AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 6, 2002
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------------------
LIBERTY MEDIA CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 4841 84-1288730
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification code number) Identification No.)
12300 Liberty Boulevard, Englewood, Colorado 80112, (720) 875-5400
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Elizabeth M. Markowski, Esq. Copy To:
Liberty Media Corporation Robert W. Murray Jr., Esq.
12300 Liberty Boulevard Baker Botts L.L.P.
Englewood, Colorado 80112 30 Rockefeller Plaza
(720) 875-5400 New York, New York 10112-4998
(Name, address, including zip code, and telephone (212) 408-2500
number, including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the later to occur of (1) the effective date hereof and (2)
the record date for the distribution of the securities registered hereby.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed Proposed
Maximum Maximum Maximum
Offering Price Offering Price Aggregate Amount of
Title of Each Class of payable in payable in Offering Registration
Securities to be Registered Cash Debt Securities(2) Price Fee(3)
-----------------------------------------------------------------------------------------------------------------------------------
Series A common stock, par value $.01 per share
Transferable rights to purchase shares of Series A Common Stock(1)
Series B common stock, par value $.01 per share
Transferable rights to purchase shares of Series B Common Stock(1)
Total (4) (4) $310,000,000 $28,520
(1) Pursuant to Rule 457(g), no separate registration fee is payable with
respect to the rights being offered hereby since the rights are being registered
in the same registration statement as the securities to be offered pursuant
thereto.
(2) Debt securities of the registrant may be exchanged for shares of common
stock purchased upon exercise of the rights being offered hereby.
(3) Calculated pursuant to Rule 457(o) based upon the maximum aggregate offering
price of all securities offered hereby.
(4) The maximum aggregate offering price may be paid entirely in cash or
entirely in debt securities or in any combination thereof.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 6, 2002
PROSPECTUS
LIBERTY MEDIA CORPORATION
UP TO [ ] SHARES OF SERIES A COMMON STOCK
UP TO [ ] SHARES OF SERIES B COMMON STOCK
-------------------------------
We are distributing to our shareholders [0.__] transferable subscription
rights to purchase shares of our Series A common stock for each share of our
Series A common stock held by them at the close of business on [______], 2002,
which is the record date for the distribution, and [0.__] transferable
subscription rights to purchase shares of our Series B common stock for each
share of our Series B common stock held by them at the close of business on the
record date. We refer to rights to purchase shares of our Series A common stock
as the Series A rights and to rights to purchase shares of our Series B common
stock as the Series B rights.
Each right entitles the holder to a basic subscription privilege and an
oversubscription privilege. Under the basic subscription privilege, each whole
Series A right entitles the holder to purchase one share of our Series A common
stock at the Series A subscription price of $[__] per share, and each whole
Series B right entitles the holder to purchase one share of our Series B common
stock at the Series B subscription price of $[__] per share. Under the
oversubscription privilege, each rightsholder which exercises its basic
subscription privilege, in full, will have the right to subscribe, at the same
subscription price, for up to that number of shares of the applicable series of
our common stock which are not purchased by other holders of the same series of
rights under their basic subscription privilege. We are offering our Series A
rightsholders up to an aggregate [____] shares of our Series A common stock and
our Series B rightsholders up to an aggregate [____] shares of our Series B
common stock. If you deliver an oversubscription request for shares of a series
of our common stock and we receive oversubscription requests for more shares of
that series than we have available for oversubscription, you will receive your
pro rata portion of the available shares based on the number of shares of the
same series you purchase under your basic subscription privilege or, if less,
the number of shares for which you oversubscribe. All exercises of rights are
irrevocable.
The subscription price for shares may be paid in cash or by exchange of
any of the following debt securities of our company for the number of shares
indicated in the table below. Debt securities may be tendered only in increments
of $1,000 principal amount.
DEBT SECURITIES CUSIP NUMBER FOR EACH $1,000 PRINCIPAL AMOUNT TENDERED:
SERIES A SHARES OR SERIES B SHARES
7 7/8% senior notes due July 15, 2009 530715AB7 [_______] [_______]
8 1/2% senior debentures due January 15, 2029 530715AD3 [_______] [_______]
8 1/4% senior debentures due February 1, 2030 530715AJ0 [_______] [_______]
7 3/4% senior notes due July 15, 2009 530718AA3 [_______] [_______]
If all rights are exercised and all subscription prices are paid in cash, we
will receive approximately $309,000,000 from the rights offering, after paying
estimated expenses.
The rights offering will expire at the expiration time of 5:00 p.m., New
York City time, on [______], 2002, unless we decide to extend it. NO EXERCISES
OF RIGHTS WILL BE ACCEPTED FOLLOWING THE EXPIRATION TIME. We may terminate the
rights offering for any reason before the expiration time. Unless we earlier
terminate the rights offering, we will issue the shares purchased by you in the
rights offering as soon as practicable following the expiration time. [________]
is the subscription agent for the rights offering.
Our Series A common stock is listed under the symbol "L" and our Series B
common stock is listed under the symbol "LMC.B" on the New York Stock Exchange.
On [_____], 2002, the closing sale price of our Series A common stock was $[__]
per share and the closing sale price of our Series B common stock was $[__] per
share on the NYSE. [We have applied to list the Series A rights and Series B
rights on the NYSE under the symbols "[___]" and "[___]", respectively.]
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. YOU SHOULD CAREFULLY
CONSIDER THE MATTERS DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON
PAGE 8 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is [____], 2002.
TABLE OF CONTENTS
PROSPECTUS SUMMARY........................................................ 1
RISK FACTORS.............................................................. 8
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS......................... 13
USE OF PROCEEDS........................................................... 14
DIVIDEND POLICY........................................................... 14
PRICE RANGE OF COMMON STOCK............................................... 15
CAPITALIZATION............................................................ 16
THE RIGHTS OFFERING....................................................... 17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 28
PLAN OF DISTRIBUTION...................................................... 35
LEGAL MATTERS............................................................. 36
EXPERTS................................................................... 36
WHERE TO FIND MORE INFORMATION............................................ 37
* * *
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT OUR COMPANY THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS.
THIS INFORMATION IS AVAILABLE, WITHOUT CHARGE, TO HOLDERS OF OUR DEBT SECURITIES
AND HOLDERS OF OUR COMMON STOCK, UPON REQUEST. ANY SUCH SECURITYHOLDER WHO WOULD
LIKE TO REQUEST A COPY OF THIS INFORMATION SHOULD CONTACT INVESTOR RELATIONS,
LIBERTY MEDIA CORPORATION, 12300 LIBERTY BOULEVARD, ENGLEWOOD, COLORADO 80012,
TELEPHONE NO. 877-772-1518. TO OBTAIN TIMELY DELIVERY OF THIS INFORMATION,
THIS INFORMATION MUST BE REQUESTED NO LATER THAN [____________], 2002, WHICH IS
FIVE (5) BUSINESS DAYS PRIOR TO THE EXPIRATION TIME OF THE RIGHTS OFFERING.
ii
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference in this prospectus. This summary does not contain all of the important
information that you should consider before exercising the rights and investing
in our common stock. You should read the entire prospectus carefully.
OUR COMPANY
Liberty Media Corporation owns interests in a broad range of video
programming, broadband distribution, interactive technology services and
communications businesses. We and our affiliated companies operate in the United
States, Europe, South America and Asia with some of the world's most recognized
and respected brands, including Encore, STARZ!, Discovery, QVC and Court TV. Our
principal executive offices are located at 12300 Liberty Boulevard, Englewood,
Colorado 80112. Our telephone number at that address is (720) 875-5400.
QUESTIONS AND ANSWERS
Q: What is a rights offering?
A: A rights offering is a distribution of subscription rights on a pro rata
basis to all shareholders of a company. We are distributing:
- to holders of our Series A common stock, [0.__] transferable
subscription rights for each share of our Series A common stock held
by them at 5:00 p.m., New York City time, on [_________], 2002; and
- to holders of our Series B common stock, [0.__] transferable
subscription rights for each share of our Series B common stock held
by them at 5:00 p.m., New York City time, on [_________], 2002.
Q: What is a right?
A: Each whole Series A right entitles its holder to purchase one share of our
Series A common stock at the Series A subscription price of $[__] per
share, a discount to the $[__] per share closing price of our Series A
common stock on the NYSE on [________], 2002. Each whole Series B right
entitles its holder to purchase one share of our Series B common stock at
the Series B subscription price of $[__] per share, a discount to the
$[__] per share closing price of our Series B common stock on the NYSE on
[________], 2002. Each right carries with it a basic subscription
privilege and an oversubscription privilege.
Q: What is the basic subscription privilege?
A: The basic subscription privilege entitles each holder of a whole Series A
right to purchase one share of our Series A common stock for the Series A
subscription price, and each holder of a whole Series B right to purchase
one share of our Series B common stock for the Series B subscription
price.
Q: What is the oversubscription privilege?
A: The oversubscription privilege entitles each holder of a whole Series A
right, if the holder fully exercises its basic subscription privilege, to
subscribe at the Series A subscription price for up to that number of
shares of our Series A common stock that are offered in the rights
offering but are not purchased by the other Series A rightsholders under
their basic subscription privilege. Similarly, the oversubscription
privilege entitles each holder of a whole Series B right, if the holder
fully exercises its basic subscription privilege, to subscribe at the
Series B subscription price for up to that number of shares of our Series
B common stock that are offered in the rights offering but are not
purchased by the other Series B rightsholders under their basic
subscription privilege.
1
Q: What are the limitations on the oversubscription privilege?
A: We will be able to satisfy exercises of the oversubscription privilege of
the Series A rights and the Series B rights only if holders of those
rights subscribe for less than all of the shares of the series of our
common stock that may be purchased under the basic subscription privilege
of those rights. If sufficient shares are available, we will honor the
oversubscription requests in full. If oversubscription requests exceed the
shares available, we will allocate the available shares pro rata among
those who oversubscribed in proportion to the number of shares of the
applicable series that each rightsholder purchases pursuant to its basic
subscription privilege.
Q: When will the rights offering expire?
A: The rights offering will expire at the expiration time of 5:00 p.m., New
York City time, on [_______], 2002 unless we extend it. We may extend the
expiration time for any reason.
Q: Are there any conditions to the consummation of the rights offering?
A: No. There are no conditions to the consummation of the rights offering.
Q: Can you terminate the rights offering?
A: Yes. We may terminate the rights offering for any reason before the
expiration time.
Q: If you terminate the rights offering, will my subscription payment be
refunded to me?
A: Yes. If we terminate the rights offering, the subscription agent will
return all subscription payments promptly. We will not pay interest on, or
deduct any amounts from, subscription payments if we terminate the rights
offering, except that interest will continue to accrue on debt securities
tendered in payment of the subscription price.
Q: Why are you conducting the rights offering?
A: We have an ongoing need for cash to take advantage of business
opportunities as they arise. We intend to use the funds raised pursuant to
this rights offering to fund our future capital needs, including
acquisition and investment opportunities. We continue to review regularly
these opportunities as they become available. In addition, to the extent
that our debt securities are tendered in payment of subscription prices,
the rights offering will enable us to reduce the principal amount of our
outstanding long-term indebtedness.
We were split off from AT&T Corp. in August 2001. In connection with the
split off, the Internal Revenue Service issued a private letter ruling
confirming that the split off would qualify as a tax-free transaction to
AT&T and its shareholders. The request for rulings and the private letter
ruling issued by the IRS stated that we intended to issue a total of at
least $500 million of our equity within a specified time period following
the split off. We believe that the issuance of stock pursuant to this
rights offering conforms with this statement of our intentions.
Q: How will you use the proceeds received from the rights offering?
A: If all of the rights are exercised and all subscriptions are paid in cash,
we will receive approximately $310,000,000, before deducting any offering
expenses. These expenses are estimated to be $1,000,000. We will not
receive cash proceeds to the extent subscriptions are paid by tender of
our debt securities. We will deliver for cancellation any debt securities
received in payment of the subscription price to the trustee for those
securities. We will use any net cash proceeds we receive from the rights
offering for general corporate purposes.
2
Q: How many shares of your common stock are currently outstanding?
A: As of August 31, 2002, we had outstanding 2,373,439,500 shares of our
Series A common stock and 212,045,128 shares of our Series B common stock.
These numbers exclude outstanding stock options and warrants to purchase
shares of our common stock. Each share of our Series B common stock is
convertible into one share of our Series A common stock, at the option of
the holder. If the rights offering is fully subscribed, we will have
outstanding approximately [_____] shares of our Series A common stock and
[_____] shares of our Series B common stock (excluding outstanding stock
options and warrants to purchase shares of our common stock) following the
issuance of all shares purchased in the rights offering.
Q: How do I exercise my rights?
A: Each holder who wishes to exercise the basic subscription privilege under
its rights should properly complete and sign its rights certificate and
deliver the rights certificate together with payment of the subscription
price for each share of common stock subscribed for to the subscription
agent before the expiration time. Each holder who further wishes to
exercise the oversubscription privilege under its rights must also include
payment of the subscription price for each share of common stock
subscribed for under the oversubscription privilege. We recommend that any
rightsholder who uses the United States mail to effect delivery to the
subscription agent use insured, registered mail with return receipt
requested. Any holder who cannot deliver its rights certificate to the
subscription agent before the expiration time may use the procedures for
guaranteed delivery described under the heading "The Rights Offering --
Guaranteed Delivery Procedures." We will not pay interest on cash
subscription payments. We have provided more detailed instructions on how
to exercise the rights under the heading "The Rights Offering" beginning
with the section entitled " -- Exercising Your Rights," in the rights
certificates themselves and in the document entitled "Instructions for Use
of Liberty Media Corporation Rights Certificates" that accompanies this
prospectus.
Q: How may I pay my subscription price?
A: The subscription price for shares may be paid in cash or by exchange of
any of the following debt securities of our company for the number of
shares indicated in the table below. Debt securities may be tendered only
in increments of $1,000 principal amount.
DEBT SECURITIES CUSIP FOR EACH $1,000 PRINCIPAL AMOUNT TENDERED:
NUMBER SERIES A SHARES OR SERIES B SHARES
7 7/8% senior notes due July 15, 2009 530715AB7 [_______] [_______]
8 1/2% senior debentures due January 15, 2029 530715AD3 [_______] [_______]
8 1/4% senior debentures due February 1, 2030 530715AJ0 [_______] [_______]
7 3/4% senior notes due July 15, 2009 530718AA3 [_______] [_______]
We refer to each of the series of senior notes listed in this table as the
"senior notes" and to each of the series of senior debentures listed in
this table as the "senior debentures."
Q: What should I do if I want to participate in the rights offering but my
shares are held in the name of my broker or a custodian bank?
A: We will ask brokers, dealers and nominees holding shares of our common
stock on behalf of other persons to notify these persons of the rights
offering. Any beneficial owner wishing to sell or exercise its rights will
need to have its broker, dealer or nominee act on its behalf. Each
beneficial owner should complete and return to its broker, dealer or
nominee the form entitled "Beneficial Owner Election Form." This form will
be available with the other subscription materials from brokers, dealers
and nominees holding shares of our common stock on behalf of other
persons.
3
Q: Will I receive subscription materials by mail if my address is outside the
United States?
A: No. We will not mail rights certificates to any person with an address
outside the United States. Instead, the subscription agent will hold
rights certificates for the account of all foreign holders. To exercise
those rights, each such holder must notify the subscription agent on or
before 11:00 a.m., New York City time, on [_______], 2002, and establish
to the satisfaction of the subscription agent that it is permitted to
exercise its rights under applicable law. The subscription agent will
attempt to sell, if feasible, the rights held on behalf of any foreign
holder who fails to notify the subscription agent and provide acceptable
instructions to it by such time (and assuming no contrary instructions are
received). The estimated proceeds, if any, of any such sale will be
payable to the applicable foreign holder.
