<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
</TABLE>
TCI SATELLITE ENTERTAINMENT, 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):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
----------------------------------------------------------
</TABLE>
<PAGE>
[TSAT LOGO]
July , 2000
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of TCI Satellite
Entertainment, Inc. ("TSAT" or the "Company"), we cordially invite you to attend
the Company's annual meeting of stockholders. The meeting will be held at
mountain daylight time, on August 3, 2000, at located at
. At the annual meeting, you will have the opportunity to
meet with the Company's management team and we will report to you on the
Company's financial and operating performance.
As you know, an important aspect of the annual meeting process is the
stockholder vote on corporate business items. I urge you to exercise your rights
as a stockholder to vote and participate in this process.
Whether or not you plan to attend the annual meeting, PLEASE READ THE
ENCLOSED PROXY STATEMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT AS PROMPTLY AS POSSIBLE IN THE ACCOMPANYING POSTAGE PAID RETURN
ENVELOPE. This will save the Company additional expense in soliciting proxies
and will ensure that your shares are represented at the meeting.
Your Board of Directors and management are committed to the success of the
Company and the enhancement of your investment. As Chief Executive Officer and
President, I want to express my appreciation for your confidence and support.
Very truly yours,
Carl E. Vogel
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
7600 EAST ORCHARD ROAD, SUITE 330 SOUTH
ENGLEWOOD, COLORADO 80111
(303) 268-5440
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 3, 2000
------------------------
To Our Stockholders:
The 2000 Annual Meeting of Stockholders of TCI Satellite
Entertainment, Inc. ("TSAT" or the "Company") will be held at
on August 3, 2000, at mountain daylight time, for the purpose of
considering and acting upon the following matters:
1. Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Series B
common stock, par value $1.00 per share, from 10 million to 30 million;
2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to change the name of the Company to Liberty Satellite &
Technology, Inc.;
3. Approval of an amendment to the Company's Restated Certificate of
Incorporation deleting Section V.B., "Classification of the Board" and
Section V.C., "Removal of Directors" and making certain conforming
changes;
4. Election of the Company's board of directors;
5. Approval of an amendment to the Company's 1996 Stock Incentive Plan to
increase the number of shares of Series A common stock reserved for
issuance thereunder from 3,200,000 shares to 5,200,000 shares;
6. Ratification of the appointment of KPMG LLP as independent auditors for
the Company for the year ending December 31, 2000; and
such other matters as may properly come before the annual meeting or any
adjournments thereof. The board of directors is not aware of any other business
scheduled for the annual meeting. Any action may be taken on the foregoing
proposals at the annual meeting on the date specified above, or on any date or
dates to which the annual meeting may be adjourned.
Stockholders of record at the close of business on July 3, 2000, are the
stockholders entitled to vote at the annual meeting, and any adjournments
thereof. A complete list of stockholders entitled to vote at the meeting will be
available for inspection by stockholders at the executive offices of the Company
during the ten days prior to the meeting as well as at the meeting.
<PAGE>
Your vote is important. Please sign and date the enclosed proxy, and return
it promptly in the enclosed envelope to ensure your representation at the annual
meeting. The proxy will not be used if you attend and vote at the meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS,
Carl E. Vogel
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
Englewood, Colorado
July , 2000
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE ANNUAL MEETING. A
PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED WITHIN THE UNITED STATES.
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
7600 EAST ORCHARD ROAD, SUITE 330 SOUTH
ENGLEWOOD, COLORADO 80111
(303) 268-5440
------------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 3, 2000
------------------------
This proxy statement is furnished in connection with the solicitation on
behalf of the board of directors of TCI Satellite Entertainment, Inc., a
Delaware corporation ("TSAT" or the "Company") of proxies to be used at the
Company's annual meeting of stockholders, to be held at ,
on August 3, 2000, at mountain daylight time, and all adjournments of the
meeting. The accompanying Notice of Meeting and this proxy statement are first
being mailed to stockholders on or about July , 2000. A copy of the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 also accompanies
these materials.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, stockholders are being asked to consider and vote
upon the matters outlined in the accompanying Notice of Meeting, including:
PROPOSAL I. Approval of an amendment to the Company's Restated Certificate
of Incorporation to increase the number of authorized shares of Series B common
stock, par value $1.00 per share, from 10 million to 30 million;
PROPOSAL II. Approval of an amendment to the Company's Restated Certificate
of Incorporation to change the name of the Company to Liberty Satellite &
Technology, Inc.;
PROPOSAL III. Approval of an amendment to the Company's Restated
Certificate of Incorporation deleting Section V.B., "Classification of the
Board" and Section V.C., "Removal of Directors" and making certain conforming
changes;
PROPOSAL IV. Election of the Company's board of directors;
PROPOSAL V. Approval of an amendment to the Company's 1996 Stock Incentive
Plan to increase the number of shares of Series A common stock reserved for
issuance thereunder from 3,200,000 shares to 5,200,000 shares; and
PROPOSAL VI. Ratification of the appointment of KPMG LLP as independent
auditors for the Company for the year ending December 31, 2000.
The stockholders will also transact any other business that may properly
come before the meeting. Members of our management team will be present at the
meeting to respond to appropriate questions from stockholders.
1
<PAGE>
WHO IS ENTITLED TO VOTE?
The record date for the annual meeting is July 3, 2000. Only stockholders of
record at the close of business on that date are entitled to notice of and to
vote at the annual meeting. The Company has four series of capital stock
outstanding: the Series A common stock, par value $1.00; the Series B common
stock, par value $1.00; the Series A preferred stock, par value $0.01; and the
Series B preferred stock, par value $0.01. Holders of the Series A common stock,
Series B common stock and Series B preferred stock are entitled to vote at the
meeting. The Series A preferred stock does not generally have voting rights.
Except as otherwise required by law, or as described in this proxy
statement, the holders of shares of Series A common stock, Series B common stock
and Series B preferred stock vote together as a single class on all matters
presented to a vote of stockholders. Each holder of Series A common stock is
entitled to 1 vote per share on each matter submitted at the meeting. Each
holder of Series B common stock is entitled to 10 votes per share on each matter
submitted at the meeting. The holder of the Series B preferred stock is entitled
to 5,580 votes per share on each matter submitted at the meeting. At the close
of business on the record date there were shares of Series A common
stock, shares of Series B common stock and 150,000 shares of
Series B preferred stock outstanding, representing a total of votes.
WHAT IF MY SHARES ARE HELD IN "STREET NAME" BY A BROKER?
If you are the beneficial owner of shares held in "street name" by a broker,
your broker, as the record holder of the shares, is required to vote those
shares in accordance with your instructions. If you do not give instructions to
your broker, your broker will be entitled to vote the shares with respect to the
election of directors (Proposal IV) and the ratification of auditors
(Proposal VI), but will not be permitted to vote your shares with respect to any
other matter.
HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A quorum must be present at the meeting for any business to be conducted.
The presence at the meeting, in person or by proxy, of the holders of a majority
of the shares of voting stock outstanding on the record date, determined by
voting power, will constitute a quorum. Proxies received but marked as
abstentions or broker non-votes, as described in the preceding paragraph, will
be included in the calculation of the number of shares considered to be present
at the meeting. In addition to the quorum required for general business at the
meeting, Proposal I, to approve an increase in the number of authorized shares
of Series B common stock, will require the presence at the meeting, in person or
by proxy, of the holders of a majority of the shares of common stock outstanding
on the record date and of a majority of the shares of Series B common stock
outstanding on the record date, in each case determined by voting power.
WHAT IF A QUORUM IS NOT PRESENT AT THE MEETING?
If a quorum is not present at the scheduled time of the meeting, the
stockholders who are represented may adjourn the meeting until a quorum is
present. The time and place of the adjourned meeting will be announced at the
time the adjournment is taken, and no other notice will be given. An adjournment
will have no effect on the business that may be conducted at the meeting.
HOW DO I VOTE?
1. YOU MAY VOTE BY MAIL. If you properly complete and sign the
accompanying proxy card and return it in the enclosed envelope, it will be voted
in accordance with your instructions. The enclosed envelope requires no
additional postage if mailed in the United States. If your shares are held in
"street name" by a broker or other nominee, you may also be able to vote by
telephone or on the
2
<PAGE>
Internet. Please check the voting form provided by your broker or nominee to see
if such options are available to you.
2. YOU MAY VOTE IN PERSON AT THE MEETING. If you hold your shares of
record and attend the annual meeting and wish to vote in person, we will give
you a ballot at the annual meeting. However, if your shares are held in the name
of your broker, bank or other nominee, you will need to obtain a proxy form from
the institution that holds your shares indicating that you were the beneficial
owner of TSAT voting stock on July 3, 2000, the record date for voting at the
annual meeting. Even if you plan to attend the meeting, please sign and return
your proxy card to ensure that your shares are represented. If you do attend the
meeting, any votes you cast at the meeting will supersede your proxy.
CAN I CHANGE MY VOTE AFTER I SUBMIT MY PROXY?
Yes, you may revoke your proxy and change your vote at any time before the
polls close at the meeting by:
- signing another proxy with a later date;
- giving written notice of the revocation of your proxy to the Secretary of
the Company prior to the annual meeting; or
- voting in person at the annual meeting.
HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE PROPOSALS?
Your Board recommends that you vote:
- "FOR" Proposal I, to increase the number of authorized shares of Series B
common stock (see page 6);
- "FOR" Proposal II, to change the name of the Company to Liberty
Satellite & Technology, Inc. (see page 8);
- "FOR" Proposal III, to amend the Company's Restated Certificate of
Incorporation to delete Section V.B., "Classification of the Board" and
Section V.C., "Removal of Directors" and to make conforming changes (see
page 8);
- "FOR" the election of the nominees to the board of directors named in this
proxy statement as Proposal IV (see page 9);
- "FOR" Proposal V, to amend the 1996 Stock Incentive Plan (see page 24);
and
- "FOR" Proposal VI, to ratify the appointment of KPMG LLP as the Company's
independent auditors for the year ending December 31, 2000.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
If you submit an executed proxy but do not indicate any voting instructions,
your shares will be voted FOR each of the proposals set forth in this proxy
statement.
WILL ANY OTHER BUSINESS BE CONDUCTED AT THE MEETING?
The board of directors knows of no other business that will be presented at
the meeting. If any other proposal properly comes before the stockholders for a
vote at the meeting, however, the proxy holders will vote your shares in
accordance with their best judgment.
