows: RESOLVED, that the First paragraph of Article IV of the restated Certificate of Incorporation of the Corporation, as amended, is further amended by changing said paragraph in its entirety so as to read as follows: FIRST: The total number of shares of stock which the corporation shall have authority to issue is fifty-one million (51,000,000) shares divided into the following classes: (a). Forty million (40,000,000) shares of Class A Common Stock with a par value of One Dollar ($1.00) per share; and (b). Ten million (10,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share; and (c). One million (1,000,000) shares of Preferred Stock having a par value of One Dollar ($1.00) per share. 2. The Annual Meeting of Stockholders of said Corporation was, on proper notice in accordance with Section 222 of the General Corporation Law of the State of Delaware duly called and held on June 11, 1981, at which Meeting the necessary number of Stockholders required by the Certificate of Incorporation of the Corporation and as required by statute cast their votes in favor of the foregoing amendment, to wit, the affirmative vote of the holders of at least two-thirds (66 2/3%) of the outstanding shares of the Corporation's Class A Common Stock and Class B Common Stock voting as one class. 19 3. Said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of Delaware as amended. 4. The capital of said Corporation will not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, said Tele-Communications, Inc. has caused its corporate seal to be hereunto affixed and this certificate to be signed by John C. Malone, its President, and attested by John M. Draper, its Assistant Secretary, this 12th day of June, 1981. TELE-COMMUNICATIONS, INC. By: /s/ JOHN C. MALONE John C. Malone President {SEAL} ATTEST: By: /s/ JOHN M. DRAPER John M. Draper Assistant Secretary 20 {LOGO} STATE OF DELAWARE OFFICE OF SECRETARY OF STATE I, Glenn C. Kenton, Secretary of State of the State of Delaware, do hereby certify that the attached is a true and correct copy Certificate of Amendment filed in this office on June 9, 1983. {SEAL} /s/ GLENN C. KENTON Glenn C. Kenton, Secretary of State BY: /s/ J. WARD DATE: June 9, 1983 21 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TELE-COMMUNICATIONS, INC. Tele-Communications, Inc., a corporation organized and existlng under the laws of the State of Delaware, hereby certifies as follows: 1. At a meeting of the Board of Directors of Tele-Communications, Inc. lawfully convened, a resolution was unanimously adopted setting forth a proposed amendment to the Certificate of Incorporation of said Corporation, declaring the advisability of said amendment and directing that the amendment be considered at the next Annual Meeting of Stockholders. The resolution is as follows: RESOLVED, that the First paragraph of Article IV of the restated Certificate of Incorporation of the Corporation, as amended, is further amended by changing said paragraph in its entirety so as to read as follows: FIRST: The total number of shares of stock which the corporation shall have authority to issue is seventy-six million (76,000,000) shares divided into the following classes: (a). Sixty million (60,000,000) shares of Class A Common Stock with a par value of One Dollar ($1.00) per share: and (b). Fifteen million (15,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share; and (c). One million (1,000,000) shares of Preferred Stock having a par value of One Dollar ($1.00) per share. 22 2. The Annual Meeting of Stockholders of said Corporation was, on proper notice in accordance with Section 222 of the General Corporation Law of the State of Delaware duly called and held on June 9, 1983, at which Meeting the necessary number of Stockholders required by the Certificate of Incorporation of the Corporation and as required by statute cast their votes in favor of the foregoing amendment, to wit the affirmative vote of the holders of at least two-thirds (66 2/3%) of the outstanding shares of the Corporation's Class A Common Stock and Class B Common Stock voting as one class. 3. Said amendment was duly adopted In accordance with the provisions of Section 242 of the General Corporation Law of Delaware as amended. 4. The capital of said Corporation will not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, said Tele-Communications, Inc., has caused its corporate seal to be hereunto affixed and this certificate to.be signed by John C. Malone, its President, and attested by John M. Draper, its Assistant Secretary, this 9th day of June, 1983. TELE-COMMUNICATiONS, INC. By: /s/ JOHN C. MALONE John C. Malone {SEAL} President ATTEST: By: /s/ JOHN M. DRAPER John M. Draper Assistant Secretary RECEIVED FOR RECORD JUN 9 1983 LEO J. DUGAN, Jr., Recorder 23 PAGE 1 STATE OF DELAWARE {LOGO} OFFICE OF SECRETARY OF STATE ------------------- I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF TELE-COHMUNICATIONS, INC. FILED IN THIS OFFICE ON THE TWENTIETH DAY OF MAY, A.D. 1986, AT 12:30 O'CLOCK P.M. {SEAL} /s/ MICHAEL HARKINS 736140049 Michael Harkins, Secretary of State AUTHENTICATION: 0824960 DATE: 05/20/1986 24 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TELE-COMMUNICATIONS, INC. Tele-Communications, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. At a meeting of the Board of Directors of Tele-Communications, Inc. lawfully convened, resolutions were unanimously adopted setting forth proposed amendments to the Certificate of Incorporation of said Corporation, declaring the advisability of said amendments and directing that the amendmenta be considered at the next Annual Meeting of Stockholders. The resolutions are as follows: RESOLVED, that the First paragraph of Article IV of the restated Certificate of Incorporation of the Corporation, as amended, is further amended by changing said paragraph in its entirety so as to read as follows: FIRST: The total number of shares of stock which the corporation shall have authority to issue is two hundred and fifty-one million (251,000,000) shares divided into the following classses: (a) Two hundred million (200,000,000) shares of Class A Common Stock with a par value of One Dollar ($1.00) per share; and (b) Fifty million (50,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share; and (c) One million (1,000,000) shares of Preferred Stock having a par value of One Dollar ($1.00) per share. RESOLVED, that Article IV of the restated Certificate of Incorporation of the Corporation, as amended, is further amended by adding a paragraph Sixth to such Article IV, such Sixth paragraph to read as follows: SIXTH: Each share of Class B Common Stock shall be convertible, at the option of the holder thereof, into one (1) share of Class A Common Stock. A holder wishing to avail itself of such option shall deliver the certificate or certificates representing the shares of Class B Common Stock to be converted, duly endorsed in blank, to the Secretary of the corporation, and at the same time notify the Secretary in writing of its desire to so convert. Upon receipt by the Secretary of the foregoing certificates and notice, the corporation shall cause to be issued to the holder of the Class B Common Stock delivering the same one (1) share of Class A Common Stock for each share of Class B Common Stock delivered for conversion, issuing and delivering to such holder a certificate for such shares. A number of shares of Class A Common Stock equal to the number of shares of Class B Common Stock outstanding from time to time shall be set aside and reserved for issuance upon conversion of Class B Common Stock. Shares of Class B Common Stock which have been converted hereunder shall remain treasury shares to be disposed of by resolution of the Board of Directors of the corporation. Class A Common Stock shall not be convertible into Class B Common Stock. 25 2. The Annual Meeting of Stockholders of said Corporation was, on proper notice in accordance with Section 222 of the General Corporation Law of the State of Delaware duly called and held on May 20, 1986, at which Meeting the necessary number of Stockholders required by the Certificate of Incorporation of the Corporaiton and as required by statute cast their votes in favor of the foregoing amendments, to wit, the affirmative vote of the holders of at least two-thirds (66 2/3%) of the outstanding shares of the Corporation's Class A Common Stock and Class B Common Stock voting as one class. 3. Said amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware as amended. 4. The capital of said Corporation will not be reduced under or by reason of said amendments. IN WITNESS WHEREOF, said Tele-Communications, Inc. has caused its corporate seal to be hereunto affixed and this certificate to be signed by John C. Malone, its President, and attested to by John M. Draper, its Assistant Secretary, this 20th day of May, 1986. TELE-COMMUNICATIONS, INC. By: /s/ JOHN C. MALONE John C. Malone President {SEAL} ATTEST: By: /s/ JOHN M. DRAPER John M. Draper Assistant Secretary RECEIVED FOR RECORD MAY 23 1986 LEO J. DUGAN, Jr., Recorder 26 PAGE 1 STATE OF DELAWARE {LOGO} OFFICE OF SECRETARY OF STATE ------------------- I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF TELE-COHMUNICATIONS, INC. FILED IN THIS OFFICE ON THE TWELFTH DAY OF JUNE, A.D. 1987, AT 12:30 O'CLOCK P.M. {SEAL} /s/ MICHAEL HARKINS 737163081 Michael Harkins, Secretary of State AUTHENTICATION: :1278977 DATE: 06/16/1987 27 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TELE-COMMUNICATIONS, INC. Tele-Communications, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. At a Meeting of the Board of Directors of Tele-Communications, Inc. lawfully convened, resolutions were unanimously adopted setting forth a proposed amendment to the Certificate of Incorporation of said Corporation declaring the advisability of said amendment and directing that the amendment be considered at the next Annual Meeting of Stockholders. The resolutions are as follows: RESOLVED, that the fourth paragraph of Article V of the restated Certificate of incorporation of the Corporation, as amended, is further amended by changing said paragraph in its entirety so as to read as follows: FOURTH: (A) To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. (B) This corporation shall, to the full extent permitted by, and in the manner permissible under, the laws of the State of Delaware, (i) indemnify, and (ii) advance litigation expenses prior to the final disposition of an action, to any person made or threatened to he made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she is or was a director or officer of this corporation or served any other enterprise as a director or officer at the request of this corporation and such rights of indemnification and to advancement of litigation expenses shall also be applicable to the heirs, executors, administrators and other similar legal representatives of any such director or officer. (C) The foregoing provisions of this paragraph FOURTH shall be deemed to be a contract between this corpration and each director and officer who serves in such capacity at any time while this paragraph FOURTH is in effect, and any repeal or modification thereof shall not affect any rights or obligations then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. (D) The foregoing rights of indemnification and to advancement of litigation expenses shall not be deemed exclusive of any other rights to which any director or officer or his or her legal representatives may be entitled apart from the provisions of this paragraph FOURTH. 2. The Annual Meeting of Stockholders of said Corporation was, on proper notice in accordance with Section 222 of the General Corporation Law of the State of Delaware duly called and held on June 12, 1987, at which Meeting the necessary number of Stockholders required by the Certificate of Incorporation of the Corporation and as required by statute cast their votes in favor of the foregoing amendment, to wit, the affirmative vote of the holders of at least two-thirds (66-2/3%) of the outstanding shares of the Corporation's Class A Common Stock and Class B Common Stock voting as one class. 28 Page 2 3. Said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware as amended. 4. The capital of said Corporation will not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, said Tele-Communications, Inc. has caused its corporate seal to be hereunto affixed and this certificate to be signed by John C. Malone, President, and attested to by John M. Draper, its Assistant Secretary, this 12th day June, 1987. TELE-COMMUNICATIONS, INC. By: /s/ JOHN C. MALONE John C. Malone President {SEAL} ATTEST: By: /s/ JOHN M. DRAPER John M. Draper Assistant Secretary 29 PAGE 1 STATE OF DELAWARE {LOGO} OFFICE OF SECRETARY OF STATE ------------------- I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF TELE-COHMUNICATIONS, INC. FILED IN THIS OFFICE ON THE FOURTEENTH DAY OF JANUARY, A.D. 1988, AT 12:15 O'CLOCK P.M. {SEAL} /s/ MICHAEL HARKINS Michael Harkins, Secretary of State 888814871 AUTHENTICATION: 1545285 DATE: 01/14/1988 30 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TELE-COMMUNICATIONS, INC. Tele-Communications, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. At a meeting of the Board of Directors of Tele-Communications, Inc. lawfully convened, a resolution was unanimously adopted setting forth a proposed amendment to the Certificate of Incorporation of said Corporation, declaring the advisability of said amendment and directing that the amendment be considered at a Special Meeting of Stockholders, the time and place of which, for said purpose, shall be fixed by the Executive Ccmmittee of this Board. The resolution is as follows: RESOLVED, that the First paragraph of Article IV of the restated Certificate of Incorporation of the Corporation, as amended, is further amended by changing said paragraph in its entirety so as to read as follows: FIRST: The total number of shares of stock which the corporation shall have authority to issue is Six Hundred One Million (601,000,000) shares divided into the following classes: (a) Five Hundred Million (500,000,000) shares of Class A Common Stock with a par value of One Dollar ($1.00) per share; and (b) One Hundred Million (100,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share; and (c) One Million (1,000,000) shares of Preferred Stock having a par value of One Dollar ($1.00) per share. 2. The Special Meeting of Stockholders of said Corporation was, on proper notice in accordance with Section 222 of the General Corporation Law of the State of Delaware duly called and held on January 14, 1988, at which Meeting the necessary number of Stockholders required by the Certificate of Incorporation of the Corporation and as required by statute cast their votes in favor of the foregoing amendment, to wit, the affirmative vote of the holders of at least two-thirds (66-2/3%) of the outstanding shares of the Corporation's Class A Common Stock and Class B Common Stock voting as one class. 3. Said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware as amended. Page 2 31 4. The capital of said Corporation will not be reduced under or by reason of said amendment. IN WITNESS WHEREOF said Tele-Communications, Inc. has caused its corporate seal to be hereunto affixed and this certificate to be signed by John C. Malone, its President, and attested to by John M. Draper, its Assistant Secretary, this 14th day of January, 1988. TELE-COMMUNICATIONS, INC. By: /s/ JOHN C. MALONE John C. Malone President ATTEST: BY: /s/ JOHN M. DRAPER John M. Draper Assistant Secretary 32 PAGE 1 STATE OF DELAWARE {LOGO} OFFICE OF SECRETARY OF STATE -------------------- I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "TELE-COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE FOURTH DAY OF NOVEMBER, A.D. 1991, AT 9 O'CLOCK A.M. * * * * * * * * * * {SEAL} /s/ MICHAEL RATCHFORD 752030311 SECRETARY OF STATE AUTHENTICATION: *3328390 DATE: 01/30/1992 33 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF TELE-COMMUNICATIONS, INC Tele-Communications, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. At a meeting of the Board of Directors of Tele-Communications, Inc. lawfully convened, a resolution was unanimously adopted setting forth a proposed amendment to the Certificate of Incorporation of said Corporation, declaring the advisability of said amendment and directing that the amendment be considered at a Meeting of Stockholders, the time and place of which, for said purpose, shall be fixed by the Executive Committee or this Board. The resolution is as follows: RESOLVED, that the First paragraph or Article IV of the Restated Certificate of Incorporation or the Corporation, as amended, is further amended by changing said paragraph in its entirety so as to read as follows: FIRST: The total number of shares of stock which the corporation shall have authority to issue is One Billion One Hundred and Ten Million (1,110,000,000) shares divided into the following classes: (a) One Billion (1,000,000,000) shares or Class A Common Stock with a par value of One Dollar ($1.00) per share; and (b) One Hundred Million (100,000,000) shares of Class B Common Stock with a par value of One Dollar ($1.00) per share; and (c) Ten Million (10,000,000) shares of Preferred Stock having a par value of One Dollar ($1.00) per share. 2. The Annual Meeting of Stockholders of said Corporation was, on proper notice in accordance with Section 222 of the General Corporation Law of the State of Delaware duly called and held on Oct . 17, 199 1. at which Meeting the necessary number of Stockholders required by the Certificate of Incorporation of the Corporation and as required by statute cast their votes in favor of the foregoing amendment, to wit, the affirmative vote of the holders of at least two-thirds (66 2/3%) of the outstanding shares of the Corporation's Class A Common Stock and Class B Common Stock voting is one class. 3. Said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware as amended. 4. The capital of said Corporation will not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, said Tele-Communications, Inc. has caused its corporate seal to be hereunto affixed and this certificate to be signed by John C. Malone, its President and attested to by John M. Draper., its Assistant Secretary, this 17th day of October, 1991. TELE-COMMUNICATIONS, INC By: /s/ JOHN C. MALONE John C. Malone President ATTEST: By: /s/ JOHN M. DRAPER John M. Draper Assistant Secretory 34 PAGE 1 STATE OF DELAWARE {LOGO} OFFICE OF SECRETARY OF STATE -------------------- I, JEFFREY D. LEWIS, ACTING SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "TELE-COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE SECOND DAY OF DECEMBER, A.D. 1991, AT 8:30 O'CLOCK A.M. * * * * * * * * * * {SEAL} /s/ JEFFREY D. LEWIS ACTING SECRETARY OF STATE AUTHENTICATION: *3327901 DATE: 01/29/1992 35 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 08:30 AM 12/02/1991 913365030 - 685208 TELE-COMMUNICATIONS, INC. CERTIFICATE OF DESIGNATIONS - -------------------------------------------------------------------------------- SETTING FORTH A COPY OF A RESOLUTION CREATING AND AUTHORIZING THE ISSUANCE OF A SERIES OF PREFERRED STOCK DESIGNATED AS "12 7/8% CUMULATIVE COMPOUNDING REDEEMABLE PREFERRED STOCK, SERIES A" ADOPTED BY THE BOARD OF DIRECTORS OF TELE-COMMUNICATIONS, INC. - -------------------------------------------------------------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware - -------------------------------------------------------------------------------- The undersigned, President of Tele-Communications, Inc., a Delaware corporation (the "Corporation"), hereby certifies that the Board of Directors, at a meeting duly called and held, adopted the following resolution creating a series of preferred stock designated as "12 7/8% Cumulative Compounding Redeemable Preferred Stock, Series A": "BE IT RESOLVED, that, pursuant to authority expressly granted by the provisions of the Restated Certificate of Incorporation of this Corporation, the Board of Directors hereby creates and authorizes the issuance of a series of preferred stock, par value $1.00 per share, of this Corporation, to consist OF 5,022,394 shares, and hereby fixes the designations, dividend rights, voting powers, rights on liquidation or dissolution and other preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series (in addition to the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Restated Certificate of Incorporation that are applicable to this Corporation's preferred stock of all series) as follows: 36 1. Designation. The designation of the series of preferred stock, par value $1.00 per share, of this corporation authorized hereby is "12 7/8% Cumulative Compounding Redeemable Preferred Stock, Series A" (the "Compounding Preferred Stock"). 2. Certain Definitions. Unless the context otherwise requires, the terms defined in this Section 2 shall have the meanings herein specified: "Board of Directors" shall mean the Board of Directors of this Corporation and any authorized committee thereof. "Convertible Preferred Stock, Series A" shall mean the 6,201 authorized shares of the Convertible Preferred Stock, Series A of this Corporation. "Common Stock" shall mean the Class A Common Stock, par value $1.00 per share, and Class B Common Stock, par value $1.00 per share, of this Corporation and all shares hereafter authorized of any other class of common stock of this Corporation, which term shall include, where appropriate, in the case of a reclassification, recapitalization or other changes in such Common Stock, or in the case of a consolidation or merger of this Corporation with or into another corporation affecting the Common Stock, such consideration to which a holder of Common Stock would have been entitled upon the occurrence of such event. "Debt Instrument" shall mean any note, bond, debenture, indenture, guarantee or other instrument or agreement evidencing any Indebtedness, whether existing at the Issue Date or thereafter created, incurred, assumed or guaranteed. "Dividend Payment Date" shall have the meaning set forth in Section 3(a). "Dividend Period" shall mean the period from and including the First Accrual Date to the first Dividend Payment Date and each three-month period from and including the Dividend Payment Date for the preceding Dividend Period to the Dividend Payment Date for such Dividend Period.. "First Accrual Date" shall mean October 1, 1991. "Indebtedness" shall mean (i) any liability, contingent or otherwise, of this Corporation or any Subsidiary (x) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of this Corporation or any Subsidiary or only to a portion thereof), (y) evidenced by -2- 37 a note, debenture or similar instrument (including a purchase money obligation) given other than in connection with the acquisition of inventory or similar property in the ordinary course of business, or (z) for the payment of money relating to indebtedness represented by obligations under a lease that is required to be capitalized for financial accounting purposes in accordance with generally accepted accounting principles; (ii) any liability of others described in the preceding clause (i) which this Corporation or any Subsidiary has guaranteed or which is otherwise its legal liability; (iii) any obligations secured by any mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or resulting in an encumbrance against any real or personal property, or a security interest of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other. agreement to sell and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction) to which the property or assets of this Corporation or any Subsidiary are subject whether or not the obligations secured thereby shall have been assumed by or shall otherwise be this Corporation's or any Subsidiary's legal liability; and (iv) any amendment, renewal, extension or refunding of any liability of the types referred to in clauses (i), (ii) and (iii) above. "Issue Date" shall mean the first date on which any shares of the Compounding Preferred Stock are first issued or deemed to have been issued. "Junior Stock" shall mean Common Stock of this Corporation and any other class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any dividends unless all dividends required to have been paid or declared and set apart for payment on the Compounding Preferred Stock and any Parity Stock shall have been so paid or declared and set apart for payment and, for purposes of Section 4, shall mean any class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any assets upon liquidation, dissolution or winding up of the affairs of this Corporation until the Compounding Preferred Stock and any Parity Stock shall have received the entire amount to which such stock is entitled upon such liquidation, dissolution or winding up. "Liquidation Price" measured per share of the Compounding Preferred Stock as of any date shall mean the sum of (i) $19.25, plus (ii) an amount equal to all dividends accrued on such share to the Dividend Payment Date on, or immediately preceding, the date on which the Liquidation Price is being determined, which pursuant to Section 3(b) have been added to and remain part of the Liquidation Price as of such -3- 38 date, plus (iii) (A) for purposes of determining amounts payable pursuant to Sections 4 and 5, an amount equal to all unpaid dividends accrued to the Redemption Date or the liquidation date an the sum of the amounts specified in clauses (i) and (ii) above, and (B) for purposes of determining the amount of dividends to be paid on a date other than A Dividend Payment Date as contemplated by Section 3(c), an amount equal to all unpaid dividends accrued on the amounts specified in clause (ii) above, to the date as of which the Liquidation Price is being determined. "Parity Stock" shall mean the Convertible Preferred Stock, Series A and any other class or series of stock of this Corporation authorized after the Issue Date entitled to receive payment of dividends on a parity with the Compounding Preferred Stock or entitled to receive assets upon liquidation, dissolution or winding up of the affairs of this Corporation on a parity with the Compounding Preferred Stock. "Record Date" for the dividends payable on any Dividend Payment Date means the fifteenth day of the month preceding the month during which such Dividend Payment Date shall occur. "Redemption Date" as to any share of Compounding Preferred Stock shall mean the date fixed for redemption of such share pursuant to Section 5(a) or 5(b), provided that no such date will be a Redemption Date unless the applicable Redemption Price is actually paid in full on such date or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart, and if the Redemption Price is not so paid in full or the consideration sufficient therefor so set apart then the Redemption Date will be the date on which such Redemption Price is fully paid or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart. "Redemption Price" as to any share of Compounding Preferred Stock that is to be redeemed on any Redemption Date shall mean the Liquidation Price as in effect on such Redemption Date. "Senior Stock" shall mean any class or series of stock of this Corporation authorized after the Issue Date ranking senior to the Compounding Preferred Stock and any Parity Stock in respect of the right to receive payment of dividends or to participate in any distribution upon liquidation, dissolution or winding up of the affairs of this Corporation. -4- 39 "Subsidiary" shall mean (i) any corporation of which the outstanding capital stock having at least a majority in voting power in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by this Corporation, by any one or more Subsidiaries of this Corporation or by this Corporation and one or more of its Subsidiaries or (ii) any partnership, joint venture, association or other unincorporated organization in which this Corporation, any one or more Subsidiaries of this Corporation or this Corporation and one or more of its Subsidiaries, directly or indirectly, has at least a majority ownership and voting interest. 3. Dividends. (a) Subject to the prior preferences and other rights of any Senior Stock, the holders of the Compounding Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of unrestricted funds legally available therefor, preferential cumulative cash dividends that shall accrue as provided herein. Dividends on each share of Compounding Preferred Stock will accrue on a daily basis at the rate of 12 7/8% per annum of the Liquidation Price of such share from and including the First Accrual Date to the date on which the Liquidation Price or Redemption Price of such share is made available pursuant to Section 4 or 5 hereof, respectively, whether or not such dividends have been declared and whether or not there are any unrestricted funds of this Corporation legally available for the payment of dividends. Accrued dividends on the Compounding Preferred Stock shall be payable quarterly on January 1, April 1, July 1 and October 1 of each year (each a "Dividend Payment Date"), commencing on January 1, 1992, to the holders of record of the Compounding Preferred Stock as of the close of business on the applicable Record Date. For purposes of determining the amount of dividends "accrued" (i) as of any date that is not a Dividend Payment Date, such amount shall be calculated on the basis of the foregoing rate per annum for actual days elapsed from and including the First Accrual Date (in the case of any date prior to the first Dividend Payment Date) or the last preceding Dividend Payment Date (in the case of any other date) to the date as of which such determination is to be made, based on a 360-day year and (ii) as of any Dividend Payment Date, such amount shall be calculated on the basis of the foregoing rate per annum, based on a 360-day year of twelve 30-day months. (b) If on any Dividend Payment Date this Corporation, pursuant to applicable law or the terms of any Debt Instrument, shall be prohibited or restricted from paying in cash the full dividends to which holders of the Compounding Preferred Stock and any Parity Stock shall be entitled, the -5- 40 amount available for such payment pursuant to applicable law and which is not restricted by the terms of any Debt Instrument shall be distributed among the holders of the Compounding Preferred Stock and such Parity Stock ratably in proportion to the full amounts to which they would otherwise be entitled. To the extent not paid on each Dividend Payment Date, all dividends that have accrued on each share of Compounding Preferred Stock during the Dividend Period ending on such Dividend Payment Date will be added cumulatively to the Liquidation Price of such share and will remain a part thereof until such dividends are paid, together with all dividends that have accrued to the date of such payment with respect to that portion of the Liquidation Price which consists of such accrued unpaid dividends. Such accrued unpaid dividends, together with all dividends accrued thereon, may be declared and paid at any time (subject to the concurrent satisfaction of any dividend arrearages then existing with respect to any Parity Stock), without reference to any regular Dividend Payment Date, to holders of record as of the close of business on such date, not more than 50 days nor less than 10 days preceding the payment date thereof, as may be fixed by the Board of Directors (the "Special Record Date"). (c) Notice of each Special Record Date shall be mailed, first class, postage prepaid, not more than 50 days nor less than 10 days prior thereto, to the holders of record of the Compounding Preferred Stock at their respective addresses as the same appear on the books of this Corporation or supplied by them in writing to this Corporation for the purpose of such notice. (d) So long as any shares of Compounding Preferred Stock shall be outstanding, this Corporation shall not declare or pay on any Junior Stock any dividend whatsoever, whether in cash, property or otherwise, nor shall this Corporation make any distribution on any Junior Stock, or set aside any assets for any such purposes, nor shall any Junior Stock be purchased, redeemed or otherwise acquired by this Corporation or any of its Subsidiaries, nor shall any monies be paid, set aside for payment or made available for a sinking fund for the purchase or redemption of any Junior Stock, unless and until (i) all dividends to which the holders of the Compounding Preferred Stock and all Parity Stock shall have been entitled for all current and all previous Dividend Periods shall have been paid or declared and the consideration sufficient for the payment thereof set apart so as to be available for the payment thereof and for no other purpose (whether or not such payment is then legally permissible) and (ii) this Corporation shall have made, in full, or set apart the consideration sufficient for the payment thereof, and for no other purpose, all redemption payments with respect to the Compounding -6- 41 Preferred Stock that it is then obligated to make (whether or not such payment is then legally permissible); provided, however, that nothing contained in this Section 3(d) shall prevent (i) the payment of dividends solely in Junior Stock, (ii) the repurchase, redemption or other acquisition of Junior Stock solely in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds from the sale of, shares of Junior Stock or (iii) the acquisition of any shares of Junior Stock that are beneficially owned by Liberty Media Corporation ("Liberty") upon the redemption of, or in exchange for, shares of Liberty's preferred stock that are beneficially owned by this Corporation. 4. Distributions Upon Liquidation, Dissolution or Winding Up. Subject to the prior payment in full of the preferential amounts to which any Senior Stock is entitled, in the event of any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, the holders of shares of the Compounding Preferred Stock shall be entitled to receive from the assets of this Corporation available for distribution to the stockholders, before any payment or distribution shall be made to the holders of any Junior Stock of this Corporation, an amount in cash or property at its fair market value, as determined by the Board of Directors in good faith, or a combination thereof, per share, equal to the Liquidation Price, which payment shall be made pari passu with any such payment made to the holders of any Parity Stock. The holders of the Compounding Preferred Stock shall be entitled to no other or further distribution of or participation in any remaining assets of this Corporation after receiving the Liquidation Price per share. If, upon distribution of this Corporation's assets in liquidation, dissolution or winding up, the assets of this Corporation to be distributed among the holders of the Compounding Preferred Stock and to all holders of any Parity Stock shall be insufficient to permit payment in full to such holders of the preferential amounts to which they are entitled, then the entire assets of this Corporation to be distributed to holders of the Compounding Preferred Stock and such Parity Stock shall be distributed pro rata to such holders based upon the aggregate of the full preferential amounts to which the shares of Compounding Preferred Stock and such Parity Stock would otherwise respectively be entitled. Neither the consolidation or merger of this Corporation with or into any other corporation or corporations nor the sale, transfer, or lease of all or substantially all the assets of this Corporation shall itself be deemed to be a liquidation, dissolution or winding up of this Corporation within the meaning of this Section 4. Notice of the liquidation, dissolution or winding up of this Corporation shall be mailed, first class mail, postage prepaid, not less than 20 days prior to the date on -7- 42 which such liquidation, dissolution or winding up is expected to take place or become effective, to the holders of record of the Compounding Preferred Stock at their respective addresses as the same appear on the books of this Corporation or supplied by them in writing to this Corporation for the purpose of such notice. 