<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
TURNER BROADCASTING SYSTEM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
TURNER BROADCASTING SYSTEM, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JUNE 7, 1996
The Annual Meeting of the Shareholders of Turner Broadcasting System, Inc.
will be held in the Rutherford Room of the Omni Hotel in Atlanta, Georgia, on
Friday, June 7, 1996, commencing at 9:00 a.m., local time.
At the meeting, the shareholders will be asked to:
1. Elect fifteen directors to serve for the ensuing year or until
their successors are duly elected and have qualified;
2. Consider and act upon a proposal to ratify the selection of Price
Waterhouse LLP as the Company's independent accountants for the fiscal year
ending December 31, 1996;
3. Consider and act upon a shareholder proposal, if properly presented
at the meeting, concerning disclosure of executive compensation; and
4. Transact any other business which may properly be brought before
the meeting.
The Board of Directors has fixed the close of business on April 22, 1996 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the meeting. Please mark, sign and date the enclosed proxy form and
mail it promptly in the accompanying envelope. If you plan to attend the meeting
and your shares are held in the name of a broker or other nominee, please bring
a proxy or letter from the broker or nominee confirming your ownership of
shares.
By Order of the Board of Directors
STEVEN W. KORN
Secretary
Atlanta, Georgia
April 29, 1996
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE WHICH HAS BEEN
PROVIDED. IN THE EVENT YOU ARE ABLE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 3
TURNER BROADCASTING SYSTEM, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 7, 1996
This proxy statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of Turner
Broadcasting System, Inc. (the "Company") for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on Friday, June 7,
1996, in the Rutherford Room of the Omni Hotel in Atlanta, Georgia, at 9:00 a.m.
local time, and any adjournments thereof. All shareholders are encouraged to
attend the Annual Meeting. Your proxy is requested, however, whether or not you
attend in order to assure maximum participation and to expedite the proceedings.
At the Annual Meeting, shareholders will be requested to act upon the
matters set forth in this proxy statement. If you are not present at the Annual
Meeting, your shares can be voted only when represented by proxy. The shares
represented by your proxy will be voted in accordance with your instructions if
the proxy is properly signed and returned to the Company before the Annual
Meeting. To the extent instructions are not indicated in your proxy, your shares
will be voted "FOR" the matters set forth in Items I and II hereof and "AGAINST"
the matter set forth in Item III hereof. You may revoke your proxy at any time
prior to its being voted at the Annual Meeting by delivering a new duly executed
proxy with a later date or by delivering written notice of revocation to the
Secretary of the Company prior to the day of the Annual Meeting, or by appearing
and voting in person at the Annual Meeting. It is anticipated that this proxy
statement and accompanying proxy card will first be mailed to the Company's
shareholders on or about May 1, 1996. The Company's 1995 Annual Report to its
shareholders is also enclosed and should be read in conjunction with the matters
set forth herein. The expenses incidental to the preparation and mailing of this
proxy material are being paid by the Company. No solicitation is planned beyond
the mailing of this proxy material to shareholders.
The principal executive offices of the Company are located at One CNN
Center, Atlanta, Georgia 30303.
VOTING SHARES
Only shareholders of record as of the close of business on April 22, 1996
will be entitled to notice of and to vote at the Annual Meeting. As of the close
of business on April 22, 1996, the Company had outstanding 68,330,388 shares of
its Class A Common Stock, par value $.0625 per share (the "Class A Common
Stock"), 139,882,227 shares of its Class B Common Stock, par value $.0625 per
share (the "Class B Common Stock"), and 12,396,976 shares of its Class C
Convertible Preferred Stock, par value $.125 per share (the "Class C Preferred
Stock"). Holders of the Class A Common Stock, the Class B Common Stock and the
Class C Preferred Stock are entitled to vote on every matter submitted to the
shareholders, voting together as a single group, except as to matters on which
separate class voting is required by law or by the Company's Restated Articles
of Incorporation (hereinafter, the "Articles of Incorporation" or the
"Articles"). Each share of Class A Common Stock entitles the holder thereof to
two votes, each share of Class B Common Stock entitles the holder thereof to
one-fifth vote and each share of Class C Preferred Stock entitles the holder
thereof to vote as though such holder held the six shares of the Class B Common
Stock currently underlying each share of the Class C Preferred Stock (i.e., one
and one-fifth votes per share of Class C Preferred Stock).
Directors are elected by a plurality of the votes cast (see "I. Election of
Directors" regarding separate class voting for the two classes of the Company's
directors). Holders of the Class A Common Stock, the Class B Common Stock and
the Class C Preferred Stock will vote together as a single group on all other
matters coming before the Annual Meeting. Action on the ratification of the
Company's independent accountants (Item II hereof) and approval of a
shareholder-proposed resolution (Item III hereof) will be approved if the votes
cast in favor of each such action exceed the votes cast opposing the action.
Abstentions and broker non-votes will not be included in the total number of
votes cast and therefore will have no effect on the outcome of the vote.
<PAGE> 4
I. ELECTION OF DIRECTORS
Under the terms of the Company's Articles of Incorporation, so long as at
least four million shares of the Class C Preferred Stock are outstanding, the
Company's Board of Directors shall consist of fifteen members, except that such
number is subject to automatic adjustment under those circumstances and during
those time periods that holders of any other class or series of the Company's
preferred stock have rights to elect members of the Board of Directors. Other
than the Class C Preferred Stock, there are no classes or series of preferred
stock outstanding which provide a present right to the holders thereof to elect
directors. Holders of the Class A Common Stock and holders of the Class B Common
Stock (such two classes hereinafter referred to collectively as the "Common
Stock") are entitled to vote together as a single group for the election of
eight of the fifteen directors (the "Common Stock Directors"), and holders of
the Class C Preferred Stock are entitled to vote as a separate class for the
election of the remaining seven directors (the "Class C Directors").
NOMINATION AND VOTING ARRANGEMENTS
Certain agreements which were entered into in connection with the Company's
issuance and sale in June 1987 of units of its securities comprised of shares of
the Class B Cumulative Preferred Stock and the Class C Preferred Stock (the
"Units Offering") contain provisions with respect to the selection of and voting
for nominees for election as directors of the Company. Pursuant to the terms of
a Shareholders' Agreement dated as of June 3, 1987, as amended as of April 15,
1988 (the "Shareholders' Agreement"), among the investors in the Units Offering
(the "Units Investors"), Mr. R. E. Turner and the Company, the Units Investors
and Mr. Turner have agreed to vote their respective shares of Common Stock, if
any, for the election of the Common Stock Directors nominated by the Board of
Directors. The Shareholders' Agreement terminates as to any Units Investor upon
that investor's sale of all of its shares of the Class C Preferred Stock, and
terminates as to all parties upon the first to occur of (i) the date on which
one or more of the Units Investors purchases Mr. Turner's interest in the
Company, (ii) the date on which less than four million shares of Class C
Preferred Stock remain outstanding (the "Termination Date"), and (iii) with
respect to the voting provisions, the twentieth anniversary of the date of the
Shareholders' Agreement (unless extended by the parties).
The following Units Investors (or their successors in interest), who in the
aggregate held approximately 92% of the outstanding shares of Class C Preferred
Stock at February 1, 1996, are also parties to a Voting Agreement dated as of
June 3, 1987 (the "Voting Agreement"): TCI Turner Preferred, Inc. (a subsidiary
of Tele-Communications, Inc., which is hereinafter referred to as "TCI"), Time
TBS Holdings, Inc. (a subsidiary of Time Warner Inc., which, together with its
predecessor, is hereinafter referred to as "TWI"), United Artists
Communications, Inc., United Cable Television Corporation (hereinafter referred
to collectively as the "TWI/TCI Group"), Warner Cable Communications, Inc.
("Warner Cable") and Continental Cablevision, Inc. ("Continental"). Under the
terms of the Voting Agreement, which terminates upon the earlier of the
Termination Date and the twentieth anniversary of the date of the agreement, the
TWI/TCI Group is entitled to nominate in the aggregate five of the seven Class C
Directors, and Warner Cable and Continental are each entitled to nominate one
Class C Director. Subsequent to the date of the Voting Agreement, Warner Cable
has become an affiliate of TWI and both United Artists Communications, Inc. and
United Cable Television Corporation have become direct wholly-owned subsidiaries
of United Artists Entertainment Company ("UAE"), which is an affiliate of TCI.
Additionally, each of the parties to the Voting Agreement has agreed to vote all
of the Class C Preferred Stock owned by it for the election of the Class C
Directors so nominated (and, if so requested by the nominating party, to vote
for, or cause its nominees who serve as Class C Directors to vote for, the
removal of any Class C Director nominated by such requesting party).
TWI, Time TBS Holdings, Inc., TCI, TCI Turner Preferred, Inc., United
Artists Communications, Inc. and United Cable Television Corporation are also
parties to an agreement dated as of June 3, 1987 (the "TWI/TCI Agreement"),
which, among other things, provides that of the five Class C Directors nominated
by the TWI/TCI Group, two are to be nominated by TWI and its controlled
affiliates (the "TWI Group") and three by TCI, United Artists Communications,
Inc. and United Cable Television Corporation and their respective controlled
affiliates (the "TCI Group") until parity is reached as between these groups in
the
2
<PAGE> 5
ownership of the Class C Preferred Stock, at which time these groups shall each
nominate the same number of Class C Directors. The TWI/TCI Agreement terminates
in its entirety upon the earliest of (i) such date as either the TWI Group or
the TCI Group no longer owns any voting securities of the Company, (ii) the
twentieth anniversary of the date of the agreement, (iii) the date Mr. Turner
sells his interest in the Company to a third party and (iv) the Termination
Date.
NOMINEES FOR COMMON STOCK DIRECTORSHIPS
The Common Stock Directors of the Board of Directors have nominated the
eight individuals named below for election as Common Stock Directors of the
Company. It is the present intention of the persons named in the accompanying
form of proxy to vote such proxy (unless authority to so vote is withheld) for
the election of the eight nominees named below as Common Stock Directors of the
Company, each to serve until the next annual meeting of shareholders and until
his or her respective successor shall be duly elected and shall qualify. As
previously noted under the caption "Nomination and Voting Arrangements", R. E.
Turner and those Units Investors who hold Common Stock have agreed to vote their
shares of Common Stock for the election of such nominees, thereby assuring the
election of such nominees.