Q: Will I be charged any fees if I exercise my rights?
A: We will not charge a fee to holders for exercising their rights. However,
any holder exercising its rights through a broker, dealer or nominee will
be responsible for any fees charged by its broker, dealer or nominee.
Q: May I transfer my rights if I do not want to purchase any shares?
A: Yes. The rights being distributed to our shareholders are transferable and
[we expect them to be listed for trading] on the NYSE until the close of
business on the last trading day before the expiration time. However, we
cannot assure you that a trading market for the rights will develop,
Q: How may I sell my rights?
A: Any holder who wishes to sell its rights should contact its broker or
dealer. Any holder who wishes to sell its rights may also seek to sell the
rights through the subscription agent. Each holder will be responsible for
all fees associated with the sale of its rights, whether the rights are
sold through its own broker or dealer or the subscription agent. We cannot
assure you that any person, including the subscription agent, will be able
to sell any rights on your behalf. Please see "The Rights Offering --
Method of Transferring and Selling Rights" for more information.
Q: Am I required to subscribe in the rights offering?
A: No. However, any shareholder who chooses not to exercise its rights will
experience dilution to its equity interest in our company.
Q: If I exercise rights in the rights offering, may I cancel or change my
decision?
A: No. All exercises of rights are irrevocable even if we extend the
subscription period. We may extend the expiration time for any reason.
Q: If I exercise my rights, when will I receive the shares for which I have
subscribed?
A: We will issue the shares for which subscriptions have been properly
delivered to the subscription agent prior to the expiration time as soon
as practicable following the expiration time, which we expect to be within
five business days after the expiration time. We will not be able to
calculate the number of shares to be issued to each exercising
rightsholder until the third business day after the expiration time, which
is the latest time by which rights certificates may be delivered to the
subscription agent under the guaranteed delivery procedures described
under "The Rights Offering -- Exercising Your Rights -- Guaranteed
Delivery Procedures." Shares that you purchase in the rights offering will
be listed on the NYSE.
4
Q: Have you or your board of directors made a recommendation as to whether I
should exercise or sell my rights or how I should pay my subscription
price?
A: No. Neither we nor our board of directors has made any recommendation as
to whether you should exercise or transfer your rights or, if exercised,
whether you should pay the subscription price in cash or by exchange of
debt securities. You should decide whether to transfer your rights,
subscribe for shares of the applicable series of our common stock, pay the
subscription price in cash or debt securities or simply take no action
with respect to your rights, based upon your own assessment of your best
interests.
Q: What are the tax consequences of the rights offering to me?
A: The U.S. federal income tax consequences to shareholders who receive
rights is complex and will depend upon a number of factors. Based upon our
current estimates that we will have no current or accumulated earnings and
profits for the taxable year that includes the distribution of rights, we
do not expect that you will be required to recognize taxable income or
gain upon the distribution of rights to you, unless your basis in a share
of our common stock is less than the fair market value on the date of the
distribution of the Put Right (as defined in the section entitled "Certain
Federal Income Tax Consequences") that is distributed with respect to such
share. We also do not expect that you will recognize taxable income or
gain upon the exercise (whether by using cash or our debt securities to
pay the subscription price) or expiration of rights, except to the extent
of cash received for accrued and unpaid interest upon exercise of rights
with our debt securities, and in certain circumstances you may be entitled
to recognize a loss upon the exercise or expiration of rights. If you
sell, exchange or otherwise dispose of your rights or the shares of common
stock that you acquire by exercising your rights, you may recognize gain
or loss. For a complete summary of the material U.S. federal income tax
consequences to holders of our common stock, please see the section
entitled "Certain Federal Income Tax Consequences."
Q: What should I do if I have other questions?
A: If you have questions or need assistance, please contact [_________], the
information agent for the rights offering, at:
[_____________]
[_____________]
Banks and brokers call collect: [(___) ___-____]
All others call toll free: [(___) ___-____]
For further assistance on how to subscribe for shares, you may also
contact [_________], the subscription agent for the rights offering, by mail or
telephone at:
[_____________]
[_____________]
Tel: [(___) ___-____]
RECENT DEVELOPMENTS
Pending Acquisition of Casema
On July 31, 2002, we entered into a definitive agreement to acquire (1) all
of the outstanding capital stock of Casema Holding B.V. from Dutchtone Group
B.V., which is an 86% owned subsidiary of France Telecom, S.A., and (2) all of
the intercompany indebtedness owed by Casema and its subsidiaries to France
Telecom, for an aggregate purchase price of approximately E750 million, subject
to certain adjustments. Casema is the third largest cable operator in the
Netherlands by number of subscribers. If closed, the acquisition would add
approximately 1.3 million cable subscribers to our European operations. We
anticipate completing the acquisition of Casema by October 31, 2002,
5
subject to customary closing conditions, including clearance from the Dutch
regulatory authorities. Therefore, we cannot assure you that we will be able to
close this acquisition within this time frame or at all.
Acquisition of Wink Communications
On August 22, 2002, we completed the acquisition by merger of Wink
Communications, Inc. for total cash consideration of approximately $100 million.
Through the merger, Wink became an indirect wholly owned subsidiary of our
company, and each outstanding share of Wink common stock was converted into the
right to receive $3.00 in cash, without interest. Wink provides mass-market
interactive television solutions in North America. Wink's technology platform
enables viewers to access program-related information (such as weather, sports
updates, trivia and play-along games), to process transactions with advertisers
and programmers (such as purchases) and to make requests of advertisers and
programmers (such as requests for product samples), without interruption in
their television viewing. Wink also collects, analyzes and routes viewer
behavior and response data to advertisers and broadcasters, which assists them
in evaluating the success and value of their television campaigns.
Acquisition of Controlling Ownership Interest in OpenTV
On August 27, 2002, we completed a transaction with MIH Limited, pursuant
to which we acquired MIH's indirect controlling ownership stake in OpenTV Corp.
for 15.4 million shares of our Series A common stock and $46.2 million in cash.
When combined with our prior shareholdings, this transaction increased our total
economic interest in OpenTV to approximately 40% and our total voting interest
to approximately 85%. OpenTV is one of the world's leading interactive
television companies. OpenTV provides software, content and applications, and
professional services that enable digital television network operators to
deliver and manage interactive television services on cable, satellite and
terrestrial platforms. OpenTV's middleware is deployed in more than 25 million
digital set-top boxes worldwide.
RISK FACTORS
The purchase of our common stock pursuant to the exercise of rights
involves a high degree of risk. You should read and carefully consider the
information set forth under "Risk Factors" beginning on page 8 and the
information contained elsewhere in this prospectus.
6
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table provides you with selected historical consolidated
financial data of Liberty Media. From August 1994 to March 1999 Liberty Media
was a wholly owned subsidiary of Tele-Communications, Inc. On March 9, 1999,
AT&T Corp. acquired TCI in a merger transaction and changed TCI's name to AT&T
Broadband. For financial reporting purposes, the merger of AT&T and TCI is
deemed to have occurred on March 1, 1999. In connection with that merger, the
assets and liabilities of Liberty Media were adjusted to their respective fair
values pursuant to the purchase method of accounting. For periods prior to March
1, 1999, the assets and liabilities of Liberty Media and the related
consolidated results of operations are referred to below as "Old Liberty," and
for periods subsequent to February 28, 1999, the assets and liabilities of
Liberty Media and the related consolidated results of operations are referred to
as "New Liberty." Also, in connection with that merger, TCI effected an internal
restructuring as a result of which certain net assets and approximately $5.5
billion in cash were contributed to Liberty Media. On August 10, 2001, AT&T
effected a split off of Liberty Media and as a result of that transaction,
Liberty Media is no longer a subsidiary of AT&T. We derived the following
historical consolidated financial data from our consolidated financial
statements. It is important that when you read this information, you read along
with it the consolidated financial statements and accompanying notes of Liberty
Media incorporated by reference in this prospectus. For a list of documents
incorporated by reference in this prospectus, see "Where You Can Find More
Information."
NEW LIBERTY OLD LIBERTY
---------------------------------- ------------------------------
SIX SIX TEN TWO
MONTHS MONTHS YEAR YEAR MONTHS MONTHS YEAR ENDED
ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31,
JUNE 30, JUNE 30, DECEMBER DECEMBER DECEMBER FEBRUARY ------------------
2002 2001 31, 2001 31, 2000 31, 1999 28, 1999 1998 1997
-------- -------- -------- -------- -------- -------- ------- -------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS) (IN MILLIONS)
OPERATING DATA:
Revenue ........................... $ 1,023 $ 1,017 $ 2,059 $ 1,526 $ 729 $ 235 $ 1,359 $ 1,225
Operating income (loss) ........... 65 (402) (1,127) 436 (2,214) (158) (431) (260)
Interest expense .................. (215) (269) (525) (399) (135) (26) (104) (40)
Share of losses of affiliates,
net (244) (2,547) (4,906) (3,485) (904) (66) (1,002) (785)
Non-temporary declines in fair
value of investments ............ (5,134) (604) (4,101) (1,463) -- -- -- --
Gain (loss) on dispositions,
net (397) (58) (310) 7,340 4 14 2,449 406
Net earnings (loss) ............... (4,569) (2,277) (6,203) 1,485 (2,021) (70) 622 (470)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents ......... $ 1,975 $ 2,077 $ 1,295 $ 1,714 $ 228 $ 100
Short-term investments ............ 107 397 500 378 159 248
Investments in affiliates ......... 7,825 10,076 20,464 15,922 3,079 2,359
Investments in available-for-
sale securities and other cost
investments ..................... 19,661 23,199 19,035 28,593 10,539 3,971
Total assets ...................... 39,743 48,194 54,268 58,658 15,783 7,735
Debt, including current portion
and call option obligations ..... 6,078 7,227 6,363 3,277 2,096 785
Stockholders' equity .............. 24,247 30,123 34,109 38,408 8,820 4,707
7
RISK FACTORS
An investment in our common stock involves risk. You should carefully
consider the following factors, as well as the other information included in
this prospectus and in the documents we have incorporated by reference before
deciding to subscribe for shares of our common stock. Any of the following risks
could have a material adverse effect on the value of our common stock.
FACTORS RELATING TO OUR COMPANY
WE DEPEND ON A LIMITED NUMBER OF POTENTIAL CUSTOMERS FOR CARRIAGE OF OUR
PROGRAMMING SERVICES. The cable television and direct-to-home satellite
industries are currently undergoing a period of consolidation. As a result, the
number of potential buyers of our programming services and those of our business
affiliates is decreasing. Until August of 2001, we were a subsidiary of AT&T
Corp. AT&T's cable television subsidiaries and affiliates, which as a group
comprise one of the two largest operators of cable television systems in the
United States, are collectively the largest single customer of our programming
companies. With respect to some of our programming services and those of our
business affiliates, this is the case by a significant margin. The existing
agreements between AT&T's cable television subsidiaries and affiliates and the
program suppliers owned by or affiliated with us were entered into with
Tele-Communications, Inc., prior to its merger with AT&T in March of 1999. We
were a subsidiary of TCI at the time of that merger. There can be no assurance
that our owned and affiliated program suppliers will be able to negotiate
renewal agreements with AT&T's cable television subsidiaries and affiliates.
Although AT&T has agreed to extend any existing affiliation agreement of ours
and our affiliates that expires on or before March 9, 2004 to a date not before
March 9, 2009, that agreement is conditioned on mutual most favored nation terms
being offered and the arrangements being consistent with industry practice. In
addition, AT&T and Comcast Corporation have entered into an agreement to merge
AT&T Broadband LLC, the holding company for AT&T's cable television business,
with Comcast. The transaction recently received shareholder approval but remains
subject to customary closing conditions, including the receipt of regulatory
approvals. We cannot assure you as to what effect, if any, this merger will have
on these programming arrangements.
THE LIQUIDITY AND VALUE OF OUR INTERESTS IN OUR BUSINESS AFFILIATES MAY BE
ADVERSELY AFFECTED BY SHAREHOLDERS AGREEMENTS AND SIMILAR AGREEMENTS TO WHICH WE
ARE A PARTY. We own equity interests in a broad range of domestic and
international video programming and communications businesses. A significant
portion of the equity securities we own is held pursuant to shareholder
agreements, partnership agreements and other instruments and agreements that
contain provisions that affect the liquidity, and therefore the realizable
value, of those securities. Most of these agreements subject the transfer of the
stock, partnership or other interests constituting equity securities to consent
rights or rights of first refusal of the other shareholders or partners. In
certain cases, a change in control of our company or of the subsidiary holding
our equity interest will give rise to rights or remedies exercisable by other
shareholders or partners, such as a right to initiate or require the initiation
of buy/sell procedures. Some of our subsidiaries and business affiliates are
parties to loan agreements that restrict changes in ownership of the borrower
without the consent of the lenders. All of these provisions will restrict our
ability to sell those equity securities and may adversely affect the price at
which those securities may be sold. For example, in the event buy/sell
procedures are initiated at a time when we are not in a financial position to
buy the initiating party's interest, we could be forced to sell our interest at
a price based upon the value established by the initiating party, and that price
might be significantly less than what we might otherwise obtain.
WE DO NOT HAVE THE RIGHT TO MANAGE OUR BUSINESS AFFILIATES, WHICH MEANS WE
CANNOT CAUSE THOSE AFFILIATES TO OPERATE IN A MANNER THAT IS FAVORABLE TO US. We
do not have the right to manage the businesses or affairs of any of our business
affiliates in which we have less than a majority voting interest. Rather, our
rights may take the form of representation on the board of directors or a
partners' or similar committee that supervises management or possession of veto
rights over significant or extraordinary actions. The scope of our veto rights
varies from agreement to agreement. Although our board representation and veto
rights may enable us to exercise influence over the management or policies of an
affiliate and enable us to prevent the sale of assets by a business affiliate in
which we own less than a majority voting interest or prevent it from paying
dividends or making distributions to its shareholders or partners, they do not
enable us to cause these actions to be taken.
8
OUR BUSINESS IS SUBJECT TO RISKS OF ADVERSE GOVERNMENT REGULATION.
Programming services, cable television systems, satellite carriers and
television stations are subject to varying degrees of regulation in the United
States by the Federal Communications Commission and other entities. Such
regulation and legislation are subject to the political process and have been in
constant flux over the past decade. In addition, substantially every foreign
country in which we have, or may in the future make, an investment regulates, in
varying degrees, the distribution and content of programming services and
foreign investment in programming companies and wireline and wireless cable
communications, satellite and telephony services. Further material changes in
the law and regulatory requirements must be anticipated, and there can be no
assurance that our business will not be adversely affected by future
legislation, new regulation or deregulation.
WE MAY MAKE SIGNIFICANT CAPITAL CONTRIBUTIONS AND LOANS TO OUR
SUBSIDIARIES AND BUSINESS AFFILIATES TO COVER THEIR OPERATING LOSSES AND FUND
THEIR DEVELOPMENT AND GROWTH, WHICH COULD LIMIT THE AMOUNT OF CASH AVAILABLE TO
PAY OUR OWN FINANCIAL OBLIGATIONS OR TO MAKE ACQUISITIONS OR INVESTMENTS. The
development of video programming, communications and technology businesses
involves substantial costs and capital expenditures. As a result, many of our
business affiliates have incurred operating and net losses to date and are
expected to continue to incur significant losses for the foreseeable future. Our
results of operations include our, and our consolidated subsidiaries', share of
the net losses of affiliates. Our net losses included $244 million for the first
six months of 2002, $4,906 million for calendar year 2001 and $3,485 million for
calendar year 2000 attributable to net losses of affiliates.
We have assisted, and may in the future assist, our subsidiaries and
business affiliates in their financing activities by guaranteeing bank and other
financial obligations. At June 30, 2002, we had guaranteed various loans, notes
payable, letters of credit and other obligations of certain of our subsidiaries
and business affiliates totaling approximately $645 million.
