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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A
SCHEDULE 14A INFORMATION
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Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rules
14a-6(e)(2) and 14c-5(d)(2))
[X] Definitive Proxy/Information Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
UNITED PAN-EUROPE COMMUNICATIONS N.V.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
[ ] 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.
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
Fred. Roeskestraat 123, P.O. Box 74763
1070 BT Amsterdam,
The Netherlands 1070 BT
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 23, 1999
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To The Shareholders:
The 1999 Annual Meeting of the Shareholders of United Pan-Europe
Communications N.V. (the "Company"), a public company organized under the laws
of The Netherlands, will be held at The Okura Hotel, Ferdinand Bol straat 333,
Amsterdam, The Netherlands, on Friday, July 23, 1999 at 2:00 p.m., local time,
for the following purposes:
1. To authorize the preparation of the Dutch Statutory Annual Accounts
and the Annual Report in the English language and to adopt the Dutch Statutory
Annual Accounts of the Company for the fiscal year ended December 31, 1998;
2. To grant discharge to the members of the Board of Management for
their management and to the members of the Supervisory Board for their
supervision thereof, insofar as such is apparent from the financial statements;
3. To remove J. Timothy Bryan from the Board of Management, as proposed
by the holders of our priority shares, due to his departure from the Company's
employment;
4. To elect a new member of the Board of Management;
5. To extend the authority of the Board of Management to repurchase up
to 10% of the Company's share capital for a period of 18 months (until January
23, 2001);
6. To amend the Articles of Association of the Company (i) to authorize
a new class of 100 million Ordinary Shares B with a nominal value of EUR 0.02
with the right to cast 1 vote per share, (ii) to rename the existing ordinary
shares as "Ordinary Shares A," (iii) to increase the voting rights of the
Ordinary Shares A, the Preference Shares A, the Preference Shares B and the
priority shares to 100 votes per share and (iv) to increase the nominal value of
each issued and outstanding Ordinary Share A and each priority share from EUR
0.30 to EUR 2.00 by crediting each issued and outstanding Ordinary Share A and
priority share with EUR 1.70 from the Company's share premium account insofar as
the Company has sufficient distributable reserves for such credit;
7. To extend authority of the Board of Management to issue and/or grant
rights to subscribe to shares in the capital of the Company for a period of five
years (until July 23, 2004);
8. To extend authority of the Board of Management to limit or exclude
the pre-emptive rights of the holders of shares in the capital of the Company
for a period of five years (until July 23, 2004); and
9. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
Copies of the Annual Accounts and the report of the Board of Management
are open for inspection at the offices of the Company, located at Fred.
Roeskestraat 123, P.O. Box 74763 1070 BT Amsterdam, The Netherlands 1070 BT, by
registered shareholders and other persons entitled to attend meetings of
shareholders of the Company. Such copies will be open for inspection from the
date hereof until the close of the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS
OF WHETHER YOU PLAN TO ATTEND. THEREFORE, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY. IF YOU ARE PRESENT AT THE ANNUAL MEETING AND WISH TO DO
SO, YOU MAY REVOKE THE PROXY AND VOTE IN PERSON.
By Order of the Board of Management
/s/ Mark L. Schneider, Chairman of Board of
Management and Chief Executive Officer
July 1, 1999 /s/ Anton H.E. v. Voskuijlen, Board of
Amsterdam, The Netherlands Management Member, Senior Vice President
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
Fred. Roeskestraat 123, P.O. Box 74763
1070 BT Amsterdam,
The Netherlands 1070 BT
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PROXY STATEMENT
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SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is being solicited by and on behalf of the Board
of Supervisory Directors (the "Supervisory Board") of United Pan-Europe
Communications N.V. (the "Company") for use at the 1999 Annual Meeting of the
Shareholders of the Company (the "Annual Meeting") to be held at The Okura
Hotel, Ferdinand Bol straat 333, Amerstdam, The Netherlands, on Friday, July 23,
1999 at 2:00 p.m., local time. If the accompanying proxy is properly executed
and returned, the shares it represents will be voted at the Annual Meeting in
accordance with the directions noted thereon, or, if no directions are
indicated, it will be voted in favor of the proposals described in this Proxy
Statement. Any shareholder giving a proxy has the power to revoke it by oral or
written notice to the Secretary of the Company at any time before it is voted.
The solicitation of proxies by the Supervisory Board will be conducted
by mail. In addition, certain members of the Supervisory Board (each, a
"Supervisory Director"), officers and regular employees of the Company may
solicit proxies in person or by facsimile, telex or telephone. The Company will
bear the cost of preparing and mailing proxy materials as well as the cost of
soliciting proxies. The Company will reimburse banks, brokerage firms,
custodians, nominees and fiduciaries for their expenses in sending proxy
materials to the beneficial owners of the ordinary shares and to UIH as the
owner of our priority shares.
At the close of business on June 8, 1999, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, there were 129,246,123 ordinary shares and 100 priority shares
outstanding, each of which is entitled to one vote. The classes of ordinary
shares and priority shares are the only classes of capital stock of the Company
outstanding and entitled to notice of and to vote at the Annual Meeting.
Adoption of all matters to be voted on shall require the vote of a majority of
the votes cast. If none of the nominees to the Board of Management obtains a
majority of the votes in the Annual Meeting, a second free vote shall be taken.
If again a majority is not obtained, further votes shall be taken until either
one person obtains a majority or both nominees receive an equal number of votes.
In the event of a tie of votes the candidate whose name appears first on the
list shall be elected. Abstentions, broker non-votes and invalid votes will not
be counted as votes.
A copy of the Company's Annual Report on Form 10-K is included. A copy
of the schedules and exhibits thereto may be obtained without charge by written
request to Anton M. Tuijten, General Counsel, Fred. Roeskestraat 123, P.O. Box
74763, 1070 BT Amsterdam, The Netherlands 1070 BT.
This Proxy Statement and the accompanying proxy were first mailed to
shareholders on or about July 1, 1999.
2
<PAGE>
ITEM 1
APPROVAL OF ANNUAL ACCOUNTS AND ENGLISH LANGUAGE
At the Annual Meeting, the shareholders of the Company will be asked
to: (i) adopt the Company's audited annual accounts for the year 1998, as
expressed in United States dollars and prepared in accordance with Dutch
statutory accounting principles (the "Annual Accounts"), for the fiscal year
ending December 31, 1998, as required under Dutch law and the articles of
association, and (ii) authorize the preparation of the Annual Accounts and the
Company's annual report in the English language.
The Annual Accounts for the fiscal year ended December 31, 1998 are
submitted to the shareholders in the English language. Pursuant to Section
2:362, Paragraph 7, of the Dutch Civil Code, the items in the annual accounts of
a Dutch company shall be prepared in the Dutch language, unless the shareholders
at the Annual Meeting resolve to use another language. Due to the international
structure of the Company and in order to facilitate intra-company communications
and external communications about the Company, the English language has been
adopted by the Company as its standard for the preparation of financial
statements and other publications. Therefore, it is proposed that the language
of the Annual Accounts for the fiscal year ending December 31, 1998 and
subsequent years be the English language.
Copies of the Annual Accounts and the reports of the Supervisory Board
and the Board of Management are available for inspection by registered
shareholders and other persons entitled to attend meetings of shareholders at
the offices of the Company at the Fred. Roeskestraat 123, 1070 BT Amsterdam, the
Netherlands, and at the office of Citibank, N.A., 111 Wall Street, New York, New
York 10043, from the date hereof until the close of the Annual Meeting.
During the 1998 fiscal year, there were no profits accrued to the
Company, and no dividend will be paid.
The affirmative vote of the holders of a majority of the ordinary
shares and the priority shares cast at the Annual Meeting is required to adopt
the Annual Accounts and to approve the use of the English language with respect
to the presentation of the Annual Accounts of the Company for 1998 and
subsequent years.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
ADOPTION OF THE ANNUAL ACCOUNTS AND USE OF THE ENGLISH LANGUAGE, AND PROXIES
EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
ITEM 2
GRANT DISCHARGE TO THE MEMBERS OF THE BOARD OF MANAGEMENT
At the Annual Meeting, the shareholders of the Company will be asked to
discharge the Supervisory Board and Board of Management from liability in
respect of the exercise of their duties during the financial year concerned.
This discharge of liability will be limited by mandatory provisions of Dutch
law, such as in the case of bankruptcy, and this discharge only extends to
actions or omissions disclosed in or apparent from the adopted annual accounts.