The Board of Directors expects that each of the nominees will be available
to stand for election and serve as director. However, in the event a vacancy
among the original nominees occurs prior to the Annual Meeting, the proxies will
be voted for a substitute nominee or nominees named by the Common Stock
Directors and for the remaining nominees.
The following is a brief description of the business experience of each of
the nominees for Common Stock directorships during the past five years:
R. E. Turner, age 57, has been Chairman of the Board, President and
controlling shareholder of the Company since 1970.
Henry L. (Hank) Aaron, age 62, has served as Senior Vice President and
Assistant to the President of Atlanta National League Baseball Club, Inc.
since 1989. Mr. Aaron has also served as Vice President -- Business
Development of the CNN Airport Network since August 1992. Mr. Aaron has
been Vice President -- Community Relations and a director of the Company
since 1980. He was previously a professional baseball player.
W. Thomas Johnson, age 54, was appointed as a Common Stock Director in
September 1990. He joined the Company in 1990 as Vice President -- News and
as President of Cable News Network, Inc. Previously, Mr. Johnson was
Chairman of the Los Angeles Times from 1989 and Vice Chairman of the Times
Mirror Company from 1987 until joining the Company. From 1980 until 1989,
he served as Publisher and Chief Executive Officer of the Los Angeles
Times.
Rubye M. Lucas, age 60, has been a director of the Company since 1981.
She is President of the William D. Lucas Fund, Inc., established in 1979 to
honor her late husband Bill Lucas, a former general manager of the Atlanta
Braves, by providing college scholarships to high school seniors who plan
to play baseball, and assists in fund raising for the National Association
for the Advancement of Colored People and the United Negro College Fund. In
addition, she is employed by the Company to serve as Director of the
Atlanta Project for the Company. Previously, she was employed as a teacher
by the Atlanta Board of Education from 1965 to 1990.
Terence F. McGuirk, age 44, has served as Executive Vice President of
the Company since 1990 and as a director since 1987. Previously, he was a
Vice President of the Company from 1979 to 1990. Mr. McGuirk joined the
Company in 1972 as an account executive.
Brian L. Roberts, age 36, has been a Common Stock Director of the
Company since January 1989. Mr. Roberts has served as President of Comcast
Corporation ("Comcast") since February 1990 and as a director of Comcast
since June 1988. Mr. Roberts also serves as a director of Storer
Communications, Inc.
3
<PAGE> 6
Scott M. Sassa, age 37, has been a Common Stock Director of the
Company since September 1992. Mr. Sassa has served as Vice
President -- Entertainment Networks of the Company since 1990 and in 1994,
his title was changed to Vice President -- Turner Entertainment Group. Mr.
Sassa also serves as President of Turner Entertainment Group, Inc., having
previously served as Executive Vice President of Turner Network Television,
Inc. from 1988 until 1990.
Robert Shaye, age 56, has been a Common Stock Director of the Company
since April 1994. Mr. Shaye serves as Chairman and Chief Executive Officer
of New Line Cinema Corporation ("New Line"), a wholly-owned subsidiary of
the Company since January 28, 1994. Mr. Shaye has served as President or
Chairman and Chief Executive Officer of New Line since its inception in
1967.
NOMINEES FOR CLASS C DIRECTORSHIPS
The Class C Directors of the Board of Directors of the Company have
nominated the seven individuals named below for election as Class C Directors of
the Company. See "Nomination and Voting Arrangements" with respect to the
selection of these nominees and agreements among certain holders of the Class C
Preferred Stock with respect to the election thereof. It is the present
intention of the persons named in the accompanying form of proxy to vote such
proxy (unless authority to so vote is withheld) for the election of the seven
nominees named below as Class C Directors of the Company, each to serve until
the next annual meeting of shareholders and until his respective successor shall
be duly elected and shall qualify.
The Board of Directors expects that each of the nominees will be available
to stand for election and to serve as director. However, in the event a vacancy
among the original nominees occurs prior to the Annual Meeting, the proxies will
be voted for a substitute nominee or nominees named by the Class C Directors and
for the remaining nominees.
Of the nominees for Class C directorships, Messrs. Malone and Neher have
served as Class C Directors since June 3, 1987. The following is a brief
description of the business experience of each of the nominees for Class C
directorships during the past five years:
Peter R. Barton, age 45, has served as a Class C Director since April
1994. Mr. Barton has served as President of Liberty Media Corporation since
1990 and Executive Vice President of TCI since January 1994. Prior to that
time, he served as Senior Vice President of TCI from 1988 until March 1991.
Mr. Barton also serves as a director of Home Shopping Network, Inc. and BET
Holdings, Inc.
Jeffrey L. Bewkes, age 43, has served as a Class C Director since
February 1996. Mr. Bewkes has served as Chairman, President and Chief
Executive Officer of Home Box Office ("HBO"), a division of Time Warner
Entertainment Company, L.P. ("TWE"), since November 1995. TWE is a limited
partnership in which TWI holds a 74.49% equity interest. Prior to that
time, Mr. Bewkes served as President and Chief Operating Officer of HBO
from 1991 and as Executive Vice President and Chief Executive Officer of
HBO from 1986 to 1991.
Joseph J. Collins, age 51, has served as a Class C Director since June
1988. Mr. Collins has served as Chairman and Chief Executive Officer of
Time Warner Cable, now a division of TWE, since June 1992. Mr. Collins
previously served as Chairman of the Board and Chief Executive Officer of
American Television and Communications Corporation, a TWI subsidiary which
was a predecessor of Time Warner Cable, from June 1988 until September
1992.
Gerald M. Levin, age 56, has served as a Class C Director since
February 1992. Mr. Levin has served as Chairman and Chief Executive Officer
of TWI since January 1993, having served as President and Co-Chief
Executive Officer of TWI from February 1992 until assuming his present
positions. He had previously served as the Vice Chairman of the Board of
TWI since July 1988 and as Chief Operating Officer of TWI since May 1991.
Mr. Levin is a director of TWI, the Chairman and Chief Executive Officer of
TWE and a member of the Board of Representatives of TWE.
4
<PAGE> 7
John C. Malone, age 55, has served as President and Chief Executive
Officer and as a director of TCI since 1973. Mr. Malone also serves as a
director of The Bank of New York Company, Inc., BET Holdings, Inc. and Home
Shopping Network, Inc.
Timothy P. Neher, age 48, has served as Vice Chairman of the Board of
Continental since January 1991 and as a director of Continental since 1982.
Previously, he had served as President and Chief Operating Officer of
Continental from 1985 through 1990.
Fred A. Vierra, age 64, has served as a Class C Director since January
1992. Mr. Vierra has served as Executive Vice President of TCI since
December 1991, and since 1994 has also served as Chairman and Chief
Executive Officer of Tele-Communications International, Inc. Prior to that
time, he served as the President and Chief Operating Officer of United
Artists Entertainment from May 1989 through December 1991. Mr. Vierra also
serves as a director of Boettcher Venture Capital, L.P.
The individuals above were nominated in accordance with the provisions set
forth in the Voting Agreement and the TWI/TCI Agreement previously discussed
under the caption "Nomination and Voting Arrangements," as follows: TCI Group
nominees -- Peter R. Barton, John C. Malone and Fred A. Vierra; TWI Group
nominees -- Joseph J. Collins and Jeffrey L. Bewkes; Warner Cable
nominee -- Gerald M. Levin; and Continental nominee -- Timothy P. Neher.
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF MANAGEMENT
The following table contains certain information as of February 1, 1996
concerning shares of the Company's Class A Common Stock and Class B Common Stock
owned by (i) all the directors and nominees, (ii) the named executive officers
listed in the Summary Compensation Table, and (iii) all directors, nominees and
executive officers of the Company as a group. Under the rules of the Securities
and Exchange Commission (the "SEC"), generally a person is deemed to be a
"beneficial owner" of a security if he or she has or shares the power to vote or
direct the voting of such security, or the power to dispose or to direct the
disposition of such security. Thus, more than one person may be deemed a
beneficial owner of the same security. Because holders of the Class A Common
Stock, holders of the Class B Common Stock and holders of the Class C Preferred
Stock generally vote together as a single group on matters other than the
election of directors, with each share of Class A Common Stock having two votes,
each share of Class B Common Stock having one-fifth vote and each share of Class
C Preferred Stock having one and one-fifth votes, the percentages of such
combined voting power held by the persons listed in the table below are
reflected in a separate column. Except as otherwise noted, the persons referred
to below had sole voting and investment power with respect to the shares set
forth as beneficially owned by them.
<TABLE>
<CAPTION>
% OF
SHARES COMBINED
TITLE OF BENEFICIALLY % OF VOTING
NAME OF BENEFICIAL OWNER SECURITIES OWNED CLASS POWER
- -------------------------------------------------- ---------- ------------ ----- --------
<S> <C> <C> <C> <C>
R. E. Turner...................................... Class A 57,730,053(1) 84.5 64.3
Class B 27,994,369(1) 20.0 3.1
Henry L. Aaron.................................... Class B 1,000(2) * *
Peter R. Barton................................... Class A 600(3) * *
Class B 300(3) * *
Jeffrey L. Bewkes................................. NA NA NA NA
Joseph J. Collins................................. NA NA NA NA
W. Thomas Johnson................................. Class B 325,466(4) * *
Gerald M. Levin................................... NA NA NA NA
Rubye M. Lucas.................................... Class A 400 * *
Class B 1,053(5) * *
John C. Malone.................................... NA NA NA NA
Terence F. McGuirk................................ Class B 522,018(6) * *
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
% OF
SHARES COMBINED
TITLE OF BENEFICIALLY % OF VOTING
NAME OF BENEFICIAL OWNER SECURITIES OWNED CLASS POWER
- -------------------------------------------------- ---------- ------------ ----- --------
<S> <C> <C> <C> <C>
Timothy P. Neher.................................. Class A 5,000(7) * *
Class B 15,000(7) * *
Brian L. Roberts.................................. NA NA NA NA
Scott M. Sassa.................................... Class B 328,395(8) * *
Robert Shaye...................................... Class B 5,120,211(9) 3.6 *
Fred A. Vierra.................................... Class A 950 * *
All directors and executive officers as a group
(25 persons).................................... Class A 57,737,225 84.5 64.3
Class B 34,719,393(10) 24.2 3.9
</TABLE>
- ---------------
* Indicates beneficial ownership of less than 1.0%.