3
<PAGE>
HOW MANY VOTES ARE REQUIRED TO APPROVE THE PROPOSED INCREASE IN THE NUMBER OF
AUTHORIZED SHARES OF SERIES B COMMON STOCK?
Approval of the amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Series B common
stock from 10 million to 30 million requires
- the affirmative vote of 66 2/3% of the voting power of the Series A common
stock, Series B common stock and Series B preferred stock outstanding as
of the record date, voting together as a single class;
- the affirmative vote of a majority of the voting power of the Series A
common stock and Series B common stock outstanding as of the record date,
voting together as a single class; and
- the affirmative vote of a majority of the voting power of the Series B
common stock outstanding as of the record date, voting as a separate
class.
HOW MANY VOTES ARE REQUIRED TO APPROVE CHANGING THE NAME OF THE COMPANY TO
LIBERTY SATELLITE & TECHNOLOGY, INC.?
Approval of this proposal requires the affirmative vote of 66 2/3% of the
voting power of the Series A common stock, Series B common stock and Series B
preferred stock outstanding as of the record date, voting together as a single
class.
HOW MANY VOTES ARE REQUIRED TO APPROVE THE AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION DELETING SECTION V.B., "CLASSIFICATION OF THE
BOARD" AND SECTION V.C., "REMOVAL OF DIRECTORS" AND MAKING CERTAIN CONFORMING
CHANGES?
Approval of this proposal requires the affirmative vote of 66 2/3% of the
voting power of the Series A common stock, Series B common stock and Series B
preferred stock outstanding as of the record date, voting together as a single
class.
HOW MANY VOTES ARE REQUIRED TO ELECT THE DIRECTOR NOMINEES?
The affirmative vote of a plurality of the votes cast on this matter is
required to elect the seven nominees as directors. This means that the seven
nominees will be elected if they receive more affirmative votes than any other
person. If you vote "Withheld" with respect to the election of one or more
nominees, your shares will not be voted with respect to the person or persons
indicated, although they will be counted for purposes of determining whether
there is a quorum.
WHAT HAPPENS IF A NOMINEE IS UNABLE TO STAND FOR ELECTION?
If a nominee is unable to stand for election, the board of directors may
either reduce the number of directors to be elected or cause a substitute
nominee to be selected. If a substitute nominee is selected, the proxy holders
will vote your shares for the substitute nominee, unless you have withheld
authority.
HOW MANY VOTES ARE REQUIRED TO APPROVE THE AMENDMENT TO THE 1996 STOCK OPTION
PLAN?
Approval of the amendment to the Company's 1996 Stock Option Plan to
increase the number of shares of Series A common stock reserved for issuance
thereunder by 2,000,000 shares requires the affirmative vote of a majority of
the combined voting power of the Series A common stock, Series B common stock
and Series B preferred stock present at the meeting in person or by proxy and
entitled to vote as of the record date.
4
<PAGE>
HOW MANY VOTES ARE REQUIRED TO RATIFY THE APPOINTMENT OF THE COMPANY'S
INDEPENDENT AUDITORS?
The ratification of the appointment of KPMG LLP as the Company's independent
auditors requires the affirmative vote of a majority of the combined voting
power of the Series A common stock, Series B common stock and Series B preferred
stock present at the meeting in person or by proxy and entitled to vote as of
the record date.
HOW WILL ABSTENTIONS BE TREATED?
If you abstain from voting on one or more proposals, your shares will still
be included for purposes of determining whether a quorum is present. Because
directors are elected by a plurality of votes, an abstention will have no effect
on the outcome of the vote and, therefore, is not offered as a voting option for
Proposal IV. If you abstain from voting on a proposal for which this option is
available, your shares will be included in the number of shares voting on the
proposal and, consequently, your abstention will have the same practical effect
as a vote against the proposal.
HOW WILL BROKER NON-VOTES BE TREATED?
If your shares are held for you by a broker or other nominee in "street
name", your broker will generally be prohibited from voting such shares on any
matter other than the election of directors and the ratification of the
Company's auditors, unless you tell your broker how you want your shares to be
voted. If you don't provide your instructions by properly completing and
returning to your broker the enclosed voting card (or by voting by telephone or
Internet, if your broker provides such services), such shares will be treated as
"broker non-votes" with respect to Proposals I, II, III and V. Such shares will
be included for purposes of calculating the presence of a quorum. Otherwise,
shares represented by broker non-votes will be treated as shares not entitled to
vote on a proposal. Consequently, broker non-votes will have the following
effects:
PROPOSALS I, II AND III. A broker non-vote will have the same practical
effect as a vote against these proposals.
PROPOSAL V. Broker non-votes will not be counted in determining the number
of shares necessary for approval of the amendment to the 1996 Stock Incentive
Plan and will, therefore, reduce the absolute number, but not the percentage, of
the affirmative votes required for approval of this proposal.
WHO PAYS FOR THE COSTS OF SOLICITING PROXIES?
The Company will pay the cost of soliciting proxies. The Company will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of voting stock. In addition to solicitation by mail,
directors, officers and employees of the Company may solicit proxies personally
or by facsimile, telegraph or telephone, without additional compensation.
5
<PAGE>
PROPOSAL I--APPROVAL OF AN AMENDMENT TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF SERIES B COMMON STOCK
At the annual meeting, you will be asked to approve an amendment to the
Company's Restated Certificate of Incorporation, to increase the number of
authorized shares of Series B common stock from 10 million to 30 million. The
board of directors of the Company has adopted this amendment, subject to
stockholder approval.
WHAT IS THE PURPOSE OF THIS PROPOSAL?
The purpose of Proposal I is to increase the number of authorized shares of
Series B common stock to 30 million, an increase of 20 million shares. Of the
total number of additional shares that Proposal I would authorize, approximately
14.7 million will be reserved for issuance upon the conversion of outstanding
shares of Series B preferred stock, which were issued to a subsidiary of Liberty
Media Corporation. The issuance of such shares is discussed below under the
heading "Recent Transaction with Liberty Media Corporation; Terms and Conditions
of Outstanding Preferred Stock", beginning on page 27. The remaining shares will
be available for any proper corporate purposes that may from time to time be
identified by the board of directors of the Company, including possible
financing transactions, future acquisitions and other corporate purposes.
The board of directors believes that the availability of such additional
shares gives the Company the flexibility necessary to take advantage of
opportunities that may arise from time to time, without the delay and expense of
an additional stockholders' meeting. The Company does not currently intend to
solicit stockholder authorization for the issuance of any additional shares of
authorized common stock, unless required by applicable law or the requirements
of Nasdaq.
HOW MANY SHARES OF SERIES B COMMON STOCK ARE CURRENTLY OUTSTANDING OR RESERVED
FOR ISSUANCE?
As of March 31, 2000, 7,756,639 shares of Series B common stock were issued
and outstanding and the remaining 2,243,361 shares were reserved for issuance
upon the conversion of outstanding shares of Series B preferred stock.
WILL THE AMENDMENT HAVE ANY EFFECT ON MY RIGHTS AS A STOCKHOLDER?
Although the increase in authorized shares will not, in itself, have any
effect on your rights as a stockholder, issuance of additional shares of
Series B common stock (other than pursuant to a stock split or dividend) could
have a dilutive effect under certain circumstances on the Company's earnings per
share and book value per share and on the relative voting power of existing
stockholders. The holders of Series B common stock do not have preemptive rights
to subscribe for any additional shares of Series B common stock proposed to be
authorized.
IF PROPOSALS I IS APPROVED, WHAT WILL THE AUTHORIZED STOCK OF THE COMPANY
CONSIST OF?
If Proposals I is approved, the authorized capital stock of the Company will
consist of the following:
- 215 million shares of common stock, divided into
- 185 million shares of Series A common stock, and
- 30 million shares of Series B common stock; and
- 5 million shares of preferred stock.
6
<PAGE>
The Series A common stock and Series B common stock are identical, except
that:
- Series A common stock has 1 vote per share and Series B common stock has
10 votes per share; and
- Shares of Series B common stock are convertible on a share-for-share basis
into shares of Series A common stock; shares of Series A common stock are
not convertible.
The preferred stock is issuable in one or more series. Under the Company's
restated certificate of incorporation and the Delaware General Corporation Law,
the Company's board of directors has the power to designate series of preferred
stock and to set the terms and conditions of each series, including the powers,
preferences and relative, participating, optional or other rights, if any, of
such preferred stock, and any qualifications, limitations or restrictions on
such powers, preferences and rights, by adopting a resolution to such effect and
filing a certificate of designation with the office of the Secretary of State of
the State of Delaware. Because of the broad discretion conferred upon the board
of directors to set the terms and conditions of a series, this kind of preferred
stock is often referred to as "blank check" preferred.
The Company currently has two series of preferred stock outstanding, the
Series A preferred stock and the Series B preferred stock. Both series were
created in connection with the transactions between the Company and Liberty
Media Corporation consummated in March 2000. There are 150,000 authorized shares
of Series A preferred stock, all of which are outstanding, and 150,000
authorized shares of Series B preferred stock, all of which are outstanding.
Each share of Series B preferred stock is convertible into 113.1145 shares of
Series B common stock and, prior to any such conversion, entitles the holder to
5,580 votes. The shares of Series A preferred stock are not convertible into
common stock and are not generally entitled to voting rights, except as required
by law.
The foregoing is not a complete description of the terms and conditions of
the Series A preferred stock and Series B preferred stock of the Company. A more
complete statement of such terms and conditions, together with a brief
description of the transactions between TSAT and Liberty Media Corporation
consummated in March 2000, are set forth in this proxy statement under the
heading "Recent Transaction with Liberty Media Corporation; Terms and Conditions
of Outstanding Preferred Stock", beginning on page 27, below.
7
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF SERIES B COMMON STOCK.
PROPOSAL II--APPROVAL OF AN AMENDMENT TO CHANGE THE COMPANY'S NAME TO
LIBERTY SATELLITE & TECHNOLOGY, INC.
At the annual meeting, you will be asked to approve an amendment to the
Company's Restated Certificate of Incorporation, to change the Company's name to
Liberty Satellite & Technology, Inc.
WHAT IS THE PURPOSE OF THE PROPOSED NAME CHANGE?
The purpose of the proposed name change is to reflect the changes in your
Company and its business that have occurred over the past several years. The
Company's former parent company, Tele-Communications, Inc., was acquired by AT&T
Corp. in March 1999 and subsequently changed its name to AT&T Broadband LLC.