5. Redemption. (a) Optional. Subject to the rights of any Senior Stock and the provisions of Section 5(g), the shares of Compounding Preferred Stock may be redeemed, at the option of this Corporation by action of the Board of Directors, in whole or from time to time in part, at any time on or after January 1, 1992, at the Redemption Price per share on the applicable Redemption Date. If less than all outstanding shares of Compounding Preferred Stock are to be redeemed, the shares of Compounding Preferred Stock to be redeemed shall be chosen by lot or pro rata or in such other manner and subject to such regulations as the Board of Directors may reasonably determine. (b) Mandatory. Subject to the rights of any Senior Stock, Parity Stock and the provisions of Section 5(g) and subject to any prohibition or restriction contained in any Debt Instrument: (i) This Corporation shall redeem, out of funds legally available therefor, (x) on January 1, 1999, a number of shares of Compounding Preferred Stock equal to 50% of the number of such shares outstanding on such date and (y) on January 1, 2000, all of the shares of Compounding Preferred Stock remaining outstanding on such date, at the Redemption Price per share on the applicable Redemption Date. (ii) If on a Redemption Date fixed pursuant to clause (i) of this Section 5(b) this Corporation, pursuant to applicable law or the terms of any Debt Instrument, shall be prohibited or restricted from redeeming the total number of shares required to be redeemed on such date, those funds that are legally available and not so restricted will be used to redeem the maximum possible number of such shares of Compounding Preferred Stock. At any time thereafter when additional funds of this Corporation are legally available and not so restricted for such purpose, such funds will immediately be used in their entirety to redeem the shares of Compounding -8- 43 Preferred stock that this Corporation failed to redeem on such Redemption Date until the balance of such shares have been redeemed. (iii) If less than all outstanding shares of Compounding Preferred Stock are to be redeemed on any Redemption Date pursuant to this Section 5(b), the shares of Compounding Preferred Stock to be redeemed shall be chosen by lot or pro rata or in such other manner and subject to such regulations as the Board of Directors shall reasonably determine (except that if clause (ii) above is applicable to the redemption of shares of Compounding Preferred Stock required to be made on January 1, 2000, then the selection of shares to be redeemed in accordance with clause (ii) shall be made pro rata). (c) Method of Redemption. Notice of redemption shall be mailed, first class, postage prepaid, not less than 15 days nor more than 60 days prior to the Redemption Date, to the holders of record of the shares of Compounding Preferred Stock to be redeemed, at their respective addresses as the same appear upon the books of this Corporation or are supplied by them in writing to this Corporation for the purpose of such notice; but no defect in such notice or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of the Compounding Preferred Stock. In addition to any information required by law or by the applicable rules of any national stock exchange on which the Compounding Preferred Stock may be listed or admitted to trading, such notice shall set forth the Redemption Price, the Redemption Date, the number of shares to be redeemed and the place at which the shares called for redemption will, upon presentation and surrender of the stock certificates evidencing such shares, be redeemed, and shall state the name and address of any Redemption Agent selected by this Corporation in accordance with Section 5(d). In case fewer than the total number of shares of Compounding Preferred Stock represented by any certificate are redeemed, a new certificate representing the number of unredeemed shares will be issued to the holder thereof without cost to such bolder. (d) Deposit of Redemption Price. If notice of any redemption by this Corporation pursuant to this Section 5 shall have been mailed as provided in subsection (c) above, and if on or before the Redemption Date specified in such notice the consideration necessary for such redemption shall have been set apart so as to be available therefor and only therefor, then on and after the close of business on the Redemption Date, the shares of Compounding Preferred Stock called for redemption, notwithstanding that any certificate therefor shall not have been surrendered for cancellation, -9- 44 shall no longer be deemed outstanding, and all rights with respect to such shares shall forthwith cease and terminate, except the right of the holders thereof to receive upon surrender of their certificates the consideration payable upon redemption thereof. If on or prior to the Redemption Date (but no earlier than 60 days prior to such Redemption Date) this Corporation shall deposit, in a trust fund, with any bank or trust company organized under the laws of the United States of America or any state thereof having capital, undivided profits and surplus aggregating at least $50,000,000 (the "Redemption Agent"), the consideration sufficient to redeem on such Redemption Date the shares of Compounding Preferred Stock to be redeemed, with irrevocable instructions and authority to the Redemption Agent, on behalf and at the expense of this Corporation, to mail the notice of redemption as soon as practicable after receipt of such irrevocable instructions (or to complete such mailing previously commenced, if it has not already been completed) and to pay, commencing on the Redemption Date or prior thereto, the Redemption Price of the shares of Compounding Preferred Stock to be redeemed to their respective holders upon the surrender of their share certificates, then, from and after the date of such deposit (although prior to the Redemption Date), the shares of Compounding Preferred Stock to be redeemed shall be deemed to be redeemed and dividends on those shares shall cease to accrue after the Redemption Date. The deposit shall be deemed to constitute full payment for shares of Compounding Preferred Stock to be redeemed to their holders and from and after the date of such deposit the shares shall be deemed to be no longer outstanding and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto, except the right to receive payment of the consideration sufficient to pay the Redemption Price of the shares, calculated through the Redemption Date, upon surrender of their certificates therefor. (e) Unclaimed Funds. Any funds so deposited by this Corporation and unclaimed for one year from the Redemption Date shall be paid to this Corporation, after which repayment the holders of such shares of Compounding Preferred Stock so called for redemption shall look to this Corporation for the payment thereof, without interest, unless an applicable abandoned property law designates another person. (f) Status of Redeemed Shares. All shares of Compounding Preferred Stock redeemed, retired, purchased or otherwise acquired by this Corporation shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock (and may be reissued as part of another series of the preferred stock of this Corporation, but such shares shall not be reissued as Compounding Preferred Stock). -10- 45 (g) Restrictions on Redemption. If at any time this Corporation shall have failed to pay, or declare and set apart the consideration sufficient to pay, all dividends accrued up to the immediately preceding Dividend Payment Date on the Compounding Preferred Stock and any Parity Stock, and until all dividends accrued up to the immediately preceding Dividend Payment Date on the Compounding Preferred Stock and any Parity Stock shall have been paid or declared and set apart so as to be available for the payment in full thereof and for no other purpose, this Corporation shall not redeem, pursuant to a sinking fund or otherwise, any shares of Compounding Preferred Stock, Parity Stock or Junior Stock, unless all then outstanding shares of Compounding Preferred Stock and Parity Stock are redeemed, and shall not purchase or otherwise acquire any shares of Compounding Preferred Stock, Parity Stock or Junior Stock. If and so long as this Corporation shall fail to redeem on a Redemption Date pursuant to Section 5(b), all shares of Compounding Preferred Stock required to be redeemed on such date, this Corporation shall not redeem, or discharge any sinking fund obligation with respect to, any Parity Stock or Junior Stock, and shall not purchase or otherwise acquire any shares of Compounding Preferred Stock, Parity Stock or Junior Stock. Nothing contained in this Section 5(g) shall prevent the purchase or acquisition (i) of shares of Compounding Preferred Stock and Parity Stock pursuant to a purchase or exchange offer or offers made to holders of all outstanding shares of Compounding Preferred Stock and Parity Stock, provided that (A) as to holders of all outstanding shares of Compounding Preferred Stock, the terms of the purchase or exchange offer for all such shares are identical, (B) as to holders of all outstanding shares of a particular series or class of Parity Stock, the terms of the purchase or exchange offer for all such shares are identical, and (C) as among holders of all outstanding shares of Compounding Preferred Stock and Parity Stock, the terms of each purchase or exchange offer or offers are substantially identical relative to the liquidation price of the shares of Compounding Preferred Stock and each series or class of Parity Stock, (ii) of shares of Compounding Preferred Stock, Parity Stock or Junior Stock in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds of the sale of, shares of Junior Stock or (iii) of shares of Junior Stock that are beneficially owned by Liberty upon the redemption of, or in exchange for, shares of Liberty's preferred stock beneficially owned by this Corporation. Subject to the foregoing, this Corporation may purchase shares of Compounding Preferred Stock but shall not redeem any shares of Compounding Preferred Stock except as expressly authorized in this Section 5. -11- 46 6. No Voting Rights. The holders of Compounding Preferred Stock shall have no right to vote for any purpose, except as specifically required by the Delaware General Corporation Law. 7. Preemptive Rights. The holders of the Compounding Preferred Stock will not have any preemptive right to subscribe for or purchase any shares of stock or any other securities which may be issued by this corporation. 8. Exclusion of Other Rights. Except as may otherwise be required by law and for the equitable rights and remedies that may otherwise be available to holders of Compounding Preferred Stock, the shares of Compounding Preferred Stock shall not have any designations, preferences, limitations or relative rights, other than those specifically set forth in these resolutions (as such resolutions may be amended from time to time) and in the Restated Certificate of Incorporation of this Corporation. 9. Headings. The headings of the various sections and subsections hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. FURTHER RESOLVED, that the appropriate officers of this Corporation are here-by authorized to execute and acknowledge a certificate setting forth these resolutions and to cause such certificate to be filed and recorded, in accordance with the requirements of Section 151(g) of the General Corporation Law of the State of Delaware." /s/ JOHN C. MALONE ATTEST John C. Malone President By: /s/ EDON V. HARTLEY Edon V. Hartley Assistant Secretary -12- 47 STATE OF DELAWARE PAGE 1 {LOGO} OFFICE OF SECRETARY OF STATE I, JEFFREY D. LEWIS, ACTING SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "TELE-COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE SECOND DAY OF DECEMBER, A.D. 1991 AT 8:31 O'CLOCK A.M. * * * * * * * * * * /s/ JEFFERY D. LEWIS ACTING SECRETARY OF STATE AUTHENTICATION: *3327903 DATE: 01/29/1992 {SEAL} 920295257 48 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 08:31 AM 12/02/1991 913365031 - 685208 TELE-COMMUNICATIONS, INC. CERTIFICATE OF DESIGNATIONS ------------------ SETTING FORTH A COPY OF A RESOLUTION CREATING AND AUTHORIZING THE ISSUANCE OF A SERIES OF PREFERRED STOCK DESIGNATED AS "CONVERTIBLE PREFERRED STOCK, SERIES A" ADOPTED BY THE BOARD OF DIRECTORS OF TELE-COMMUNICATIONS, INC. ------------------ Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------ The undersigned, President of Tele-Communications, Inc., a Delaware corporation (the "Corporation"), hereby certifies that the Board of Directors, at a meeting duly called and held, adopted the following resolutions creating a series of preferred stock designated AS "Convertible Preferred Stock, Series A": "BE IT RESOLVED, that, pursuant to authority expressly granted by the provisions of the Restated Certificate of Incorporation of this corporation, the Board of Directors hereby creates and authorizes the issuance of a series of preferred stock, par value $1.00 per share, of this Corporation, to consist of 6,201 shares, and hereby fixes the designations, dividend rights, voting powers, rights on liquidation and other preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof of the shares of such series (in addition to the designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof set forth in the Restated Certificate of Incorporation that are applicable to preferred stock of all series) as follows: 49 1. Designation. The designation of the series of preferred stock, par value $1.00 per share, of this Corporation authorized hereby is "Convertible Preferred Stock, Series A" (the "Convertible Preferred Stock"). 2. Certain Definitions. Unless the context otherwise requires, the terms defined in this Section 2 shall have the meanings herein specified: Affiliate: As defined in Section 7(b). Board of Directors: The Board of Directors of this Corporation and any authorized committee thereof. Capital Stock: Any and all shares, interests, participations or other equivalents (however designated) of corporate stock of this Corporation. Class A Common Stock: The Class A Common Stock, par value $1.00 per share, of this Corporation as such exists on the date of this Certificate of Designations, and Capital Stock of any other class into which such Class A Common Stock may thereafter have been changed. Class B Common Stock: The Class B Common Stock, par value $1.00 per share, of this Corporation as such exists on the date of this Certificate of Designations, and Capital Stock of any other class into which such Class B Common Stock may thereafter have been changed. Conversion Rate: As defined in Section 5(b). Convertible Preferred Holder: As defined in Section 7(a). Convertible Securities: Securities, other than the Class B Common Stock, that are convertible into Class A Common Stock. Debt Instrument: any bond, debenture, note, indenture, guarantee or other instrument or agreement evidencing any Indebtedness, whether existing at the Issue Date or thereafter created, incurred, assumed or guaranteed. Dividend Payment Date: As defined in Section 3(b). Dividend Period: The period from but excluding the First Accrual Date to and including the first Dividend Payment Date and each three-month period from but excluding the Dividend Payment Date for the preceding Dividend Period to and including the Dividend Payment Date for such Dividend Period. -2- 50 First Accrual Date: October 1, 1991. Indebtedness: Any (i) liability, contingent or otherwise, of this Corporation (x) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of this Corporation or only to a portion thereof), (y) evidenced by a note, debenture or similar instrument (including a purchase money obligation) given other than in connection with the acquisition of inventory or similar property in the ordinary course of business, or (z) for the payment of money relating to an obligation under a lease that is required to be capitalized for financial accounting purposes in accordance with generally accepted accounting principles; (ii) liability of others described in the preceding clause (i) which this Corporation has guaranteed or which is otherwise its legal liability; (iii) obligations secured by a mortgage, pledge, lien, charge or other encumbrance to which the property or assets of this Corporation are subject whether or not the obligations secured thereby shall have been assumed by or shall otherwise be this Corporation's legal liability; and (iv) any amendment, renewal, extension or refunding of any liability of the types referred to in clauses (i), (ii) and (iii) above. Issue Date: The first date on which any shares of the Convertible Preferred Stock are first issued or deemed to have been issued. Junior Securities: All shares of Class A Common Stock, Class B Common Stock, and any other class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any dividends unless all dividends required to have been paid or declared and set apart for payment on the Convertible Preferred Stock and any Parity Securities shall have been so paid or declared and set apart for payment and, for purposes of Section 4 hereof, any class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any assets upon liquidation, dissolution or winding up of the affairs of this Corporation until the Convertible Preferred Stock and any Parity Securities shall have received the entire amount to which such stock is entitled upon such liquidation, dissolution or winding up. Liquidation Value: Measured per Share of the Convertible Preferred Stock as of any particular date, the sum of (i) $3,000, plus (ii) an amount equal to all dividends accrued on such Share through the Dividend Payment Date immediately preceding the date on which the Liquidation Value is being determined, which pursuant to Section 3(c) have been added to and remain a part of the Liquidation Value as of -3- 51 such date, plus (iii), for purposes of determining amounts payable pursuant to Sections 4 and 6 hereof, an amount equal to all unpaid dividends accrued on the sum of the amounts specified in clauses (i) and (ii) above to the date as of which the Liquidation Value is being determined. Original Holder: As defined in Section 7 (a). Parity Securities: The 12 7/8% Preferred Stock and any other class or series of stock of this Corporation authorized after the Issue Date entitled to receive payment of dividends on a parity with the Convertible Preferred Stock or entitled to receive assets upon liquidation, dissolution or winding up of the affairs of this Corporation on a parity with the Convertible Preferred Stock. Permitted Transferee: As defined in Section 7(a). Record Date: For dividends payable on any Dividend Payment Date, the fifteenth day of the month preceding the month during which such Dividend Payment Date shall occur. Redemption Date: As to any Share, the date fixed for redemption of such Share as specified in the notice of redemption given in accordance with Section 6(d), provided that no such date will be a Redemption Date unless the applicable Redemption Price is actually paid on such date or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart, and if the Redemption Price is not so paid in full or the consideration sufficient therefor so set apart then the Redemption Date will be the date on which such Redemption Price is fully paid or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart. Redemption Price: As to any Share that is to be redeemed on any Redemption Date, the Liquidation Value as in effect on such Redemption Date. Senior Securities: Any class or series of stock of this Corporation authorized after the Issue Date ranking senior to the Convertible Preferred Stock and any Parity securities in respect of the right to receive payment of dividends or the right to participate in any distribution upon liquidation, dissolution or winding up of the affairs of this Corporation. -4- 52 Share: As defined in Section 3(a). Special Record Date; As defined in Section 3(c) . 12 7/8% Preferred Stock: The 5,022,394 authorized shares of the 12 7/8% Cumulative Compounding Redeemable Preferred Stock, Series A, of this Corporation. 3. Dividends. (a) Subject to the prior preferences and other rights of any Senior Securities with respect to dividends, the holders of the Convertible Preferred Stock shall be entitled to receive, and, subject to any prohibition or restriction contained in any Debt instrument, this Corporation shall be obligated to pay, but only out of funds legally available therefor, preferential cumulative cash dividends which shall accrue as provided herein. Except as otherwise provided in Sections 3(c) or 3(d) hereof, dividends on each share of Convertible Preferred Stock (hereinafter referred to as a "Share") shall accrue on a daily basis at the rate of ten percent (10%) per annum of the Liquidation Value thereof, from but excluding the First Accrual Date to and including the date of conversion thereof pursuant to Section 5 or the date on which the Liquidation Value or Redemption Price of such Share is made available pursuant to Section 4 or 6 hereof, respectively. Dividends on the convertible Preferred Stock shall accrue as provided herein, whether or not such dividends have been declared and whether or not there are profits, surplus or other funds of the Corporation legally or contractually available for the payment of dividends. (b) Accrued dividends on the Convertible Preferred Stock shall be payable quarterly on the first day of each January, April, July and October, or the immediately preceding business day if such first day is a Saturday, Sunday or legal holiday (each such payment date being hereinafter referred to as a "Dividend Payment Date"), commencing on January 1, 1992, to the holders of record of the Convertible Preferred Stock as of the close of business on the applicable Record Date. For purposes of determining the amount of dividends "accrued" as of any date that is not a Dividend Payment Date, such amount shall be calculated on the basis of the rate per annum specified in Section 3(a) for actual days elapsed from but excluding the First Accrual Date (in the case of any date prior to the first Dividend Payment Date) or the last preceding Dividend Payment Date (in the case of any other date) to and including the date as of which such determination is to be made, based on a 365-day year. -5- 53 (c) If on any Dividend Payment Date this corporation, pursuant to applicable law or the terms of any Debt Instrument, shall be prohibited or restricted from paying in cash the full dividends to which holders of the Convertible Preferred Stock and any Parity Securities shall be entitled, the amount available for such payment pursuant to applicable law and which is not restricted by the terms of any Debt Instrument shall be distributed among the holders of the Convertible Preferred Stock and such Parity Securities ratably in proportion to the full amounts to which they would otherwise be entitled. To the extent not paid on each Dividend Payment Date, all dividends which have accrued on each Share during the Dividend Period ending on such Dividend Payment Date will be added cumulatively to the Liquidation Value of such Share and will remain a part thereof until such dividends are paid. In the event that dividends are not paid in full on two consecutive Dividend Payment Dates, dividends on that portion of the Liquidation Value of each Share which consists of accrued dividends that have theretofore been or thereafter are added to, and remain a part of, the Liquidation Value in accordance with the preceding sentence shall accrue cumulatively on a daily basis at the rate of fifteen percent (15%) per annum, from and after such second consecutive Dividend Payment Date to and including the date of conversion of such share pursuant to Section 5 or the date on which the Liquidation Value or Redemption Price of such Share is made available pursuant to Section 4 or 6 hereof, respectively, unless such portion of the Liquidation Value that consists of accrued unpaid dividends shall be earlier paid in full. Such portion of the Liquidation Value as consists of accrued unpaid dividends, may be declared and paid at any time (subject to the concurrent satisfaction of any dividend arrearage then existing with respect to any Parity Securities), without reference to any regular Dividend Payment Date, to holders of record as of the close of business on such date, not more than 50 days nor less than 10 days preceding the payment date thereof, as may be fixed by the Board of Directors of this Corporation (the "Special Record Date"). (d) In the event that on any date fixed for redemption of Shares pursuant to Section 6 (other than on any date fixed for a redemption of Shares pursuant to Section 6(a)), this Corporation shall fail to pay the Redemption Price due and payable upon presentation and surrender of the stock certificates evidencing Shares to be redeemed, then dividends on such Shares shall accrue cumulatively on a daily basis at the rate of fifteen percent (15%) per annum of the Liquidation Value thereof from and after such Redemption Date to and including the date of conversion of such Shares pursuant to Section 5 or the date on which the Liquidation -6- 54 Value or Redemption Price of such Shares is made available pursuant to Section 4 or 6 hereof, respectively. (e) Notice of each Special Record Date shall be mailed, in the manner provided in Section 6(d), to the holders of record of the Convertible Preferred Stock not less than 15 days prior thereto. (f) As long as any Convertible Preferred Stock shall be outstanding, no dividend, whether in cash or property, shall be paid or declared, nor shall any other distribution be made, on any Junior Security, nor shall any shares of any Junior Security be purchased, redeemed, or otherwise acquired for value by the Corporation, unless the holders of the Convertible Preferred Stock shall have received all dividends to which they are entitled pursuant to Section 3(a) hereof for the Dividend Period in which such dividend on the Junior Securities is to occur and all preceding Dividend Periods, or such dividends shall have been declared and the consideration sufficient for the payment thereof set apart so as to be available for the payment in full thereof and for no other purpose. The provisions of this Section 3(f) shall not apply (i) to a dividend payable in any Junior Security, (ii) to the repurchase, redemption or other acquisition of shares of any Junior Security solely through the issuance of Junior Securities (together with a cash adjustment for fractional shares, if any) or through the application of the proceeds from the sale of Junior Securities or (iii) to the acquisition of any shares of any Junior Security beneficially owned by Liberty Media Corporation ("Liberty") upon the redemption of, or in exchange for, shares of Liberty's preferred stock that are beneficially owned by this Corporation. 4. Liquidation. Subject to the prior payment in full of the preferential amounts to which any Senior Securities are entitled, upon any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, the holders of Convertible Preferred Stock shall be entitled to be paid an amount in cash equal to the aggregate Liquidation Value at the date fixed for liquidation of all Shares outstanding before any distribution or payment is made upon any Junior Securities, which payment shall be made pari passu with any such payment made to the holders of any Parity Securities. The holders of Convertible Preferred Stock shall be entitled to no other or further distribution of or participation in any remaining assets of this Corporation after receiving the Liquidation Value per Share. If upon such liquidation, dissolution or winding up, the assets of this Corporation to be distributed among the holders of Convertible Preferred Stock and to all holders of Parity Securities are insufficient to permit payment in full to such -7- 55 holders of the aggregate preferential amounts which they are entitled to be paid, then the entire assets of this Corporation to be distributed to such holders shall be distributed ratably among them based upon the full preferential amounts to which the shares of Convertible Preferred Stock and such Parity Securities would otherwise respectively be entitled. Upon any such liquidation, dissolution or winding up, after the holders of Convertible Preferred Stock and Parity Securities have been paid in full the amounts to which they are entitled, the remaining assets of this Corporation may be distributed to the holders of Junior Securities. This corporation shall mail written notice of such liquidation, dissolution or winding up to each record holder of Convertible Preferred Stock not less than 30 days prior to the payment date stated in such written notice. Neither the consolidation or merger of this Corporation into or with any other corporation or corporations, nor the sale, transfer or lease by this Corporation of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of this Corporation within the meaning of this Section 4. 5. Conversion. (a) Unless previously called for redemption as provided in Section 6 hereof, the Convertible Preferred Stock may be converted at such time, in such manner and upon such terms and conditions as hereinafter provided in this Section 5 into fully paid and non-assessable full shares of Class A Common Stock. In the case of Shares called for redemption by this Corporation pursuant to Sections 6(a) or 6(b) hereof, the conversion right provided by this Section 5 shall terminate at the close of business on the fifteenth day preceding the date fixed for redemption. In the case of Shares required to be redeemed pursuant to Section 6(c), the conversion right provided by this Section 5 shall terminate immediately upon receipt by this Corporation of a notice given pursuant to said Section. In case cash, securities or property other than Class A Common Stock shall be payable, deliverable or issuable upon conversion as provided herein, then all references to Class A Common Stock in this Section 5 shall be deemed to apply, so far as appropriate and as nearly as may be, to such cash, property or other securities. (b) Subject to the provisions for adjustment hereinafter set forth in this Section 5, the Convertible Preferred Stock may be converted into Class A Common Stock at the initial conversion rate of two hundred and four (204) fully paid and non-assessable shares of Class A Common Stock for one share of the Convertible Preferred Stock. (This conversion rate as from time to time adjusted cumulatively pursuant to the provisions of this Section is hereinafter referred to as the "Conversion Rate".) -8- 56 (c) In case this Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Class A Common Stock in shares of its Capital Stock, (ii) subdivide the then outstanding shares of Class A Common Stock into a greater number of shares of Class A Common Stock, (iii) combine the then outstanding shares of Class A Common Stock into a smaller number of shares of Class A Common Stock, or (iv) issue by reclassification of its shares of Class A Common Stock any shares of any other class of Capital Stock of this Corporation (including any such reclassification in connection with a merger in which this Corporation is the continuing corporation), then the Conversion Rate in effect immediately prior to the opening of business on the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that the holder of each share of the Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number and kind of shares of Capital Stock of this Corporation that such holder would have owned or been entitled to receive immediately following such action had such shares of Convertible Preferred Stock been converted immediately prior to such time. An adjustment made pursuant to this Section 5(c) for a dividend or distribution shall become effective immediately after the record date for the dividend or distribution and an adjustment made pursuant to this Section 5(c) for a subdivision, combination or reclassification shall become effective immediately after the effective date of the subdivision, combination or reclassification. Such adjustment shall be made successively whenever any action listed above shall be taken. (d) In case this Corporation shall issue any rights or warrants to all holders of shares of Class A Common Stock entitling them (for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Class A Common Stock (or Convertible Securities) at a price per share of Class A common Stock (or having an initial exercise price or conversion price per share of Class A Common Stock) less than the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 5(f) below) on such record date, the number of shares of Class A Common Stock into which each Share shall thereafter be convertible shall be determined by multiplying the number of shares of Class A Common Stock into which such Share was theretofore convertible immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Class A Common Stock outstanding on such record date plus the number of additional shares of Class A Common Stock offered for subscription or purchase (or into which the -9- 57 Convertible Securities so offered are initially convertible) and of which the denominator shall be the number of shares of Class A Common Stock outstanding on such record date plus the number of shares of class A Common Stock which the aggregate offering price of the total number of shares of Class A Common Stock so offered (or the aggregate initial conversion or exercise price of the Convertible Securities so offered) would purchase at the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 5(f) below) on such record date. Such adjustment shall be made successively whenever any such rights or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. In the event that all of the shares of Class A Common Stock (or all of the Convertible Securities) subject to such rights or warrants have not been issued when such rights or warrants expire (or, in the case of rights or warrants to purchase Convertible Securities which have been exercised, all of the shares of Class A Common Stock issuable upon conversion of such Convertible Securities have not been issued prior to the expiration of the conversion right thereof), then the Conversion Rate shall be readjusted retroactively to be the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights or warrants been made on the basis of the actual number of shares of Class A Common Stock (or Convertible Securities) issued upon the exercise of such rights or warrants (or the conversion of such Convertible Securities); but such subsequent adjustment shall not affect the number of shares of Class A Common Stock issued upon the conversion of any Share prior to the date such subsequent adjustment is made. (e) In case this Corporation shall distribute to all holders of shares of class A Common Stock (including any such distribution made in connection with a merger in which this Corporation is the continuing corporation, other than a merger to which Section 5(g) is applicable) any evidences of its indebtedness or assets (other than cash dividends or Capital Stock) or rights or warrants to purchase shares of Class A Common Stock or Class B Common Stock or securities convertible into shares of Class A Common Stock or Class B Common Stock (excluding those referred to in Section 5(d) above), then in each such case the number of shares of Class A Common Stock into which each Share shall thereafter be convertible shall be determined by multiplying the number of shares of Class A Common Stock into which such Share was theretofore convertible immediately prior to record date for the determination of stockholders entitled to receive the distribution by a fraction of which the numerator shall be the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of -10- 58 Section 5(f) below) on such record date and of which the denominator shall be such current market price per share of Class A Common Stock less the fair market value on such record date (as determined by the Board of Directors of this Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness or rights and warrants so to be distributed applicable to one share of Class A Common Stock. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution. (f) For the purpose of any computation under Section 5(d), (e) or (k), the current market price per share of Class A Common Stock at any date shall be deemed to be the average of the daily closing prices for a share of Class A Common Stock for the ten (10) consecutive trading days before the day in question. The closing price for each day shall be the last reported sale price regular way or, in case no such reported sale takes place an such day, the average of the reported closing bid and asked prices regular way, in either case on the composite tape, or if the shares of Class A Common Stock are not quoted on the composite tape, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on which the shares of Class A Common Stock are listed or admitted to trading, or if they are not listed or admitted to trading on any such exchange, the last reported sale price (or the average of the quoted closing bid and asked prices if there were no reported sales) as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if the Class A Common Stock is not quoted on NASDAQ or any comparable system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by this Corporation for that purpose or, in the absence of such quotations, such other method of determining market value as the Board of Directors shall from time to time deem to be fair. (g) In case of any reclassification or change in the Class A Common stock (other than any reclassification or change referred to in Section 5(c) and other than a change in par value) or in case of any consolidation of this Corporation with any other corporation or any merger of this Corporation into another corporation or of another corporation into this Corporation (other than a merger in which this Corporation is the continuing corporation and which does not result in any reclassification or change (other than a change in par value or any reclassification or -11- 59 change to which Section 5(c) is applicable) in the outstanding Class A Common Stock) , or in case of any sale or transfer to another corporation or entity (other than by mortgage or pledge) of all or substantially all of the properties and assets of this Corporation, this Corporation (or its successor in such consolidation or merger) or the purchaser of such properties and assets shall make appropriate provision so that the holder of a Share shall have the right thereafter to convert such Share into the kind and amount of shares of stock and other securities and property that such holder would have owned immediately after such reclassification, change, consolidation, merger, sale or transfer if such holder had converted such Share into Class A Common Stock immediately prior to the effective date of such reclassification, change, consolidation, merger, sale or transfer (assuming for this purpose (to the extent applicable) that such holder failed to exercise any rights of election and received per share of Class A Common Stock the kind and amount of shares of stock and other securities and property received per share by a plurality of the nonelecting shares), and the holders of the Convertible Preferred Stock shall have no other conversion rights under these provisions; provided, that effective provision shall be made, in the Articles or Certificate of Incorporation of the resulting or surviving corporation or otherwise or in any contracts of sale or transfer, so that the provisions set forth herein for the protection of the conversion rights of the Convertible Preferred Stock shall thereafter be made applicable, as nearly as reasonably may be to any such other shares of stock and other securities and property deliverable upon conversion of the Convertible Preferred Stock remaining outstanding or other convertible preferred stock or other Convertible Securities received by the holders of Convertible Preferred Stock in place thereof; and provided, further, that any such resulting or surviving corporation or purchaser shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Convertible Preferred Stock remaining outstanding, or other convertible preferred stock or other convertible securities received by the holders in place thereof, shall be entitled to receive pursuant to the provisions hereof, and to make provisions for the protection of the conversion rights as above provided. (h) Whenever the Conversion Rate or the conversion privilege shall be adjusted as provided in Sections 5(c),(d), (e) or (g), this Corporation shall promptly cause a notice to be mailed to the holders of record of The Convertible Preferred Stock describing the nature of the event requiring such adjustment, the Conversion Rate in effect immediately thereafter and the kind and amount of stock or other securities or property into which The -12- 60 Convertible Preferred Stock shall be convertible after such event. Where appropriate, such notice may be given in advance and included as a part of a notice required to be mailed under the provisions of Section 5(j). (i) This Corporation may, but shall not be required to, make any adjustment of the Conversion Rate if such adjustment would require an increase or decrease of less than 1% in such Conversion Rate; provided, however, that any adjustments which by reason of this Section 5(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. In any case in which this Section 5(i) shall require that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (x) issuing to the holder of any shares of Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Class A Common Stock or other Capital Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Class A Common Stock, or other Capital Stock issuable upon such conversion before giving effect to such adjustment and (y) paying to such holder cash in lieu of any fractional interest to which such holder is entitled pursuant to Section 5(n); provided, however, that, if requested by such holder, this Corporation shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares of Class A Common Stock or other Capital Stock, and such cash, upon the occurrence of the event requiring such adjustment. (j) In case at any time: (i) this Corporation shall take any action which would require an adjustment in the Conversion Rate pursuant to this Section; (ii) there shall be any capital reorganization or reclassification of the Class A Common Stock (other than a change in par value), or any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of this Corporation is required, or any sale, transfer or lease of all or substantially all of the properties and assets of the Corporation, or a tender offer for shares of Class A Common Stock representing, together with any shares of Class B Common Stock tendered for in such tender offer, at least a majority of the total -13- 61 voting power represented by the outstanding shares of Class A Common Stock and Class B Common Stock which has been recommended by the Board of Directors as being in the best interests of the holders of Class A Common Stock; or (iii) there shall be a voluntarily or involuntary dissolution, liquidation or winding up of this Corporation; then, in any such event, this Corporation shall give written notice, in the manner provided in Section 6(d) hereof, to the holders of the Convertible Preferred Stock at their respective addresses as the same appear upon the books of the Corporation, at least twenty days (or ten days in the case of a recommended tender offer as specified in clause (ii) above) prior to any record date for such action, dividend or distribution or the date as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their shares of Class A Common Stock for securities or other property, if any, deliverable upon such reorganization, reclassification, consolidation, merger, sale, transfer, lease, tender offer, dissolution, liquidation or winding up; provided, however, that any notice required by any event described in clause (ii) of this Section 5(j) shall be given in the manner and at the time that such notice is given to the holders of Class A Common Stock. Without limiting the obligation of this Corporation to provide notice of corporate actions hereunder, the failure to give the notice required by this Section 5(j) or any defect therein shall not affect the legality or validity of any such corporate action of the Corporation or the vote upon such action. (k) Before any holder of Convertible Preferred Stock shall be entitled to convert the same into Class A Common Stock, such holder shall surrender the certificate or certificates for such Convertible Preferred Stock at the office of this Corporation or at the office of the