(1) Includes (a) 559,962 shares of Class A Common Stock and 559,962 shares of
Class B Common Stock owned by Turner Outdoor, Inc., a corporation which is
wholly-owned by Mr. Turner, (b) 3,000,000 shares of Class B Common Stock as
to which Mr. Turner has voting control but not dispository control, (c)
2,180,894 shares of Class B Common Stock held by a charitable remainder
unitrust, as to which shares Mr. Turner shares voting and dispositive
control, (d) 500,000 shares of Class B Common Stock owned by Mr. Turner's
wife and (e) 5,000,000 shares of Class B Common Stock held by the Turner
Foundation, Inc. Mr. Turner disclaims beneficial ownership of those shares
which are held by his spouse and the Turner Foundation, Inc.
(2) Represents 1,000 shares which are subject to purchase upon exercise of
options.
(3) All of such shares are held in trust for the benefit of Mr. Barton's
children.
(4) Includes 311,666 shares which are subject to purchase upon exercise of
options.
(5) Includes 1,000 shares which are subject to purchase upon exercise of
options.
(6) Includes 466,666 shares which are subject to purchase upon exercise of
options.
(7) Includes 2,500 shares of Class A Common Stock and 2,500 shares of Class B
Common Stock held in trust for the benefit of Mr. Neher's children.
(8) Includes 311,666 shares which are subject to purchase upon exercise of
options.
(9) Includes (a) 107,348 shares held in trusts for Mr. Shaye's family which are
subject to voting control by Mr. Shaye, (b) 214,696 shares held in trust by
Mr. Shaye for his children, (c) 176,544 shares owned by Mr. Shaye's spouse,
(d) 49,637 shares held by a private foundation, (e) 31,295 shares held by
the 401(k) defined contribution plan of New Line in which Mr. Shaye has a
vested interest and (f) 2,458,088 shares which are subject to purchase upon
exercise of options. Mr. Shaye disclaims beneficial ownership of those
shares which are held of record by his spouse, his children, by trusts for
the benefit of family members and the private foundation.
(10) Includes an aggregate of 3,953,052 shares which are subject to purchase
upon the exercise of options held by directors and executive officers of
the Company.
Except as discussed below under the caption "Security Ownership of Certain
Beneficial Owners," the Company knows of no person other than Mr. Turner who, as
of February 1, 1996, owns beneficially more than 5% of any class of the
Company's outstanding Common Stock. Mr. Turner's address is One CNN Center,
Atlanta, Georgia 30303.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table contains certain information as of February 1, 1996
concerning shares of the Company's Class C Preferred Stock and Class B Common
Stock beneficially owned by each person (other than the person set forth in the
preceding table under the caption "Security Ownership of Management") known to
the Company to be the beneficial owner of more than 5% of the outstanding shares
of either of these classes of securities, and reflects information presented in
each such person's Schedule 13D or Schedule 13G and amendments (if any) thereto
as filed with the SEC and provided to the Company. Because holders of the Class
C Preferred Stock generally vote together with the holders of the Common Stock
on matters other than election of directors, the percentages of the combined
voting power represented by the persons listed in the
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<PAGE> 9
table below are reflected in a separate column. Because the Class C Preferred
Stock is convertible into Class B Common Stock at a present conversion rate of
six shares of Class B Common Stock for each share of Class C Preferred Stock,
the percentages of Class B Common Stock which would be held by the persons
listed below if their presently outstanding shares of Class C Preferred Stock
were presently converted are reflected in a separate column. Except as otherwise
noted, the persons referred to below had sole voting and investment power with
respect to the shares set forth as beneficially owned by them.
<TABLE>
<CAPTION>
CLASS C CLASS B % OF
PREFERRED STOCK COMMON STOCK CLASS B % OF
------------------- -------------------- COMMON COMBINED
BENEFICIAL % OF BENEFICIAL % OF UPON VOTING
ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS OWNERSHIP CLASS CONVERSION POWER
- ----------------------------------- --------- ----- ---------- ----- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Tele-Communications, Inc.(1)....... 6,087,080(2) 49.1 % 30,111,320(2) 21.6% 31.1% 7.7%(3)
5619 DTC Parkway
Englewood, Colorado 80111
Time Warner Inc.(1)................ 4,890,457(4) 39.4 % 25,349,085(5) 18.2% 25.6% 6.4%(6)
75 Rockefeller Center
New York, New York 10022
The Capital Group Companies, -- -- 18,153,085(7) 12.9% NA 2.0%
Inc..............................
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- ---------------
(1) These entities are, directly or through subsidiaries, Units Investors and
are parties to certain agreements entered into in connection with the Units
Offering, including (a) the Shareholders' Agreement, which provides for
certain voting and disposition arrangements with respect to the parties'
respective equity interests in the Company, and (b) an Investors'
Agreement, which provides for certain conversion and disposition
arrangements with respect to the Class C Preferred Stock held by the Units
Investors. By virtue of such agreements and certain other agreements
hereinafter referenced in this footnote, such entities may be deemed,
together with the other parties to such respective agreements, to
constitute "groups" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) for purposes of determining
beneficial ownership of the Class C Preferred Stock and the Class B Common
Stock. Except as set forth in the table above and as otherwise acknowledged
in these footnotes, each of the above entities disclaims beneficial
ownership of the shares owned by any other persons in such "groups." These
entities may also be deemed to constitute a group for purposes of Section
13(d)(3) by virtue of the TWI/TCI Agreement, which contains provisions
relating to the acquisition, disposition and voting of the Company's
securities. In addition, by virtue of the Voting Agreement, such companies
might constitute a group for the purposes of Section 13(d)(3).
(2) Consists of shares (Class C Preferred Stock and Class B Common Stock,
respectively) held by entities in which TCI claims beneficial ownership,
including United Cable Turner Investment, Inc. (5,820,452 and none),
Communication Capital Corporation (none and 29,237,671), TCI Turner
Preferred, Inc. (119,099 and 47,100), TCI TKR of Southern Kentucky, Inc.
(none and 372,711), and TKR Cable Company (147,529 and 453,838).
(3) The percentage of combined voting power includes 225,000 shares of Class A
Common Stock held by TCI Turner Preferred, Inc.
(4) Consists of shares held by entities in which TWI claims beneficial
ownership, including Time TBS Holdings, Inc. (4,221,619) and Warner Cable
Communications Inc. (668,838).
(5) Consists of shares held by entities in which TWI claims beneficial
ownership, including American Television and Communications Corporation
(17,010,889), Time Warner Operations Inc. (4,881,687), Warner Cable
Communications Inc. (1,991,310) and Warner Communications Inc. (1,465,199).
(6) The percentage of combined voting power includes 254,100 shares of Class A
Common Stock held by Warner Communications Inc.
(7) Certain operating subsidiaries of The Capital Group Companies, Inc.
exercised investment discretion over various institutional accounts which
held, as of December 29, 1995, 17,194,360 shares of the Company's Class B
Common Stock. The total number of shares set forth in the above table
includes 958,725 shares of Class B Common Stock which would be received
upon the conversion, at the current
7
<PAGE> 10
conversion rate, of $75,000,000 principal amount of the Company's zero
coupon subordinated convertible notes due 2007 currently held by The
Capital Group Companies, Inc.
BOARD MEETINGS
The Board of Directors met on seven occasions during 1995 and took action
by unanimous written consent in lieu of meeting on two occasions. Each of the
directors, with the exception of Brian L. Roberts, Joseph J. Collins, Gerald M.
Levin and Fred A. Vierra, attended at least 75% of the aggregate of (1) the
total number of meetings of the Board of Directors and (2) the total number of
meetings held by all committees of the Board on which he or she served, in each
case during the periods that he or she served.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company is paid an annual retainer fee of
$5,000. All directors receive a fee of $500 for each meeting of the Board of
Directors attended and a fee of $300 for each committee meeting attended.
COMMITTEES OF THE BOARD OF DIRECTORS
The Executive Committee may exercise the full powers of the Board of
Directors during the intervals between meetings of the Board, except as
otherwise provided by law, the Company's By-Laws, or resolution of the full
Board of Directors. The Executive Committee did not meet during 1995. The
present members of this committee are Messrs. R. E. Turner, Gerald M. Levin and
John C. Malone.
The Audit Committee is responsible for overseeing the financial reporting
process, including the Company's internal controls. Additionally, the committee
is responsible for recommending the independent accountants for appointment by
the Board, subject to ratification by the shareholders, and for reviewing the
scope and results of the Company's audits with the Company's internal auditors
and independent accountants. The present members of the Audit Committee are
Messrs. Peter R. Barton, Joseph J. Collins and Brian L. Roberts. This committee
met one time in 1995.
The Stock Option and Compensation Committee, which met once and took action
by unanimous written consent in lieu of meeting one time in 1995, is responsible
for reviewing matters relative to and making recommendations to the Board
concerning compensation of the Company's officers, directors and employees. The
present members of the Stock Option and Compensation Committee are Messrs.
Timothy P. Neher, Brian L. Roberts and Fred A. Vierra.
The Planning Committee, which took action by unanimous written consent in
lieu of meeting eight times during 1995, is responsible for studying and making
recommendations to the Board with respect to the Company's development and
future business objectives. The present members of the Planning Committee are
Messrs. R. E. Turner, W. Thomas Johnson, Terence F. McGuirk, Scott M. Sassa,
Fred A. Vierra and Robert Shaye and Mrs. Rubye M. Lucas.
The Finance Committee, which took action by unanimous written consent in
lieu of meeting four times during 1995, is responsible for examining the
Company's financial position and policies and making reports and recommendations
to the Board with respect thereto. The present members of the Finance Committee
are Messrs. Joseph J. Collins, John C. Malone, Terence F. McGuirk and Timothy P.
Neher.
EXECUTIVE COMPENSATION
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's compensation policies applicable to its executive officers,
and specifically Mr. R. E. Turner, the Company's Chairman, President and Chief
Executive Officer, are administered by the Stock Option and Compensation
Committee (the "Committee") of the Company's Board of Directors, the current
8
<PAGE> 11
members of which are non-employee directors of the Company. The compensation
policies adopted by the Committee are designed to enhance the overall strength
and financial performance of the Company, both by aligning the financial
interests of the Company's executive officers with those of its shareholders and
by retaining and rewarding talented executives who are critical to the long-term
success of the Company's complex and globally competitive businesses. A
significant portion of executive compensation is directly related to the
financial results of the Company, although individual contributions and
accomplishments are also considered in the determination of compensation.