Accordingly, the reference to "TCI" in the Company's current name has no current
context. The proposed new name reflects the Company's relationship with Liberty
Media Corporation and the Company's strategic focus on satellite and related
technologies.
WILL THE PROPOSED NAME CHANGE HAVE ANY EFFECT ON MY RIGHTS AS A STOCKHOLDER?
No. The proposed name change will not effect the status of the Company, or
your rights as a stockholder, in any significant respect. If your shares are
currently represented by a physical certificate, that certificate will continue
to represent your ownership of such shares, notwithstanding the change in name.
DOES THE COMPANY INTEND TO CHANGE THE TRADING SYMBOL OF THE COMMON STOCK?
Yes. The Company's common stock currently trades through the OTC Bulletin
Board, under the symbol TSATA for the Series A common stock, and the symbol
TSATB for the Series B common stock. Following the annual meeting, the Company
intends to apply for inclusion in the National Market tier of The Nasdaq Stock
Market, and has reserved the symbols LSATA and LSATB with Nasdaq.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE
COMPANY'S NAME TO LIBERTY SATELLITE & TECHNOLOGY, INC.
PROPOSAL III--APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO DELETE SECTION V.B., "CLASSIFICATION OF
THE BOARD" AND SECTION V.C., "REMOVAL OF DIRECTORS"
AND TO MAKE CERTAIN CONFORMING CHANGES
At the annual meeting you will be asked to approve an amendment to the
Company's Restated Certificate of Incorporation to delete Section V.B.,
"Classification of the Board" and Section V.C., "Removal of Directors" and to
make certain conforming changes.
WHAT IS THE PURPOSE OF THE AMENDMENT?
Section V.B. of the Company's charter currently provides for the Company's
board of directors to be divided into three classes of approximately equal size,
with each class elected for a three-year term. Such terms are staggered so that
the term of one class of directors is set to expire at each annual meeting of
stockholders. Proposal III seeks approval to delete that section of the
Company's charter, so
8
<PAGE>
that the board will no longer be classified. If Proposal III is approved, each
director will serve until his or her successor is elected and qualified, or
until such director's prior resignation or removal, and each board seat will
come up for election at each annual meeting of stockholders. Accordingly,
directors will be elected for a term of approximately one year, rather than the
three year terms currently in effect.
The proposed amendment would also delete Section V.C., which currently
provides that directors may be removed from office only for cause, as defined in
such section, upon a 66 2/3% vote of the Company's stockholders. The Company is
a Delaware corporation. Delaware law does not permit restrictions on the right
of the stockholders to remove directors, except in the case of a classified
board. Accordingly, since the proposed amendment would delete the provision for
a classified board, it must also delete the provision limiting removal of
directors by action of the stockholders. Similarly, since the proposed amendment
would delete Sections B and C of Article V, the sections currently identified as
Sections D, E and F must be re-lettered, and other references in the certificate
of incorporation to such sections, or to the classification of the board as
provided therein, must be conformed, if the Proposal is approved.
The purpose of the proposed amendment to is to give the stockholders of the
Company the right to vote on the election of all directors at each annual
meeting of the stockholders of the Company. The Company believes that an
unclassified board will benefit the stockholders of the Company by simplifying
and clarifying the election of directors and that the power of the stockholders
to remove directors, with or without cause, should not be limited by the
Company's certificate of incorporation.
WILL THE AMENDMENT HAVE ANY EFFECT ON MY RIGHTS AS A STOCKHOLDER?
As a result of the proposed amendment, each stockholder will have the right
to vote for a director to fill each position on the Company's board of directors
at each annual meeting of the Company's stockholders. The amendment will not
have any other effect on your rights as a stockholder.
IF IT IS APPROVED, WHEN WOULD THE PROPOSED AMENDMENT TAKE EFFECT?
If Proposal III is approved at the meeting, the Company intends to file the
proposed amendment immediately, so that the election of directors at the meeting
need not be done by class. Liberty Media Corporation, which holds Series B
preferred stock representing approximately 85% of the total voting power of the
Company's outstanding capital stock, has advised the Company that it intends to
vote in favor of Proposal III, and the Company therefore believes that the
Proposal will be adopted at the meeting. Accordingly, the nominees for director
named herein have not been divided into separate classes, as would be the case
under the Company's current charter. Please see Proposal IV, Election of
Directors, below.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO DELETE
SECTION V.B., "CLASSIFICATION OF THE BOARD" AND SECTION V.C., "REMOVAL OF
DIRECTORS" AND MAKE CONFORMING CHANGES.
PROPOSAL IV--ELECTION OF DIRECTORS
Except as disclosed in this proxy statement, there are no arrangements or
understandings between the nominees and any other person pursuant to which the
nominees were selected.
Each nominee has consented to being named in this proxy statement and has
agreed to serve if elected. If a nominee is unable to stand for election, the
board of directors may either reduce the number of directors to be elected or
cause a substitute nominee to be selected. If a substitute nominee is selected,
the proxy holders will vote your shares for the substitute nominee, unless you
have withheld authority.
9
<PAGE>
The following tables set forth, with respect to each director nominee, his
or her name, date of birth, principal occupation and employment during the past
five years, the year in which he or she first became a director of the Company
and directorships held in other companies. For additional information regarding
the nominees, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT," "MEETINGS AND COMMITTEES OF THE BOARDS OF DIRECTORS," "COMPENSATION
INFORMATION," "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "RECENT
TRANSACTION WITH LIBERTY MEDIA CORPORATION; TERMS AND CONDITIONS OF OUTSTANDING
PREFERRED STOCK"
The affirmative vote of a plurality of the votes cast for a director at the
meeting is required to elect the seven nominees as directors.
Subject to the approval of Proposal III, which would eliminate the current
classification of the Company's board into three classes, each person elected as
a director of the Company will serve until such director's successor is duly
elected and qualified, or until such director's earlier resignation or removal,
and each seat on the board of directors will be up for election at each annual
meeting of stockholders. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES.
<TABLE>
<S> <C>
Alan M. Angelich ......................... Mr. Angelich has been the President of Janco Partners,
Born October 22, 1943 Inc., an investment banking firm specializing in the
telecommunications industry, since December 1995 when he
co-founded the firm. From October 1993 to December 1995,
Mr. Angelich was a self-employed consultant in the
telecommunications industry. From May 1982 to October
1993, Mr. Angelich served in various executive
capacities with Jones Intercable, Inc., including Vice
Chairman of the company from December 1988 to October
1993. From August 1990 to October 1993, Mr. Angelich was
also the Chief Executive Officer of Jones Capital
Markets, Inc.
Robert R. Bennett ........................ Mr. Bennett has been President, Chief Executive Officer
Born April 19, 1958 and a member of the board of directors of Liberty Media
Corporation since April 1997. Mr. Bennett served as
Executive Vice President of Tele-Communications, Inc.
from April 1997 to March 1999. Mr. Bennett served as
Executive Vice President and Chief Financial Officer,
Secretary and Treasurer of Liberty Media Corporation
from June 1995 through March 1997, and as Senior Vice
President from September 1991 to June 1995. Mr. Bennett
also served as acting Chief Financial Officer of Liberty
Digital, Inc. from June 1997 to July 1997. Mr. Bennett
is a director of TV Guide, Inc., USANi LLC, Teligent,
Inc., Telewest Communications plc and Chairman of the
Board of Liberty Digital, Inc.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
William H. Berkman ....................... Mr. Berkman has been the Managing Partner of the
Born February 26, 1965 Associated Group, LLC, a venture capital and investment
firm primarily engaged in the telecommunications, media
and internet commerce market segments since January,
2000. From 1994 to January 2000, Mr. Berkman was a
principal at The Associated Group, Inc. and one of the
founders of Teligent, Inc. and served as a member of
Teligent's board of directors from August 1996 to
January 2000. Mr. Berkman currently serves on the Boards
of CMGI and Centerpoint Broadband Technologies, Inc.
John W. Goddard .......................... Mr. Goddard has served as a director of the Company
Born May 4, 1941 since December 1996. Mr. Goddard served as President and
Chief Executive Officer of the cable division of Viacom
International, Inc. from 1980 until the division was
sold in July 1996. Mr. Goddard is also a director of
Diva Systems Corporations, Phoenixstar Inc. (formerly
Primestar, Inc.), Bend Cable Communications, Cable
Television Laboratories, Inc. (Cablelabs), and the
Deafness Research Foundation and is a Trustee of the
Walter Kaitz Foundation.
Gary S. Howard ........................... Mr. Howard served as Chief Executive Officer of the
Born February 22, 1951 Company from December 1996 until April 2000, and has
served as a director of the Company since November 1996.
From February 1995 through August 1997, Mr. Howard also
served as President of the Company. Mr. Howard is
currently the Executive Vice President and Chief
Operating Officer of Liberty Media Corporation.
Mr. Howard served as Executive Vice President of TCI
from December 1997 to March 1999; as Chief Executive
Officer, Chairman of the Board and director of TV Guide,
Inc. from June 1997 to March 1999; and as President and
Chief Executive Officer of TCI Ventures Group, LLC from
December 1997 to March 1999. Mr. Howard served as
President of TV Guide, Inc. from June 1997 to September
1997; and as Senior Vice President of TCI
Communications, Inc. from October 1994 to December 1996.
Mr. Howard is a director of Liberty Media Corporation,
TV Guide, Inc., Liberty Digital, Inc., Teligent, Inc.,
ICG Communications, Inc. and On Command Corp.
J. Curt Hockemeier ....................... Mr. Hockemeier has been President and Chief Operating
Born May 15, 1948 Officer of Arbinet Holdings, Inc., a leading online
telecommunications exchange, since April 2000. From June
1999 until April 2000, Mr. Hockemeier served as
Executive Vice President and Chief Operating Officer for
telephone operations for AT&T Broadband and, from July
1998 until June 1999, he served as AT&T Local Network
Services' Vice President. Beginning in 1993,
Mr. Hockemeier served as Senior Vice President of
Affiliate Services for Teleport Communications Group and
held other senior management positions with Teleport,
including Senior Vice President of National Operations,
until AT&T acquired Teleport in July 1998.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Carl E. Vogel ............................ Mr. Vogel has been Chief Executive Officer and President
Born October 18, 1957 of the Company since April 2000. Mr. Vogel has also been
Senior Vice President of Liberty Media Corporation since
December 1999. Mr. Vogel served as Executive Vice
President/Chief Operating Officer of Field Operations
for AT&T Broadband from June 1999 until joining Liberty.