Generally, under Dutch law, directors will not be held personally liable for
decisions made with reasonable business judgment.
3
<PAGE>
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
DISCHARGE WITHOUT RESERVATION OF THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT,
AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS
ARE INDICATED THEREON.
ITEM 3
REMOVAL OF J. TIMOTHY BRYAN FROM BOARD
OF MANAGEMENT
The holder of our priority shares has proposed to remove Mr. Bryan from
the Board of Management because he is no longer employed by the Company. A
shareholder vote will be taken on his removal from the Board of Management.
The affirmative vote of the holders of a majority of the ordinary
shares and of UIH as the holder of our priority shares cast at the Annual
Meeting is required to remove Mr. Bryan from the Board of Management.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
REMOVAL OF MR. BRYAN FROM THE BOARD OF MANAGEMENT.
ITEM 4
ELECTION OF MEMBER OF THE BOARD OF MANAGEMENT
Our general affairs and business are managed by a Board of Management,
subject to the supervision of a Supervisory Board.
The Board of Management members are appointed at the general meeting of
shareholders from a list of at least two persons proposed by UIH as the holder
of our priority shares. The proposal may be set aside by two-thirds of the votes
cast at the general meeting of shareholders representing more than one-half of
the issued nominal capital.
One member of the Board of Management is to be elected at the Annual
Meeting. UIH, the holder of our priority shares, has proposed the election of
either Charles H.R. Bracken or Anton M. Tuijten, and the Supervisory Board
recommends the election of Mr. Bracken.
First Nominee
Charles H.R. Bracken, 33, was appointed Managing Director of Strategy,
Acquisitions and Corporate Development in March 1999. From 1994 he held a number
of appointments at Goldman Sachs International, in London, most recently as
Executive Director, Communications, Media and Technology. While at Goldman
Sachs, he was responsible for providing merger and corporate insurance advice to
a number of communications companies including UPC.
Second Nominee
Anton Tuijten, 36, joined UPC in September 1998 as Vice President Legal
Services and was appointed General Counsel of UPC in May 1999. He is also a
member of the Management Board of chello broadband n.v. Prior to joining UPC he
was General Counsel and Company Secretary of Unisource, an international
telecommunications company.
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<PAGE>
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed proxy will be voted for the election of Mr. Charles H.R. Bracken as
a member of the Board of Management ("statutair directeur"). If at the time of
or prior to the Annual Meeting Mr. Bracken should be unable or decline to serve,
the discretionary authority provided in the proxy may be used to vote for a
substitute or substitutes designated by the Supervisory Board. The Supervisory
Board has no reason to believe that any substitute nominee or nominees will be
required. No proxy will be voted for more than one nominee.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" MR. BRACKEN TO BE
A MEMBER OF THE BOARD OF MANAGEMENT, AND PROXIES EXECUTED AND RETURNED WILL BE
SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
BOARD OF MANAGEMENT
As of June 1, 1999, the members of the Board of Management are:
Name Age Position
Mark L. Schneider 43 Chairman of Board of Management and
Chief Executive Officer
John F. Riordan 56 Vice Chairman of Board of Management and
President, Advanced Communications and
Chief Executive Officer, chello broadband n.v.
J. Timothy Bryan 38 Board of Management Member
Anton H.E. v. Voskuijlen 41 Board of Management Member,
Senior Vice President
Nimrod J. Kovacs 49 Board of Management Member and
Managing Director, Eastern Europe
Mark Schneider has been our Chief Executive Officer and Chairman of the
Board of Management since April 1997. He was President of UPC from April 1997 to
September 1998. Since December 1996, he has served as Executive Vice President
of UIH and President and Chief Executive Officer of UIH Europe/Middle East
Communications, Inc. and from May 1996 to December 1996 he was Chief of
Strategic Planning and Operational Oversight of UIH. He served as President of
UIH from July 1992 until March 1995 and was Senior Vice President of UIH from
May 1989 until July 1992. Mr. Schneider also worked as a consultant for UIH from
March 1995 to May 1998.
He has been a member of the board of directors of UIH since 1993.
John F. Riordan was appointed our Executive Vice President in March
1998, and a member of our Board of Management in September 1998. In September
1998, Mr. Riordan was appointed Vice Chairman and President of our Advanced
Communications division, overseeing implementation of our Internet/data services
and digital distribution platform. In March 1999, Mr Riordan was also appointed
as CEO of chello broadband n.v. From April 1997 until March 1998, he was a
member of our Supervisory Board. Mr. Riordan also has served as a director of
UIH since March 1998. Mr. Riordan was Chairman and Chief Executive Officer from
1992 to November 1998 of Princes Holdings Limited, the Irish multi-channel
television operating company of which we owned 20% until its sale in November
1998.
5
<PAGE>
J. Timothy Bryan has been a member of the Board of Management since
September 1998 and was our President and Chief Financial Officer from September
1998 to June 1999 and a member of our Supervisory Board from December 1996 to
September 1998. He was also Chief Financial Officer, Treasurer and Assistant
Secretary of UIH from December 1996 until September 1998. From 1993 until
joining UIH, he served as Treasurer at Jones Financial Group, Inc, an affiliate
of Jones International Limited, where he was primarily responsible for public
and private capital formation. He also served as Treasurer for Jones Intercable,
Inc. from 1990 until 1993.
Anton H.E. v. Voskuijlen has been on our Board of Management since April
1997 and has been Senior Vice President since May 1999. He also served as our
General Counsel from July 1996 until May 1999. Prior to joining our company in
1996, he served as Vice President, Business Affairs and Legal Counsel of Philips
Media in New York from March 1994.
Nimrod Kovacs was appointed our Managing Director of Eastern Europe in
March 1998 and a member of the Board of Management in September 1998. He has
served in various positions with UIH including President of UIH Programming,
Inc. since December 1996; President, Eastern Europe Electronic Distribution &
Global Programming Group from January to December 1996 and Senior Vice
President, Central/Eastern Europe from March 1991 until December 1995.
SUPERVISORY BOARD
As of June 1, 1999, the Supervisory Directors are:
Name Age Position
Michael T. Fries 36 Chairman of the Supervisory Board
John P. Cole, Jr. 69 Supervisory Director
Richard De Lange 53 Supervisory Director
Antony P. Ressler 38 Supervisory Director
Ellen P. Spangler 50 Supervisory Director
Tina M. Wildes 38 Supervisory Director
The Advisor is:
Gene W. Schneider 72 Advisor
Michael T. Fries has been a member of the Supervisory Board since September
1998 and the Chairman since February 1999. He is also President of UIH and
President of UIH Latin America, Inc., a wholly-owned subsidiary of UIH,
positions he has held since September 1998. Mr. Fries also serves as President
and Chief Executive Officer of UIH Asia/Pacific Communications, Inc., a
majority-owned subsidiary of UIH, positions he has held since June 1995 and
December 1996, respectively. Prior to becoming President of UIH Asia/Pacific
Communications, Inc., Mr. Fries served as UIH's Senior Vice President,
Development, in which capacity he was responsible for managing UIH's
acquisitions and new business development activities since March 1990, including
UIH's expansion into the Asia/Pacific, Latin American and European markets.
John P. Cole Jr. became a member of the Supervisory Board in February 1999
and has been a director of UIH since March 1998. Mr. Cole has practiced law in
Washington, D.C. since 1956 and has been counsel over the years in many landmark
proceedings before the U.S. Federal Communications Commission, reflecting the
development of the cable television industry. In 1966, he founded the law firm
of Cole, Raywid & Braverman, a 30-lawyer firm specializing in all aspects of
communications and media law. Mr. Cole is also a director of Century
Communications Corporation.
6
<PAGE>
Richard De Lange has been a member of the Supervisory Board since April
1996. Since October 1998, Mr. De Lange has been Chairman of the Dutch Philips
organization (Philips Nederland B.V. and Nederlandse Philips Bedrijven B.V.). He
also continues to serve as President and Chief Executive Officer of Philips
Media B.V., which position he assumed in February 1996. From April 1995 until
October 1998, Mr. De Lange was Chairman and Managing Director of Philips
Electronics UK Ltd. Previously, Mr. De Lange served since 1970 in various
capacities with subsidiaries of Philips, including President of Philips Lighting
Europe from December 1990 until April 1995.