The Company's executive compensation program as administered by the
Committee consists primarily of (i) annual cash compensation, the components of
which are base salary and an annual variable cash incentive ("bonus") which is
currently paid pursuant to the Turner Incentive Plan (the "TIP"), and (ii)
long-term incentive compensation consisting of stock options and a long-term
incentive opportunity payable in cash at the end of a three-year period
currently administered under the Company's Long-Term Incentive Plan (the
"LTIP").
The Committee reviews the level of total compensation for the Company's
executives annually as well as when circumstances require a more frequent
review, such as when an executive's duties and responsibilities substantially
change. The Committee in general has attempted to set annual compensation for
the Company's executives at substantially the median level for similarly
situated executives in the entertainment industry; however, the Committee has
deemed it necessary in certain cases and with respect to the named executive
officers (other than Mr. Turner and Mr. Shaye) to pay higher compensation to
retain executives who can contribute greatly to the Company's long-term plans.
On the basis of an annual survey conducted by the Company's outside executive
compensation consultants, the Committee has compared the Company's executives'
base salaries, short-term and long-term incentive compensation and stock option
grants with the compensation awarded to executives of fourteen companies in the
media and entertainment business. In order to review a broad range of
compensation packages for executives in the entertainment business, the
Committee elected to review companies in addition to those included in the
comparative performance graphs appearing after this report. Certain of those
additional companies are either divisions of larger entities or
internationally-based companies and could not be included in the Company's peer
group for purposes of the performance graphs.
Base Salaries
In 1993, the Committee determined it to be in the best interest of the
Company to secure the employment of certain of its key executive officers
(including the named executive officers other than Mr. Turner) through the
execution of employment agreements with such officers. By the beginning of 1994,
the Company had entered into four-year employment contracts with Messrs.
McGuirk, Sassa and Johnson which, in the case of each of Messrs. McGuirk and
Johnson, were extended an additional year in June of 1995. The base compensation
paid to Messrs. McGuirk, Sassa and Johnson under their employment agreements in
1995 was in approximately the upper third of the pay range for similarly
situated executives in the entertainment industry and such base compensation
will be increased by approximately five percent each year during the employment
term for each executive. The base salary of Mr. Shaye was negotiated in
connection with a new five-year employment contract (which was extended to a
six-year contract in July 1995) which he signed with New Line Cinema Corporation
("New Line") upon the Company's acquisition of New Line in January 1994. The
base salary paid to Mr. Shaye in 1995 is competitive with similarly situated
executives in the film production and distribution business. Mr. Shaye's
employment agreement provides for a five percent increase in base compensation
each year during the term. While the Company intends to continue its practice of
establishing annual cash compensation for its executives at substantially the
median level for similarly-situated executives in the entertainment industry,
the Committee will maintain the flexibility to pay higher compensation to retain
executives who are important to the Company's long-term success.
Annual Incentive Compensation
The second major component of executive compensation is annual incentive
compensation which is paid under the TIP. Under this plan, the Company's
executive officers and other key employees have the
9
<PAGE> 12
opportunity to earn performance bonuses. The Committee establishes target
bonuses each year which are expressed as a percentage of the base salary of the
respective employee. The amount of the performance bonus that was paid under the
TIP in 1995 to the named executive officers other than Mr. Shaye was based upon
the Company's actual operating income results as compared to the budgeted level
for the year. The Committee elected to use operating income (which is defined as
income before amortization of purchased programming, depreciation and
amortization of goodwill and other intangibles, non-cash amortization of certain
acquisition purchase adjustments, TWI merger costs, costs of accounts receivable
securitization program and interest expense, interest income and income taxes)
as the relevant annual target because it is a measure which can be affected by
the performance of the executive officers of the Company. For most of the
executive officers of the Company, other than the named executive officers, the
bonus opportunity under the TIP is also based, in part, on the achievement of
certain annual goals by the operating unit managed by each such executive
officer. Despite the significant revenue and operating income increases for the
Company in 1995, the performance bonuses paid to all executive officers under
the TIP for 1995 were only a fraction above the targeted bonus amounts as the
Company's actual operating income for the year was approximately equivalent to
the aggressive budgeted goal established by the Committee.
In 1995, Mr. Shaye's annual performance bonus was based in part on the
operating income results of the Company for the year and in part on the
operating income results of New Line, as provided in his employment contract.
The bonus payment to Mr. Shaye in 1995 approximated the maximum bonus which he
could have earned; New Line exceeded its budgeted operating income goal for 1995
and the Company's actual operating income for 1995 equaled the budgeted goal
established by the Committee.
As an executive officer's level of responsibility increases, a greater
portion of his or her total annual compensation is based upon incentive
compensation under the TIP (or a similar arrangement pursuant to an employment
agreement) and less is derived from base salary. The bonus opportunity for the
executive officers other than Mr. Turner and Mr. Shaye can range from 20 to 80
percent of their base salaries, with a majority of the target bonuses in the 30
percent range. Under his employment agreement, Mr. Shaye's bonus opportunity can
range from 25 to 125 percent of his base salary, depending upon the financial
performance of New Line and the Company. Mr. Turner's annual bonus is discussed
below.
Long-Term Incentive Compensation
The Company's long-term incentive compensation for its executives currently
consists of (i) a cash opportunity payable for succeeding three-year cycles and
(ii) annual grants of stock options or other equity-based awards. In fixing
these long-term incentive opportunities, the Committee has worked with its
outside executive compensation consultant and reviewed the published long-term
incentive compensation survey conducted by that consultant for approximately 375
participating companies across a broad spectrum of industries. Due to the small
number of companies in the entertainment industry and the possibility of one
company having undue influence on the comparative results, the Committee
reviewed the long-term incentive compensation awards of companies in a wide
variety of industries. This also allowed the Committee to analyze a broad range
of approaches to long-term incentive compensation.
The current LTIP cash opportunity is based upon the Company's operating
performance during the years 1995 through 1997. The cash award, which was
established to comprise approximately 25% of the long-term incentive opportunity
for each executive officer, including Mr. Turner but excluding Mr. Shaye, will
be payable upon completion of the Company's 1997 financial results. The
projected cash award is payable only to the extent that the Company meets or
exceeds benchmark goals set by the Committee for compounded growth in operating
income and in revenue over the three-year cycle, with 75% of such cash
compensation based upon the achievement of benchmark operating income levels,
and the remaining 25% based upon the achievement of targeted revenue levels. The
benchmark goals were determined by the Committee on the basis of the Company's
three-year strategic plan for the years 1995 through 1997. In 1995, the Company
achieved that year's operating income and revenue targets established for
purposes of long-term incentive compensation.
10
<PAGE> 13
The Committee believes that through the use of stock options or other
equity-based awards, executives' interests are directly tied to enhancing
shareholder value. Stock options are generally granted at the fair market value
of the underlying stock as of the date of grant and, with only certain
exceptions, become exercisable over a four-year vesting schedule and have a term
of ten years. The stock options provide value to the recipients only when the
price of the Company's stock increases above the option grant price. In January
1995, the Committee granted stock options to executive officers as well as to
other executives and key employees of the Company. In June 1995, the Company
made a special grant of stock options to Messrs. McGuirk, Johnson and Shaye, as
well as certain other executive officers of the Company, in connection with the
execution by each such executive officer of a one-year extension of such
executive's employment agreement. With respect to the Company's executives, the
Committee, with the assistance of its outside consultant, used the Black-Scholes
option pricing method to calculate the aggregate value of each option grant in
order to place the Company's executives close to median levels of long-term
incentive compensation in effect at the 375 surveyed companies. The Committee's
objective in granting stock options is to provide recipients with a competitive
award opportunity based on the aggregate exercise price of the shares subject to
the stock option. The Committee did not consider the number of stock options
currently held by an executive or employee in determining individual stock
option awards in 1995. The Committee approved an option grant schedule for 1995
awards based on the estimated requirements for competitive long-term
compensation opportunities and an employee's base salary. The schedule was used
as a guide in determining a "typical" award for each eligible employee
(including the named executive officers). Each award may vary based upon
experience, achievements and anticipated future contributions to the Company of
each individual.
Chairman and Chief Executive Officer Compensation
Mr. Turner's compensation consists of three components: base salary, an
annual bonus under the TIP and the opportunity for cash payments under the LTIP.
The Committee has set Mr. Turner's base salary at slightly below the median
level for industry chief executive officers. This is primarily due to Mr.
Turner's status, unusual in the industry, as the Company's largest shareholder
(thus entitling him, among other things, to certain dividend income) and is
consistent with his long-standing desire to leave value in the Company. In 1995,
Mr. Turner's base salary was increased by approximately 5.3 percent over his
base compensation in 1994. Mr. Turner's target bonus opportunity in 1995 was
approximately 67 percent of his base salary. As a result, Mr. Turner had a
compensation package in 1995 in which a significant portion of his annual
compensation was "at risk" because it was based upon the financial results of
the Company. As discussed above, payments under the TIP to the Company's
executive officers were slightly over the targeted level for 1995.
The Committee excluded Mr. Turner from the Company's stock option grant
program because of his position as the controlling shareholder of the Company.
Mr. Turner is a participant in the LTIP for the 1995 through 1997 cycle for
purposes of the cash opportunity thereunder. As described above, the Company
achieved the operating income and revenue targets for 1995 for purposes of
long-term incentive compensation.
Corporate Tax Deduction for Executive Compensation
During 1993, Section 162(m) of the Internal Revenue Code was enacted to
limit to $1 million per year the corporate deduction for compensation paid to
each of a corporation's chief executive officer and the four other most highly
compensated executive officers, unless certain requirements are met. To the
extent compensation is "performance-based" as defined by the Internal Revenue
Code, it is excluded from the calculation of the amount of deductible
compensation.
In an effort to preserve the deductibility of compensation paid to the
Company's executive officers, the Company's executive compensation plans and
performance criteria used for payments thereunder were approved by the Company's
shareholders in 1994. In the future, the Committee will try to structure
compensation plans to ensure deductibility while still preserving the Company's
ability to attract and retain qualified executives and the Committee's
discretion in balancing the effectiveness of the Company's
11
<PAGE> 14
compensation plans against the broader issue of achieving its strategic plans,
as well as the materiality of any lost deduction.