He served as Chairman and Chief Executive Officer of
PRIMESTAR, Inc. from June 1998 to June 1999. From
October 1997 to June 1998, Mr. Vogel was Chief
Executive Officer of Star Choice Communications. From
March 1994 to March 1997, he served first as Executive
Vice President and Chief Operating Officer and later as
President of EchoStar Communications Corporation.
Mr. Vogel is a director of On Command Corp., Teligent,
Inc., ICG Communications, Inc. and Canadian Satellite
Communications.
</TABLE>
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
DOES ANYONE OWN MORE THAN FIVE PERCENT OF THE COMPANY'S STOCK?
The following table lists persons believed by the Company to be the
beneficial owners of more than five percent of the outstanding Company stock as
of March 31, 2000. Shares issuable upon exercise of options and upon vesting of
restricted shares are deemed to be outstanding for the purpose of computing the
percentage ownership and overall voting power of persons believed to
beneficially own such securities, but have not been deemed to be outstanding for
the purpose of computing the percentage ownership or overall voting power of any
other person. Voting power in the table is computed with respect to a general
election of directors. So far as is known to the Company, the persons indicated
below have sole voting and investment power with respect to the shares indicated
as believed to be owned by them except as otherwise stated in the notes to the
table.
<TABLE>
<CAPTION>
COMBINED
VOTING
NUMBER OF SHARES PERCENT OF POWER OF ALL
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIALLY OWNED CLASS(1) HOLDINGS(1)
------------------------------------ ------------------------ ------------------ ---------- ------------
<S> <C> <C> <C> <C>
Liberty Media Corporation......... 85.7%
9197 S. Peoria Street Series A preferred stock 150,000 100.0%
Englewood, Colorado Series B preferred stock 150,000 100.0%
Series A common stock 1,790,499 2.8%
Series B common stock -- *
John C. Malone,................... 3.6%
Chairman of the Board Series A preferred stock -- *
9197 S. Peoria Street Series B preferred stock -- *
Englewood, Colorado Series A common stock 909,845(2) 1.4%
Series B common stock 3,439,958(3) 44.3%
Kim Magness....................... 3.9%
(individually as a member of Series A preferred stock -- *
Magness Security LLC) Series B preferred stock -- *
4000 E. Belleview Series A common stock 383,806(4) *
Greenwood Village, Colorado Series B common stock 3,745,206 48.3%
Gary Magness...................... 3.2%
(as co-representative of the Series A preferred stock -- *
estate of Bob Magness) Series B preferred stock -- *
29 Sunset Drive Series A common stock 243,373 *
Englewood, Colorado Series B common stock 3,120,770 40.2%
Tudor Investment Corporation...... *
600 Steamboat Road Series A preferred stock -- *
Greenwich, CT 06830 Series B preferred stock -- *
Series A common stock 4,390,255(5) 6.9%
Series B common stock -- *
Paul Tudor Jones, II.............. *
c/o Tudor Investment Corporation Series A preferred stock -- *
600 Steamboat Road Series B preferred stock -- *
Greenwich, CT 06830 Series A common stock 4,638,500(6) 7.3%
Series B common stock -- *
</TABLE>
------------------------
* Less than one percent.
13
<PAGE>
(1) Based on 150,000 shares of Series A preferred stock, 150,000 shares of
Series B preferred stock, 63,720,531 shares of Series A common stock and
7,756,639 shares of Series B common stock outstanding as of March 31, 2000.
(2) Assumes the exercise in full of Company stock options, whether or not then
exercisable or in-the-money, in respect of the following: (i) stock options
granted in tandem with SARs in November of 1992 to acquire 100,000 shares of
Series A common stock, all of which options are currently exercisable; and
(ii) stock options granted in tandem with SARs in December of 1995 to
acquire 100,000 shares of Series A common stock, of which options to
purchase 80,000 shares are currently exercisable. Also assumes the exercise
in full of options to purchase 50,000 shares of Series A common stock
granted pursuant to the Company's Nonemployee Director Stock Option Plan
effective February 3, 1997, all of which options are vested.
(3) Includes 117,300 shares of Series B common stock held by Dr. Malone's wife,
Mrs. Leslie Malone, but Dr. Malone disclaims any beneficial ownership of
such shares.
(4) Includes 210,533 shares of Series A common stock and 634,621 shares of
Series B common stock held by Magness Securities LLC. Mr. Magness is deemed
to have beneficial ownership over such shares as a member of Magness
Securities LLC. Also assumes the exercise in full of stock options granted
in November of 1994 to acquire 5,000 shares of Series A common stock, all of
which options are currently exercisable.
(5) The number of shares in the table is based upon information provided by
Tudor Investment Corporation. Said company has shared voting power over
4,390,255 shares and shared dispositive power over 4,390,255 shares of
Series A common stock.
(6) The number of shares in the table is based upon information provided by Paul
Tudor Jones, II. Said individual has shared voting power over 4,638,500
shares and shared dispositive power over 4,638,500 shares of Series A common
stock.
14
<PAGE>
HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table lists the number of shares of Company stock believed to
be owned beneficially by each director, the Chief Executive Officer and the
named executive officers of the Company in all capacities to the Company and its
subsidiaries individually, and all directors and executive officers as a group
as of March 31, 2000, according to data furnished by the persons named. Shares
issuable upon exercise of options and upon vesting of restricted shares are
deemed to be outstanding for the purpose of computing the percentage ownership
and overall voting power of persons believed to beneficially own such
securities, but have not been deemed to be outstanding for the purpose of
computing the percentage ownership or overall voting power of any other persons.
Voting power in the table is computed with respect to a general election of
directors. So far as is known to the Company, the persons indicated below have
sole voting and investment power with respect to the shares indicated as
believed to be owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENT OF CLASS(1)
-------------------------------- -----------------------------
SERIES A SERIES B SERIES A SERIES B VOTING
NAME COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK POWER(1)
---- ------------- ------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C>
Directors:
John C. Malone..................... 909,845(2) 3,439,958(3) 1.4% 44.3% 3.6%
Gary S. Howard..................... 412,618(4) -- * -- *
David P. Beddow.................... 414,300(5) -- * -- *
William E. Johnson................. 50,200(6) 10 * * *
John W. Goddard.................... 51,408(6)(7) 1,425(7) * * *
Leo J. Hindery, Jr................. 50,000(6) * -- *
Director Nominees:
Alan M. Angelich................... 50,000(8) -- * -- *
Robert R. Bennett.................. 5,089(9) -- * -- *
William H. Berkman................. -- -- -- -- --
J. Curt Hockemeier................. -- -- -- -- --
Carl E. Vogel...................... 5,000 -- * -- *
Other named executive officers:
Christopher Sophinos............... 575,000(10) * -- *
Kenneth G. Carroll................. 577,170(11) -- * -- *
William D. Myers(13)............... 151,974(12) -- * -- *
All directors and executive officers
as a group (15 persons)............ 3,498,463 3,441,393 5.3% 44.4% 3.9%
</TABLE>
------------------------------
(1) Based on 150,000 shares of Series A preferred stock, 150,000 shares of
Series B preferred stock, 63,720,531 shares of Series A common stock and
7,756,639 shares of Series B common stock outstanding as of March 31, 2000.
(2) Assumes the exercise in full of Company stock options, whether or not then
exercisable or in-the-money, in respect of the following: (1) stock options
granted in tandem with SARs in November of 1992 to acquire 100,000 shares
of Series A common stock, all of which options are currently exercisable;
and (ii) stock options granted in tandem with SARs in December of 1995 to
acquire 100,000 shares of Series A common stock, of which options to
purchase 80,000 shares are currently exercisable. Also assumes the exercise
in full of options to purchase 50,000 shares of Series A common stock
granted pursuant to the Company's Nonemployee Director Stock Option Plan
effective February 3, 1997, all of which are exercisable.
(3) Includes 117,300 shares of Series B common stock held by Dr. Malone's wife,
Mrs. Leslie Malone, but Dr. Malone disclaims any beneficial ownership of
such shares.
(4) Assumes the exercise in full of Company stock options, whether or not then
exercisable or in-the-money, in respect of the following: (i) stock options
granted in tandem with SARs in November of 1992 to acquire 2,500 shares of
Series A common stock, all of which options are currently exercisable;
(ii) stock options in tandem with SARs granted in October of 1993 to
acquire 2,500 shares of Series A common stock, all of which options are
currently exercisable; (iii) stock options in tandem with SARs granted in
November of 1994 to acquire 2,500 shares of Series A common stock, all of
which options to are currently exercisable; (iv) stock options granted in
tandem with SARs in December of 1995 to purchase 7,500 shares of Series A
common stock, of which options to acquire 6,000 shares are currently
exercisable; and (v) stock options granted in
15
<PAGE>
December of 1996 to purchase 332,038 shares of Series A common stock,
265,630 of which are currently exercisable. Also includes 1,022 shares of
Series A common stock held by trusts in which Mr. Howard is beneficial
owner as trustee for his children.
(5) Assumes the exercise in full of Company stock options, whether or not then
exercisable or in-the-money, in respect of the following: (i) stock options
granted in tandem with SARs in October of 1993 to acquire 750 shares of
Series A common stock, all of which options are currently exercisable;
(ii) stock options granted in tandem with SARs in November of 1994 to
acquire 5,000 shares of Series A common stock, all of which are currently
exercisable; (iii) stock options granted in tandem with SARs in
December of 1995 to purchase 25,000 shares of Series A common stock, of
which options to purchase 20,000 shares are currently exercisable; and
(iv) stock options granted in December of 1996 to purchase 332,038 shares
of Series A common stock, 265,630 of which are currently exercisable.
Additionally assumes the vesting in full of 1,500 restricted shares of
Series A common stock, 750 of which are currently vested. Also assumes the
exercise in full of options to purchase 50,000 shares of Series A common
stock granted pursuant to the Company's Nonemployee Director Stock Option
Plan effective February 3, 1997, all of which are exercisable.
(6) Assumes the exercise in full of options to purchase 50,000 shares of
Series A common stock granted pursuant to the Company's Nonemployee
Director Stock Option Plan, all of which are exercisable.
(7) Includes 478 shares of Series A common stock held by Mr. Goddard's wife, of
which Mr. Goddard is beneficial owner, and 129 shares of Series B common
stock held by a trust in which Mr. Goddard is beneficial owner as trustee.
(8) Includes 50,000 shares of Series A Common Stock over which Mr. Angelich has
shared voting and dispositive power.