Antony P. Ressler became a member of the Supervisory Board in February 1999
and has been a director of UIH since October 1993. Mr. Ressler is one of the
founding principals of Apollo Advisors, L.P. and Ares Management, L.P., which
through several funds represent institutional investors with respect to
corporate acquisitions and securities investments. Mr. Ressler is also a
director of Allied Waste Industries, Inc., Vail Resorts, Inc., Prandium, Inc.
and Berlitz International, Inc.
Ellen P. Spangler became a member of the Supervisory Board in February
1999. Ms. Spangler is the Senior Vice President of Business and Legal Affairs
and Secretary of UIH, positions she has held since December 1996. Prior to
assuming her current positions, since February 1991 she served as a Vice
President of UIH where her responsibilities included business and legal affairs,
programming and assisting on development projects.
Tina M. Wildes became a member of the Supervisory Board in February 1999.
Ms. Wildes is the Senior Vice President of Operations and Development Oversight
of UIH, a position she has held since May 1998. From October 1997 until May
1998, Ms. Wildes served as Senior Vice President of Programming for UIH. From
1993 to 1997, she was Regional Vice President of UIH Latin America, Inc. From
1988 to 1994, Ms. Wildes served as either a director or vice president for
development, programming and operations for several of UIH's European operating
companies, including operations in Sweden, Norway, Malta, Israel, Spain and
Portugal.
Gene W. Schneider served as a member of the Supervisory Board from July
1995 until February 1999, when he became an advisor to the Supervisory Board.
Mr. Schneider is also the Chairman of the Board of Directors of UIH, a position
he has held since its inception in May 1989. In addition to serving as UIH's
Chairman, Mr. Schneider has served as UIH's Chief Executive Officer since
October 1995. From October 1995 until September 1998, Mr. Schneider also served
as UIH's President.
COMMITTEES OF THE SUPERVISORY BOARD
The Supervisory Board has an Audit Committee and a Compensation Committee.
Both committees are comprised of Mr. Fries, Ms. Spangler and Ms. Wildes. The
Board of Management has no committees.
Audit Committee. The Audit Committee's functions include making
recommendations concerning the engagement of independent accountants, reviewing
with the independent accountants the plan and results of the auditing
engagement, approving professional services provided by the independent
accountants and reviewing the adequacy of the Company's internal accounting
controls.
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<PAGE>
Compensation Committee. The Compensation Committee's functions include
a general review of the Company's compensation and benefit plans to ensure that
they meet corporate objectives. The Compensation Committee reviews the Chief
Executive Officer's recommendations on (a) compensation of the senior executive
officers of the Company, (b) granting of awards under the Company's stock option
and other benefit plans and (c) adopting and changing major compensation
policies and practices of the Company. In addition to reviewing the compensation
for the Chief Executive Officer, the Compensation Committee reports its
recommendations to the whole Supervisory Board for approval. The Compensation
Committee also oversees the Company's Equity Stock Option Plan and Phantom Stock
Option Plan.
INFORMATION REGARDING MEETINGS
The Board of Management held no meetings in 1998. The Supervisory Board
held two meetings in 1998. The Audit Committee and the Compensation Committee
each held no meetings in 1998. Each Management and Supervisory Director attended
at least 75% of the meetings of the Board of Management and Supervisory Board
and of the committees (if any) on which such person serves.
Family Relationships
Tina M. Wildes, a member of the Supervisory Board, and Mark L.
Schneider, the Chairman of our Board of Management and our Chief Executive
Officer, are sister and brother. Gene W. Schneider is their father. No other
family relationships exist between any other members of our Supervisory Board or
Board of Management.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, our directors, our
executive (and certain other) officers, and any persons holding more than 10
percent of our ordinary shares are required to report their ownership of our
ordinary shares and any changes in that ownership to the Securities and Exchange
Commission. We are required to report in this statement any failure to file
timely reports during fiscal 1999. Based on our review of Form 3, Form 4 and
Form 5 filings, we believe that all required reports were filed timely during
fiscal 1999.
Executive Compensation
The following table sets forth the 1998 compensation for our chief
executive officer, the four other highest compensated executive officers at
fiscal year end 1998 and two other executive officers that were not executive
officers at fiscal year end 1998.
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<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation (1)
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation (2) Compensation (3)
- --------------------------- ---- ------ ----- ---------------- ----------------
(Dutch guilders)
<S> <C> <C> <C> <C> <C>
Mark L. 1997 584,940 --- --- 9,557
Schneider(4).......................................1998 738,010
Chief Executive Officer
J. Timothy 1997 --- --- --- ---
Bryan(5)......................................... 1998 597,300 210,262 1,657 9,557
Former President and Chief Financial Officer
Gene 1997 --- --- --- ---
Musselman(6).......................................1998 499,663 149,325 7,403 142,442
Chief Operating Officer, Telekabel Wien
Margaret M. 1997 --- --- --- ---
Houlihan(7)................................. 1998 449,637 --- 46,310 176,205
Former Managing Director, Video Services
Nimrod 1997 --- --- --- ---
Kovacs(8)..........................................1998 547,525 --- 1,657 9,557
Managing Director, Eastern Europe
Michael 1997 --- --- --- ---
Simmons(9)........................................ 1998 448,509 --- --- 76,208
Former Managing Director, Portugal
</TABLE>
(1) Compensation amounts (except for automobile allowance payments and school
fees, if applicable, which were paid in Dutch guilders) for the persons
identified above were converted from U.S. dollars to Dutch guilders using the
1998 average exchange rate.
(2) Consisted of automobile lease, operating and maintenance payments, and
health and life insurance payments for some of the executive officers listed
above.
(3) Our executive officers who are United States citizens were employed by UIH
and seconded to us during 1998. UIH compensates all United States citizens
working for us outside the United States for certain expenses and adjustments
related to non-U.S. assignments and we reimburse UIH for such expenses. These
expenses and adjustments include home leave payments for trips back to the
employee's home country, housing allowance and school tuition fees for the
employee's children. See "-- Agreements with Executive Officers". Certain
compensation identified in this column also consisted of matching employer
contributions under UIH's employee 401(k) plan or our pension plan, as
applicable.
(4) Mr. Schneider was appointed as our Chief Executive Officer in April 1997 but
continued to serve as a consultant for UIH until September 1998. The salary
amount shown consisted of the total salary paid to Mr. Schneider for his duties
to us and UIH. Other compensation consisted of matching employer contributions
under UIH's employee 401(k) plan and personal use of an airplane.
(5) Mr. Bryan was our President and Chief Financial Officer from September 1998
to June 1999, prior to which time he was the Chief Financial Officer of UIH. The
salary amount shown consisted of the total salary paid to Mr. Bryan for his
duties to us and UIH. Mr. Bryan received a performance-based bonus for 1998.
Other annual compensation consisted of health and life insurance payments and
other compensation consisted of matching employer contributions under UIH's
employee 401(k) plan and personal use of an airplane.
(6) Mr. Musselman received a performance-based bonus for 1998. Other annual
compensation consisted of health and life insurance payments. Other compensation
consisted of NLG132,885 related to Mr. Musselman's non-U.S. assignment and
NLG9,557 of matching employer contributions under UIH's employee 401(k) plan.
(7) Ms. Houlihan is no longer our employee. Other annual compensation consisted
of NLG38,657 for Ms. Houlihan's automobile allowance and NLG7,659 for health and
life insurance payments and other compensation consisted of NLG166,648 related
to Ms. Houlihan's non-U.S.
assignment and NLG9,557 of matching employer contributions under UIH's employee
401(k) plan.
(8) Mr. Kovacs was appointed as our Managing Director of Eastern Europe in March
1998. The salary amount shown consisted of the total salary paid to Mr. Kovacs
for his duties to us and UIH. Other annual compensation consisted of health and
life insurance payments and other compensation consisted of matching employer
contributions under UIH's employee 401(k) plan.
(9) We sold our interest in our Portuguese system in February 1998. Mr. Simmons
no longer is our employee. Other annual compensation consisted of health and
life insurance payments and other compensation consisted of NLG66,651 related to
Mr. Simmons' non-U.S.
assignment and NLG9,557 of matching employer contributions under UIH's employee
401(k) plan.