transfer agent for the Convertible Preferred Stock, which certificate or certificates, if this Corporation shall so request, shall be duly endorsed to this Corporation or in blank or accompanied by proper instruments of transfer to this Corporation or in blank (such endorsements or instruments of transfer to be in form satisfactory to this Corporation), and shall give written notice to this Corporation at said office that it elects to convert all or a part of the Shares represented by said certificate or certificates in accordance with the terms of this Section 5, and shall state in writing therein the name or names in which such holder wishes the -14- 62 certificates for Class A Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Convertible Preferred Stock and the Corporation, whereby the holder of such Convertible Preferred Stock shall be deemed to subscribe for the amount of Class A Common Stock which such holder shall be entitled to receive upon conversion of the number of shares of Convertible Preferred Stock to be converted, and, in satisfaction of such subscription, to deposit the shares of Convertible Preferred Stock to be converted, and thereby this Corporation shall be deemed to agree that the surrender of the shares of Convertible Preferred Stock to be converted shall constitute full payment of such subscription for Class A Common Stock to be issued upon such conversion. This Corporation will as soon as practicable after such deposit of a certificate or certificates for Convertible Preferred Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of this Corporation or of said transfer agent to the person for whose account such Convertible Preferred Stock was so surrendered, or to his nominee(s) or, subject to compliance with applicable law, transferee(s), a certificate or certificates for the number of full shares of Class A Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share as hereinafter provided. If surrendered certificates for Convertible Preferred Stock are converted only in part, this Corporation will issue and deliver to the holder, or to his nominee(s), without charge therefor, a new certificate or certificates representing the aggregate of the unconverted Shares. Such conversion shall be deemed to have been made as of the date of such surrender of the Convertible Preferred Stock to be converted; and the person or persons entitled to receive the Class A Common Stock issuable upon conversion of such Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such Class A Common Stock on such date. Upon the conversion of any Share, this Corporation shall pay, to the holder of record of such Share on the immediately preceding Record Date, all accrued but unpaid dividends on such Share to the date of the surrender of such Share for conversion. Such payment shall be made in cash or, at the election of this Corporation, the issuance of certificates representing such number of shares of Class A Common Stock as have an aggregate current market price (as determined in accordance with Section 5(f)) on the date of issuance equal to the amount of such accrued but unpaid dividends. Upon the making of such payment to the person entitled thereto as determined pursuant to the first sentence of this paragraph, no further dividends shall accrue on such Share or be payable to any other person. -15- 63 The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Convertible Preferred Stock shall be made without charge for any issue, stamp or other similar tax in respect of such issuance, provided, however, if any such certificate is to be issued in a name other than that of the registered holder of the share or shares of Convertible Preferred Stock converted, the person or persons requesting the issuance thereof shall pay to this Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of this Corporation that such tax has been paid. This Corporation shall not be required to convert any shares of Convertible Preferred Stock, and no surrender of Convertible Preferred Stock shall be effective for that purpose, while the stock transfer books of this Corporation are closed for any purpose; but the surrender of Convertible Preferred Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Convertible Preferred Stock was surrendered. (l) This Corporation shall at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of Convertible Preferred Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all outstanding Shares, provided that nothing contained herein shall be construed to preclude this Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Convertible Preferred Stock by delivery of shares of Class A Common Stock which are held in the treasury of this Corporation. This Corporation shall take all such corporate and other actions as from time to time may be necessary to insure that all shares of Class A Common Stock issuable upon conversion of shares of Convertible Preferred Stock at the Conversion Rate in effect from time to time will, upon issue, be duly and validly authorized and issued, fully paid and nonassessable and free of any preemptive or similar rights. (m) All shares of Convertible Preferred Stock received by this Corporation upon conversion thereof into Class A Common Stock shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock (and may be reissued as part of another series of the preferred stock of this Corporation, but such shares shall not be reissued as Convertible Preferred Stock). (n) This Corporation shall not be required to issue fractional shares of Class A Common Stock or scrip upon -16- 64 conversion of the Convertible Preferred Stock. As to any final fraction of a share of Class A Common Stock which a holder of one or more Shares would otherwise be entitled to receive upon conversion of such Shares in the same transaction, this Corporation shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the market value of a full share of Class A Common Stock. For purposes of this Section 5(n), the market value of a share of Class A Common Stock shall be the last reported sale price regular way on the business day immediately preceding the date of conversion, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case on the composite tape, or if the shares of Class A Common Stock are not quoted on the composite tape, on the principal United States securities exchange registered under the Exchange Act on which the shares of Class A Common Stock are listed or admitted to trading, or if the shares of Class A Common Stock are not listed or admitted to trading on any such exchange, the last reported sale price (or the average of the quoted last reported bid and asked prices if there were no reported sales) as reported by NASDAQ or any comparable system, or if the Class A Common Stock is not quoted on NASDAQ or any comparable system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by this Corporation for that purpose or, in the absence of such quotations, such other method of determining market value as the Board of Directors shall from time to time deem to be fair. 6. Redemption. (a) Subject to the rights of any Senior Securities and the provisions of Section 6(g), the shares of Convertible Preferred Stock may be redeemed out of funds legally available therefor, at the option of this Corporation by action of the Board of Directors, in whole or from time to time in part, at any time after the Issue Date, at the Redemption price per share as of the applicable Redemption Date. If less than all outstanding Shares are to be redeemed, Shares shall be redeemed ratably among the holders thereof. (b) Subject to the rights of any Senior Securities, Parity Securities and the provisions of Section 6(g) and subject to any prohibition or restriction contained in any Debt Instrument, this Corporation shall redeem, out of funds legally available therefor, on April 1, 1999 all of the shares of the Convertible Preferred Stock remaining outstanding at the Redemption Price per share on the Redemption Date. If the funds of this Corporation available, -17- 65 in accordance with the immediately preceding sentence, for redemption of Shares are insufficient to redeem the total number of Shares, those funds which are legally available for redemption of Shares and not restricted in accordance with the first sentence of this Section 6(b) will be used to redeem the maximum possible number of Shares ratably among the holders thereof. At any time thereafter when additional funds of this Corporation are legally available and not so restricted for such purpose, such funds will immediately be used to redeem the Shares this Corporation failed to redeem on such Redemption Date until the balance of the Shares have been redeemed. (c) Subject to the rights of any Senior Securities, parity Securities and the provisions of Section 6(g) and subject to any prohibition or restriction contained in any Debt Instrument, at any time on or after the Issue Date, any holder shall have the right, at such holder's option, to require redemption by this Corporation at the Redemption price per Share as of the applicable Redemption Date of all or any portion of his Shares having an aggregate Liquidation Value in excess of $1,000,000, by written notice to this Corporation stating the number of Shares to be redeemed. This Corporation shall redeem, out of funds legally available therefor and not restricted in accordance with the first sentence of this Section 6(c), the Shares so requested to be redeemed on such date within 60 days following this corporation's receipt of such notice as this Corporation shall state in its notice given pursuant to Section 6(d). If the funds of this Corporation legally available for redemption of Shares and not restricted in accordance with the first sentence of this Section 6(c) are insufficient to redeem the total number of Shares required to be redeemed pursuant to this Section 6(c), those funds which are legally available for redemption of such Shares and not so restricted will be used to redeem the maximum possible number of such Shares ratably among the holders who have required Shares to be redeemed under this Section 6(c). At any time thereafter when additional funds of this Corporation are legally available and not so restricted for such purpose, such funds will immediately be used to redeem the Shares this Corporation failed to redeem on such Redemption Date until the balance of such Shares are redeemed. (d) Notice of any redemption pursuant to this Section shall be mailed, first class, postage prepaid, not less than 30 days nor more than 60 days prior to the Redemption Date, to the holders of record of the shares of Convertible Preferred Stock to be redeemed, at their respective addresses as the same appear upon the books of this Corporation or are supplied by them in writing to this Corporation for the purpose of such notice; but no failure to -18- 66 mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of the Convertible Preferred Stock. Such notice shall set forth the Redemption price, the Redemption Date, the number of Shares to be redeemed and the place at which the Shares called for redemption will, upon presentation and surrender of the stock certificates evidencing such Shares, be redeemed. In case fewer than the total number of shares of Convertible Preferred Stock represented by any certificate are redeemed, a new certificate representing the number of unredeemed Shares will be issued to the holder thereof without cost to such holder. (e) If notice of any redemption by this Corporation pursuant to this Section 6 shall have been mailed as provided in Section 6(d) and if on or before the Redemption Date specified in such notice the consideration necessary for such redemption shall have been set apart so as to be available therefor and only therefor, then on and after the close of business on the Redemption Date, the Shares called for redemption, notwithstanding that any certificate therefor shall not have been surrendered for cancellation, shall no longer be deemed outstanding, and all rights with respect to such Shares shall forthwith cease and terminate, except the right of the holders thereof to receive upon surrender of their certificates the consideration payable upon redemption thereof. (f) All shares of Convertible Preferred Stock redeemed, retired, purchased or otherwise acquired by this Corporation shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock (and may be reissued as part of another series of the preferred stock of this Corporation, but such shares shall not be reissued as Convertible Preferred Stock). (g) If at any time this Corporation shall have failed to pay, or declare and set apart the consideration sufficient to pay, all dividends accrued up to and including the immediately preceding Dividend Payment Date on the Convertible Preferred Stock and any Parity Securities, and until all dividends accrued up to and including the immediately preceding Dividend Payment Date on the Convertible Preferred Stock and any Parity Securities shall have been paid or declared and set apart so as to be available for the payment in full thereof and for no other purpose, this Corporation shall not redeem, pursuant to a sinking fund or otherwise, any shares of Convertible Preferred Stock, Parity Securities or Junior Securities, unless all then outstanding shares of Convertible Preferred Stock and Parity Securities are redeemed, and shall not purchase or otherwise acquire any shares of Convertible -19- 67 Preferred Stock, Parity Securities or Junior Securities. If and so long as this Corporation shall fail to redeem on a Redemption Date pursuant to Section 6(b) or 6(c) all shares of Convertible Preferred Stock required to be redeemed on such date, this Corporation shall not redeem, or discharge any sinking fund obligation with respect to, any Parity Securities or Junior Securities, unless all then outstanding shares of Convertible Preferred Stock and Parity Securities are redeemed, and shall not purchase or otherwise acquire any shares of Convertible Preferred Stock, Parity Securities or Junior Securities. Nothing contained in this Section 6(g) shall prevent the purchase or acquisition (i) of shares of Convertible Preferred Stock and Parity Securities pursuant to a purchase or exchange offer or offers made to holders of all outstanding shares of Convertible Preferred Stock and Parity Securities, provided that (A) as to holders of all outstanding shares of Convertible Preferred Stock, the terms of the purchase or exchange offer for all such shares are identical, (B) as to holders of all outstanding shares of a particular series or class of Parity Securities, the terms of the purchase or exchange offer for all such shares are identical, and (C) as among holders of all outstanding shares of Convertible Preferred Stock and Parity Securities, the terms of each purchase or exchange offer or offers are substantially identical relative to the liquidation price of the shares of Convertible Preferred Stock and each series or class of Parity Securities, (ii) of shares of Convertible Preferred Stock, Parity Securities or Junior Securities in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds of the sale of, shares of Junior Securities or (iii) of shares of Junior Securities that are beneficially owned by Liberty upon the redemption of, or in exchange for, shares of Liberty's preferred stock beneficially owned by this Corporation. The provisions of this Section 6(g) are for the benefit of holders of Convertible Preferred Stock and Parity Securities and accordingly, at any time when there are no Parity Securities outstanding, the provisions of this Section 6(g) shall not restrict any redemption by this Corporation of Shares held by any holder, provided that all other holders of Shares shall have waived in writing the benefits of this provision with respect to such redemption. 7. Transfer. (a) Without the prior written consent of this on holding shares of Convertible Preferred Stock of record (hereinafter called a "Convertible Preferred Holder") may transfer, and this Corporation shall not register the transfer of, such share of Convertible Preferred Stock, whether by sale, assignment, or otherwise, except to a Permitted Transferee. -20- 68 (i) In the case of a Convertible Preferred Holder acquiring record and beneficial ownership of the shares of Convertible Preferred Stock in question upon initial issuance by this Corporation (an "Original Holder"), a "permitted Transferee" shall mean: (x) any Affiliate (as defined in Section 7(b)) of such Original Holder, (y) any other Original Holder (or any Affiliate of any such other Original Holder), or (z) any person or entity to whom Shares are transferred by an Original Holder which Original Holder is a natural person pursuant to a gift or bequest or pursuant to the laws of intestacy. (ii) In the case of a Convertible preferred Holder which is a permitted Transferee of an Original Holder, a "permitted Transferee" shall mean: (x) any Original Holder, (y) any Permitted Transferee of an Original Holder, except any transferee referred to in clause (i)(z) above, or (z) any person or entity to whom Shares are transferred by a Permitted Transferee which Permitted Transferee is a natural person pursuant to a gift or bequest or pursuant to the laws of intestacy. (b) For purposes of this Section 7, the term "Affiliate" shall mean (i) any person or corporation that beneficially and of record at least a majority of the outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors ("voting securities") of an Original Holder or (ii) any person or corporation at least a majority of the voting securities of which are owned beneficially and of record by an Original Holder, where in the case of both (i) and (ii), voting securities will be deemed "owned" by a person or corporation if either owned directly or if owned indirectly through one or more intermediary corporations at least a majority of the voting securities of which are owned beneficially and of record by that person or corporation or -21- 69 by an intermediary corporation in such a majority or more chain of ownership. (c) This Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Convertible Preferred Stock on this Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Convertible Preferred Stock or is a permitted Transferee. (d) Shares of Convertible Preferred Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Convertible Preferred Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. Certificates for shares of Convertible Preferred Stock shall bear a legend referencing the restrictions on transfer imposed by this Section 7. 8. No Voting Rights. The holders of Convertible Preferred Stock shall have no right to vote for any purpose, except as specifically required by the Delaware General Corporation Law. 9. Amendment. No amendment or modification of the designation, rights, preferences, and limitations of the Shares set forth herein shall be binding or effective without the prior consent of the holders of record of Shares representing 66 2/3% of the Liquidation Value of all Shares outstanding at the time such action is taken. 10. Preemptive Rights. The holders of the Convertible Preferred Stock will not have any preemptive right to subscribe for or purchase any shares of stock or any other securities which may be issued by this Corporation. 11. Exclusion of Other Rights. Except as may otherwise be required by law and for the equitable rights and remedies that may otherwise be available to holders of Convertible Preferred Stock, the shares of Convertible Preferred Stock shall not have any designations, preferences, limitations or relative rights, other that those specifically set forth in these resolutions (as such resolutions may, subject to Section 9, be amended from time to time) and in the Restated Certificate of Incorporation of this Corporation. 12. Headings. The headings of the various sections and subsections hereof are for convenience of -22- 70 reference only and shall not affect the interpretation of any of the provisions hereof. FURTHER RESOLVED, that the appropriate officers of this Corporation are hereby authorized to execute and acknowledge a certificate setting forth these resolutions and cause such certificate to be filed and recorded, in accordance with the requirements of Section 151(g) of the General Corporation Law of the State of Delaware." /s/ JOHN C. MALONE John C. Malone President ATTEST By: /s/ EDON V. HARTLEY Edon V. Hartley Assistant Secretary -23- 71 PAGE 1 STATE OF DELAWARE {LOGO} OFFICE OF SECRETARY OF STATE _______________________ I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "TELE-COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE TWENTY-SEVENTH DAY OF DECEMBER, A.D. 1991, AT 2 O'CLOCK P.M. * * * * * * * * * * /s/ MICHAEL RATCHFORD SECRETARY OF STATE AUTHENTICATION: *3328395 DATE: 01/30/1992 {SEAL} 752030312 72 TELE-COMMUNICATIONS, INC. CERTIFICATE OF DESIGNATIONS _______________________ SETTING FORTH A COPY OF A RESOLUTION CREATING AND AUTHORIZING THE ISSUANCE OF A SERIES OF PREFERRED STOCK DESIGNATED AS "CONVERTIBLE PREFERRED STOCK, SERIES B" ADOPTED BY THE BOARD OF DIRECTORS OF TELE-COMMUNICATIONS, INC. _______________________ Pursuant to Section 151 of the General Corporation Law of the State of Delaware _______________________ The undersigned, President of Tele-Communications, Inc., a Delaware corporation (the "Corporation"), hereby certifies that the Board of Directors, at a meeting duly called and held, adopted the following resolutions creating a series of preferred stock designated as "Convertible Preferred Stock, Series B": "BE IT RESOLVED, that, pursuant to authority expressly granted by the provisions of the Restated Certificate of Incorporation of this Corporation, the Board of Directors hereby creates and authorizes the issuance of a series of preferred stock, par value $1.00 per share, of this Corporation, to consist of 6,201 shares, and hereby fixes the designations, dividend rights, voting powers, rights on liquidation and other preferences and.relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof of the shares of such series (in addition to the designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof set forth in the Restated Certificate of Incorporation that are applicable to preferred stock of all series) as follows: -1- 73 1. Designation. The designation of the series of preferred stock par value $1.00 per share, of this Corporation authorized hereby is "Convertible Preferred Stock, Series B" (the "Convertible Preferred Stock"). 2. Certain Definitions. Unless the context otherwise requires, the terms defined in this Section 2 shall have the meanings herein specified: Affiliate: As defined in Section 7(b). Board of Directors: The Board of Directors of this Corporation and any authorized committee thereof. Capital Stock: Any and all shares, interests, participations or other equivalents (however designated) of corporate stock of this Corporation. Class A Common Stock: The Class A Common Stock, par value $1.00 per share, of this Corporation as such exists on the date of this Certificate of Designations, and Capital Stock of any other class into which such Class A Common Stock may thereafter have been changed. Class B Common Stock: The class B Common Stock, par value $1.00 per share, of this Corporation as such exists on the date of this Certificate of Designations, and Capital Stock of any other class into which such Class B Common Stock may thereafter have been changed. Conversion Rate: As defined in Section 5(b). Convertible Preferred Holder: As defined in Section 7(b). Convertible Securities: Securities, other than the Class B Common Stock, that are convertible into Class A Common Stock. Debt Instrument: Any bond, debenture, note, indenture, guarantee or other instrument or agreement evidencing any Indebtedness, whether existing at the Issue Date or thereafter created, incurred, assumed or guaranteed. Dividend Payment Date: As defined in Section 3(b). Dividend Period: The period from but excluding the First Accrual Date to and including the first Dividend Payment Date and each three-month period from but excluding the Dividend Payment Date for the preceding Dividend Period to and including the Dividend Payment Date for such Dividend period. -2- 74 First Accrual Date: October 1, 1991. Indebtedness: Any (i) liability, contingent or otherwise, of this Corporation (x) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of this Corporation or only to a portion thereof), (y) evidenced by a note, debenture or similar instrument (including a purchase money obligation) given other than in connection with the acquisition of inventory or similar property in the ordinary course of business, or (z) for the payment of money relating to an obligation under a lease that is required to be capitalized for financial accounting purposes in accordance with generally accepted accounting principles; (ii) liability of others described in the preceding clause (i) which this Corporation has guaranteed which is otherwise its legal liability; (iii) obligations secured by a mortgage, pledge, lien, charge or other encumbrance to which the property or assets of this Corporation are subject whether or not the obligations secured thereby shall have been assumed by or shall otherwise be this Corporation's legal liability; and (iv) any amendment, renewal, extension or refunding of any liability of the types referred to in clauses (i), (ii) and (iii) above. Issue Date: The first date on which any shares of the Convertible Preferred Stock are first issued or deemed to have been issued. Junior Securities: All shares of Class A Common Stock, Class B Common Stock, and any other class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any dividends unless all dividends required to have been paid or declared and set apart for payment on the Convertible Preferred Stock and any Parity Securities shall have been so paid or declared and set apart for payment and, for purposes of Section 4 hereof, any class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any assets upon liquidation, dissolution or winding up of the affairs of this Corporation until the Convertible Preferred Stock and any Parity Securities shall have received the entire amount to which such stock is entitled upon such liquidation, dissolution or winding up. Liquidation Value: Measured per Share of the Convertible Preferred Stock as of any particular date, the sum of (i) $3,000, plus (ii) an amount equal to all dividends accrued on such Share through the Dividend Payment Date immediately preceding the date on which the Liquidation Value being determined, which pursuant to Section 3(c) have been added to and remain a part of the Liquidation Value as of -3- 75 such date, plus (iii), for purposes of determining amounts payable pursuant to Sections 4 and 6 hereof, an amount equal all unpaid dividends accrued on the sum of the amounts specified in clauses (i) and (ii) above to the date as of which the Liquidation Value is being determined. Original Holder: As defined in Section 7(a). Parity Securities: The 12 7/8% Preferred Stock and any other Class or series of stock of this Corporation authorized after the Issue Date entitled to receive payment of dividends on a parity with the Convertible Preferred Stock or entitled to receive assets upon liquidation, dissolution or winding up of the affairs of this Corporation on a parity with the Convertible Preferred Stock. Permitted Tranferee: As defined in Section 7(a). Record Date: For dividends payable on any Dividend Payment Date, the fifteenth day of the month preceding the month during which such Dividend Payment Date shall occur. Redemption Date: As to any share, the date fixed for redemption of such Share as specified in the notice of redemption given in accordance with Section 6(d), provided that no such date will be a Redemption Date unless the applicable Redemption Price is actually paid on such date or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart, and if the Redemption Price is not so paid in full or the consideration sufficient therefor so set apart then the Redemption Date will be the date on which such Redemption Price is fully paid or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart. Redemption Price: As to any Share that is to be redeemed on any Redemption Date, the Liquidation Value as in effect on such Redemption Date. Senior Securities: Any class or series of stock of this Corporation authorized after the Issue Date ranking senior to the Convertible Preferred Stock and any Parity Securities in respect of the right to receive payment of dividends or the right to participate in any distribution upon liquidation, dissolution or winding up of the affairs of this Corporation. -4- 76 Share: As defined in Section 3(a). Special Record Date: As defined in Section 3(c). 12 7/8% Preferred Stock: The 5,022,394 authorized shares of the 12 7/8% Cumulative Compounding Redeemable Preferred Stock, Series A, of this Corporation. 3. Dividends. (a) Subject to the prior preferences and other rights of any Senior Securities with respect to dividends, the holders of the Convertible Preferred Stock shall be entitled to receive, and, subject to any prohibition or restriction contained in any Debt Instrument, this Corporation shall be obligated to pay, but only out of funds legally available therefor, preferential cumulative cash dividends which shall accrue as provided herein. Except as otherwise provided in Sections 3(c) or 3(d) hereof, dividends on each share of Convertible Preferred Stock (hereinafter referred to as a "Share") shall accrue on a daily basis at the rate of ten percent (10%) per annum of the Liquidation Value thereof, from but excluding the First Accrual Date to and including January 1, 1992, and thereafter at the rate of 6 3/4% per annum of the Liquidation Value to and including the date of conversion thereof pursuant to Section 5 or the date on which the Liquidation Value or Redemption Price of such Share is made available pursuant to Section 4 or 6 hereof, respectively. Dividends on the Convertible Preferred Stock shall accrue as provided herein, whether or not such dividends have been declared and whether or not there are profits, surplus or other funds of the Corporation legally or contractually available for the payment of dividends. (b) Accrued dividends on the Convertible Preferred Stock shall be payable quarterly on the first day of each January, April, July and October, or the immediately preceding business day if such first day is a Saturday, Sunday or legal holiday (each such payment date being hereinafter referred to as a "Dividend Payment Date"), commencing on January 1, 1992, to the holders of record of the Convertible Preferred Stock as of the close of business on the applicable Record Date. For purposes of determining the amount of dividends "accrued" as of any date that is not a Dividend Payment Date, such amount shall be calculated on the basis of the rate per annum specified in Section 3(a) for actual days elapsed from but excluding the First Accrual Date (in the case of any date prior to the first Dividend Payment Date) or the last preceding Dividend Payment Date (in the case of any other date) to and including the date as of which such determination is to be made, based on a 365-day year. -5- 77 (c) If on any Dividend Payment Date this Corporation, pursuant to applicable law or the terms of any Debt Instrument, shall be prohibited or restricted from paying in cash the full dividends to which holders of the Convertible Preferred Stock and any Parity Securities shall be entitled, the amount available for such payment pursuant to applicable law and which is not restricted by the terms of any Debt Instrument shall be distributed among the holders of the Convertible Preferred Stock and such Parity Securities ratably in proportion to the full amounts to which they would otherwise be entitled. To the extent not paid on each Dividend Payment Date, all dividends which have accrued on each Share during the Dividend Period ending on such Dividend Payment Date will be added cumulatively to the Liquidation Value of such Share and will remain a part thereof until such dividends are paid. In the event that dividends are not paid in full on two consecutive Dividend Payment Dates, dividends on that portion of the Liquidation Value of each Share which consists of accrued dividends that have theretofor been or thereafter are added to, and remain a part of, the Liquidation Value in accordance with the preceding sentence shall accrue cumulatively on a daily basis at the rate of fifteen percent (15%) per annum, from and after such second consecutive Dividend Payment Date to and including the date of conversion of such Share pursuant to Section 5 or the date on which the Liquidation Value or Redemption Price of such Share is made available pursuant to Section 4 or 6 hereof, respectively, unless such portion of the Liquidation Value that consists of accrued unpaid dividends shall be earlier paid in full. Such portion of the Liquidation Value as consists of accrued unpaid dividends, may be declared and paid at any time (subject to the concurrent satisfaction of any dividend arrearages then existing with respect to any Parity Securities), without reference to any regular Dividend Payment Date, to holders of record as of the close of business on such date, not more than 50 days nor less than 10 days preceding the payment date thereof, as may be fixed by the Board of Directors of this Corporation (the "Special Record Date"). (d) In the event that on any date fixed for redemption of Shares pursuant to Section 6 (other than on any date fixed for a redemption of Shares pursuant to Section 6(a)), this Corporation shall fail to pay the Redemption Price due and payable upon presentation and surrender of the stock certificates evidencing Shares to be redeemed, then dividends on such Shares shall accrue cumulatively on a daily basis at the rate of fifteen percent (15%) per annum of the Liquidation Value thereof from and after such Redemption Date to and including the date of conversion of such Shares pursuant to Section 5 or the date on which the Liquidation -6- 78 Value or Redemption Price of such Shares is made available pursuant to Section 4 or 6 hereof, respectively. (e) Notice of each Special Record Date shall be mailed, in the manner provided in Section 6(d), to the holders of record of the Convertible Preferred Stock not less than 15 days prior thereto. (f) As long as any Convertible Preferred Stock shall be outstanding, no dividend, whether in cash or property, shall be paid or declared, nor shall any other distribution be made, on any Junior Security, nor shall any shares of any Junior Security be purchased, redeemed, or otherwise acquired for value by the Corporation, unless the holders of the Convertible Preferred Stock shall have received all dividends to which they are entitled pursuant to Section 3(a) hereof for the Dividend Period in which such dividend on the Junior Securities is to occur and all preceding Dividend Periods, or such dividends shall have been declared and the consideration sufficient for the payment thereof set apart so as to be available for the payment in full thereof and for no other purpose. The provisions of this Section 3(f) shall not apply (i) to a dividend payable in any Junior Security, (ii) to the repurchase, redemption or other acquisition of shares of any Junior Security solely through the issuance of Junior Securities (together with a cash adjustment for fractional shares, if any) or through the application of the proceeds from the sale of Junior Securities or (iii) to the acquisition of any shares of any Junior Security beneficially owned by Liberty Media Corporation ("Liberty") upon the redemption of, or in exchange for, shares of Liberty's preferred stock that are beneficially owned by this Corporation. 4. Liquidation. Subject to the prior payment in full of the preferential amounts to which any Senior Securities are entitled, upon any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, the holders of Convertible Preferred Stock shall be entitled to be paid an amount in cash equal to the aggregate Liquidation Value at the date fixed for liquidation of all Shares outstanding before any distribution or payment is made upon any Junior Securities, which payment shall be made pari passu with any such payment made to the holders of any Parity Securities. The holders of Convertible Preferred Stock shall be entitled to no other or further distribution of or participation in any remaining assets of this Corporation after receiving the Liquidation Value per Share. If upon such liquidation, dissolution or winding up, the assets of this Corporation to be distributed among the holders of Convertible Preferred Stock and to all holders of Parity Securities are insufficient to permit payment in full to such -7- 79 holders of the aggregate preferential amounts which they are entitled to be paid, then the entire assets of this Corporation to be distributed to such holders shall be distributed ratably among them based upon the full preferential amounts to which the shares of Convertible Preferred Stock and such Parity Securities would otherwise respectively be entitled. Upon any such liquidation, dissolution or winding up, after the holders of Convertible Preferred Stock and Parity Securities have been paid in full the amounts to which they are entitled, the remaining assets of this Corporation may be distributed to the holders of Junior Securities. This Corporation shall mail written notice of such liquidation, dissolution or winding up to each record holder of Convertible Preferred Stock not less than 30 days prior to the payment date stated in such written notice. Neither the consolidation or merger of this Corporation into or with any other corporation or corporations, nor the sale, transfer or lease by this Corporation of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of this Corporation within the meaning of this Section 4. 