Summary
Each Committee member is personally familiar with compensation levels in
the entertainment and communications fields, and based on this familiarity,
bolstered by the various survey results provided by the Company's outside
executive compensation consultants, the Committee is satisfied that the annual
cash compensation levels for 1995, as well as the awards under the Company's
long-term incentive plan and stock option grants, were appropriate and
consistent with the Company's compensation policies.
This report has been provided by the Stock Option and Compensation
Committee of the Company's Board of Directors, the members of which are as
follows:
<TABLE>
<S> <C>
Timothy P. Neher Brian L. Roberts
Fred A. Vierra
</TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company serving as of December
31, 1995 (these individuals, collectively the "named executive officers"), for
the fiscal years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -----------------------------------------
------------------------------------------ RESTRICTED SECURITIES ALL OTHER
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION($) AWARDS($) OPTIONS (#) PAYOUTS($)(1) ($)(2)
- ---------------------- ---- ---------- ---------- ----------------- ---------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. E. Turner.......... 1995 1,013,173 680,603 -- -- 0 -- 204,536
Chairman of the 1994 945,000 596,030 -- -- 0 810,219 105,400
Board, President and 1993 925,096 471,685 -- -- 0 -- 141,621
Chief Executive
Officer
Terence F. McGuirk.... 1995 913,173 680,603 -- -- 233,000 -- 212,609
Executive Vice 1994 856,298 596,030 -- -- 40,000 699,735 97,867
President 1993 770,913 1,388,230(3) -- -- 500,000 -- 111,555
Scott M. Sassa........ 1995 860,481 680,603 -- -- 45,000 -- 185,613
Vice President -- 1994 805,000 596,030 -- -- 35,000 338,819 86,369
Turner Entertainment 1993 513,942 1,000,445(4) -- -- 500,000 -- 71,467
Group
W. Thomas Johnson..... 1995 749,807 365,324 -- -- 150,000 -- 165,538
Vice President -- 1994 704,495 323,427 -- -- 30,000 456,669 79,269
News 1993 456,431 813,115(5) -- -- 300,000 -- 63,057
Robert Shaye(6)....... 1995 1,575,000 1,971,125 115,874(7) -- 686,000 -- 243,295
Chairman and Chief 1994 1,384,615 1,512,482 106,027(8) 1,000,000(9) 2,100,000 -- 201,284
Executive Officer,
New Line Cinema
Corporation
</TABLE>
- ---------------
(1) The amounts shown in this column represent payouts under the Long-Term
Incentive Plan for the period January 1, 1992 through December 31, 1994.
Compounded growth in the Company's operating income determined 75% of the
cash award and the remaining 25% was based upon targeted revenue levels.
The benchmark goals were determined by the Stock Option and Compensation
Committee on the basis of the Company's three-year strategic plan for 1992
through 1994. For the three-year cycle, the Company exceeded the
established benchmark goals. Actual cash payments for the three-year period
ended December 31, 1994 were made in the first quarter of 1995, after 1994
financial results were available.
(2) The amounts shown in this column for 1995 represent Company contributions in
1995 to the Retirement Savings Plan, the Supplemental Benefit Plan (ERISA
excess plan under which accruals are made to offset Internal Revenue Code
imposed limitations under the Retirement Savings Plan), the Supplemental
Executive Retirement Plan (defined contribution plan for a select group of
management and highly compensated individuals), and the Life Insurance
Program, respectively, as follows: Mr. Turner -- $9,481, $111,000, $80,408
and $1,062; Mr. McGuirk -- $9,481, $111,000, $80,408 and $4,425;
12
<PAGE> 15
Mr. Sassa -- $9,481, $98,720, $72,221 and $3,151; Mr. Johnson -- $9,481,
$82,256, $61,246 and $6,306; and Mr. Shaye -- $9,481, $111,000, $80,720 and
$42,094. In addition, the amounts shown in this column for Messrs. Turner,
McGuirk, Sassa and Johnson include amounts of $2,585, $7,295, $2,040 and
$6,249, respectively, paid by the Company on behalf of such executive
officers with respect to Medicare tax withholding obligations.
(3) This bonus amount includes 22,000 shares of Class B Common Stock valued at
$27.125 per share granted in connection with Mr. McGuirk's execution of an
employment agreement with the Company and a special cash bonus to defray
the tax liability associated with such stock grant. See "Executive
Compensation -- Employment Agreements".
(4) This bonus amount includes 16,700 shares of Class B Common Stock valued at
$27.125 per share granted in connection with Mr. Sassa's execution of an
employment agreement with the Company and a special cash bonus to defray
the tax liability associated with such stock grant. See "Executive
Compensation -- Employment Agreements".
(5) This bonus amount includes 13,800 shares of Class B Common Stock valued at
$27.125 per share granted in connection with Mr. Johnson's execution of an
employment agreement with the Company and a special cash bonus to defray
the tax liability associated with such stock grant. See "Executive
Compensation -- Employment Agreements".
(6) In accordance with the rules of the Securities Exchange Act of 1934, as
amended, no compensation information is provided with respect to Mr. Shaye
for the year 1993 which was prior to the acquisition of New Line by the
Company. Compensation information with respect to Mr. Shaye for 1994 does
not include any compensation paid to Mr. Shaye by New Line in 1994 prior to
the Company's acquisition of New Line on January 28, 1994.
(7) This amount includes an aggregate of $35,000 received by Mr. Shaye in
respect of a per diem allowance for certain business travel and $37,388 of
imputed interest on an interest-free loan made by New Line to Mr. Shaye.
See "Executive Compensation -- Certain Relationships and Related
Transactions -- Other Transactions".
(8) This amount includes an aggregate of $32,200 received by Mr. Shaye in
respect of a per diem allowance for certain business travel and $33,536 of
imputed interest on an interest-free loan made by New Line to Mr. Shaye.
See "Executive Compensation -- Certain Relationships and Related
Transactions -- Other Transactions".
(9) The Company granted Mr. Shaye 50,000 shares of Class B Common Stock on
September 30, 1994 under the Company's 1993 Stock Option and Equity-Based
Award Plan. Such shares were subject to forfeiture upon the termination of
Mr. Shaye's employment with New Line under certain circumstances until the
restrictions lapsed on December 31, 1995. Dividends on such shares are paid
to Mr. Shaye. The value of the restricted stock award on December 29, 1995
was $1,300,000 on the basis of a closing price of the Company's Class B
Common Stock of $26.00 per share.
13
<PAGE> 16
STOCK OPTION GRANTS IN 1995
The following table sets forth information concerning stock option grants
during 1995 to the named executive officers.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL EXERCISE
UNDERLYING OPTIONS OR
OPTIONS GRANTED TO BASE MARKET PRICE
GRANTED EMPLOYEES PRICE ON GRANT DATE EXPIRATION GRANT DATE
NAME (#)(1) IN 1995 ($/SH) ($/SH)(2) DATE PRESENT VALUE ($)(3)
- -------------------------- --------- ----------- ------ --------------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
R. E. Turner.............. 0 -- -- -- --
Terence F. McGuirk........ 50,000 1.30 16.625 16.625 1/5/05 371,000(4)
183,000 4.74 16.875 20.00 6/9/05 1,656,150(5)
Scott M. Sassa............ 45,000 1.17 16.625 16.625 1/5/05 333,900(4)
W. Thomas Johnson......... 40,000 1.04 16.625 16.625 1/5/05 296,800(4)
110,000 2.85 16.875 20.00 6/9/05 995,500(5)
Robert Shaye.............. 50,000 1.30 16.625 16.625 1/5/05 371,000(4)
636,000 16.48 16.875 20.00 6/9/05 5,755,800(5)
</TABLE>
- ---------------
(1) Grants vest annually, commencing on the second anniversary of the grant
date, at a rate of 33 1/3% of the grant.
(2) The grants of options to Messrs. McGuirk, Johnson and Shaye with an exercise
price of $16.875 per share of the Class B Common Stock were conditioned
upon the approval by the Company's shareholders of an increase in the
number of shares of the Class B Common Stock as to which stock options and
other equity-based awards may be granted under the Company's 1993 Stock
Option and Equity-Based Award Plan. The Company's shareholders approved
such increase on June 9, 1995.
(3) This calculation is based on the Black-Scholes option pricing model adapted
for use in valuing stock options. The actual value, if any, an executive
officer may realize ultimately depends on the market value of the Class B
Common Stock at a future date. There is no assurance that the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. The estimated values under that model are based on the
assumptions described in footnotes 4 and 5 to the above table.
(4) The estimated value of the options granted to Messrs. McGuirk, Sassa,
Johnson and Shaye on January 5, 1995 were based upon a grant date of
January 5, 1995, using both the exercise price and the market value of the
Class B Common Stock on the date of grant of $16.625. The following
assumptions were used in such calculation: expected stock volatility of
0.3374 based upon the weekly closing prices of the Class B Common Stock
over the two-year period ending on the date of grant, a dividend yield of
0.42% based upon the annualized dividend divided by the stock price of the
Class B Common Stock on the date of grant, a risk-free interest rate of
7.88% based upon the yield as of the date of grant on a U.S. Government
Zero Coupon Bond with a maturity equal to the expected term of the option,
and an expected time of exercise of seven years after the date of grant and
a 3% per year forfeiture rate, both based upon the Company's experience.
(5) The estimated value of the options granted to Messrs. McGuirk, Johnson and
Shaye on June 9, 1995 was based upon a grant date of June 9, 1995, using
the exercise price of each option of $16.875 and the market value of the
Class B Common Stock on June 9, 1995 of $20.00. The following assumptions
were used in such calculation: expected stock volatility of 0.3093 based
upon the weekly closing prices of the Class B Common Stock over the
two-year period ending on the date of grant, a dividend yield of 0.35%
based upon the annualized dividend divided by the stock price of the Class
B Common Stock on the date of grant, a risk-free interest rate of 6.28%
based upon the yield as of the date of grant on a U.S. Government Zero
Coupon Bond with a maturity equal to the term of the option, and an
expected time of exercise of seven years after the date of grant and a 3%
per year forfeiture rate, based upon the Company's experience.