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<PAGE>
The following table sets forth information concerning options that were
granted by us to the executive officers listed in the Summary Compensation Table
above during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
for Option
Individual Grants Term(1)
--------------- --------------------- -------------------- -------------- --------------- ---------------
Number of Percentage of Total
Securities Options Granted to
Underlying Employees in
Options Fiscal Year Exercise Price
Granted (#) (NLG/Share) Expiration 5% (NLG) 10% (NLG)
----------- ------------------- ----------- Date -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Schneider 975,000(2) 41.0% NLG12.00 04/01/07 75,747,750 91,221,000
J. Timothy Bryan 90,000(3) 2.4% NLG12.00 04/01/07 679,206 1,721,242
397,500(4) 10.6% NLG13.57 09/24/08 3,392,036 8,596,766
---------------------- --------------- --------------------- -------------------- -------------- --------------- ---------------
</TABLE>
(1) The potential realizable value is based on assumed annual rates of stock
price appreciation from our initial public offering, NLG63.91, to the end
of the option term.
(2) Vests in 48 equal monthly installments from April 1, 1997.
(3) Shares subject to phantom options, which UPC may at its option pay in cash
or UPC shares on exercise, and vest in 48 equal monthly installments from
April 1, 1997. Mr. Bryan is no longer an employee of the Company.
(4) Shares subject to phantom options, which UPC may at its option pay in cash
or UPC shares on exercise, and vest in 48 equal monthly installments from
September 24, 1998.
The following table sets forth information with respect to the executive
officers listed in the Summary Compensation Table above holding unexercised
options as of December 31, 1998. The value of unexercised in-the-money options
represents the difference between the price of the ordinary shares in our
initial public offering, NLG63.91, and the exercise price of the options. See
"--Stock Option Plans" and "Security Ownership of Certain Beneficial Owners and
Management".
10
<PAGE>
<TABLE>
<CAPTION>
Aggregate Fiscal Year 1998 Option Exercises
and Option Values at the End of Fiscal Year 1998
Number of
Shares Number of Securities
Acquired on Value Underlying Unexercised Value of Unexercised
Exercise Realized Options at Fiscal Year-End In-the-Money Options (1)
-------- -------- -------------------------- ------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Mark L. Schneider 406,250 568,750 NLG21,088,438 NLG29,523,812
J. Timothy Bryan 12,500(2) US$59,000 62,344 425,156 NLG3,095,410 NLG21,109,198
</TABLE>
(1) UPC sold shares in its initial public offering at NLG63.91 per share
February 11, 1999. Such share price is the basis for the values determined
in the above table for UPC.
(2) Represents the number of shares underlying the phantom options, which were
exercised with respect to an affiliate of UPC. The value was determined by
the UIH Board of Directors. Mr. Bryan is no longer an employee of the
Company.
Agreements with Executive Officers
We do not have employment agreements with any of the executive officers
listed in the above table. Mr. Simmons had an employment agreement with UIH that
has been terminated. Mr. Schneider has a consulting agreement with UIH and Mr.
Musselman has an employment agreement with UIH. We and UIH are parties to a
Secondment Agreement, pursuant to which Mr. Schneider, together with all of our
other U.S. citizen employees, are seconded to us. See "Relationship with UIH and
Related Transactions". Pursuant to the Secondment Agreement, we reimburse UIH
for all expenses incurred by UIH in connection with the seconded employees.
Mr. Schneider's consulting agreement with UIH is for a term of five years
and expires May 31, 2000. Mr. Schneider receives a fee of NLG759,000 per year.
If Mr. Schneider is terminated without cause or dies prior to the end of the
term of the agreement, he or his personal representative shall receive all
payments due under the agreement through its term.
UIH , UPC and Mr. Bryan entered into an employment agreement in October
1998. Mr. Bryan ceased to be employed by UIH and UPC in June 1999 and the
parties are currently in dispute over the terms of the agreement.
11
<PAGE>
Stock Option Plans
Equity Stock Option Plan. Under our Equity Stock Option Plan, the
Supervisory Board may grant incentive stock options to our employees. There are
6,000,000 total shares available for the granting of options under our stock
option plan. Options under our stock option plan must be granted at fair market
value (as determined by the Supervisory Board) at the time of grant. The
ordinary shares available under our stock option plan are held by Stichting
Administratiekantoor UPC, a stock option foundation, which administers our stock
option plan. Each option represents the right to acquire from the foundation a
depositary receipt representing the economic value of one share. UIH appoints
the board members of the foundation and thus controls the voting of the
foundation's ordinary shares. Proceeds from the exercise of these options remain
in the foundation. Upon liquidation of the foundation, any remaining assets
revert to UIH.
All options are exercisable upon grant and for the next five years. In
order to introduce the element of "vesting" of the options, our stock option
plan provides that even though the options are exercisable immediately, the
shares to be issued or options granted in 1996 are deemed to "vest" 1/36th each
month for a three-year period from the date of option grant. The date of option
grant is generally the employee's employment commencement date. For options
granted in 1998 and thereafter, the vesting period has been increased to four
years and the options vest 1/48th each month. No options were granted in 1997.
If the employee's employment terminates other than in the case of death,
disability or the like, all unvested options previously exercised must be resold
to the foundation at the original purchase price, or all vested options must be
exercised, within 30 days of the termination date. The Supervisory Board may
alter these vesting schedules in its discretion.
Our stock option plan contains limited anti-dilution protection in the case
of stock splits, stock dividends and the like. Our stock option plan also
provides that, in the case of change of control, the acquiring company has the
right to require us to acquire all of the options outstanding at the per share
value determined in the transaction giving rise to the change of control.
Through December 31, 1998, options to acquire a total of 6,492,000 shares
have been granted under the Plan. Of these, options representing 375,000 shares
have been exercised and resold to the foundation and, therefore, are available
for future option grants. Options representing 123,182 shares have been
canceled. The exercise prices for the options range from NLG10.49 to NLG13.57.
In March 1998, we granted Mark Schneider options for 975,000 shares at an
exercise price of NLG12.00, the price at which shares were acquired by UIH and
us from Philips in connection with the purchase, in December 1997, of Philips'
50% ownership interest in us. See "Certain Transactions and Relationships."
12
<PAGE>
Phantom Stock Option Plan. Under our phantom stock option plan, the
Supervisory Board has granted certain employees the right to receive an amount
in cash or stock, at the Supervisory Board's option, equal to the difference
between the fair market value of the shares and the stated grant price for a
specified number of phantom options. Through December 31, 1998, options
representing 2,162,500 phantom shares remained outstanding. The grant prices for
the phantom options range from NLG12.00 to NLG13.57. The phantom options have a
four-year vesting period and vest 1/48th each month. The phantom options may be
exercised during the period specified in the option certificate, but in no
event, later than ten years following the date of grant. 744,100 of the
outstanding phantom options were fully vested on December 31, 1998. Our phantom
stock option plan contains limited anti-dilution protection in the case of stock
splits, stock dividends and the like. Our phantom stock option plan also
provides that, in certain cases of a change of control, all phantom options
outstanding become fully exercisable.
Our phantom stock option plan also provides that upon the offering, an
employee holding phantom options may convert these into options for shares under
our stock option plan. If the employee elects not to do so, upon exercise of the
phantom options we may elect to issue such number of shares equal to the value
of the cash difference in lieu of paying the cash.
Limitation of Liability and Indemnification Matters
Pursuant to Dutch law, each member of the Supervisory Board and Board of
Management is responsible to us for the proper performance of his or her
assigned duties. Generally, under Dutch law, directors will not be held
personally liable for decisions made with reasonable business judgment.
Our articles of association provide that we must indemnify any person who:
o is or was a member of the Supervisory Board or the Board of
Management,
o suffers any loss as a result of their position as a member of such
boards, and
o acted in good faith in carrying out their duties.
This indemnification does not apply if the person seeking indemnification
is found to have acted with gross negligence or wilful misconduct in the
performance of their duty to us unless the court in which the action is brought
determines that indemnification is appropriate. A majority of the members of the
Supervisory Board must approve any indemnification unless the entire Supervisory
Board is named in the lawsuit, in which case the indemnification may be approved
by independent legal counsel in a written opinion or by the general meeting of
shareholders. The Supervisory Board may extend the indemnification provisions of
our articles of association to any of our officers, employees or agents.
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<PAGE>
Compensation of Supervisory Board Members
All of the members of the Supervisory Board, other than Mr. De Lange, are
directors or employees of UIH. None of these members receive additional
compensation for serving on the Supervisory Board.