5. Conversion. (a) Unless previously called for redemption as provided in Section 6 hereof, the Convertible Preferred Stock may be converted at such time, in such manner and upon such terms and conditions as hereinafter provided in this Section 5 into fully paid and non-assessable full shares of Class A Common Stock. In the case of Shares called for redemption by this Corporation pursuant to Sections 6(a) or 6(b) hereof, the conversion right provided by this Section 5 shall terminate at the close of business on the fifteenth day preceding the date fixed for redemption. In the case of Shares required to be redeemed pursuant to Section 6(c), the conversion right provided by this Section 5 shall terminate immediately upon receipt by this Corporation of a notice given pursuant to said Section. In case cash, securities or property other than Class A Common Stock shall be payable, deliverable or issuable upon conversion as provided herein, then all references to Class A Common Stock in this Section 5 shall be deemed to apply, so far as appropriate and as nearly as may be, to such cash, property or other securities. (b) Subject to the provisions for adjustment hereinafter set forth in this Section 5, the Convertible Preferred Stock may be converted into Class A Common Stock at the initial conversion rate of two hundred and four (204) fully paid and non-assessable shares of Class A Common Stock for one share of the Convertible Preferred Stock. (This conversion rate as from time to time adjusted cumulatively pursuant to the provisions of this Section is hereinafter referred to as the "Conversion Rate".) -8- 80 (c) In case this Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Class A Common Stock in shares of its Capital Stock, (ii) subdivide the then outstanding shares of Class A Common Stock into a greater number of shares of Class A Common stock, (iii) combine the then outstanding shares of Class A Common Stock into a smaller number of shares of Class A Common Stock, or (iv) issue by reclassification of its shares of Class A Common Stock any shares of any other class of Capital Stock of this Corporation (including any such reclassification in connection with a merger in which this Corporation is the continuing corporation), then the Conversion Rate in effect immediately prior to the opening of business on the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that the holder of each share of the Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number and kind of shares of Capital Stock of this Corporation that such holder would have owned or been entitled to receive immediately following such action had such shares of Convertible Preferred Stock been converted immediately prior to such time. An adjustment made pursuant to this Section 5(c) for a dividend or distribution shall become effective immediately after the record date for the dividend or distribution and an adjustment made pursuant to this Section 5(c) for a subdivision, combination or reclassification shall become effective immediately after the effective date of the subdivision, combination or reclassification. Such adjustment shall be made successively whenever any action listed above shall be taken. (d) In case this Corporation shall issue any rights or warrants to all holders of shares of Class A Common Stock entitling them (for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Class A Common Stock (or Convertible Securities) at a price per share of Class A Common Stock (or having an initial exercise price or conversion price per share of Class A Common Stock) less than the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 5(f) below) on such record date, the number of shares of Class A Common Stock into which each Share shall thereafter be convertible shall be determined by multiplying the number of shares of Class A Common Stock into which such Share was theretofore convertible immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Class A Common Stock outstanding on such record date plus the number of additional shares of Class A Common Stock offered for subscription or purchase (or into which the -9- 81 Convertible Securities so offered are initially convertible) and of which the denominator shall be the number of shares of Class A Common Stock outstanding on such record date plus the number of shares of Class A Common Stock which the aggregate offering price of the total number of shares of Class A Common Stock so offered (or the aggregate initial conversion or exercise price of the Convertible Securities so offered) would purchase at the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 5(f) below) on such record date. Such adjustment shall be made successively whenever any such rights or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. In the event that all of the shares of Class A Common Stock (or all of the Convertible Securities) subject to such rights or warrants have not been issued when such rights or warrants expire (or, in the case of rights or warrants to purchase Convertible Securities which have been exercised, all of the shares of Class A Common Stock issuable upon conversion of such Convertible Securities have not been issued prior to the expiration of the conversion right thereof), then the Conversion Rate shall be readjusted retroactively to be the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights or warrants been made on the basis of the actual number of shares of Class A Common Stock (or Convertible Securities) issued upon the exercise of such rights or warrants (or the conversion of such Convertible Securities); but such subsequent adjustment shall not affect the number of shares of Class A Common Stock issued upon the conversion of any Share prior to the date such subsequent adjustment is made. (e) In case this Corporation shall distribute to all holders of shares of Class A Common Stock (including any such distribution made in connection with a merger in which this Corporation is the continuing corporation, other than a merger to which Section 5(g) is applicable) any evidences of its indebtedness or assets (other than cash dividends or Capital Stock) or rights or warrants to purchase shares of Class A Common Stock or Class B Common Stock or securities convertible into shares of Class A Common Stock or Class B Common Stock (excluding those referred to in Section 5(d) above), then in each such case the number of shares of Class A Common Stock into which each Share shall thereafter be convertible shall be determined by multiplying the number of shares of Class A Common Stock into which such Share was theretofore convertible immediately prior to record date for the determination of stockholders entitled to receive the distribution by a fraction of which the numerator shall be the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of -10- 82 Section 5(f) below) on such record date and of which the denominator shall be such current market price per share of Class A Common Stock less the fair market value on such record date (as determined by the Board of Directors of this Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness or rights and warrants so to be distributed applicable to one share of Class A Common Stock. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution. (f) For the purpose of any computation under Section 5(d), (e) or (k), the current market price per share of Class A Common Stock at any date shall be deemed to be the average of the daily closing prices for a share of Class A Common Stock for the ten (10) consecutive trading days before the day in question. The closing price for each day shall be the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the composite tape, or if the shares of Class A Common Stock are not quoted on the composite tape, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on which the shares of Class A Common Stock are listed or admitted to trading, or if they are not listed or admitted to trading on any such exchange, the last reported sale price (or the average of the quoted closing bid and asked prices if there were no reported sales) as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if the Class A Common Stock is not quoted on NASDAQ or any comparable system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by this Corporation for that purpose or, in the absence of such quotations, such other method of determining market value as the Board of Directors shall from time to time deem to be fair. (g) In case of any reclassification or change in the Class A Common Stock (other than any reclassification or change referred to in Section 5(c) and other than a change in par value) or in case of any consolidation of this Corporation with any other corporation or any merger of this Corporation into another corporation or of another corporation into this Corporation (other than a merger in which this Corporation is the continuing corporation and which does not result in any reclassification or change (other than a change in par value or any reclassification or -11- 83 change to which Section 5(c) is applicable) in the outstanding Class A Common Stock), or in case of any sale or transfer to another corporation or entity (other than by mortgage or pledge) of all or substantially all of the properties and assets of this Corporation, this Corporation (or its successor in such consolidation or merger) or the purchaser of such properties and assets shall make appropriate provision so that the holder of a Share shall have the right thereafter to convert such Share into the kind and amount of shares of stock and other securities and property that such holder would have owned immediately after such reclassification, change, consolidation, merger, sale or transfer if such holder had converted such Share into Class A Common Stock immediately prior to the effective date of such reclassification, change, consolidation, merger, sale or transfer (assuming for this purpose (to the extent applicable) that such holder failed to exercise any rights of election and received per share of Class A Common Stock the kind and amount of shares of stock and other securities and property received per share by a plurality of the nonelecting shares), and the holders of the Convertible Preferred Stock shall have no other conversion rights under these provisions; provided, that effective provision shall be made, in the Articles or Certificate of Incorporation of the resulting or surviving corporation or otherwise or in any contracts of sale or transfer, so that the provisions set forth herein for the protection of the conversion rights of the Convertible Preferred Stock shall thereafter be made applicable, as nearly as reasonably may be to any such other shares of stock and other securities and property deliverable upon conversion of the Convertible Preferred Stock remaining outstanding or other convertible preferred stock or other Convertible Securities received by the holders of Convertible Preferred Stock in place thereof; and provided, further, that any such resulting or surviving corporation or purchaser shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Convertible Preferred Stock remaining outstanding, or other convertible preferred stock or other convertible securities received by the holders in place thereof, shall be entitled to receive pursuant to the provisions hereof, and to make provisions for the protection of the conversion rights as above provided. (h) Whenever the Conversion Rate or the conversion privilege shall be adjusted as provided in Sections 5(c), (d), (e) or (g), this Corporation shall promptly cause a notice to be mailed to the holders of record of the Convertible Preferred Stock describing the nature of the event requiring such adjustment, the Conversion Rate in effect immediately thereafter and the kind and amount of stock or other securities or property into which the -12- 84 Convertible Preferred Stock shall be convertible after such event. Where appropriate, such notice may be given in advance and included as a part of a notice required to be mailed under the provisions of Section 5(J). (i) This Corporation may, but shall not be required to, make any adjustment of the Conversion Rate if such adjustment would require an increase or decrease of less than 1% in such Conversion Rate; provided, however, that any adjustments which by reason of this Section 5(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. In any case in which this Section 5(i) shall require that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (x) issuing to the holder of any shares of Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Class A Common Stock or other Capital Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Class A Common Stock, or other Capital Stock issuable upon such conversion before giving effect to such adjustment and (y) paying to such holder cash in lieu of any fractional interest to which such holder is entitled pursuant to Section 5(n); provided, however, that, if requested by such holder, this Corporation shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares of Class A Common Stock or other Capital Stock, and such cash, upon the occurrence of the event requiring such adjustment. (j) In case at any time: (i) this Corporation shall take any action which would require an adjustment in the Conversion Rate pursuant to this Section; (ii) there shall be any capital reorganization or reclassification of the Class A Common Stock (other than a change in par value), or any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of this Corporation is required, or any sale, transfer or lease of all or substantially all of the properties and assets of the Corporation, or a tender offer for shares of Class A Common Stock representing, together with any shares of Class B Common Stock tendered for in such tender offer, at least a majority of the total -13- 85 voting power represented by the outstanding shares of Class A Common Stock and Class B Common Stock which has been recommended by the Board of Directors as being in the best interests of the holders of Class A Common Stock; or (iii) there shall be a voluntary or involuntary dissolution, liquidation or winding up of this Corporation; then, in any such event, this Corporation shall give written notice, in the manner provided in Section 6(d) hereof, to the holders of the Convertible Preferred Stock at their respective addresses as the same appear upon the books of the Corporation, at least twenty days (or ten days in the case of a recommended tender offer as specified in clause (ii) above) prior to any record date for such action, dividend or distribution or the date as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their shares of Class A Common Stock for securities or other property, if any, deliverable upon such reorganization, reclassification, consolidation, merger, sale, transfer, lease, tender offer, dissolution, liquidation or winding up; provided, however, that any notice required by any event described in clause (ii) of this Section 5(j) shall be given in the manner and at the time that such notice is given to the holders of Class A Common Stock. Without limiting the obligation of this Corporation to provide notice of corporate actions hereunder, the failure to give the notice required by this Section 5(j) or any defect therein shall not affect the legality or validity of any such corporate action of the Corporation or the vote upon such action. (k) Before any holder of Convertible Preferred Stock shall be entitled to convert the same into Class A Common Stock, such holder shall surrender the certificate or certificates for such Convertible Preferred Stock at the office of this Corporation or at the office of the transfer agent for the Convertible Preferred Stock, which certificate or certificates, if this Corporation shall so request, shall be duly endorsed to this Corporation or in blank or accompanied by proper instruments of transfer to this Corporation or in blank (such endorsements or instruments of transfer to be in form satisfactory to this Corporation), and shall give written notice to this Corporation at said office that it elects to convert all or a part of the Shares represented by said certificate or certificates in accordance with the terms of this Section 5, and shall state in writing therein the name or names in which such holder wishes the certificates for Class A Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Convertible Preferred -14- 86 Stock and the Corporation, whereby the holder of such Convertible Preferred Stock shall be deemed to subscribe for the amount of Class A Common Stock which such holder shall be entitled to receive upon conversion of the number of shares of Convertible Preferred Stock to be converted, and, in satisfaction of such subscription, to deposit the shares of Convertible Preferred Stock to be converted, and thereby this Corporation shall be deemed to agree that the surrender of the shares of Convertible Preferred Stock to be converted shall constitute full payment of such subscription for Class A Common Stock to be issued upon such conversion. This Corporation will as soon as practicable after such deposit of a certificate or certificates for Convertible Preferred Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of this Corporation or of said transfer agent to the person for whose account such Convertible Preferred Stock was so surrendered, or to his nominee(s) or, subject to compliance with applicable law, transferee(s), a certificate or certificates for the number of full shares of Class A Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share as hereinafter provided. If surrendered certificates for Convertible Preferred Stock are converted only in part, this Corporation will issue and deliver to the holder, or to his nominee(s), without charge therefor, a new certificate or certificates representing the aggregate of the unconverted Shares. Such conversion shall be deemed to have been made as of the date of such surrender of the Convertible Preferred Stock to be converted; and the person or persons entitled to receive the Class A Common Stock issuable upon conversion of such Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such Class A Common Stock on such date. Upon the conversion of any Share, this Corporation shall pay, to the holder of record of such Share on the immediately preceding Record Date, all accrued but unpaid dividends on such Share to the date of the surrender of such Share for conversion. Such payment shall be made in cash or, at the election of this Corporation, the issuance of certificates representing such number of shares of Class A Common Stock as have an aggregate current market price (as determined in accordance with Section 5(f)) on the date of issuance equal to the amount of such accrued but unpaid dividends. Upon the making of such payment to the person entitled thereto as determined pursuant to the first sentence of this paragraph, no further dividends shall accrue on such Share or be payable to any other person. The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Convertible Preferred Stock shall be made without charge for any issue, -15- 87 stamp or other similar tax in respect of such issuance, provided, however, if any such certificate is to be issued in a name other than that of the registered holder of the share or shares of Convertible Preferred Stock converted, the person or persons requesting the issuance thereof shall pay to this Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of this Corporation that such tax has been paid. This Corporation shall not he required to convert any shares of Convertible Preferred Stock, and no surrender of Convertible Preferred Stock shall be effective for that purpose, while the stock transfer books of this Corporation are closed for any purpose; but the surrender of Convertible Preferred Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Convertible Preferred Stock was surrendered. (l) This Corporation shall at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of Convertible Preferred Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all outstanding Shares, provided that nothing contained herein shall be construed to preclude this Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Convertible Preferred Stock by delivery of shares of Class A Common Stock which are held in the treasury of this Corporation. This Corporation shall take all such corporate and other actions as from time to time may be necessary to insure that all shares of Class A Common Stock issuable upon conversion of shares of Convertible Preferred Stock at the Conversion Rate in effect from time to time will, upon issue, be duly and validly authorized and issued, fully paid and nonassessable and free of any preemptive or similar rights. (m) All shares of Convertible Preferred Stock received by this Corporation upon conversion thereof into Class A Common Stock shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock (and may be reissued as part of another series of the preferred stock of this Corporation, but such shares shall not be reissued as Convertible Preferred Stock). (n) This Corporation shall not be required to issue fractional shares of Class A Common Stock or scrip upon conversion of the Convertible Preferred Stock. As to any final fraction of a share of Class A Common Stock which a holder of one or more Shares would otherwise be entitled to -16- 88 receive upon conversion of such Shares in the same transaction, this Corporation shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the market value of a full share of Class A Common Stock. For purposes of this Section S(n), the market value of a share of Class A Common Stock shall be the last reported sale price regular way on the business day immediately preceding the date of conversion, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case on the composite tape, or if the shares of Class A Common Stock are not quoted on the composite tape, on the principal United States securities exchange registered under the Exchange Act on which the shares of Class A Common Stock are listed or admitted to trading, or if the shares of Class A Common Stock are not listed or admitted to trading on any such exchange, the last reported sale price (or the average of the quoted last reported bid and asked prices if there were no reported sales) as reported by NASDAQ or any comparable system, or if the Class A Common Stock is not quoted on NASDAQ or any comparable system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by this Corporation for that purpose or, in the absence of such quotations, such other method of determining market value as the Board of Directors shall from time to time deem to be fair. 6. Redemption. (a) Subject to the rights of any Senior Securities and the provisions of Section 6(g), the shares of Convertible Preferred Stock may be redeemed out of funds legally available therefor, at the option of this Corporation by action of the Board of Directors, in whole or from time to time in part, at any time after the Issue Date, at the Redemption Price per share as of the applicable Redemption Date. If less than all outstanding Shares are to be redeemed, Shares shall be redeemed ratably among the holders thereof. (b) Subject to the rights of any Senior Securities, Parity Securities and the provisions of Section 6(g) and subject to any prohibition or restriction contained in any Debt Instrument, this Corporation shall redeem, out of funds legally available therefor, on April 1, 1999 all of the shares of the Convertible Preferred Stock remaining outstanding at the Redemption Price per share on the Redemption Date. If the funds of this Corporation available, in accordance with the immediately preceding sentence, for redemption of Shares are insufficient to redeem the total number of Shares, those funds which are legally available for -17- 89 redemption of Shares and not restricted in accordance with the first sentence of this Section 6(b) will be used to redeem the maximum possible number of Shares ratably among the holders thereof. At any time thereafter when additional funds of this Corporation are legally available and not so restricted for such purpose, such funds will immediately be used to redeem the Shares this Corporation failed to redeem on such Redemption Date until the balance of the Shares have been redeemed. (c) Subject to the rights of any Senior Securities, Parity Securities and the provisions of Section 6(g) and subject to any prohibition or restriction contained in any Debt Instrument, at any time on or after the Issue Date, any holder shall have the right, at such holder's option, to require redemption by this Corporation at the Redemption Price per Share as of the applicable Redemption Date of all or any portion of his Shares having an aggregate Liquidation Value in excess of $1,000,000, by written notice to this Corporation stating the number of Shares to be redeemed. This Corporation shall redeem, out of funds legally available therefor and not restricted in accordance with the first sentence of this Section 6(c), the Shares so requested to be redeemed on such date within 60 days following this Corporation's receipt of such notice as this Corporation shall state in its notice given pursuant to Section 6(d). If the funds of this Corporation legally available for redemption of Shares and not restricted in accordance with the first sentence of this Section 6(c) are insufficient to redeem the total number of Shares required to be redeemed pursuant to this Section 6(c), those funds which are legally available for redemption of such Shares and not so restricted will be used to redeem the maximum possible number of such Shares ratably among the holders who have required Shares to be redeemed under this Section 6(c). At any time thereafter when additional funds of this Corporation are legally available and not so restricted for such purpose, such funds will immediately be used to redeem the Shares this Corporation failed to redeem on such Redemption Date until the balance of such Shares are redeemed. (d) Notice of any redemption pursuant to this Section shall be mailed, first class, postage prepaid, not less than 30 days nor more than 60 days prior to the Redemption Date, to the holders of record of the shares of Convertible Preferred Stock to be redeemed, at their respective addresses as the same appear upon the books of this Corporation or are supplied by them in writing to this Corporation for the purpose of such notice; but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of the Convertible Preferred Stock. -18- 90 Such notice shall set forth the Redemption Price, the Redemption Date, the number of Shares to be redeemed and the place at which the Shares called for redemption will, upon presentation and surrender of the stock certificates evidencing such Shares, be redeemed. In case fewer than the total number of shares of Convertible Preferred Stock represented by any certificate are redeemed, a new certificate representing the number of unredeemed Shares will be issued to the holder thereof without cost to such holder. (e) If notice of any redemption by this Corporation pursuant to this Section 6 shall have been mailed as provided in Section 6(d) and if on or before the Redemption Date specified in such notice the consideration necessary for such redemption shall have been set apart so as to be available therefor and only therefor, then on and after the close of business on the Redemption Date, the Shares called for redemption, notwithstanding that any certificate therefor shall not have been surrendered for cancellation, shall no longer be deemed outstanding, and all rights with respect to such Shares shall forthwith cease and terminate, except the right of the holders thereof to receive upon surrender of their certificates the consideration payable upon redemption thereof. (f) All shares of Convertible Preferred Stock redeemed, retired, purchased or otherwise acquired by this Corporation shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock (and may be reissued as part of another series of the preferred stock of this Corporation, but such shares shall not be reissued as Convertible Preferred Stock). (g) If at any time this Corporation shall have failed to pay, or declare and set apart the consideration sufficient to pay, all dividends accrued up to and including the immediately preceding Dividend Payment Date on the Convertible Preferred Stock and any Parity Securities, and until all dividends accrued up to and including the immediately preceding Dividend Payment Date on the Convertible Preferred Stock and any Parity Securities shall have been paid or declared and set apart so as to be available for the payment in full thereof and for no other purpose, this corporation shall not redeem, pursuant to a sinking fund or otherwise, any shares of Convertible Preferred Stock, Parity Securities or Junior Securities, unless all then outstanding shares of Convertible Preferred Stock and Parity Securities are redeemed, and shall not purchase or otherwise acquire any shares of Convertible Preferred Stock, Parity Securities or Junior Securities. If and so long as this Corporation shall fail to redeem on a Redemption Date pursuant to Section 6(b) or 6(c) all shares -19- 91 of Convertible Preferred Stock required to be redeemed on such date, this Corporation shall not redeem, or discharge any sinking fund obligation with respect to, any Parity Securities or Junior Securities, unless all then outstanding shares of Convertible Preferred Stock and Parity Securities are redeemed, and shall not purchase or otherwise acquire any shares of Convertible Preferred Stock, Parity Securities or Junior Securities. Nothing contained in this Section 6(g) shall prevent the purchase or acquisition (i) of shares of Convertible Preferred Stock and purchase or exchange offer or offers made to holders of all outstanding shares of Convertible Preferred Stock and Parity Securities, provided that (A) as to holders of outstanding shares of Convertible Preferred Stock, the terms of the purchase or exchange offer for all such shares are identical, (B) as to holders of all outstanding shares of a particular series or class of Parity Securities, the terms of the purchase or exchange offer for all such shares are identical, and (C) as among holders of all outstanding shares of Convertible Preferred Stock and Parity Securities, the terns of each purchase or exchange offer or offers are substantially identical relative to the liquidation price of the shares of Convertible Preferred Stock and each series or class of Parity Securities, (ii) of shares Of Convertible Preferred Stock, Parity Securities or Junior Securities in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds of the sale of, shares of Junior Securities or (iii) of shares of Junior Securities that are beneficially owned by Liberty upon the redemption of, or in exchange for, shares of Liberty's preferred stock beneficially owned by this Corporation. The provisions of this Section 6(g) are for the benefit of holders of Convertible Preferred Stock and Parity Securities and accordingly, at any time when there are no parity Securities outstanding, the provisions of this Section 6(g) shall not restrict any redemption by this Corporation of Shares held by any holder, provided that all other holders of Shares shall have waived in writing the benefits of this provision with respect to such redemption. 7. Transfer. (a) Without the prior written consent of this Corporation, no person holding shares of Convertible Preferred Stock of record (hereinafter called a "Convertible Preferred Holder") may transfer, and this Corporation shall not register the transfer of, such shares of Convertible Preferred Stock, whether by sale, assignment, or otherwise, except to a Permitted Transferee. (i) In the case of a Convertible Preferred Holder acquiring record and beneficial ownership of -20- 92 the shares of Convertible Preferred Stock in question upon initial issuance by this Corporation (an "Original Holder"), a "Permitted Transferee" shall mean: (x) any Affiliate (as defined in Section 7(b)) of such Original Holder, (y) any other Original Holder (or any Affiliate of any such other Original Holder), or (z) any person or entity to whom Shares are transferred by an Original Holder which Original Holder is a natural person pursuant to a gift or bequest or pursuant to the laws of intestacy. (ii) In the case of a Convertible Preferred Holder which is a Permitted Translates of an Original Holder, a "Permitted Transferee" shall mean: (x) any Original Molder, (y) any Permitted Translates of an Original Molder, except any translates referred to in clause (i)(z) above, or (z) any person or entity to whom Shares are transferred by a Permitted Translates which Permitted Translates is a natural person pursuant to a gift or bequest or pursuant to the laws of intestacy. (b) For purposes of this Section 7, the term "Affiliate" shall mean (i) any person or corporation that owns beneficially and of record at least a majority of the outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors ("voting securities") of an Original Holder or (ii) any person or corporation at least a majority of the voting securities of which are owned beneficially and of record by an Original Holder, where in the case of both (i) and (ii), voting securities will be deemed "owned" by a person or corporation if either owned directly or if owned indirectly through one or more intermediary corporations at least a majority of the voting securities of which are owned beneficially and of record by that person or corporation or by an intermediary corporation in such a majority or more chain of ownership. -21- 93 (c) This Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Convertible Preferred stock on this Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Convertible Preferred Stock or is a Permitted Transferee. (d) Shares of Convertible Preferred Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Convertible Preferred Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. Certificates for shares of Convertible Preferred Stock shall bear a legend referencing the restrictions on transfer imposed by this Section 7. 8. No Voting Rights. The holders of Convertible Preferred Stock shall have no right to vote for any purpose, except as specifically required by the Delaware General Corporation Law. 9. Amendment. No amendment or modification of the designation, rights, preferences, and limitations of the Shares set forth herein shall be binding or effective without the prior consent of the holders of record of Shares representing 66 2/3% of the Liquidation Value of all Shares outstanding at the time such action is taken. 10. Preemptive Rights. The holders of the Convertible Preferred Stock will not have any preemptive right to subscribe for or purchase any shares of stock or any other securities which may be issued by this Corporation. 11. Exclusion of Other Rights. Except as may otherwise be required by law and for the equitable rights and remedies that may otherwise be available to holders of Convertible Preferred Stock, the shares of Convertible Preferred Stock shall not have any designations, preferences, limitations or relative rights, other than those specifically set forth in these resolutions (as such resolutions may, subject to Section 9, be amended from time to time) and in the Restated Certificate of Incorporation of this Corporation. 12. Headings. The headings of the various sections and subsections hereof are for convenience of -22- 94 reference only and shall not affect the interpretation of any of the provisions hereof. FURTHER RESOLVED, that the appropriate officers of this Corporation are hereby authorized to execute and acknowledge a certificate setting forth these resolutions and to cause such certificate to be filed and recorded, in accordance with the requirements of Section 151(g) of the General Corporation Law of the State of Delaware." /s/ JOHN C. MALONE ATTEST By: -23- 95 PAGE 1 STATE OF DELAWARE {LOGO} OFFICE OF SECRETARY OF STATE ---------------- I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "TELE-COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE THIRD DAY OF APRIL, A.D. 1992, AT 9 O'CLOCK A.M. * * * * * * * * * * /s/ MICHAEL RATCHFORD SECRETARY OF STATE AUTHENTICATION: *3407110 DATE: 04/06/1992 {SEAL} 920945212 96 TELE-COMMUNICATIONS, INC. AMENDED CERTIFICATE OF DESIGNATIONS --------------- SETTING FORTH A COPY OF THE RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF TELE-COMMUNICATIONS, INC. RELATING TO THE RETIREMENT OF A SERIES OF PREFERRED STOCK DESIGNATED AS "CONVERTIBLE PREFERRED STOCK, SERIES A" --------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware --------------- The undersigned, President of Tele-Communications, Inc., a Delaware Corporation (the "Corporation"), hereby certifies that the Board of Directors, by unanimous written consent, adopted the following resolutions relating to the retirement of an authorized series of preferred stock designated as "Convertible Preferred Stock, Series A": "RESOLVED, that in connection with the exchange (the "Exchange") of all of the outstanding shares of the Corporation's Convertible Preferred Stock, Series A, $1.00 par value per share (the "Series A Preferred Stock") for shares of the Corporation's Convertible Preferred Stock, Series B, $1.00 par value per share (the "Series B preferred Stock"), the Chairman of the Board, the President, or any Executive Vice President of the Corporation (each an "Authorized Officer" and collectively the "Authorized Officers") be, and they hereby are, and each of them with 97 full authority to act without the others hereby is, authorized to execute, file and record in accordance with the requirements of Section 151(g) of the General Corporation Law of the State of Delaware an amendment to the Certificate of Designations with respect to the Series A Preferred Stock filed with the Secretary of State of the State of Delaware on December 2, 1991 (the "Certificate of Designations") to indicate that (i) the shares of Series A Preferred Stock authorized pursuant to resolutions of the Board of Directors as set forth in the Certificate of Designations and subsequently issued no longer remain outstanding by reason of the Exchange, (ii) no shares of Series A Preferred Stock authorized pursuant to resolutions of the Board of Directors as set forth in the Certificate of Designations will hereafter be issued and all shares of Series A Preferred Stock shall hereafter have the status of retired shares; and (iii) the capital of this Corporation shall not be reduced by or in connection with the retirement of the shares of Series A Preferred Stock; and RESOLVED, that the Authorized Officers be, and they hereby are, and each of them with full authority to act without the others hereby is, authorized to take or cause to be taken all such action and to execute, file, record and/or deliver all such instruments and documents, in the name and on behalf of the Corporation and under its corporate seal or otherwise, as in their or his judgment shall be necessary, proper or advisable in order to carry out fully the intent and to accomplish the purposes of the foregoing resolution and to take any other actions necessary to effect the elimination from the Restated Certificate of Incorporation of this Corporation of all matters set forth in the Certificate of Designations, the execution, filing, recordation and/or delivery thereof by such officers or officer or the doing by them or him of any act in connection with -2- 98 the foregoing matters to conclusively establish their or his authority therefor from the Corporation and the approval and ratification by the Corporation of the instruments and documents so executed, filed, recorded and/or delivered and the action so taken, and that any Secretary or Assistant Secretary of the Corporation is authorized to acknowledge any instrument or document so executed, filed, recorded and/or delivered including, without limitation, the amendment to the Certificate of Designations." /s/ JOHN C. MALONE John C. Malone President Attest By: /s/ MARY S. WILLIS Mary S. Willis Assistant Secretary -3- 99 PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE --------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RETIREMENT OF STOCK OF "TELE-COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE EIGHTH DAY OF FEBRUARY, A.D. 1993, AT 1:40 O'CLOCK P.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO KENT COUNTY RECORDER OF DEEDS ON THE EIGHTH DAY OF FEBRUARY, A.D. 1993 FOR RECORDING. * * * * * * * * * * /s/ WILLIAM T. QUILLEN William T. Quillen, Secretary of State AUTHENTICATION: *3777508 DATE: 02/08/1993 {SEAL} 930395170 100 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:40 PM 02/08/1993 930395170 - 685208 CERTIFICATE OF RETIREMENT OF THE 12 7/8% CUMULATIVE COMPOUNDING REDEEMABLE PREFERRED STOCK, SERIES A OF TELE-COMMUNICATIONS, INC. Pursuant to Section 243(b) of the General Corporation Law of the State of Delaware TELE-COMMUNICATIONS, INC., a corporation organized and existing under the laws of the State of Delware (the "Company"), hereby certifies as follows: 1. The Board of Directors of the Company has duly adopted resolutions providing for the redemption of all outstanding shares of the series of the preferred stock of the Company, par value $1.00 per share, designated 12 7/8% Cumulative Compounding Redeemable Preferred Stock, Series A (the "Compounding Preferred Stock"). 2. All outstanding shares of the Compounding Preferred Stock have been redeemed as aforesaid and retired. 3. The Certificate of Designations with respect to the Compounding Preferred Stock, filed with the Secretary of State of the State of Delaware on December 2, 1991 prohibits the reissuance of the aforesaid shares of Compounding Preferred Stock as shares of said series. 4. Accordingly, pursuant to the provisions of Section 243(b) of the General Corporation Law of the State of Delaware, upon the effective date of the filing of this Certificate of Retirement, the Restated Certificate of Incorporation of the Company shall be amended so as to eliminate therefrom all reference to the Compounding Preferred Stock, but not to reduce the total authorized number of shares of preferred stock of the Company. IN WITNESS WHEREOF, the Company has caused this Certificate of Retirement to be executed and its corporate seal to be affixed hereto this 8th day of February, 1993. TELE-COMMUNICATIONS, INC. By: /s/ JOHN C. MALONE President ATTEST By: /s/ PAUL J. O'BRIEN Corporate Secretary 101 PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "TELE-COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE NINETEENTH DAY OF MARCH, A.D. 1993, AT 4:30 O'CLOCK P.