To the extent we make loans and capital contributions to our subsidiaries
and business affiliates or we are required to expend cash due to a default by a
subsidiary or business affiliate of any obligation we guarantee, there will be
that much less cash available to us with which to pay our own financial
obligations or make acquisitions or investments.
IF WE FAIL TO MEET REQUIRED CAPITAL CALLS TO A SUBSIDIARY OR BUSINESS
AFFILIATE, WE COULD BE FORCED TO SELL OUR INTEREST IN THAT COMPANY, OUR INTEREST
IN THAT COMPANY COULD BE DILUTED OR WE COULD FORFEIT IMPORTANT RIGHTS. We are
parties to shareholder and partnership agreements that provide for possible
capital calls on shareholders and partners. Our failure to meet a capital call,
or other commitment to provide capital or loans to a particular subsidiary or
business affiliate, may have adverse consequences to us. These consequences may
include, among others, the dilution of our equity interest in that company, the
forfeiture of our right to vote or exercise other rights, the right of the other
shareholders or partners to force us to sell our interest at less than fair
value, the forced dissolution of the company to which we have made the
commitment or, in some instances, a breach of contract action for damages
against us. Our ability to meet capital calls or other capital or loan
commitments is subject to our ability to access cash. See " -- We could be
unable in the future to obtain cash in amounts sufficient to service our
financial obligations" below.
WE ARE SUBJECT TO THE RISK OF POSSIBLY BECOMING AN INVESTMENT COMPANY.
Because we are a holding company and a significant portion of our assets
consists of investments in companies in which we own less than a 50% interest,
we run the risk of inadvertently becoming an investment company that is required
to register under the Investment Company Act of 1940. Registered investment
companies are subject to extensive, restrictive and potentially adverse
regulation relating to, among other things, operating methods, management,
capital structure, dividends and transactions with affiliates. Registered
investment companies are not permitted to operate their business in the manner
in which we operate our business, nor are registered investment companies
permitted to have many of the relationships that we have with our affiliated
companies.
To avoid regulation under the Investment Company Act, we monitor the value
of our investments and structure transactions with an eye toward the Investment
Company Act. As a result, we may structure transactions in a less advantageous
manner than if we did not have Investment Company Act concerns, or we may avoid
otherwise economically desirable transactions due to those concerns. In
addition, events beyond our control, including
9
significant appreciation or depreciation in the market value of certain of our
publicly traded holdings, could result in our becoming an inadvertent investment
company. If we were to become an inadvertent investment company, we would have
one year to divest of a sufficient amount of investment securities and/or
acquire other assets sufficient to cause us to no longer be an investment
company.
If it were established that we are an unregistered investment company,
there would be a risk, among other material adverse consequences, that we could
become subject to monetary penalties or injunctive relief, or both, in an action
brought by the Securities and Exchange Commission, that we would be unable to
enforce contracts with third parties or that third parties could seek to obtain
rescission of transactions with us undertaken during the period it was
established that we were an unregistered investment company.
WE COULD BE UNABLE IN THE FUTURE TO OBTAIN CASH IN AMOUNTS SUFFICIENT TO
SERVICE OUR FINANCIAL OBLIGATIONS. Our ability to meet our financial obligations
depends upon our ability to access cash. We are a holding company, and our
sources of cash include our available cash balances, net cash from operating
activities, dividends and interest from our investments, availability under
credit facilities and proceeds from asset sales. We cannot assure you that we
will maintain significant amounts of cash, cash equivalents or marketable
securities in the future.
We obtained from one of our subsidiaries net cash in the form of dividends
in the amount of $23 million in calendar year 2001 and $5 million in calendar
year 2000. We did not obtain any cash dividends from our subsidiaries in the
first six months of 2002. The ability of our operating subsidiaries to pay
dividends or to make other payments or advances to us depends on their
individual operating results and any statutory, regulatory or contractual
restrictions to which they may be or may become subject. Some of our
subsidiaries are subject to loan agreements that restrict sales of assets and
prohibit or limit the payment of dividends or the making of distributions, loans
or advances to shareholders and partners.
We generally do not receive cash, in the form of dividends, loans,
advances or otherwise, from our business affiliates. In this regard, we do not
have sufficient voting control over most of our business affiliates to cause
those companies to pay dividends or make other payments or advances to their
partners or shareholders, including us.
WE HAVE ENTERED INTO BANK CREDIT AGREEMENTS THAT CONTAIN RESTRICTIONS ON
HOW WE FINANCE OUR OPERATIONS AND OPERATE OUR BUSINESS, WHICH COULD IMPEDE OUR
ABILITY TO ENGAGE IN TRANSACTIONS THAT WOULD BE BENEFICIAL TO US. We and our
subsidiaries are subject to significant financial and operating restrictions
contained in outstanding credit facilities. These restrictions will affect, and
in some cases significantly limit or prohibit, among other things, our ability
or the ability of our subsidiaries to:
- borrow more funds;
- pay dividends or make other distributions;
- make investments;
- engage in transactions with affiliates; or
- create liens.
The restrictions contained in these credit agreements could have the
following adverse effects on us, among others:
- we could be unable to obtain additional capital in the future to:
- fund capital expenditures or acquisitions that could improve
the value of our company;
- permit us to meet our loan and capital commitments to our
business affiliates;
10
- allow us to help fund the operating losses or future
development of our business affiliates; or
- allow us to conduct necessary corporate activities;
- we could be unable to access the net cash of our subsidiaries to
help meet our own financial obligations;
- we could be unable to invest in companies in which we would
otherwise invest; and
- we could be unable to obtain lower borrowing costs that are
available from secured lenders or engage in advantageous
transactions that monetize our assets.
In addition, some of the credit agreements to which our subsidiaries are
parties require them to maintain financial ratios, including ratios of total
debt to operating cash flow and operating cash flow to interest expense. If we
or our subsidiaries fail to comply with the covenant restrictions contained in
the credit agreements, that failure could result in a default that accelerates
the maturity of the indebtedness under those agreements. Such a default could
also result in indebtedness under other credit agreements and certain of our
debt securities becoming due and payable due to the existence of cross-default
or cross-acceleration provisions of our credit agreements and in the indentures
governing such debt securities.
THOSE OF OUR BUSINESS AFFILIATES THAT OPERATE OFFSHORE ARE SUBJECT TO
NUMEROUS OPERATIONAL RISKS. A number of our business affiliates operate
primarily in countries other than the United States. Their businesses are thus
subject to the following inherent risks:
- fluctuations in currency exchange rates;
- longer payment cycles for sales in foreign countries that may
increase the uncertainty associated with recoverable accounts;
- difficulties in staffing and managing international operations; and
- political unrest that may result in disruptions of services that are
critical to their businesses.
THE ECONOMIES IN MANY OF THE OPERATING REGIONS OF OUR INTERNATIONAL
BUSINESS AFFILIATES HAVE RECENTLY EXPERIENCED RECESSIONARY CONDITIONS, WHICH HAS
ADVERSELY AFFECTED THE FINANCIAL CONDITION OF THEIR BUSINESSES. The economies in
many of the operating regions of our international business affiliates have
recently experienced moderate to severe recessionary conditions, including
Argentina, Chile, the United Kingdom, Germany and Japan, among others, which has
strained consumer and corporate spending and financial systems and financial
institutions in these areas. As a result, our affiliates have experienced a
reduction in consumer spending and demand for services coupled with an increase
in borrowing costs, which has, in some cases, caused our affiliates to default
on their own indebtedness. We cannot assure you that these economies will
recover in the future or that continued economic weakness will not lead to
further reductions in consumer spending or demand for services. We also cannot
assure you that our affiliates in these regions will be able to obtain
sufficient capital or credit to fund their operations.
YOU WILL HAVE NO RECOURSE AGAINST ONE OF THE EXPERTS NAMED IN THIS
PROSPECTUS. Arthur Andersen LLP is unable to consent to the use of their
independent auditors report with respect to (1) the consolidated financial
statements as of December 31, 2001 and for the period from February 5, 2001
(inception) through December 31, 2001 of UnitedGlobalCom, Inc. and (2) the
consolidated financial statements as of December 31, 2001 and 2000, and for the
three-years then ended of UGC Holdings, Inc., which financial statements have
been incorporated by reference into this prospectus. This means that Arthur
Andersen is not reconfirming the continuing validity of its audit opinion on
those financial statements. Although we have no reason to believe that those
financial statements are incorrect, if they are incorrect and we are adversely
affected as a result, you will not be able to recover any
11
damages you may incur from Arthur Andersen.
WE HAVE TAKEN SIGNIFICANT IMPAIRMENT CHARGES DUE TO OTHER THAN TEMPORARY
DECLINES IN THE MARKET VALUE OF CERTAIN OF OUR AVAILABLE FOR SALE SECURITIES. We
own equity interests in a significant number of publicly traded companies which
we account for as available for sale securities. We are required by generally
accepted accounting principles to determine, from time to time, whether a
decline in the market value of any of those investments below our cost for that
investment is other than temporary. If we determine that it is, we are required
to write down our cost to a new cost basis, with the amount of the write-down
accounted for as a realized loss in the determination of net income for the
period in which the write-down occurs. We realized losses of $5,134 million,
$4,101 million and $1,463 million for the six months ended June 30, 2002 and for
the years ended December 31, 2001 and 2000, respectively, due to other than
temporary declines in the fair value of certain of our available for sale
securities, and we may be required to realize further losses of this nature in
future periods. We consider a number of factors in determining the fair value of
an investment and whether any decline in an investment is other than temporary.
As our assessment of fair value and any resulting impairment losses requires a
high degree of judgment and includes significant estimates and assumptions, the
actual amount we may eventually realize for an investment could differ
materially from our assessment of the value of that investment made in an
earlier period.
FACTORS RELATING TO THE RIGHTS OFFERING AND OUR COMMON STOCK
IF WE TERMINATE THE RIGHTS OFFERING, NEITHER WE NOR THE SUBSCRIPTION AGENT
WILL HAVE ANY OBLIGATION TO YOU EXCEPT TO RETURN YOUR SUBSCRIPTION PAYMENTS. We
may terminate the rights offering for any reason prior to the expiration time.
However, you may not revoke your exercise of rights. If we terminate the rights
offering, neither we nor the subscription agent will have any obligation to you
with respect to the rights, except to return your subscription payments, without
interest or deduction (except that interest will continue to accrue on any
tendered debt securities). In addition, if you purchase rights on the public
market and we later terminate the rights offering, you will lose the purchase
price you paid for your rights.
THE SUBSCRIPTION PRICE MAY NOT REFLECT THE VALUE OF OUR COMPANY. The
special pricing committee of our board of directors determined the subscription
price for each series of our common stock. Each subscription price represented a
discount of approximately [___%] to the market price of the applicable series of
our common stock as of the date of this prospectus. The subscription prices do
not necessarily bear any relationship to the book value of our assets, historic
or future cash flows, financial condition, recent or historic stock prices or
any other established criteria for valuation, and you should not consider the
subscription prices as any indication of the value of our company. We cannot,
however, assure you that our common stock will trade at prices in excess of the
subscription prices at any time after the date of this prospectus.
SHAREHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS WILL EXPERIENCE DILUTION. If
you do not exercise your basic subscription privilege in full, you will
experience a decrease in your proportionate interest in the equity ownership of
our company. If you do not exercise or sell your rights, you will relinquish any
value inherent in the rights.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US, EVEN IF DOING SO MAY
BE BENEFICIAL TO OUR SHAREHOLDERS. Certain provisions of our restated
certificate of incorporation and bylaws may discourage, delay or prevent a
change in control of our company that a shareholder may consider favorable.
These provisions include the following:
- authorizing the issuance of "blank check" preferred stock that could
be issued by our board of directors to increase the number of
outstanding shares and thwart a takeover attempt;
- classifying our board of directors with staggered three-year terms,
which may lengthen the time required to gain control of our board of
directors;
- limiting who may call special meetings of shareholders;
- prohibiting shareholder action by written consent, thereby requiring
all shareholder actions to be taken at a meeting of the
shareholders; and
12
- establishing advance notice requirements for nominations of
candidates for election to the board of directors or for proposing
matters that can be acted upon by shareholders at shareholder
meetings.
Section 203 of the Delaware General Corporation Law and any stock option
plan relating to our common stock may also discourage, delay or prevent a change
in control of our company even if such change of control would be in the best
interests of our shareholders.
OUR STOCK PRICE MAY DECLINE SIGNIFICANTLY BECAUSE OF STOCK MARKET
FLUCTUATIONS THAT AFFECT THE PRICES OF THE PUBLIC COMPANIES IN WHICH WE HAVE
OWNERSHIP INTERESTS. The stock market has recently experienced significant price
and volume fluctuations that have affected the market prices of securities of
media and other technology companies. We own equity interests in many media and
technology companies. If market fluctuations cause the stock price of these
companies to decline, our stock price may decline.
OUR STOCK PRICE HAS DECLINED SIGNIFICANTLY OVER THE LAST YEAR. During the
past year, the stock market has experienced significant price and volume
fluctuations that have affected the market prices of our stock. In the future,
our stock price may be materially affected by, among other things:
- the rights offering, the number of shares offered and the price at
which shares may be purchased pursuant to the rights;
- actual or anticipated fluctuations in our operating results or those
of the companies in which we invest;
- potential acquisition activity by our company or the companies in
which we invest;
- changes in financial estimates by securities analysts regarding our
company or companies in which we invest; or
- general market conditions.
We cannot assure you that the market price of our Series A common stock
will not decline below the Series A subscription price, or that the market price
of our Series B common stock will not decline below the Series B subscription
price. You will not be able to revoke your exercise of rights were this to occur
after you exercise your rights. Also, we cannot assure you that after you
exercise your rights you will be able to sell the shares of common stock
purchased thereby at a price equal to or greater than the subscription price
paid by you.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including documents incorporated by reference herein,
contains forward looking statements concerning future events that are subject to
risks, uncertainties and assumptions. These forward-looking statements are based
upon our current expectations and projections about future events. When used in
this prospectus and in our incorporated documents, the words "believe,"
"anticipate," "intend," "estimate," "expect" and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain such words. These forward-looking statements
are subject to risks, uncertainties and assumptions about us and our
subsidiaries and business affiliates, including, among other things, the
following:
- the success of the rights offering;
- general economic and business conditions and industry trends;
- the continued strength of the industries in which we are involved;
- uncertainties inherent in our proposed business strategies;
13
- our future financial performance, including availability, terms and
deployment of capital;
- availability of qualified personnel;
- changes in, or our failure or inability to comply with, government
regulations and adverse outcomes from regulatory proceedings;
- changes in the nature of key strategic relationships with partners
and business affiliates;
- rapid technological changes;
- our inability to obtain regulatory or other necessary approvals of
any strategic transactions; and
- social, political and economic situations in foreign countries where
we do business.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of the document in which they are
included. In light of these risks, uncertainties and other assumptions, the
forward-looking events discussed in this prospectus might not occur.
USE OF PROCEEDS
If all of the rights are exercised and all subscriptions are paid in cash,
we will receive approximately $310,000,000, before deducting any offering
expenses. These expenses are estimated to be $1,000,000. We will not receive
cash proceeds to the extent subscriptions are paid by tender of our debt
securities. We will deliver for cancellation any debt securities received in
payment of the subscription price to the trustee for those securities. We will
use any net cash proceeds we receive from the rights offering for general
corporate purposes.
DIVIDEND POLICY
We have never paid cash dividends on our common stock, and we do not plan
to do so for the foreseeable future. However, the payment of any dividends by us
and the amount of any such dividends will be subject to the discretion of our
board of directors and will depend, among other things, upon our results of
operations, financial condition, cash requirements, future prospects and other
factors which may be considered relevant by our board of directors.