Compensation of Board of Management Members
The aggregate 1999 salary compensation for the entire Board of Management
is approximately NLG3,111,000. In addition, we provide our executive officers
with automobile allowances and other benefits. Expatriates also receive housing
allowances, foreign tax equalization payments and other compensation relating to
their foreign assignments.
Compensation Committee Interlocks and Insider Participation
We and UIH have concluded a secondment arrangement, pursuant to which
certain U.S. citizens employed by UIH are seconded to us. See "Relationship with
UIH and Related Transactions". Prior to our initial public offering in February
1999, compensation for all members of our management who are employees of UIH
was set by the compensation committee of UIH and compensation for all of our
other employees was determined by the Supervisory Board. In February 1999, our
Supervisory Board established a compensation committee following the completion
of the initial public offering. The compensation committee is composed of Mr.
Fries, Ms. Spangler and Ms. Wildes, each of whom is a member of the Supervisory
Board. The members of our management who are employees of UIH, however, will
continue to have their compensation set by the UIH compensation committee. None
of the members of the UIH or UPC compensation committee or our Supervisory Board
has served as a director or member of a compensation committee of another
company that had any executive officer that was also one of our Supervisory
Directors or a member of the compensation committee of UIH.
14
<PAGE>
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of all classes of securities as of June 1, 1999, by (1)
each shareholder who is known by us to own beneficially more than 5% of the
outstanding ordinary shares at such date; (2) each of our Supervisory Directors
and our advisor to the Supervisory Board; (3) each of our executive officers;
and (4) all of our Supervisory Directors, advisors and executive officers as a
group. Because Messrs. G. Schneider, Cole, Ressler, M. Schneider and Riordan are
directors of UIH, they may be deemed to own beneficially our shares held by UIH.
They disclaim any beneficial ownership of these shares and this table does not
include those shares.
Ordinary Shares
Number Percentage(1)
Beneficial Owner
United International Holdings, 80,734,292(2) 62.5%
Inc.(2)
Microsoft Corporation(3) 10,157,750 7.86%
Gene W. Schneider(4) 31,000 *
Michael T. Fries(5) 3,051 *
John P. Cole, Jr. 1,525 *
Richard De Lange --- ---
Antony P. Ressler --- ---
Ellen P. Spangler 305 *
Tina Wildes 3,051 *
Mark L. Schneider(6) 578,438 *
J. Timothy Bryan --- ---
Charles H.R. Bracken --- ---
John F. Riordan(7) 296,532 *
Nimrod J. Kovacs(8) 15,000 ---
Anton H.E. v. Voskuijlen(9) 254,688 *
All directors, director nominees and 1,168,590 1.4%
executive officers as a group (11
persons)
- ---------------------------
* Less than 1%.
15
<PAGE>
(1) The figures for the percent of shares are based on 129,246,123 ordinary
shares outstanding on June 8, 1999 (after elimination of shares held in
treasury or by subsidiaries).
(2) Includes 3,646,823 ordinary shares held by the stock option foundation,
the board members of which are appointed by UIH. The address of United
International Holdings, Inc. is 4643 South Ulster Street, Suite 1300,
Denver, Colorado 80237, U.S.A.
(3) The address of Microsoft Corporation is One Microsoft Way, Redmond,
Washington 98052.
(4) Includes 10,000 ordinary shares held by the Gene W. Schneider Family
Trust of which Mr. Schneider is a co-trustee. Also includes 1,000
ordinary shares owned by his spouse.
(5) Includes 3,051 ordinary shares owned by Mr. Fries' spouse.
(6) Mr. M. Schneider holds currently exercisable options for 975,000
ordinary shares of which options for 426,562 ordinary shares are
subject to our repurchase right, which expires April 1, 2001. Includes
10,000 ordinary shares held by the Gene W. Schneider Family Trust of
which Mr. Schneider is a co-trustee.
(7) Mr. Riordan holds currently exercisable options for 525,000 ordinary
shares of which options for 229,688 ordinary shares are subject to our
repurchase right, which expires April 1, 2001. Includes 1,220 ordinary
shares owned by Mr. Riordan's spouse.
(8) Includes 5,000 ordinary shares held by Kovacs Communications, Inc.
(9) Represents currently exercisable options for 300,000 ordinary shares of
which options for 45,312 ordinary shares are subject to our repurchase
right, which expires January 1, 2002.
Certain Transactions and Relationships
Loans to Executive Officers
In 1996, we loaned Mr. van Voskuijlen NLG106,245 and in 1998, we loaned
him NLG40,500 to enable him to pay the tax on the stock options received in
those years. These recourse loans bear no interest. The loans are due upon
exercise of his options. We made similar loans to other employees for the
purpose of exercising and/or paying tax on options.
The Discount Group's Option
In November 1998, a subsidiary of Discount Investment Corporation
loaned us $90.0 million (the "DIC Loan") to acquire additional interests in our
Israeli operation. In connection with the DIC Loan, we granted an option to the
Discount Group, our partner in our Israeli system and an affiliate of Discount
Investment Corporation, to acquire ordinary shares at a price per share equal to
the price in the initial public offering, discounted by a factor of 10%. The
Discount Group exercised its option and we issued 1,558,654 ordinary shares to
it at the same time as the closing of our initial public offering. The aggregate
purchase price for the shares was equal to the sum of $45 million, plus interest
thereon at the rate of 8% per annum from November 9, 1998 through the closing of
the exercise of the option. The Discount Group currently owns about 1.3% of our
outstanding ordinary shares.
16
<PAGE>
In connection with the exercise of the option, we have agreed to enter
into a registration rights agreement with the Discount Group and a shareholders'
agreement with the Discount Group and UIH. Under the shareholders' agreement,
UIH has agreed to vote in favor of one supervisory board member nominated by the
Discount Group for as long as the Discount Group and its affiliates retain at
least the number of ordinary shares originally acquired upon the exercise of the
option. In addition, the Discount Group will receive the right to participate on
equal terms in connection with sales of ordinary shares by UIH, including the
right to sell the Discount Group's entire interest in us in connection with a
sale by UIH of a controlling interest in us. The Discount Group will also
receive the right to negotiate with UIH prior to certain sales of ordinary
shares by UIH. UIH will receive a right of first refusal with respect to a sale
of ordinary shares by the Discount Group and the right to require that the
Discount Group agree to a merger or sale of all of our shares proposed by UIH.
In addition, there are certain limited restrictions on the entities or persons
to whom the Discount Group may transfer its ordinary shares.
Upon the exercise of the option, the Discount Group received an
additional option to acquire ordinary shares from us at a price per share equal
to the greater of (1) the price in our initial public offering or (2) the
average sale price of our ordinary shares on the Amsterdam Stock Exchange for
the 30-day period immediately preceding the exercise date. The aggregate
purchase price for the ordinary shares purchased pursuant to the additional
option would be equal to the sum of $45 million, plus interest thereon at the
rate of 8% per annum from November 9, 1998 through the closing of the additional
option. The transfer rights and restrictions set forth in the registration
rights agreement and the shareholders' agreement discussed above will be
applicable with respect to the ordinary shares acquired by the Discount Group
upon the exercise of the additional option. The additional option will terminate
if it is not exercised on or before September 30, 2000.
Relationship With UIH and Related Transactions
UIH is a leading provider of video, voice and data services outside the
United States. Together with its strategic and financial partners, UIH has
ownership interests in multi-channel television systems in operation or under
construction in over 20 countries. UIH's operations are organized in three
geographic regions: (1) Europe, consisting of UIH's interest in us; (2)
Asia/Pacific, including investments in operating systems and development
projects in Australia, New Zealand, the Philippines, Tahiti and China; and (3)
Latin America, including multi-channel television systems in Brazil, Chile,
Mexico and Peru.
Control by UIH. Immediately prior to our initial public offering, UIH
held effectively all of the voting control over us and held all of our issued
and outstanding ordinary shares, other than approximately 7.7% of such shares
that have been registered in the name of the stock option foundation to support
our stock option plan. As a result of the initial public offering, the shares
registered in the name of the foundation currently represent 4.8% of our issued
and outstanding ordinary shares. UIH appoints the board members of the
foundation and thus controls the voting of these shares as well. See "Management
- -- Stock Option Plans". UIH currently owns approximately 62% of our outstanding
ordinary shares and all of our outstanding priority shares. Because we are a
strategic holding of UIH, UIH will continue to control us for the foreseeable
future. Five members of our six-member Supervisory Board are directors, officers
or employees of UIH.