(9) Assumes the exercise in full of stock options granted in tandem with SARs
in November 1994 to purchase 5,000 shares of Series A common stock, all of
which are exercisable.
(10) Assumes the exercise in full, whether or not then exercisable or
in-the-money, of (i) stock options granted in tandem with SARs in
February of 1997 to purchase 100,000 shares of Series A common stock, all
of which are currently exercisable; and (ii) stock options granted in
December of 1999 to purchase 425,000 shares of Series A common stock, none
of which are currently exercisable.
(11) Assumes the exercise in full of Company stock options, whether or not then
exercisable or in-the-money, in respect of the following: (1) stock
options granted in tandem with SARs in November of 1994 to acquire 400
shares of Series A common stock, all of which options are currently
exercisable; (ii) stock options granted in tandem with SARs in
December of 1995 to purchase 1,750 shares of Series A common stock, of
which options to purchase 1,400 shares of Series A common stock are
currently exercisable; (iii) stock options granted in tandem with SARs in
February of 1997 to purchase 100,000 shares of Series A common stock, all
of which are currently exercisable; and (iv) stock options granted in
December of 1999 to purchase 425,000 shares of Series A common stock, none
of which are currently exercisable.
(12) Assumes the exercise in full of all Company stock options, whether or not
then exercisable or in-the-money, in respect of the following: (i) stock
options granted in tandem with SARs in November of 1994 to acquire 900
shares of Series A common stock, all of which options are currently
exercisable; (ii) stock options granted in tandem with SARs in
December of 1995 to purchase 1,000 shares of Series A common stock, all of
which options are currently exercisable; and (iii) stock options granted
in tandem with SARs in February of 1997 to purchase 100,000 shares of
Series A common stock, all of which are currently exercisable and which
expire on June 4, 2000 if not exercised.
(13) Mr. Myers terminated employment with the Company effective August 13,
1999.
WHO ARE THE EXECUTIVE OFFICERS?
<TABLE>
<S> <C>
Carl E. Vogel ............................ (See "Proposal IV--Election of Directors" above.)
Born October 18, 1957
Kenneth G. Carroll ....................... Mr. Carroll has served as Senior Vice President and
Born April 21, 1955 Chief Financial Officer of the Company since February
1995 and as Treasurer since August 1999. He has also
served as Senior Vice President and Chief Financial
Officer of PRIMESTAR, Inc. (now known as Phoenixstar,
Inc.) since April 1998. From December 1994 to May 1997,
Mr. Carroll served as Vice President of TCI K-1, Inc.
and as Vice President of United Artists K-1 Investments,
Inc. From April 1994 through January 1995, Mr. Carroll
served as Vice President of Business Operations and
Chief Financial Officer of Netlink USA, a subsidiary of
TCI.
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Christopher Sophinos ..................... Mr. Sophinos has served as Senior Vice President of the
Born January 26, 1952 Company since April 2000 and was previously President
from September 1997. From February 1996 to September
1997, Mr. Sophinos was Senior Vice President of the
Company. Mr. Sophinos also served as Senior Vice
President of PRIMESTAR, Inc. (now known as Phoenixstar,
Inc.) from April 1998 until August 1999. Mr. Sophinos
served as the President of Boats Unlimited from November
1993 to September 1998.
Pamela J. Strauss ........................ Ms. Strauss has served as General Counsel of the Company
Born September 5, 1960 since February 2000 and as Secretary since April 2000
and was previously Corporate Counsel from April 1994 and
Assistant Secretary from December 1996. Ms. Strauss has
also served as Associate General Counsel for PRIMESTAR,
Inc. (now known as Phoenixstar, Inc.) since April 1998,
Secretary since July 1999 and Assistant Secretary from
August 1997 to June 1999.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARDS OF DIRECTORS
HOW OFTEN DID THE BOARD OF DIRECTORS MEET DURING 1999?
For the year ended December 31, 1999, the Company's board of directors met
four times. During 1999, no incumbent director of the Company attended, either
in person or telephonically, fewer than 75% of the aggregate of the total number
of board of directors meetings and the total number of meetings held by the
committees of the board of directors on which they served.
ARE THERE ANY BOARD COMMITTEES?
The Company's board of directors has a standing Audit Committee and
Compensation Committee. The purpose of the Audit Committee is to review the
scope and approach of the annual audit, the annual financial statements and the
auditors' report thereon and the auditors' comments relative to the adequacy of
the Company's system of internal controls and accounting systems. The Audit
Committee is also responsible for recommending to the board of directors the
appointment of independent public accountants for the following year. The Audit
Committee did not meet in 1999. The members of the Audit Committee are directors
John Goddard and William Johnson.
The purpose of the Compensation Committee is to review management
compensation levels and provide recommendations to the board of directors
regarding salaries and other compensation for the Company's executive officers,
including bonuses and incentive programs. The Compensation Committee met one
time in 1999. The members of the Compensation Committee are directors John
Goddard and William Johnson.
HOW ARE BOARD MEMBERS NOMINATED?
Stockholders may nominate directors to be elected to the board of directors
at any annual meeting of stockholders or any special meeting of stockholders
called for the purpose of electing directors. In order to make such a
nomination, the stockholder must (i) be a record holder of shares on the date
notice is given as provided for in the Company's bylaws and on the record date
for the determination of stockholders entitled to vote at such meeting, (ii) be
entitled to vote for the election of such director(s) and (iii) comply with the
notice procedures set forth in the Company's bylaws.
17
<PAGE>
IS THERE A DUE DATE FOR STOCKHOLDER NOMINATIONS?
Notice of a stockholder's nomination(s) must be delivered to or mailed and
received by the Company's Secretary at its principal executive offices: not
later than 90 days nor more than 120 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that if the date of the
annual meeting is advanced by more than 20 days, or delayed by more than
70 days from such anniversary date, notice by the stockholder must be delivered
not earlier than the 120th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of the annual meeting
is first made. The stockholder's notice shall be signed by the stockholder of
record who intends to introduce the other business, shall indicate the date of
signature of the stockholder and shall set forth: (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected; and (ii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (A) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial
owner, (B) the series and number of shares of the Company which are of record
and owned beneficially by such stockholder and such beneficial owner and (C) a
representation that such stockholder is entitled to vote at the meeting and
intends to appear in person or by proxy at the meeting to nominate the person
specified in the notice.
COMPENSATION INFORMATION
HOW ARE DIRECTORS COMPENSATED?
Members of the Company's board of directors who are also full-time employees
of the Company or Liberty Media Corporation, or any of their respective
subsidiaries, or any other member of the Liberty Media Group (a "tracking group"
of AT&T Corp., of which Liberty Media Corporation and its subsidiaries are the
principal components), do not receive any additional compensation for their
services as directors. Directors who are not full-time employees of the Company
or Liberty Media, any of their respective subsidiaries, or another member of the
Liberty Media Group, receive a retainer of $30,000 per year. All members of the
Company's board of directors are also reimbursed for expenses incurred to attend
any meeting of the board or any committee thereof. In addition, on March 6,
1998, the stockholders of the Company approved the TCI Satellite
Entertainment, Inc. 1997 Nonemployee Director Stock Option Plan. Pursuant to the
Nonemployee Director Stock Option Plan, each of the persons who were directors
of the Company, but not employees of the Company or any of the Company's
affiliates as of February 3, 1997 has been granted options to purchase 50,000
shares of Series A common stock, and each person who becomes such a non-employee
director after February 3, 1997 will be automatically granted options to
purchase 50,000 shares of Series A common stock upon such person's becoming a
director. The Nonemployee Director Stock Option Plan provides that the per share
exercise price of each option granted under the plan will be equal to the fair
market value of the Series A common stock on the date such option is granted. In
general, fair market value is determined by reference to the last sale price for
shares of Series A common stock on the date of grant.
18
<PAGE>
SUMMARY COMPENSATION TABLE
The following table is a summary of all forms of compensation paid by the
Company to the officers named therein for services rendered in all capacities to
the Company for the fiscal years ended December 31, 1999, 1998, and 1997 (total
of four persons).
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- -----------------------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION STOCK UNDERLYING COMPENSATION
WITH THE COMPANY YEAR SALARY BONUS (5) AWARD OPTIONS/SARS (9)
--------------------------- -------- -------- -------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary S. Howard(1).................... 1999 $ -- $ -- $ -- -- -- $ --
(Chief Executive Officer) 1998 -- -- -- -- -- --
1997 215,519 120,600 2,976 1,000,000(6) -- 17,158
Christopher Sophinos(2).............. 1999 51,923(4) -- -- -- 425,000(7) --
(President) 1998 51,626 35,500 -- -- -- 4,667
1997 174,538 70,000 -- 400,000(6) 100,000(8) 10,240
Kenneth G. Carroll(2)................ 1999 -- -- -- -- 425,000(7) --
(Senior Vice President 1998 51,827 35,500 -- -- -- 4,590
and Chief Financial Officer) 1997 174,538 78,846 2,182 400,000(6) 100,000(8) 9,934
William D. Meyers(2)(3).............. 1999 -- -- -- -- -- --
(Vice President and 1998 41,731 26,000 -- -- -- 2,617
Treasurer) 1997 139,827 35,000 2,352 400,000(6) 100,000(8) 9,711
</TABLE>
------------------------------
(1) Effective June 1, 1997 and through December 31, 1997, the Company and United
Video Satellite Group, Inc. ("UVSG") agreed that 75% of Mr. Howard's annual
salary was to be charged to UVSG, of which Mr. Howard was a director and
Chief Executive Officer. The 1997 amount represents Mr. Howard's 1997 annual
salary less amount charged to UVSG ($215,481). Subsequent to December 31,
1997, none of Mr. Howard's annual salary is charged to the Company.
(2) In connection with a restructuring, effective April 1, 1998,
Messrs. Sophinos, Carroll and Myers became officers of Phoenixstar, Inc.;
and from that date forward, all of such officers' compensation for 1998 was
paid by Phoenixstar. Accordingly, the 1998 compensation information included
in the table represents three months of employment.
(3) Mr. Myers terminated employment with the Company effective August 13, 1999.
(4) Mr. Sophinos' employment with Phoenixstar terminated on August 31, 1999.
Mr. Sophinos began receiving compensation from the Company on September 1,
1999. Accordingly, the 1999 compensation information included in the table
represents four months of employment.
(5) Consists of amounts reimbursed during the year for the payment of taxes.