14
PRICE RANGE OF COMMON STOCK
Our Series A common stock is listed under the symbol "L" and our Series B
common stock is listed under the symbol "LMC.B" on the New York Stock Exchange.
The following tables show the high and low sales prices of our Series A
common stock and Series B common stock for each full quarterly period since our
split off from AT&T on August 10, 2001.
SERIES A COMMON STOCK HIGH LOW
2001
Third Quarter (from August 10, 2001)............ 16.50 9.75
Fourth Quarter.................................. 14.46 11.17
2002
First Quarter................................... 15.03 11.90
Second Quarter.................................. 12.80 7.70
Third Quarter (through [____], 2002)............
SERIES B COMMON STOCK HIGH LOW
2001
Third Quarter (from August 10, 2001)............ 18.15 12.00
Fourth Quarter.................................. 15.50 12.30
2002
First Quarter................................... 15.90 12.65
Second Quarter.................................. 13.49 8.23
Third Quarter (through [____], 2002)............
On [____], 2002, we had approximately [___] stockholders of record. The
closing price of our Series A common stock on [______], 2002, the last full
trading day before we publicly announced the rights offering, was $[__] and on
[______], 2002, the record date for the rights offering, was $[__]. The closing
price of our Series B common stock on [______], 2002 was $[__] and on [______],
2002 was $[__].
15
CAPITALIZATION
The following table shows our consolidated capitalization as of June 30,
2002, on a historical basis and as adjusted to give effect to:
- our receipt of $309,000,000 in cash, the anticipated net proceeds from the
sale of all of the shares of our common stock offered pursuant to the
rights offering (assuming that all subscriptions are paid in cash); and
- our receipt of an aggregate $310,000,000 principal amount of our debt
securities, assuming that all subscriptions are paid by tender of our debt
securities.
You should read this table in conjunction with our consolidated financial
statements and related notes incorporated by reference in this prospectus.
AS OF
JUNE 30, 2002
---------------------------------------
PRO FORMA PRO FORMA
HISTORICAL (CASH ONLY) (DEBT ONLY)
---------- ----------- -----------
(AMOUNTS IN MILLIONS)
Cash and cash equivalents ............................. $ 1,975 $ 2,284 $ 1,974
Short-term investments ................................ 107 107 107
---------- ---------- ----------
$ 2,082 $ 2,391 $ 2,081
========== ========== ==========
Long-term debt (including current portion):
Bank credit facilities ............................. $ 1,857 $ 1,857 $ 1,857
Senior Notes and Debentures ........................ 2,469 2,469 2,159
Senior Exchangeable Debentures ..................... 861 861 861
Other debt 99 99 99
---------- ---------- ----------
Total debt ...................................... 5,286 5,286 4,976
---------- ---------- ----------
Call option obligations (a) ........................... 792 792 792
Stockholders' equity:
Common equity (b) .................................. 35,776 36,085 36,085
Accumulated other comprehensive losses, net of taxes (221) (221) (221)
Accumulated deficit ................................ (11,308) (11,308) (11,308)
---------- ---------- ----------
Total stockholder's equity ...................... 24,247 24,556 24,556
---------- ---------- ----------
Total capitalization ............................ $ 30,325 $ 30,634 $ 30,324
========== ========== ==========
----------
(a) The call option obligation represents the fair value of the call option
feature associated with our Senior Exchangeable Debentures. In connection
with the adoption of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities", the call option obligation
was separated from the Senior Exchangeable Debentures and recorded
separately in our financial statements at fair value. Changes in the fair
value of the call option obligations subsequent to January 1, 2001 are
recognized as unrealized gains (losses) in our consolidated statements of
operations.
(b) Excludes 15.4 million shares of our Series A common stock issued on August
27, 2002 to a subsidiary of MIH Limited in connection with our acquisition
of a controlling ownership interest in OpenTV. See "Prospectus Summary --
Recent Developments" for more information regarding this transaction.
16
THE RIGHTS OFFERING
GENERAL
Promptly following 5:00 p.m., New York City time, on [________], 2002,
which is the record date for the distribution, we will distribute to each holder
of our Series A common stock, at no charge, [0.____] transferable subscription
rights for each share of Series A common stock owned as of the record date, and
we will distribute to each holder of our Series B common stock, at no charge,
[0.____] transferable subscription rights for each share of our Series B common
stock owned as of the record date. The rights will be evidenced by rights
certificates.
Each right entitles the holder to a basic subscription privilege and an
oversubscription privilege. Under the basic subscription privilege, each whole
Series A right entitles the holder to purchase one share of our Series A common
stock at a subscription price of $[___] per share, a discount to the $[___] per
share closing price of our Series A common stock on the NYSE on [______], 2002,
and each whole Series B right entitles the holder to purchase one share of our
Series B common stock at a subscription price of $[___] per share, a discount to
the $[___] per share closing price of our Series B common stock on the NYSE on
[______], 2002. Each Series A right and Series B right also has an
oversubscription privilege, as described below under the heading " --
Subscription Privilege -- Oversubscription Privilege."
The following describes the rights offering in general and assumes (unless
specifically provided otherwise) that you are a record holder of our common
stock. If you hold your shares in a brokerage account or through a dealer or
other nominee, please see the information included below under the heading " --
Beneficial Owners." As used in this prospectus, the term "business day" means
any day on which securities may be traded on the NYSE.
REASONS FOR THE RIGHTS OFFERING
We have an ongoing need for cash to take advantage of business
opportunities as they arise. We intend to use the funds raised pursuant to this
rights offering to fund our future capital needs, including acquisition and
investment opportunities. We continue to review regularly these opportunities as
they become available. In addition, to the extent that our debt securities are
tendered in payment of subscription prices, the rights offering will enable us
to reduce the principal amount of our outstanding long-term indebtedness.
We were split off from AT&T Corp. in August 2001. In connection with the
split off, the Internal Revenue Service issued a private letter ruling
confirming that the split off would qualify as a tax-free transaction to AT&T
and its shareholders. The request for rulings and the private letter ruling
issued by the IRS stated that we intended to issue a total of at least $500
million of our equity within a specified time period following the split off. We
believe that the issuance of stock pursuant to this rights offering conforms
with this statement of our intentions.
DETERMINATION OF SUBSCRIPTION PRICE
On [______], 2002, the special pricing committee of our board of directors
determined the Series A subscription price, the Series B subscription price, the
series of our debt securities that may be tendered in the rights offering and
the rates at which these debt securities could be exchanged. The members of the
special pricing committee are John C. Malone, Donne F. Fisher and Paul A. Gould.
The Series A subscription price represents a discount of $[___] from the closing
market price of our Series A common stock on the date that the Series A
subscription price was determined, and the Series B subscription price
represents a discount of $[___] from the closing market price of our Series B
common stock on the date that the Series B subscription price was determined.
The exchange rates for each series of our debt securities is based upon the
subscription price for the Series A common stock or Series B common stock, as
applicable, compared to [__]% of the par value of the senior notes and [__]% of
the par value of the senior debentures. On [______], 2002, the average of the
bid and ask prices for the senior notes and senior debentures, as quoted by
three broker-dealers that make a market in the senior notes and senior
debentures, were:
17
AVERAGE OF BID AND
ASK PRICES PER $1,000
PRINCIPAL AMOUNT
DEBT SECURITIES (AS OF [_____], 2002)
7 7/8% senior notes due July 15, 2009 $[______]
8 1/2% senior debentures due January 15, 2029 $[______]
8 1/4% senior debentures due February 1, 2030 $[______]
7 3/4% senior notes due July 15, 2009 $[______]
In reaching these determinations, the special pricing committee considered,
among other things, our financial performance, the recent market prices of our
common stock, the recent market prices of our debt securities, discounts used in
similar rights offerings and the general condition of the securities markets.
NO FRACTIONAL RIGHTS
We will not issue or pay cash in lieu of fractional rights. Instead, we
will round [up] any fractional rights to the nearest whole right. For example,
if you own [__] shares of Series A common stock, you will receive [__] rights,
instead of [__] rights you would have received without rounding.
You may request that the subscription agent divide your rights certificate
into transferable parts if you are the record holder for a number of beneficial
owners of common stock. However, the subscription agent will not divide your
rights certificate so that (through rounding or otherwise) you would receive a
greater number of rights than those to which you would be entitled if you had
not divided your certificates.
EXPIRATION TIME
You may exercise the basic subscription privilege and the oversubscription
privilege at any time before the expiration time, which is 5:00 p.m., New York
City time, on [____], 2002, unless the rights offering is extended. If you do
not exercise your rights before the expiration time, then your rights will
expire and become null and void. We will not be obligated to honor your exercise
of rights if the subscription agent receives any of the required documents
relating to your exercise after the expiration time, regardless of when you
transmitted the documents, except if you have timely transmitted the documents
pursuant to the guaranteed delivery procedures described below.
We may extend the expiration time for any reason, and you will not be able
to revoke your exercise of subscriptions.
If we elect to extend the date the rights expire, we will issue a press
release announcing the extension before 9:00 a.m. on the first business day
after the most recently announced expiration time.
SUBSCRIPTION PRIVILEGES
Your rights entitle you to a basic subscription privilege and an
oversubscription privilege.
Basic Subscription Privilege
The basic subscription privilege entitles you to purchase one share of the
applicable series of common stock per whole right held, upon delivery of the
required documents and payment of the applicable subscription price per share,
prior to the expiration time. You are not required to exercise your basic
subscription privilege, in full or in part, unless you wish to also purchase
shares under your oversubscription privilege described below.
Oversubscription Privilege
The oversubscription privilege entitles you to purchase up to that number
of shares of the applicable series of our common stock offered in the rights
offering which are not purchased by other holders of the same series of
18
rights pursuant to their basic subscription privilege, upon delivery of the
required documents and payment of the applicable subscription price per share
prior to the expiration time. You will be permitted to purchase shares of common
stock of the applicable series pursuant to your oversubscription privilege only
if other holders of rights of the same series do not exercise their basic
subscription privilege in full. You may exercise your oversubscription privilege
only if you exercise your basic subscription privilege in full. If you wish to
exercise your oversubscription privilege, you must specify the number of
additional shares you wish to purchase, which may be up to the maximum number of
shares of that series offered in the rights offering, less the number of shares
of that series you may purchase under your basic subscription privilege.
Pro Rata Allocation. If there are not enough shares of the applicable
series to satisfy all subscriptions pursuant to the exercise of the
oversubscription privilege, we will allocate the shares of the applicable series
that are available for purchase under the oversubscription privilege pro rata
(subject to the elimination of fractional shares) among those rightsholders of
the same series who exercise their oversubscription privilege . Pro rata means
in proportion to the number of shares of the applicable series that you and the
other holders of the same series of rights have purchased pursuant to the
exercise of the basic subscription privilege. If there is a need to prorate the
exercise of rights pursuant to the oversubscription privilege and the pro ration
results in the allocation to you of a greater number of shares than you
subscribed for pursuant to the oversubscription privilege, then we will allocate
to you only the number of shares of the applicable series for which you
subscribed. We will allocate the remaining shares among all other holders of the
applicable series of rights exercising their oversubscription privileges.
Full Exercise of Basic Subscription Privilege. You may exercise your
oversubscription privilege only if you exercise, in full, your basic
subscription privilege for all rights represented by a single rights
certificate. To determine if you have fully exercised your basic subscription
privilege, we will consider only the basic subscription privilege held by you in
the same capacity under a single rights certificate. For example, if you were
granted rights under a single rights certificate for shares of Series A common
stock you own individually and rights under a single rights certificate for
shares of Series A common stock you own jointly with your spouse, you only need
to fully exercise your basic subscription privilege with respect to your
individually owned rights in order to exercise your oversubscription privilege
with respect to those rights. You do not have to subscribe for any shares under
the basic subscription privilege owned jointly with your spouse to exercise your
individual oversubscription privilege. If you transfer a portion of your rights,
you may exercise your oversubscription privilege if you exercise all of the
remaining rights represented by the rights certificate you receive back from the
subscription agent following the transfer.
You must exercise your oversubscription privilege at the same time as you
exercise your basic subscription privilege in full.
If you own your shares of common stock through your broker, dealer or
other nominee holder and you wish for them to exercise your oversubscription
privilege on your behalf, the nominee holder will be required to certify to us
and the subscription agent:
- the number of shares of the applicable series held on the record
date on your behalf;
- the number of rights of the applicable series you exercised under
your basic subscription privilege;
- that your entire basic subscription privilege held in the same
capacity has been exercised in full; and
- the number of shares of common stock of the applicable series you
subscribed for pursuant to the oversubscription privilege.
Your nominee holder must also disclose to us certain other information received
from you.
Return of Excess Payment. If you exercise your oversubscription privilege
and are allocated less than all of the shares of common stock for which you
subscribed, the funds you paid or debt securities you tendered for exchange for
those shares of common stock that are not allocated to you will be returned by
mail or similarly prompt
19
means, without interest or deduction (except that interest will continue to
accrue on any such tendered debt securities), as soon as practicable after the
expiration time.
EXERCISING YOUR RIGHTS
You may exercise your rights by delivering the following to the
subscription agent before the expiration time:
- your properly completed and executed rights certificate evidencing
the exercised rights with any required signature guarantees or other
supplemental documentation; and
- your payment in full of the subscription price for each share of the
applicable series of common stock subscribed for pursuant to the
basic subscription privilege and the oversubscription privilege.
Alternatively, if you deliver a notice of guaranteed delivery together
with your subscription price payment prior to the expiration time, you must
deliver the rights certificate within three business days after the expiration
time using the guaranteed delivery procedures described below under the heading
" -- Guaranteed Delivery Procedures."
Payment of Subscription Price
Cash Payment. Your cash payment of the subscription price must be made by
either:
- check or bank draft drawn upon a U.S. bank or postal, telegraphic or
express money order payable to the subscription agent; or
- wire transfer of immediately available funds to the account
maintained by the subscription agent for such purpose at
[_________________, ABA No. _________, Attention: ___________].
Any cash payment of the subscription price will be deemed to have been
received by the subscription agent only when:
- any uncertified check clears;
- the subscription agent receives any certified check or bank draft
drawn upon a U.S. bank or any postal, telegraphic or express money
order; or
- the subscription agent receives collected funds in its account at
[__________] referred to above.
You should note that funds paid by uncertified personal checks may take
five business days or more to clear. If you wish to pay the subscription price
in respect of your basic subscription privilege and oversubscription privilege
by an uncertified personal check, we urge you to make payment sufficiently in
advance of the time the rights expire to ensure that your payment is received
and clears by that time. We urge you to consider using a certified or cashier's
check, money order or wire transfer of funds to avoid missing the opportunity to
exercise your rights.
We will retain any interest earned on the cash funds held by the
subscription agent prior to the earlier of the consummation or termination of
the rights offering.
The subscription agent will hold your payment of the subscription price in
a segregated escrow account with other payments received from holders of rights
until we issue to you your shares of common stock or return your overpayment, if
any.
20
Debt Securities as Payment. You may exchange any of the following debt
securities of our company for the number of shares of each series of our common
stock indicated in the table below:
FOR EACH $1,000
AGGREGATE PRINCIPAL AMOUNT TENDERED:
PRINCIPAL CUSIP SERIES A SERIES B
DEBT SECURITIES AMOUNT NUMBER SHARES OR SHARES
7 7/8% senior notes due July 15, 2009 $ 750,000,000 530715AB7 [_______] [_______]
8 1/2% senior debentures due January 15, 2029 $ 500,000,000 530715AD3 [_______] [_______]
8 1/4% senior debentures due February 1, 2030 $1,000,000,000 530715AJ0 [_______] [_______]
7 3/4% senior notes due July 15, 2009 $ 237,800,000 530718AA3 [_______] [_______]
Debt securities may be tendered only in increments of $1,000 principal amount.