Transactions with UIH. As part of the acquisition of UPC, we acquired
approximately 3.17 million shares of UIH's Class A Common Stock. We subsequently
sold 384,531 of these shares for certain interests in our Irish operating
company and Tara, a programming service. We currently hold approximately 2.8
million shares, which currently represents approximately 7% of UIH's outstanding
common stock. We have given UIH the right to acquire these shares of UIH Class A
Common Stock at their market value, based on a ten-trading day average.
17
<PAGE>
UIH has sold to us, in exchange for 6,330,340 of our ordinary shares,
UIH's 37.5% voting and 44.75% economic interest in the telephone system
operating in the Monor region of Hungary, and its interest in the Tara
programming joint venture. UIH has also sold to us its interest in the IPS
programming joint venture in exchange for 4,955,264 ordinary shares.
Agreements with UIH. Subject to certain limitations, beginning on
February 11, 2000 (one year after the date of our initial public offering), UIH
may require us to file a registration statement under the Securities Act of 1933
with respect to all or a portion of UIH's ordinary shares or ADSs, and we are
required to use our best efforts to effect such registration, subject to certain
conditions and limitations. We are not obligated to effect more than three of
these demand registrations using forms other than Form S-3 or F-3, as the case
may be. UIH may demand registration of such securities an unlimited number of
times on Form S-3 or F-3, as the case may be, except that we are not required to
register UIH's ordinary shares on Form S-3 more than once in any six-month
period. UIH also has the right to have its ordinary shares included in any
registration statement we propose to file under the Act except that, among other
conditions, the underwriters of any such offering may limit the number of shares
included in such registration. We have also granted UIH rights comparable to
those described above with respect to the listing or qualification of the
ordinary shares held by UIH on the Amsterdam Stock Exchange or on any other
exchange and in any other jurisdiction where we previously have taken action to
permit the public sale of our securities.
UIH incurs certain overhead and other expenses at the corporate level
on behalf of us and its other operating companies. These include expenses not
readily allocable among the operating companies, such as accounting, financial
reporting, investor relations, human resources, information technology,
equipment procurement and testing expenses, corporate offices lease payments and
costs associated with corporate finance activities. UIH also incurs direct costs
for its operating companies such as travel and salaries for UIH employees
performing services on behalf of its respective operating companies. We and UIH
are parties to a management service agreement, with an initial term through
2009, pursuant to which UIH will continue to perform these services for us.
Under the management service agreement, we will pay UIH a fixed amount each
month as its portion of such unallocated expenses. This fixed amount is
initially $300,000 per month. After the first year of the management services
agreement, the fixed amount may be adjusted from time to time by UIH to allocate
these corporate level expenses among UIH's operating companies, including us,
taking into account the relative size of the operating companies and their
estimated use of UIH resources. In addition, we will continue to reimburse UIH
for costs incurred by UIH that are directly attributable to us.
We and UIH are also parties to a secondment agreement that specifies
the basis upon which UIH may second certain of its employees to us. UIH's
secondment of employees to us helps us attract and retain U.S. citizens and
other employees who want U.S. benefit plans, without creating a separate U.S.
employment subsidiary. We generally are responsible for all costs incurred by
UIH with respect to any seconded employee's employment and severance. UIH may
terminate a seconded employee's employment if the employee's conduct constitutes
willful misconduct that is materially injurious to UIH. During the year ended
December 31, 1998, we incurred approximately NLG11.9 million for costs
associated with the seconded employees, reimbursable to UIH.
We have agreed with UIH that so long as UIH holds 50% or more of our
outstanding ordinary shares, (1) UIH will not pursue any video services,
telephone or Internet access or content business opportunities specifically
directed to the Europe or Israel markets, unless it has first presented such
business opportunity to us and we have elected not to pursue such business
opportunity, and (2) we will not pursue any video services, telephone or
Internet access or content business opportunities in Saudi Arabia or in other
markets outside of Europe or the Middle East unless we have first presented such
business opportunity to UIH and UIH has elected not to pursue such business
opportunity. Either party may pursue any business in the United States and its
territories and possessions without regard to activities of the other.
18
<PAGE>
We have agreed to sell to UIH, upon request, all or any portion of the
UIH Class A Common Stock held by us at a price based upon the trading price of
such stock during a specified period prior to sale. UIH and we have also agreed
that we will provide audited financial statements to UIH in such form and with
respect to such periods as shall be necessary or appropriate to permit UIH to
comply with its reporting obligations as a publicly traded company and that we
will not change our accounting principles without UIH's prior consent. We have
consented to the public disclosure by UIH of all matters deemed necessary or
appropriate by UIH in its sole discretion to satisfy the disclosure obligations
of UIH or any affiliate thereof under the United States federal securities laws
or to avoid potential liability thereunder. We have also agreed to indemnify UIH
against all liabilities UIH may incur in connection with UIH's indemnification
obligations under the underwriting agreement.
UIH Indenture. We, as a subsidiary of UIH, are subject to the
provisions of the indenture governing UIH's senior secured discount notes due
2008. This indenture contains covenants that, among other things, limit the
ability of UIH and its subsidiaries, including us, to:
o incur indebtedness and issue certain preferred stock in
amounts exceeding that permitted based upon financial ratio
and other tests,
o repurchase equity interests from third parties other than
UIH,
o make investments in non-controlled entities,
o enter into agreements that would restrict the ability to make
distributions,
o loans or other payments to equity holders,
o create certain liens,
o sell assets or issue equity for other than cash or fail to
invest the cash proceeds of such sales within 360 days of the
sale periods, and
o enter into transactions with affiliates of UIH.
We will continue to be controlled by UIH and restricted by the terms of
its debt securities. We have agreed with UIH that, for as long as we are subject
to the provisions of UIH's indenture, as amended or supplemented, or any other
indenture or agreement to which UIH is a party governing indebtedness of UIH
that replaces or refinances any indebtedness governed by UIH's indenture, as
amended or supplemented, we will not take any action that will result in a
breach of UIH's indenture.
UIH's senior secured discount notes were issued pursuant to the
Indenture, dated as of February 5, 1998, by and between UIH and Firstar Bank of
Minnesota N.A., as trustee. The foregoing description of certain covenants of
this indenture is a summary only, does not purport to be complete and is
qualified in its entirety by reference to all of the provisions of this
indenture, which are hereby incorporated by reference. A copy of UIH's indenture
has been incorporated as an exhibit to the registration statement filed with the
United States Securities and Exchange Commission in connection with our initial
public offering.
19
<PAGE>
Relationship With Microsoft
We have signed a letter of intent with Microsoft Corporation to
establish a technical services relationship and, as part of this, have agreed to
set up a series of joint projects to deliver Internet, non-traditional telephone
and other interactive video and general services to digital cable set-top
devices, personal computers and other devices within and beyond our service
areas. The particular terms of each joint project will be negotiated by us and
Microsoft. As part of this relationship, we plan to establish a technology board
to review technology issues and develop technology specifications and
directions. This board would be chaired by Scott Bachman, our Managing Director
of Technology, and would include representatives from Microsoft and us. In
addition, we and Microsoft would be preferred suppliers to one another, with
Microsoft having the first opportunity to license technologies to us. We would
be given the opportunity to present and offer our products to Microsoft offices
in Europe. We and Microsoft would also cooperate to advocate mutually-agreed
standards and regulations to the bodies in our service territories who set
technical standards. We would also have the right to license Microsoft software
for the delivery of Internet content services over our network.
As part of this technology relationship, we have agreed that, on the
earlier of three months from the date of the letter of intent and the signing of
the first definitive agreement with Microsoft, we will grant Microsoft warrants
to purchase up to 3,800,000 ADSs, which would currently represent approximately
3.0% of our outstanding share capital. Microsoft will have the option under
these warrants to purchase ordinary shares instead of ADSs. These warrants can
be exercised at a price of $28.00 per ordinary share or ADS. These warrants will
not be exercisable until at least February 16, 2000 and will expire February 16,
2003. In addition, half of the warrants will not vest until certain performance
standards are met. We have agreed to grant Microsoft certain registration rights
to be negotiated with respect to the ADSs or shares to be issued upon exercise
of these warrants. In addition, we will grant Microsoft a preemptive right to
purchase up to an aggregate of 10% of chello broadband n.v. in any public or
private equity offering at such offering's price and the right of first
negotiation in any private equity offering, other than to our or other cable
operators in exchange for carriage of chello broadband n.v..