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO KENT COUNTY RECORDER OF DEEDS FOR RECORDING. * * * * * * * * * * /s/ WILLIAM T. QUILLEN {SEAL} William T. Quillen, Secretary of State 753078020 AUTHENTICATION: *3829498 DATE: 03/22/1993 102 TELE-COMMUNICATIONS, INC. CERTIFICATE OF DESIGNATIONS --------------- SETTING FORTH A COPY OF A RESOLUTION CREATING AND AUTHORIZING THE ISSUANCE OF A SERIES OF PREFERRED STOCK DESIGNATED AS "CONVERTIBLE PREFERRED STOCK SERIES C" ADOPTED BY THE BOARD OF DIRECTORS OF TELE-COMMUNICATIONS, INC. --------------- The undersigned, Executive Vice President and Assistant Secretary, respectively, of Tele-Communications, Inc., a Delaware corporation (the "Corporation"), hereby certifies that the Board of Directors duly adopted the following resolutions creating a series of preferred stock designated as "Convertible Preferred Stock, Series C": "BE IT RESOLVED, that, pursuant to authority expressly granted by the provisions of the Restated Certificate of Incorporation of this Corporation, the Board of Directors hereby creates and authorizes the issuance of a series of preferred stock, par value $1.00 per share, of this Corporation, to consist of 6,201 shares, and hereby fixes the designations, dividend rights, voting powers, rights on liquidation and other preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof of the shares of such series (In addition to the designations, preferences and relative, participating, limitations or restrictions thereof act forth in the Restated Certificate of Incorporation that are applicable to preferred stock of all series) as follows: 1. Designation. The designation of the series of preferred stock, par value $1.00 per share, of this Corporation authorized hereby is "Convertible Preferred Stock, Series C" (the "Convertible Preferred Stock"). 2. Certain Definitions. Unless the context otherwise requires, the terms defined in this Section 2 shall have the meanings herein specified: Affiliate: As defined in Section 7(b). Board of Directors: The Board of Directors of this Corporation and any authorized committee thereof. 103 Capital Stock: Any and all shares, interests, participations, or other equivalents (however designated) of corporate stock of this Corporation. Class A Common Stock: The Class A Common Stock, par value $1.00 per share, of this Corporation as such exists on the date of this Certificate of Designations, and Capital Stock of any other class into which such Class A Common Stock may thereafter have been changed. Class B Common Stock: The Class B Common Stock, par value $1.00 per share, of this Corporation as such exists on the date of this Certificate of Designations, and Capital Stock of any other class into which such Class B Common Stock may thereafter have been changed. Conversion Rate: As defined in Section 5(b). Convertible Preferred Holder: As defined in Section 7(a). Convertible Securities: Securities, other than the Class B Common Stock, that are convertible into Class A Common Stock. Debt Instrument: Any bond, debenture, note, indenture, guarantee or other instrument or agreement evidencing any Indebtedness, whether existing at the Issue Date or thereafter created, incurred, assumed or guaranteed. Dividend Payment Date: As defined in Section 3(b). Dividend Period: The period from but excluding the First Accrual Date to and including the first Dividend Payment Date and each three-month period from but excluding the Dividend Payment Date from preceding Dividend Period to and including the Dividend Payment Date for such Dividend Period. First Accrual Date: January 1, 1993. Indebtedness: Any (i) liability, contingent or otherwise, of this Corporation (x) for borrowed money (whether or not the recourse of the lender is to whole of the assets of this Corporation or only to a portion thereof), (y) evidenced by a note, debenture or similar instrument (including a purchase money obligation) given other than in connection with the acquisition of inventory or similar property in the ordinary course of business, or (z) for the payment of money relating to an obligation under a lease that is required to be capitalized for financial accounting purposes in accordance with generally accepted accounting principles; (ii) liability of others described in the preceding clause (i) which this Corporation has guaranteed or which is otherwise its legal liability; (iii) obligations accrued by a mortgage, pledge, lien, charge or other encumbrance to which the property or assets of this Corporation are subject whether or not the obligations secured thereby shall have been assumed by or shall otherwise be this Corporation's legal liability; and (iv) any amendment, renewal, -2- 104 extension or refunding of any liability of the types referred to in clauses (i), (ii), and (iii) above. Issue Date: The first date on which any shares of the Convertible Preferred Stock are first issued or deemed to have been issued. Junior Securities: All shares of Class A Common Stock, Class B Common Stock, and any other class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any dividends unless all dividends required to have been paid or declared and set apart for payment on the Convertible Preferred Stock and any Parity Securities shall have been so paid or declared and set apart for payment and, for purposes of Section 4 hereof, any class or series of stock of this Corporation authorized after the Issue Date not entitled to receive any assets upon liquidation, dissolution or winding up of the affairs of this Corporation until the Convertible Preferred Stock and any Parity Securities shall have received the entire amount to which such stock is entitled upon such liquidation, dissolution or winding up. Liquidation Value: Measured per Share of the Convertible Preferred Stock as of any particular date, the sum of (i) $3,000, plus (ii) an amount equal to all dividends accrued on such Share through the Dividend Payment Date immediately preceding the date on which the Liquidation Value being determined, which pursuant to Section 3(c) have been added to and remain a part of the Liquidation Value as of such date, plus (iii), for purposes of determining amounts payable pursuant to Sections 4 and 6 hereof, an amount equal all unpaid dividends accrued on the sum of the amounts specified in clauses (i) and (ii) above to the date as of which the Liquidation Value is being determined. Original Holder: As defined in Section 7(a). Parity Securities.: The 12 7/8% Preferred Stock and any other Class or series of stock of this Corporation authorized after the Issue Date entitled to receive payment of dividends on a parity with the Convertible Preferred Stock or entitled to receive assets upon liquidation, dissolution or winding up of the affairs of this Corporation on a parity with the Convertible Preferred Stock. Permitted Transferee: As defined in Section 7(a). Record Date: For dividends payable on any Dividend Payment Date, the fifteenth day of the month preceding the month during which such Dividend Payment Date shall occur. Redemption Date: As to any share, the date fixed for redemption of such Share as specified in the notice of redemption given in accordance with Section 6(d), provided that no such date will be a Redemption Date unless the applicable Redemption Price is actually paid on such date or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart, and if the Redemption Price is not so paid in full or -3- 105 the consideration sufficient therefor so set apart then the Redemption Date will be the date on which such Redemption Price is fully paid or the consideration sufficient for the payment thereof, and for no other purpose, has been set apart. Redemption Price: As to any Share that is to be redeemed on any Redemption Date, the Liquidation Value as in effect on such Redemption Date. Senior Securities: Any class or series of stock of this Corporation authorized after the Issue Date ranking senior to the Convertible Preferred Stock and any Parity Securities in respect of the right to receive payment of dividends or the right to participate in any distribution upon liquidation, dissolution or winding up of the affairs of this Corporation. Share: As defined in Section 3(a). Special Record Date: As defined in Section 3(C). 12-7/8% Preferred Stock: The 5,022,394 authorized shares of the 12-7/8% Cumulative Compounding Redeemable Preferred Stock, Series A, of this Corporation. 3. Dividends. (a) Subject to the prior preferences and other rights of any Senior Securities with respect to dividends, the holders of the Convertible Preferred Stock shall be entitled to receive, and, subject to any prohibition or restriction contained in any Debt Instrument, this Corporation shall be obligated to pay, but only out of funds legally available therefor, preferential cumulative cash dividends which shall accrue as provided herein. Except as otherwise provided in Sections 3(c) or 3(d) hereof, dividends on each share of Convertible Preferred Stock (hereinafter referred to as a "Share") shall accrue on a daily basis at the rate of ten percent (10%) per annum of the Liquidation Value thereof, from but excluding the First Accrual Date to and including January 1, 1992, and thereafter at the rate of 6 3/4% per annum of the Liquidation Value to and including the date of conversion thereof pursuant to Section 5 or the date on which the Liquidation Value or Redemption Price of such Share ie made available pursuant to Section 4 or 6 hereof, respectively. Dividends on the Convertible Preferred Stock shall accrue as provided herein, whether or not such dividends have been declared and whether or not there are profits, surplus or other funds of the Corporation legally or contractually available for the payment of dividends. (b) Accrued dividends on the Convertible Preferred Stock shall be payable quarterly on the first day of each January, April, July and October, or the immediately preceding business day if such first day is a Saturday, Sunday or legal holiday (each such payment date being hereinafter referred to as a "Dividend Payment Date"), commencing on January 1, 1992, to the holders of record of the Convertible Preferred Stock as of the close of business on the applicable Record Date. For purposes of determining the amount of dividends "accrued" as of any date that is not a Dividend Payment Date, such amount shall be calculated on the basis of the rate per annum specified In Section 3(a) for actual days elapsed from but excluding the First Accrual Date (in the case of any date prior to the first -4- 106 Dividend Payment Date) or the last preceding Dividend Payment Date (in the case of any other date) to and including the date as of which such determination is to be made, based on a 365-day year. (c) If on any Dividend Payment Date this Corporation, pursuant to applicable law or the terms of any Debt Instrument, shall be prohibited or restricted from paying in cash the full dividends to which holders of the Convertible Preferred Stock and any Parity Securities shall be entitled, the amount available for such payment pursuant to applicable law and which is not restricted by the terms of any Debt Instrument shall be distributed among the holders of the Convertible Preferred Stock and such Parity Securities ratably in proportion to the full amounts to which they would otherwise be entitled. To the extent not paid on each Dividend Period ending on such Dividend Payment Date will be added cumulatively to the Liquidation Value of such Share and will remain a part thereof until such dividends are paid. In the event that dividends are not paid in full on two consecutive Dividend Payment Dates, dividends on that portion of the Liquidation Value of each Share which consists of accrued dividends that have theretofore been or thereafter are added to, and remain a part of the Liquidation Value in accordance which the preceding sentence shall accrue cumulatively on a daily basis at the rate of fifteen percent (15%) per annum, from and after such second consecutive Dividend Payment Date to and including the date of conversion of such Share pursuant to Section 5 or the date on which the Liquidation Value or Redemption Price of such Share is made available pursuant to Section 4 or 6 hereof, respectively, unless such portion of the Liquidation Value that consists of accrued unpaid dividends shall be earlier paid in full. Such portion of the Liquidation Value as consists of accrued unpaid dividends, may be declared and paid at any time (subject to the concurrent satisfaction of any dividend arrearages then existing with respect to any Parity Securities), without reference to any regular Dividend Payment Date, to holders of record as of the close of business on such date, not more than 50 days nor less than days preceding the payment date thereof, as may be fixed by the Board of Directors of this Corporation (the "Special Record Date"). (d) In the event that on any date fixed for redemption of Share pursuant to Section 6 (other than on any date fixed for a redemption Price due and payable upon presentation and surrender of the stock certificates evidencing Shares to be redeemed, then dividends on such Shares shall accrue cumulatively on a daily basis at the rate of fifteen percent (15%) per annum of the Liquidation Value thereof from and after such Redemption date to and including the date of conversion of such Shares pursuant to Section 5 or the date on which the Liquidation Value or Redemption Price of such Shares is made available pursuant to Section 4 or 6 hereof, respectively. (e) Notice of such Special Record Date shall be mailed, in the manner provided in Section 6(d), to the holders of record of the Convertible Preferred Stock not less than 15 days prior thereto. -5- 107 (f) As long as any Convertible Preferred Stock shall be outstanding, no dividend, whether in cash or property, shall be paid or declared, nor shall any other distribution be made, on any Junior Security, nor shall any shares of any Junior Security be purchased, redeemed, or otherwise acquired for value by the Corporation, unless the holders of the Convertible Preferred Stock shall have received all dividends to which they are entitled pursuant to Section 3(a) hereof for the Dividend Period in which such dividend on the Junior Securities is to occur and all preceding Dividend Periods, or such dividends shall have been declared and the consideration sufficient for the payment thereof set apart so as to be available for the payment in full thereof and for no other purpose. The provisions of this Section 3(f) shall not apply (i) to a dividend payable in any Junior Security, (ii) to the repurchase, redemption or other acquisition of shares of any Junior Security solely through the issuance of Junior Securities (together with a cash adjustment for fractional shares, if any) or through the application of the proceeds from the sale of Junior Securities or (iii) to the acquisition of any shares of any Junior Security beneficially owned by Liberty Media Corporation ("Liberty") upon the redemption of, or in exchange for, shares of Liberty's preferred stock that are beneficially owned by this Corporation. 4. Liquidation. Subject to the prior payment in full of the preferential amounts to which any Senior Securities are entitled, upon any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, the holders of Convertible Preferred Stock shall be entitled to be paid an amount in cash equal to the aggregate Liquidation Value at the date fixed for liquidation of all Shares outstanding before any distribution or payment is made upon any Junior Securities, which payment shall be made pari passu with any such payment made to the holders of any Parity Securities. The holders of Convertible Preferred Stock shall be entitled to no other or further distribution of or participation in any remaining assets of this Corporation after receiving the Liquidation Value per Share. If upon such liquidation, dissolution or winding up, the assets of this Corporation to be distributed among the holders of Convertible Preferred Stock and to all holders of Parity Securities are insufficient to permit payment in full to such holders of the aggregate preferential amounts which they are entitled to be paid, then the entire assets of this Corporation to be distributed to such holders shall be distributed ratably among them based upon the full preferential amounts to which the shares of Convertible Preferred Stock and such Parity Securities would otherwise respectively be entitled. Upon any such liquidation, dissolution or winding up, after the holders of Convertible Preferred Stock and Parity Securities have been paid in full the amounts to which they are entitled, the remaining assets of this Corporation may be distributed to the holders of Junior Securities. This corporation shall mail written notice of such liquidation, dissolution or winding up to each record holder of Convertible Preferred Stock not less than 30 days prior to the payment date stated in such written notice. Neither the consolidation or merger of this Corporation into or with any other corporation or corporations, nor the sale, transfer or lease by this Corporation of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of this Corporation within the meaning of this Section 4. -6- 108 5. Conversion. (a) Unless previously called for redemption as provided in Section 6 hereof, the Convertible Preferred Stock may be converted at such time, in such manner and upon such terms and conditions as hereinafter provided in this Section 5 into fully paid and non-assessable full shares of Class A Common Stock. In the case of Shares called for redemption by this Corporation pursuant to Sections 6(a) or 6(b) hereof, the conversion right provided by this Section 5 shall terminate at the close of business on the fifteenth day preceding the date fixed for redemption. In the case of Shares required to be redeemed pursuant to Section 6(c), the conversion right provided by this Section 5 shall terminate immediately upon receipt by this Corporation of a notice given pursuant to said Section. In case cash, securities or property other than Class A Common Stock shall be payable, deliverable or issuable upon conversion as provided herein, then all references to Class A Common Stock in this Section 5 shall be deemed to apply, so far as appropriate and as nearly as may be, to such cash, property or other securities. (b) Subject to the provisions for adjustment hereinafter set forth in this Section 5, the Convertible Preferred Stock may be converted into Class A Common Stock at the initial conversion rate of two hundred and four (204) fully paid and non-assessable shares of Class A Common Stock for one share of the Convertible Preferred Stock. (This conversion rate as from time to time adjusted cumulatively pursuant to the provisions of this Section is hereinafter referred to as the "Conversion Rate".) (c) In case this Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Class A Common Stock in shares of its Capital Stock, (ii) subdivide the then outstanding shares of Class A Common Stock into a greater number of shares of Class A Common Stock, (iii) combine the then outstanding shares of Class A Common Stock into a smaller number of shares of Class A Common Stock, or (iv) issue by reclassification of its shares of Class A Common Stock any shares of any other class of Capital Stock of this Corporation (including any such reclassification in connection with a merger in which this Corporation is the continuing corporation), then the Conversion Rate in effect immediately prior to the opening of business on the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that the holder of each share of the Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number and kind of shares of Capital Stock of this Corporation that such holder would have owned or been entitled to receive immediately following such action had such shares of Convertible Preferred Stock been converted immediately prior to such time. An adjustment made pursuant to this Section 5(c) for a dividend or distribution shall become effective immediately after the record date for the dividend or distribution and an adjustment made pursuant to this Section 5(c) for a subdivision, combination or reclassification shall become effective immediately after the effective date of the subdivision, combination or reclassification. Such adjustment shall be made successively whenever any action listed above shall be taken. -7- 109 (d) In case this Corporation shall issue any rights or warrants to all holders of shares of Class A Common Stock entitling them (for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Class A Common Stock (or Convertible Securities) at a price per share of Class A common Stock (or having an initial exercise price or conversion price per share of Class A Common Stock) less than the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 5(f) below) on such record date, the number of shares of Class A Common Stock into which each Share shall thereafter be convertible shall be determined by multiplying the number of shares of Class A Common Stock into which such Share was theretofore convertible immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Class A Common Stock outstanding on such record date plus the number of additional shares of Class A Common Stock offered for subscription or purchase (or into which the Convertible Securities so offered are initially convertible) and of which the denominator shall be the number of shares of Class A Common Stock outstanding on such record date plus the number of shares of class A Common Stock which the aggregate offering price of the total number of shares of Class A Common Stock so offered (or the aggregate initial conversion or exercise price of the Convertible Securities so offered) would purchase at the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 5(f) below) on such record date. Such adjustment shall be made successively whenever any such rights or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. In the event that all of the shares of Class A Common Stock (or all of the Convertible Securities) subject to such rights or warrants have not been issued when such rights or warrants expire (or, in the case of rights or warrants to purchase Convertible Securities which have been exercised, all of the shares of Class A Common Stock issuable upon conversion of such Convertible Securities have not been issued prior to the expiration of the conversion right thereof), then the Conversion Rate shall be readjusted retroactively to be the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights or warrants been made on the basis of the actual number of shares of Class A Common Stock (or Convertible Securities) issued upon the exercise of such rights or warrants (or the conversion of such Convertible Securities); but such subsequent adjustment shall not affect the number of shares of Class A Common Stock issued upon the conversion of any Share prior to the date such subsequent adjustment is made. (e) In case this Corporation shall distribute to all holders of shares of class A Common Stock (including any such distribution made in connection with a merger in which this Corporation is the continuing corporation, other than a merger to which Section 5(g) is applicable) any evidences of its indebtedness or assets (other than cash dividends or Capital Stock) or rights or warrants to purchase shares of Class A Common Stock or Class B Common Stock or securities convertible into shares of Class A Common Stock or Class B Common Stock (excluding those referred to in Section 5(d) above), then in each such case the number of shares of Class A Common Stock into which each Share shall thereafter be convertible shall be determined by multiplying the number of shares of -8- 110 Class A Common Stock into which such Share was theretofore convertible immediately prior to record date for the determination of stockholders entitled to receive the distribution by a fraction of which the numerator shall be the then current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 5(f) below) on such record date and of which the denominator shall be such current market price per share of Class A Common Stock less the fair market value on such record date (as determined by the Board of Directors of this Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness or rights and warrants so to be distributed applicable to one share of Class A Common Stock. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution. (f) For the purpose of any computation under Section 5(d), (e) or (k), the current market price per share of Class A Common Stock at any date shall be deemed to be the average of the daily closing prices for a share of Class A Common Stock for the ten (10) consecutive trading days before the day in question. The closing price for each day shall be the last reported sale price regular way or, in case no such reported sale takes place an such day, the average of the reported closing bid and asked prices regular way, in either case on the composite tape, or if the shares of Class A Common Stock are not quoted on the composite tape, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on which the shares of Class A Common Stock are listed or admitted to trading, or if they are not listed or admitted to trading on any such exchange, the last reported sale price (or the average of the quoted closing bid and asked prices if there were no reported sales) as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if the Class A Common Stock is not quoted on NASDAQ or any comparable system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by this Corporation for that purpose or, in the absence of such quotations, such other method of determining market value as the Board of Directors shall from time to time deem to be fair. (g) In case of any reclassification or change in the Class A Common stock (other than any reclassification or change referred to in Section 5(c) and other than a change in par value) or in case of any consolidation of this Corporation with any other corporation or any merger of this Corporation into another corporation or of another corporation into this Corporation (other than a merger in which this Corporation is the continuing corporation and which does not result in any reclassification or change (other than a change in par value or any reclassification or change to which Section 5(c) is applicable) in the outstanding Class A Common Stock) , or in case of any sale or transfer to another corporation or entity (other than by mortgage or pledge) of all or substantially all of the properties and assets of this Corporation, this Corporation (or its successor in such consolidation or merger) or the purchaser of such properties and assets shall make appropriate provision so that the holder of a Share shall have the right thereafter to convert such Share into the kind and amount -9- 111 of shares of stock and other securities and property that such holder would have owned immediately after such reclassification, change, consolidation, merger, sale or transfer if such holder had converted such Share into Class A Common Stock immediately prior to the effective date of such reclassification, change, consolidation, merger, sale or transfer (assuming for this purpose (to the extent applicable) that such holder failed to exercise any rights of election and received per share of Class A Common Stock the kind and amount of shares of stock and other securities and property received per share by a plurality of the nonelecting shares), and the holders of the Convertible Preferred Stock shall have no other conversion rights under these provisions; provided, that effective provision shall be made, in the Articles or Certificate of Incorporation of the resulting or surviving corporation or otherwise or in any contracts of sale or transfer, so that the provisions set forth herein for the protection of the conversion rights of the Convertible Preferred Stock shall thereafter be made applicable, as nearly as reasonably may be to any such other shares of stock and other securities and property deliverable upon conversion of the Convertible Preferred Stock remaining outstanding or other convertible preferred stock or other Convertible Securities received by the holders of Convertible Preferred Stock in place thereof; and provided, further, that any such resulting or surviving corporation or purchaser shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Convertible Preferred Stock remaining outstanding, or other convertible preferred stock or other convertible securities received by the holders in place thereof, shall be entitled to receive pursuant to the provisions hereof, and to make provisions for the protection of the conversion rights as above provided. (h) Whenever the Conversion Rate or the conversion privilege shall be adjusted as provided in Sections 5(c),(d), (e) or (g), this Corporation shall promptly cause a notice to be mailed to the holders of record of The Convertible Preferred Stock describing the nature of the event requiring such adjustment, the Conversion Rate in effect immediately thereafter and the kind and amount of stock or other securities or property into which The Convertible Preferred Stock shall be convertible after such event. Where appropriate, such notice may be given in advance and included as a part of a notice required to be mailed under the provisions of Section 5(j). (i) This Corporation may, but shall not be required to, make any adjustment of the Conversion Rate if such adjustment would require an increase or decrease of less than 1% in such Conversion Rate; provided, however, that any adjustments which by reason of this Section 5(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. In any case in which this Section 5(i) shall require that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (x) issuing to the holder of any shares of Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Class A Common Stock or other Capital Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Class A Common Stock, or other Capital Stock issuable upon such conversion before giving effect to such adjustment and (y) paying to such -10- 112 holder cash in lieu of any fractional interest to which such holder is entitled pursuant to Section 5(n); provided, however, that, if requested by such holder, this Corporation shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares of Class A Common Stock or other Capital Stock, and such cash, upon the occurrence of the event requiring such adjustment. (j) In case at any time: (i) this Corporation shall take any action which would require an adjustment in the Conversion Rate pursuant to this Section; (ii) there shall be any capital reorganization or reclassification of the Class A Common Stock (other than a change in par value), or any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of this Corporation is required, or any sale, transfer or lease of all or substantially all of the properties and assets of the Corporation, or a tender offer for shares of Class A Common Stock representing, together with any shares of Class B Common Stock tendered for in such tender offer, at least a majority of the total voting power represented by the outstanding shares of Class A Common Stock and Class B Common Stock which has been recommended by the Board of Directors as being in the best interests of the holders of Class A Common Stock; or (iii) there shall be a voluntarily or involuntary dissolution, liquidation or winding up of this Corporation; then, in any such event, this Corporation shall give written notice, in the manner provided in Section 6(d) hereof, to the holders of the Convertible preferred Stock at their respective addresses as the same appear on the books of the Corporation, at least twenty days (or ten days in the case of a recommended tender offer as specified in clause (ii) above) prior to any record date for such action, dividend or distribution or the date as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their shares of Class A Common Stock for securities or other property, if any, deliverable upon such reorganization, reclassification, consolidation, merger, sale, transfer, lease, tender offer, dissolution, liquidation or winding up; provided, however, that any notice required by any event described in clause (ii) of this Section 5(j) shall be given in the manner and at the time that such notice is given to the holders of Class A Common Stock. Without limiting the obligations of this Corporation to provide notice of corporate actions hereunder, the failure to give the notice required by this Section 5(j) or any defect therein shall not affect the legality or validity of any such corporate action of the Corporation or the vote upon such action. -11- 113 (k) Before any holder of Convertible Preferred Stock shall be entitled to convert the same into Class A Common Stock, such holder shall surrender the certificate or certificates for such Convertible Preferred Stock at the office of this Corporation or at the office of the transfer agent for the Convertible Preferred Stock, which certificate or certificates, if this Corporation shall so request, shall be duly endorsed to this Corporation or in blank or accompanied by proper instruments of transfer to this Corporation or in blank (such endorsements or instruments of transfer to be in form satisfactory to this Corporation), and shall give written notice to this Corporation at said office that it elects to convert all or a part of the Shares represented by said certificate or certificates in accordance with the terms of this Section 5, and shall state in writing therein the name or names in which such holder wishes the certificates for Class A Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Convertible Preferred Stock and the Corporation, whereby the holder of such Convertible Preferred Stock shall be deemed to subscribe for the amount of Class A Common Stock which such holder shall be entitled to receive upon conversion of the number of shares of Convertible Preferred Stock to be converted, and, in satisfaction of such subscription, to deposit the shares of Convertible Preferred Stock to be converted, and thereby this Corporation shall be deemed to agree that the surrender of the shares of Convertible Preferred Stock to be converted shall constitute full payment of such subscription for Class A Common Stock to be issued upon such conversion. This Corporation will as soon as practicable after such deposit of a certificate or certificates for Convertible Preferred Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of this Corporation or of said transfer agent to the person for whose account such Convertible Preferred Stock was so surrendered, or to his nominee(s) or, subject to compliance with applicable law, transferee(s), a certificate or certificates for the number of full shares of Class A Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share as hereinafter provided. If surrendered certificates for Convertible Preferred Stock are converted only in part, this Corporation will issue and deliver to the holder, or to his nominee(s), without charge therefor, a new certificate or certificates representing the aggregate of the unconverted Shares. Such conversion shall be deemed to have been made as of the date of such surrender of the Convertible Preferred Stock to be converted; and the person or persons entitled to receive the Class A Common Stock issuable upon conversion of such Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such Class A Common Stock on such date. Upon the conversion of any Share, this Corporation shall pay, to the holder of record of such Share on the immediately preceding Record Date, all accrued but unpaid dividends on such Share to the date of the surrender of such Share for conversion. Such payment shall be made in cash or, at the election of this Corporation, the issuance of certificates representing such number of shares of Class A Common Stock as have an aggregate current market price (as determined in accordance with Section 5(f)) on the date of issuance equal to the amount of such accrued but unpaid dividends. Upon the making of such payment to the person entitled thereto as determined pursuant to the first sentence of -12- 114 this paragraph, no further dividends shall accrue on such Share or be payable to any other person. The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Convertible Preferred Stock shall be made without charge for any issue, stamp or other similar tax in respect of such issuance, provided, however, if any such certificate is to be issued in a name other than that of the registered holder of the share or shares of Convertible Preferred Stock converted, the person or persons requesting the issuance thereof shall pay to this Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of this Corporation that such tax has been paid. This Corporation shall not be required to convert any shares of Convertible Preferred Stock, and no surrender of Convertible Preferred Stock shall be effective for that purpose, while the stock transfer books of this Corporation are closed for any purpose; but the surrender of Convertible Preferred Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Convertible Preferred Stock was surrendered. (l) This Corporation shall at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of Convertible Preferred Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all outstanding Shares, provided that nothing contained herein shall be construed to preclude this Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Convertible Preferred Stock by delivery of shares of Class A Common Stock which are held in the treasury of this Corporation. This Corporation shall take all such corporate and other actions as from time to time may be necessary to insure that all shares of Class A Common Stock issuable upon conversion of shares of Convertible Preferred Stock at the Conversion Rate in effect from time to time will, upon issue, be duly and validly authorized and issued, fully paid and nonassessable and free of any preemptive or similar rights. (m) All shares of Convertible Preferred Stock received by this Corporation upon conversion thereof into Class A Common Stock shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock (and may be reissued as part of another series of the preferred stock of this Corporation, but such shares shall not be reissued as Convertible Preferred Stock). (n) This Corporation shall not be required to issue fractional shares of Class A Common Stock or scrip upon conversion of the Convertible Preferred Stock. As to any final fraction of a share of Class A Common Stock which a holder of one or more Shares would otherwise be entitled to receive upon conversion of such Shares in the same transaction, this Corporation shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the market value of a full share of Class A -13- 115 Common Stock. For purposes of this Section 5(n), the market value of a share of Class A Common Stock shall be the last reported sale price regular way on the business day immediately preceding the date of conversion, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case on the composite tape, or if the shares of Class A Common Stock are not quoted on the composite tape, on the principal United States securities exchange registered under the Exchange Act on which the shares of Class A Common Stock are listed or admitted to trading, or if the shares of Class A Common Stock are not listed or admitted to trading on any such exchange, the last reported sale price (or the average of the quoted last reported bid and asked prices if there were no reported sales) as reported by NASDAQ or any comparable system, or if the Class A Common Stock is not quoted on NASDAQ or any comparable system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by this Corporation for that purpose or, in the absence of such quotations, such other method of determining market value as the Board of Directors shall from time to time deem to be fair. 6. Redemption. (a) Subject to the rights of any Senior Securities and the provisions of Section 6(g), the shares of Convertible Preferred Stock may be redeemed out of funds legally available therefor, at the option of this Corporation by action of the Board of Directors, in whole or from time to time in part, at any time after January 10,1994, at the Redemption price per share as of the applicable Redemption Date. If less than all outstanding Shares are to be redeemed, Shares shall be redeemed ratably among the holders thereof. (b) Subject to the rights of any Senior Securities, Parity Securities and the provisions of Section 6(g) and subject to any prohibition or restriction contained in any Debt Instrument, this Corporation shall redeem, out of funds legally available therefor, on April 1, 1999 all of the shares of the Convertible