We will comply with the requirements of Regulation 14E under the Securities
Exchange Act of 1934, as amended, in conducting the exchange of these debt
securities in the rights offering.
All of the foregoing debt securities are held through the facilities of
The Depository Trust Company (commonly known as DTC). Your payment of the
subscription price by means of an exchange of debt securities will be deemed to
have been received by the subscription agent only when you have tendered the
debt securities pursuant to the book-entry delivery procedures set forth below.
Within two business days after the date of this document, the subscription agent
will establish an account with respect to the debt securities at DTC for
purposes of the rights offering. Any financial institution that is a participant
in the DTC system may make book-entry delivery of the debt securities by causing
DTC to transfer those debt securities into the subscription agent's account in
accordance with DTC's procedure for such transfers. Although delivery of debt
securities may be effected through book-entry at DTC, an agent's message and any
other required documents must be transmitted to and received by the subscription
agent by the expiration time. Delivery of such documents to DTC does not
constitute delivery to the subscription agent. To effectively tender debt
securities in the rights offering that are held through DTC, DTC participants
should transmit their acceptance through DTC's Automated Tender Offer Program,
and DTC will then edit and verify the acceptance and send an agent's message to
the subscription agent for its acceptance. To effectively tender debt securities
in the rights offering that are held of record by a broker, dealer or other
nominee, the beneficial owner of the debt securities must instruct the
recordholder to tender the debt securities on the beneficial owner's behalf. The
term "agent's message" means a message transmitted by DTC to, and received by,
the subscription agent and forming a part of a book-entry confirmation, which
states that DTC has received an express acknowledgment from the tendering
participant, stating that such participant has received and agrees to be bound
by its exercise of the rights certificate, and that we may enforce the exercise
of that rights certificate against that participant.
We will pay to each debtholder that exchanges any of the foregoing debt
securities in the rights offering any accrued and unpaid interest thereon to,
but not including, the expiration time. For example, if the expiration time is
5:00 p.m., New York City time, on [____________], 2002, then we will pay the
following amount of accrued interest with respect to each series of debt
securities indicated in the table below:
ACCRUED INTEREST FOR EACH
$1,000 PRINCIPAL AMOUNT TENDERED
DEBT SECURITIES (AS OF [______], 2002)
7 7/8% senior notes due July 15, 2009 $[_____]
8 1/2% senior debentures due January 15, 2029 $[_____]
8 1/4% senior debentures due February 1, 2030 $[_____]
7 3/4% senior notes due July 15, 2009 $[_____]
We will not issue any shares of common stock in the rights offering in exchange
for any accrued and unpaid interest on any debt securities that may be tendered
in payment of the subscription price.
21
Exercising a Portion of Your Rights
If you subscribe for fewer than all of the shares of the applicable series
of common stock that you are eligible to purchase pursuant to the basic
subscription privilege represented by your rights certificate, you may, under
certain circumstances, request from the subscription agent a new rights
certificate representing the unused rights and then attempt to sell your unused
rights. See " -- Method of Transferring and Selling Rights" below.
Alternatively, you may transfer a portion of your rights and request from the
subscription agent a new rights certificate representing the rights you did not
transfer. If you exercise less than all of your rights represented by a single
rights certificate, you may not exercise the oversubscription privilege.
Calculation of Rights Exercised
If you do not indicate the number of rights being exercised, or do not
forward full payment of the aggregate subscription price for the number of
rights that you indicate are being exercised, then you will be deemed to have
exercised the basic subscription privilege with respect to the maximum number of
rights that may be exercised for the aggregate subscription price payment you
delivered to the subscription agent. If your aggregate subscription price
payment is greater than the amount you owe for your basic subscription and no
direction is given as to the excess, you will be deemed to have exercised the
oversubscription privilege to purchase the maximum number of shares available to
you pursuant to your oversubscription privilege that may be purchased with your
overpayment. If we do not apply your full subscription price payment to your
purchase of shares of common stock, we will return the excess amount to you by
mail or similarly prompt means, without interest or deduction (except that
interest will continue to accrue on any tendered debt securities), as soon as
practicable after the expiration time.
Instructions for Completing the Rights Certificate
You should read and follow the instructions accompanying the rights
certificate carefully. If you want to exercise your rights, you must send your
completed rights certificates, any necessary accompanying documents and payment
of the applicable subscription price to the subscription agent. YOU SHOULD NOT
SEND THE RIGHTS CERTIFICATES, ANY OTHER DOCUMENTATION OR PAYMENT TO US. Any
rights certificates and other items received by us will be returned to the
sender as promptly as possible.
You are responsible for the method of delivery of rights certificates, any
necessary accompanying documents and payment of the subscription price to the
subscription agent. If you send the rights certificates and other items by mail,
we recommend that you send them by registered mail, properly insured, with
return receipt requested. You should allow a sufficient number of days to ensure
delivery to the subscription agent and clearance of cash payment prior to the
expiration time.
Signature Guarantee May Be Required
Your signature on each rights certificate must be guaranteed by an
eligible institution such as a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, subject to standards and procedures adopted by the subscription agent,
unless:
- your rights certificate is registered in your name and completed to
provide that the shares of the applicable series of common stock you
subscribed for are to be delivered to you; or
- you are an eligible institution.
22
Delivery of Subscription Materials and Payment
You should deliver the rights certificate and payment of the subscription
price, as well as any nominee holder certifications, notices of guaranteed
delivery, Depository Trust Company participant oversubscription forms and any
other required documentation:
If by mail to: If by hand or overnight delivery to:
[________] [________]
[________] [________]
[________] [________]
You may call the subscription agent at [(___) ___-____].
Guaranteed Delivery Procedures
If you wish to exercise your rights, but you do not have sufficient time
to deliver the rights certificates evidencing your rights to the subscription
agent before the expiration time, you may exercise your rights by the following
guaranteed delivery procedures:
- provide your payment in full of the subscription price for each
share of the applicable series of common stock being subscribed for
pursuant to the basic subscription privilege and the
oversubscription privilege to the subscription agent before the
expiration time;
- deliver a notice of guaranteed delivery to the subscription agent at
or before the expiration time; and
- deliver the properly completed rights certificate evidencing the
rights being exercised (and, if applicable for a nominee holder, the
related nominee holder certification), with any required signatures
guaranteed, to the subscription agent, within three business days
following the date the notice of guaranteed delivery was delivered
to the subscription agent.
Your notice of guaranteed delivery must be substantially in the form
provided with the "Instructions For Use of Liberty Media Corporation Rights
Certificates" distributed to you with your rights certificate. Your notice of
guaranteed delivery must come from an eligible institution which is a member of,
or a participant in, a signature guarantee program acceptable to the
subscription agent. In your notice of guaranteed delivery you must state:
- your name;
- the number and series of rights represented by your rights
certificates, the number and series of shares of common stock you
are subscribing for pursuant to the basic subscription privilege,
the number and series of shares of common stock, if any, you are
subscribing for pursuant to the oversubscription privilege; and
- your guarantee that you will deliver to the subscription agent any
rights certificates evidencing the rights you are exercising within
three business days following the date the subscription agent
receives your notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery to the subscription
agent in the same manner as the rights certificate at the addresses set forth
under " -- Delivery of Subscription Materials and Payment" above. You may also
transmit the notice of guaranteed delivery to the subscription agent by
facsimile transmission to [(___) ___-____]. To confirm facsimile deliveries, you
may call [(___) ___-____].
The subscription agent will send you additional copies of the form of
notice of guaranteed delivery if you need them. Please call the subscription
agent at [(___) ___-_____).
23
Notice to Nominees
If you are a broker, a dealer, a trustee or a depositary for securities
who holds shares of our common stock for the account of others as a nominee
holder, you should notify the respective beneficial owners of those shares of
the issuance of the rights as soon as possible to find out the beneficial
owners' intentions. You should obtain instructions from the beneficial owner
with respect to the rights, as set forth in the instructions we have provided to
you for your distribution to beneficial owners. If the beneficial owner so
instructs, you should complete the appropriate rights certificates and, in the
case of the oversubscription privilege, the related nominee holder
certification, and submit them to the subscription agent with the proper
payment. A nominee holder that holds shares for the account(s) of more than one
beneficial owner may exercise the number of rights to which all such beneficial
owners in the aggregate otherwise would have been entitled if they had been
direct record holders of common stock on the record date, so long as the nominee
submits the appropriate rights certificates and certifications and proper
payment to the subscription agent.
Beneficial Owners
If you are a beneficial owner of shares of our common stock or rights that
you hold through a nominee holder, we will ask your broker, dealer or other
nominee to notify you of this rights offering. If you wish to sell or exercise
your rights, you will need to have your broker, dealer or other nominee act for
you. To indicate your decision with respect to your rights, you should complete
and return to your broker, dealer or other nominee the form entitled "Beneficial
Owners Election Form." You should receive this form from your broker, dealer or
other nominee with the other subscription materials.
Procedures for DTC Participants
We expect that the rights will be eligible for transfer through, and that
your exercise of your basic subscription privilege may be made through, the
facilities of DTC. If you exercise your basic subscription privilege through DTC
we refer to your rights as DTC Exercised Rights. If you hold DTC Exercised
Rights, you may exercise your oversubscription privilege by properly executing
and delivering to the subscription agent, at or prior to the expiration time, a
DTC participant oversubscription exercise form and a nominee holder
certification and making payment of the appropriate subscription price for the
number of shares of the applicable series of common stock for which your
oversubscription privilege is to be exercised. Please call the subscription
agent at [(___) ___-_____] to obtain copies of the DTC participant
oversubscription exercise form and the nominee holder certification.
Determinations Regarding the Exercise of Rights
We will decide all questions concerning the timeliness, validity, form and
eligibility of your exercise of rights. Our decisions will be final and binding.
We, in our sole discretion, may waive any defect or irregularity, or permit a
defect or irregularity to be corrected within whatever time we determine. We may
reject the exercise of any of your rights because of any defect or irregularity.
Your subscription will not be deemed to have been received or accepted until all
irregularities have been waived by us or cured by you within the time we decide,
in our sole discretion.
We reserve the right to reject your exercise of rights if your exercise is
not in accordance with the terms of the rights offering or in proper form.
Neither we nor the subscription agent will have any duty to notify you of a
defect or irregularity in your exercise of the rights. We will not be liable for
failing to give you that notice. We will also not accept your exercise of rights
if our issuance of shares of common stock pursuant to your exercise could be
deemed unlawful or materially burdensome. See " -- Regulatory Limitation" and
"-Compliance with State Regulations Pertaining to the Rights Offering" below.
24
NO REVOCATION OF EXERCISED RIGHTS
Once you have exercised your basic subscription privilege and, should you
choose, your oversubscription privilege, you may not revoke your exercise. Even
if we extend the expiration time, you may not revoke your exercise.
SUBSCRIPTION AGENT
We have appointed [___________] as subscription agent for the rights
offering. We will pay its fees and expenses related to the rights offering.
INFORMATION AGENT
You may direct any questions or requests for assistance concerning the
method of exercising your rights, additional copies of this prospectus, the
instructions, the nominee holder certification, the notice of guaranteed
delivery or other subscription materials referred to herein, to the information
agent, at the following telephone number and address:
[____________]
[____________]
[____________]
Banks and brokers call collect: [(___) ___-____]
All others call toll free: [(___) ___-____]
METHOD OF TRANSFERRING AND SELLING RIGHTS
[We have applied to list the Series A rights and Series B rights for
trading on the NYSE under the symbols "[__]" and "[__]", respectively.] We
expect that rights may be purchased or sold through usual investment channels
until the close of business on the last trading day preceding the expiration
time. However, there has been no prior public market for the rights, and we
cannot assure you that a trading market for the rights will develop or, if a
market develops, that the market will remain available throughout the
subscription period. We also cannot assure you of the price at which the rights
will trade, if at all. If you do not exercise or sell your rights you will lose
any value inherent in the rights. See " -- General Considerations Regarding the
Partial Exercise, Transfer or Sale of Rights" below.
Transfer of Rights
You may transfer rights in whole by endorsing the rights certificate for
transfer. Please follow the instructions for transfer included in the
information sent to you with your rights certificate. If you wish to transfer
only a portion of the rights, you should deliver your properly endorsed rights
certificate to the subscription agent. With your rights certificate, you should
include instructions to register such portion of the rights evidenced thereby in
the name of the transferee (and to issue a new rights certificate to the
transferee evidencing such transferred rights). You may only transfer whole
rights and not fractions of a right. If there is sufficient time before the
expiration of the rights offering, the subscription agent will send you a new
rights certificate evidencing the balance of the rights issued to you but not
transferred to the transferee. You may also instruct the subscription agent to
send the rights certificate to one or more additional transferees. If you wish
to sell your remaining rights, you may request that the subscription agent send
you certificates representing your remaining (whole) rights so that you may sell
them through your broker or dealer. You may also request that the subscription
agent sell your rights for you, as described below.
If you wish to transfer all or a portion of your rights, you should allow
a sufficient amount of time prior to the time the rights expire for the
subscription agent to:
- receive and process your transfer instructions; and
25
- issue and transmit a new rights certificate to your transferee or
transferees with respect to transferred rights, and to you with
respect to any rights you retained.
If you wish to transfer your rights to any person other than a bank or
broker, the signatures on your rights certificate must be guaranteed by an
eligible institution.
Sales of Rights Through the Subscription Agent
If you choose not to sell your rights through your broker or dealer, you
may seek to sell your rights through the subscription agent. If you wish to have
the subscription agent seek to sell your rights, you must deliver your properly
executed rights certificate, with appropriate instructions, to the subscription
agent. If you want the subscription agent to seek to sell only a portion of your
rights, you must send the subscription agent instructions setting forth what you
would like done with the rights, along with your rights certificate.
If the subscription agent sells rights for you, it will send you a check
for the net proceeds from the sale of any of your rights as soon as practicable
after the expiration time. If your rights can be sold, the sale will be deemed
to have been made at the weighted average net sale price of all rights of the
applicable series sold by the subscription agent. The aggregate fees charged by
the subscription agent for selling all rights of a given series will be deducted
from the aggregate sale price for all such rights in determining the weighted
average net sale price of all such rights. We cannot assure you, however, that a
market will develop for the rights or that the subscription agent will be able
to sell your rights.
You must have your order to sell your rights to the subscription agent
before 11:00 a.m., New York City time, on [_____], 2002, the fifth business day
before the expiration time. If less than all sales orders received by the
subscription agent are filled, it will prorate the sales proceeds among you and
the other holders of the same series of rights based upon the number of rights
of the applicable series that each holder has instructed the subscription agent
to sell during that period, irrespective of when during the period the
instructions are received by it. The subscription agent is required to sell your
rights only if it is able to find buyers. If the subscription agent cannot sell
your rights by 5:00 p.m., New York City time, on [____], 2002, the third
business day before the expiration time, the subscription agent will hold your
rights certificate for pick up by you at the subscription agent's hand delivery
address.
IF YOU SELL YOUR RIGHTS THROUGH YOUR BROKER OR DEALER, YOU WILL LIKELY
RECEIVE A DIFFERENT AMOUNT OF PROCEEDS THAN IF YOU SELL THE SAME AMOUNT OF
RIGHTS THROUGH THE SUBSCRIPTION AGENT. IF YOU SELL YOUR RIGHTS THROUGH YOUR
BROKER OR DEALER INSTEAD OF THE SUBSCRIPTION AGENT, YOUR SALES PROCEEDS WILL BE
THE ACTUAL SALES PRICE OF YOUR RIGHTS RATHER THAN THE WEIGHTED AVERAGE SALES
PRICE DESCRIBED ABOVE.