Microsoft agreed not to dispose of the shares purchased in our initial
public offering for six months following such offering nor will it acquire more
than 15% of our total share capital without the prior written approval of our
Supervisory Board. If we enter into a definitive agreement, as expected,
Microsoft will extend its six-month lock-up period to one year.
20
<PAGE>
Compensation Committee Report On Executive Compensation
The Compensation Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed field under such Acts.
Compensation Philosophy
During 1998, the Supervisory Board was responsible for structuring and
implementing the Company's executive compensation program and for reviewing
compensation paid to certain key management personnel. The Supervisory Board
also administered the stock option plans during 1998. The Compensation Committee
was formed in January 1999. The following report relates to compensation
reported by the Company for 1998 and is based upon the compensation program
implemented by the Supervisory Board. The report is based upon information
available to the current members of the Compensation Committee about the
Company's compensation program as it was implemented during 1998, by the
Supervisory Board.
The Company's compensation philosophy is based on the belief that the
principal component of total executive compensation should be linked to
stockholder return on investment as reflected in the appreciation in the price
of the Company's ordinary shares. In applying this philosophy, the Supervisory
Board implemented a compensation policy that seeks to attract and retain
superior executives and to align the financial interests of the Company's senior
executives with those of its shareholders. The Company attempts to realize these
goals by providing a reasonable base salary to its executive officers and senior
management while emphasizing the grant of equity-based incentives commensurate
with their performance and level of responsibility. Given the nature of the
Company's business and its stage of development, any assessment of an executive
performance tends to be very subjective. The Company does not generally pay cash
bonuses to its executive officers.
Base Salary
The Company believes base salary levels of its executive officers
should be reasonable but not excessive. The Company reviews and determines the
base salaries for the Company's executive officers and other senior management
every 12 to 16 months. A recommendation for specific base salaries for all
executive officers is submitted to the Committee by the Company's Chief
Executive Officer for approval. The recommendation is based largely on the
subjective assessment of the executives' experience, performance, level of
responsibility and length of service with the Company, but also reflects the
base salary paid to executives and other senior management recently hired by the
Company relative to the salary of those whose compensation is being reviewed.
The Chief Executive Officer explains the factors on which the
recommendation is based, discusses the responsibilities and performance of the
persons whose compensation is being reviewed and responds to inquiries from the
Committee. During the year ended December 31, 1998, the Supervisory Board
undertook a review of the compensation paid to its named executive officers and
other key management as a result of certain promotions and realignment of
responsibilities. Based on such review and the recommendation of the Chief
Executive Officer, the Committee then established new salary levels for its
named executive officers. The Committee believes such new salary levels reflect
the responsibilities of such officers and are necessary to retain such officers
based on the salaries paid to officers in comparable positions in the media
companies included in the survey.
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Equity Based Incentives
To make its overall compensation package for executive officers and
other senior management competitive with other companies in the
telecommunications industry, the Company emphasizes equity-based incentives
rather than salary and bonuses. The Supervisory Board believes that reliance
upon such incentives is appropriate because they foster a long-term commitment
to the Company and encourage employees to seek to improve the long-term
appreciation in the market price of the Company's ordinary shares. Equity-based
incentives are provided to the Company's executives and key employees through
the Employee Plan. In general, executive officers and other employees are
eligible for grants of stock options upon their employment by the Company.
Options are typically granted at the fair market value of the ordinary shares on
the date of grant and, since 1998, options typically vest over a period of four
years. During the year ended December 31, 1998, the Supervisory Board granted
stock options for an aggregate of 975,000 ordinary shares to the Chief Executive
Officer. In addition, the Supervisory Board granted phantom options for an
aggregate of 487,500 ordinary shares to one of the named executive officers. The
Committee believes such grants are in the best interest of the Company and are
consistent with its philosophy of providing equity-based incentives to retain
talented management and to encourage such management to improve the long-term
appreciation of the Company's ordinary shares. The Supervisory Board based its
grants for the year ended December 31, 1998, in part, upon the level of the
executive or other key employee's responsibilities and contributions they have
made to the Company's financial and strategic objectives.
Fiscal 1998 Compensation for Chief Executive Officer
The executive compensation policy described above is applied in
establishing the base salary for the Company's Chief Executive Officer. The
Company did not make any adjustment to the base salary of the Chief Executive
Officer during the year ended December 31, 1998. As a result, the Chief
Executive Officer's salary remains at $375,000, which the Supervisory Board set
in December 1997. The Committee continues to believe such salary is reasonable
based on the recent growth of the Company. Such salary is also intended to be at
a level slightly higher than that of the other most highly compensated executive
officers of the Company. The base salary bears no specific relationship to the
Company's performance during the year ended December 31, 1998. For the reasons
stated above under "Equity-Based Incentives," the Company granted options for
975,000 ordinary shares with an exercise price of NLG 12.00 per share to the
Chief Executive Officer.
COMPENSATION COMMITTEE
Michael T. Fries
Ellen P. Spangler
Tina M. Wildes
Stockholder Return Performance Graph
The stock price performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
22
<PAGE>
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends) on the Company's ordinary shares with the
NASDAQ Composite Index (U.S. and Foreign) and a peer group of companies based on
the NASDAQ Telecommunications Stocks Index (the "NASDAQ Telecom"). The graph
assumes that the value of the investment in the Company's ordinary shares and
each index was $100 on February 11, 1999. The Company has not paid any cash
dividends on its ordinary shares and does not expect to pay dividends for the
foreseeable future. The stockholder return performance graph below is not
necessarily indicative of future performance.
[graph appears here]
2/11/99 4/30/99
United Pan-Europe Communications $100.00 155.39
NASDAQ Telecom $100.00 114.19
NASDAQ Composite (US & Foreign) $100.00 104.56
*The quotation for the Company is a February 11, 1999 initial offering price.
ITEM 5
EXTENSION OF AUTHORITY OF BOARD OF MANAGEMENT UNTIL
JANUARY 23, 2001 TO REPURCHASE SHARES
Under Dutch law and the Articles of Association of the Company, the
Company and its subsidiaries may, subject to certain Dutch statutory provisions,
repurchase up to one-tenth of the Company's issued share capital. Any such
purchases are subject to approval of the Supervisory Board, UIH as the holder of
our priority shares and the authorization by the shareholders at the Annual
Meeting, which authorization may not continue for more than eighteen months. By
shareholders' resolution adopted on February 10, 1999, the Board of Management
was authorized for eighteen months to repurchase up to 10% of the outstanding
share capital of the Company. The authorization expires on October 9, 2000, but
may be extended for an additional eighteen-month period if authorized by the
shareholders at the Annual Meeting.
It is proposed to extend the authority of the Board of Management to
repurchase up to 10% of the outstanding share capital of the Company for an
additional eighteen-month period from the date of the Annual Meeting until
January 23, 2001, for a repurchase price between (i) the nominal value of the
shares concerned and (ii) an amount equal to 110% of the highest price
officially quoted on the NASDAQ National Market and the Amsterdam Stock Exchange
on any of five banking days preceding the date of the repurchase.
The affirmative vote of the holders of a majority of the ordinary
shares and the priority shares cast at the Annual Meeting is required to extend
the authorization of the Board of Management to repurchase up to 10% of the
outstanding share capital of the Company for an additional 18-month period from
the date of the Annual Meeting.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE EXTENSION OF
THE AUTHORITY OF THE BOARD OF MANAGEMENT TO REPURCHASE UP TO 10% OF THE
OUTSTANDING SHARE CAPITAL OF THE COMPANY UNTIL JANUARY 23, 2001.
23
<PAGE>
ITEM 6
AMENDMENT OF THE ARTICLES OF ASSOCIATION TO AUTHORIZE 100 MILLION ORDINARY
SHARES B WITH THE RIGHT TO CAST 1 VOTE PER SHARE AND TO INCREASE THE VOTING
RIGHTS OF THE NEWLY RE-NAMED ORDINARY SHARES A, THE PRIORITY SHARES, THE
PREFERENCE SHARES A AND THE PREFERENCE SHARES B TO 100 VOTES PER SHARE
The Supervisory Board has proposed an amendment to the Company's
Articles of Association to (i) authorize 100 million shares of a new class of
ordinary shares ("Ordinary Shares B") with the right to cast 1 vote per share,
(ii) to re-name the existing ordinary shares as "Ordinary Shares A," (iii) to
increase the voting rights of the Ordinary Shares A, the priority shares, the
Preference Shares A and the Preference Shares B to 100 votes per share and (iv)
to increase the nominal value of each issued and outstanding Ordinary Share A
and each priority share from EUR 0.30 to EUR 2 by crediting each issued and
outstanding Ordinary Share A and priority share with EUR 1.70 from the Company's
share premium account insofar as the Company has sufficient distributable
reserves for such credit. The Company's distributable reserves are the total
equity of the Company less the paid-up and called-up part of the issued share
capital and any reserves that are required by law.