14
<PAGE> 17
AGGREGATED STOCK OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
The following table sets forth information concerning options exercised
during 1995 by the named executive officers and the value of unexercised options
held by them as of December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
SHARES OPTIONS AT FISCAL OPTIONS AT
ACQUIRED YEAR-END (#) FISCAL YEAR-END ($)(1)
ON VALUE ---------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. E. Turner............ 0 -- 0 0 -- --
Terence F. McGuirk...... 0 -- 466,666 536,334 2,367,829 2,565,296
Scott M. Sassa.......... 0 -- 186,666 463,334 565,329 772,296
W. Thomas Johnson....... 0 -- 311,666 338,334 1,816,679 1,687,296
Robert Shaye............ 0 -- 2,258,088(2) 2,186,000 24,481,669 6,272,250
</TABLE>
- ---------------
(1) These amounts represent the excess of the fair market value of the Class B
Common Stock of $26.00 per share as of December 31, 1995 above the exercise
price of the options.
(2) Includes 1,658,088 options granted to Mr. Shaye by New Line prior to the
Company's acquisition of New Line. Pursuant to such acquisition, the New
Line options were converted into options exercisable for shares of the
Company's Class B Common Stock.
EMPLOYMENT AGREEMENTS
By the beginning of 1994, the Company had entered into four-year employment
agreements with Messrs. McGuirk, Sassa and Johnson which, in the case of each of
Messrs. McGuirk and Johnson, were extended in June of 1995 to five-year
agreements. Under Mr. McGuirk's employment agreement dated as of December 20,
1993, he serves as Executive Vice President of the Company for a minimum annual
base salary of $855,000 and a minimum annual bonus of $645,000 under the Turner
Incentive Plan (provided certain Company performance targets are met). Under Mr.
Sassa's employment agreement dated as of January 1, 1994, he serves as Vice
President-Turner Entertainment Group of the Company for a minimum annual base
salary of $805,000 and a minimum annual bonus of $645,000 under the Turner
Incentive Plan (provided certain Company performance targets are met). Under Mr.
Johnson's employment agreement dated as of December 20, 1993, he serves as Vice
President-News of the Company for a minimum annual base salary of $700,000 and a
minimum annual bonus of $350,000 under the Turner Incentive Plan (provided
certain Company performance targets are met). The employment agreements for
Messrs. McGuirk, Sassa and Johnson provide for annual increases in base salary
of approximately five percent. During their respective terms of employment with
the Company, Messrs. McGuirk, Sassa and Johnson will be eligible to participate
in the Company's LTIP, Retirement Savings Plan, Supplemental Benefit Plan,
Supplemental Executive Retirement Plan and health benefit plans. Under each such
employment agreement, the executive officer's employment with the Company may
not be terminated except for "cause" (as defined therein). Upon a change of
control of the Company (as defined in such employment agreements), each of
Messrs. McGuirk, Sassa and Johnson will be entitled to terminate his employment
with the Company and receive all earned and vested compensation (including
annual bonus and payments under the Company's LTIP) as of the date of such
termination. Under their respective employment agreements, Messrs. McGuirk,
Sassa and Johnson have agreed not to compete with the Company for 12 months
following the termination of their employment under certain circumstances.
At the time of the Company's acquisition of New Line, Mr. Shaye entered
into an employment agreement with New Line with a term which began on January
28, 1994 and expires on December 31, 1998. In July 1995, Mr. Shaye's employment
agreement was extended by one year to December 31, 1999. Mr. Shaye's employment
agreement provides for, among other things, a minimum annual base salary of $1.5
million, annual bonus compensation ranging from a minimum of 25% of base salary
to a maximum bonus of 125% of base salary, determined on the basis of the
achievement of certain performance goals by New Line and the Company, and a
grant of 50,000 shares of Class B Common Stock and stock options for 2.1 million
shares of Class B Common Stock (1.1 million of which vest on the basis of the
achievement by New Line of certain performance goals). Mr. Shaye's employment
agreement may be terminated by New Line for "cause"
15
<PAGE> 18
(as defined therein) or terminated by Mr. Shaye for "good reason" (as defined
therein). In the event New Line terminates Mr. Shaye's employment agreement
without "cause" or Mr. Shaye terminates his employment agreement for "good
reason", Mr. Shaye will be entitled to the base salary, bonus and stock options
(each as if 100% of the performance goal had been met for each year subsequent
to the termination) due under his employment agreement for the remainder of its
term.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related party
transactions involving entities with which members of the Company's Stock Option
and Compensation Committee are affiliated is set forth below under the caption
"Compensation Committee Interlocks and Insider Participation," and comparable
information with respect to entities with which other members of the Company's
Board of Directors are affiliated is set forth below under the caption "Other
Transactions."
Compensation Committee Interlocks and Insider Participation
The Stock Option and Compensation Committee is currently comprised of two
Class C Directors and one Common Stock Director who are all identified in the
next succeeding paragraph. The members of the Committee, as well as the five
other Class C Directors, are affiliated with entities which were investors in
the Company's 1987 Units Offering and which have ongoing business relationships
with the Company, primarily as operators, directly or through affiliates, of
cable television systems which receive and distribute to their subscribers
programming provided by the Company's cable television operations. For purposes
of the following discussion, Comcast, Continental, and the other entities
previously reflected in the table set forth under the caption "Security
Ownership of Certain Beneficial Owners" are collectively referred to as the
"Affiliated Holders."
The present members of the Stock Option and Compensation Committee have the
following relationships with the Affiliated Holders: Timothy P. Neher is Vice
Chairman of the Board of Directors of Continental; Brian L. Roberts is President
of Comcast; and Fred A. Vierra is the Executive Vice President of TCI.
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of September 22, 1995 (the "Merger Agreement") among the
Company, TWI, TW Inc., a Delaware corporation and currently a wholly-owned
subsidiary of TWI ("New Time Warner"), Time Warner Acquisition Corp., a Delaware
corporation ("Delaware Sub") and TW Acquisition Corp., a Georgia corporation
("Georgia Sub"), which provides for a transaction in which the Company and TWI
will each become a wholly-owned subsidiary of a new holding company, New Time
Warner. Pursuant to the Merger Agreement, (a) Georgia Sub will be merged into
the Company (the "TBS Merger"), (b) each outstanding share of Class A Common
Stock of the Company and each share of Class B Common Stock of the Company
(other than shares held directly or indirectly by TWI or New Time Warner or in
the treasury of the Company and other than shares with respect to which
dissenters' rights are properly exercised) will be converted into 0.75 of a
share of common stock, par value $.01 per share, of New Time Warner ("New Time
Warner Common Stock"), (c) each share of Class C Preferred Stock of the Company
(other than shares held directly or indirectly by TWI or New Time Warner or in
the treasury of the Company and other than shares with respect to which
dissenters' rights are properly exercised) will be converted into 4.80 shares of
New Time Warner Common Stock, (d) Delaware Sub will be merged into TWI (the "TW
Merger" and together with the TBS Merger, the "Mergers"), (e) each outstanding
share of common stock, par value $1.00 per share, of TWI (other than shares held
directly or indirectly by TWI) will be converted into one share of New Time
Warner Common Stock, (f) each outstanding share of each series of preferred
stock of TWI (other than shares held directly or indirectly by TWI and shares
with respect to which appraisal rights are properly exercised) will be converted
into one share of a substantially identical series of preferred stock of New
Time Warner having the same designation as the shares of preferred stock of TWI
so converted, (g) each of TWI and the Company will become a wholly owned
subsidiary of New Time Warner and (h) New Time Warner will be renamed "Time
Warner Inc."
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<PAGE> 19
The Mergers are subject to a number of closing conditions, including
regulatory approvals and the approval of the shareholders of the Company and the
stockholders of TWI. Among the required regulatory approvals are (i) the
approval of the Federal Communications Commission (the "FCC") and (ii) the
expiration of all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Both the FCC and the
Federal Trade Commission (the "FTC"), which has the responsibility for reviewing
the parties' filings under the HSR Act, are reviewing the Mergers. There can be
no assurance that all of the conditions to the consummation of the Mergers will
be satisfied or that, as a condition to the grant of any approvals by government
agencies, including the FCC and the FTC, changes will not be required to the
terms of the Merger Agreement or the other agreements entered into by the
Company, TWI and Liberty Media Corporation ("LMC"), a wholly-owned subsidiary of
TCI, and its affiliates in connection with the Mergers. As a result of certain
arrangements among R.E. Turner, the Company, TWI and LMC and its affiliates,
holders of a sufficient number of shares of the Company's capital stock of each
class have agreed to vote in favor of the TBS Merger to assure its approval by
the Company's shareholders, regardless of the vote of any other shareholders of
the Company. The LMC Agreement described below, however provides that the
obligation of LMC and its affiliates to vote in favor of the Merger is subject
to certain conditions, including there not having been amendments to the related
agreements that would have certain effects on LMC.
Pursuant to the Amended and Restated LMC Agreement (the "LMC Agreement"),
dated as of September 22, 1995, among TWI, New Time Warner, LMC and certain of
its affiliates, LMC and certain of its affiliates have agreed, subject to
certain conditions, to vote all their shares of Company capital stock in favor
of the approval of the TBS Merger and each of the other transactions
contemplated by the Merger Agreement and in favor of the approval of the Merger
Agreement. Pursuant to the LMC Agreement, TWI has agreed with LMC that, upon the
happening of certain events, LMC will have the right to cause TWI to terminate
the Merger Agreement and abandon the Mergers.
Also in connection with the execution of the Merger Agreement, the Company
has agreed, subject to the consummation of the Mergers, to extend the existing
affiliation agreements pursuant to which TCI and its affiliates distribute
programming produced by the Company and its subsidiaries.
During 1995, the Company recorded subscription fees from the Affiliated
Holders (directly or through affiliated entities) for their receipt of the
Company's cable services (Cable News Network ("CNN"), Turner Network Television
("TNT"), Headline News, the Cartoon Network and Turner Classic Movies and
certain international networks), before deductions for advertising allowances,
as follows: TCI -- $165,273,000; TWI -- $96,184,000; Continental -- $34,383,000;
and Comcast -- $30,039,000. These amounts constituted approximately 44% of the
Company's total subscription fees recorded during 1995. Advertising revenues
received by the Company during 1995 were also indirectly dependent to a
substantial degree on cable television systems operated by the Affiliated
Holders or their affiliates since subscribers to those systems constitute
approximately 52%, 52%, 52%, 55% and 50% of the current U.S. cable audience
coverage for TBS Superstation, TNT, CNN, Headline News and the Cartoon Network,
respectively.