General Considerations Regarding the Partial Exercise, Transfer or Sale of
Rights
The amount of time needed by your transferee to exercise or sell its
rights depends upon the method by which the transferor delivers the rights
certificates, the method of payment made by the transferee and the number of
transactions which the holder instructs the subscription agent to effect. You
should also allow up to ten business days for your transferee to exercise or
sell the rights transferred to it. Neither we nor the subscription agent will be
liable to a transferee or transferor of rights if rights certificates or any
other required documents are not received in time for exercise or sale prior to
the expiration time.
You will receive a new rights certificate upon a partial exercise,
transfer or sale of rights only if the subscription agent receives your properly
endorsed rights certificate no later than 5:00 p.m., New York City time, five
business days before the expiration time. The subscription agent will not issue
a new rights certificate if your rights certificate is received after that time
and date. If your instructions and rights certificate are received by the
subscription agent after that time and date, you will not receive a new rights
certificate and therefore will not be able to sell or exercise your remaining
rights.
26
Unless you make other arrangements with the subscription agent, a new
rights certificate issued to you after 5:00 p.m., New York City time, five
business days before the expiration time will be held for pick-up by you at the
subscription agent's hand delivery address.
You are responsible for all commissions, fees and other expenses
(including brokerage commissions and transfer taxes) incurred in connection with
the purchase, sale or exercise of your rights, except that we will pay any fees
of the subscription agent associated with the exercise of rights. Any amounts
you owe will be deducted from your account.
If you do not exercise your rights before the expiration time, your rights
will expire and will no longer be exercisable.
NO RECOMMENDATIONS TO RIGHTSHOLDERS
Neither we nor our board of directors has made any recommendation as to
whether you should exercise or transfer your rights or, if exercised, whether
you should pay the subscription price in cash or by exchange of debt securities.
You should decide whether to transfer your rights, subscribe for shares of the
applicable series of our common stock, pay the subscription price in cash or
debt securities or simply take no action with respect to your rights, based upon
your own assessment of your best interests.
TERMINATION
There are no conditions to the consummation of the rights offering.
However, we may terminate the rights offering for any reason at any time before
the expiration time. If we terminate the rights offering, we will promptly issue
a press release announcing the termination, and we will promptly thereafter
return all subscription payments. We will not pay interest on, or deduct any
amounts from, subscription payments if we terminate the rights offering, except
that interest will continue to accrue on debt securities tendered in payment of
the subscription price.
FOREIGN SHAREHOLDERS
We will not mail rights certificates to holders of either series of our
common stock on the record date or to subsequent transferees whose addresses are
outside the United States. Instead, we will have the subscription agent hold the
rights certificates for those holders' accounts. To exercise their rights,
foreign holders must notify the subscription agent before 11:00 a.m., New York
City time, on [____], 2002, three business days prior to the expiration time and
must establish to the satisfaction of the subscription agent that such exercise
is permitted under applicable law. If a foreign holder does not notify and
provide acceptable instructions to the subscription agent by such time (and if
no contrary instructions have been received), the rights will be sold, subject
to the subscription agent's ability to find a purchaser. Any such sales will be
deemed to be effected at the weighted average sale price of all rights of the
same series sold by the subscription agent. See " -- Method of Transferring and
Selling Rights" above. If the subscription agent sells the rights, the
subscription agent will remit a check for the net proceeds from the sale of any
rights to foreign holders by mail. The proceeds, if any, resulting from sales of
rights pursuant to the basic subscription privilege of holders whose addresses
are not known by the subscription agent or to whom delivery cannot be made will
be held in an interest bearing account. Any amount remaining unclaimed on the
second anniversary of the expiration time will be turned over to us.
REGULATORY LIMITATION
We will not be required to issue to you shares of our common stock
pursuant to the rights offering if, in our opinion, you would be required to
obtain prior clearance or approval from any state or federal regulatory
authorities to own or control such shares and if, at the expiration time, you
have not obtained such clearance or approval.
ISSUANCE OF COMMON STOCK
Unless we earlier terminate the rights offering, the subscription agent
will issue to you the shares of the applicable series of our common stock
purchased by you in the rights offering as soon as practicable after the
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expiration time. Each subscribing holder's new shares will be issued in the same
form, certificated or book-entry, as that holder's shares for which it received
rights were held on the record date.
Your payment of the aggregate subscription price will be retained by the
subscription agent and will not be delivered to us, unless and until your
subscription is accepted and you are issued your stock certificates. Similarly,
no book-entry transfer of tendered debt securities will be accepted prior to the
expiration time. We will not pay you any interest on funds paid to the
subscription agent, regardless of whether the funds are applied to the
subscription price or returned to you. You will have no rights as a shareholder
of our company with respect to the subscribed for shares of our common stock
until the certificates representing such shares are issued to you or the shares
are deposited in the book-entry account held on your behalf. Upon our issuance
of the certificates or the deposit of the shares in the applicable book-entry
account, you will be deemed the owner of the shares you purchased by exercise of
your rights. Unless otherwise instructed in the rights certificates, the shares
issued to you pursuant to your subscription will be registered in your name or
the name of your nominee, if applicable.
We will not issue any fractional shares of common stock. You may only
exercise whole rights; fractional rights may not be exercised.
SHARES OF COMMON STOCK OUTSTANDING
As of August 31, 2002, we had outstanding 2,373,439,500 shares of our
Series A common stock and 212,045,128 shares of our Series B common stock. Based
on the number of shares of our common stock outstanding as of August 31, 2002,
we will have outstanding approximately [_____] shares of our Series A common
stock and [_____] shares of our Series B common stock following the issuance of
all shares purchased in the rights offering (assuming that the rights offering
is fully subscribed), which represents a [__]% increase in the number of
outstanding shares of our Series A common stock and a [__]% increase in the
number of outstanding shares of our Series B common stock. The share numbers
included in this paragraph exclude outstanding stock options and warrants to
purchase shares of our common stock.
COMPLIANCE WITH STATE REGULATIONS PERTAINING TO THE RIGHTS OFFERING
We are not making the rights offering in any state or other jurisdiction
in which it is unlawful to do so. We will not sell or accept an offer to
purchase shares of our common stock from you if you are a resident of any state
or other jurisdiction in which the sale or offer of the rights would be
unlawful. We may delay the commencement of the rights offering in certain states
or other jurisdictions in order to comply with the laws of those states or other
jurisdictions. However, we may decide, in our sole discretion, not to modify the
terms of the rights offering as may be requested by certain states or other
jurisdictions. If that happens and you are a resident of the state or
jurisdiction that requests the modification, you will not be eligible to
participate in the rights offering. We do not expect that there will be any
changes in the terms of the rights offering.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income
tax consequences to holders of our common stock of the acquisition, ownership,
and disposition, expiration or exercise of the rights distributed pursuant to
the rights offering and the acquisition, ownership and disposition of shares of
our common stock acquired through exercise of the rights. We have received the
opinion of Baker Botts L.L.P., counsel to our company, that the following
discussion, insofar as it relates to statements of United States law or legal
conclusions, is accurate in all material respects. This opinion is included as
an exhibit to the registration statement of which this prospectus forms a part.
The opinion of Baker Botts L.L.P. is conditioned upon the accuracy of the
statements, representations and assumptions upon which the opinion is based,
including, without limitation, the representation by us that, at the time of the
distribution, the exercise price of all of our outstanding warrants and stock
options will be adjusted so that our shareholders' proportionate interest in our
assets and earnings and profits will not increase as a result of the
distribution of rights.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the Code), Treasury regulations promulgated thereunder, administrative
pronouncements and judicial decisions as of the date hereof, all
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of which are subject to change or differing interpretations at any time,
possibly with retroactive effect. This summary assumes that holders of our
common stock hold all such stock as capital assets within the meaning of the
Code (generally property held for investment), will hold all stock acquired on
exercise of rights as capital assets, would hold any stock acquired on exercise
of rights that are disposed of or expire unexercised as capital assets, and
either hold our debt securities as capital assets or would hold our debt
securities as capital assets if the holder acquired our debt securities. We have
not obtained and do not intend to obtain a ruling from the Internal Revenue
Service (the IRS) with respect to any of the tax consequences discussed below,
and there is no assurance that the IRS will not successfully challenge certain
of the conclusions.
This summary does not address all aspects of U.S. federal income taxation
that may be applicable to you in light of your particular circumstances and does
not address special classes of holders of our common stock or rights that may be
subject to special treatment under the Code (such as dealers in securities,
partnerships or other pass-through entities, financial institutions, life
insurance companies, tax-exempt organizations, certain expatriates, persons
holding our stock or rights as part of a hedge, constructive sale, wash sale,
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar). This summary also does not address the effect of any state,
local or foreign tax laws that may apply or the application of the U.S. federal
estate and gift tax or the alternative minimum tax. Except as otherwise
indicated, references to "tax" mean U.S. federal income tax.
As used herein, a "U.S. Holder" is a beneficial owner of our common stock
that is, for U.S. federal income tax purposes, (1) a citizen or resident of the
United States, (2) a corporation that is organized under the laws of the United
States or any political subdivision thereof, (3) an estate the income of which
is subject to U.S. federal income tax without regard to its source, or (4) a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the trust, or if the
trust has made a valid election in effect to be treated as a U.S. person.
A "Non-U.S. Holder" is a beneficial owner of our common stock that is not
a U.S. Holder.
If a partnership holds our common stock, the tax treatment of a partner
generally will depend on the status of the partner and on the activities of the
partnership. Partners of partnerships holding our common stock should consult
their tax advisors.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE
U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS THE
APPLICABILITY OF ANY FEDERAL ESTATE AND GIFT, STATE, LOCAL OR FOREIGN TAX LAWS
TO WHICH YOU MAY BE SUBJECT.
GENERAL DISCUSSION
The tax treatment of certain aspects of the acquisition, ownership, and
disposition, expiration or exercise of the rights is not entirely clear. We
believe that, for U.S. federal income tax purposes, the rights will be treated
as two separate rights: (i) the right to purchase our common stock (which we
refer to as Purchase Rights) and (ii) the right to put our debt securities to us
at the principal amount of such debt securities as payment for the subscription
price of the rights (which we refer to as Put Rights). Hereafter, for
convenience, we will sometimes refer separately to the Purchase Rights and the
Put Rights even though, for legal purposes, both are embodied in the rights
certificates.
The issuance of rights by us will be treated as a distribution of those
rights to the holders of our common stock. We intend to allocate the value of
each right distributed between a Purchase Right and a Put Right on the basis of
their respective fair market values at the time of the distribution. On the
basis of our estimate of the fair market value of the Purchase Rights and the
Put Rights, we intend to treat [___]% of each right as allocable to a Purchase
Right and [___]% of each right as allocable to a Put Right.
There is no direct authority that addresses our conclusion that the rights
should be treated as separate rights for U.S. federal income tax purposes. The
following discussion summarizes the treatment that we believe is correct
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and that we will follow in all reporting we furnish to the IRS. IN THIS
DISCUSSION, WE ASSUME, WITHOUT FURTHER STATEMENTS QUALIFYING THE CONCLUSIONS,
THAT, FOR U.S. FEDERAL INCOME TAX PURPOSES, THE RIGHTS WILL BE SEPARATED INTO
PURCHASE RIGHTS AND PUT RIGHTS. THERE CAN BE NO ASSURANCE THAT THE IRS WILL
AGREE THAT THIS IS THE PROPER TREATMENT OF THE RIGHTS OR THAT, IF THE IRS DOES
AGREE, IT WILL RESPECT THE ALLOCATION WE HAVE MADE BETWEEN THE PURCHASE RIGHTS
AND THE PUT RIGHTS. You should consult your own tax advisors regarding the tax
consequences to you of the acquisition, ownership, and disposition, expiration
or exercise of the rights.
Except as otherwise indicated, the following discussion assumes that we
will not terminate the rights offering.
TAXATION OF U.S. HOLDERS
Distribution of Rights
You will not be required to recognize taxable income upon the distribution
to you of Purchase Rights.
The distribution of Put Rights will be treated as a distribution of
property in the amount of the fair market value of the Put Rights on the date of
the distribution. This distribution will be treated as a dividend, taxable as
ordinary income, to the extent made out of our current or accumulated earnings
and profits as determined for U.S. federal income tax purposes. The amount of
the distribution in excess of such earnings and profits will be applied against
and will reduce the U.S. Holder's basis in his common stock, and any amount in
excess of the U.S. Holder's basis in his common stock will be treated as gain
from the sale or exchange of that stock.
Although the matter cannot be predicted with complete accuracy, we do not
presently expect to have any current or accumulated earnings and profits for the
taxable year that includes the distribution of rights. If we nevertheless do
have current or accumulated earnings and profits for that taxable year,
corporate holders may be entitled to a dividends received deduction with respect
to the amount of the Put Rights distributed to them that are treated as a
dividend. Corporate holders should consult their tax advisors regarding their
eligibility for the dividends received deduction.
Basis and Holding Period of Rights
Distribution of Purchase Rights. If, on the distribution date, the fair
market value of the Purchase Rights which we distribute to you is less than 15%
of the fair market value of your common stock with respect to which the Purchase
Rights were distributed, your basis in those Purchase Rights generally will be
zero. You may elect, however, to allocate the basis in your common stock between
that stock and the Purchase Rights in proportion to their relative fair market
values on the distribution date. This election may be made pursuant to Section
307 of the Code and the Treasury regulations thereunder and will be irrevocable
once made.
If, on the distribution date, the fair market value of the Purchase Rights
which we distribute to you is 15% or more of the fair market value of your
common stock with respect to which the Purchase Rights were distributed, you
will be required to allocate the basis in your common stock between that stock
and the Purchase Rights in proportion to their relative fair market values on
the distribution date.
In either case, your holding period for the Purchase Rights that we
distribute to you will include the holding period of your common stock with
respect to which the Purchase Rights were distributed.
Distribution of Put Rights. Your basis in the Put Rights which we
distribute to you will be the fair market value of the Put Rights on the date of
distribution, and your holding period for those Put Rights will begin on the day
after the distribution date, except as otherwise described under " -- Taxation
of U.S. Holders -- Application of Straddle Rules to Holders of Put Rights and
Our Debt Securities."
Purchase of Rights from a Third Party. If you purchase rights from a third
party, your basis in the rights generally will be the purchase price of such
rights. This basis will be allocated between Purchase Rights and Put
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Rights in proportion to the relative fair market values of each on the date you
purchase the rights. Your holding period for both Purchase Rights and Put Rights
will begin on the day following the date you purchase the rights, except as
otherwise described under " -- Taxation of U.S. Holders -- Application of
Straddle Rules to Holders of Put Rights and Our Debt Securities."
Sale, Exchange or Other Disposition of Rights
Upon the sale, exchange or other disposition of your rights, subject to
the discussion under " -- Taxation of U.S. Holders -- Application of Straddle
Rules to Holders of Put Rights and Our Debt Securities," you generally will
recognize capital gain or loss calculated separately for the Purchase Rights and
the Put Rights. The proceeds which you receive will be allocated between the
Purchase Rights and the Put Rights in accordance with the fair market value of
each on the date of the sale, exchange or other disposition. Your gain or loss
on the Purchase Rights will be an amount equal to the difference between the
proceeds allocated to the Purchase Rights and your basis in the Purchase Rights,
and your gain or loss on the Put Rights will be an amount equal to the
difference between the proceeds allocated to the Put Rights and your basis in
the Put Rights. If your holding period in the Purchase Rights is more than one
year on the date of the sale, exchange or other disposition, then your gain or
loss on the Purchase Rights will be long-term capital gain or loss. Your gain or
loss on the Put Rights should be short-term capital gain or loss, except as
described under " -- Taxation of U.S. Holders -- Application of Straddle Rules
to Holders of Put Rights and Our Debt Securities." Long-term capital gains of
certain non-corporate taxpayers generally are taxed at lower rates than items of
ordinary income. The deductibility of capital losses is subject to limitations.