Preferred Stock remaining outstanding at the Redemption Price per share on the Redemption Date. If the funds of this Corporation available, in accordance with the immediately preceding sentence, for redemption of Shares are insufficient to redeem the total number of Shares, those funds which are legally available for redemption of Shares and not restricted in accordance with the first sentence of this Section 6(b) will be used to redeem the maximum possible number of Shares ratably among the holders thereof. At any time thereafter when additional funds of this Corporation are legally available and not so restricted for such purpose, such funds will immediately be used to redeem the Shares this Corporation failed to redeem on such Redemption Date until the balance of the Shares have been redeemed. (c) Subject to the rights of any Senior Securities, Parity Securities and the provisions of Section 6(g) and subject to any prohibition or restriction contained in any Debt Instrument, at any time on or after the Issue Date, any holder shall have the right, at such holder's option, to require redemption by this Corporation at the Redemption Price per Share as of the applicable Redemption Date of all or any portion of his Shares having an aggregate -14- 116 Liquidation Value in excess of $1,000,000, by written notice to this Corporation stating the number of Shares to be redeemed. This Corporation shall redeem, out of funds legally available therefor and not restricted in accordance with the first sentence of this Section 6(c), the Shares so requested to be redeemed on such date within 60 days following this Corporation's receipt of such notice as this Corporation shall state in its notice given pursuant to Section 6(d). If the funds of this Corporation legally available for redemption of Shares and not restricted in accordance with the first sentence of this Section 6(c) are insufficient to redeem the total number of Shares required to be redeemed pursuant to this Section 6(c), those funds which are legally available for redemption of such Shares and not so restricted will be used to redeem the maximum possible number of such Shares ratably among the holders who have required Shares to be redeemed under this Section 6(c). At any time thereafter when additional funds of this Corporation are legally available and not so restricted for such purpose, such funds will immediately be used to redeem the Shares this Corporation failed to redeem on such Redemption Date until the balance of such Shares are redeemed. (d) Notice of any redemption pursuant to this Section shall be mailed, first class, postage prepaid, not less than 30 days nor more than 60 days prior to the Redemption Date, to the holders of record of the shares of Convertible Preferred Stock to be redeemed, at their respective addresses as the same appear upon the books of this Corporation or are supplied by them in writing to this Corporation for the purpose of such notice; but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of the Convertible Preferred Stock. Such notice shall set forth the Redemption Price, the Redemption Date, the number of Shares to be redeemed and the place at which the Shares called for redemption will, upon presentation and surrender of the stock certificates evidencing such Shares, be redeemed. In case fewer than the total number of shares of Convertible Preferred Stock represented by any certificate are redeemed, a new certificate representing the number of unredeemed Shares will be issued to the holder thereof without cost to such holder. (e) If notice of any redemption by this Corporation pursuant to this Section 6 shall have been mailed as provided in Section 6(d) and if on or before the Redemption Date specified in such notice the consideration necessary for such redemption shall have been set apart so as to be available therefor and only therefor, then on and after the close of business on the Redemption Date, the Shares called for redemption, notwithstanding that any certificate therefor shall not have been surrendered for cancellation, shall no longer be deemed outstanding, and all rights with respect to such Shares shall forthwith cease and terminate, except the right of the holders thereof to receive upon surrender of their certificates the consideration payable upon redemption thereof. (f) All shares of Convertible Preferred Stock redeemed, retired, purchased or otherwise acquired by this Corporation shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock (and may be reissued as part of another series of the preferred stock of this Corporation, but such shares shall not be reissued as Convertible Preferred Stock). -15- 117 (g) If at any time this Corporation shall have failed to pay, or declare and set apart the consideration sufficient to pay, all dividends accrued up to and including the immediately preceding Dividend Payment Date on the Convertible Preferred Stock and any Parity Securities, and until all dividends accrued up to and including the immediately preceding Dividend Payment Date on the Convertible Preferred Stock and any Parity Securities shall have been paid or declared and set apart so as to be available for the payment in full thereof and for no other purpose, this Corporation shall not redeem, pursuant to a sinking fund or otherwise, any shares of Convertible Preferred Stock, Parity Securities or Junior Securities, unless all then outstanding shares of Convertible Preferred Stock and Parity Securities are redeemed, and shall not purchase or otherwise acquire any shares of Convertible Preferred Stock, Parity Securities or Junior Securities. If and so long as this Corporation shall fail to redeem on a Redemption Date pursuant to Section 6(b) or 6(c) all shares of Convertible Preferred Stock required to be redeemed on such date, this Corporation shall not redeem, or discharge any sinking fund obligation with respect to, any Parity Securities or Junior Securities, unless all then outstanding shares of Convertible Preferred Stock and Parity Securities are redeemed, and shall not purchase or otherwise acquire any shares of Convertible Preferred Stock, Parity Securities or Junior Securities. Nothing contained in this Section 6(g) shall prevent the purchase or acquisition (i) of shares of Convertible Preferred Stock and Parity Securities pursuant to a purchase or exchange offer or offers made to holders of all outstanding shares of Convertible Preferred Stock and Parity Securities, provided that (A) as to holders of all outstanding shares of Convertible Preferred Stock, the terms of the purchase or exchange offer for all such shares are identical, (B) as to holders of all outstanding shares of a particular series or class of Parity Securities, the terms of the purchase or exchange offer for all such shares are identical, and (C) as among holders of all outstanding shares of Convertible Preferred Stock and Parity Securities, the terms of each purchase or exchange offer or offers are substantially identical relative to the liquidation price of the shares of Convertible Preferred Stock and each series or class of Parity Securities, (ii) of shares of Convertible Preferred Stock, Parity Securities or Junior Securities in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds of the sale of, shares of Junior Securities or (iii) of shares of Junior Securities that are beneficially owned by Liberty upon the redemption of, or in exchange for, shares of Liberty's preferred stock beneficially owned by this Corporation. The provisions of this Section 6(g) are for the benefit of holders of Convertible Preferred Stock and Parity Securities and accordingly, at any time when there are no Parity Securities outstanding, the provisions of this Section 6(g) shall not restrict any redemption by this Corporation of Shares held by any holder, provided that all other holders of Shares shall have waived in writing the benefits of this provision with respect to such redemption. 7. Transfer. (a) Without the prior written consent of this Corporation, no person holding shares of Convertible Preferred Stock of record (hereinafter called a "Convertible Preferred Holder") may transfer, and this Corporation shall not register the transfer of, such shares of -16- 118 Convertible Preferred Stock, whether by sale, assignment, or otherwise, except to a Permitted Transferee. (i) In the case of a Convertible Preferred Holder acquiring record and beneficial ownership of the shares of Convertible Preferred Stock in question upon initial issuance by this Corporation (an "Original Holder"), a "Permitted Transferee" shall mean: (x) any Affiliate (as defined in Section 7(b)) of such Original Holder, (y) any other Original Holder (or any Affiliate of any such other Original Holder), or (z) any person or entity to whom Shares are transferred by an Original Holder which Original Holder is a natural person pursuant to a gift or bequest or pursuant to the laws of intestacy. (ii) In the case of a Convertible Preferred Holder which is a Permitted Transferee of an Original Holder, a "Permitted Transferee" shall mean: (x) any Original Holder, (y) any Permitted Transferee of an Original Holder, except any transferee referred to in clause (i)(z) above, or (z) any person or entity to whom Shares are transferred by a Permitted Transferee which Permitted Transferee is a natural person pursuant to a gift or bequest or pursuant to the laws of intestacy. (b) For purposes of this Section 7, the term "Affiliate" shall mean (i) any person or corporation that owns beneficially and of record at least a majority of the outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors ("voting securities") of an Original Holder or (ii) any person or corporation at least a majority of the voting securities of which are owned beneficially and of record by an Original Holder, where in the case of both (i) and (ii), voting securities will be deemed "owned" by a person or corporation if either owned directly or if owned indirectly through one or more intermediary corporations at least a majority of the voting securities of which are owned beneficially and of record by that person or corporation or by an intermediary corporation in such a majority or more chain of ownership. -17- 119 (c) This Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Convertible Preferred Stock on this Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Convertible Preferred Stock or is a Permitted Transferee. (d) Shares of Convertible preferred Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Convertible Preferred Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. Certificates for shares of Convertible Preferred Stock shall bear a legend referencing the restrictions on transfer imposed by this Section 7. 8. No Voting Rights. The holders of Convertible Preferred Stock shall have no right to vote for any purpose, except as specifically required by the Delaware General Corporation Law. 9. Amendment. No amendment or modification of the designation, rights, preferences, and limitations of the Shares set forth herein shall be binding or effective without the prior consent of the holders of record of Shares representing 66 2/3% of the Liquidation Value of all Shares outstanding at the time such action is taken. 10. Preemptive Rights. The holders of the Convertible Preferred Stock will not have any preemptive right to subscribe for or purchase any shares of stock or any other securities which may be issued by this Corporation. 11. Exclusion of Other Rights. Except as may otherwise be required by law and for the equitable rights and remedies that may otherwise be available to holders of Convertible Preferred Stock, the shares of Convertible Preferred Stock shall not have any designations, preferences, limitations or relative rights, other that those specifically set forth in these resolutions (as such resolutions may, subject to Section 9, be amended from time to time) and in the Restated Certificate of Incorporation of this Corporation. 12. Headings. The headings of the various sections and subsections hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. -18- 120 FURTHER RESOLVED, that the appropriate officers of this Corporation are hereby authorized to execute and acknowledge a certificate setting forth these resolutions and to cause such certificate to be filed and recorded, in accordance with the requirements of Section 151(g) of the General Corporation Law of the State of Delaware." /s/ D. F. FISHER D. F. Fisher Executive Vice President ATTEST By: /s/ MARY S. WILLIS Mary Willis Assistant Secretary -19- 121 TELE-COMMUNICATIONS, INC. CERTIFICATE PURSUANT TO SECTIONS 151(g) OF THE DELAWARE GENERAL CORPORATION LAW WHEREAS, Tele-Communications, Inc. (the "Corporation") having previously issued all 6,201 authorized shares of its Convertible Preferred Stock, Series B ("Series B Preferred Stock"), and having retired all the Series B Preferred Stock in a share-for-share exchange for shares of this Corporation's Convertible Preferred Stock, Series C, certifies as follows: That all of the authorized shares of Series B Preferred Stock have been retired, and reissuance of such shares being prohibited, such shares shall be restored to the status of authorized and unissued shares of preferred stock of this Corporation and may be reissued as part of another series of preferred stock of this Corporation, but such shares shall not be reissued as Series B Preferred Stock; all matters previously set forth in the Certificate of Designations filed with respect to the Series B Preferred Stock shall be deemed eliminated from the certificate of incorporation of this Corporation. Date: July 23, 1993 TELE-COMMUNICATIONS, INC. By: /s/ STEPHEN M. BRETT Stephen M. Brett Senior Vice President ATTEST: /s/ MARY S. WILLIS Mary S. Willis Assistant Secretary EX-10 3 3 NON-QUALIFIED EX. AND FORM OF INDEMNIFICATION 1 1992 GRANT TELE-COMMUNICATIONS, INC. 1992 STOCK INCENTIVE PLAN NON-QUALIFIED STOCK OPTION AND STOCK APPRECIATION RIGHTS AGREEMENT THIS AGREEMENT ("Agreement") is made as of the 11th day of November, 1992 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and the person signing adjacent to the caption "Grantee" on the signature page hereof (the "Grantee"). The Company has adopted the Tele-Communications, Inc. 1992 Stock Incentive Plan (the "Plan"), a copy of which is appended to this Agreement as Exhibit A and by this reference made a part hereof, for the benefit of eligible employees of the Company and its Subsidiaries. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed thereto in the Plan. Pursuant to the Plan, the Compensation Committee of the Board (the "Committee"), which has been assigned responsibility for administering the Plan, has determined that it would be in the interest of the Company and its stockholders to grant the options and rights provided herein in order to provide Grantee with additional remuneration for services rendered, to encourage Grantee to remain in the employ of the Company or its Subsidiaries and to increase Grantee's personal interest in the continued success and progress of the Company. The Company and Grantee therefore agree as follows: 1. GRANT OF OPTION. Subject to the terms and conditions herein, the Company grants to the Grantee, during the period commencing on the Grant Date and expiring at 5:00 p.m., Denver, Colorado time ("Close of Business"), on the day which immediately precedes the tenth anniversary of the Grant Date (the "Option Term"), subject to earlier termination as provided in paragraphs 8 and 12(b) below, an option to purchase from the Company, at the price per share set forth on Schedule 1 hereto (the "Option Price"), the number of shares of Common Stock set forth on said Schedule 1 (the "Option Shares"). The Option Price and Option Shares are subject to adjustment pursuant to paragraph 12 below. This option is designated as a "Nonqualified Stock Option" in accordance with the Plan and is hereinafter referred to as the "Option." 2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and conditions herein and in tandem with the Option, the Company grants to Grantee for the Option Term, subject to earlier termination as provided in paragraphs 8 and 12(b) below, a -1- 2 stock appreciation right with respect to each Option Share (individually, a "Tandem SAR" and collectively, the "Tandem SARs"). Upon exercise of a Tandem SAR in accordance with this Agreement, the Company shall, subject to paragraph 6 below, make payment as follows: (i) the amount of payment shall equal the amount by which the Fair Market Value of the Option Share on the date of exercise if the Tandem SAR exceeds the Option Price; and (ii) payment of the amount determined in accordance with clause (i) shall be made in shares of Common Stock (valued at their Fair Market Value as of the date of exercise of such Tandem SAR), or, in the sole discretion of the Committee, in cash, or partly in cash and partly in shares of Common Stock. 3. REDUCTION UPON EXERCISE. The exercise of any number of Tandem SARs shall cause a corresponding reduction in the number of Option Shares which shall apply against the Option Shares then available for purchase. The exercise of the Option to purchase any number of Option Shares shall cause a corresponding reduction in the number of Tandem SARs. 4. CONDITIONS OF EXERCISE. The Option and Tandem SARs are exercisable only in accordance with the conditions stated in this paragraph. (a) Except as otherwise provided in paragraph 12(b) below or in the last sentence of this subparagraph (a), the Option shall not be exercisable until the first anniversary of the Grant Date, and on such first anniversary and thereafter the Option may only be exercised to the extent the Option Shares have become available for purchase in accordance with the following schedule:
Anniversary of Percentage of Option Shares Grant Date Available for Purchase -------------- --------------------------- 1st 20% 2nd 40% 3rd 60% 4th 80% 5th 100%
Notwithstanding the foregoing, all Option Shares shall become available for purchase if Grantee's employment with the Company and its Subsidiaries (i) shall terminate by reason of (x) termination by the Company without cause (as defined in Section 10.2(b) of the Plan), (y) termination by Grantee for good reason (as defined herein) or (z) Disability, (ii) shall terminate pursuant to provisions of a written employment agreement, if any, between the Grantee and the Company which expressly permit the Grantee to terminate such employment -2- 3 upon the occurrence of specified events (other than the giving of notice and passage of time), or (iii) if Grantee dies while employed by the Company or a Subsidiary. (b) A Tandem SAR with respect to an Option Share shall be exercisable only if the Option Share is then available for purchase in accordance with subparagraph (a). (c) To the extent the Option or Tandem SARs become exercisable, such Option or Tandem SARs may be exercised in whole or in part (at any time or from time to time, except as otherwise provided herein) until expiration of the Option Term or earlier termination thereof. (d) Grantee acknowledges and agrees that the Committee may, in its discretion and as contemplated by Section 7.5 of the Plan, adopt rules and regulations from time to time after the date hereof with respect to the exercise of SARs and that the exercise by Grantee of the Tandem SARs will be subject to the further condition that such exercise is made in accordance with all such rules and regulations as the Committee may determine are applicable thereto. 5. MANNER OF EXERCISE. The Option or a Tandem SAR shall be considered exercised (as to the number of Option Shares or Tandem SARs specified in the notice referred to in subparagraph (a) below) on the latest of (i) the date of exercise designated in the written notice referred to in subparagraph (a) below, (ii) if the date so designated is not a business day, the first business day following such date or (iii) the earliest business day by which the Company has received all of the following: (a) Written notice, in such form as the Committee may require, designating, among other things, the date of exercise, the number of Option Shares to be purchased and/or the number of Tandem SARs to be exercised; (b) If the Option is to be exercised, payment of the Option Price for each Option Share to be purchased in cash or in such other form, or combination of forms, of payment contemplated by Section 6.6(a) of the Plan as the Committee may permit; provided, however, that any shares of Common Stock or Class B Stock delivered in payment of the Option Price, if such form of payment is so permitted by the Committee, shall be shares that the Grantee has owned for a period of at least six months prior to the date of exercise, and provided, further, that, notwithstanding clause (v) of Section 6.6(a) of the Plan, Option Shares may not be withheld in payment or partial payment of the Option Price; and (c) Any other documentation that the Committee may reasonably require. Notwithstanding the foregoing, if in order to meet the exemptive requirements of Rule 16b-3, the Grantee exercises Tandem SARs during a quarterly window period determined in accordance with paragraph (e)(3) of such Rule (including by designating in a written notice of exercise delivered prior thereto that such exercise is to be effective during -3- 4 such window period), then the date of exercise of such Tandem SARs shall be deemed for purposes of this paragraph 5 and for purposes of the Fair Market Value determinations to be made pursuant to paragraph 2 hereof, to be the day during such window period on which the highest reported last sale price of a share of Common Stock as reported on NASDAQ occurred and the Fair Market Value of such share shall be deemed to be such highest reported last sale price. 6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and agrees that the Company shall deduct from the cash and/or shares of Common Stock otherwise payable or deliverable upon exercise of the Option or a Tandem SAR an amount of cash and/or number of shares of Common Stock (valued at their Fair Market Value on the date of exercise) that is equal to the amount of all federal, state and local taxes required to be withheld by the Company upon such exercise, as determined by the Committee. 7. DELIVERY BY THE COMPANY. As soon as practicable after receipt of all items referred to in paragraph 5, and subject to the withholding referred to in paragraph 6, the Company shall deliver to the Grantee certificates issued in Grantee's name for the number of Option Shares purchased by exercise of the Option and for the number of shares of Common Stock to which the Grantee is entitled by the exercise of Tandem SARs and any cash payment to which the Grantee is entitled by the exercise of Tandem SARs. If delivery is by mail, delivery of shares of Common Stock shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited the certificates in the United States mail, addressed to the Grantee, and any cash payment shall be deemed effected when a Company check, payable to Grantee and in an amount equal to the amount of the cash payment, shall have been deposited in the United States mail, addressed to the Grantee. 8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise determined by the Committee in its sole discretion, the Option and Tandem SARs shall terminate, prior to the expiration of the Option Term, at the time specified below: (a) If Grantee's employment with the Company and its Subsidiaries terminates (i) other than (x) by the Company for "cause" (as defined in Section 10.2(b) of the Plan), (y) by the Grantee with "good reason" (as defined herein) or (z) by the Company without cause, and (ii) other than (x) by reason of death or Disability, (y) with the written consent of the Company or the applicable Subsidiary or (z) without such consent if such termination is pursuant to provisions of a written employment agreement, if any, between the Grantee and the Company which expressly permit the Grantee to terminate such employment upon the occurrence of specified events (other than the giving of notice and passage of time), then the Option and all Tandem SARs shall terminate at the Close of Business on the first business day following the expiration of the 90-day period which began on the date of termination of Grantee's employment; (b) If Grantee dies while employed by the Company or a Subsidiary, or prior to the expiration of a period of time following termination of Grantee's employment during -4- 5 which the Option and Tandem SARs remain exercisable as provided in paragraph (a), the Option and all Tandem SARs shall terminate at the Close of Business on the first business day following the expiration of the one-year period which began on the date of death; (c) If Grantee's employment with the Company terminates by reason of Disability, then the Option and all Tandem SARs shall terminate at the Close of Business on the first business day following the expiration of the one-year period which began on the date of termination of Grantee's employment; (d) If Grantee's employment with the Company and its Subsidiaries is terminated by the Company for "cause" (as defined in Section 10.2(b) of the Plan), then the Option and all Tandem SARs shall terminate immediately upon such termination of Grantee's employment; or (e) If Grantee's employment (i) is terminated by Grantee (x) with "good reason" (as defined herein), (y) with the written consent of the Company or the applicable Subsidiary or (z) pursuant to provisions of a written employment agreement, if any, between the Grantee and the Company which expressly permit the Grantee to terminate such employment upon the occurrence of specified events (other than the giving of notice and passage of time), or (ii) by the Company without "cause" (as defined in Section 10.2(b) of the Plan), then the Option Term shall terminate early only as provided for in paragraph 8(b) or 12(b) below. In any event in which the Option and Tandem SARs remain exercisable for a period of time following the date of termination of Grantee's employment as provided above, the Option and Tandem SARs may be exercised during such period of time only to the extent the same were exercisable as provided in paragraph 4 above on such date of termination of Grantee's employment. A change of employment is not a termination of employment within the meaning of this paragraph 8 provided that, after giving effect to such change, the Grantee continues to be an employee of the Company or any Subsidiary. Notwithstanding any period of time referenced in this paragraph 8 or any other provision of this paragraph that may be construed to the contrary, the Option and all Tandem SARs shall in any event terminate upon the expiration of the Option Term. "Good reason" for purposes of the Agreement shall be deemed to have occurred upon the happening of any of the following: (i) any reduction in Grantee's annual rate of salary; (ii) either (x) a failure of the Company to continue in effect any employee benefit plan in which Grantee was participating or (y) the taking of any action by the Company that would adversely affect Grantee's participation in, or materially reduce Grantee's benefits under, any such employee benefit -5- 6 plan, unless such failure or such taking of any action, adversely affects the senior members of the corporate management of the Company generally; (iii) the assignment to Grantee of duties and responsibilities that are materially more oppressive or onerous than those attendant to Grantee's position immediately after the date hereof; (iv) the relocation of the office location as assigned to Grantee by the Company to a location more than 20 miles from Grantee's current location without Grantee's consent; or (v) the failure of the Company to obtain, prior to the time of any reorganization, merger, consolidation, disposition of all or substantially all of the assets of the Company or similar transaction effective after the date hereof, in which the Company is not the surviving person, the unconditional assumption in writing or by operation of law of the Company's obligations to Grantee under this Agreement by each direct successor to the Company in any such transaction. 9. AUTOMATIC EXERCISE OF TANDEM SARS. Immediately prior to the termination of the Option, as provided in paragraph 8 above, or the expiration of the Option Term, all remaining Tandem SARs shall be deemed to have been exercised by the Grantee. 10. NONTRANSFERABILITY OF OPTION AND TANDEM SARS. During Grantee's lifetime, the Option and Tandem SARs are not transferable (voluntarily or involuntarily) other than pursuant to a qualified domestic relations order and, except as otherwise required pursuant to a qualified domestic relations order, are exercisable only by the Grantee or Grantee's court appointed legal representative. The Grantee may designate a beneficiary or beneficiaries to whom the Option and Tandem SARs shall pass upon Grantee's death and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Committee on the form annexed hereto as Exhibit B or such other form as may be prescribed by the Committee, provided that no such designation shall be effective unless so filed prior to the death of Grantee. If no such designation is made or if the designated beneficiary does not survive the Grantee's death, the Option and Tandem SARs shall pass by will or the laws of descent and distribution. Following Grantee's death, the Option and any Tandem SARs, if otherwise exercisable, may be exercised by the person to whom such option or right passes accordingly to the foregoing and such person shall be deemed the Grantee for purposes of any applicable provisions of this Agreement. 11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any purpose to be, or to have any of the rights of, a stockholder of the Company with respect to any shares of Common Stock as to which this Agreement relates until such shares shall have been issued to Grantee by the Company. Furthermore, the existence of this Agreement shall not affect in any way the right or power of the Company or its stockholders to accomplish any corporate act, including, without limitation, the acts referred to in Section 10.18 of the Plan. -6- 7 12. ADJUSTMENTS. (a) The Option and Tandem SARs shall be subject to adjustment (including, without limitation, as to the number of Option Shares and the Option Price per share) in the sole discretion of the Committee and in such manner as the Committee may deem equitable and appropriate in connection with the occurrence of any of the events described in Section 4.2 of the Plan following the Grant Date. (b) In the event of any Approved Transaction, Board Change or Control Purchase, the Option and all Tandem SARs shall become exercisable in full without regard to paragraph 4(a); provided, however, that to the extent not theretofore exercised the Option and all Tandem SARs shall terminate upon the first to occur of the consummation of the Approved Transaction, the expiration of the Option Term or the earlier termination of the Option and Tandem SARs pursuant to paragraph 8 hereof. Notwithstanding the foregoing, the Committee may, in its discretion, determine that the Option and Tandem SARs will not become exercisable on an accelerated basis in connection with an Approved Transaction and/or will not terminate if not exercised prior to consummation of the Approved Transaction, if the Board or the surviving or acquiring corporation, as the case may be, shall have taken or made effective provision for the taking of such action as in the opinion of the Committee is equitable and appropriate to substitute a new Award for the Award evidenced by this Agreement or to assume this Agreement and the Award evidenced hereby and in order to make such new or assumed Award, as nearly as may be practicable, equivalent to the Award evidenced by this Agreement as then in effect (but before giving effect to any acceleration of the exercisability hereof unless otherwise determined by the Committee), taking into account, to the extent applicable, the kind and amount of securities, cash or other assets into or for which the Common Stock may be changed, converted or exchanged in connection with the Approved Transaction. 13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise the Option or any Tandem SAR and that the Company will not be obligated to deliver any shares of Common Stock or make any cash payment, if counsel to the Company determines that such exercise, delivery or payment would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any securities exchange or association upon which the Common Stock is listed or quoted. Except as provided in Section 10.9 of the Plan, the Company shall in no event be obligated to take any affirmative action in order to cause the exercise of the Option or any Tandem SAR or the resulting delivery of shares of Common Stock or other payment to comply with any such law, rule, regulation or agreement. 14. NOTICE. Unless the Company notifies the Grantee in writing of a different procedure, any notice or other communication to the Company with respect to this Agreement shall be in writing and shall be: -7- 8 (i) delivered personally to the following address: Tele-Communications, Inc. 5619 DTC Parkway Englewood, Colorado 80111-3000 and conspicuously marked "Tele-Communications, Inc. 1992 Stock Incentive Plan, c/o General Counsel"; or (ii) sent by first class mail, postage prepaid, and addressed as follows: Tele-Communications, Inc. 1992 Stock Incentive Plan c/o General Counsel, Tele-Communications, Inc. P. O. Box 5630 Denver, Colorado 80217 Any notice or other communication to the Grantee with respect to this Agreement shall be in writing and shall be delivered personally, or shall be sent by first class mail, postage prepaid, to Grantee's address as listed in the records of the Company or the employing Subsidiary on the Grant Date, unless the Company has received written notification from the Grantee of a change of address. 15. AMENDMENT. Notwithstanding any other provisions hereof, this Agreement may be supplemented or amended from time to time as approved by the Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the generality of the foregoing, without the consent of the Grantee, (a) this Agreement may be amended or supplemented (i) to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or (ii) to add to the covenants and agreements of the Company for the benefit of Grantee or surrender any right or power reserved to or conferred upon the Company in this Agreement, subject, however, to any required approval of the Company's stockholders and, provided, in each case, that such changes or corrections shall not adversely affect the rights of Grantee with respect to the Award evidenced hereby, or (iii) to make such other changes as the Company, upon advice of counsel, determines are necessary or advisable because of the adoption or promulgation of, or change in or of the interpretation of, any law or governmental rule or regulation, including any applicable federal or state securities laws; and (b) subject to Section 10.8(b) of the Plan and any required approval of the Company's stockholders, the Award evidenced by this Agreement may be cancelled by the Committee and a new Award made in substitution therefor, provided that the Award so substituted shall satisfy all of the requirements of the Plan as of the date such new Award is -8- 9 made and no such action shall adversely affect the Option or any Tandem SAR to the extent then exercisable. 16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action of the Company or the Committee with respect hereto, shall confer or be construed to confer on the Grantee any right to continue in the employ of the Company or any of its Subsidiaries or interfere in any way with the right of the Company or any employing Subsidiary to terminate the Grantee's employment at any time, with or without cause; subject, however, to the provisions of any employment agreement between the Grantee and the Company or any Subsidiary. 17. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Colorado. 18. CONSTRUCTION. References in this Agreement to "this Agreement" and the words "herein," "hereof," "hereunder" and similar terms include all Exhibits and Schedules appended hereto, including the Plan. This Agreement is entered into, and the Award evidenced hereby is granted, pursuant to the Plan and shall be governed by and construed in accordance with the Plan and the administrative interpretations adopted by the Committee thereunder. All decisions of the Committee upon questions regarding the Plan or this Agreement shall be conclusive. Unless otherwise expressly stated herein, in the event of any inconsistency between the terms of the Plan and this Agreement, the terms of the Plan shall control. The headings of the paragraphs of this Agreement have been included for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. 19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. 20. RULES BY COMMITTEE. The rights of the Grantee and obligations of the Company hereunder shall be subject to such reasonable rules and regulations as the Committee may, subject to the express provisions of the Plan, adopt from time to time hereafter. -9- 10 21. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms and conditions of this Agreement by signing in the space provided below and returning a signed copy to the Company. ATTEST: TELE-COMMUNICATIONS, INC. _________________________ By:_______________________________ Assistant Secretary Name: Title: ACCEPTED: __________________________________ Grantee -10- 11 Schedule 1 to Non-Qualified Stock Option and Stock Appreciation Rights Agreement dated as of November 11, 1992 TELE-COMMUNICATIONS, INC. 1992 STOCK INCENTIVE PLAN Grantee: Grant Date: November 11, 1992 Option Price: $16.75 per share Option Shares: __________ shares of the Company's Class A Common Stock, $1.00 par value per share -11- 12 Exhibit B to Non-Qualified Stock Option and Stock Appreciation Rights Agreement dated as of November 11, 1992 TELE-COMMUNICATIONS, INC. 1992 STOCK INCENTIVE PLAN DESIGNATION OF BENEFICIARY I, _________________________________ (the "Grantee"), hereby declare that upon my death ____________________________________ (the "Beneficiary") of Name _____________________________________________________________________________, Street Address City State Zip Code who is my __________________________________________, shall be entitled to the Relationship to Grantee Option, Tandem SARs and all other rights accorded the Grantee by the above-referenced grant agreement (the "Agreement"). It is understood that this Designation of Beneficiary is made pursuant to the Agreement and is subject to the conditions stated herein, including the Beneficiary's survival of the Grantee's death. If any such condition is not satisfied, such rights shall devolve according to the Grantee's will or the laws of descent and distribution. It is further understood that all prior designations of beneficiary under the Agreement are hereby revoked and that this Designation of Beneficiary may only be revoked in writing, signed by the Grantee, and filed with the Company prior to the Grantee's death. _______________________________ __________________________________________ Date Grantee 13 1993 GRANT TELE-COMMUNICATIONS, INC. 1992 STOCK INCENTIVE PLAN NON-QUALIFIED STOCK OPTION AND STOCK APPRECIATION RIGHTS AGREEMENT THIS AGREEMENT ("Agreement") is made as of the 12th day of October, 1993 (the "Grant Date"), by and between TELE-COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and the person signing adjacent to the caption "Grantee" on the signature page hereof (the "Grantee"). The Company has adopted the Tele-Communications, Inc. 1992 Stock Incentive Plan (the "Plan"), a copy of which is appended to this Agreement as Exhibit A and by this reference made a part hereof, for the benefit of eligible employees of the Company and its Subsidiaries. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed thereto in the Plan. Pursuant to the Plan, the Compensation Committee of the Board (the "Committee"), which has been assigned responsibility for administering the Plan, has determined that it would be in the interest of the Company and its stockholders to grant the options and rights provided herein in order to provide Grantee with additional remuneration for services rendered, to encourage Grantee to remain in the employ of the Company or its Subsidiaries and to increase Grantee's personal interest in the continued success and progress of the Company. The Company and Grantee therefore agree as follows: 1. GRANT OF OPTION. Subject to the terms and conditions herein, the Company grants to the Grantee, during the period commencing on the Grant Date and expiring at 5:00 p.m., Denver, Colorado time ("Close of Business"), on the day which immediately precedes the tenth anniversary of the Grant Date (the "Option Term"), subject to earlier termination as provided in paragraphs 8 and 12(b) below, an option to purchase from the Company, at the price per share set forth on Schedule 1 hereto (the "Option Price"), the number of shares of Common Stock set forth on said Schedule 1 (the "Option Shares"). The Option Price and Option Shares are subject to adjustment pursuant to paragraph 12 below. This option is designated as a "Nonqualified Stock Option" in accordance with the Plan and is hereinafter referred to as the "Option." 2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and conditions herein and in tandem with the Option, the Company grants to Grantee for the -1- 14 Option Term, subject to earlier termination as provided in paragraphs 8 and 12(b) below, a stock appreciation right with respect to each Option Share (individually, a "Tandem SAR" and collectively, the "Tandem SARs"). Upon exercise of a Tandem SAR in accordance with this Agreement, the Company shall, subject to paragraph 6 below, make payment as follows: (i) the amount of payment shall equal the amount by which the Fair Market Value of the Option Share on the date of exercise if the Tandem SAR exceeds the Option Price; and (ii) payment of the amount determined in accordance with clause (i) shall be made in shares of Common Stock (valued at their Fair Market Value as of the date of exercise of such Tandem SAR), or, in the sole discretion of the Committee, in cash, or partly in cash and partly in shares of Common Stock. 3. REDUCTION UPON EXERCISE. The exercise of any number of Tandem SARs shall cause a corresponding reduction in the number of Option Shares which shall apply against the Option Shares then available for purchase. The exercise of the Option to purchase any number of Option Shares shall cause a corresponding reduction in the number of Tandem SARs. 4. CONDITIONS OF EXERCISE. The Option and Tandem SARs are exercisable only in accordance with the conditions stated in this paragraph. (a) Except as otherwise provided in paragraph 12(b) below or in the last sentence of this subparagraph (a), the Option shall not be exercisable until the first anniversary of the Grant Date, and on such first anniversary and thereafter the Option may only be exercised to the extent the Option Shares have become available for purchase in accordance with the following schedule:
Anniversary of Percentage of Option Shares Grant Date Available for Purchase -------------- --------------------------- 1st 25% 2nd 50% 3rd 75% 4th 100%
Notwithstanding the foregoing, all Option Shares shall become available for purchase if Grantee's employment with the Company and its Subsidiaries (i) shall terminate by reason of (x) termination by the Company without cause (as defined in Section 10.2(b) of the Plan), (y) termination by Grantee for good reason (as defined herein) or (z) Disability, (ii) shall terminate pursuant to provisions of a written employment agreement, if any, between the Grantee and the Company which expressly permit the Grantee to terminate such employment -2- 15 upon the occurrence of specified events (other than the giving of notice and passage of time), or (iii) if Grantee dies while employed by the Company or a Subsidiary. (b) A Tandem SAR with respect to an Option Share shall be exercisable only if the Option Share is then available for purchase in accordance with subparagraph (a). (c) To the extent the Option or Tandem SARs become exercisable, such Option or Tandem SARs may be exercised in whole or in part (at any time or from time to time, except as otherwise provided herein) until expiration of the Option Term or earlier termination thereof. (d) Grantee acknowledges and agrees that the Committee may, in its discretion and as contemplated by Section 7.5 of the Plan, adopt rules and regulations from time to time after the date hereof with respect to the exercise of SARs and that the exercise by Grantee of the Tandem SARs will be subject to the further condition that such exercise is made in accordance with all such rules and regulations as the Committee may determine are applicable thereto. 5. MANNER OF EXERCISE. The Option or a Tandem SAR shall be considered exercised (as to the number of Option Shares or Tandem SARs specified in the notice referred to in subparagraph (a) below) on the latest of (i) the date of exercise designated in the written notice referred to in subparagraph (a) below, (ii) if the date so designated is not a business day, the first business day following such date or (iii) the earliest business day by which the Company has received all of the following: (a) Written notice, in such form as the Committee may require, designating, among other things, the date of exercise, the number of Option Shares to be purchased and/or the number of Tandem SARs to be exercised; (b) If the Option is to be exercised, payment of the Option Price for each Option Share to be purchased in cash or in such other form, or combination of forms, of payment contemplated by Section 6.6(a) of the Plan as the Committee may permit; provided, however, that any shares of Common Stock or Class B Stock delivered in payment of the Option Price, if such form of payment is so permitted by the Committee, shall be shares that the Grantee has owned for a period of at least six months prior to the date of exercise, and provided, further, that, notwithstanding clause (v) of Section 6.6(a) of the Plan, Option Shares may not be withheld in payment or partial payment of the Option Price; and (c) Any other documentation that the Committee may reasonably require. Notwithstanding the foregoing, if in order to meet the exemptive requirements of Rule 16b-3, the Grantee exercises Tandem SARs during a quarterly window period determined in accordance with paragraph (e)(3) of such Rule (including by designating in a written notice of exercise delivered prior thereto that such exercise is to be effective during -3- 16 such window period), then the date of exercise of such Tandem SARs shall be deemed for purposes of this paragraph 5 and for purposes of the Fair Market Value determinations to be made pursuant to paragraph 2 hereof, to be the day during such window period on which the highest reported last sale price of a share of Common Stock as reported on NASDAQ occurred and the Fair Market Value of such share shall be deemed to be such highest reported last sale price. 6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and agrees that the Company shall deduct from the cash and/or shares of Common Stock otherwise payable or deliverable upon exercise of the Option or a Tandem SAR an amount of cash and/or number of shares of Common Stock (valued at their Fair Market Value on the date of exercise) that is equal to the amount of all federal, state and local taxes required to be withheld by the Company upon such exercise, as determined by the Committee. 7. DELIVERY BY THE COMPANY. As soon as practicable after receipt of all items referred to in paragraph 5, and subject to the withholding referred to in paragraph 6, the Company shall deliver to the Grantee certificates issued in Grantee's name for the number of Option Shares purchased by exercise of the Option and for the number of shares of Common Stock to which the Grantee is entitled by the exercise of Tandem SARs and any cash payment to which the Grantee is entitled by the exercise of Tandem SARs. If delivery is by mail, delivery of shares of Common Stock shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited the certificates in the United States mail, addressed to the Grantee, and any cash payment shall be deemed effected when a Company check, payable to Grantee and in an amount equal to the amount of the cash payment, shall have been deposited in the United States mail, addressed to the Grantee. 8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise determined by the Committee in its sole discretion, the Option and Tandem SARs shall terminate, prior to the expiration of the Option Term, at the time specified below: (a) If Grantee's employment with the Company and its Subsidiaries terminates (i) other than (x) by the Company for "cause" (as defined in Section 10.2(b) of the Plan), (y) by the Grantee with "good reason" (as defined herein) or (z) by the Company without cause, and (ii) other than (x) by reason of death or Disability, (y) with the written consent of the Company or the applicable Subsidiary or (z) without such consent if such termination is pursuant to provisions of a written employment agreement, if any, between the Grantee and the Company which expressly permit the Grantee to terminate such employment upon the occurrence of specified events (other than the giving of notice and passage of time), then the Option and all Tandem SARs shall terminate at the Close of Business on the first business day following the expiration of the 90-day period which began on the date of termination of Grantee's employment; (b) If Grantee dies while employed by the Company or a Subsidiary, or prior to the expiration of a period of time following termination of Grantee's employment during -4- 17 which the Option and Tandem SARs remain exercisable as provided in paragraph (a), the Option and all Tandem SARs shall terminate at the Close of Business on the first business day following the expiration of the one-year period which began on the date of death; (c) If Grantee's employment with the Company terminates by reason of Disability, then the Option and all Tandem SARs shall terminate at the Close of Business on the first business day following the expiration of the one-year period which began on the date of termination of Grantee's employment; (d) If Grantee's employment with the Company and its Subsidiaries is terminated by the Company for "cause" (as defined in Section 10.2(b) of the Plan), then the Option and all Tandem SARs shall terminate immediately upon such termination of Grantee's employment; or (e) If Grantee's employment (i) is terminated by Grantee (x) with "good reason" (as defined herein), (y) with the written consent of the Company or the applicable Subsidiary or (z) pursuant to provisions of a written employment agreement, if any, between the Grantee and the Company which expressly permit the Grantee to terminate such employment upon the occurrence of specified events (other than the giving of notice and passage of time), or (ii) by the Company without "cause" (as defined in Section 10.2(b) of the Plan), then the Option Term shall terminate early only as provided for in paragraph 8(b) or 12(b) below. In any event in which the Option and Tandem SARs remain exercisable for a period of time following the date of termination of Grantee's employment as provided above, the Option and Tandem SARs may be exercised during such period of time only to the extent the same were exercisable as provided in paragraph 4 above on such date of termination of Grantee's employment. A change of employment is not a termination of employment within the meaning of this paragraph 8 provided that, after giving effect to such change, the Grantee continues to be an employee of the Company or any Subsidiary. Notwithstanding any period of time referenced in this paragraph 8 or any other provision of this paragraph that may be construed to the contrary, the Option and all Tandem SARs shall in any event terminate upon the expiration of the Option Term. "Good reason" for purposes of the Agreement shall be deemed to have occurred upon the happening of any of the following: (i) any reduction in Grantee's annual rate of salary; (ii) either (x) a failure of the Company to continue in effect any employee benefit plan in which Grantee was participating or (y) the taking of any action by the Company that would adversely affect Grantee's participation in, or materially reduce Grantee's benefits under, any such employee benefit -5- 18 plan, unless such failure or such taking of any action, adversely affects the senior members of the corporate management of the Company generally; (iii) the assignment to Grantee of duties and responsibilities that are materially more oppressive or onerous than those attendant to Grantee's position immediately after the date hereof; (iv) the relocation of the office location as assigned to Grantee by the Company to a location more than 20 miles from Grantee's current location without Grantee's consent; or (v) the failure of the Company to obtain, prior to the time of any reorganization, merger, consolidation, disposition of all or substantially all of the assets of the Company or similar transaction effective after the date hereof, in which the Company is not the surviving person, the unconditional assumption in writing or by operation of law of the Company's obligations to Grantee under this Agreement by each direct successor to the Company in any such transaction. 9. AUTOMATIC EXERCISE OF TANDEM SARS. Immediately prior to the termination of the Option, as provided in paragraph 8 above, or the expiration of the Option Term, all remaining Tandem SARs shall be deemed to have been exercised by the Grantee. 10. NONTRANSFERABILITY OF OPTION AND TANDEM SARS. During Grantee's lifetime, the Option and Tandem SARs are not transferable (voluntarily or involuntarily) other than pursuant to a qualified domestic relations order and, except as otherwise required pursuant to a qualified domestic relations order, are exercisable only by the Grantee or Grantee's court appointed legal representative. The Grantee may designate a beneficiary or beneficiaries to whom the Option and Tandem SARs shall pass upon Grantee's death and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Committee on the form annexed hereto as Exhibit B or such other form as may be prescribed by the Committee, provided that no such designation shall be effective unless so filed prior to the death of Grantee. If no such designation is made or if the designated beneficiary does not survive the Grantee's death, the Option and Tandem SARs shall pass by will or the laws of descent and distribution. Following Grantee's death, the Option and any Tandem SARs, if otherwise exercisable, may be exercised by the person to whom such option or right passes accordingly to the foregoing and such person shall be deemed the Grantee for purposes of any applicable provisions of this Agreement. 11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any purpose to be, or to have any of the rights of, a stockholder of the Company with respect to any shares of Common Stock as to which this Agreement relates until such shares shall have been issued to Grantee by the Company. Furthermore, the existence of this Agreement shall not affect in any way the right or power of the Company or its stockholders to accomplish any corporate act, including, without limitation, the acts referred to in Section 10.18 of the Plan. -6- 19 12. ADJUSTMENTS. (a) The Option and Tandem SARs shall be subject to adjustment (including, without limitation, as to the number of Option Shares and the Option Price per share) in the sole discretion of the Committee and in such manner as the Committee may deem equitable and appropriate in connection with the occurrence of any of the events described in Section 4.2 of the Plan following the Grant Date. (b) In the event of any Approved Transaction, Board Change or Control Purchase, the Option and all Tandem SARs shall become exercisable in full without regard to paragraph 4(a); provided, however, that to the extent not theretofore exercised the Option and all Tandem SARs shall terminate upon the first to occur of the consummation of the Approved Transaction, the expiration of the Option Term or the earlier termination of the Option and Tandem SARs pursuant to paragraph 8 hereof. Notwithstanding the foregoing, the Committee may, in its discretion, determine that the Option and Tandem SARs will not become exercisable on an accelerated basis in connection with an Approved Transaction and/or will not terminate if not exercised prior to consummation of the Approved Transaction, if the Board or the surviving or acquiring corporation, as the case may be, shall have taken or made effective provision for the taking of such action as in the opinion of the Committee is equitable and appropriate to substitute a new Award for the Award evidenced by this Agreement or to assume this Agreement and the Award evidenced hereby and in order to make such new or assumed Award, as nearly as may be practicable, equivalent to the Award evidenced by this Agreement as then in effect (but before giving effect to any acceleration of the exercisability hereof unless otherwise determined by the Committee), taking into account, to the extent applicable, the kind and amount of securities, cash or other assets into or for which the Common Stock may be changed, converted or exchanged in connection with the Approved Transaction. 13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise the Option or any Tandem SAR and that the Company will not be obligated to deliver any shares of Common Stock or make any cash payment, if counsel to the Company determines that such exercise, delivery or payment would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any securities exchange or association upon which the Common Stock is listed or quoted. Except as provided in Section 10.9 of the Plan, the Company shall in no event be obligated to take any affirmative action in order to cause the exercise of the Option or any Tandem SAR or the resulting delivery of shares of Common Stock or other payment to comply with any such law, rule, regulation or agreement. 14. NOTICE. Unless the Company notifies the Grantee in writing of a different procedure, any notice or other communication to the Company with respect to this Agreement shall be in writing and shall be: -7- 20 (i) delivered personally to the following address: Tele-Communications, Inc. 5619 DTC Parkway Englewood, Colorado 80111-3000 and conspicuously marked "Tele-Communications, Inc. 1992 Stock Incentive Plan, c/o General Counsel"; or (ii) sent by first class mail, postage prepaid, and addressed as follows: Tele-Communications, Inc. 1992 Stock Incentive Plan c/o General Counsel, Tele-Communications, Inc. P. O. Box 5630 Denver, Colorado 80217 Any notice or other communication to the Grantee with respect to this Agreement shall be in writing and shall be delivered personally, or shall be sent by first class mail, postage prepaid, to Grantee's address as listed in the records of the Company or the employing Subsidiary on the Grant Date, unless the Company has received written notification from the Grantee of a change of address. 15. AMENDMENT. Notwithstanding any other provisions hereof, this Agreement may be supplemented or amended from time to time as approved by the Committee as contemplated by Section 10.8(b) of the Plan. Without limiting the generality of the foregoing, without the consent of the Grantee, (a) this Agreement may be amended or supplemented (i) to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or (ii) to add to the covenants and agreements of the Company for the benefit of Grantee or surrender any right or power reserved to or conferred upon the Company in this Agreement, subject, however, to any required approval of the Company's stockholders and, provided, in each case, that such changes or corrections shall not adversely affect the rights of Grantee with respect to the Award evidenced hereby, or (iii) to make such other changes as the Company, upon advice of counsel, determines are necessary or advisable because of the adoption or promulgation of, or change in or of the interpretation of, any law or governmental rule or regulation, including any applicable federal or state securities laws; and (b) subject to Section 10.8(b) of the Plan and any required approval of the Company's stockholders, the Award evidenced by this Agreement may be cancelled by the Committee and a new Award made in substitution therefor, provided that the Award so substituted shall satisfy all of the requirements of the Plan as of the date such new Award is -8- 21 made and no such action shall adversely affect the Option or any Tandem SAR to the extent then exercisable. 16. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action of the Company or the Committee with respect hereto, shall confer or be construed to confer on the Grantee any right to continue in the employ of the Company or any of its Subsidiaries or interfere in any way with the right of the Company or any employing Subsidiary to terminate the Grantee's employment at any time, with or without cause; subject, however, to the provisions of any employment agreement between the Grantee and the Company or any Subsidiary. 17. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Colorado. 18. CONSTRUCTION. References in this Agreement to "this Agreement" and the words "herein," "hereof," "hereunder" and similar terms include all Exhibits and Schedules appended hereto, including the Plan. This Agreement is entered into, and the Award evidenced hereby is granted, pursuant to the Plan and shall be governed by and construed in accordance with the Plan and the administrative interpretations adopted by the Committee thereunder. All decisions of the Committee upon questions regarding the Plan or this Agreement shall be conclusive. Unless otherwise expressly stated herein, in the event of any inconsistency between the terms of the Plan and this Agreement, the terms of the Plan shall control. The headings of the paragraphs of this Agreement have been included for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. 19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. 20. RULES BY COMMITTEE. The rights of the Grantee and obligations of the Company hereunder shall be subject to such reasonable rules and regulations as the Committee may, subject to the express provisions of the Plan, adopt from time to time hereafter. -9- 22 21. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms and conditions of this Agreement by signing in the space provided below and returning a signed copy to the Company. ATTEST: TELE-COMMUNICATIONS, INC. _________________________ By:_________________________________ Assistant Secretary Name: Title: ACCEPTED: ____________________________________ Grantee -10- 23 Schedule 1 to Non-Qualified Stock Option and Stock Appreciation Rights Agreement dated as of October 12, 1993 TELE-COMMUNICATIONS, INC. 1992 STOCK INCENTIVE PLAN Grantee: Grant Date: October 12, 1993 Option Price: $16.75 per share Option Shares: __________ shares of the Company's Class A Common Stock, $1.00 par value per share -11- 24 Exhibit B to Non-Qualified Stock Option and Stock Appreciation Rights Agreement dated as of October 12, 1993 TELE-COMMUNICATIONS, INC. 1992 STOCK INCENTIVE PLAN DESIGNATION OF BENEFICIARY I, __________________________________ (the "Grantee"), hereby declare that upon my death ____________________________________ (the "Beneficiary") of Name _____________________________________________________________________________, Street Address City State Zip Code who is my __________________________________________, shall be entitled to the Relationship to Grantee Option, Tandem SARs and all other rights accorded the Grantee by the above-referenced grant agreement (the "Agreement"). It is understood that this Designation of Beneficiary is made pursuant to the Agreement and is subject to the conditions stated herein, including the Beneficiary's survival of the Grantee's death. If any such condition is not satisfied, such rights shall devolve according to the Grantee's will or the laws of descent and distribution. It is further understood that all prior designations of beneficiary under the Agreement are hereby revoked and that this Designation of Beneficiary may only be revoked in writing, signed by the Grantee, and filed with the Company prior to the Grantee's death. _______________________________ __________________________________________ Date Grantee 25 TELE-COMMUNICATIONS, INC. NON-QUALIFIED STOCK OPTION AND STOCK APPRECIATION RIGHTS AGREEMENT THIS AGREEMENT ("Agreement") is made as of the 12th day of October, 1993, by and between TELE-COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and JEROME H. KERN (the "Grantee"). The Company has adopted the Tele-Communications, Inc. 1992 Stock Incentive Plan (the "Plan"), a copy of which is appended to this Agreement as Exhibit A. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed thereto in the Plan. The Board of Directors of the Company has determined that it would be in the interest of the Company and its stockholders to grant the options and rights provided herein in order to provide Grantee with additional remuneration for non-legal services rendered, to encourage Grantee to become a member of the Board and to increase Grantee's personal interest in the continued success and progress of the Company. The Company and Grantee therefore agree as follows: 1. GRANT OF OPTION. Subject to the terms and conditions herein, the Company grants to the Grantee, during the period commencing on the Grant Date (as defined in Schedule 1 hereto) and expiring at 5:00 p.m., Denver, Colorado time ("Close of Business") on the day which immediately precedes the fifth anniversary of the Grant Date (the "Option Term"), subject to earlier termination as provided in paragraphs 8 and 12(b) below, an option to purchase from the Company, at the price per share set forth on Schedule 1 hereto (the "Option Price"), the number of shares of Common Stock set forth on said Schedule 1 (the "Option Shares"). The Option Price and Option Shares are subject to adjustment pursuant to paragraph 12 below. This option is as a "Nonqualified Stock Option" and is hereinafter referred to as the "Option". 2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and conditions herein and in tandem with the Option, the Company grants to Grantee for the Option Term, subject to earlier termination as provided in paragraphs 8 and 12(b) below, a stock appreciation right with respect to each Option Share (individually, a "Tandem SAR" and collectively, the "Tandem SARs"). Upon exercise of a Tandem SAR in accordance with this Agreement, the Company shall, subject to paragraph 6 below, make payment as follows: (i) the amount of payment shall equal the amount by which the Fair Market Value of the Option Share on the date of exercise if the Tandem SAR exceeds the Option Price; and -1- 26 (ii) payment of the amount determined in accordance with clause (i) shall be made in shares of Common Stock (valued at their Fair Market Value as of the date of exercise of such Tandem SAR), or, in the sole discretion of the Committee, in cash, or partly in cash and partly in shares of Common Stock. 3. REDUCTION UPON EXERCISE. The exercise of any number of Tandem SARs shall cause a corresponding reduction in the number of Option Shares which shall apply against the Option Shares then available for purchase. The exercise of the Option to purchase any number of Option Shares shall cause a corresponding reduction in the number of Tandem SARs. 4. CONDITIONS OF EXERCISE. The Option and Tandem SARs are exercisable only in accordance with the conditions stated in this paragraph. (a) Except as otherwise provided in paragraph 12(b) below or in the last sentence of this subparagraph (a), 20% of the shares subject to the Option shall be exercisable on the Grant Date and the remaining shares subject to the Option shall not be exercisable until the first anniversary of the Grant Date, and on such first anniversary and thereafter the Option may only be exercised to the extent the Option Shares have become available for purchase in accordance with the following schedule:
Anniversary of Percentage of Option Shares Grant Date Available for Purchase -------------- --------------------------- 1st 40% 2nd 60% 3rd 80% 4th 100%
Notwithstanding the foregoing, all Option Shares shall become available for purchase if Grantee's status as a member of the Board (or of the board of directors of any successor to the Company) shall terminate for any reason other than Grantee's voluntarily terminating such status. (b) A Tandem SAR with respect to an Option Share shall be exercisable only if the Option Share is then available for purchase in accordance with subparagraph (a). (c) To the extent the Option or Tandem SARs become exercisable, such Option or Tandem SARs may be exercised in whole or in part (at any time or from time to time, except as otherwise provided herein) until expiration of the Option Term or earlier termination thereof. 5. MANNER OF EXERCISE. The Option or a Tandem SAR shall be considered exercised (as to the number of Option Shares or Tandem SARs specified in the notice referred to in subparagraph (a) below) on the latest of (i) the date of exercise designated in the written notice referred to in subparagraph (a) below, (ii) if the date so designated is not a business day, -2- 27 the first business day following such date or (iii) the earliest business day by which the Company has received all of the following: (a) Written notice, in such form as the Compensation Committee of the Board (the "Committee") may require, designating, among other things, the date of exercise, the number of Option Shares to be purchased and/or the number of Tandem SARs to be exercised; (b) If the Option is to be exercised, payment of the Option Price for each Option Share to be purchased in cash or in such other form, or combination of forms, of payment contemplated by Section 6.6(a) of the Plan as the Committee may permit; provided, however, that any shares of Common Stock or Class B Stock delivered in payment of the Option Price, if such form of payment is so permitted by the Committee, shall be shares that the Grantee has owned for a period of at least six months prior to the date of exercise, and provided, further, that, notwithstanding clause (v) of Section 6.6(a) of the Plan, Option Shares may not be withheld in payment or partial payment of the Option Price; and (c) Any other documentation that the Committee may reasonably require. 6. MANDATORY WITHHOLDING FOR TAXES. Grantee acknowledges and agrees that the Company shall deduct from the cash and/or shares of Common Stock otherwise payable or deliverable upon exercise of the Option or a Tandem SAR an amount of cash and/or number of shares of Common Stock (valued at their Fair Market Value on the date of exercise) that is equal to the amount of all federal, state and local taxes required to be withheld by the Company upon such exercise, as determined by the Committee. 7. DELIVERY BY THE COMPANY. As soon as practicable after receipt of all items referred to in paragraph 5, and subject to the withholding referred to in paragraph 6, the Company shall deliver to the Grantee certificates issued in Grantee's name for the number of Option Shares purchased by exercise of the Option and for the number of shares of Common Stock to which the Grantee is entitled by the exercise of Tandem SARs and any cash payment to which the Grantee is entitled by the exercise of Tandem SARs. If delivery is by mail, delivery of shares of Common Stock shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited the certificates in the United States mail, addressed to the Grantee, and any cash payment shall be deemed effected when a Company check, payable to Grantee and in an amount equal to the amount of the cash payment, shall have been deposited in the United States mail, addressed to the Grantee. 8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise determined by the Committee in its sole discretion, the Option and Tandem SARs shall terminate, prior to the expiration of the Option Term, only if Grantee's status as a member of the Board (or of the board of directors of any successor to the Company) is terminated voluntarily by Grantee. -3- 28 In any event in which the Option and Tandem SARs remain exercisable for a period of time following the Grantee's voluntary termination of his status as a member of the Board, the Option and Tandem SARs may be exercised during such period of time only to the extent the same were exercisable as provided in paragraph 4 above on such date of termination of Grantee's status. Notwithstanding any period of time referenced in this paragraph 8 or any other provision of this paragraph that may be construed to the contrary, the Option and all Tandem SARS shall in any event terminate upon the expiration of the Option Term. 9. AUTOMATIC EXERCISE OF TANDEM SARS. Immediately prior to the termination of the Option, as provided in paragraph 8 above, or the expiration of the Option Term, all remaining Tandem SARs shall be deemed to have been exercised by the Grantee. 10. NONTRANSFERABILITY OF OPTION AND TANDEM SARS. During Grantee's lifetime, the Option and Tandem SARs are not transferable (voluntarily or involuntarily) other than pursuant to a qualified domestic relations order and, except as otherwise required pursuant to a qualified domestic relations order, are exercisable only by the Grantee or Grantee's court appointed legal representative. The Grantee may designate a beneficiary or beneficiaries to whom the Option and Tandem SARs shall pass upon Grantee's death and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Committee on the form annexed hereto as Exhibit B or such other form as may be prescribed by the Committee, provided that no such designation shall be effective unless so filed prior to the death of Grantee. If no such designation is made or if the designated beneficiary does not survive the Grantee's death, the Option and Tandem SARs shall pass by will or the laws of descent and distribution. Following Grantee's death, the Option and any Tandem SARs, if otherwise exercisable, may be exercised by the person to whom such option or right passes accordingly to the foregoing and such person shall be deemed the Grantee for purposes of any applicable provisions of this Agreement. 11. NO SHAREHOLDER RIGHTS. The Grantee shall not be deemed for any purpose to be, or to have any of the rights of, a stockholder of the Company with respect to any shares of Common Stock as to which this Agreement relates until such shares shall have been issued to Grantee by the Company. Furthermore, the existence of this Agreement shall not affect in any way the right or power of the Company or its stockholders to accomplish any corporate act, including, without limitation, the acts referred to in Section 10.18 of the Plan. 12. ADJUSTMENTS. (a) The Option and Tandem SARs shall be subject to adjustment (including, without limitation, as to the number of Option Shares and the Option Price per share) in the sole discretion of the Committee and in such manner as the Committee may deem equitable and appropriate in connection with the occurrence of any of the events described in Section 4.2 of the Plan following the Grant Date. -4- 29 (b) In the event of any Approved Transaction, Board Change or Control Purchase, the Option and all Tandem SARs shall become exercisable in full without regard to paragraph 4(a); provided, however, that to the extent not theretofore exercised the Option and all Tandem SARs shall terminate upon the first to occur of the consummation of the Approved Transaction, the expiration of the Option Term or the earlier termination of the Option and Tandem SARs pursuant to paragraph 8 hereof. Notwithstanding the foregoing, the Committee may, in its discretion, determine that the Option and Tandem SARs will not become exercisable on an accelerated basis in connection with an Approved Transaction and/or will not terminate if not exercised prior to consummation of the Approved Transaction, if the Board or the surviving or acquiring corporation, as the case may be, shall have taken or made effective provision for the taking of such action as in the opinion of the Committee is equitable and appropriate to substitute a new Award for the Award evidenced by this Agreement or to assume this Agreement and the Award evidenced hereby and in order to make such new or assumed Award, as nearly as may be practicable, equivalent to the Award evidenced by this Agreement as then in effect (but before giving effect to any acceleration of the exercisability hereof unless otherwise determined by the Committee), taking into account, to the extent applicable, the kind and amount of securities, cash or other assets into or for which the Common Stock may be changed, converted or exchanged in connection with the Approved Transaction. 13. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section 10.9 of the Plan, the Grantee agrees that Grantee will not exercise the Option or any Tandem SAR and that the Company will not be obligated to deliver any shares of Common Stock or make any cash payment, if counsel to the Company determines that such exercise, delivery or payment would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any securities exchange or association upon which the Common Stock is listed or quoted. The Company shall in no event be obligated to take any affirmative action in order to cause the exercise of the Option or any Tandem SAR or the resulting delivery of shares of Common Stock or other payment to comply with any such law, rule, regulation or agreement. 14. NOTICE. Unless the Company notifies the Grantee in writing of a different procedure, any notice or other communication to the Company with respect to this Agreement shall be in writing and shall be: (i) delivered personally to the following address: Tele-Communications, Inc. 5619 DTC Parkway Englewood, Colorado 80111-3000 -5- 30 or (ii) sent by first class mail, postage prepaid and addressed as follows Tele-Communications, Inc. c/o General Counsel, Tele-Communications, Inc. P. O. Box 5630 Denver, Colorado 80217 Any notice or other communication to the Grantee with respect to this Agreement shall be in writing and shall be delive red personally, or shall be sent by first class mail, postage prepaid, to Grantee's address as listed in the records of the Company on the Grant Date, unless the Company has received written notification from the Grantee of a change of address. 15. AMENDMENT. Notwithstanding any other provisions hereof, this Agreement may not be supplemented or amended from time to time without the consent of the Grantee. 16. GRANTEE STATUS AS A DIRECTOR. Nothing contained in this Agreement, and no action of the Company or the Committee with respect hereto, shall confer or be construed to confer on the Grantee any right to continue as a member of the Board or interfere in any way with the right of the Company to terminate the Grantee's status as a member of the Board at any time, with or without cause; subject, however, to the provisions of applicable law. 17. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Colorado. 18. CONSTRUCTION. References in this Agreement to "this Agreement" and the words "herein", "hereof", "hereunder" and similar terms include all Exhibits and Schedules appended hereto. The headings of the paragraphs of this Agreement have been included for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. 19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. 20. RULES BY COMMITTEE. The rights of the Grantee and obligations of the Company hereunder shall be subject to such reasonable rules and regulations as the Committee may adopt from time to time hereafter. -6- 31 21. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms and conditions of this Agreement by signing in the space provided below and returning a signed copy to the Company. ATTEST: TELE-COMMUNICATIONS, INC. _________________________ By:_______________________________ Assistant Secretary Name: Title: ACCEPTED: __________________________________ Jerome H. Kern, Grantee -7- 32 Schedule 1 to Non-Qualified Stock Option and Stock Appreciation Rights Agreement dated as of October 12, 1993 TELE-COMMUNICATIONS, INC. Grantee: Grant Date: October 12, 1993 Option Price: $16.75 per share Option Shares: 2,000,000 shares of the Company's Class A Common Stock, $1.00 par value per share 33 Exhibit B to Non-Qualified Stock Option and Stock Appreciation Rights Agreement dated as of October 12, 1993 TELE-COMMUNICATIONS, INC. DESIGNATION OF BENEFICIARY I, __________________________ (the "Grantee") hereby declare, that upon my death ____________________________________ (the "Beneficiary") of Name ____________________________________ __________________________________________ Street Address City State Zip Code who is my ___________________________________________, shall be entitled to the Relationship to Grantee Option, Tandem SARs, and all other rights accorded the Grantee by the above referenced grant agreement (the "Agreement"). It is understood that this Designation of Beneficiary is made pursuant to the Agreement and is subject to the conditions stated herein including the Beneficiary's survival of the Grantee's death. If any such condition is not satisfied, such rights shall devolve according to the Grantee's will or the laws of descent and distribution. It is further understood that all prior designations of beneficiary under the Agreement are hereby revoked and that this Designation of Beneficiary may only be revoked in writing, signed by the Grantee, and filed with the Company prior to the Grantee's death. _______________________________ __________________________________________ Date Grantee 34 FORM OF AGREEMENT INDEMNIFICATION AGREEMENT This AGREEMENT is made and entered into this _____ day of _________, 1994, by and between Tele-Communications, Inc., a Delaware corporation (the "Company"), and [name of director] (the "Indemnitee"). WHEREAS, it is essential to the Company to retain and attract as directors the most capable persons available; WHEREAS, Indemnitee is a director of the Company; WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims routinely being asserted against directors of public companies in today's environment, and the attendant costs of defending even wholly frivolous claims; WHEREAS, it has become increasingly difficult to obtain insurance against the risk of personal liability of directors on terms providing reasonable protection at reasonable cost; WHEREAS, the Bylaws of the Company provide certain indemnification rights to the directors of the Company, and its directors have been otherwise assured indemnification, as provided by Delaware law; WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Company in an effective manner, the increasing difficulty in obtaining and maintaining satisfactory insurance coverage, and Indemnitee's reliance on past assurances of indemnification, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent permitted by law (whether partial or complete) and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies; NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements contained herein and Indemnitee's continuing to serve as a director of the Company, the parties hereto agree as follows: 1. Certain Definitions: (a) Change in Control: shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities (other than any such person or any affiliate thereof that is such a 20% beneficial owner as of the date hereof), or (ii) during any period of two consecutive years, 35 individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all the Company's assets. (b) Claim: any threatened, pending or completed action, suit or proceeding, whether instituted by the Company or any other party, or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative, investigative or other. (c) Expenses: include attorneys' fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Independent Legal Counsel: an attorney or firm of attorneys, selected in accordance with the provisions of Section 3, who shall not have otherwise performed services for the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements). (f) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Company's Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel. (g) Voting Securities: any securities of the Company which vote generally in the election of directors. -2- 36 2. Basic Indemnification Arrangement. (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. If so requested by Indemnitee, the Company shall advance (within two business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 3 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the State of Delaware or the State of Colorado having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and agrees to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. -3- 37 3. Change in Control. The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or Company Bylaw now or hereafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. 4. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee against any and all expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within two business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Company Bylaw now or hereafter in effect relating to Claims for Indemnifiable Events or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. 5. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 6. Burden of Proof. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. 7. No Presumptions. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any -4- 38 particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. 8. Nonexclusivity; Subsequent Change in Law. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Bylaws or the General Corporation Law of the State of Delaware or otherwise. To the extent that a change in the General Corporation Law of the State of Delaware (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 9. Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer. 10. Amendments; Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 11. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 12. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder. 13. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director of the Company or of any other enterprise at the Company's request. -5- 39 14. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law. 15. Effective Date. This Agreement shall be effective as of the date hereof and shall apply to any claim for indemnification by the Indemnitee on or after such date. 16. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above. TELE-COMMUNICATIONS, INC. By:_____________________________________ Name: Title: _____________________________________ [name of director] -6- EX-21 4 SUBSIDIARIES 1 EXHIBIT 21 A table of the subsidiaries of the Company, as of March 1, 1994, is set forth below, indicating as to each the state or the jurisdiction of incorporation or organization ("org.") and the names under which such subsidiaries do business ("d/b/a"). Subsidiaries not included in the table are inactive and, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
Subsidiary Org. d/b/a - ---------- ---- ----- 1st Cablevision, Inc. 816 Enterprises OK Alabama T.V. Cable, Inc. AL American Cable of Redlands Joint Venture CO American Cable TV Investors 2 CA American Cable TV Investors 3 CA American Cable TV Investors 4, Ltd. CO Sun Cablevision American Cable TV Investors 5, Ltd. CO American Cable TV of Lower Delaware American Cable TV of St. Mary's County American Heritage Cablevision, Inc. IA American Microwave & Communications, Inc. MI American Mobile Systems Incorporated DE American Movie Classics Investment, Inc. CO American TeleVenture Corporation CO American Televenture of Minersville, Inc. CO American Televenture of Utah, Inc. UT American Televenture West, Inc. CO American Televenture, Inc. UT TCI of Colorado, Inc. Ames Cablevision, Inc. IA TCI of Central Iowa Andover Cablevision Ltd. UK Anfel-Kabelkom Kabelcommunikacios KFT HUNGARY Antares Satellite Corporation CO ARP Partnership DE Asia Business News PTE Limited SINGAPORE Athena Cablevision Corporation of Knoxville TN
-1- 2
Subsidiary Org. d/b/a - ---------- ---- ----- Athena Cablevision of Tennessee and Kentucky, Inc. TN Athena Realty, Inc. NV Atlantic American Cablevision of Florida, Inc. FL TCI Cablevision of Pasco County Atlantic American Cablevision, Inc. DE Atlantic American Holdings, Inc. FL Atlantic Cablevision of Florida, Inc. FL Avon Cable Investments Limited UK Avon Cable Joint Venture UK Avon Cable Limited Partnership CO Baton Rouge Cablevision Associates, L.P. CO Bay Cable Advertising/Bay Area Interconnect CA Beamlink Limited UK Beatrice Cable TV Company NE TCI Cable of Beatrice Bellevue Cable Television Limited Partnership NE TCI Cable of the Midlands Bellevue Cable Television Operators, Inc. NE Bellevue Cable Television Company; TCI Cable of the Midlands Bellevue Cablevision, Inc. DE Billings Tele-Communications, Inc. OR Birmingham Cable Corporation Limited UK Birmingham Cable Limited UK Bitteroot Cable TV, Inc. UT TCI of Colorado, Inc. Bob Magness, Inc. WY Bravo Classic Movies Limited UK Brenmor Cable Partners, L.P. CA Bresnan Communications Company Limited Partnership MI Brigand Pictures, Inc. NY Brookhaven Cable TV, Inc. NY TCI Cable of Brookhaven Brookings Cablevision CO Brookside Antenna Company OH C3W Ltd. UK C3W (Management) Ltd. UK C3WW Ltd. UK Cable Accounting, Inc. CO Cable AdNet of Puerto Rico, Inc. CO Cable AdNet Cable AdNet Partners DE Cable AdNet
-2- 3
Subsidiary Org. d/b/a - ---------- ---- ----- Hudson Valley Cable Cable Group Cable Alarms Ltd. UK Cable Camden Limited UK Cable Educational Network, Inc. MD The Discovery Channel Cable Enfield Limited UK Cable Guide Limited UK Cable Hackney and Islington Limited UK Cable Haringey Limited UK Cable London PLC UK Cable Network Television, Inc. NV Cable North (Forth District) Ltd. UK Cable Programme Partners-1 Limited Partnership DE Cable Programme Partners (1) Ltd. UK Cable Shopping Investment, Inc. CO Cable Soft Network Corporation JAPAN Cable Telecom Ltd. UK Cable Television Advertising Group, Inc. WY Cable Television of Gary, Inc. IN Cablephone Ltd. UK Cabletime, Inc. CO Cablevision Associates of Gary Joint Venture IN Cablevision IV, Ltd. IA Cablevision of Arcadia/Sierra Madre, Inc. DE Cablevision of Baton Rouge, Ltd. CO United Artists Cable of Baton Rouge Cablevision V, Inc. IA Cablevision VI, Inc. IA TCI of the Heartlands TCI Cablevision of the Rockies, Inc. Cablevision VII, Inc. IA TCI Cablevision of the Rockies, Inc. TCI of Eastern Iowa TCI of the Heartlands Caguas/Humacao Cable Systems CT Capital City Cablevision Limited UK Carver-Scott County Cable, Inc. CA CAT Partnership DE CATV Facility Co., Inc. CO
-3- 4
Subsidiary Org. d/b/a - ---------- ---- ----- Century 21 Cable Communitaions Ltd. UK Channel 64 Acquisition, Inc. DE Channel 64 Joint Venture OH Chicago Cable Network Joint Venture IL Cincinnati Television Incorporated DE Clinton Cablevision IA Clinton TV Cable Company, Inc. IA Colorado Cablevision Company CO TCI of Colorado, Inc. Colorado Terrace Tower II Corporation CO Comment Cablevision Tyneside Limited UK Communication Capital Corp. DE Colorado Communications Capital Corp. Communications & Cable of Chicago, Inc. IL Chicago Cable TV Communications Services, Inc. KS TCI Cablevision of Central Texas TCI Cablevision of East Oklahoma TCI Cablevision of North Texas TCI Cablevision of Northeast Texas TCI Cablevision of Oklahoma (CSI), Inc. TCI Cablevision of Texas (CSI), Inc. TCI Communications Services, Inc. TCI of Arkansas TCI of Arkansas (CSI), Inc. TCI of Kansas (CSI), Inc. TCI of Louisiana TCI of Louisiana (CSI), Inc. Community Cable Television WY TCI Cablevision of Southwest Texas TCI Cablevision of West Oakland County Community Realty, Inc. NV Nevada Community Realty, Inc. Community Television Systems, Inc. DE TCI Cablevision of South Central Connecticut Consumer Entertainment Services, Inc. WY Cork Communications Ltd. IRELAND Corsair Pictures, Inc. DE Brigand Pictures, Inc. Cotswold Cable Joint Venture UK Cotswold Cable Limited Partnership CO Croydon Cable Venture UK Crystal Palace Radio Limited UK
-4- 5
Subsidiary Org. d/b/a - ---------- ---- ----- Crystalvision Productions Limited UK Culross Investments Ltd. IRELAND Custom Cableventure of Colorado, Inc. CO DD Cable Holdings, Inc. CA DD Cable Partners, L.P. CA Daniels & Associates, Inc. DE Daniels Baton Rouge Ventures, Inc. CO Daniels Cablevision of Baker/Zachary, Inc. DE TCI of Louisiana Daniels Cablevision of Leesville, Inc. DE Daniels Cablevision of St. Bernard, Inc. LA TCI of Louisiana Daniels Communications Partners Limited Partnership DE Daniels-Hauser Holdings CO Daniels Private Ventures, Inc. CO Daniels Ventures Five, Inc. CO Daniels Ventures Four, Inc. CO Daniels Ventures, Inc. CO Daniels Woodlands Ventures, Inc. CO Davis County Cablevision, Inc. UT DCP-85, Ltd. CO Digital Direct, Inc. CO TCI Telephony, Inc. Digital Direct of Chicago, Inc. IL Digital Direct of Dallas, Inc. TX Digital Direct of Pittsburgh, Inc. PA Penn Access Corporation Digital Direct of Seattle, Inc. WA Direct Broadcast Satellite Services, Inc. DE Discovery Communications, Inc. MD Discovery Programming Investment, Inc. CO Discovery (UK) Limited UK District Cablevision Limited Partnership DC Dundee Cable and Satellite Ltd. UK East Arkansas Cablevision, Inc. AR TCI of Arkansas East Arkansas Investments, Inc. CO Eastex Microwave, Inc. TX East/West Uplink Partnership CO ECP Holdings, Inc. OK
-5- 6
Subsidiary Org. d/b/a - ---------- ---- ----- Edinburgh Cable Limited Partnership CO Edinburgh Cablevision Ltd. Elbert County Cable Partners, L.P. CO TCI of Colorado, Inc. Estuaries Cable Limited Partnership CO European Business Network Ltd. UK Execulines of the Northwest, Inc. WA ENWI FAB Communications, Inc. OK Fleximedia Ltd. UK Flexodrilling (Holdings) Ltd. UK Flextech Children's Channel Ltd. UK Flextech Communications Limited UK Flextech Distribution Ltd. UK Flextech IVS Ltd. UK Flextech Media Holdings Ltd. UK Flextech-Flexinvest Ltd. UK Flextech (1992) plc UK Flextech plc UK Foothills Cablevision Associates, L.P. CO Foothills Cablevision, Ltd. CO Four Flags Cable TV MI Four Flags Cablevision MI General Communications and Entertainment Company, Inc. DE Gill Bay Interconnect, Inc. CA Greater Birmingham Interconnect AL Greater Portland Interconnect OR Hadjukabelkom Kabeltelvizio KFT HUNGARY Halcyon Communications Partners OK Halcyon Communications Limited Partnership OK Harbor Communications Joint Venture WA Hawkeye Communications of Clinton, Inc. IA Heritage Cable Partners, Inc. IA Heritage Cablevision Associates, A Limited Partnership IA Indiana Cable Advertising TCI of Bedford TCI of Michiana Heritage Cablevision, Inc. IA TCI of Central Iowa
-6- 7
Subsidiary Org. d/b/a - ---------- ---- ----- TCI of Eastern Iowa TCI of Northern Iowa TCI of Southern Iowa TCI of the Heartlands Heritage Cablevision, Inc. TX Heritage Cablevision of California, Inc. DE TCI Cablevision of San Jose Heritage Cablevision of Colorado, Inc. CO TCI Cablevision of Southern Colorado, Inc. Heritage Cablevision of Dallas, Inc. IA Heritage Cablevision of Delaware, Inc. DE TCI Cablevision of New Castle County Heritage Cablevision of Maine II, Inc. ME Heritage Cablevision of Massachusetts, Inc. MA TCI Cablevision of Andover Heritage Cablevision of South East Massachusetts, Inc. MA Heritage Cablevision of Tennessee, Inc. TN TCI of Colorado, Inc. Heritage Cablevision of Texas, Inc. IA TCI Cablevision of South Texas Heritage CableVue, Inc. DE TCI Cablevision of New England Heritage Communications, Inc. IA Heritage Communications Products Corp. IA Heritage/Indiana Cablevision, Inc. IA Heritage Investments, Inc. IA Heritage ROC Holdings Corp. IA Hieronymous Limited UK Hillcrest Cablevision Company OH HIT Entertainment plc UK HKP Partners of New Zealand, Limited NZ Home Sports Network, Inc. CO Horizon Communications Ltd. IRELAND Horizon T.V. Distribution Ltd. IRELAND Independence Cable TV Company MI TCI Cablevision of Oakland County, Inc. Independent Wireless Cable Ltd. IRELAND Interactive Network, Inc. CA Intermedia Capital Partners III, L.P. CA Intermedia Partners CA Intermedia Partners II, L.P. CA Intermedia Partners III, L.P. CA Intermedia Partners V, L.P. CA
-7- 8
Subsidiary Org. d/b/a - ---------- ---- ----- Intermedia Partners of Carolina, L.P. CA Intermedia Partners of Maryland, L.P. CA Intermedia Partners of West Tennessee, L.P. CA International Cablecasting Technologies Eurpoe N.V. NETHERLANDS International Telemeter Corporation NV Ionian Communications, L.P. DE IR-Daniels Partners II CA IR-Daniels Partners III CA IR-Daniels Partners IV, L.P. CO IR-Daniels Partners V, L.P. CO IVS Cable Holdings Ltd. UK IVS Cable Services Ltd. UK Jersey Cable Ltd. UK Kabelkom-Dunaujvaros Kabelcommunikacios KFT HUNGARY Kabelkom-Szged Kabelcommunikacios KFT HUNGARY Kabelkom-Veszprem Kabelcommunikacios KFT HUNGARY Kabelcom Holding Co. DE Kabelcom Kabeltelevizio KFT HUNGARY Kabelcom Management Co. DE Kabelkom Nyireghyaza Kabelcommunikacios KFT HUNGARY Kabelkom Szekesfehervar Kabelcommunikacios KFT HUNGARY Kanal 2 A/S NORWAY Kauai Cablevision HI Kenniv Securities IRELAND KFT HUNGARY Kids Are People Too Kingdom Cablevision Ltd. UK Knox Cable T.V., Inc. TN KTMA-TV, Inc. TX LaSalle Telecommunications, Inc. IL Chicago Cable TV-IV L-TCI Associates DE Lawrence County Cable Partners CO Liberty Broadcasting, Inc. OR Liberty of Northern Indiana, Inc. DE Liberty-CSI, Inc. CO
-8- 9
Subsidiary Org. d/b/a - ---------- ---- ----- London Interconnect Ltd. UK London South Cable Partnership CO LVO Cable Properties, Inc. OK LVOC Management, Inc. OK Materials Handling Services, Inc. CO Western Communications Materials Handling Services, Inc. MCNS Holdings, L.P. NY Melita Cable Holdings Ltd. MALTA Melita Partnership CO Melita Cable TV Ltd. MALTA Metro Network Ltd. UK Metro Network (Hounslow) Ltd. UK Metro Network (Hillingdon) Ltd. UK Miami Tele-Communications, Inc. FL Microband United Corporation DE Micro-Relay, Inc. MD Microwave Distribution Systems Ltd. IRELAND Mile Hi Cable Partners, L.P. CO Middlesex Cable Limited UK Mid-Kansas, Inc. KS Mississippi Cablevision, Inc. MS TCI of North Mississippi Moonlight Bowl, Inc. CA Mountain Cable Network, Inc. NV Mountain Cable Advertising Mountain States General Partner Co. CO Mountain States Limited Partner Co. CO Mountain States Video CO TCI of Colorado, Inc. Mountain States Video Communications Co., Inc. CO TCI of Colorado, Inc. Mountain States Video, Inc. CO TCI of Colorado, Inc. MSV Subsidiary, Inc. CO MT Venture I TX Muskegon Cable TV Co. MI TCI Cablevision of Greater Michigan, Inc. Narragansett Cablevision Corporation RI Heritage Cablevision of Narragansett National Cable Acquisition Associates, L.P. DE Netlink International, Inc. CO Netlink USA CO Network 21 Ltd. UK
-9- 10
Subsidiary Org. d/b/a - ---------- ---- ----- Newport News Cablevision Associates, L.P. CO Newport News Cablevision, Ltd. CO United Artists Cablevision of Newport News NHT Parntership NY NorKabel A/S NORWAY NorKabel Groupen A/S NORWAY North London Channel Ltd. UK Northern Video,Inc. MN TCI of Central Minnesota Northwest Cable Advertising NY Northwest Illinois Cable Corporation DE Northwest Illinois TV Cable Co. DE TCI Cablevision of Galesburg/Monmouth Northwest Illinois TV Cable Company IL TCI Cablevision of Galesburg/Monmouth Northwest Network Communications, Inc. NV Ohio Cablevision Network, Inc. IA TCI Cablevision of Northwestern Ohio Oslo Kabelanlagg A/S NORWAY Ottumwa Cablevision, Inc. IA TCI of Southern Iowa Oxford Cable Services Ltd. UK Pacific Microwave Joint Venture CA Perth Cable Television Ltd. UK Pesci Kabeltelevizio KFT HUNGARY Pittsburg Cable TV, Inc. KS TCI of Pittsburg Preview Magazine Corporation NY Prime Time Tonight, Inc. DE Primestar Partners L.P. DE Princes Holdings Ltd. IRELAND Public Cable Company ME QE+ Ltd. CO QVC Investment, Inc. CO QVC Network, Inc. DE Reiss Media Enterprises, Inc. DE Republic Pictures TV DE Robert Fulk, Ltd. DE Robin Cable Systems, L.P. CA Robin Cable Systems II, L.P. CA Robin Cable Systems II, Inc. NV Robin Cable Systems of Tucson, L.P. AZ
-10- 11
Subsidiary Org. d/b/a - ---------- ---- ----- Robin Media Group, Inc. NV Rocky Mountain Leonard vs. Hearns II, Joint Venture CO Rocky Mountain Prime Sports Network CO Rocky Mountain Sports and Lifestyle Channel, Inc. DE RTV Associates, L.P. DE S/D Cable Partners, Ltd. CO TCI Cablevision of Princeton, L.P. TCI Cablevision of Rock Falls, L.P. Saguaro Cable Television Investors Limited Partnership CO San Leandro Cable Television, Inc. CA TCI Cablevision of Hayward Santa Fe Cablevision Co. NM Santa Fe Cablevision Company NM TCI Cablevision of Santa Fe Satellite Services of Puerto Rico, Inc. DE Satellite Services, Inc. DE SCC Programs, Inc. IL SCD Invest AB SWEDEN Scotcable (Cumbernauld) Ltd. UK Scotcable (Dumbarton) Ltd. UK Scotcable (Motherwell) Ltd. UK Semaphore Partners CO Silver Spur Land and Cattle Co. WY Silver Spur Ranch Sky Network Television, Limited NZ Sonic Communications San Luis Obispo and Santa Cruz CA Sonic Partners, L.P. CA South Chicago Cable, Inc. IL Chicago Cable TV-V South Florida Cable Advertising FL Southeast Cable Ltd. UK Southwest Cablevision Associates, L.P. CO Southwest Cablevision, Ltd. CO Southwest Washington Cable, Inc. WA SSI 2, Inc. NV Stafford Communications Ltd. UK Starstream Limited UK St. Louis Tele-Communications, Inc. MO TCI Cablevision of St. Louis SVHH Cable Acquisitions, L.P. DE Sweden Cable & Dish AB SWEDEN
-11- 12
Subsidiary Org. d/b/a - ---------- ---- ----- Syracuse Hilton Head Holdings, L.P. DE Tampa Bay Interconnect FL Tayside Cable Systems Ltd. UK TCG Chicago NY TCG Connecticut NY TCG Dallas NY TCG Detroit NY TCG Illinois NY TCG Partners NY TCG South Florida NY TCI Cable Education, Inc. CO TCI Cable Management Corporation CO TCI Cable Programme Partners, Inc. CO TCI Cablevision of Alabama, Inc. AL TCI Cablevision of Arizona, Inc. AZ TCI Cablevision of California, Inc. CA TCI Cablevision of Colorado, Inc. CO TCI of Colorado, Inc. TCI Cablevision of Dallas, Inc. TX TCI Cablevision of Florida, Inc. FL TCI of Colorado, Inc. TCI Cablevision of Georgia, Inc. GA TCI Cablevision of Great Falls, Inc. DE TCI Cablevision of Idaho, Inc. ID TCI Cablevision of Kentucky, Inc. KY Indiana Cable Advertising TCI Cablevision of Kiowa, Inc. CO TCI Cablevision of Maryland, Inc. MD TCI Cablevision of Massachusetts, Inc. MA TCI Cablevision of Michigan, Inc. MI Michigan Cable Advertising TCI Cablevision of Minnesota, Inc. MN TCI of Minnesota TCI Cablevision of Missouri, Inc. MO TCI Cablevision of Montana, Inc. MT TCI Cablevision of Nebraska, Inc. NE TCI Cablevision of Nevada, Inc. NV TCI Cablevision of New Hampshire, Inc. NH TCI Cablevision of New Mexico, Inc. NM TCI Cablevision of North Carolina, Inc. NC
-12- 13
Subsidiary Org. d/b/a - ---------- ---- ----- TCI Cablevision of North Central Kentucky, Inc. KY TCI Cablevision of Ohio, Inc. OH Northeast Television Advertising TCI Cablevision of Okanogan Valley, Inc. WA TCI Cablevision of Oklahoma, Inc. OK TCI Cablevision of Oregon, Inc. OR TCI Cablevision of Pasco County FL TCI Cablevision of Pinellas County, Inc. FL TCI Cablevision of Puerto Rico, Inc. DE TCI Cablevision of South Dakota, Inc. SD TCI Cablevision of Southwest Washington, Inc. WA TCI Cablevision of Texas, Inc. TX TCI Cablevision of Twin Cities, Inc. WA TCI Cablevision of Utah, Inc. UT TCI Cablevision of Vermont, Inc. DE TCI Cablevision of Washington, Inc. WA PACCOM TCI Cablevision of Wisconsin, Inc. WI TCI Cablevision of Wyoming, Inc. WY TCI Cablevision of Yakima Valley, Inc. WA TCI Cablevision of Yakima, Inc. WA TCI Central, Inc. DE TCI CablePCS, Inc. CO TCI CablePhone, Inc. CO TCI Development Corporation CO TCI East, Inc. DE TCI Fleet Services, Inc. CO TCI Great Lakes, Inc. DE TCI Holdings, Inc. CO TCI Holdings II, Inc. CO TCI Investments, Inc. CO TCI IP, Inc. DE TCI K-1, Inc. CO TCI Liberty, Inc. DE TCI Mergerco, Inc. DE TCI Microwave, Inc. DE
-13- 14
Subsidiary Org. d/b/a - ---------- ---- ----- TCI News, Inc. CO TCI North Central, Inc. DE TCI Northeast, Inc. DE TCI of Arkansas, Inc. AR TCI of Auburn, Inc. DE TCI of Connecticut, Inc. CT TCI of D.C., Inc. DC TCI of Delaware, Inc. DE TCI of Greensburg CO TCI of Illinois, Inc. IL Chicago Cable Advertising Illinois Cable Advertising TCI Cablevision of Dubuque, Inc. TCI of Indiana, Inc. IN Indiana Cable Advertising TCI of Iowa, Inc. IA TCI Cablevision of Dubuque, Inc. TCI of Kansas, Inc. KS TCI of Maine, Inc. ME TCI of Mississippi, Inc. MS TCI of New Jersey, Inc. NV TCI of New York, Inc. NY TCI of North Central Kentucky, Inc. KY TCI of North Dakota, Inc. ND TCI of Northern New Jersey, Inc. WA TCI Cablevision of Central Colorado, Inc. TCI Cablevision of Northeastern Oregon TCI Cablevision of Southeast Washington TCI Cablevision of the Treasure Coast TCI of Northern New Jersey TCI of Pennsylvania, Inc. PA Northeast Television Advertising TCI of California TCI of PR, Inc. CO TCI of Puerto Rico, Inc. CO TCI of Rhode Island, Inc. RI TCI of Seattle, Inc. DE TCI of South Carolina, Inc. SC TCI of Southern Maine, Inc. ME
-14- 15
Subsidiary Org. d/b/a - ---------- ---- ----- TCI of Southern Minnesota, Inc. DE TCI of Southern Minnesota TCI of Tacoma, Inc. DE TCI of Tennessee, Inc. TN TCI of the Blufflands, Inc. DE TCI Cable of La Crosse TCI of Southern Minnesota TCI of Virginia, Inc. VA TCI of Watertown, Inc. IA TCI of West Virginia, Inc. WV Northeast Television Advertising TCI Oscar I, Inc. CO TCI Pacific Microwave, Inc. CO Pacific Microwave TCI Realty Investments Company DE TCI Request, Inc. CO TCI Southeast Divisional Headquarters, Inc. AL TCI Southeast, Inc. DE TCI Sports UT TCI Sports, Inc. NV TCI Starz, Inc. CO TCI Technology, Inc. CO TCI Teleport of Boston, Inc. MA TCI Teleport of Chicago, Inc. IL TCI Teleport of Chicago-Switch, Inc. IL TCI Teleport of Dallas, Inc. TX TCI Teleport of Detroit, Inc. MI TCI Teleport of Hartford, Inc. CT TCI Teleport of Houston, Inc. TX TCI Teleport of Los Angeles, Inc. CA TCI Teleport of Miami, Inc. FL TCI Teleport of Phoenix, Inc. AZ TCI Teleport of Pittsburgh, Inc. PA TCI Teleport of San Francisco, Inc. CA TCI Teleport of Seattle, Inc. WA TCI Teleport of St. Louis, Inc. MO TCI Teleport, Inc. CO TCI Teleport Partners, Inc. CO TCI TKR Cable I, Inc. DE
-15- 16
Subsidiary Org. d/b/a - ---------- ---- ----- TCI TKR Cable II, Inc. DE TCI TKR Cable III, Inc. DE TCI TKR Limited Partnership CO TCI TKR of Alabama, Inc. DE TCI of Alabama TCI TKR of Central Florida, Inc. FL TCI of Central Florida TCI TKR of Dallas, Inc. DE TCI TKR of Florida, Inc. DE TCI TKR of Georgia, Inc. DE TCI of Georgia TCI TKR of Hollywood, Inc. DE TCI of Hollywood TCI TKR of Houston, Inc. TX TCI Cablevision of Houston TCI TKR of Jefferson County, Inc. KY TKR Cable of Greater Louisville, Inc. TCI TKR of Kentucky, Inc. DE TCI TKR of Metro Dade, Inc. DE TCI TKR of Northern Kentucky, Inc. KY TKR Cable of Northern Kentucky, Inc. TCI TKR of South Dade, Inc. FL TCI of South Dade TCI TKR of South Florida, Inc. DE TCI of South Florida TCI TKR of Southeast Texas, Inc. DE TCI TKR of Southern Kentucky, Inc. DE TKR Cable of Southern Kentucky, Inc. TCI TKR of the Gulf Plains, Inc. DE TCI of the Gulf Plains TCI TKR of the Metroplex, Inc. TX TCI Cablevision of the Metroplex TCI TKR of Wyoming, Inc. WY TCI TKR, Inc. DE TCI Turner Preferred, Inc. CO TCI TVRO Management Corporation CO TCI UA, Inc. DE TCI UA I, Inc. CO TCI West, Inc. DE TCI-Euromusic, Inc. CO TCI-TVGOS, Inc. CO TCI-UC, Inc. DE TCI/Fox Funding Partnership NY TCI/Liberty Holding Company DE TCI/US WEST Cable Communications Group CO TCI/US West Cable Communications, Inc. CO TCI/US WEST Parliamentary Holdings Limited UK
-16- 17
Subsidiary Org. d/b/a - ---------- ---- ----- TCID - WW, Inc. CO TCID Data Transport, Inc. CO TCID Games, Inc. CO TCID Networks, Inc. DE TCID of Carson, Inc. CA TCID of Chicago, Inc. IL TCID of Florida, Inc. FL TCI Cablevision of Pasco County TCID of Michigan, Inc. NV TCID of New Zealand Limited NZ TCID of Puerto Rico, Inc. NV TCID Partners, Inc. CO TCID Partners II, Inc. CO TCID of South Chicago, Inc. IL TCID Video Enterprises, Inc. CO TCID Virtual I/O, Inc. CO TCID X*Press, Inc. CO TCID-Commercial Music, Inc. CO TCID-ICP III, Inc. CO TCID-IP III, Inc. CO TCID-IP V, Inc. CO TCID-SVHH, Inc. DE TCIP, Inc. CO Telecable Nacional CXA DR Telecommunications Cable Systems, Inc. LA TCI of Louisiana Tele-Communications Dominicana, Inc. DE Tele-Communications, Inc. DE TCI Cablevision of Durango, Inc. Tele-Communications of Colorado, Inc. CO TCI Colorado Community Cable Television, Inc. Tele-Communications of South Suburbia, Inc. IL Telenois, Inc. IL Teleport Communications Group, Inc. Telestar-Kabelkom Kabelcommunikacios KFT HUNGARY Televents Group Joint Venture CO TCI of Central Iowa TCI of Eastern Iowa TCI of the Heartlands Televents Group, Inc. NV
-17- 18
Subsidiary Org. d/b/a - ---------- ---- ----- Televents, Inc. NV TCI Cablevision of Contra Costa County Televents of Colorado, Inc. CO Televents of East County, Inc. WY TCI Cablevision of East County Televents of Florida, Inc. WY Televents of Powder River, Inc. WY Televents of San Joaquin, Inc. WY TCI Cablevision of San Joaquin Televents of Wyoming, Inc. WY Television Cable Service, Inc. TX TCI Cablevision of Abilene TCI Cablevision of East Texas TCI Cablevision of Perryton TCI Cablevision of West Texas TeleWest Communications Group Ltd. UK TeleWest Europe Group CO TeleWest Ltd. UK Telford Cable Ltd. UK Telluride Cablevision, Inc. DE TEMPO Cable, Inc. OK TCI of Arkansas (Tempo), Inc. TCI Cablevision of Central Oklahoma, Inc. TCI Cablevision of Nocona TCI Cablevision of Oklahoma (Tempo), Inc. TCI Cablevision of Texas (Tempo), Inc. TEMPO Development Corporation OK TEMPO Enterprises, Inc. OK TEMPO Enterprises, Inc. (of Oklahoma) TEMPO Satellite, Inc. OK TEMPO Television, Inc. OK Tennessee-Kentucky Cable TV Company TN Tevel Israel International Communications Ltd. ISRAEL The Alpine Tower Company NJ The Cable Corporation Limited UK The Fashion Channel Network, Inc. DE The Greater Chicago Interconnect IL The Greater Philadelphia Cable Interconnect PA The Hiline Network MT The Parliamentary Channel Limited UK
-18- 19
Subsidiary Org. d/b/a - ---------- ---- ----- The Wolfdale Corporation CO The Woodlands Communications Network TX Tishdoret Achzakot Ltd. Israel Trans-Muskingum, Incorporated WV Tri Cities Cable Television Company NE Tri Cities Cable Television Operators NE Tribune Company Cable of Michigan, Inc. DE Tribune/United Cable of Oakland County Tribune-United Cable of Oakland County MI TCI Cablevision of Oakland County, Inc. Tulsa Cable Television, Inc. OK TCI Cablevision of Tulsa Turner Broadcasting System, Inc. T.V. Sports Ltd. IRELAND Tyneside Cable Limited Partnership CO UA European Theatres, Inc. CO UA Think, Inc. CO UA-Columbia Alpine Tower, Inc. NJ UA-Columbia Cablevision of Massachusetts, Inc. MA TCI Cablevision of North Attleboro\Taunton UA-Columbia Cablevision of New Jersey, Inc. NJ UA-Columbia Cablevision of Westchester, Inc. NY TCI Cable of Westchester TCI of Northern New Jersey UA-France, Inc. CO UA-UII, Inc. CO UA-UII Management, Inc. CO UACC Midwest, Inc. DE Indiana Cable Advertising TCI Cablevision of Asheville TCI Cablevision of Central Illinois TCI Cablevision of Decatur TCI Cablevision of Merced County TCI Cablevision of Northshore TCI Cablevision of Santa Cruz County TCI Cablevision of Tracy TCI Cablevision of Vacaville TCI Cablevision of Walnut Creek TCI Cablevision of West Michigan, Inc. TCI of Central Indiana
-19- 20
Subsidiary Org. d/b/a - ---------- ---- ----- TCI of Evansville TCI of South Mississippi UAII Merger Corp. DE UAII Sub No. 24, Inc. DE UAII Turner Investment, Inc. CO UATC Merger Corp. NY UCI Enterprises, Inc. CO UCT Aircraft, Inc. CO UCT Investments (Colorado), Inc. CO UCT Video, Inc. CO UCT-Netherlands, B.V. NETHERLANDS UCTC LP Company DE UCTC of Baltimore, Inc. DE UCTC of Los Angeles County, Inc. DE TCI Cablevision of Los Angeles County UII-Ireland Limited Liability Company UT UII-Ireland, Ltd. CO UII Management CO UK Gold Broadcasting Ltd. UK UK Gold Services Ltd. UK UK Gold Television Limited UK UK Living Ltd. UK United Advertising Network, Inc. CO United Artists B.V. NETHERLANDS United Artists Broadcast Properties, Inc. DE United Artists Cable Holdings, Inc. CO United Artists Cable Investments, Inc. DE United Artists Cable Television Avon, Inc. CO United Artists Cable Television Cotswolds, Inc. CO United Artists Cable Television Edinburgh, Inc. CO United Artists Cable Television Estuaries, Inc. CO United Artists Cable Television International Holdings, Inc. CO United Artists Cable Television International Investments, Inc. CO United Artists Cable Television International Limited UK United Artists Cable Television International Service Company, Inc. CO United Artists Cable Television Tyneside, Inc. CO
-20- 21
Subsidiary Org. d/b/a - ---------- ---- ----- United Artists Cable Television UK Holdings, Inc. DE United Artists Cable Television-UK, Inc. CO United Artists Cablesystems Corporation DE United Artists (Childrens Channel) Limited UK United Artists Communications (Avon) Limited UK United Artists Communications (Cotswolds) Limited UK United Artists Communications (London South) Plc UK United Artists Communications (Nominees) Limited UK United Artists Communications (North East) Limited UK United Artists Communications (North East) Partnership UK United Artists Communications (North Thames Estuary) Limited UK United Artists Communications (Scotland) Ltd. UK United Artists Communications (Scotland) Venture UK United Artists Communications (South East) Partnership UK United Artists Communications (South Thames Estuary) Limited UK United Artists Communications (Thames Estuary) Partnership UK United Artists Communications (Tyneside) Ltd. UK United Artists Cotswolds Partnership Holdings L.P. CO United Artists Entertainment Company DE United Artists Entertainment (Programming) Ltd. UK United Artists European Holdings Limited UK United Artists Holdings, Inc. DE United Artists International, Inc. CO United Artists Investments, Inc. CO United Artists Investments Ltd. UK United Artists K-1 Investments, Inc. CO United Artists (Learning Channel) Limited UK United Artists Operator Services Corporation CO United Artists Payphone Corporation CO United Artists Preferred Investment, Inc. CO United Artists Programme Management Limited UK United Artists Programming International, Inc. CO United Artists Programming-Europe, Inc. CO United Artists Republic Investments, Inc. CO United Artists Satellite, Inc. CO
-21- 22
Subsidiary Org. d/b/a - ---------- ---- ----- United Artists TeleCommunications, Inc. DE United Cable Ad-Link, Inc. CO United Cable Advertising, Inc. CO United Cable and Microwave Ltd. IRELAND United Cable Entertainment Corporation CO United Cable Investment of Baltimore, Inc. MD United Cable (London South) Limited Partnership CO United Cable Productions, Inc. CO United Cable Realty Co. of California, Inc. CO United Cable Shopping Channel, Inc. CO United Cable T.V. of Oakland County, Inc. MI TCI Cablevision of Oakland County, Inc. United Cable Television Acquisition Corporation CO TCI of Colorado, Inc. United Cable Television Corp. of Eastern Connecticut CT TCI Cablevision of Central Connecticut United Cable Television Corporation DE TCI Cable of the Midlands TCI Cablevision of Hayward TCI Cablevision of Treasure Valley United Cable Television Corporation of Michigan MI TCI Cablevision of Woodhaven, Inc. United Cable Television Corporation of Northern Illinois IL TCI Cablevision of Northern Illinois United Cable Television Financing Corporation CO United Cable Television Investments, Ltd. CO United Cable Television of Alameda, Inc. CA UCT of Alameda, Inc. #2 TCI Cablevision of Alameda United Cable Television of Baldwin Park, Inc. CO TCI Cablevision of Los Angeles County United Cable Television of Baltimore Limited Partnership CO United Artists Cable of Baltimore United Cable Television of Bossier City, Inc. DE TCI of Louisiana United Cable Television of California, Inc. CO TCI Cablevision of Cupertino\Los Altos TCI Cablevision of Davis United Cable Television of Chaska, Inc. CO United Cable Television of Colorado, Inc. CO TCI of Colorado, Inc. United Cable Television of Cupertino, Inc. CA TCI Cablevision of Cupertino\Los Altos United Cable Television of East San Fernando Valley, Ltd. CO United Cable Television of Eastern Shore, Inc. DE TCI Cablevision of Eastern Shore United Cable Television of Hillsborough, Inc. CO TCI Cablevision of Hayward United Cable Television of Illinois Valley, Inc. IL TCI Cablevision of Illinois Valley United Cable Television of Jeffco, Inc. CO TCI of Colorado, Inc.
-22- 23
Subsidiary Org. d/b/a - ---------- ---- ----- United Cable Television of Los Angeles, Inc. CA TCI Cablevision of Los Angeles County United Cable Television of Los Angeles County, Ltd. CO United Cable Television of Mid-Michigan, Inc. MI TCI Cablevision of Mid-Michigan, Inc. United Cable Television of Northern Indiana, Inc. DE TCI of Northern Indiana United Cable Television of Oakland County, Ltd. CO United Cable Television of Pico Rivera, Inc. CO United Cable Television of Santa Cruz, Inc. CO TCI Cablevision of Santa Cruz County United Cable Television of Sarpy County, Inc. NE TCI Cable of the Midlands United Cable Television of Scottsdale, Inc. AZ TCI Cable of Scottsdale United Cable Television of Southern Illinois, Inc. DE TCI Cablevision of Southern Illinois United Cable Television of Western Colorado, Inc. CO TCI Cablevision of Western Colorado, Inc. United Cable Television Real Estate Corporation CO United Cable Television Services Corporation OK TCI Cablevision of Central Connecticut United Cable Television Services of Colorado, Inc. CO United Cable Turner Investment, Inc. CO United Cable Video Investment, Inc. CO United Carphone Corporation CO United CATV, Inc. MD TCI Cablevision of Annapolis United Communications International CO United Corporate Communications Company CO United Entertainment Corporation CO United Entertainment Network, Inc. NE United Hockey, Inc. CO United International Investments CO United Microwave Corporation DE United of Oakland, Inc. DE TCI Cablevision of Oakland County, Inc. Tribune/United Cable of Oakland County United Paging Corporation CO United Tribune Paging Corporation CO United's Home Video Centers, Inc. CO Upper Valley Telecable Company, Inc. IN TCI Cablevision of Idaho (UVTC), Inc. Vacationland Cablevision, Inc. WI TCI of South Central Wisconsin Valley Cable TV, Inc. TX Videopole FRANCE Vision Group Incorporated CO
-23- 24
Subsidiary Org. d/b/a - ---------- ---- ----- Waltham Tele-Communications MA TCI Cablevision of Waltham Waltham Tele-Communications, Inc. CO Wasatch Community T.V., Incorporated UT Wentronics, Inc. NM TCI Cablevision of Casper TCI Cablevision of Gallup TCI Cablevision of Moab TCI Cablevision of Western Colorado, Inc. Wessex Cable Ltd. UK Western Community TV, Inc. MT Western Information Systems, Inc. CO WIS Western New York Cable Advertising, L.P. NY Western Satellite 2, Inc. CO Western Tele-Communications, Inc. DE Westlink, Inc. CO WestMarc Cable Group, Inc. DE WestMarc Cable Holding, Inc. DE TCI of Central Minnesota TCI of Northern Iowa TCI of Northern Minnesota TCI of the Valley WestMarc Communications, Inc. NV WestMarc Communications of Minnesota, Inc. DE TCI of Central Minnesota TCI of Southern Minnesota WestMarc Development II, Inc. CO WestMarc Development III, Inc. CO WestMarc Development IV, Inc. CO WestMarc Development Joint Venture CO Michigan Cable Advertising TCI Cablevision of Greater Michigan, Inc. TCI Cablevision of Northwestern Connecticut TCI Cablevision of Cape Cod TCI Cablevision of Nantucket TCI Twin State Cable TV TCI/Twin Valley Cable TCI Cable of Vermont WestMarc Development, Inc. CO WestMarc Realty, Inc. CO
-24- 25
Subsidiary Org. d/b/a - ---------- ---- ----- Westward Cables Ltd. IRELAND Westward Horizon Ltd. IRELAND Windsor Alarms Ltd. UK Windsor Television Ltd. UK Woodlands Cablevision Associates, L.P. CO WTCI Uplink, Inc. PA
-25- EX-23.1 5 KPMG PEAT MARWICK CONSENT 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to incorporation by reference in the Registration Statement (No. 33-59058) on Form S-8 of Tele-Communications, Inc. Employee Stock Purchase Plan; Registration Statement (No. 2-87938) on Form S-8 of Tele-Communications, Inc. 1982 Incentive Stock Option Plan; Registration Statement (No. 33-44532) on Form S-8 of United Artists Theatre Circuit, Inc. Employee Stock Purchase Plan; Registration Statements (Nos. 2-96706, 2-99512, 33-12385, 33-51104, 33-58198 and 33-60982) on Form S-3; the Post-Effective Amendment No. 1 to Form S-4 Registration Statement (No. 33-43009) on Form S-8 Registration Statement of Tele-Communications, Inc. of our reports dated March 21, 1994, relating to the consolidated balance sheets of Tele-Communications, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity, and cash flows and related financial statement schedules for each of the years in the three-year period ended December 31, 1993, which reports appear in the December 31, 1993 annual report on Form 10-K of Tele-Communications, Inc. Our reports refer to a change in the method of accounting for income taxes. /s/ KPMG PEAT MARWICK KPMG Peat Marwick Denver, Colorado March 21, 1994 -----END PRIVACY-ENHANCED MESSAGE-----