The TBS Superstation signal is retransmitted by a common carrier, Southern
Satellite Systems, Inc. ("Southern"), which is controlled by an indirect
wholly-owned subsidiary of LMC. Mr. Peter R. Barton is President of LMC. The
Company does not have a contract with Southern and does not receive compensation
for such transmission. This retransmission of the TBS Superstation signal by
Southern could be discontinued by the carrier, subject to Southern's contracts
with the local cable systems. In view of the substantial aggregate fees received
by Southern from the local cable systems for the TBS Superstation signal, the
Company considers voluntary discontinuance of such retransmission by Southern to
be unlikely.
Turner Sports Programming, Inc. ("TSPI"), a wholly-owned subsidiary of the
Company, has a 44% interest in SportSouth Network, Ltd. ("SportSouth"), a
limited partnership in which LMC Southeast Sports, Inc. ("LMC Sports"), a
subsidiary of LMC, also has a 44% interest. SportSouth operates SportSouth
Network, a regional sports network serving the Southeast United States, the
revenues of which are principally derived from the sale of advertising time and
the subscription sale of its service to cable operators. Concurrently with the
execution of the Merger Agreement, the Company and LMC Sports entered into a
Stock Purchase Agreement (the "SportSouth Agreement") pursuant to which the
Company will sell to LMC
17
<PAGE> 20
Sports all of the outstanding capital stock of TSPI. The purchase price for the
stock of TSPI (currently estimated to be $60 million) will be determined in
accordance with a formula set forth in the SportSouth Agreement. The transaction
contemplated by the SportSouth Agreement is conditioned upon the consummation of
the Mergers.
All of the Affiliated Holders and LMC have interests in cable programming
services which compete with the services offered by the Company for cable system
viewers, for channel space on low channel capacity cable systems and, in several
cases, for advertising funds. Among the significant competing services are HBO
and Cinemax, which are operated by an affiliate of TWI, The Discovery Channel,
in which TCI has an interest, and American Movie Classics and The Black
Entertainment Network, in which LMC has interests.
Pursuant to a lease agreement entered into in 1992 relating to a satellite
transponder, the Company recorded revenue from LMC of $1,824,000 in 1995. LMC is
committed to pay approximately $8,816,000 through 2000 under such lease.
Pursuant to an agreement entered into between New Line and Encore Media
Corporation ("Encore"), New Line has agreed to supply, on an exclusive basis,
certain feature films of New Line, New Line's Fine Line division and Turner
Pictures Worldwide, Inc. each year for exhibition on Starz!, a premium cable
programming service, or other pay television services owned or operated by
Encore, through December 31, 2005. LMC has a 90% interest in Encore. For the
year ended December 31, 1995, New Line recorded revenue from Encore of
$42,198,000 pursuant to such agreement. In addition to the New Line agreement,
Encore has entered into certain other license agreements with the Company and
certain of its other subsidiaries pursuant to which Encore has acquired
broadcast rights to certain television and theatrical product owned by the
Company. The Company recorded revenue under these agreements of approximately
$1,820,000 in 1995.
The Company and its subsidiaries have licensed the pay television or
syndication broadcast rights to certain of the Company's programming to other
pay television services owned or operated by the Affiliated Holders. In 1995,
the Company recorded aggregate revenue from such licensing arrangements of
approximately $18,653,000.
Other Transactions
In addition to the relationships of the members of the Stock Option and
Compensation Committee with the Affiliated Holders, as previously described (see
"Compensation Committee Interlocks and Insider Participation"), the remaining
Class C Directors have the following relationships with the Affiliated Holders:
Gerald M. Levin is the Chairman and Chief Executive Officer of TWI; Joseph J.
Collins is Chairman and Chief Executive Officer of Time Warner Cable; Jeffrey L.
Bewkes is Chairman, President and Chief Executive Officer of HBO; John C. Malone
is the President and Chief Executive Officer and a director of TCI; and Peter R.
Barton is the President of LMC.
Also, pursuant to an agreement entered into in October 1986, Lorimar
Telepictures, a former subsidiary of TWI and now a division of TWE, has an
eight-year commitment with the Company to purchase $4,500,000 per year in
reciprocal advertising time on the Company's networks. In addition, TWI placed
advertising on the Company's networks which was not pursuant to the agreement
discussed above. In total, the Company recorded advertising revenues, excluding
reciprocal advertising agreements, of approximately $5,306,000 in the year ended
December 31, 1995 for advertising placed on the Company's services by the
Affiliated Holders.
In connection with the advertising and promotion of its cable services in
1995, the Company purchased advertising space in certain of the magazines that
are published by TWI. The Company recorded expenses in connection with those
purchases in 1995 of approximately $3,722,000.
Pursuant to a 1986 agreement with the predecessor of Metro-Goldwyn-Mayer,
Inc. ("MGM"), MGM became the designated distributor in the home video market of
most MGM and pre-1950 Warner Bros. films in the Turner Entertainment Co. film
library, both domestically and internationally, and certain RKO Pictures, Inc.
films internationally. The distribution agreement (the "Home Video Agreement")
provides for a fifteen-year term commencing June 6, 1986 with distribution fees
payable based primarily on the suggested
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<PAGE> 21
retail price of the films sold. In November 1990, MGM entered into an agreement
with Warner Home Video ("WHV"), a former subsidiary of TWI and now a division of
TWE, wherein WHV agreed to service certain of MGM's obligations under the Home
Video Agreement. Revenues recorded in 1995 pursuant to this agreement were
$80,361,000, while expenses recorded in the same period with respect to the Home
Video Agreement were $54,441,000.
TWI and its subsidiaries have entered into license agreements with the
Company pursuant to which the Company has acquired broadcast rights to certain
television and theatrical product. The Company recorded aggregate expenses of
approximately $18,236,000 for license fees during 1995 under these agreements
and, as of December 31, 1995, was committed to pay $59,946,000 through 2005
under these agreements. TWI also has an investment in n-tv, a 24-hour German
language news channel in which the Company owned a 33.1% limited partnership
interest as of December 31, 1995.
In February 1989, the Company entered into a joint venture arrangement with
HBO to purchase satellite transponders. The joint venture is structured so that
the purchased transponders are allocated by agreement between the Company and
HBO, and the Company's obligations are limited solely to those transponders and
ancillary service arrangements which are to be allocated to and used by the
Company and its subsidiaries.
Prior to the Company's acquisition of New Line, New Line had provided to
Mr. Shaye a loan of $750,000 in connection with the purchase and renovation of a
residence in California. Such loan is unsecured and does not bear interest.
Under the terms of Mr. Shaye's current employment agreement with New Line, the
loan shall be repaid in four equal installments on December 31, 1994, 1995, 1996
and June 30, 1997, provided that if the residence is sold or if Mr. Shaye's
employment agreement is terminated for any reason, then the remaining unpaid
indebtedness under the loan shall become immediately due and payable. The
largest amount of such loan outstanding since January 1, 1995 was approximately
$750,000, with a balance of $562,500 remaining outstanding on December 31, 1995.
Mr. Henry L. Aaron, Vice President -- Community Relations and a director of
the Company since 1980, is indebted to the Company for a non-interest bearing
advance secured by and payable out of deferred compensation, payable in 240
monthly installments which began in January 1983. The largest amount of such
indebtedness outstanding since January 1, 1995 was approximately $97,000, with a
balance of $82,000 remaining outstanding on December 31, 1995.
Turner Air, Inc. ("TAI"), a company wholly owned by Mr. Turner, is
reimbursed by the Company for Mr. Turner's business use of a plane owned and
operated by TAI. During 1995, the Company reimbursed TAI for an aggregate of
$1,101,048 in expenses that related to Mr. Turner's business use of such plane
in 1993, 1994 and a portion of 1995.
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<PAGE> 22
PERFORMANCE GRAPHS
The following graphs compare the cumulative shareholder returns on the
Company's Class A Common Stock and Class B Common Stock with the comparable
cumulative returns of the S&P 500 Index and a peer group index comprised of the
common stock of the companies listed below, excluding the Company, for the
five-year period commencing December 31, 1990 and ended December 31, 1995, and
the eight-year period commencing December 31, 1987 and ended December 31, 1995.
The peer group index is based on a selection of companies operating in the
television and filmed entertainment business (Capital Cities/ABC, Inc., CBS Inc.
(for all years through December 31, 1994), Comcast Corporation (Class A Common
Stock), Paramount Communications, Inc. (for all years through December 31,
1993), Tele-Communications, Inc. (Class A Common Stock), The Walt Disney
Company, Time Warner Inc. and Viacom, Inc. (Class A Common Stock)). The annual
return for the peer group index is weighted based on the capitalization of each
of the companies within the peer group at the beginning of each period for which
a return is indicated. The graphs assume that the value of the investment in the
Class A Common Stock and the Class B Common Stock and each index was $100 on
December 31, 1990 and December 31, 1987, respectively, and that all dividends
were reinvested. In 1987, there was a recapitalization of the Company which
resulted in the dual classes of common stock as well as the issuance of
preferred stock to the Units Investors (see "I. Election of
Directors -- Nomination and Voting Arrangements"). The eight-year performance
graph illustrates the relative performance of the Company since such
recapitalization.
CUMULATIVE TOTAL SHAREHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDED DECEMBER 31, 1995
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TURNER CLASS TURNER CLASS
(FISCAL YEAR COVERED) A B S&P 500 PEER GROUP
<S> <C> <C> <C> <C>
12/31/90 100.00 100.00 100.00 100.00
12/31/91 203.30 205.56 130.34 118.21
12/31/92 188.37 188.25 140.25 156.86
12/31/93 240.86 241.32 154.32 203.12
12/31/94 145.30 146.92 156.42 191.66
12/31/95 230.34 234.02 214.99 233.98
</TABLE>
20
<PAGE> 23
CUMULATIVE TOTAL SHAREHOLDER RETURN FOR
EIGHT-YEAR PERIOD ENDED DECEMBER 31, 1995
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TURNER CLASS TURNER CLASS
(FISCAL YEAR COVERED) A B S&P 500 PEER GROUP
<S> <C> <C> <C> <C>
12/31/87 100.00 100.00 100.00 100.00
12/31/88 155.17 164.79 116.50 115.78
12/31/89 464.37 563.38 153.30 165.50
12/31/90 313.79 380.28 148.52 138.47
12/31/91 637.93 781.69 193.58 163.68
12/31/92 591.09 715.89 208.31 217.20
12/31/93 755.80 917.71 229.21 281.26
12/31/94 455.95 558.72 232.32 265.38
12/31/95 722.79 889.94 319.31 323.98
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Performance
Graphs and the Report of the Stock Option and Compensation Committee of the
Board of Directors on Executive Compensation shall not be incorporated by
reference into any such filings.