Expiration of Rights
If you receive rights in a distribution from us and you allow the rights
to expire (i.e., you retain but do not exercise the rights), then, in general,
(1) you will not be permitted to recognize a taxable loss on the Purchase
Rights, (2) your basis in the Purchase Rights will be reallocated to your common
stock with respect to which the rights were distributed, and (3) subject to the
special rules described in the last paragraph of this section, you will
recognize a capital loss in the taxable year of such expiration in the amount of
your basis in the Put Rights. If you receive rights in a distribution from us
and you exercise the rights and pay the subscription price in cash rather than
our debt securities, then, except as otherwise described in the last paragraph
of this section, you generally will recognize a capital loss in the taxable year
in which you exercise the rights in the amount of your basis in the Put Rights.
In either case, and subject to the special rules described in the last paragraph
of this section, your loss on the Put Rights should be short-term capital loss.
The deductibility of capital losses is subject to limitations.
If you purchased rights from a third party and allow the rights to expire,
then, except as described in the following paragraph, you generally will
recognize a capital loss in the year of such expiration in the amount of your
basis in the rights (both the Purchase Rights and the Put Rights). Your loss on
the rights should be short-term capital loss, except as otherwise described in
the following paragraph. The deductibility of capital losses is subject to
limitations.
Special rules apply to the expiration of Put Rights held by a U.S. Holder
who, on the same day, acquires such Put Rights (whether by the distribution by
us or by purchase from a third party) and debt securities of ours which are
identified as intended to be used in exercising the rights. U.S. Holders in such
circumstances may not recognize a taxable loss upon the expiration of the Put
Rights and must add their basis in the Put Rights to the basis of their debt
securities which are identified as intended to be used in exercising the rights.
In addition, special rules affecting both the timing of the recognition of
losses and the character of losses realized upon expiration of the Put Rights
apply to a U.S. Holder that holds Put Rights as part of a straddle. These rules
are described below under " -- Taxation of U.S. Holders -- Application of
Straddle Rules to Holders of Put Rights and Our Debt Securities."
Exercise of Rights; Basis and Holding Period of Acquired Shares
Exercise for Cash. If you exercise the rights with cash, then, in general,
you will recognize a loss on the Put Rights, as explained above, and you will
not otherwise recognize gain or loss. Your basis in the common stock you acquire
through exercise of the rights will equal the sum of (1) the subscription price
you paid to acquire such
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common stock and (2) your basis in the Purchase Rights which you exercised. Your
holding period in the acquired common stock will begin on the day you exercise
the rights.
Exercise for Debt Securities. If upon exercise of the rights you tender
our debt securities as payment for the subscription price, you should not
recognize gain or loss on the exchange. Any cash payment you receive for accrued
and unpaid interest will be taxable to you as ordinary interest income to the
extent not already included in income in accordance with your method of
accounting. Assuming that you do not recognize gain or loss on the exchange of
our debt securities for our stock, your aggregate basis in the acquired common
stock will equal the sum of (1) your basis in our debt securities that you
tender, (2) your basis in the Put Rights which you exercised, and (3) your basis
in the Purchase Rights which you exercised.
While there is no clear authority, we believe the most likely treatment is
that you will acquire a split basis and holding period in each share of the
common stock which you acquire upon exercise of the rights, determined as
follows: (1) you will be treated as acquiring a portion of each such share of
common stock for debt securities and the remainder of each such share for
rights, in proportion to the fair market values of the debt securities and
rights on the date you exercise the rights; (2) the basis of the portion of each
share of stock treated as acquired for debt securities will be an allocable
portion of your basis in the debt securities, and the holding period of that
portion of the share will include the period the debt securities were held by
you (subject to the discussion under " -- Taxation of U.S. Holders --
Application of Straddle Rules to Holders of Put Rights and Our Debt
Securities"); and (3) the basis of the remaining portion of each share of stock
that you acquire will be an allocable portion of your basis in the rights which
you exercised (both the Purchase Rights and the Put Rights), and the holding
period for that portion of each share will begin on the day the rights are
exercised. However, other determinations of basis and holding period are
possible. Thus, you should consult your tax advisor regarding your basis and
holding period in the common stock which you acquire.
Sale, Exchange or Other Disposition of Acquired Shares
Upon the sale, exchange or other disposition of our common stock acquired
upon exercise of the rights, you generally will recognize gain or loss equal to
the difference between the amount realized and your basis in such stock. Except
as indicated in the following paragraph, such gain or loss will be capital gain
or loss and will be long-term capital gain or loss if your holding period for
the common stock exceeds one year at the time of the sale, exchange or other
disposition. Long-term capital gains of certain non-corporate taxpayers
generally are taxed at lower rates than items of ordinary income. The
deductibility of capital losses is subject to limitations.
If upon exercise of the rights you tender our debt securities as payment
for the subscription price, then you will recognize ordinary interest income on
the sale, exchange or other disposition of the acquired common stock to the
extent of any market discount that accrued during your holding period for the
debt securities and that was not previously included in your income.
Termination of Rights Offering
If you receive rights in a distribution from us and retain such rights,
then, upon a termination of the rights offering by us, (1) you should not
recognize income, gain or loss as a result of the distribution, ownership,
exercise or expiration of the rights, and (2) your basis in your common stock
with respect to which the rights were distributed should not be affected by the
rights offering.
If you receive rights in a distribution from us, and you sell, exchange or
otherwise dispose of such rights, then, while there is no clear authority, upon
a termination of the rights offering by us: (1) you should not recognize income
or gain as a result of the prior distribution to you of the rights, (2) your
basis in your common stock with respect to which the rights were distributed
should not be affected by the rights offering, and (3) you should be treated as
selling rights which have a zero basis, and you should recognize short-term
capital gain in an amount equal to the proceeds received.
If you purchase rights from a third party, and we terminate the rights
offering, then, although the matter is not free from doubt, you should recognize
a capital loss in the taxable year of such termination in the amount of your
basis in the rights, except as otherwise indicated under " -- Taxation of U.S.
Holders -- Application of Straddle
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Rules to Holders of Put Rights and Our Debt Securities." In such case, your loss
on the rights should be short-term capital loss. The deductibility of capital
losses is subject to limitations.
Application of Straddle Rules to Holders of Put Rights and Our Debt Securities
Because the ownership of Put Rights may diminish the risk of loss with
respect to your ownership (if applicable) of our debt securities that may be
tendered upon exercise of the rights, the ownership by you or certain persons
related to you of both our Put Rights and our debt securities that may be
tendered for the subscription price of the rights may constitute positions in a
straddle; in which case, the straddle rules of Section 1092 of the Code would
apply to you. For purposes of this discussion, it is assumed that no other
positions offsetting either the Put Rights or our debt securities that may be
tendered for the subscription price are held by you or by certain persons
related to you.
If you acquire Put Rights (either in a distribution from us or by
purchase), and the straddle rules apply, then unless your holding period in the
debt securities that may be tendered for the subscription price exceeds one year
on the date you acquire the Put Rights, (1) your holding period in the Put
Rights will not begin until the date that you (or certain persons related to
you) no longer hold the debt securities that may be tendered for the
subscription price, and (2) your holding period in the debt securities that may
be tendered for the subscription price will not begin until the date that you
(or certain persons related to you) no longer hold the Put Rights. If you
acquire debt securities that may be tendered for the subscription price of the
rights after you have acquired Put Rights (either in a distribution from us or
by purchase), and the straddle rules apply, then your holding period in the Put
Rights and the debt securities will not begin until the date that you (or
certain persons related to you) no longer hold either the Put Rights or the debt
securities.
If you realize a loss on the sale, exchange, expiration or other
disposition of a Put Right, and the straddle rules apply, recognition of the
loss generally will be deferred until the debt securities that may be tendered
for the subscription price are sold by you (or certain persons related to you).
If, however, the loss from the sale, exchange, expiration, or other disposition
of a Put Right exceeds the unrecognized gain as of the close of the taxable year
with respect to our debt securities that may be tendered for the subscription
price, then the loss can be recognized currently to the extent of the excess,
and the deferred loss may be carried forward to succeeding taxable years. If at
the time of your acquisition of the Put Right (whether by distribution or by
purchase), your holding period for our debt securities that may be tendered for
the subscription price exceeds one year, any loss from the sale, exchange,
expiration or other disposition of a Put Right will be long-term capital loss,
but any gain from the sale, exchange, expiration or other disposition of a Put
Right will be short-term capital gain. If your holding period for our debt
securities that may be tendered for the subscription price does not exceed one
year at the time of your acquisition of the Put Right (whether by distribution
or by purchase), then any gain or loss realized from the sale, exchange,
expiration or other disposition of the Put Right will be short-term capital gain
or loss.
If the straddle rules apply, certain carrying charges (including interest
expense) associated with the Put Rights and debt securities that may be tendered
for the subscription price may be required to be capitalized rather than
deducted currently. There are also certain elections that a holder may make with
respect to its straddle positions that would affect the amount, character and
timing of the recognition of gains or losses on the Put Rights and debt
securities. Due to the complexity of the U.S. federal income tax consequences
applicable to straddles, you should consult your own tax advisors regarding the
straddle rules.
Information Reporting and Backup Withholding
The distribution of rights to you and your sale, exchange or other
disposition of rights or acquired common stock may be subject to information
reporting to the IRS and to backup withholding. Backup withholding (currently
30%) may apply to "reportable payments" if a U.S. Holder fails to provide a
correct taxpayer identification number and certain other information, fails to
provide a certification of exempt status or fails to report the holder's full
dividend and interest income. You are not subject to backup withholding if you
(1) are a corporation or fall within certain other exempt categories and, when
required, demonstrate that fact; or (2) provide a correct taxpayer
identification number, certify under penalties of perjury that you are not
subject to backup withholding, and otherwise comply with the applicable
requirements of the backup withholding rules.
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Backup withholding is not an additional tax; any amounts withheld under
the backup withholding rules will be allowed as a refund or credit against your
U.S. federal income tax liability provided the required information is furnished
to the IRS. The information reporting requirements may apply regardless of
whether backup withholding is required.
TAXATION OF NON-U.S. HOLDERS
Scope of Discussion
In this discussion of taxation of Non-U.S. Holders, it is assumed that no
income, gain or loss of the Non-U.S. Holder from the acquisition, ownership, and
disposition, expiration or exercise of the rights distributed pursuant to the
rights offering and the acquisition, ownership and disposition of shares of our
common stock acquired through exercise of the rights will be effectively
connected with the conduct by the Non-U.S. Holder of a trade or business in the
United States. Non-U.S. Holders for which any such income, gain or loss might
represent income that is effectively connected with the conduct of a U.S. trade
or business should consult their own tax advisors, including as to the
availability of an exemption from U.S. federal withholding tax and, in the case
of a Non-U.S. Holder which is a corporation, the applicability of the "branch
profits tax."
Distribution of Rights
Non-U.S. Holders generally will not be subject to U.S. federal withholding
tax upon the distribution to them of Purchase Rights.
As indicated, we intend to treat the distribution of Put Rights as a
distribution of property in the amount of the fair market value of the Put
Rights on the date of the distribution. As discussed above, we do not presently
expect to have any current or accumulated earnings and profits for the taxable
year that includes the distribution of rights and therefore do not presently
expect that any portion of the distribution of Put Rights to Non-U.S. Holders
will be treated as a dividend. Accordingly, we do not presently intend to
withhold tax on any portion of the distribution of rights to Non-U.S. Holders.
If a Non-U.S. Holder were nevertheless in receipt of a dividend, that dividend
would generally be subject to tax at 30% (unless reduced or eliminated by an
applicable income tax treaty).
Distributions in excess of any dividends will be applied against and will
reduce the Non-U.S. Holder's basis in his common stock. Any amount in excess of
the Non-U.S. Holder's basis in his common stock will be treated as gain from the
sale or exchange of that stock and will be treated as discussed below.
Exercise of Rights
A Non-U.S. Holder will not be subject to U.S. federal withholding tax upon
exercise of the rights, except that, if the Non-U.S. Holder tenders debt
securities as payment for the subscription price, any cash payment received by
the Non-U.S. Holder for accrued and unpaid interest will be subject to the rules
generally applicable to payments of interest on those debt securities to the
Non-U.S. Holder. While beyond the scope of this discussion, we expect that most
Non-U.S. Holders will qualify for an exemption from U.S. federal withholding tax
on such interest, provided that the proper certifications have been or are
provided.
Expiration of Rights
The expiration of rights held by a Non-U.S. Holder generally will not have
tax consequences to the holder unless the holder would have been subject to tax
upon the sale, exchange, or other disposition of the rights or common stock
acquired on exercise of the rights, as described below.
Sale, Exchange or Other Disposition of Rights or Acquired Shares
Generally, a Non-U.S. Holder will not be subject to U.S. federal income or
withholding tax on any capital gain realized upon the sale, exchange or other
disposition of rights or any acquired common stock unless (1) the
34
Non-U.S. Holder is an individual that is present in the United States for 183
days or more in the taxable year of the sale, exchange or other disposition and
certain other conditions are met, or (2) we are or have previously been a "U.S.
real property holding corporation" for U.S. federal income tax purposes. We do
not believe that we are currently or at any relevant time have previously been a
"U.S. real property holding corporation" or that we will become one in the
future.
Termination of Rights Offering
If a Non-U.S. Holder receives rights in a distribution from us and retains
such rights, then, upon a termination of the rights offering by us, the Non-U.S.
Holder should not be subject to U.S. federal income or withholding tax as a
result of the distribution, ownership, exercise or expiration of the rights.
If a Non-U.S. Holder receives rights in a distribution from us, and such
holder sells, exchanges or otherwise disposes of such rights, then, while there
is no clear authority, upon a termination of the rights offering by us: (1) the
Non-U.S. Holder should not be subject to U.S. federal income or withholding tax
as a result of the prior distribution of the rights, and (2) the Non-U.S. Holder
should be treated as selling rights which have a zero basis; in which case, the
Non-U.S. Holder should not be subject to U.S. federal income or withholding tax
upon the sale, exchange or other disposition of rights except as described above
under " -- Taxation of Non-U.S. Holders -- Sale, Exchange or Other Disposition
of Rights or Acquired Shares."
If a Non-U.S. Holder has purchased rights, then our termination of the
rights offering generally will not have tax consequences to the Non-U.S. Holder
unless such holder would have been subject to tax upon the sale, exchange, or
other disposition of the rights as described above under " -- Taxation of
Non-U.S. Holders -- Sale, Exchange or Other Disposition of Rights or Acquired
Shares."
Information Reporting and Backup Withholding
The distribution of rights to a Non-U.S. Holder and the holder's sale,
exchange or other disposition of rights or acquired common stock may be subject
to information reporting to the IRS. Copies of these information returns also
may be made available under the provisions of a specific treaty or agreement to
the tax authorities of the country in which the Non-U.S. Holder resides. Backup
withholding (currently 30%) may apply to "reportable payments" if a Non-U.S.
Holder fails to provide a correct taxpayer identification number and certain
other information, fails to provide a certification of exempt status or fails to
report the holder's full dividend and interest income.
Payment of the proceeds of the disposition of our rights or acquired
common stock to or through the U.S. office of any broker, U.S. or foreign,
generally will be subject to information reporting and backup withholding unless
the Non-U.S. Holder certifies as to the holder's non-U.S. status under penalties
of perjury or otherwise establishes that the holder qualifies for an exemption,
provided that the broker does not have actual knowledge that the holder is a
U.S. Holder or that the conditions of any other exemption are not in fact
satisfied. Payment of the proceeds of the disposition of our rights or acquired
common stock to or through a foreign office of a broker generally will not be
subject to information reporting or backup withholding; however, if such broker
has certain connections to the United States, then information reporting, but
not backup withholding, will apply unless the holder establishes its non-U.S.
status.