(6) Pursuant to the TCI Satellite Entertainment, Inc. 1996 Stock Incentive Plan
(the "Stock Incentive Plan"), Mr. Howard was granted 125,000 restricted
shares of Series A common stock and Messrs. Sophinos, Carroll and Myers were
each granted 50,000 restricted shares which vested as to 50% on each of
January 1, 2001 and January 1, 2002. On November 10, 1997, the Company's
board and the Compensation Committee of the Company's board approved
modifications to the terms of such awards, accelerating the vesting
provisions to provide for vesting of 50% on February 3, 1999 and as to the
remaining 50% on February 3, 2000. The value of Mr. Howard's unvested
restricted shares at the end of 1999 was $1,000,000, and the value of each
of Messrs. Sophinos' and Carroll's unvested restricted shares at the end of
1999 was $400,000. Mr. Myers' restricted shares were fully vested at
December 31, 1999. The Company has not paid cash dividends on the Series A
Common Stock and does not anticipate paying cash dividends on the Series A
common stock at any time in the foreseeable future.
(7) Pursuant to the Stock Incentive Plan, Messrs. Sophinos and Carroll were each
granted options to purchase 200,000 shares of Series A common stock at a
purchase price of $7.125 and 225,000 shares of Series A Common stock at a
purchase price of $8.84.
(8) Pursuant to the Stock Incentive Plan, Messrs. Sophinos, Carroll and Myers
were each granted options with tandem SARs to purchase 100,000 shares of
Series A common stock at a purchase price of $8.00. As originally granted
each such grant of options vests evenly over five years with such vesting
period beginning January 1, 1997, first became exercisable on January 1,
1998 and expires on December 31, 2006. On November 10, 1997, the Company's
board and the compensation committee of the Company's board approved
modifications to the vesting of all options issued pursuant to the TSAT 1996
Plan, accelerating the vesting schedules under such options from five to
three years, commencing February 1998.
(9) Includes Company contributions to the TSAT Employee Stock Purchase Plan (the
"TSAT ESPP") from January 1, 1997 through March 31, 1998. All named
executives were fully vested in such plans. Directors who are not employees
of the Company are ineligible to participate in the TSAT ESPP. In connection
with a restructuring and effective June 30, 1998, the
19
<PAGE>
TSAT ESPP was merged into the Phoenixstar, Inc. 401(k) Savings Plan. Also
includes insurance premiums paid by the Company in 1998 for the benefit of
Messrs. Sophinos, Carroll and Myers in the amount of $245, $148 and $113,
respectively, and in 1997 for the benefit of Messrs. Howard, Sophinos,
Carroll and Myers in the amount of $2,158, $740, $434 and $211,
respectively.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table discloses information regarding stock options granted
during the year ended December 31, 1999 to each of the named executive officers
of the Company in respect of shares of Series A common stock under the Stock
Incentive Plan.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES GRANTED TO EXERCISE MARKET
UNDERLYING OFFICERS AND OR BASE PRICE ON GRANT DATE
OPTIONS EMPLOYEES PRICE GRANT DATE PRESENT
NAME GRANTED(1) IN 1999 ($/SH) ($/SH)(2) EXPIRATION DATE VALUE(3)
---- ---------- ------------ -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gary S. Howard..................... -- -- -- -- -- --
Christopher Sophinos............... 200,000 16.80% $7.125 $7.125 December 1, 2009 $1,218,600
225,000 18.90% $8.840 $7.125 December 1, 2009 $1,342,800
Kenneth G. Carroll................. 200,000 16.80% $7.125 $7.125 December 1, 2009 $1,218,600
225,000 18.90% $8.840 $7.125 December 1, 2009 $1,342,800
William D. Meyers(4)............... -- -- -- -- -- --
</TABLE>
------------------------------
(1) Effective December 1, 1999 certain key employees and officers of the Company
were granted, pursuant to the TSAT 1996 Plan, an aggregate of 628,000
options to acquire shares of Class A Common stock at a per share exercise
price of $7.125 and 562,500 options to acquire shares of Class A common
stock at a per share exercise price of $8.84 (the "1999 Grant"). Each such
grant of options vests over a five-year period beginning on the date of
grant, first becomes exercisable as to 25% on the second anniversary of the
date of grant and becomes exercisable as to an additional 25% on each of the
third, fourth, and fifth anniversaries of the date of grant, and expires on
December 1, 2009.
(2) Represents the closing market price per share of TSAT Series A common stock
on December 1, 1999, the date of grant.
(3) The value shown is based on the Black-Scholes model and is stated in current
annualized dollars on a present value basis. The key assumptions used in the
model for purposes of this calculation include the following: (a) a 5%
discount rate; (b) a 84% volatility factor; (c) the 10-year option term;
(d) the closing price of TSAT Series A common stock on December 1, 1999; and
(e) a per share exercise price of $7.125 or $8.84 accordingly. The actual
value an executive may realize will depend upon the extent to which the
stock price exceeds the exercise price on the date the option is exercised.
Accordingly, the value, if any, realized by an executive will not
necessarily be the value determined by the model.
(4) Mr. Myers terminated employment with the Company effective August 13, 1999.
20
<PAGE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides, for the executives named in the Summary
Compensation Table, information on (i) the exercise during the year ended
December 31, 1999, of options with respect to shares of Series A common stock,
(ii) the number of shares of Series A common stock represented by unexercised
options owned by them at December 31, 1999, and (iii) the value of those options
as of the same date.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE DECEMBER 31, 1999 DECEMBER 31, 1999
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gary S. Howard
Exercisable
Series A...................... -- $ -- 212,723 $1,422,450
Unexercisable
Series A...................... -- -- 134,315 948,300
Christopher Sophinos
Exercisable
Series A...................... -- -- 66,667 533,336
Unexercisable
Series A...................... -- -- 458,333 3,652,664
Kenneth G. Carroll
Exercisable
Series A...................... -- -- 68,467 533,336
Unexercisable
Series A...................... -- -- 458,683 3,652,664
William D. Myers(1)
Exercisable
Series A...................... -- -- 101,900 800,000
Unexercisable
Series A...................... -- -- -- --
</TABLE>
------------------------
(1) Mr. Myers terminated employment with the Company effective August 13, 1999.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed entirely of non-employee directors
and is responsible for developing and making recommendations to the board of
directors with respect to the Company's executive compensation policies and
practices. In addition, the Compensation Committee determines the compensation
to be paid to the Chief Executive Officer and each of the other Executive
Officers.
COMPENSATION PHILOSOPHY
The philosophy of the Company's compensation program is, generally, to
provide a performance-based executive compensation program that rewards
executives whose efforts enable the Company to achieve its business objectives
and enhance stockholder value. Specifically, the Company's executive
compensation program has been designed to provide an overall level of
compensation opportunity that is competitive within the telecommunications
industry. The Compensation Committee uses its discretion to set individual
executive compensation levels warranted in its judgment by market practice,
Company performance and individual performance thereby enabling the Company to
attract,
21
<PAGE>
motivate, reward and retain individuals who possess the skills, experience and
talents necessary to advance the Company's growth and financial performance.
The compensation of the Company's executive officers, including the
Executive Officers, is comprised of three elements: base salary, annual cash
bonus and stock options.
BASE SALARY. Base salary is the primary mechanism used to compensate
executives for their management responsibilities. Base salaries are determined
by evaluating the responsibilities of the position, the experience and knowledge
of the individual, the contribution of the individual to the Company's
achievements during the prior year and the competitive marketplace for executive
talent. The Chief Executive Officer recommends annual salary adjustments for
executive officers after consideration of these factors. The Chief Executive
Officer's recommendations are considered by the Compensation Committee in
determining executive officers' annual salary levels.
ANNUAL BONUS. The annual bonuses paid to the Company's executive officers
are dependent upon individual and overall company performance. At the beginning
of the year, the Compensation Committee approves specific performance measures
and goals based upon the business plan for that year. At the conclusion of the
year, the Compensation Committee compares actual achievements against these
goals. There were no annual bonuses awarded for the year ending December 31,
1999.
STOCK OPTIONS. Stock options provide an incentive for retention of
executive talent and the creation of stockholder value in the long-term since
their full benefits cannot be realized unless the price of the Company's stock
appreciates over a specified number of years and the executive continues to
perform services for the Company. The Compensation Committee believes that stock
options serve as an important component of compensation by closely aligning
management's interests and actions with those of the Company's stockholders.
COMPENSATION OF THE EXECUTIVE OFFICERS
The Compensation Committee has reviewed the compensation of the Company's
Executive Officers and has concluded that their 1999 compensation was reasonable
in view of the Company's performance and the contribution of those officers to
that performance.
162(m) OF THE INTERNAL REVENUE CODE
In adopting and administering executive compensation plans and arrangements,
the Compensation Committee will consider whether the deductibility of such
compensation will be limited under section 162(m) of the Internal Revenue Code,
as amended, and, in appropriate cases, may serve to structure arrangements so
that any such limitation will not apply.
Submitted by the Compensation
Committee,
John W. Goddard
William E. Johnson
22
<PAGE>
STOCK PERFORMANCE GRAPH
The following chart compares the yearly percentage change in the cumulative
stockholder return on the Company's common stock during the three years ended
December 31, 1999 with the cumulative total return on the NASDAQ index. The
comparison assumes $100 was invested on January 1, 1997, in the Company's common
stock and in the NASDAQ index and assumes reinvestment of dividends.
[GRAPH]
<TABLE>
<CAPTION>
1996 1997 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TSATA......................................... 100 69.62 14.56 162.03
TSATB......................................... 100 70.00 18.13 175.00
NASDAQ........................................ 100 121.64 169.84 315.20
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXECUTIVE OFFICER LOANS
Messrs. Carroll and Sophinos received loans in the principal amounts of
$136,071.03 and $134,998.92 respectively to be used solely for the purpose of
satisfying tax liabilities related to the lapse of restrictions on shares of
common stock awarded under the TCI Satellite Entertainment 1996 Stock Incentive
Plan. The loans bear interest, payment of which may be deferred by the borrowers
until maturity, at an annual rate of 6.42%. Each of the loans provides for
principal and interest to be payable upon the occurrence of certain events and
in no event later than December 1, 2001. The loans are secured in each case by
25,000 shares of the Company's common stock and are otherwise nonrecourse to the
borrowers.
SERVICES RECEIVED FROM LIBERTY MEDIA
Since April, 2000, the Company has received payroll processing services,
benefits for its employees, and insurance coverage through Liberty Media
Corporation. There is no written agreement between
23
<PAGE>
the companies related to these services, however, the Company reimburses Liberty
Media Corporation for the associated costs.