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<PAGE> 24
II. RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee of the Board of Directors,
the Board of Directors has selected Price Waterhouse LLP ("Price Waterhouse") as
the Company's independent public accountants for the fiscal year ending December
31, 1996, subject to ratification by the shareholders. Price Waterhouse served
in such capacity for the fiscal year ended December 31, 1995 and previously. A
representative of Price Waterhouse is expected to be present at the Annual
Meeting and will have the opportunity to make a statement if he or she so
desires and to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF PRICE WATERHOUSE AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1996.
III. SHAREHOLDER PROPOSAL REGARDING
EXECUTIVE COMPENSATION DISCLOSURE
The Company has been advised that Mrs. Evelyn Y. Davis, Editor, Highlights
and Lowlights, Watergate Office Building, 2600 Virginia Ave. N.W., Suite 215,
Washington, DC 20037, holder of 300 shares of Class A Common Stock, proposes to
submit the following resolution at the 1996 Annual Meeting of Shareholders:
RESOLVED: "That the shareholders recommend that the Board take the
necessary step that Turner Broadcasting specifically identify by name and
corporate title in all future proxy statements those executive officers, not
otherwise so identified, who are contractually entitled to receive in excess of
$100,000 annually as a base salary, together with whatever other additional
compensation bonuses and other cash payments were due them."
REASONS: "In support of such proposed Resolution it is clear that the
shareholders have a right to comprehensively evaluate the management in the
manner in which the Corporation is being operated and its resources utilized."
"At present only a few of the most senior executive officers are so identified,
and not the many other senior executive officers who should contribute to the
ultimate success of the Corporation." "Through such additional identification
the shareholders will then be provided an opportunity to better evaluate the
soundness and efficacy of the overall management."
"If you AGREE, please mark your proxy FOR this proposal."
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
The Company provides in the Summary Compensation Table and elsewhere in
this proxy statement comprehensive compensation information with respect to the
Company's most highly compensated executive officers. In addition, the report of
the Stock Option and Compensation Committee discusses in detail the compensation
of the Company's Chief Executive Officer and the compensation policies
applicable to the Company's executive officers in general. All of such
compensation disclosure complies with the rules and regulations of the SEC which
were revised in 1992 to provide for more extensive disclosure in response to
investors' views. The Board of Directors believes that the existing disclosure
provides shareholders with a clear overview of the Company's compensation
structure for executive officers and provides an adequate basis for shareholders
to evaluate the Company's use of resources for compensation.
The Board of Directors does not believe that the additional disclosure
described in the shareholder proposal would provide information that would
assist shareholders in assessing the Company's compensation program, its
operations or the effectiveness of management in utilizing the Company's
resources and responding to the competitive environment in which the Company
operates.
The shareholder proposal attempts to impose on the Company disclosure
obligations beyond what is required by the SEC and what is reported by other
public companies. If the Company were to provide additional and specific
disclosure related to the compensation of a broader group of employees as
suggested by the shareholder proposal, the Board of Directors believes that the
Company would be at a competitive disadvantage, as compared to other public
companies, as a result of the more extensive compensation disclosure. Such
expanded disclosure could impair the effectiveness of the Company's recruiting
and
22
<PAGE> 25
compensation programs. Except with respect to required compensation disclosure
under SEC rules applicable to all public companies, the Company views each
employee's salary as a private matter. Compensation levels within the Company
vary based upon factors such as performance, experience, job classification and
geographic location. Disclosure of compensation information for a broad group of
employees would invade employee privacy and harm employee morale. Accordingly,
the Board of Directors respectfully requests shareholders to vote against this
proposal.
IV. OTHER BUSINESS
The Board of Directors does not know of any matters to be presented for
action at the Annual Meeting other than as set forth in Items I, II and III of
this proxy statement. If any other business should properly come before the
meeting, the persons named in the accompanying form of proxy intend to vote
thereon in accordance with their best judgment.
SHAREHOLDERS' PROPOSALS
Any shareholder of the Company who wishes to present a proposal at the 1997
annual meeting of shareholders of the Company, and who wishes to have such
proposal included in the Company's proxy statement for that meeting, must
deliver a copy of such proposal to the Company at One CNN Center, Atlanta,
Georgia 30303, Attention: Corporate Secretary, no later than January 3, 1997;
however, if next year's annual meeting of shareholders is held on a date more
than 30 days before or after the corresponding date of the 1996 Annual Meeting,
any shareholder who wishes to have a proposal included in the Company's proxy
statement for that meeting must deliver a copy of the proposal to the Company a
reasonable time before the proxy solicitation is made. The Company reserves the
right to decline to include in the Company's proxy statement any shareholder's
proposal which does not comply with the rules of the SEC for inclusion therein.
You are encouraged to let us know your preference by marking the
appropriate boxes on the enclosed proxy.
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<PAGE> 26
APPENDIX A
TURNER BROADCASTING SYSTEM, INC.
ONE CNN CENTER, ATLANTA, GEORGIA 30303
CLASS A COMMON STOCK PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, JUNE 7, 1996
The undersigned hereby appoints R. E. TURNER, STEVEN W. KORN, and WAYNE H.
PACE, and each of them, proxies with full power of substitution, to represent
and to vote as set forth herein all the shares of Class A Common Stock of Turner
Broadcasting System, Inc. held of record by the undersigned on April 22, 1996,
at the Annual Meeting of Shareholders to be held in the Rutherford Room of the
Omni Hotel in Atlanta, Georgia, at 9:00 a.m., local time, on Friday, June 7,
1996, and any adjournments thereof.
<TABLE>
<S> <C> <C> <C>
1. Election of Common Stock Directors / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as written to the contrary for all nominees listed below
below)
</TABLE>
R. E. Turner; Henry L. Aaron; W. Thomas Johnson; Rubye M. Lucas;
Terence F. McGuirk; Brian L. Roberts; Scott M. Sassa; Robert Shaye.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the selection of Price Waterhouse as the Company's
independent accountants for the fiscal year ending December 31, 1996.
/ / FOR / / AGAINST / / ABSTAIN
3. Shareholder proposal with respect to disclosure of executive compensation.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the proxies are authorized to vote as described in the
proxy statement and upon such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
ITEMS 1 AND 2 AND "AGAINST" ITEM 3.
PLEASE SIGN EXACTLY AS NAME APPEARS ON STOCK CERTIFICATE.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
If stock is held in the name of two
or more persons, all must sign. When
signing as attorney, executor,
administrator, trustee, or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated:
------------------------------
------------------------------------
Signature
------------------------------------
Signature If Held Jointly
<PAGE> 27
APPENDIX B
TURNER BROADCASTING SYSTEM, INC.
ONE CNN CENTER, ATLANTA, GEORGIA 30303
CLASS B COMMON STOCK PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, JUNE 7, 1996
The undersigned hereby appoints R. E. TURNER, STEVEN W. KORN, and WAYNE H.
PACE, and each of them, proxies with full power of substitution, to represent
and to vote as set forth herein all the shares of Class B Common Stock of Turner
Broadcasting System, Inc. held of record by the undersigned on April 22, 1996,
at the Annual Meeting of Shareholders to be held in the Rutherford Room of the
Omni Hotel in Atlanta, Georgia, at 9:00 a.m., local time, on Friday, June 7,
1996, and any adjournments thereof.
<TABLE>
<S> <C> <C> <C>
1. Election of Common Stock Directors / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as written to the contrary for all nominees listed below
below)
</TABLE>
R. E. Turner; Henry L. Aaron; W. Thomas Johnson; Rubye M. Lucas;
Terence F. McGuirk; Brian L. Roberts; Scott M. Sassa; Robert Shaye.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the selection of Price Waterhouse as the Company's
independent accountants for the fiscal year ending December 31, 1996.
/ / FOR / / AGAINST / / ABSTAIN
3. Shareholder proposal with respect to disclosure of executive compensation.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the proxies are authorized to vote as described in the
proxy statement and upon such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
ITEMS 1 AND 2 AND "AGAINST" ITEM 3.
PLEASE SIGN EXACTLY AS NAME APPEARS ON STOCK CERTIFICATE.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
If stock is held in the name of two
or more persons, all must sign. When
signing as attorney, executor,
administrator, trustee, or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated:
------------------------------
------------------------------------
Signature
------------------------------------
Signature If Held Jointly
<PAGE> 28
APPENDIX C
TURNER BROADCASTING SYSTEM, INC.
ONE CNN CENTER, ATLANTA, GEORGIA 30303
CLASS C CONVERTIBLE PREFERRED STOCK PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, JUNE 7, 1996
The undersigned hereby appoints R. E. TURNER, STEVEN W. KORN, and WAYNE H.
PACE, and each of them, proxies with full power of substitution, to represent
and to vote as set forth herein all the shares of Class C Convertible Preferred
Stock of Turner Broadcasting System, Inc. held of record by the undersigned on
April 22, 1996, at the Annual Meeting of Shareholders to be held in the
Rutherford Room of the Omni Hotel in Atlanta, Georgia, at 9:00 a.m., local time,
on Friday, June 7, 1996, and any adjournments thereof.
<TABLE>
<S> <C> <C> <C>
1. Election of Class C Directors / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as written to the contrary for all nominees listed below
below)
</TABLE>
Peter R. Barton; Jeffrey L. Bewkes; Joseph J. Collins; Gerald M. Levin;
John C. Malone; Timothy P. Neher, Fred A. Vierra.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the selection of Price Waterhouse as the Company's
independent accountants for the fiscal year ending December 31, 1996.
/ / FOR / / AGAINST / / ABSTAIN
3. Shareholder proposal with respect to disclosure of executive compensation.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the proxies are authorized to vote as described in the
proxy statement and upon such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
ITEMS 1 AND 2 AND "AGAINST" ITEM 3.
PLEASE SIGN EXACTLY AS NAME APPEARS ON STOCK CERTIFICATE.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
If stock is held in the name of two
or more persons, all must sign. When
signing as attorney, executor,
administrator, trustee, or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated:
-----------------------------
------------------------------------
Signature
------------------------------------
Signature If Held Jointly