Backup withholding is not an additional tax; any amounts withheld under
the backup withholding rules will be allowed as a refund or credit against the
Non-U.S. Holder's U.S. federal income tax liability provided the required
information is furnished to the IRS. The information reporting requirements may
apply regardless of whether backup withholding is required.
PLAN OF DISTRIBUTION
We are making this rights offering directly to you, the holders of our
common stock, on a pro rata basis for each share of our common stock held at the
close of business on [_____], 2002.
35
We will pay [________], the information agent, a fee of approximately
$[___] and [________], the subscription agent, a fee of approximately $[___] for
their services in connection with this rights offering (which includes the
subscription agent's fees associated with the exercise of rights). We have also
agreed to reimburse the information agent and the subscription agent their
reasonable expenses.
We estimate that our total expenses in connection with the rights
offering, including registration, legal and accounting fees, will be $1,000,000.
We have not employed any brokers, dealers or underwriters in connection
with the solicitation of exercise of rights. Except as described in this
section, we are not paying any other commissions, fees or discounts in
connection with the rights offering. Some of our employees may solicit responses
from you as a holder of rights, but we will not pay our employees any
commissions or compensation for such services other than their normal employment
compensation.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of common
stock and the rights offered by this prospectus will be passed upon for us by
Baker Botts L.L.P., New York, New York.
EXPERTS
The consolidated balance sheets of Liberty Media Corporation and
subsidiaries ("New Liberty" or "Successor") as of December 31, 2001 and 2000,
and the related consolidated statements of operations, comprehensive earnings,
shareholders' equity, and cash flows for the years ended December 31, 2001 and
2000 and the period from March 1, 1999 to December 31, 1999 (Successor periods)
and from January 1, 1999 to February 28, 1999 (Predecessor period) have been
incorporated by reference herein in reliance upon the report, dated March 8,
2002, of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The KPMG LLP report states that Liberty Media Corporation changed its
method of accounting for derivative instruments and hedging activities in 2001.
In addition, the KPMG LLP report contains an explanatory paragraph that
states that, effective March 9, 1999, AT&T Corp., the former parent company of
New Liberty, acquired Tele-Communications, Inc., the former parent company of
Liberty Media Corporation, in a business combination accounted for as a
purchase. As a result of the acquisition, the consolidated financial information
for the periods after the acquisition is presented on a different basis than
that for the periods before the acquisition and, therefore, is not comparable.
The consolidated balance sheets of Telewest Communications plc and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of operations, shareholders' equity and comprehensive income, and
cash flows for each of the years in the three-year period ended December 31,
2001, have been incorporated by reference herein in reliance upon the report,
dated February 28, 2002, of KPMG Audit Plc, independent chartered accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
Our Current Report on Form 8-K filed on February 13, 2002, as amended on
April 15, 2002, which is incorporated by reference in this prospectus, includes
the consolidated balance sheet of UnitedGlobalCom, Inc. (a Delaware corporation
f/k/a New UnitedGlobalCom, Inc.) and subsidiaries as of December 31, 2001, and
the related consolidated statements of operations and cash flows for the period
from February 5, 2001 (inception) through December 31, 2001, and the
consolidated balance sheets of UGC Holdings, Inc. (a Delaware corporation f/k/a
UnitedGlobalCom, Inc.) and subsidiaries as of December 31, 2001 and 2000, and
the related consolidated statements of operations and comprehensive (loss)
income, shareholders' (deficit) equity and cash flows for each of the three
years in the period ended December 31, 2001 (which we refer to as the UGC
Financial Statements). After reasonable efforts, we have not been able to obtain
the consent of Arthur Andersen LLP to the incorporation by reference in this
prospectus of their report with respect to the UGC Financial Statements, and we
have dispensed
36
with the requirement under Section 7 of the Securities Act of 1933, as amended,
to file their consent as an exhibit to the registration statement of which this
prospectus forms a part in reliance on Rule 437(a) promulgated under the
Securities Act. Because we have been unable to obtain the consent of Arthur
Andersen LLP to the incorporation by reference of their audit report, you will
not be able to recover any damages you may incur from Arthur Andersen LLP under
Section 11 of the Securities Act in the event that the UGC Financial Statements
contain any untrue statements of a material fact or omit to state a material
fact required to be stated therein, in each case by virtue of their
incorporation by reference herein.
WHERE TO FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act with respect to the securities
being offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information included in the
registration statement and the exhibits thereto. You should refer to the
registration statement, including its exhibits and schedules, for further
information about our company and the securities being offered hereby.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this document, which means that we can disclose
important information to you by referring you to other documents. The
information incorporated by reference is an important part of this prospectus,
and is deemed to be part of this document except for any information superseded
by this document or any other document incorporated by reference into this
document. Any statement, including financial statements, contained in our Annual
Report on Form 10-K for the year ended December 31, 2001 shall be deemed to be
modified or superseded to the extent that a statement, including financial
statements, contained in this prospectus or in any other later incorporated
document modifies or supersedes that statement. We incorporate by reference the
documents listed below and any future filings made by us with the Securities and
Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934:
- Our Annual Report on Form 10-K for the year ended December 31, 2001,
filed on April 1, 2002.
- Our Quarterly Report on Form 10-Q for the three-month period ending
March 31, 2002, filed on May 14, 2002.
- Our Quarterly Report on Form 10-Q for the six-month period ending
June 30, 2002, filed on August 14, 2002.
- Our Current Report on Form 8-K, filed on January 9, 2002.
- Our Current Report on Form 8-K, filed on February 13, 2002, as
amended by Current Report on Form 8-K/A, filed on April 15, 2002.
- Our Current Report on Form 8-K, filed on June 17, 2002.
- The description of our capital stock contained in Annex A to our
Form 8-A filed under the Securities Exchange Act of 1934 on July 24,
2001, and any amendment or report filed for the purpose of updating
that description.
37
You may request a copy of these filings at no cost, by writing or
telephoning the office of:
Investor Relations
Liberty Media Corporation
12300 Liberty Boulevard
Englewood, Colorado 80112
Telephone: 877-772-1518
Our annual, quarterly and special reports and other information are on
file with the Securities and Exchange Commission. You may read and copy any
document that we file at the Public Reference Room of the Securities and
Exchange Commission at 450 Fifth Street, NW, Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. You may also inspect our
filings at the regional office of the Securities and Exchange Commission located
at Citicorp, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 or
over the Internet at the Securities and Exchange Commission's website at
http://www.sec.gov. Information contained on any website referenced in this
prospectus is not incorporated by reference in this prospectus.
This prospectus incorporates by reference documents which include
information concerning The News Corporation Limited, AOL Time Warner Inc., USA
Interactive, Vivendi Universal, S.A., Sprint Corporation, Telewest
Communications plc, Motorola Inc., IDT Corporation and UnitedGlobalCom, Inc.,
among other public companies. All of these companies file reports and other
information with the Securities and Exchange Commission in accordance with the
requirements of the Securities Act and the Securities Exchange Act. Information
incorporated by reference into this prospectus concerning those companies has
been derived from the reports and other information filed by them with the
Securities and Exchange Commission. We had no part in the preparation of those
reports and other information, nor are they incorporated by reference into this
prospectus. You may read and copy any reports and other information filed by
those companies with the Securities and Exchange Commission as set forth above.
You should rely only on the information contained or incorporated by
reference into this prospectus or to which we have referred you. We have not
authorized any person to provide you with different information or to make any
representation not contained in this prospectus.
38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides,
generally, that a corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (except actions by or in the right of
the corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation against all expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A corporation may similarly indemnify such person for
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of any action or suit by or in the right of the
corporation, provided that such person acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of claims, issues and matters as to which such
person shall have been adjudged liable to the corporation, provided that a court
shall have determined, upon application, that, despite the adjudication of
liability but in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
Section 102(b)(7) of the DGCL provides, generally, that the certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
may not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of Title 8 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision may eliminate or limit
the liability of a director for any act or omission occurring prior to the date
when such provision became effective.
Article V, Section E of the Restated Certificate of Incorporation, as
amended (the "Liberty Charter"), of Liberty Media Corporation, a Delaware
corporation ("Liberty"), provides as follows:
1. Limitation On Liability. To the fullest extent permitted by the DGCL as
the same exists or may hereafter be amended, a director of Liberty shall not be
liable to Liberty or any of its shareholders for monetary damages for breach of
fiduciary duty as a director. Any repeal or modification of this paragraph 1
shall be prospective only and shall not adversely affect any limitation, right
or protection of a director of Liberty existing at the time of such repeal or
modification.
2. Indemnification.
(a) Right to Indemnification. Liberty shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director or officer of Liberty or is or was serving at the request of Liberty
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by such
person. Such right of indemnification shall inure whether or not the claim
asserted is based upon matters which antedate the adoption of Section E of the
Liberty Charter. Liberty shall be required to indemnify or make advances to a
person in connection with a proceeding (or part thereof) initiated by such
person only if the proceeding (or part thereof) was authorized by the board of
directors of Liberty.
(b) Prepayment of Expenses. Liberty shall pay the expenses (including
attorneys' fees) incurred by a director or officer in defending any proceeding
in advance of its final disposition, provided, however, that the payment of
II-1
expenses incurred by a director or officer in advance of the final disposition
of the proceeding shall be made only upon receipt of an undertaking by the
director or officer to repay all amounts advanced if it should be ultimately
determined that the director or officer is not entitled to be indemnified under
this paragraph or otherwise.
(c) Claims. If a claim for indemnification or payment of expenses under
this paragraph is not paid in full within 60 days after a written claim therefor
has been received by Liberty, the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action, Liberty
shall have the burden of proving that the claimant was not entitled to the
requested indemnification or payment of expenses under applicable law.
(d) Non-Exclusivity of Rights. The rights conferred on any person by this
paragraph shall not be exclusive of any other rights which such person may have
or hereafter acquire under any statute, provision of the Liberty Charter,
Liberty's Bylaws, agreement, vote of shareholders or resolution of disinterested
directors or otherwise.
(e) Other Indemnification. Liberty's obligation, if any, to indemnify any
person who was or is serving at its request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, enterprise or
nonprofit entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or nonprofit entity.
3. Amendment or Repeal. Any amendment, modification or repeal of the
foregoing provisions of Section E of the Liberty Charter shall not adversely
affect any right or protection hereunder of any person in respect of any act or
omission occurring prior to the time of such amendment, modification or repeal.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a complete list of Exhibits filed as part
of this registration statement.
EXHIBIT NO. DOCUMENT
----------- --------
4.1 Specimen Series A transferable subscription rights certificate
4.2 Specimen Series B transferable subscription rights certificate
4.3 Instructions for Use of Liberty Media Corporation Right
Certificates
4.4 Specimen certificate for shares of Series A common stock, par
value $.01 per share, of the Registrant (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form
S-1 of the Registrant (File No. 333-55998) as filed on February
21, 2001 (the "Split Off S-1 Registration Statement"))
4.5 Specimen certificate for shares of Series B common stock, par
value $.01 per share, of the Registrant (incorporated by
reference to Exhibit 4.2 to the Split Off S-1 Registration
Statement)
5.1 Opinion of Baker Botts L.L.P.
5.2 Opinion of Baker Botts L.L.P. regarding certain tax matters
23.1 Consent of KPMG LLP
23.2 Consent of KPMG Audit Plc+
23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-5)
99.1 Notice of Intent to Conduct Rights Offering+
99.2 Notice of Guaranteed Delivery
99.3 DTC Participant Oversubscription Exercise Form
II-2
EXHIBIT NO. DOCUMENT
----------- --------
99.4 Letter from the Registrant to brokers, dealers and nominees
99.5 Letter from brokers, dealers and nominees to clients
99.6 Beneficial Owner Election Form
99.7 Nominee Holder Certification Form and Request for Additional
Rights
99.8 Form of Subscription Agent Agreement by and between the
Registrant and [________]+
99.9 Form of Information Agent Agreement by and between the Registrant
and [________]+
99.10 Important Tax Information
------------------------
+ To be filed by amendment.
(b) Financial Statement Schedules. Schedules not listed above have been omitted
because the information to be set forth therein is not material, not applicable
or is shown in the financial statements or notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Liberty pursuant to the foregoing provisions, or otherwise, Liberty has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Liberty of
expenses incurred or paid by a director, officer or controlling person of
Liberty in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, Liberty will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
Liberty hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(2) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report, to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934;
and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide
such interim financial information.
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Denver, state of
Colorado, on September 6, 2002.
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
--------------------------
Name: Robert R. Bennett
Title: President and Chief Executive Officer
II-4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Elizabeth M. Markowski, Esq. and Robert W. Murray
Jr., Esq., and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution and re-substitution for him and in his name,
place and stead, in any and all capacities, to sign and file (i) any or all
amendments (including post-effective amendments) to this Registration Statement,
with all exhibits thereto, and other documents in connection therewith, and (ii)
a registration statement, and any and all exhibits thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them full power and authority, to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, to all intents and purposes and as fully as they might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons (which
persons constitute a majority of the Board of Directors) in the capacities and
on the dates indicated:
NAME TITLE DATE
---- ----- ----
/s/ John. C. Malone Chairman of the Board and Director September 6, 2002
-------------------
John. C. Malone
/s/ Robert R. Bennett President, Chief Executive Officer September 6, 2002
--------------------- (Principal Executive Officer) and
Robert R. Bennett Director
/s/ Gary S. Howard Executive Vice President, Chief September 6, 2002
------------------ Operating Officer and Director
Gary S. Howard
/s/ David J.A. Flowers Senior Vice President and Treasurer September 6, 2002
---------------------- (Principal Financial Officer)
David J.A. Flowers
/s/ Christopher W. Shean Senior Vice President and Controller September 6, 2002
------------------------ (Principal Accounting Officer)
Christopher W. Shean
/s/ Donne F. Fisher Director September 6, 2002
-------------------
Donne F. Fisher
/s/ Paul A. Gould Director September 6, 2002
-----------------
Paul A. Gould
/s/ Jerome H. Kern Director September 6, 2002
------------------
Jerome H. Kern
/s/ David E. Rapley Director September 6, 2002
-------------------
David E. Rapley
/s/ Larry E. Romrell Director September 6, 2002
--------------------
Larry E. Romrell
II-5
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
----------- --------
4.1 Specimen Series A transferable subscription rights certificate
4.2 Specimen Series B transferable subscription rights certificate
4.3 Instructions for Use of Liberty Media Corporation Right
Certificates
4.4 Specimen certificate for shares of Series A common stock, par
value $.01 per share, of the Registrant (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form
S-1 of the Registrant (File No. 333-55998) as filed on February
21, 2001 (the "Split Off S-1 Registration Statement"))
4.5 Specimen certificate for shares of Series B common stock, par
value $.01 per share, of the Registrant (incorporated by
reference to Exhibit 4.2 to the Split Off S-1 Registration
Statement)
5.1 Opinion of Baker Botts L.L.P.
5.2 Opinion of Baker Botts L.L.P. regarding certain tax matters
23.1 Consent of KPMG LLP
23.2 Consent of KPMG Audit Plc+
23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-5)
99.1 Notice of Intent to Conduct Rights Offering+
99.2 Notice of Guaranteed Delivery
99.3 DTC Participant Oversubscription Exercise Form
99.4 Letter from the Registrant to brokers, dealers and nominees
99.5 Letter from brokers, dealers and nominees to clients
99.6 Beneficial Owner Election Form
99.7 Nominee Holder Certification Form and Request for Additional
Rights
99.8 Form of Subscription Agent Agreement by and between the
Registrant and [________]+
99.9 Form of Information Agent Agreement by and between the Registrant
and [________]+
99.10 Important Tax Information
------------------------
+ To be filed by amendment.