Please also see the discussion below under the heading "Recent Transaction
with Liberty Media Corporation; Terms and Conditions of Outstanding Preferred
Stock", beginning on page 27.
Messrs. Bennett, Howard and Vogel are officers, and Messrs. Bennett and
Howard are directors, of Liberty Media Corporation. Dr. Malone is also an
officer and director of Liberty Media Corporation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who beneficially own more than
10 percent of a registered class of the Company's equity securities, to file
with the SEC and The Nasdaq Stock Market initial reports of ownership and
reports of changes in ownership of the Company's Series A common stock and other
equity securities of the Company by the tenth of the month following a change.
Officers, directors and greater than 10 percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company or written representations that no other
reports were required during the year ended December 31, 1999, the Company
believes that all filing requirements were met during the year ending
December 31, 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES TO BE ELECTED BY HOLDERS OF COMMON STOCK AND SERIES B PREFERRED
STOCK AS DIRECTORS OF THE COMPANY.
PROPOSAL V--APPROVAL OF AN AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
At the annual meeting, you will be asked to approve an amendment to the TCI
Satellite Entertainment, Inc. 1996 Stock Incentive Plan to increase the number
of shares of Series A common stock reserved for issuance under the plan from
3,200,000 shares to 5,200,000 shares. The board of directors has adopted the
amendment, subject to stockholder approval.
If this Proposal V is approved, the first sentence of Section 11.1 of the
TCI Satellite Entertainment, Inc. 1996 Stock Incentive Plan would be amended to
read as follows:
"Subject to the provisions of Article IV, the maximum number of shares of
Series A common stock with respect to which Awards may be granted during the
term of the Plan shall be 5,200,000."
WHAT ARE THE PURPOSES OF THE 1996 STOCK INCENTIVE PLAN AND WHY IS IT BEING
AMENDED?
The Company believes that long term equity compensation in the form of stock
options is critical in order to attract qualified personnel to the Company and
to retain and provide incentive to current personnel, particularly in light of
the increasingly competitive environment for talented personnel. As of
March 31, 2000, options to purchase 2,426,576 shares were outstanding under the
1996 Stock Incentive Plan, 5,000 shares had been issued pursuant to the exercise
of options granted under such plan, 325,000 restricted shares had been granted
under the plan and 443,424 shares remained available for future grants. The
board of directors believes that the number of shares currently available under
the 1996 Stock Incentive Plan will be insufficient in light of the anticipated
continued growth in the Company's operations. For this reason, the board of
directors has determined that it is in the best interests of the
24
<PAGE>
Company to increase the number of shares available for issuance under the 1996
Stock Incentive Plan by 2,000,000 shares.
WHAT ARE THE MAIN FEATURES OF THE 1996 STOCK INCENTIVE PLAN?
The following description of the main features of the 1996 Stock Incentive
Plan is qualified in its entirety by reference to the full text of the 1996
Stock Incentive Plan, which was filed as Exhibit 10.4 to the Company's
Registration Statement on Form 10, as amended by Form 10/A (Amendments No 1, 2
and 3).
As of March 31, 2000, there were 2,870,000 shares of Series A common stock
reserved for issuance under the 1996 Stock Incentive Plan. The 1996 Stock
Incentive Plan provides that no participant may be granted options covering more
than 1,000,000 shares of Series A common stock in the calendar year ending
December 31, 1996, or options covering more than 500,000 shares of Series A
common stock in any one subsequent calendar year.
The 1996 Stock Incentive Plan provides that the board of directors may
amend, suspend or terminate the 1996 Stock Incentive Plan at any time; provided,
however, that no amendment that requires stockholder approval under applicable
law in order for the 1996 Stock Incentive Plan to comply with Section 162(m) of
the Internal Revenue Code of 1986, or that otherwise requires stockholder
approval, will be effective unless the same is approved by the requisite vote of
the Company's stockholders.
The 1996 Stock Incentive Plan provides that it will be administered by the
Compensation Committee of the board of directors, unless a different committee
is approved by the Board. The Committee shall be comprised of not less than two
persons. Each member of the Committee shall be a member of the board of
directors of the Company who (i) is not a current employee of the Company, and
(ii) is not otherwise disqualified from being (A) a "non-employee director" with
respect to the Company for purposes of Rule 16b-3 under the Exchange Act (or any
successor rule), or (B) an "outside director" with respect to the Company for
purposes of Section 162(m) of the Internal Revenue Code (or any successor
statute) and the rules and regulations of the Treasury Department promulgated
thereunder. The Company's current Compensation Committee members are Directors
John Goddard and William Johnson.
The 1996 Stock Incentive Plan provides for the granting of options intended
to be "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code and options that do not qualify as incentive stock
options. Stock appreciation rights may be granted under the 1996 Stock Incentive
Plan, either independently of an option or in tandem with an option. The 1996
Stock Incentive Plan also provides for the grant of restricted stock awards,
which may be subject to such restrictions as the Compensation Committee may deem
appropriate. The 1996 Stock Incentive Plan also provides for the grant of stock
units, which may be in the form of Series A common stock or units, the value of
which is based, in whole or in part, on the fair market value of the stock. The
awards of stock units are subject to the provisions of the 1996 Stock Incentive
Plan and such terms, restrictions, conditions, vesting requirements and payment
rules as the Compensation Committee may determine in its sole discretion. The
1996 Stock Incentive Plan also provides for grants of performance awards in the
form of cash, property or securities of the Company. Performance awards are to
be paid, vested or otherwise deliverable solely on account of the attainment of
one or more pre-established, objective performance goals established by the
Compensation Committee prior to the earlier to occur of (i) 90 days after the
commencement of the period of service for which the performance goal relates,
and (ii) the passage of 25% of the period of service and in any event while the
outcome is substantially uncertain.
Employees, non-employee consultants and advisors to the Company and its
subsidiaries are eligible for participation in the 1996 Stock Incentive Plan.
25
<PAGE>
Upon the exercise of any stock option under the 1996 plan, the purchase
price must be fully paid. Such purchase price may be paid (i) in cash; (ii) by
check; (iii) by promissory note; (iv) with whole shares of Series A common stock
or Series B common stock already owned by the party exercising the option;
(v) by the withholding of shares of Series A common stock issuable upon exercise
of the option; (vi) by the delivery, together with a properly executed exercise
notice, of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds required to pay the purchase price;
(vii) by any combination of the foregoing methods of payment; or (viii) by other
methods of payment permitted under Delaware General Corporation Law. Methods of
payment other than cash are subject to such conditions as the Compensation
Committee deems appropriate. The 1996 Stock Incentive Plan provides that the
Company has the right to require a participant to satisfy the tax withholding
requirements arising with respect to awards granted thereunder. Such obligation
may be satisfied by a cash payment, by authorizing the Company to withhold from
the shares of Series A common stock or cash otherwise payable a number of shares
or cash, as applicable, equal to such obligation, or delivery of Series A common
stock equal in market value to such obligation.
In the event of any "Approved Transaction," "Board Change" or "Control
Purchase" (as defined in the 1996 Stock Incentive Plan), all options under the
1996 Stock Incentive Plan will become immediately exercisable in full and
terminate and all restrictions with respect to restricted stock awards will
lapse unless the Compensation Committee exercises its discretion to determine
that outstanding options will not vest and terminate and restrictions on
restricted stock awards will not lapse.
WHAT IS THE VALUE OF THE BENEFITS THAT DIRECTORS, EXECUTIVE OFFICERS AND
EMPLOYEES CAN OBTAIN UNDER THE 1996 STOCK INCENTIVE PLAN?
From the start of the fiscal year that ended December 31, 1999 through the
date hereof, no stock options to purchase shares of Series A common stock were
granted to the current directors or Executive Officers. From the start of the
fiscal year that ended December 31, 1999 through the date hereof, stock options
to purchase 50,000 shares of Series A common stock were granted to the Company's
employees and consultants (including all current officers who are not Executive
Officers) under the 1996 Stock Incentive Plan.
WHAT ARE THE FEDERAL TAX CONSEQUENCES OF THE 1996 STOCK INCENTIVE PLAN?
Options granted under the 1996 Stock Incentive Plan may be either "incentive
stock options" as defined in Section 422 of the Internal Revenue Code, or
nonstatutory stock options.
If an option granted under the 1996 Stock Incentive Plan is an incentive
stock option, under Federal tax laws the optionee will recognize no income upon
grant of the incentive stock option and incur no tax liability due to the
exercise unless the optionee is subject to the alternative minimum tax. The
Company will not be allowed a deduction for Federal income tax purposes as a
result of the exercise of an incentive stock option regardless of the
applicability of the alternative minimum tax. Upon the sale or exchange of the
shares at least two years after grant of the incentive stock option and one year
after receipt of the shares by the optionee, any gain will be treated as
long-term capital gain under federal tax laws. If these holding periods are not
satisfied, the optionee will recognize ordinary income under Federal tax laws
equal to the difference between the exercise price and the lower of the fair
market value of the stock at the date of the option exercise or the sales price
of the stock. The Company will be entitled to a deduction in the same amount as
the ordinary income recognized by the optionee. Any gain recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income will be characterized under Federal tax laws as long-term capital gain if
the sale occurs more than one year after exercise of the option or as short-term
capital gain if the sale is made earlier. The current federal tax rate on
long-term capital is gain capped at 20 percent for shares held more than one
year.
26
<PAGE>
All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income under Federal tax laws at the time he or she is granted a
nonstatutory stock option. However, upon its exercise, the optionee will
recognize ordinary income for Federal tax law purposes measured by the excess of
the then fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer, director or ten percent
stockholder of the Company, the date of taxation under Federal tax laws may be
deferred unless the optionee files a timely election with the Internal Revenue
Service under section 83(b) of the Internal Revenue Code. The income recognized
by an optionee who is also an employee of the Company by payment in cash or out
of the current earnings paid to the optionee, any difference between the sale
price and the optionee's tax basis (exercise price plus the income recognized
upon exercise) will be treated under Federal tax laws as capital gain or loss,
and will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN.
PROPOSAL VI--RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors has renewed the Company's arrangement for KPMG LLP to
be its independent auditors for the year ending December 31, 2000, subject to
the ratification of the appointment by stockholders. A representative of KPMG
LLP is expected to attend the annual meeting to respond to appropriate questions
and will have an opportunity to make a statement if he or she so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE
YEAR ENDING DECEMBER 31, 2000.