The Ordinary Shares B would be issued as either bearer shares or
registered shares, at the option of the shareholder. Their nominal value would
be EUR 0,02 and the minimum price at which they could be issued would be EUR
2.00. The two classes of Ordinary Shares would be otherwise identical, except
that the Board of Management must obtain the approval of the holders of Ordinary
Shares B prior to cooperating with a public offer for shares in the capital of
the Company if the offer is either limited to Ordinary Shares A or the offer is
not made on equal financial terms for the shares of both classes of Ordinary
Shares.
The shareholders are being asked to approve the amendment and to
authorize each member of the Board of Management of the Company, as well as each
deputy civil law notary of Loeff Claeys Verbeke, advocates and civil law
notaries in Amsterdam, to apply for the ministerial statement of no objections
on the draft deed of amendment, to amend said draft in such a way as might
appear necessary in order to obtain the statement of no objections and to
execute the deed of amendment of the Articles of Association.
There are currently no plans to issue the Ordinary Shares B or to list
them on any exchange. The Ordinary Shares B could be issued in the future for
cash or to acquire other businesses or assets.
A copy of the proposed amendment is attached.
The affirmative vote of the holders of a majority of the ordinary
shares and of UIH as the holder of our priority shares cast at the Annual
Meeting is required to approve the proposed amendment.
THE SUPERVISORY BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT.
24
<PAGE>
ITEM 7
EXTENSION OF AUTHORITY OF SUPERVISORY BOARD
TO ISSUE SHARES THE COMPANY UNTIL JULY 23, 2004
Under Dutch law and the Articles of Association of the Company, the
Board of Management has the power, subject in each case to the approval of the
Supervisory Board and UIH as the holder of our priority shares, to issue and/or
grant rights to subscribe to shares in the Company's share capital if and
insofar as the Board of Management has been designated by the Company's
shareholders as the authorized body for this purpose. A designation of the Board
of Management to issue shares may be effective for a specified period up to five
years and may be renewed on a rolling annual basis. By shareholders' resolution
adopted on February 10, 1999, the Board of Management was authorized to issue
shares and/or to grant rights to subscribe to shares. The authorization expires
on February 9, 2004.
It is proposed to extend the designation of the Board of Management to
issue all unissued shares of the Company's authorized capital shares and/or
grant rights to subscribe to shares for a five year period from the date of the
Annual Meeting until July 23, 2004.
The affirmative vote of the holders of a majority of the ordinary
shares and of UIH as the holder of our priority shares cast at the Annual
Meeting is required to extend the said designation of the Board of Management to
issue shares and/or grant rights to subscribe to shares for a five year period
from the date of the Annual Meeting until July 23, 2004.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE EXTENSION
OF THE AUTHORITY OF THE SUPERVISORY BOARD TO ISSUE SHARES AND/OR TO GRANT RIGHTS
TO SUBSCRIBE TO SHARES OF THE COMPANY UNTIL JULY 23, 2004.
ITEM 8
EXTENSION OF AUTHORITY OF SUPERVISORY BOARD
TO LIMIT OR EXCLUDE PREEMPTIVE RIGHTS UNTIL JULY 23, 2004
Holders of ordinary shares have a pro rata pre-emptive right of
subscription to any ordinary share issuance for cash except if it concerns
shares to employees unless such right is limited or excluded. Holders of
ordinary shares have no pro rata pre-emptive subscription right with respect to
any ordinary shares issued for consideration other than cash. If designated for
this purpose by the shareholders, the Board of Management has the power, after
approval by the Supervisory Board and UIH as the holder of our priority shares,
to limit or exclude such rights. A designation may be effective for up to five
years and may be renewed on a rolling annual basis. By shareholders' resolution
adopted on February 10, 1999, the Board of Management was authorized for a
five-year period to limit or exclude from time to time the pre-emptive rights of
holders of ordinary shares in the event of a share issue. The authorization
expires on February 9, 2004.
It is proposed to extend the authority of the Board of Management to
limit or exclude the pre-emptive rights of holders of ordinary shares (including
Ordinary Shares A and Ordinary Shares B after the amendment of the Articles of
Association of the Company creating these classes of shares comes into effect)
in the event of a share issue or granting of rights to subscribe to shares for a
new five year period from the date of the Annual Meeting until July 23, 2004.
The affirmative vote of the holders of a majority of the ordinary
shares cast at the Annual Meeting and of UIH as the holder of our priority
shares is required (provided at least 50% of the share capital of the Company is
present in person or represented by proxy at the meeting) in order to extend the
authorization to limit or exclude the pre-emptive rights of holders of ordinary
shares in the event of a share issue for a five year period from the date of the
Annual Meeting until July 23, 2004. If 50% or more of the share capital of the
Company is not present in person or represented by proxy at the Annual Meeting,
a two-thirds majority of the votes cast is required.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
EXTENSION OF THE AUTHORITY OF THE SUPERVISORY BOARD TO LIMIT OR ELIMINATE
PREEMPTIVE RIGHTS OF HOLDERS OF ORDINARY SHARES UNTIL JULY 23, 2004.
25
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD
OF SUPERVISORY DIRECTORS OF
UNITED PAN-EUROPE COMMUNICATIONS N.V. FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON FRIDAY, JULY 23, 1999
The undersigned hereby constitutes and appoints Anton H.E. v. Voskuijlen
and Anton M. Tuijten, and each or either of them, his true and lawful attorneys
and proxies with full power of substitution, for and in the name, place and
stead of the undersigned, to attend the Annual Meeting of Shareholders of UNITED
PAN-EUROPE COMMUNICATIONS N.V. to be held at The Okura Hotel, Fred. Roeskestraat
123, P.O. Box 74763, 1070 BT Amsterdam, The Netherlands, on July 23, 1999 at
2:00 p.m., local time, and any adjournment(s) thereof, with all powers the
undersigned would possess if personally present and to vote thereof, as provided
on the reverse side of this card, the number of ordinary shares (or American
Depository Shares representing ordinary shares) the undersigned would be
entitled to vote if personally present. In accordance with their discretion,
said attorneys and proxies are authorized to vote upon such other matters as may
properly come before the meeting or any adjournment thereof.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF SUPERVISORY DIRECTORS.
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE
OF DIRECTION, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS LISTED BELOW.
(TO BE SIGNED AND CONTINUED ON THE REVERSE SIDE.)
SEE REVERSE SIDE
[X] Please mark your votes as in this example.
1. Adoption of Annual Accounts and use of the English language:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To grant discharge to the members of the Board of Management for their
management and the members of the Supervisory Board for their supervision
thereof, insofar as such is apparent from the financial statements:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To remove J. Timothy Bryan from the Board of Management, as proposed by the
holders of our priority shares, due to his departure from the Company's
employment:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Election of Charles H.R. Bracken as a member of the Board of Management:
[ ] FOR [ ] WITHHOLD AUTHORITY TO VOTE FOR
5. To extend the authority of the Board of Management to repurchase up to 10% of
the Company's share capital for a period of 18 months (until January 23, 2001):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
6. To amend the Articles of Association of the Company to authorize a new class
of 100 million Ordinary Shares B with the right to cast 1 vote per share and to
increase the voting rights of the remaining authorized capital shares to 100
votes per share:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. To extend the authority of the Board of Management to issue and/or grant
rights to subscribe to shares in the capital of the Company for a period of five
years (until July 23, 2004):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. To extend the authority of the Board of Management to limit or exclude the
pre-emptive rights of the holders of shares in the capital of the Company for a
period of five years (until July 23, 2004):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: Such other business as may properly come before the meeting or any
adjournment thereof shall be voted in accordance with the discretion of the
attorneys and proxies appointed hereby.
SIGNATURE(S) DATE _________________________
- -----------------------------------------------------
- -----------------------------------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