STOCKHOLDER PROPOSALS
The Company currently expects that next year's Annual Meeting of
Stockholders will be held in June, 2001. In order to be eligible for inclusion
in the Company's proxy materials for this meeting, any stockholder proposal must
be submitted in writing and received at the Company's executive office at
7600 E. Orchard Road, Suite # 330 South, Englewood, CO 80111 by the close of
business on February 2, 2001 or such later date as the Company may determine in
connection with the actual scheduling of the annual meeting. To be considered
for presentation at next year's annual meeting, although not included in the
proxy statement, any stockholder proposal must be received at the Company's
executive office at the foregoing address on or before the close of business on
April 6, 2001, or such later date as the Company may determine in connection
with the actual scheduling of the annual meeting.
All stockholder proposals for inclusion in the Company's proxy materials
will be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934 and, as with any stockholder proposal
(regardless of whether it is included in the Company's proxy materials), the
Company's Restated Certificate of Incorporation, Bylaws and Delaware law.
RECENT TRANSACTION WITH LIBERTY MEDIA CORPORATION;
TERMS AND CONDITIONS OF OUTSTANDING PREFERRED STOCK
On March 16, 2000, the Company completed a transaction with Liberty Media
Corporation in which Liberty Media purchased shares of two series of cumulative
preferred stock of the Company in exchange for Liberty Media's economic interest
in 5,084,745 shares of Sprint Corporation PCS common stock, having a market
value of approximately $300 million, based on the closing price of PCS stock
27
<PAGE>
two days before the closing. In exchange for such beneficial interest, the
Company issued to Liberty Media
- 150,000 shares of Series A preferred stock of the Company, having a
liquidation value of $150 million, and
- 150,000 shares Series B preferred stock of the Company, having a
liquidation value of $150 million.
The terms and conditions of both series of preferred stock are described in
more detail below. The Series A and Series B preferred stock are senior to all
other outstanding classes and series of capital stock of the company. The shares
of Series B preferred stock have super voting rights that give Liberty Media
voting control over the Company. Accordingly, since March 16, 2000, the Company
has been a consolidated subsidiary of Liberty Media Corporation.
Concurrently with the investment by Liberty Media in the Company, the
Company and Liberty Media formed a new joint venture to hold and manage
interests in entities engaged globally in the distribution of internet data and
other content via satellite and related businesses. Liberty Media contributed
interests in XM Satellite Radio Holdings, Inc., iSKY, Inc., LSAT Astro LLC and
the Sky Latin America satellite businesses in exchange for an 89.41% ownership
interest in the joint venture. The Company contributed its interest in Jato
Communications Corp. and General Motors Class H Common Stock (net of an
associated liability to Phoenixstar, Inc.) in exchange for a 10.59% ownership
interest in the joint venture. The Company will manage the business and affairs
of the venture, which has been named Liberty Satellite, LLC.
In a related transaction, the Company paid Liberty Media $60 million in the
form of an unsecured promissory note in exchange for a 13.99% ownership interest
in LSAT Astro LLC, a limited liability company that owns an approximate 31.5%
interest in ASTROLINK International LLC. The remaining 86.01% of LSAT Astro LLC
was contributed by Liberty Media to Liberty Satellite, LLC, as indicated above.
SERIES A CUMULATIVE PREFERRED STOCK.
The Series A preferred stock accrues dividends at 12% per year at all times
prior to April 1, 2005, at 11% per year from April 1, 2005 to April 1, 2010, and
at 10% per year from and after April 1, 2010. Such dividends are payable the
last day of each March, June, September and December, commencing March 2000. On
any dividend date prior to April 1, 2003, dividends on the Series A preferred
stock are payable in cash or at the option of the Company, in shares of the
Company's Series A common stock, valued at 90% of the 20 day average closing
price per share ending on the tenth trading day prior to the record date for
payment of the dividends. Dividends not paid are added to the liquidation
preference of the Series A preferred stock on such date and remain a part of the
liquidation preference until such dividends are paid. Subject to certain
specified exceptions, the Company is prohibited from paying dividends on any
shares, parity securities or junior securities and from setting aside any money
or assets for any such purpose during any period in which the Company is in
arrears with respect to payment of dividends on Series A preferred stock.
The holder of Series A preferred stock is not entitled to vote on any
matters submitted to a vote of the stockholders of the Company, except as
required by law and other limited exceptions.
The liquidation preference of each share of the Series A preferred stock is
equal to the sum of (a) the stated value of $1,000 per share, plus (b) an amount
equal to any and all unpaid dividends accrued on such shares.
The Series A preferred stock is redeemable at the option of the Company by
action of the board of directors, in whole or from time to time in part, on any
business day after April 1, 2020, at a
28
<PAGE>
redemption price per share equal to the liquidation preference of such share on
the redemption date. If less than all outstanding shares are to be redeemed,
shares will be redeemed ratably among the holders. On or after April 1, 2020,
the Series A preferred stock is redeemable at the option of the holder for cash.
SERIES B CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK.
The Series B preferred stock accrues dividends at the rate of 8% per year.
Such dividends are payable the last day of each March, June, September and
December commencing March 31, 2000. On any dividend date prior to April 1, 2003,
dividends on the Series B preferred stock are payable in cash or at the option
of the Company, in shares of the Company's Series A common stock, valued at 90%
of the 20 day average closing price per share ending on the tenth trading day
prior to the record date for payment of the dividends. Dividends not paid are
added to the liquidation preference on such date and remain a part of the
liquidation preference until such dividends are paid. In the event of a default,
the dividend rate will be 10% per year so long as such default continues.
Subject to certain specified exceptions, the Company is prohibited from paying
dividends on any shares, parity securities or junior securities and from setting
aside any money or assets for any such purpose during any period in which the
Company is in arrears with respect to payment of dividends on Series B preferred
stock.
In addition to voting rights required by law, each share of Series B
preferred stock is entitled to vote together with holders of the common stock as
a single class upon all matters upon which holders of common stock are entitled
to vote. In any such vote, the holders of Series B preferred stock are entitled
to 5,580 votes per each share of Series B preferred stock held. The Series B
preferred stock is redeemable at the option of the Company on April 1, 2005. At
any date on or after April 1, 2020, the Series B preferred stock is redeemable
at the option of the holder for cash.
The liquidation preference of each share of the Series B preferred stock as
of any date of determination is equal to the sum of (a) the stated value per
share of $1,000, plus (b) an amount equal to all dividends accrued on such
shares.
Each share of the Series B preferred stock is initially convertible into
113.1145 shares of Series B common stock. Such conversion rate was calculated as
the liquidation value of such shares divided by $8.8406 and is adjustable based
on the adjusted liquidation value at the date of conversion.
REASONS FOR THE TRANSACTIONS WITH LIBERTY MEDIA.
The transactions with Liberty Media provided the Company with capital to
support the Company's ongoing operations and activities as well as control over
a portfolio of satellite and related technology assets and investments and
certain related contract rights. The Company believes that its relationship with
Liberty Media will enhance the Company's ability to identify and exploit
investments and strategic opportunities related to the satellite business and
associated technologies.
OTHER MATTERS
The board of directors is not aware of any business to come before the
annual meeting other than the matters described above in this proxy statement.
However, if any other matters should properly come before the annual meeting, it
is intended that holders of the proxies will act in accordance with their best
judgment.
29
<PAGE>
REVOCABLE PROXY
TCI SATELLITE ENTERTAINMENT, INC.
ANNUAL MEETING OF STOCKHOLDERS--AUGUST 3, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TCI SATELLITE
ENTERTAINMENT, INC.
The undersigned hereby appoints Kenneth G. Carroll and Pamela J. Strauss
with full power of substitution, and authorizes them to represent and vote, as
designated below and in accordance with their judgment upon any other matters
properly presented at the annual meeting, all the shares of Company stock held
of record by the undersigned at the close of business on July 3, 2000, at the
Annual Meeting of Stockholders, to be held on August 3, 2000 and or at any and
all adjournments thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS SET FORTH HEREIN. The
board of directors recommends a vote "FOR" the election of the nominees named
herein as directors of the Company and "FOR" each of the other proposals set
forth below.
I. Approval of an amendment to the TCI Satellite Entertainment, Inc. Restated
Certificate of Incorporation to increase the number of authorized shares of
Series B common stock.
/ / FOR / / WITHHELD / / ABSTAIN
II. Approval of an amendment to the TCI Satellite Entertainment, Inc. Restated
Certificate of Incorporation to change the name of the Company to Liberty
Satellite & Technology, Inc.
/ / FOR / / WITHHELD / / ABSTAIN
III. Approval of an amendment to the TCI Satellite Entertainment, Inc. Restated
Certificate of Incorporation deleting Section V.B., "Classification of the
Board" and Section V.C., "Removal of Directors" and making certain
conforming changes.
/ / FOR / / WITHHELD / / ABSTAIN
IV. Election of the following persons as directors of TCI Satellite
Entertainment, Inc.:
<TABLE>
<S> <C> <C> <C>
Alan M. Angelich William H. Berkman Gary S. Howard Carl E. Vogel
Robert R. Bennett John W. Goddard J. Curt Hockemeier
</TABLE>
/ / FOR / / WITHHELD / / FOR ALL EXCEPT
----------------------------------------------------------------
INSTRUCTIONS: WRITE THE NAME OF THE NOMINEE(S) ON THE LINE FOR
WHOM YOU WISH YOUR VOTE WITHHELD
<PAGE>
V. Approval of an amendment to the TCI Satellite Entertainment, Inc. 1996 Stock
Incentive Plan to increase the number of shares of Series A common stock
reserved for issuance thereunder by 2,000,000 shares.
/ / FOR / / WITHHELD / / ABSTAIN
VI. Ratification of the appointment of KPMG LLP as independent auditors for TCI
Satellite Entertainment, Inc. for the year ending December 31, 2000.
/ / FOR / / WITHHELD / / ABSTAIN
THE UNDERSIGNED ACKNOWLEDGES RECEIPT, PRIOR TO THE EXECUTION OF THIS PROXY,
OF NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS, A PROXY STATEMENT DATED
2000 AND THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999.
/ / CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING.
DATED:
-------------------------------------
-------------------------------------
PRINT NAME OF STOCKHOLDER
-------------------------------------
SIGNATURE OF STOCKHOLDER
-------------------------------------
PRINT NAME OF STOCKHOLDER
-------------------------------------
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name
appears above on this card. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If
shares are held jointly, each holder
should sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN
AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
